17th Mar 2006 07:30
P&MM Group PLC17 March 2006 P&MM GROUP PLC ("THE COMPANY") RECENTLY RENAMED MOTIVCOM PLC 17 MARCH 2006 PRELIMINARY ANNOUNCEMENT FOR THE YEAR ENDED 31 DECEMBER 2005 P&MM Group plc ("the Company"), a leading marketing services company providingincentive and motivation services to a range of UK and international clients,announces its preliminary results for the year ended 31 December 2005. FINANCIAL HIGHLIGHTS • Operating profit increased by 21% to £1,992,000 (2004: £1,645,000) • Profit before tax increased by 30% to £2,025,000 (2004: £1,555,000) • Gross profit increased by 31% to £10,900,000 (2004: £8,315,000) • Basic earnings per share increased by 10% to 5.57 pence (2004: 5.08 pence) • Maiden dividend of 0.75 pence recommended by the Board • 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 • January 2006 acquisition of Summersault Communications, a provider of internal corporate communications for large blue chip organisations, extending involvement in the arena of employee motivation • February 2006 acquisition of the trade of The Voucher Shop, fulfilling vouchers in respect of employee flexible benefit and incentive programmes for blue chip organisations, increases range of services and client base • Equity increased by 32% to £6,027,000 (2004: £4,580,000) • Excellent platform for future growth and development For further information please contact: P&MM Group plcSue Hocken, Finance Director Tel: 01908-352007 Binns & Co PR Ltd Tel: 020-7786-9600Peter Binns Mob: 07768-392582Ben Knowles Mob: 07900-346978 CHAIRMAN'S STATEMENT Trading Results This is my second report to shareholders since your Company was admitted totrading on AIM in August 2004 and again I am pleased to report that the Grouphas continued to make progress. Operating profit for the Group for the yearended 31 December 2005 grew by 21% to £1,992,000 from £1,645,000 in 2004, inline with market expectations. Profit before tax of the Group for the year ended 31 December 2005 increased by30% to £2,025,000 from £1,555,000 in 2004. The combination of funds raised atthe listing and retained profits has resulted in a considerably strengthenedbalance sheet with equity at 31 December 2005 standing at £6,027,000. The gross profit for the Group has increased by 31% to £10,900,000 in thereported period. I would again ask shareholders to note that it is the Group'spractice to measure gross profit as the key performance indicator as turnovercan fluctuate substantially as a result of third party billings. Turnover doesnot provide a reliable measure of performance for your Group. Basic earnings per share increased by 10% to 5.57p with diluted earnings pershare increasing by 9% to 5.47p. The growth in earnings per share is lower thanthe growth in underlying earnings, due to the timing of the issue of shares onadmission to AIM in August 2004. If the AIM float had occurred on 1 January 2004basic earnings per share would have been 4.38 pence and on this basis the 2005growth in basic earnings per share would have been 27%. Dividend In my inaugural statement to shareholders last year I indicated that the Companywould initiate a dividend policy when its resources allowed. In view of theprogress of the Company since its listing and taking account of the balancesheet strength and future prospects your Board has decided it appropriate torecommend payment of a maiden final dividend of 0.75p. Subject to shareholderapproval at the Annual General Meeting, the final dividend will be paid on 24May 2006 to shareholders on the register at close of business on 31 March 2006. Group Developments Since going public the Group has made four acquisitions, all for cashconsideration, underlying our stated focus on seeking to consolidate the highlyfragmented market by adding complementary businesses to our diversified range ofspecialist marketing services. I am pleased to report that the acquisitions of Fotorama in 2004 and AYMServices in 2005 have made positive contributions to Group trading profit,exceeding expectations at the time of these acquisitions. On 31 January 2006 we acquired Summersault Communications, a creative servicescompany specialising in internal corporate communications for largeorganisations. This will provide additional opportunities for cross sellingthese services within the Group. Early indications suggest that Summersault hassettled well into being part of our Group and has already won new contracts. On 15 February 2006 we acquired the trade of The Voucher Shop, a well know brandin the incentive programme and employee benefits sectors. The Voucher Shop willbe integrated into the Motivation and Incentives division; the combination willcreate one of the UK largest suppliers of these services and we expect toachieve further growth and improved terms from voucher suppliers. To better manage the future growth your Board has structured the Group intothree operating divisions: •Motivation and Incentives •Incentive Travel and Live Communications •Sales Promotion and Employee Benefits The three divisions are headed respectively by John Sylvester, Nigel Cooper andDavid Lebond. Each of these divisions has shown good progress in the year with many newclients won in each division. In particular, the Employee Benefits products launched two years ago havedemonstrated good market penetration with many large companies and localauthorities buying the programmes. We estimate that some 422,000 employees ofthese companies are currently benefiting from these programmes with a further94,000 shortly to benefit with new programme launches. What is particularlypleasing is that the programmes are experiencing a 100% annual renewal ratecreating good future earnings visibility. Substantial