TIDMSPMG
Press Release 27 October 2009
SPORT MEDIA GROUP PLC
("Sport Media", "SPMG", "the Group" or "the Company")
Interim results for the twelve months to 31 July 2009 and Board
Appointment
Sport Media Group plc (AIM: SPMG.L), the integrated multi-media group
that publishes the Sunday and Daily Sport newspapers, numerous
magazines and digital content for internet and mobile channels,
publishes its interim results for the twelve months ended 31 July
2009.
Interim Period Trading Summary
* Turnover down 22% to GBP22.9 million (2008: GBP29.4 million)
* Underlying operating profit GBP0.3 million (2008: GBP6.4 million)
* Underlying pre-tax loss GBP(0.8) million (2008: profit GBP6.0
million)
* Adjusted EPS loss 1.18p (2008: profit 5.72p)
Commenting on the Interim results, Andrew Fickling, Chief Executive
Officer, said:
"With significant re-financing and re-structuring now completed, and
the management team able to focus all of their attention on the
Group's future strategy, we are well positioned to build on our
current profitability and deliver the potential that this group of
companies has always promised - to become creator, owner and
multi-platform distributor of exclusive content in the men's
lifestyle sector."
For further information, please contact:
Sport Media Group plc Daniel Stewart & Company plc
David Bailey, Chairman Simon Leathers / Oliver Rigby
Andrew Fickling, Chief Executive Tel: +44 (0) 20 7776 6550
Officer www.danielstewart.co.uk
Neil Robertson, Group Finance Director
Tel: +44 (0) 7836 258 558
Tel: +44 (0) 161 236 4466
www.sportmediagroup.co.uk
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.
CHAIRMAN'S STATEMENT
Overview
In the 12-month period to July 31st 2009, incorporating the second
six months of our 17 month reporting period to 31st December 2009,
the Company has seen a substantial change in fortunes as it underwent
a significant re-structuring and re-financing process. Revenues were
GBP23m (2008: GBP29.4m), Pre-exceptional Operating Profit was GBP300k (2008
GBP6.4m), and adjusted earnings per share were (0.63)p (2008 5.72p).
Decisive and focussed management action during the period saw the
Group re-negotiate its banking facilities, secure additional
financing from Gold Group International and David Sullivan and return
Sport Newspapers to sustainable profitability. Front magazine was
sold to re-focus the management on the Group's core publishing and
digital businesses, enabling us to implement further cost reductions
and more effective cost management practices across all divisions,
which included securing a material improvement in the terms of the
newspaper's print contract.
As a result of these initiatives, and a provision against the
outstanding debtor claim against the newspaper distribution arm of
Dawson Holdings (GBP200k), we have borne some significant exceptional
costs, amounting to GBP2.4m in the period. We are bearing additional
interest costs, as a consequence of the bank re-negotiation and the
additional finance provision, but the Board is now confident of the
survival of the business, and the Group is achieving consistent
monthly profitability and positive cash generation.
David Sullivan has made a positive impact as Honorary Publisher of
the newspaper and circulation of the titles has risen over 10% from
the nadir in March. Improvements in the newspaper supply chain have
ensured that the previously experienced declines in retailers have
been arrested, and total retailer numbers remain steady at c.
40,000. The Digital Division suffered the loss of a significant
hosting and web development contract in the period (c. GBP2m), and
while some revenue lines have declined, others are showing signs of
growth. In particular, the Digital Division was able to take
advantage of the liquidation of a former service provider to
establish in August 2009, Telecom2, an ISP and Tier-2 telecoms
business that will have significant impact on margins across the
Group, as well as providing it with general telecoms and hosting
services. Both sides of the Group rely on the discretionary spending
power of our consumers, but although the sales and advertising
markets remain difficult in both sectors, we are optimistic for the
future.
Andrew Fletcher left the business in August, and we have appointed
Neil Robertson, who has been the Financial Director of the Newspaper
for the last 1¿ years, to the Board with immediate effect. We
continue to make progress with our search for a new Chairman and are
hopeful of making an announcement on this matter in the near future.
