6th Nov 2007 07:00
Sport Media Group PLC06 November 2007 Press Release 6 November 2007 SPORT MEDIA GROUP PLC ("Sport Media", "SPMG", "the Group" or "the Company") Preliminary results for the year ended 31 July 2007 Sport Media Group plc (AIM: SPMG.L and SPMR.L), the integrated multi-media groupthat publishes the Sunday and Daily Sport newspapers and digital content forinternet and mobile channels, announces its preliminary results for the yearended 31 July 2007. These results are for the original business known formerlyas Interactive World plc, and cover the period preceding the acquisition ofSport Newspapers Ltd on 5 September 2007. Financial and business highlights: • Turnover up by 24% to £11.3 million (2006: £9.1 million) • Profit before tax before amortisation and share based payments rose by 25% to £5.4 million (2006: £4.3 million) • Mobile related turnover reached record levels of £7.7 million (2006: £6.8 million) • Final dividend of 4.0p per share (to the holders of SPMG.L only), making full year total dividend of 7.0p per share (yield of 9.3% on recent placing price of 75p) • New product development including the successful roll out of Locked and Pay DVD Post year end highlights: • Acquisition of Sport Newspapers Ltd on 5 September 2007 for £50 million to create broad based media group • First six weeks have shown an encouraging trend in newspaper circulation and the Directors fully expect this to continue as further restructuring takes affect. • Advertising yield up 10% to £6.60 since acquisition • New mass-market advertisers now being signed up including Setanta and Dial-a-phone with further sign ups expected before the end of the calendar year. Also an expanding recruitment section including recruitment advertising for Tesco • Significant new retailers on board including Somerfield - overall retailer universe has increased by approximately 700 retailers in last quarter with penetration of target sales universe up by 7% • Appointment of James Brown as consultant Editor-in-Chief of Sport Newspapers Commenting on the results Simon Hume-Kendall, Chairman, said: "This has been aperiod of significant transformation for the Group. Our existing mobile andinternet businesses have continued to perform well and are now benefiting fromcross-selling opportunities following the acquisition of Sport Newspapers. Thisacquisition was a significant development for the Group and we have also alreadyseen positive changes in the newspaper business since the completion. We arecurrently trading in line with our expectations for the enlarged group, andbelieve that the cross platform media model we are developing has significantpotential. Our dividend payout for the full year provides shareholders with anattractive yield, and we intend to continue this policy in the future." For press enquiries, please contact:Sport Media Group plc Tel: + 44 (0) 20 8507 6920Andrew Fletcher, Chief Financial Officer www.sportmediagroup.co.uk Daniel Stewart & Company plc Tel: +44 (0) 20 7776 6550Alastair Cade / Katie Shelton www.danielstewart.co.uk Abchurch Communications Tel: +44 (0) 20 7398 7700Chris Lane / Gareth Mead www.abchurch-group.com CHAIRMAN'S STATEMENT We are delighted to present the preliminary results for the year ended 31 July2007. Our strong results show a further increase in revenues from the mobilecontent delivery business and an improvement in profitability from our internetservices. Financial Review We are pleased to report that the Group achieved considerable growth during theyear. The reported figures only refer to the period preceding the acquisitionof Sport Newspapers Ltd. Turnover has grown to £11.3 million from £9.1 millionthe previous year, whilst we have been able to maintain strong operating marginsof 46.4% (2006: 46.7%). This has helped the Company to report anothersignificant rise in pre-tax profits which, before amortisation of intangiblesand share based payments and on a comparable basis with 2006, are up by 25% to£5.4 million (2006: £4.3 million). The Group's mobile phone and internet operations, known by the trading name ofNetcollex, and what was the constituent parts of Interactive World, performedwell in the financial year and trading for the current year is in line withBoard expectations. The business has developed its core offerings and rolledout enhanced versions of key products such as "Chat" as well as enhancing theuser experience across all of its products to reflect improved handsets andconnection speeds. New product development has led to the successful roll out of Locked and PayDVD. This technology encourages viewers to pay to unlock further content onDVDs and is proving an increasing success, as the models for design anddistribution are further refined. Further new offerings, particularly in thearea of user generated content, are being evaluated and the possibility of ajoint venture or acquisition of IP in this area is being considered. The Board continues to explore opportunities for overseas expansion, inparticular with new European prospects. The Group is also making progress withregard to monetizing the growing opportunities of IPTV (Internet Protocol TV). Operating Review Since the acquisition of Sport Newspapers, the group has taken a number of verypositive steps forward. In line with our strategy, the number of mass-marketadvertisers is increasing quickly, with brands such as 'Setanta' and 'Dial-a-phone' committing to regular advertising plans., and we have seencontinued progress in educating media buyers of the benefits of working with theSport Newspapers