investment has been madein new product development in this area during 2005. Group Change of Name The Group now operates five well-known brand names in our various sectors.Following a strategic review of our market positioning your Board has agreedthat it would improve our long-term strategic position if the holding companydid not share a name with any of the trading businesses. Your Board thereforerecommended changing the Company name to Motivcom plc, which was approved byshareholders at an EGM on 14 March 2006. The new name reflects the Motivationand Communications sectors in which we operate and will provide an excellentplatform for future development, particularly when we enter overseas markets. Market Overview Your Group operates in a sub-sector of the £20 billion marketing services sectorin the UK. Marketing services is a highly diverse, dynamic and fragmentedindustry where the UK enjoys a global reputation for excellence. The industryfollows cyclical patterns linked to the general economy and is influenced at amacro level by global events such as the World Cup and Olympics. Whilst allcompanies in our industry are affected both positively and negatively by theseinfluences your Board is confident that in the employee communication,motivation, benefits and sales promotions sector in which we operate, your Groupwill not be overly affected. Indeed, in a lower growth phase of the economy,advertisers have historically switched budgets to the more accountable marketingchannels in which we operate. Our People Key to the success of any service organisation is the enthusiasm, loyalty andcommitment of its employees. As much of the Group's offerings are in employeemotivation for our clients we have a particular interest in how successful weare with our own people particularly as staff numbers have grown to 209. I amtherefore pleased to report that the Group has recently been ranked 30th in theSunday Times best small companies to work for in the UK survey, up from 44thlast year. I am also pleased that our staff churn rate is the lowest that it hasever been and employee participation in the Group's Sharesave Scheme is nearlytwice the national average. This commitment also benefits our clients and isreflected in the industry awards that our peers bestow on us. In the last 5years the Group has won 65 major awards. It is therefore appropriate on behalf of our shareholders and Board that I thankour employees for the contribution to our continuing success. 2005 Accounts The Group's consolidated financial results for the period have been prepared forthe first time under International Financial Reporting Standards. The impact onthese results, and the comparatives, is not significant. Outlook The position that we have attained provides an excellent platform for futuregrowth and development of the Group. Colin LloydChairman 16 March 2006 CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2005 Year Year ended ended 31 December 31 December 2005 2004 Note £000 £000 Revenue 2 46,385 42,704Cost of sales (35,485) (34,389) Gross profit 10,900 8,315 Administrative expenses (8,908) (6,670)Operating profit 2 1,992 1,645Interest expense 3 (193) (234)Interest income 226 144Profit before income tax 2,025 1,555Income tax expense 4 (626) (455)Profit for the period 1,399 1,100 Attributable to:Equity holders of the Company 1,399 1,100 Earnings per share for profit attributable to theequity holders of the Company during the year(expressed in pence) - basic 5 5.57 5.08- diluted 5 5.47 5.03 CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE FOR THE YEAR ENDED 31 DECEMBER 2005 Year ended 31 Year ended 31 December 2005 December 2004 £000 £000 Profit for the period and total recognisedincome and expense for period 1,399 1,100 CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2005 At 31 December At 31 December 2005 2004 Note £000 £000 ASSETSNon-current assetsProperty, plant and equipment 268 263Goodwill 3,882 3,223Deferred income tax assets 113 79 4,263 3,565 Current assetsInventories 466 268Trade and other receivables 8,545 8,498Cash and cash equivalents 6,369 5,075 15,380 13,841Total assets 19,643 17,406 EQUITYCapital and reserves attributable to theCompany's equity holdersShare capital 7 126 126Share premium account 7 2,882 2,879Other reserves 7 75 75Retained earnings 7 2,944 1,500Total equity 6,027 4,580 LIABILITIESNon-current liabilitiesBorrowings 393 813 Current liabilitiesTrade and other payables 12,476 11,113Current income tax liabilities 327 480Borrowings 420 420 13,223 12,013Total liabilities 13,616 12,826Total equity and liabilities 19,643 17,406 The financial statements were approved by the Board of Directors on 16 March2006 and signed on its behalf by Colin Lloyd, Chairman. CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2005 Year ended 31 Year ended 31 December 2005 December 2004 Note £000 £000 Cash flows from operating activities Cash generated fromoperations 8 2,783 2,233Interest paid (93) (134)Income tax paid (811) (278)Net cash generated fromoperating activities 1,879 1,821 Cash flows from investing activities Acquisition of subsidiary,net of cash acquired anddividends due to formershareholders (36) -Purchases of property, plantand equipment (PPE) (108) (118)Purchase of unincorporatedtrade - (206)Proceeds from sale of PPE 5 -Interest received 226 144Net cash generated from/(usedin) investing activities 87 (180) Cash flows from financing activities Proceeds from issue of shares 3 2,496Repayments of borrowings (675) (780)Net cash (used in)/generatedfrom financing activities (672) 1,716 Net increase in cash 1,294 3,357Cash at beginning of period 5,075 1,718Cash at end of period 6,369 5,075 NOTES TO THE PRELIMINARY ANNOUNCEMENT 