We continue to seek strategic opportunities to develop the business,
and to find ways of reducing group debt which stood at GBP12.7m as at
31st July (2008 GBP9.9m). The focus of the Board is on building
shareholder value through the reduction of the long term debt, and
therefore there will be no dividends until a significant proportion
of the Group debt is repaid. The Group expects to show enhanced
underlying profitability in the remaining months of the year.
David Bailey
Chairman
26 October 2009
CONSOLIDATED INTERIM INCOME STATEMENT
Unaudited Results for the twelve months ended 31st July 2009
12 months to 12 months to
31 July 2009 31 July 2008
Unaudited Audited
Note GBP'000s GBP'000s
Revenue 22,898 29,394
Cost of sales (17,729) (16,095)
Gross profit 5,169 13,299
Administrative costs (4,906) (6,865)
Underlying operating profit* 263 6,434
Depreciation (128) (225)
Finance income 44 103
Finance costs (550) (309)
Underlying profit before tax ** (371) 6,003
Share based payment charges (1,315) (1,026)
Re-organisation and re-launch (1,741) (1,489)
charges
Exceptional charges (615)
Negative goodwill on acquisitions - 279
Amortisation of intangibles (2,053) (1,316)
Impairment of goodwill and other (1,631) (20,676)
intangibles
(Loss)/profit before tax (7,726) (18,225)
Taxation credit/(charge) 1,437 191
(Loss)/profit for the period from (6,289) (18,034)
continuing operations
Minority interest (39) (65)
(Loss)/profit for the period
attributable
to equity holders of the parent (6,328) (18,099)
Earnings per share for profit
attributable to the
equity holders of the Company
during the period:
Basic (loss)/earnings per share 4 (6.53)p (19.87)p
Adjusted (loss)/earnings per share 4 (0.63)p 5.72p
Diluted (loss)/earnings per share 4 (6.53)p (19.87)p
* Operating profit before non-recurring items, amortisation and
impairment of intangibles, share based payment charges, interest and
taxation.
** Profit before tax and non-recurring items, amortisation and
impairment of intangibles, and share based payment charges.
CONSOLIDATED INTERIM BALANCE SHEET
Unaudited Results as at 31st July 2009
31 July 2009 31 July 2008
Unaudited Audited
GBP'000s GBP'000s
Non-current assets
Property, plant and equipment 173 286
Indefinite lived assets 10,911 11,452
Customer relationships and contracts 2,129 3,102
Goodwill 18,194 18,194
Other intangible assets 2,946 3,390
Investments - 3
Deferred tax assets 1,746 430
36,099 36,857
Current assets
Inventories 64 102
Trade and other receivables 4,961 6,812
Cash and cash equivalents 216 534
5,241 7,448
Total assets 41,339 44,305
Current liabilities
Trade and other payables 4,196 4,066
Short-term borrowings 12,696 10,430
Current tax payable - -
16,892 14,496
Non-current liabilities
Deferred tax 4,682 4,986
4,682 4,986
Total liabilities 21,574 19,482
Total net assets 19,765 24,823
Equity attributable to equity holders of
the parent
Share capital 242 242
Share premium account 41,537 41,537
Other reserves 100 100
Share award and option reserve 2,409 1,094
Retained earnings (24,574) (18,246)
Equity shareholders' funds 19,714 24,727
Minority interest 51 96
Total shareholders' funds 19,765 24,823
CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
Share Share Other Share Retained Total
capital premium reserves option earnings equity
account reserve
Note GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Balance at 1 96 1,187 100 68 3,333 4,784
August 2007
Adjustment to
IFRS
transaction
estimates (1) - - - - 131 131
Profit for - - - - (18,230) (18,230)
the period
Charge for
share based
Payments - - - 1,026 - 1,026
Dividends 5 - - - - (3,480) (3,480)
Issue of 146 43,554 - - - 43,700
share capital
Cost of - (3,204) - - - (3,204)
shares issued
Balance at 31 242 41,537 100 1,094 (18,246) 24,727
July 2008
Loss for the - - - - (6,328) (6,328)
period
Charge for
share based
Payments - - - 1,315 - 1,315
Balance at 31 242 41,537 100 2,409 (24,574) 19,714
July 2009
CONSOLIDATED INTERIM CASH FLOW STATEMENTS
12 months to 12 months
to
31 July 2009 31 July 2008
Unaudited Audited
GBP'000s GBP'000s
Cash flows from operating activities
Underlying operating profit 263 6,434
Adjustments for:
Decrease/(increase) in trade and other
Receivables 1,587 2,484
(Increase)/decrease in inventories 38 (62)
