RNS Number : 8019D
Cagney PLC
19 September 2008
CAGNEY Plc ("Cagney" or the "Company")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2008
19 September 2008
Cagney, an integrated group of marketing services firms, today reports interim results for the six months ended 30 June 2008.
Financial highlights
* Gross profit increased by 18.8% to �4.4m (2007 - �3.7m).
* Operating profit of �234,000 (2007 - operating loss of �180,000).
* Profit before tax of �133,000 (2007 - loss before tax �436,000).
* All operating segments profitable and growing
Operational highlights
* Steve Mattey appointed as CEO, replacing Paul Simons.
* Kerry Simpson, joint founder of Cubo, joins board.
* Tree and Cubo recruit business development directors with growing success.
* More than 20 new clients added across the Group.
* New business pipeline strong and growing.
* AGL, our organically grown new business venture, wins its first clients.
Commenting on the results, Chief Executive Steve Mattey said:
"I am very pleased with our performance in the first half of 2008. Firstly, our financial performance shows that we have put last year
behind us and are moving firmly in the right direction with our management of the business. Secondly, in a difficult economic climate, we
have a strong pipeline of new business. Thirdly, we have re-structured ourselves internally to ensure that we have a robust business model
to face the future.
However, the first half of the year benefited from two significant items of revenue that are unlikely to be repeated in the second half,
and parts of the Group are beginning to feel the effects of the difficult economic circumstances in which we are presently operating.
Therefore, we must entertain the possibility that the second half will be less profitable than the first.
Nevertheless, I am cautiously optimistic about the future. With the economy struggling there becomes an increased need for companies to
communicate effectively to customers and potential customers. Cagney is in a very good place to respond to this need. We have also taken
action to save costs amounting to several hundred thousand pounds, the benefit of which will be realised next year.
We will continue to develop a consultancy-led approach to servicing our clients by exploiting the considerable expertise and talent
across our group companies. We will also ensure that we are in a position to offer the full range of marketing services required to deliver
brand and product messages to consumers in a fragmented and constantly evolving media market place.
We will also continue to build the business by acquiring carefully selected complementary businesses; by stimulating organic growth from
within the Group; and by aggressively pursuing new clients.
Finally, a company is nothing without its people, and I would like to thank all of the staff within the Cagney Group for their
continuing hard work and support."
ENDS
Enquiries:
Cagney Plc Tel: 020 7637 4198
Steve Mattey, Chief Executive Officer
Patrick Oram, Chief Financial Officer
Smith & Williamson Tel: 0117 376 2213
Nick Reeve
The Media Foundry Tel: 020 7612 1163
Anna Foster
About Cagney Plc
Cagney Plc is an integrated group of marketing services firms. It combines five businesses: Exedra (incorporating BrandAid as a
division), Chick Smith Trott (advertising and design), Cubo (promotional marketing), The Media Foundry (public relations) and Tree (market
research and data analysis). The Group floated on AIM in February 2006.
www.cagneyplc.com
CHIEF EXECUTIVE'S STATEMENT
For the six months ended 30 June 2008
Introduction
Cagney was formed in 2005 and floated on AIM in February 2006 with the strategy of building an integrated marketing services group,
primarily to service domestic clients, as an alternative to the global multi-nationals.
The Group presently comprises five businesses: Exedra (incorporating BrandAid as a division), Chick Smith Trott ("CST") (advertising and
design), Cubo (promotional marketing), The Media Foundry ("TMF") (public relations) and Tree (market research and data analysis).
Our strategy is to create a multi-disciplined marketing services group with a highly innovative and creative approach to servicing
clients.
We will do this by attracting and retaining exceptional human talent, by fostering a collaborative and integrated approach to servicing
our clients, and by having strong financial and strategic management.
Trading results
Although the Group made considerable operational progress in 2007, the year was disappointing financially. The Group reported an
operating loss of �547,000 that year, primarily because its cost base was too high in relation to its revenue.
For the first half of 2008 I am pleased to report an operating profit of �234,000, compared with an operating loss of �180,000 in the
first half of 2007.
I am also pleased to report that gross profit increased by 18.8% from �3.7 million in the first half of 2007 to �4.4 million in the
first half of 2008. All our trading segments contributed to that increase. Creative services increased its gross profit by 7.8%; public
relations by 44.5%; and market research and data analysis by 34.8%.
The Group also recorded a profit before tax for the first half of 2008 of �133,000, compared with a loss before tax of �436,000 in the
first half of 2007. All our trading segments contributed to that profit.
