17th Mar 2005 07:00
P&MM Group PLC17 March 2005 P&MM GROUP PLC ("P&MM" or "THE COMPANY") 17 MARCH 2005 PRELIMINARY ANNOUNCEMENT FOR THE YEAR ENDED 31 DECEMBER 2004 P&MM Group plc ("P&MM" or the "Company"), a leading marketing services companyproviding incentive and motivation services to a range of UK and internationalclients, announces its maiden preliminary results for the year ended 31 December2004. FINANCIAL HIGHLIGHTS • Operating profit before amortisation increased by 50% to £1,652,000 (2003 proforma £1,100,000) • Profit before tax increased by 68% to £1,377,000 (2003 proforma £822,000) • Gross profit increased by 27% to £8,315,000 (2003 proforma £6,550,000) • Basic earnings per share increased by 46% to 4.26 pence (2003 proforma 2.91 pence) • July 2004 acquisition of Fotorama, a provider of fixed fee sales promotions, creates one of the UK's largest fixed fee sales promotion providers • February 2005 acquisition of AYM Services, a provider of performance improvement and motivation services, incentive travel and conference production to corporate clients, increases range of services and client base • Shareholders' funds increased by 350% to £4,395,000 (2003 £977,000) • Excellent platform for future growth and development CHAIRMAN'S STATEMENT Trading Review I am pleased to report a record year at all levels for P&MM following theCompany's successful admission to trading on AIM in August 2004, which raised£2,496,000 net of expenses. Operating profits of the group before amortisationfor the year ended 31 December 2004 grew by 50% to £1,652,000 from £1,100,000 in2003 on a proforma basis and exceeded market expectations. Profit before tax of the group for the year ended 31 December 2004 was up 67.5%to £1,377,000 from £822,000 for 2003 on a proforma basis. This substantialincrease from the Interim Results confirms that profits are historically biasedto the second half of the year. A combination of retained after tax earnings andthe proceeds from the flotation strengthened the balance sheet by 350% to£4,395,000 at 31 December 2004 compared to £977,000 at 31 December 2003. Basic earnings per share is 4.26 pence and adjusted earnings per share excludinggoodwill amortisation is 5.12 pence. No dividend is being paid, as indicated inthe Company's AIM admission document. The Company intends to initiate a dividendpolicy in the medium term as and when its resources allow. These results confirm the trading update issued on 9 February 2005, when P&MMsaid that it 'had continued to benefit from positive trading conditions in thesecond half of 2004 and that, consequently, the group's operating profit wouldexceed market expectations, with revenues then estimated to be materially aheadof broker forecasts.' As noted in the group's Interim Report for the period ended 30 June 2004, it isthe group's current practice to measure gross profit as the key performanceindicator. As identified in our presentations to prospective investors, turnovercan fluctuate substantially as a result of third party billings which may besettled by the group or settled directly by the client. Turnover does nottherefore provide a reliable measure of performance. Market Overview At the time of the Company's flotation we set out a strategy for the group toachieve growth both organically and through acquisitions and productdevelopment. Industry research has identified that the performance improvementand motivation market in the UK is a substantial, highly fragmented market placeworth at least £500 million in company expenditure per annum. As such, theopportunities for further market growth for the group are significant. On most criteria the UK enjoys one of the lowest unemployment rates in matureeconomies. This has put pressure on UK businesses to provide additionalincentives and benefits to employees to achieve better recruitment and retentionrates and, at the same time, create reward programmes to maximise staffmotivation to achieve their goals. Increasingly, companies are realising thatefficiencies and profitability can be achieved through better management andmotivation of their human capital asset. With unemployment forecast to remainlow for the foreseeable future your Board believes that the demand for thegroup's products and services will continue to grow. The industry sectors in which P&MM operates form a component of the overallmarketing services marketplace. Following its well publicised downturn in 2002and 2003 all indications are that in the second half of 2004 and through into2005 this market has continued on a growth path substantially in excess ofinflation. Whilst advertising accounts for the larger part of the sector, thebelow the line (non-advertising) sector was not as adversely affected, as budgetallocations by clients were made in favour of the below the line sector, a trendwhich is continuing. Your Board believes that the market in which the group operates provides it withsignificant opportunities to expand and enhance its position and status withinits sector. This has already manifested itself. Acquisitions At the time of our AIM admission, we acquired the trade and certain businessassets of Fotorama (UK) Limited ("Fotorama"), one of the UK's leading providersof 'fixed fee' promotions. The types of consumer promotions offered by Fotoramaenable companies to run successful brand promotions against a fixed budget. Theskills of Fotorama are to assess the likely uptake of the promotion. Our