(Decrease)/increase in trade & other 186 (1,806)
payables
Profit on disposal of investments - (106
Cash generated from operations before
nonrecurring
Costs 2,074 6,944
Re-organisation and re-launch costs (1,741) (1,489)
Cash generated from operations 333 5,455
Interest received 44 103
Interest paid (542) (309)
Income taxes paid - (1,015)
Net cash from operating activities (165) 4,234
Cash flows from investing activities
Acquisitions of subsidiaries net of cash - (47,256)
acquired
Purchase of property, plant and equipment (16) (83)
Purchase of intangible assets (1,097) (2,063)
Capitalised development expenditure (966) (1,304)
Sale/(purchase) of investments - 356
Net cash used in investing activities (2,079) (50,350)
Cash flows from financing activities
Proceeds from issue of share capital - 41,100
Share issue costs settled in cash - (604)
Proceeds from new borrowings 1,927 8,500
Repayment of borrowings - (570)
Payment of equity dividends - (3,480)
Net cash from financing activities 1,927 44,946
Net decrease in cash and cash equivalents (317) (1,170)
Cash and cash equivalents at beginning of
Period 534 1,704
Cash and cash equivalents at end of period 217 534
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION
1. General Information
Sport Media Group Plc and its subsidiaries ("the Group") sell digital
media content through mobile telephones via the internet to mobile
customers of major UK network operators and users of leading UK
internet key search engines. Since September 2007 the Group has been
the publisher of two national newspapers in the UK under the titles
of the Daily Sport and the Sunday Sport.
SPMG, the Group's ultimate parent company, is incorporated and
domiciled in Great Britain. Its registered office is at 19, Great
Ancoats Street, Manchester, M60 4BT, and its principal places of
business are 26 Thames Road, Barking, Essex IG11 0JA and 19 Great
Ancoats Street, Manchester M60 4BT. SPMG's ordinary shares are listed
on the AIM market of the London Stock Exchange.
2. Basis of preparation
The interim financial information has been prepared in accordance
with IAS 34 'Interim financial reporting' and on the basis of the
accounting policies set out in the July 2008 annual report and
accounts, which are prepared in accordance with International
Financial Reporting Standards. The interim financial information is
unaudited, has not been reviewed by the Group's auditors and does not
constitute statutory accounts as defined in Section 434 of the
Companies Act 2006. The last statutory accounts for the Company and
the Group, for the financial year ended 31 July 2008, upon which the
auditors issued a disclaimer of view opinion, have been delivered to
the registrar of companies.
As announced on 7 January 2009, on 6 January 2009 the Group was
notified by its bankers that SPMG was in breach of one of its banking
covenants. The bank initially informed the Board that the Group would
be provided with a two month extension to its current facility,
expiring on 6 March 2009. That extension period was later extended to
enable the Group continue to negotiate in relation to the breach and
the Group has subsequently reached agreement with its bankers for an
extension of its current banking facilities for a period of 18
months. In addition, the Group has reached agreement with David
Sullivan and Gold Group International Limited for the provision of
loans of GBP1.68 million. The interim financial information has
therefore been prepared on a going concern basis.
The accounting policies adopted by the Group and set out in its last
statutory accounts have been applied consistently throughout the
Group for the purposes of preparation of this consolidated interim
financial information.
This consolidated interim financial information has been approved for
issue by the Board of Directors on 29 April 2009.
3. Segment analysis
Prior to the acquisition of Sport Newspapers the Group was organised
for management purposes into a single operating division delivering
digital content to mobile telephony and internet based platforms.
Following the acquisition of Sport Newspapers the group is organised
into two operating divisions for management purposes - Digital and
Print.