One of the biggest contributors to last year's loss was the very high level of central overheads - as much as �1.3m at the operating
level. In recent months we have taken action that will reduce central overheads by several hundred thousand pounds, though we will have to
wait until 2009 to realise the benefits of that action. However, 2008 will derive some benefit from cost reductions that took place at the
end of 2007.
In general we are determined to cut out all unnecessary expenditure, and ensure that the funds available to the Group are spent in
building its long-term profitability.
Deferred consideration
Under the terms of most of the Group's acquisitions, the vendors can earn additional consideration if certain profit targets are
achieved. TMF and Tree are eligible for deferred payments based on their 2008 profitability, and both are expected to qualify for additional
payments. Part of the deferred consideration may be settled in shares at the Company's discretion.
Financing
The Group's balance sheet combines liabilities payable in cash with deferred consideration capable of being settled in shares. On this
combined basis, the Group had net current liabilities at 30 June 2008 of �1.95m, and total net debt of �2.57m. However, if we remove
liabilities expected to be settled in the form of shares, the Group's net current liabilities would be �1.53m, and the Group's total net
debt would be �2.15m.
The total net debt of �2.15m comprises a bank overdraft with Coutts of �0.39m; the �0.91m balance of the Coutts term loan; loan notes of
�0.42m; and �0.95m of deferred consideration, partially offset by �0.52m of net current trading assets. The term loan is payable in equal
monthly instalments of �28,712, and is scheduled to be fully repaid by May 2011. Interest is charged at 1.75% above Coutts' base rate from
time to time. The loan and overdraft are secured by fixed and floating charges over the assets of the Group, with cross guarantees.
People
Paul Simons resigned as CEO and departed the Company on 12 May 2008, and I succeeded him in the role on 20 May.
On 2 July I was delighted to welcome Kerry Simpson to the board of the Company. Kerry is one of the founders of Cubo, and brings
tremendous business insight to the holding company team.
Vicky Carrel departed the board on 30 June, and the Company on 11 July.
The board of directors is now:
Alex Hambro (non-executive Chairman)
Steve Mattey (CEO)
Patrick Oram (CFO)
Kerry Simpson
Robin Williams (non-executive)
Mark Phillips joined Tree as commercial director in February 2008, and Cal Ledward joined Cubo as business development director in March
2008. Both have attracted new business to the Group, increasingly working in teams with other Group companies.
New Business
New business is the life blood of our industry and we have made significant improvements to the energy and focus on new client
acquisition. This is reflected in the addition of 22 new clients across the Group in the first half of the year. The scale and quality of
opportunities continually improve, and currently all our businesses are particularly busy with potential new clients. However, we are not
complacent in this matter, as there is, without doubt, a shiver running through the economy. This presents both threats and opportunities
to marketing services companies.
The best defences against a challenging marketplace are to provide excellence to existing clients, and to aggressively pursue new
business opportunities. During these difficult times, brands need to communicate with their customers and potential customers with
effectiveness and vigour. Cagney is in a good place to respond to this need, and we will actively position ourselves as an innovative and
creative communications partner for these companies.
Cross Referral
One of our core goals is the growth of cross referral and this is improving rapidly. We have established a team drawn from each division
within the Group with two purposes - to co-operate on any new business opportunity by sourcing skills and case studies from across the
Group, and to seek to maximise any potential opportunities within the existing client base at Cagney.
This approach has already resulted in one significant business win.
Dividend
No interim dividend is recommended.
Outlook
The Group has enjoyed a profitable first half of the year, and we are hopeful of adding further profit in the second half.
However, the first half benefited from two significant items of revenue that are unlikely to be repeated in the second half, and parts
of the Group are beginning to feel the effects of the difficult economic circumstances in which we are presently operating. Therefore, we
must entertain the possibility that the second half will be less profitable than the first.
Nevertheless, I am cautiously optimistic about the future. With the economy struggling there becomes an increased need for companies to
communicate even more effectively to customers and potential customers. Cagney is in a very good place to respond to this need. Next year
will also benefit from the considerable cost savings put in place this year.
