27th Sep 2006 07:01
Motivcom PLC27 September 2006 27 September 2006 MOTIVCOM PLC INTERIM RESULTS FOR THE PERIOD ENDED 30 JUNE 2006 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 2006. Financial Highlights • Gross profit £6,311,000 (2005 £5,039,000) • Operating profit £932,000 (2005 £889,000) • Profit before tax £939,000 (2005 £927,000) • Basic earnings per share 2.58 pence (2005 2.58 pence) • Net assets £6,487,000 (2005 £6,027,000) • Interim dividend of 0.35 pence • Continuing successful new product development • Positive outlook Colin Lloyd, Chairman of the Company, said: I am pleased to report that the interim results for Motivcom plc for the sixmonth period to June 2006 are in line with both the market and the Board'sexpectations. They reflect a combination of organic growth and consolidationwhich currently characterise the sector, together with the development of newproducts. I am pleased to report that the first half of 2006 has seen strong underlyinggrowth across our businesses, even though this may not be reflected in therelatively modest growth in profit before tax. However, this is a direct resultof timing factors, in particular a major event project that will take place inSeptember this year, compared to May in 2005. This means that the resultingfinancial benefit for Motivcom, which is not insignificant, will occur in thesecond half of 2006, whereas it impacted during the first half of last year.Despite this timing shift, I am therefore also pleased to advise that we havealready achieved 83% of our budgeted full year gross profit at the end ofAugust. As a result of the above, operating profits before tax have increased marginallyto £932,000 (2005 £889,000) on gross profit that has increased by 25% to£6,311,000 (2005 £5,039,000). Profits before tax are £939,000 (2005 £927,000)and basic earnings per share are 2.58 pence (2005 2.58 pence). Net assetsincreased to £6,487,000 from £6,027,000 at 31 December 2005, providing the Groupwith continued scope to make appropriate investments to further its development. Your Board has approved an interim dividend of 0.35 pence. This will be paid on3 November 2006 to all shareholders on the register at close of business on 6October 2006. For further information please contact: Motivcom PLCSue Hocken, Finance Director - 01908 352007 Abchurch CommunicationsHeather Salmond - 020 7398 7704 CHAIRMAN'S STATEMENT Trading update The Group is one of the leading performance improvement businesses in the UKwith over 16 years' experience in delivering incentive and motivation programmesto clients. These programmes focus on the rewarding of employees, distributorsand customers. The Group has three operating divisions: Motivation andIncentives, Incentive Travel and Live Events and Sales Promotion and EmployeeBenefits. The Motivation and Incentives division has made further investment in both salesand product development to take advantage of the increasing recognition by UKcompanies of the need to find new and innovative ways of motivating employees.Existing technology platforms (rewardbanking.com, rewardvouchers.com andrecogniseme.com) have been built on with the introduction of "Spree" a pre-paidincentive Visa card. This has resulted in a significant upturn in new businessactivity and strong prospects for 2007. The Incentive Travel and Live Events division has continued to demonstratesustained growth and has seen a 44% increase in new business opportunities, withwin ratios continuing to remain at the normal levels. Archer Young, acquired in2005, continues to make good progress, making a contribution to Group profitsand fully justifying the investment. I am pleased to report good forwardvisibility for further growth in 2007. The Sales Promotion and Employee Benefits division has again performed well.The annual contract renewal cycle for our "Lifestyle" product has to dateresulted in a 99% repeat purchase pattern, demonstrating the value of theoffering and indicating an excellent future revenue stream. The Employee Benefits division had made a considerable investment in developingand marketing a Home Computer Initiative (HCI) benefits programme and had woncontracts from a number of public and private sector organisations. However,the Chancellor announced in the April 2006 Budget, with only 3 weeks notice,that this tax benefit was withdrawn and, despite significant lobbying by the HCIindustry, this status remains. We have absorbed all abortive costs in the firsthalf and there has been a short term impact. However, we continue to work withmany of the clients, who have appreciated our efforts on their behalf, toprovide them with alternative programmes with the result that revenue prospectsand further new and exciting product offers have been developed. Investments Your Board has made investments in two of our divisions to further productdevelopment. We believe these products will have a significant impact on thegroup's future profitability, although the short term impact from theinvestments has been a small reduction in operating profits. • The Spree Card (Motivation and Incentives division). This is thefirst prepaid reward debit card to be up and running in the UK using the VisaPrepaid platform. I announced in July that British