Digital Division - digital content delivery
For internal reporting purposes the group records and monitors
digital content revenues and cost of sales according to the delivery
platform to which content is delivered and through which services are
provided, differentiating its key business segments between mobile
telephony and internet. Administrative expenses of the digital
content delivery business are shared overheads of that business and
cannot meaningfully be allocated by revenue stream. The principal
tangible fixed assets utilised in the digital content delivery
business consist of computer equipment and servers, which are
utilised in the delivery of content and services through both
platforms. All of the group's digital content delivery activities are
currently carried out in the United Kingdom.
Print Division - publication of newspapers, magazines and related
periodicals
For internal reporting purposes the group records and monitors
revenues of the Print Division according to the nature of the
revenues - from the wholesale distribution of newspaper and magazine
titles and from advertising, differentiating its advertising revenues
between classified and display. The Group does not differentiate cost
of sales in the Print Division between wholesale and advertising
revenue streams as the overwhelming majority of such costs represent
shared costs of producing, printing and distributing its newspaper
titles. Similarly, administrative expenses of the print business are
shared overheads of that business and cannot meaningfully be
allocated by revenue stream. Excluding goodwill and other intangible
assets arising on consolidation, the principal tangible fixed assets
utilised in the print business consist of computer equipment and
fixtures and fittings, which are utilised in the production of the
titles. All of the group's print activities are currently carried out
in the United Kingdom.
Group overheads
Group overheads consist of the costs of retaining the Company's AIM
listing, investor relations activities and some central functions
which are not recharged to the operating divisions.
The segment analysis presented in this interim financial information
differs in presentation from that presented in the Group's 2008
annual report in that the component elements of the Print Division,
in so far as they were previously separately disclosed, are now
aggregated.
The directors do not consider the interim financial information to be
subject to significant
seasonal or cyclical fluctuations.
Segment information about these businesses is presented below.
12m to 31 July 2009 Digital Print Group & Consolidated
eliminations
GBP'000 GBP'000 GBP'000 GBP'000
Gross revenues 4,008 19,110 (220) 22,898
Intra-segment sales - (220) 220 -
Net revenues 4,008 18,890 - 22,898
Underlying operating profit 76 187 - 263
Depreciation (109) (20) - (129)
Impairment and amortisation (1,507) (2,177) - (3,684)
of intangibles
Share based payment charges - - (1,090) (1,090)
Re-organisation and - (884) (857) (1,741)
re-launch charges
Exceptional charges (272) (343) - (615)
Profit/(loss) before 76 (794) (858) (6,995)
interest and tax
Finance costs - net (973)
Loss before tax (7,968)
Taxation credit 1,437
Loss for the period (6,531)
Balance sheet
Assets 7,029 41,395 (8,831) 39,593
Liabilities 8,428 4,325 (8,557) 4,196
Capital expenditure
Property, plant and - 16 - 16
equipment
Goodwill - business - - - -
combinations
Segment assets and liabilities are reconciled to Group assets and
liabilities as follows:
Assets Liabilities
GBP'000 GBP'000
Segment assets / liabilities 39,593 4,196
Borrowings - 12,696
Deferred tax 1,746 4,682
Total 41,339 21,574
12m to 31 July 2008
Digital Print Group & Consolidated
eliminations
GBP'000 GBP'000 GBP'000 GBP'000
Gross revenues 9,298 20,327 (231) 29,394
Intra-segment sales - (231) 231 -
Net revenues 9,298 20,096 - 29,394
Underlying operating profit 4,279 2,444 (289) 6,434
Depreciation (69) (156) - (225)
Impairment and amortisation
of
intangibles (2,735) (19,257) - (21,992)
Share based payment charges - - (1,026) (1,026)
Reorganisation and - (1,489) - (1,489)
re-launch charges
Negative goodwill on - 279 - 279
acquisitions
Profit/(loss) before 1,475 (18,179) (1,315) (18,019)
interest and tax
Finance costs - net (206)
Loss before tax (18,225)
Taxation 191
Loss for the period (18,034)
Balance sheet
Assets 7,645 44,318 (8,171) 43,792
Liabilities 8,418 4,099 (8,451) 4,066
Capital expenditure
Property, plant and 28 55 - 83
equipment
Goodwill - business - 36,073 - 36,073
combinations
Segment assets and liabilities are reconciled to Group assets and
liabilities as follows:
GBP'000 GBP'000
Segment assets / liabilities 43,792 4,066
Borrowings - 10,430
Corporation tax repayable 83 -
Deferred tax 430 4,986
Total 44,305 19,482
4. Earnings per share
The calculation of the basic earnings per share is based on the
earnings attributable to ordinary shareholders of the Company divided
by the weighted average number of shares in issue during the year.
