6th Jun 2008 07:00
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Press Release |
6 June 2008 |
SPORT MEDIA GROUP PLC
("Sport Media", "SPMG", "the Group" or "the Company")
Trading Update, Strategic Review and Board Reorganisation
and Acquisition of Flip Media Ltd
Sport Media Group plc (AIM: SPMG.L), the integrated multi-media group that publishes the Sunday and Daily Sport newspapers and digital content for internet and mobile channels, today announces the acquisition of Flip Media Ltd and the following trading update and strategic review.
Trading Update
Following the re-launch of the Daily Sport newspaper on 21 April 2008, the Audit Bureau of Circulation (ABC) figures for the month of May, which are to be published today, confirm that the circulation of the Daily Sport has fallen by approximately 11% with sales now averaging circa 85,000. Initial analysis shows that the fall in sales was more severe in the early part of May and is showing recovery towards the latter part as a result of changes to the newspaper following early feedback from customers and the continuing evolution of its editorial content.
The initial reaction to the re-launch has been disappointing, although the Board remains confident that the revised style of the paper will attract new readers and advertisers. However the Board also recognises that this may take longer, and require more promotion than previously expected.
As a result of this information, the Group now expects that pre-exceptional Profit Before Tax for the year to 31 July 2008, which will include the results from the newspaper for less than 11 months, will be lower than current market expectations, but nonetheless in excess of £6 million. The outlook for 2008/9 remains positive, when the benefit of a full years' trading from the Sport, significant cost reductions already implemented, and enhanced cross-selling opportunities between the interactive business, the newspaper and the newly acquired magazine titles, will be fully realised for the first time.
Strategic review and Board reorganisation
In response to the recent share price performance, the Board is undertaking a strategic review of all options regarding the future of the Group.
Simon Hume-Kendall, non-Executive Chairman, has informed the Board that due to increased business commitments, he intends to step down from the Chairmanship of the Group once the strategic review has been completed, but will be remaining on the Board as a Non-Executive Director.
Acquisition of Flip Media Ltd ("Flip")
Flip is a mainstream magazine publisher. Its flagship monthly title, called 'Front', is aimed at males aged 18-25, specifically the 'lads mag' genre. Flip has published over 100 editions of Front and has a growing monthly circulation which is currently in excess of 40,000. It is sold throughout the UK as well as overseas, and has a cover price of £3.50. The other titles owned by Flip make a small contribution to profits, and will be reviewed once the acquisition is completed.
Sport Media will pay £125,000 in cash upon completion and has agreed to repay loans totalling £140,000 made to Flip by its previous owners. Flip has been acquired with a positive working capital position and requires no further investment by the Group. The deal is expected to be earnings enhancing for Sport Media.
The acquisition of Flip strengthens the Group's presence in the London advertising markets, and provides strong cross selling opportunities between both Flip and the Sport. Integration costs will be negligible and short term synergies have been identified, which will make the Group's overall magazine publishing operations more efficient.
Andrew Fickling, Group Chief Executive Officer, commented:
"Whilst the Board is naturally disappointed with the initial reaction to the re-launched Daily title, I am pleased to note that performance over the most recent weeks indicates a growing acceptance of the new format. This compliments the feedback we have had from potential advertisers, readers and retailers. The paper will continue to evolve as we re-introduce it to our existing audience and strike the right balance to appeal to more new readers.
"The reaction of our share price during the period since the acquisition of the newspaper business has also been a cause of concern to the Board, and we are now reviewing all the options for the group's future. Further updates on this will be provided as necessary.
"I would also like to thank Simon Hume-Kendall for the valuable support he has provided to the entire Board and I during his time as Chairman. I am delighted that he will be remaining as a Director. The process to select a successor is underway and a further announcement will be made in due course.
"Our acquisition of Front magazine demonstrates a key part of our strategy: to build a portfolio of complementary titles in order to broaden our readership and take advantage of synergies across content, advertising and production.
"Front immediately gives the Group a strong and focussed editorial and advertising team in central London and bolsters our exposure to the 18 to 25-year-old male market with a magazine title that is currently growing in circulation, despite the current difficult general publishing climate.
"Under the umbrella of the Group, the excellent progress that the existing Front team has made to grow the magazine to its current position can continue with the benefit of the resources of a larger organisation. This includes access to our digital division, greater negotiating power for content, printing and advertising and economies in finance and administration."
For further information, please contact:
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Sport Media Group plc Andrew Fickling, Chief Executive Officer Andrew Fletcher, Chief Financial Officer |
Tel: +44 (0) 161 236 4466 Tel: + 44 (0) 20 8507 6920 www.sportmediagroup.co.uk |
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Daniel Stewart & Company plc Simon Leathers / Tom Jenkins |
Tel: +44 (0) 20 7776 6550 www.danielstewart.co.uk |
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Abchurch Communications Gareth Mead / Stephanie Cuthbert |
Tel: +44 (0) 20 7398 7710 www.abchurch-group.com |
Notes to Editors:
Formed by a reverse takeover of Sport Newspapers Limited by Interactive World plc, SPMG combines an established national newspaper brand with recognised experience in the delivery of content through digital channels, including both broadband and mobile.
Through integrating traditional print with new media digital content, SPMG's strategy is to expand its target audiences beyond its current loyal readership and users. The Group will also build upon the brand to attract a more diverse audience thereby attracting a broader base of significant advertisers. The integration also provides significant cross selling and marketing opportunities.
Further information on the Company is available at www.sportmediagroup.co.uk.
Related Shares:
SPMG.L