Ltd's publications with the introduction of an agencyrepresentation house in London. New retailers are being brought on board at a pleasing pace and we have added700 outlets in the last quarter. The successful conclusion of negotiations withSomerfield brought stocking commitment back from a major UK retailer and thiswill have a knock on effect in terms of promoting the titles' credibility amongother major retail groups who are currently considering restocking the papers.Our total retail reach now extends to around 37,500 outlets, which represents81% of our potential market. We continue to aggressively pursue further retailpartners. Editorial changes, under the guidance of our newly-appointed consultant,Editor-In-Chief James Brown, have been well received by the retailer communityand feedback from initial customer research is equally supportive. James Brownwas the deputy features editor at NME magazine before leading the team thatfounded Loaded in 1994. He subsequently edited GQ and then later launched hisown company which published Viz and Jack magazines. The Group has successfully implemented industry-standard EDI and data analysistechniques and has also improved newspaper wastage. The Board is confident thatthese initial improvements will provide the Group with even more significantbenefits in the medium to long term. The reformatting of the newspapers has now been completed, including a shift ineditorial focus, which now includes sections such as a new twelve page featureon Championship football, published each week within the Sunday Sport. It isconsidered by the Board that the new overall look and feel of the papersreflects an extremely positive move, one which should assist in rebuildingcirculation. The Group recently undertook a significant promotion of the newspaper, utilisingLocked and Pay DVD technology sourced from its own internal division. Thepromotion consisted of inserting a free DVD in each copy of an edition of theSunday Sport (4 November 2007), which contained both free content and 'Locked'content. The 'Locked' content requires readers to pay for access to it viaeither Premium Rate SMS or Premium Rate telephony. Smaller scale trials havebeen very successful during the summer where we have seen circulation uplifts ofmore than 15% in conjunction with a return on investment of more than 200% onthe DVD's used. This technique is currently unique in UK newspapers andreflects the cross platform skills of the enlarged group and the extremelyeffective fit of the businesses. Dividends During the year the Company paid its final dividend in respect of the year ended31 July 2006, and also paid an interim dividend in respect of the period ended31 January 2007. The Company today announces a final dividend of 4p per sharefor the year ended 31 July 2007 payable to holders of SPMG.L only, making thetotal dividend for the year 7p per share. This represents a yield of 9.3% onthe placing price of 75p per share relating to the acquisition of SportNewspapers Ltd on 5 September 2007. The dividend reflects the strong cashgenerative nature of the Company and, given the low working capital needs of thebusiness, the Board intends to maintain a progressive policy. Holders of SPMG.L shares on the register at the close of business on 16thNovember 2007 (the "Record Date") will be entitled to the final dividend, whichwill be subject to approval by shareholders at the Company's Annual GeneralMeeting (AGM) to be held on 21st December 2007. The SPMG.L shares will bemarked ex dividend on 14th November 2007 and shareholders will be paid on 4January 2008. It is expected that on 19 November 2007, following the Record Date the two linesof stock, SPMG.L and SPMR.L, will merge into one line of stock and have thesymbol SPMG.L. Finally, I would like to take this opportunity to sincerely thank all theemployees of Sport Media Group, without whose enthusiasm and commitment thesepleasing results could not have been achieved. Simon Hume-KendallChairman6 November 2007 Consolidated Profit & Loss AccountYear ended 31 July 2007 Note 2007 2006 £'000 £'000 Turnover 4 11,363 9,065Cost of sales (4,505) (3,949) Gross profit 6,858 5,116Administrative expenses (1,658) (882) Operating profit 5,200 4,234Interest receivable 109 87Interest payable (2) - Profit on ordinary activities beforetaxation analysed between:Profit before tax before amortisationof acquired intangibles and sharebased payments 5,424 4,321Amortisation of acquired intangibleassets (49) -Share based payments (68) - Profit on ordinary activities beforetaxation 5,307 4,321Tax on profit on ordinary activities (1,644) (1,307) Profit after taxation 3,663 3,014Minority interest (43) - Profit for the year 3,620 3,014 Basic earnings per share 3 9.50 8.32 Diluted earnings per share 3 8.66 7.67 The Group has no recognised gains or losses other than the profit for theperiod. All amounts relate to continuing activities. Consolidated Balance SheetAs at 31 July 2007 2007 2006 £'000 £'000 £'000 £'000 FIXED ASSETSIntangible fixed assets 801 -Tangible assets 126 106Investments 3 32 930 138CURRENT ASSETSStock 35 -Debtors 4,552 2,020Cash at bank and in hand 1,704 3,421 6,291 5,441CREDITORSAmounts falling duewithin one year (2,391) (1,798) NET CURRENT ASSETS 3,900 3,643 TOTAL ASSETS LESSCURRENT LIABILITIES 4,830 3,781 CAPITAL AND RESERVESCalled up share capital 96 96Share premium account 1,187 1,161Profit and loss account 3,416 2,424Merger reserve 100 100 4,799 3,781Minority interest 31 - SHAREHOLDERS' FUNDS 4,830 3,781 Approved by the board on 6 November 2007 Consolidated Cash