The calculation of diluted earnings per share is based on the basic
earnings per share, adjusted to allow for the issue of shares and the
post tax effect of dividends and/or interest, on the assumed
conversion of all dilutive options and other dilutive potential
ordinary shares. Dilutive options and other dilutive potential
ordinary shares are not considered dilutive where the effect of doing
so would be to reduce a reported loss per share.
Reconciliations of the earnings and weighted average number of shares
used in the calculations are set out below:
Weighted Per share
Earnings Average amount
12 months to 31 July 2009 GBP'000s number of shares pence
Continuing and total operations
Loss after tax (6,328) 96,851,547
Earnings attributable to ordinary (6,328)
shareholders
Weighted average number of shares
(used for basic
earnings per share) 96,851,547
Dilutive effect of options - -
Dilutive effect of share bonus - -
schemes
Diluted weighted average number
of shares (used for
diluted earnings per share) (6,328) 96,851,547
Basic earnings per share (6.53)p
Diluted earnings per share (6.53)p
Weighted Per share
Earnings Average amount
Year to 31 July 2008 GBP'000s number of shares pence
Continuing and total operations
Loss after tax (18,099)
Earnings attributable to ordinary (18,099)
shareholders
Weighted average number of shares
(used for basic
earnings per share) 91,104,234
Dilutive effect of options - -
Dilutive effect of share bonus - -
scheme
Diluted weighted average number
of shares (used for
diluted earnings per share) (18,099) 91,104,234
Basic earnings per share (19.87)p
Diluted earnings per share (19.87)p
Adjusted basic and diluted earnings per share
In order to understand the underlying trading performance, the
directors consider it appropriate to disclose earnings per share
before and after amortisation of acquired intangible assets and the
costs of share based payments. The calculation of adjusted earnings
per share is set out below:
12 months to 12 months to
31st July 2009 31st July 2008
GBP'000s GBP'000s
(Loss)/earnings attributable to (6,328) (18,099)
ordinary shareholders
Post-tax impairment and amortisation of
acquired
intangible assets 2,652 21,333
Post-tax costs of re-organization and 1,253 1,072
re-launch costs
Post-tax cost of share based payments 1,366 902
Post-tax cost of exceptional costs 443 -
Adjusted profit on ordinary activities (614) 5,208
after taxation
Weighted average number of shares in
issue
- basic 96,851,547 91,104,234
- diluted 96,851,547 91,104,234
Basic earnings/(loss) per share (6.53)p (19.87)p
Amortisation of acquired intangible 2.74p 23.42p
assets
Costs of re-organization and re-launch 1.29p 1.18p
Cost of share based payments 1.41p 0.99p
Cost of exceptional payments 0.46p
Adjusted earnings per share - basic (0.63)p 5.72p
5. Dividends
12 months to 12 months to
31 July 2009 31 July 2008
Unaudited Audited
2007 final dividend - 4.00 pence per share - 1,544
2008 interim dividend - 2.00 pence per - 1,936
share
- 3,480
6. Share issues
No new shares were issued during the period to 31 July 2009.