use ofinsurance policies protects the group against excessive consumer demand.Fotorama has been integrated into a similar service that the group had beenrunning and the combination has created one of the UK's largest providers inthis specialist field. The speed of integration of the acquisition and itsfinancial performance to date has more than met our expectations. On 9th February 2005, I was pleased to announce that we had acquired the entireissued share capital of AYM Services Ltd ("AYM") for a cash consideration of£682,000. AYM provides performance improvement and motivation services,incentive travel and conference production to corporate clients. AYM has anexcellent blue chip client list serviced by a highly professional team. It isthe group's intention to operate AYM as a stand-alone brand in the marketplaceand support its development. New products and Industry Awards Through its sales promotion division the group has been active in successfullydeveloping new products that have applications to the HR needs of corporations.The 'Lifestyles' product developed in 2003 provides a package of voluntaryemployee benefits for a low cost per employee. The group has already won manyclients for this product with early indications of repeat orders providingsustainable revenue. In view of this success, the group has embarked on furtherdevelopments in employee benefits which we believe to be a market withsubstantial opportunities. I am also delighted that the quality of our product has been recognised by ourpeers at the Incentive Travel and Meetings Association annual awards, thepremier awards for one of our key divisions. In January 2005 P&MM won theoverall Platinum Grand Prix Award and 4 gold awards. This follows winning theplatinum awards in 2003 and 2004. This achievement of winning the top award forthree consecutive years is unprecedented in the history of the industry. In March 2005 P&MM was voted as one of the top 50 companies to work for in theUK in The Sunday Times special feature "100 Best Small Companies to Work For".In a people business the goodwill and loyalty of staff are of paramountimportance and these awards reflect the standing that the group enjoys with itsstaff and executives. Board Appointment The Company is committed to a level of corporate governance appropriate to itssize. We have formed independent Remuneration and Audit Committees. As part ofthis commitment, I was delighted to announce the appointment of Stephen Clarkeas a non-executive director to the Board of the Company in October 2004. Stephenbrings with him substantial experience in corporate affairs and governance,which will be invaluable as the group expands and develops. IFRS adoption The group intends to adopt IFRS for the year ending 31 December 2005. The grouphas carried out a detailed conversion planning exercise. The group hasidentified that there are two key changes between UK GAAP and IFRS that willaffect the group. Under IFRS 3 goodwill will no longer be amortised and underIFRS 2 it will be necessary to account for share based payments. If IFRS 3 and IFRS 2 had been adopted for the year ended 31 December 2004,goodwill of £185,000 would not have been amortised and charged to the profit andloss account and an amount of £8,000 for share based payments would have beencharged to the profit and loss account. The net effect would have been toincrease profit before tax by £177,000. The proposed option to be issued to C TLloyd has been excluded from the calculation for the IFRS 2 charge as all theconditions attaching to the proposed option had not been met as at 31 December2004. Outlook Our admission to trading on AIM, our substantial organic and corporate growth,and the winning of industry awards could not have been achieved without thededication of my Board colleagues and our employees, for which I thank them. Wehave achieved much in a short time. The position that we have attained providesan excellent platform for future growth and development of the group. Colin LloydChairman The preliminary announcement was approved by the Board on 16 March 2005. P&MM GROUP PLC CONSOLIDATED SUMMARISED PROFIT AND LOSS ACCOUNT For the year ended 31 December 2004 Note Year ended 31 17 April to 31 Unaudited December 2004 December 2003 proforma Year ended 31 December 2003 £'000 £'000 £'000 Turnover 42,704 27,275 36,492Cost of sales (34,389) (22,237) (29,942) Gross profit 8,315 5,038 6,550Administrativeexpenses (6,848) (4,292) (5,563)-------------------------- ----- -------- -------- --------Operatingprofit beforegoodwillamortisation 1,652 859 1,100Goodwillamortisation (185) (113) (113)-------------------------- ----- -------- -------- -------- Operatingprofit 1,467 746 987Net interest (90) (143) (165) Profit onordinaryactivities 1,377 603 822 Tax on profiton ordinaryactivities 2 (455) (210) (274) Retainedprofit for thefinancialperiod 922 393 548 Earnings pershare 3- basic 4.26p 2.32p 2.91p- diluted 4.22p 2.99p 3.51pAdjusted earnings per shareexcluding goodwillamortisation- basic 5.12p 2.32p 2.91p- diluted 5.07p 2.99p 3.51p P&MM GROUP PLC CONSOLIDATED SUMMARISED BALANCE SHEET At 31 December 2004 31 December 31 December 2003 2004 £'000 £'000 Fixed assets 3,301 3,329 Current assetsStocks 268 114Debtors 8,577 6,006Cash at bank and in hand 5,075 1,718 13,920 7,838 Creditors: amounts falling due within one year (12,013) (8,697) Net current assets/(liabilities) 1,907 (859) Total assets less current