Gas was the first client toimplement the Spree Card as part of its strategic internal rewards programme.This has been followed by a number of other wins that are at various stages ofcontract. • Childcare - Plus (Sales Promotion and Employee Benefits division).This is a range of childcare vouchers that expands this division's range offlexible and voluntary benefits. Nottingham City Council was the first client.This has been followed by a further ten client wins, with long term revenuepotential. Acquisitions As previously reported on 31 January 2006 the Group acquired SummersaultCommunications, a creative services company specialising in internal corporatecommunications for large organisations. A combination of new business wins andits ability to provide synergistic cross selling opportunities means that thishas been an excellent addition to the Group. In addition, we announced that on 15 February 2006 the Group acquired the tradeof The Voucher Shop, a well known brand in the incentive programme and employeebenefits sector. The Voucher Shop has been integrated into the Motivation andIncentives division; the combination has created one of the UK's largestsuppliers of these services and we have since achieved further growth combinedwith improved terms from voucher suppliers. Outlook A dramatic improvement for the marketing services industry is that the tradebodies and media that support the various sub-sectors of the Group's activityare now addressing the lack of quality research and sector statistics. For thefirst time the scale, growth and scope of the overall market for Motivcom isbeing measured. The result is that there are extremely positive signs for theindustry's prospects as a whole, with industry expenditure forecasts indicatinghealthy increases. The business to employee (B2E) sector remains strong, in spite of the recentheadline increase in unemployment. Recent research shows that, whilst theheadline figures show an underlying increase, this disguises the substantialinflow of workers from new member countries in the EU, combined with higheremployment activity rates amongst older workers. This does not impact the coreB2E market and our clients report that their workforce pressures are no lessthan in recent years. Indeed a more educated work force is demanding more andmore. The combination of our investments in successful new products, a number ofclient wins, our recent successful acquisitions, and a healthy tradingenvironment gives rise to a positive outlook for the rest of the year andbeyond. Colin Lloyd Chairman CONSOLIDATED INTERIM INCOME STATEMENT (UNAUDITED) 6 months 6 months ended 30 ended 30 12 months ended June 2006 June 2005 31 December 2005 Note £000 £000 £000 Sales 3 32,161 27,066 46,385 Cost of sales (25,850) (22,027) (35,485) __________ __________ _________ Gross profit 6,311 5,039 10,900 Administrative expenses (5,379) (4,150) (8,908) __________ __________ _________ Operating profit 3 932 889 1,992 Finance costs - net 7 38 33 __________ __________ _________ Profit before income tax 939 927 2,025 Income tax expense 4 (292) (279) (626) __________ __________ _________ Profit for the period 8 647 648 1,399 __________ __________ _________ Attributable to: Equity holders of the Company 647 648 1,399 __________ __________ _________ Earnings per share for profit attributable to the equity holders of the Company during the year (expressed in pence) - basic 5 2.58 2.58 5.57 __________ __________ _________ - diluted 5 2.51 2.54 5.47 __________ __________ _________ There are no gains and losses other than the profit for the period. CONSOLIDATED INTERIM BALANCE SHEET (UNAUDITED) At 30 June At 30 June At 31 December 2006 2005 2005 Note £000 £000 £000 ASSETS Non-current assets Property, plant and equipment 349 300 268 Goodwill 5,442 3,880 3,882 Other intangible assets 82 - - Deferred income tax assets 121 107 113 ______ ______ ______ 5,994 4,287 4,263 ______ ______ ______ Current assets Inventories 644 111 466 Trade and other receivables 9,301 7,554 8,545 Cash and cash equivalents 3,312 3,478 6,369 ______ ______ ______ 13,257 11,143 15,380 ______ ______ ______ Total assets 19,251 15,430 19,643 ______ ______ ______ EQUITY Capital and reserves attributable to the Company's equity holders Share capital 126 126 126 Share premium account 2,882 2,882 2,882 Other reserves 75 75 75 Retained earnings 3,404 2,164 2,944 ______ ______ ______ Total equity 8 6,487 5,247 6,027 ______ ______ ______ LIABILITIES Non-current liabilities Borrowings 183 603 393 Deferred income tax liabilities 12 - - Deferred consideration 300 - - ______ ______ ______ 495 603 393 ______ ______ ______ Current liabilities Trade and other payables 11,397 8,817 12,476 Current income tax liabilities 452 343 327 Borrowings 420 420 420 ______ ______ ______ 12,269 9,580 13,223 ______ ______ ______ Total liabilities 12,764 10,183 13,616 ______ ______ ______ Total equity and liabilities 19,251 15,430 19,643 ______ ______ ______ CONSOLIDATED INTERIM CASH FLOW STATEMENT (UNAUDITED) 6 months 6 months ended 30 ended 30 June 2005 12 months ended June 2006 £000 31 December 2005 £000 £000 Cash flows from operating activities Cash (used in)/generated from operations (829) (744) 2,783 Interest paid (29) (49) (93) Income tax paid (328) (441) (811) _______ ________ ______ Net cash (used in)/generated from operating (1,186) (1,234) 1,879 activities _______ ________ ______ Cash flows from investing activities Acquisition of subsidiary, net of cash (1,271) (33) (36) acquired and dividends due to former shareholders Purchases of property, plant and equipment (77) (57) (108) (PPE) Purchase of unincorporated trade (161) - - Proceeds from sale of PPE - 2 5 Interest received 86 137 226 _______ ________ ______ Net cash (used in)/generated from investing (1,423) 49 87 activities _______ ________ ______ Cash flows from financing activities Proceeds from issue of shares - 3 3 Repayments of borrowings (260) (415) (675) Dividends paid (188) - - _______ ________ ______ Net cash (used in)/generated from financing (448) (412) (672) activities _______ ________ ______ Net (decrease)/increase in cash (3,057) (1,597) 1,294 Cash at beginning of period 6,369 5,075 5,075 _______ ________ ______ Cash at end of period 3,312 3,478 6,369 _______ ________ ______ Cash generated from operations 6 months 6 months ended 30 ended 30 June 2005 12 months ended June 2006 £000 31 December 2005 £000 £000 Profit for the period 939 927 2,025 Adjustments for: - depreciation 77 76 157 - interest expense (7) (38) (33) - share based payments 1 16 45 - amortisation of intangibles 8 - - Changes in working capital (excluding the effects of acquisition and exchange differences on consolidation): - inventories (119) 467 112 - trade and other receivables (455) 1,903 1,094 - trade and other payables (1,273) (4,095) (617) _______ ________ ______ Cash (used in)/generated from operations (829) (744) 2,783 _______ ________ ______ NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) 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 communications and (3) the provision of trade and consumer salespromotions and employee 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 AIM, a market operated by the LondonStock Exchange plc. These consolidated interim financial statements have been approved for issue bythe Board of Directors on 27 September 2006. 2 Basis of preparation These condensed consolidated interim financial statements of Motivcom plc arefor the six months ended 30 June 2006. They have been prepared in accordancewith International Accounting Standard 34 Interim Financial Reporting. Theabove financial information does not constitute statutory accounts within themeaning of Section 240, Companies Act 1985 and should be read in conjunctionwith the consolidated financial statements of the Group as at and for the yearended 31 December 2005. 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 2005 which is available on the Group'swebsite (www.motivcom.com). As of 1 January 2006 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 2006, 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 livecommunications ("Events") - (3) trade and consumer sales promotions and employeebenefit products ("Promotions"). Unallocated costs represent corporateexpenses. 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) 932 _______ _______ ______ ______ ______ Finance costs - net 7 ______ Profit before income tax 939 Income tax expense (292) ______ Profit for the period 647 ______ The segment results for the six months ended 30 June 2005 are as follows: Motivation Events Promotions Unallocated Group £000 £000 £000 £000 £000 Total gross segment sales 5,834 17,732 3,500 - 27,066 _______ _______ ______ ______ ______ Operating profit/(loss) 110 844 2 (67) 889 _______ _______ ______ ______ Finance costs - net 38 ______ Profit before income tax 927 Income tax expense (279) ______ Profit for the period 648 ______ The segment results for the year ended 31 December 2005 are as follows: Motivation Events Promotions Unallocated Group £000 £000 £000 £000 £000 Total gross segment sales 14,142 22,703 9,540 - 46,385 _______ _______ ______ ______ ______ Operating profit/(loss) 441 1,112 588 (149) 1,992 _______ _______ ______ ______ ______ Finance costs - net 33 ______ Profit before income tax 2,025 Income tax expense (626) ______ Profit for the period 1,399 ______ 4 Income tax expenses 6 months 6 months ended 30 ended 30 12 months ended June 2006 June 2005 31 December 2005 £000 £000 £000 Current tax 312 296 649 Overprovision of tax for prior year (11) - (1) Deferred tax (9) (17) (22) _______ ______ _____ 292 279 626 _______ ______ _____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 6 months ended 30 ended 30 12 months ended June 2006 June 2005 31 December 2005 £000 £000 £000 Profit attributable to equity holders of the Company 647 648 1,399 _______ ______ _____ Weighted average number of ordinary shares in issue 25,115 25,115 25,115 (thousands) _______ ______ _____ Basic earnings per share in pence 2.58 2.58 5.57 _______ ______ _____ 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. The number ofshares calculated as above is compared with the number of shares that would havebeen issued assuming the exercise of the share options. The proposed option tobe issued to C T Lloyd has been excluded from this calculation as all theconditions attaching to the proposed option had not been met at 30 June 2006. 