Flow StatementYear ended 31 July 2007 CASH FLOW STATEMENT 2007 2006 £'000 £'000 Net cash flow from operating activities 3,062 3,887 Returns on investments and servicing of financeInterest received 109 87Interest paid (2) - Net cash flow from returns on investments and servicing of finance 107 87 Corporation tax paid (1,429) (777) Capital expenditure and financial investmentPurchase of intangible fixed assets (500) -Purchase of tangible fixed assets (85) (102)Purchase of fixed asset trade investments (3) (12) Net cash flow from capital expenditure and financial investment (588) (114) Acquisitions and disposalsPurchase of subsidiary undertakings (273) -Net cash acquired with subsidiaries 181 - Net cash flow from acquisitions and disposals (92) - Payment of equity dividends (2,696) (3,487) Net cash flow before financing (1,636) (404) FinancingIssue of share capital - 2,001Costs of issue (80) (805)Share capital repurchase - (16) Net cash flow from financing (80) 1,180 (Decrease)/increase in cash (1,716) 776 Consolidated Cash Flow StatementYear ended 31 July 2007 2007 2006 £'000 £'000Reconciliation of operating profit to cash flow from operatingactivitiesOperating profit 5,200 4,234Depreciation and amortisation 133 67(Increase) in stock (35) -(Increase)/decrease in debtors (2,292) (830)(Decrease)/(increase) in creditors (12) 416Share based payments 68 - Net cash flow from operating activities 3,062 3,887 2007 2006 £'000 £'000Reconciliation of net cash flow to movement in net funds (Decrease)/increase in cash (1,716) 776Net funds brought forward 3,420 2,644 Net funds carried forward 1,704 3,420 Notes to the financial informationYear ended 31 July 2007 1 The financial information set out in this announcement does notconstitute the company's statutory accounts for the years ended 31 July 2007 and2006. Except as shown below, the financial information for the year ended 31July 2007 has been prepared using the accounting policies which are consistentwith those adopted in the audited accounts for the year ended 31 July 2006. Thefinancial information for the year ended 31 July 2006 is derived from thestatutory accounts for that year, which have been delivered to the Registrar ofCompanies. The auditors have reported on the 2006 accounts; their report wasunqualified and did not contain a statement under section 237 (2) or (3) of theCompanies Act 1985. The auditors have yet to sign their report on the 2007accounts. The statutory accounts for the year ended 31 July 2007 will befinalised on the basis of the financial information presented by the Directorsin this preliminary announcement and will be delivered to the Registrar ofCompanies following the company's Annual General Meeting. The financialinformation set out in this announcement was approved by the Board of Directorson 6 November 2007. SMG has adopted FRS20 'Share based payment' in the current financial year ended31 July 2007. The company's accounting policy in this respect is as follows: Employee share schemes The company's employee share schemes allow the group employees to acquire sharesin SMG. The fair value of options granted is recognised as an employee expensewith a corresponding increase in equity. The fair value is measured at grantdate and spread over the period during which the employees becomeunconditionally entitled to the options. At each balance sheet date, the companyrevises its estimates of the number of options that are expected to becomeexercisable. It recognises the impact of the revision of original estimates inemployee expense and in a corresponding adjustment to equity over the remainingvested period. There has been no material adjustment included in respect of options granted inprior periods. The adjustment to the current period in respect of optionsgranted amounts to £68k. 2 DIVIDENDS 2007 2006 £'000 £'000 2005 final dividend paid (6.21 pence per share) - 2,196 2006 interim dividend paid (3.65 pence per share) - 1,291 2006 final dividend paid (4.00 pence per share) 1,538 - 2007 interim dividend paid (3.00 pence per share) 1,158 - 2,696 3,487 Notes to the financial informationYear ended 31 July 2007 3 EARNINGS PER SHARE The calculation of basic earnings per share is based on a profit of £3.663m(2006: £3.014m) and a weighted average of 38,540,066 (2006: 36,225,371) sharesin issue. 2007 2006 Basic earnings per share 9.50 8.32 Diluted earnings per share 8.66 7.67 Adjusted earnings per share 9.72 8.32 In order to understand the underlying trading performance, thedirectors consider it appropriate to disclose earnings per share before andafter amortisation of acquired intangible assets and the cost of share basedpayments. Diluted earnings per share assumes dilutive options have beenconverted into ordinary shares. The calculations are as follows: 2007 2006 Profit Shares Profit Shares No. No. £'000 000 £'000 000 Basic earnings 3,663 38,540,066 3,014 36,225,371Dilutive effects:- Options - 3,754,800 - 3,047,436 Diluted earnings 3,663 42,294,866 3,014 39,272,807 Basic earnings 3,663 38,540,066 3,014 36,225,371Post tax amortisation ofacquired intangible assets 34 - - -Post tax cost of share basedpayments 49 - - - Adjusted earnings 3,746 38,540,066 3,014 36,225,371 4 TURNOVER AND SEGMENTAL ANALYSIS The activities of the Group divide into two segments: the Mobile EntertainmentBusiness and the Internet Content and Services Business. All of its activitiesare carried out in the UK. 2007 2006 £'000 £'000TurnoverMobile 7,688 6,766Internet 3,675 2,299 TOTAL 11,363 9,065 -ENDS- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
SPMG.L