liabilities 5,208 2,470 Creditors: amounts falling due after more thanone year (813) (1,493) 4,395 977 Capital and reservesCalled up share capital 126 99Share premium account 2,879 410Other reserves 75 75Profit and loss account 1,315 393 Shareholders' funds 4,395 977 RECONCILIATION OF MOVEMENT IN SHAREHOLDERS FUNDS Year to 31 17 April to December 2004 31 December 2003 £'000 £'000 Profit for the period 922 393Issue of shares 2,496 584 Net increase inshareholders' funds 3,418 977Shareholders' funds atbeginning of period 977 - Shareholders' funds atend of period 4,395 977 P&MM GROUP PLC CONSOLIDATED SUMMARISED CASH FLOW STATEMENT For the year ended 31 December 2004 Note Year ended 31 17 April to December 2004 31 December 2003 £'000 £'000 Net cashinflow fromoperatingactivities 2,233 2,302 Returns oninvestmentsand servicingof finance 10 (70) Taxation (278) (225) Capitalexpenditure (118) (79) Acquisitionsand disposals (206) (2,531) Financing 1,716 2,321 Increase incash 4 3,357 1,718 NET CASH INFLOW/OUTFLOW FROM OPERATING ACTIVITIES Year ended 31 17 April to December 2004 31 December 2003 £'000 £'000 Operating profit 1,467 746Depreciation andamortisation 352 223(Increase)/decreasein stock (154) 27(Increase)/decreasein debtors (2,547) 2,847Increase/(decrease)in creditors 3,115 (1,541) Net cash inflowfrom operatingactivities 2,233 2,302 P&MM GROUP PLC NOTES TO THE PRELIMINARY ANNOUNCEMENT For the year ended 31 December 2004 1. BASIS OF PREPARATION The preliminary announcement has been prepared in accordance with applicableaccounting standards and under the historical cost convention. The principal accounting policies of the group have remained unchanged fromthose set out in the group's 2003 annual report and financial statements. The consolidated profit and loss account includes unaudited proforma comparativeinformation. This unaudited proforma information has been prepared as if theacquisition of P&MM Holdings Limited during the year ended 31 December 2003,which completed on 17 April 2003 had been completed on 1 January 2003. Goodwillhas only been amortised for the period since acquisition. 2. TAX ON PROFIT ON ORDINARY ACTIVITIES Year ended 31 17 April to December 2004 31 December 2003 £'000 £'000The tax charge represents:United Kingdomcorporation tax at30% 480 226Over provision ofcorporation taxfor prior period (1) -Deferred tax (24) (16) 455 210 3. EARNINGS PER SHARE On 17 August 2004 the Company converted all its issued A ordinary shares of £1each, B ordinary shares of £1 each and C ordinary shares of £1 each intoOrdinary shares of 0.5 pence each. As a result of this transaction the number ofordinary shares in issue increased from 98,723 to 19,744,601. On 25 August 2004the Company issued a further 5,370,370 ordinary shares of 0.5 pence for cash,increasing its issued share capital to 25,114,971 ordinary shares of 0.5 penceeach. On the same day the shares of the Company were admitted to trading on AIM.The calculation of the basic earnings per share is based on the earningsattributable to ordinary shareholders divided by the weighted average number ofshares in issue during the year. The weighted average number of shares used inthis calculation for 2004 and 2003 were 21,627,909 and 16,911,968 respectively.The calculation of diluted earnings per share is based on the basic earnings pershare, adjusted to allow for the issue of shares on the assumed conversion ofall dilutive options from the date the option is issued. The weighted averagenumber of shares used in this calculation for 2004 and 2003 were 21,854,789 and16,911,968 respectively. The proposed option to be issued to C T Lloyd has beenexcluded from this calculation as all the conditions attaching to the proposedoption had not been met as at 31 December 2004. P&MM GROUP PLC NOTES TO THE INTERIM FINANCIAL STATEMENTS For the year ended 31 December 2004 4. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT Year ended 31 17 April to 31 December 2004 December 2003 £'000 £'000 Increase in cashin the period 3,357 1,718Cash inflow fromfinancing - (2,340)Repayment of debtin the year 780 -Movement in netdebt in theperiod 4,137 (622)Net debt atbeginning ofperiod (622) - Net cash/(debt)at end of period 3,515 (622) 5. POST BALANCE SHEET EVENTS On 8 February 2005 P&MM Group plc acquired the entire issued share capital ofAYM Services Limited ("AYM") for a cash consideration of £682,000. AYM is aperformance improvement agency that provides motivation and incentiveprogrammes, incentive travel and conference production management to corporateclients. AYM had net assets of approximately £518,000 at 31 December 2003,turnover of approximately £8,151,000 and a loss before tax of approximately£87,000 for the year ended 31 December 2003. 6. PUBLICATION OF NON-STATUTORY ACCOUNTS The financial information set out in this preliminary announcement does notconstitute statutory accounts as defined in section 240 of the Companies Act1985. The summarised balance sheet at 31 December 2004 and the summarised profit andloss account, summarised cash flow statement and associated notes for the yearthen ended have been extracted from the group's 2004 statutory financialstatements upon which the auditors opinion is unqualified and does not includeany statement under section 237 of the Companies Act 1985. Those financial statements have not yet been delivered to the registrar ofcompanies. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
MCM.L