Steve Mattey
Chief Executive Officer
19 September 2008
CONSOLIDATED INCOME STATEMENT
For the six months ended 30 June 2008
6 months ended 6 months ended Year ended
30 June 2008 30 June 2007 31
(unaudited) (unaudited) December
2007
(audited)
Note Continuing Acqui-sitions Total
Operations
�000 �000 �000 �000 �000
Revenue 2 6,463 - 6,463 5,397 11,251
Direct costs (2,084) - (2,084) (1,712) (3,724)
Gross profit 2 4,379 - 4,379 3,685 7,527
Administrative expenses (4,145) - (4,145) (3,865) (8,074)
Operating profit/(loss) 234 - 234 (180) (547)
Interest receivable 8 8 13
Interest payable and similar 3 (106) (101) (188)
charges
Impairment of goodwill - - (2,000)
Finance cost of deferred 8 (3) (163) (368)
consideration
Profit/(loss) on ordinary 2 133 (436) (3,090)
activities before taxation
Tax (charge)/credit on 4 (39) 87 147
profit/(loss) on ordinary
activities
Profit/(loss) on ordinary 94 (349) (2,943)
activities after taxation
Earnings/(loss) per ordinary share: 6 months ended 6 months ended Year ended
30 June 2008 30 June 2007 31
(unaudited) (unaudited) December
2007
(audited)
Basic 5 0.059p (0.37p) (2.6p)
Diluted 5 0.052p (0.37p) (2.6p)
CONSOLIDATED BALANCE SHEET
As at 30 June 2008
30 June 2008 30 June 2007 31 December 2007
(unaudited) (unaudited) (audited)
Note �000 �000 �000
Non-current assets
Goodwill 6 9,546 10,764 10,509
Tangible assets 240 211 249
9,786 10,975 10,758
Current assets
Trade and other receivables 2,859 2,864 2,972
Cash at bank and in hand - 98 -
2,859 2,962 2,972
Current liabilities
Trade and other payables (2,301) (2,055) (2,181)
Current tax liabilities (33) (64) (142)
Bank overdrafts, loans and 7 (1,103) (738) (1,120)
loan notes
Short term provisions 8 (1,374) (3,055) (3,636)
(4,811) (5,912) (7,079)
Net current liabilities 9 (1,952) (2,950) (4,107)
Total assets less current 7,834 8,025 6,651
liabilities
Non-current liabilities
Deferred taxation - (2) -
Bank loans and loan notes 7 (613) (913) (764)
Long term provisions - (423) (1,773)
Total net assets 2 7,221 6,687 4,114
Capital and reserves
Called up share capital 10 2,183 1,341 1,344
Share premium 8,153 5,974 5,986
Share options reserve 13 - 6
Merger reserve (150) (150) (150)
Profit and loss account (2,978) (478) (3,072)
Equity shareholders' funds 7,221 6,687 4,114
CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 30 June 2008
6 months ended 6 months ended Year ended
30 June 2008 30 June 2007 31
(unaudited) (unaudited) December
2007
(audited)
Note �000 �000 �000
Net cash flow from operating 11 524 (166) (472)
activities
Investing activities
Interest received 8 8 13
Purchases of property, plant (53) (27) (116)
and equipment
Purchase of business and - (880) (882)
assets
Settlement of deferred (70) (1,572) -
consideration
Net cash used in investing (115) (2,471) (2,618)
activities
Taxation
UK corporation tax paid (164) - -
Financing activities
Interest paid (76) (56) (123)
Proceeds on issue of shares - 1,661 1,811
(net of expenses)
Proceeds from loan financing - 1,200 1,200
Loan repayments (139) (461) (606)
Net cash relating to financing (215) 2,344 2,282
activities
Net change in cash and cash 30 (293) (808)
equivalents
Net cash and cash equivalents (417) 391 391
at beginning of period
Cash and cash equivalents at (387) 98 (417)
end of period
Analysed as:
Cash at bank and in hand and - 113 -
short term deposits
Bank overdrafts 7 (387) (72) (417)
Cash and cash equivalents at (387) 41 (417)
end of period
CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY
For the six months ended 30 June 2008
Called up share Share premium Share options Other reserves Profit and loss account
Total
capital account reserve
�000 �000 �000 �000 �000
�000
At beginning of period 1,344 5,986 6 (150) (3,072)
4,114
Retained profit for the period - - - - 94
94
Provision for share based - - 7 - -
7
payment
Shares issued during the 839 2,167 - - -
3,006
period
At end of period 2,183 8,153 13 (150) (2,978)
7,221
Other reserves represents the merger reserve arising from the prior year merger of Cagney Plc with Paul Simons & Partners Limited.
Merger relief under S131 of the Companies Act has been taken and the premium arising on the issue of these shares has been disregarded as
permitted under S133 of the Companies Act.