6 months 6 months ended 30 ended 30 12 months ended June 2006 June 2005 31 December 2005 £000 £000 £000 Profit attributable to equity holders of the Company 647 648 1,399 _______ ______ _____ Weighted average number of ordinary shares in issue 25,115 25,115 21,115 (thousands) Adjustment for share options (thousands) 626 410 442 _______ ______ _____ Weighted average number of ordinary shares for diluted 25,741 25,525 25,557 earnings per share (thousands) _______ ______ _____ Diluted earnings per share in pence 2.51 2.54 5.47 _______ ______ _____ During the first six months of 2006, Motivcom plc paid dividends of £188,000 to its equity shareholders (2005: £nil). This represents a payment of £0.75 pence per share. 6 Share-based payments The Group has four contracted share option schemes. The EMI Option Schemes and the Sharesave Scheme disclosed in theGroup's most recent financial statements and a Sharesave Scheme introduced on 7 June 2006. Additionally, as noted inthe Group's most recent financial statements the Company proposes to issue options to C T Lloyd by reference to thegrowth in market capitalisation of the Company. The following contracted and proposed options have been valued inaccordance with the provisions of IFRS 2. Date of original grant Number of Option price Vesting Life of Scheme options conditions option Fair Value £ £ EMI Option 29/03/2004 150,000 0.4285 2 years from 10 Years 0.01 Scheme 25/08/2004 Sharesave Scheme 28/04/2005 459,483 0.64 3 Years 3 Years 0.10 EMI Option 21/11/2005 121,693 0.945 3 Years 10 Years 0.14 Scheme Sharesave Scheme 07/06/2006 98,186 0.815 3 Years 3 Years 0.12 Each 20% growth in market value C T Lloyd - 775,672 0.005 10 Years 0.12 Option Scheme 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 contracted EMI and Sharesave Schemes and a MonteCarlo model for the proposed C T Lloyd Scheme. The vesting period is used as aninput to those models. The following additional assumptions were used: - Expected volatility of 28% based on the average volatility of the company since flotation in August 2004.- No expected dividends.- Risk free interest rate of 4.40%. 7 Acquisition of subsidiaries On 31 January 2006 the Company acquired the entire issued share capital ofSummersault Communications Limited ("Summersault") for an initial cashconsideration of £1,500,000 and a further payment of £116,000 in respect of netassets at completion in excess of those envisaged of £475,000. Additionaldeferred cash consideration of up to £750,000 is payable subject to Summersaultachieving specified levels of earnings before tax and interest in the yearsending 31 December 2006, 2007 and 2008, of which this Interim Statement assumes£300,000 will be payable. Associated costs of £93,000 were paid. Summersaultis a creative services business that specialises in internal corporatecommunications for large blue chip organisations. In the five months to 30 June2006, the business contributed £118,000 and £86,000 to consolidated operatingprofit and consolidated profit for the period. If Summersault had been acquiredon 1 January 2006, consolidated revenue and profit of the Group for 2006 wouldhave been £32,157,000 and £566,000. The acquisition had the following effect on the Group's assets and liabilities: Recognised and carrying amount £000Intangible asset - customer relationships and contractual arrangements 90Plant, property and equipment 81Inventories 59Trade and other receivables 301Cash and cash equivalents 438Trade and other payables (123)Current income tax liability (153)Deferred income tax liability (12) _____Net identifiable assets and liabilities 681Goodwill on acquisition 1,328 _____Consideration payable, including costs 2,009 _____ A significant part of the acquisition cost can be attributed to the accountdirection and production know-how of key personnel of Summersault. Under IFRSno value can be attributed to such intangibles. There was also an intangiblerelating to the name but the value estimated for this is not material. Thesecircumstances contributed to the amount recognised as goodwill. The aboveamounts are provisional. On 15 February 2006 the Company acquired The Voucher Shop ("The Voucher Shop"),a trading division of FHSC Limited from the Administrators of FHSC Limited. Acash consideration of £147,000 was paid for the trade and liabilities of £71,000assumed in respect of contracts. Associated costs of £14,000 were paid. Thebusiness has been assumed into that of P&MM Limited. 8 Statement of changes in equity Share capital Share Other Retained earnings Total £000 Premium Reserves £000 equity £000 £000 £000 Balance at 1 January 2005 126 2,879 75 1,500 4,580 Reduction in issue costs - 3 - - 3 Profit for the period - - - 648 648 Share based payments - - - 16 16 _____ ______ _____ ______ ______ Balance at 30 June 2005 126 2,882 75 2,164 5,247 Profit for the period - - - 751 751 Share based payments - - - 29 29 _____ ______ _____ ______ ______ Balance at 31 December 2005 126 2,882 75 2,944 6,027 Profit for the period - - - 647 647 Share based payments - - - 1 1 Dividends - - - (188) (188) _____ ______ _____ ______ ______ Balance at 30 June 2006 126 2,882 75 3,404 6,487 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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