7. Share options and share based payments
Share options held by directors, employees and third parties are as
follows:
Granted Exercised First Final
Outstanding during during Outstanding Exercise Date of date of date of
1 Aug 08 Period period 31 Jul 09 price grant exercise exercise
463,972 - - 463,972 73p 08.05.06 08.05.07 08.05.10
1,345,765 - - 1,345,765 73p 08.05.06 08.05.06 08.05.11
1,237,699 - - 1,237,699 73p 08.05.06 08.05.06 08.05.16
707,366 - - 707,366 79.25p 01.11.06 01.11.09 01.11.16
- 9,684,800 - 9,684,800 3.5p 08.05.09 08.10.09 08.05.14
3,754,802 9,684,800 - 13,439,602
A modified Black-Scholes model has been used to determine the fair
value of the share options on the date of grant. The fair value is
expensed to the profit and loss account on a straight line basis over
the vesting period, which is determined annually. The model assesses
a number of factors in calculating the fair value. These include the
market price on the date of grant, the exercise price of the share
options, the expected share price volatility of the market sector in
which the group operates, the expected life of the options, the risk
free rate of interest and the expected level of dividends in future
periods.
The inputs into the model were as follows:
Granted Unapproved Other Other EMI
Other
2006 2006 2007 2009
Weighted average share 73.00p 73.00p 73.00p 79.50p 6.5p
price
Weighted average exercise 73.00p 73.00p 73.00p 79.50p 6.5p
price
Expected volatility 25% 25% 25% 46% 85%
Expected life 2 years 5 years 10 years 10 years 5 years
Risk-free rate 4% 4% 4% 4% 4%
Expected dividend yield 6% 6% 6% 6% 0%
Expected volatility was determined at the date of grant of the 2006
options based on the directors' estimates of volatility of similar
quoted stocks. In respect of the 2007 grants the directors estimated
the actual volatility at the date of grant by reference to the
company's share price since admission to AIM to the date of the
relevant grant and in respect of the 2009 grant, by reference to
published market information.
During the year ended 31 July 2008 three directors and one senior
employee of the group were granted rights to acquire new ordinary
shares under new schemes as follows:
the Executive Share Bonus Plan ('ESBP')
the Executive Incentive Plan ('EIP')
the Non Executive Share Bonus Plan ('NESBP')
the Non Executive Incentive Plan ('NEIP')
The terms of the ESBP, EIP, NESBP and NEIP were set out in the
Company's AIM admission document dated 8 August 2007. At 31 July 2009
the following rights to acquire shares had been granted under the
schemes:
Scheme Rights over shares Vesting
Awarded period
ESBP 1,452,771 18 months
EIP 3,631,932 36 months
NESBP 484,257 18 months
NEIP 1,210,644 36 months
Total 6,779,604
Shares awarded under the ESBP and the NESBP were subject to forfeit
if the recipients ceased continuous employment with the group in the
eighteen month period following grant of rights (see below). Shares
awarded under the EIP and the NEIP are subject to continuous
employment with the group and performance conditions which must be
satisfied over a three year period from the date of grant of rights.
Performance conditions are based on a target share price on a sliding
scale between GBP1.20 and GBP1.60 with 2.5 per cent vesting for each
penny increase in the share price. Subject to satisfaction of the
defined performance criteria and to continuous employment awards will
vest in equal instalments on the first, second and third
anniversaries of the award.
The fair value of the share awards on the date of grant was
determined by reference to the market value of shares at that date
and the application of an appropriate discount factor to take into
account the probability of the performance conditions being met. The
fair value is expensed to the profit and loss account on a straight
line basis over the vesting period, which is determined annually.
The inputs into the model were as follows:
Granted ESBP EIP NESBP NEIP
Weighted average share price 75.00p 75.00p 75.00p 75.00p
Weighted average exercise price Nil Nil Nil Nil
Discount rate applied to 25% 75% 25% 75%
performance conditions
Expected life 18 months 3 years 18months 3 years
The charge for share based payments arising in the period ended 31
July 2009 of GBP1,315,000 included an additional charge of GBP343,000 to
correct the discount applied to the performance contributions
applicable for ESBP and NESBP because all four beneficiaries from
these systems qualified for the full share awards after the balance
sheet date.
These interim results will be available on the Company's website
www.sportmediagroup.co.uk.
Further copies can be obtained from the registered office at:
19, Great Ancoats Street, Manchester, M60 4BT
=--END OF MESSAGE---
This announcement was originally distributed by Hugin. The issuer is
solely responsible for the content of this announcement.
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