1 Basis of information in the preliminary announcement The financial information in this preliminary announcement does not constitutethe Company's statutory accounts for the periods ended 31 December 2005 or 31December 2004 but is derived from those accounts. Statutory Accounts for 2004 have been delivered to the Registrar of Companiesand those for 2005 will be delivered following the Company's annual generalmeeting. The auditors have reported on those accounts; their report was (i)unqualified, (ii) did not include a reference to any matters to which theauditors drew attention by way of emphasis without qualifying their report and(iii) did not contain a statement under section 237 (2) or (3) of the CompaniesAct 1985. The preliminary announcement has been prepared in accordance with the accountingpolicies adopted under IFRS for the first time with a transition date of 1January 2004. The disclosures required by IFRS 1 "First-time Adoption ofInternational Financial Reporting Standards" concerning the transition from UKGAAP to IFRS can be found in the Interim Announcement for the period ended 30June 2005. 2 Segment Information Primary reporting format - business segments At 31 December 2005, 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 corporate expenses. The segment results for the year ended 31 December 2005 are as follows: Motivation Events Promotions Unallocated Group £000 £000 £000 £000 £000 Total grosssegmentrevenue 14,142 22,703 9,540 - 46,385 Operatingprofit/(loss) 441 1,112 588 (149) 1,992Finance costs- net 33Profit beforeincome tax 2,025Income taxexpense (626)Profit for theperiod 1,399 The segment results for the year ended 31 December 2004 are as follows: Motivation Events Promotions Unallocated Group £000 £000 £000 £000 £000 Total grosssegmentrevenue 11,803 21,023 9,878 - 42,704 Operatingprofit/(loss) 508 521 691 (75) 1,645Finance costs- net (90)Profit beforeincome tax 1,555Income taxexpense (455)Profit for theperiod 1,100 Secondary reporting format - geographical segments The home-country of the Company - which is also the main operating Company - isEngland. The Group's sales are mainly in countries within the UK and the eurozone and,allocated on the basis of the country in which the customer is located, are asfollows: Year ended 31 Year ended 31 December 2005 December 2004 £000 £000 UK 43,917 38,306Rest of Europe 2,201 2,805Other countries 267 1,593 46,385 42,704 3 Interest expense Year ended 31 Year ended 31 December 2005 December 2004 £000 £000Interest expense:- bank borrowings 93 134- debt finance costs 100 100 193 234 4 Income tax expense Year ended 31 Year ended 31 December 2005 December 2004 £000 £000 Current tax 649 479Overprovision of tax for prior year (1) - 648 479Deferred tax (22) (24) 626 455 The tax on the Group's profit before tax differs from the theoretical amountthat would arise using the weighted average tax rate applicable to profits ofthe consolidated companies as follows: Year ended 31 Year ended 31 December 2005 December 2004 £000 £000 Profit before tax 2,025 1,555 Tax calculated at domestic tax ratesapplicable to profits in the respectivecountries 608 467Overprovision of tax for prior year (1) -Corporation tax rate difference - (12)Expenses not deductible for tax purposes 19 -Tax charge 626 455 The weighted average applicable tax rate was 30.9% (2004: 29.3%). 5 Earnings per share 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. Year ended 31 Year ended 31 December 2005 December 2004 £000 £000 Profit attributable to equity holders ofthe Company 1,399 1,100Weighted average number of ordinary sharesin issue (thousands) 25,115 21,643Basic earnings per share in pence 5.57 5.08 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 number ofshares that would have been issued assuming the exercise of the share options.The proposed option to be issued to C T Lloyd has been excluded from thiscalculation as all the conditions attaching to the proposed option had not beenmet at 31 December 2005. Year ended 31 Year ended 31 December 2005 December 2004 £000 £000 Profit attributable to equity holders ofthe Company 1,399 1,100Weighted average number of ordinary sharesin issue (thousands) 25,115 21,643Adjustment for share options (thousands) 442 225Weighted average number of ordinary sharesfor diluted earnings per share (thousands) 25,557 21,868Diluted earnings per share in pence 5.47 5.03 6 Proposed final dividend The proposed final dividend for the year ended 31 December 2005 of 0.75 pence(2004: nil) is subject to approval by shareholders at the Annual General Meetingand has not been included as a liability in these financial statements. Thetotal amount payable is £188,362. 7 Statement of changes in equity Share Share Other Retained Total capital Premium Reserves earnings equity £000 £000 £000 £000 £000 At 1 January 2004 99 410 75 393 977Profit for the period - - - 1,100 1,100Issue of shares 27 2,873 - - 2,900Issue costs - (404) - - (404)Share based payments - - - 7 7At 31 December 2004 126 2,879 75 1,500 4,580Reduction in issue costs - 3 - - 3Profit for the period - - - 1,399 1,399Share based payments - - - 45 45At 31 December 2005 126 2,882 75 2,944 6,027 8 Cash generated from operations Year ended Year ended 31 December 31 December 2005 2004 £000 £000 Profit for the period 2,025 1,555Adjustments for:- depreciation 157 167- net interest (33) 90- share based payments 45 7Changes in working capital (excluding the effects ofacquisition):- inventories 112 (154)- trade and other receivables 1,094 (2,547)- trade and other payables (617) 3,115Cash generated from operations 2,783 2,233 END This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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