NOTES TO THE INTERIM ACCOUNTS
1. Basis of preparation
The consolidated interim financial statements, which were approved by the board on 19 September 2008, have been prepared under the
accounting policies set out in the Group's 2007 Annual Report, and in accordance with IAS34 "Interim Financial Reporting".
The information relating to the six months ended 30 June 2008 is unaudited and does not constitute statutory accounts but has been
reviewed by the Company's auditors in accordance with the Auditing Practices Board Bulletin 1999/4 "Review of Interim Financial
Information". The accounts for the year ended 31 December 2007 have been reported on by the Company's auditors and delivered to the
Registrar of Companies. The report of the auditors was unqualified and did not contain a statement under section 237(2) or (3) of the
Companies Act 1985.
2. Segment reporting
6 months ended 6 months ended Year ended
30 June 2008 30 June 2007 31
(unaudited) (unaudited) December
2007
(audited)
�000 �000 �000
Gross profit
Creative services 2,431 2,256 4,280
Public relations 643 445 1,046
Market research and data 1,305 968 2,201
analysis
Head office - 16 -
4,379 3,685 7,527
Profit/(loss) on ordinary
activities before taxation
Creative services 412 175 210
Public relations 201 (26) 57
Market research and data 288 170 348
analysis
Head office (768) (755) (1,705)
Impairment provision - - (2,000)
133 (436) (3,090)
Net assets
Creative services 1,024 1,143 1,122
Public relations 271 167 202
Market research and data 300 170 277
analysis
Head office 5,626 5,207 2,513
7,221 6,687 4,114
The Group's revenue was earned from clients based in the following geographical markets:
UK Rest of World Total
�000 �000 �000
Six months ended 30 June 2008
Creative services 2,687 1,343 4,030
Public relations 663 - 663
Market research and data analysis 1,770 - 1,770
5,120 1,343 6,463
Six months ended 30 June 2007
Creative services 2,167 1,564 3,731
Public relations 458 - 458
Market research and data analysis 1,192 - 1,192
Head office - 16 16
3,817 1,580 5,397
Year ended 31 December 2007
Creative services 4,603 2,813 7,416
Public relations 1,113 - 1,113
Market research and data analysis 2,722 - 2,722
8,438 2,813 11,251
3. Interest payable and similar charges
6 months ended 6 months ended Year ended
30 June 2008 30 June 2007 31
(unaudited) (unaudited) December
2007
(audited)
�000 �000 �000
Interest on bank overdrafts 56 35 76
and loans
Interest on loan notes 41 42 22
Interest on other loans 9 24 90
106 101 188
4. Tax on profit on ordinary activities
The tax charge for the six months ended 30 June 2008 has been based on an estimated effective tax rate for the full year of
approximately 29%, applied to the profit on ordinary activities before deduction of the finance charge, which does not attract corporation
tax relief.
5. Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
6 months ended 6 months ended Year ended
30 June 2008 30 June 2007 31
(unaudited) (unaudited) December
2007
(audited)
Earnings/(loss) �000 �000 �000
Earnings/(loss) for the 94 (349) (2,943)
purposes of basic earnings per
share, being net profit or
loss attributable to equity
holders
Interest and redemption n/a 29 34
premium on convertible loan
notes
Adjusted earnings/(loss) for 94 (320) (2,909)
diluted earnings per share
6 months ended 6 months ended Year ended
30 June 2008 30 June 2007 31 December
(unaudited) (unaudited) 2007
(audited)
Number of shares Number Number Number
Weighted average number of 160,210,521 94,414,059 114,497,772
ordinary shares for basic
earnings per share
Effect of dilutive potential
ordinary shares:
Shares anticipated to be issued 21,000,000 60,239,019 89,559,339
in respect of deferred
acquisition consideration
Share options 531,768 - -
Convertible loan notes n/a 2,500,000 2,500,000
Weighted average number of 181,742,289 157,153,078 206,557,111
ordinary shares for diluted
earnings per share
The shares anticipated to be issued in respect of deferred consideration are assumed converted at a share price on 30 June 2008 of 2p
per share.
6. Movement on goodwill
The movement on goodwill during the period is set out below.
�000
Estimated deferred consideration in respect of Tree (216)
Estimated deferred consideration in respect of The Media Foundry (747)
(963)
7. Bank overdrafts, loans and loan notes
Bank overdrafts, loans and loan notes comprised the following:
As at: 30 June 2008 30 June 2007 31 December 2007
(unaudited) (unaudited) (audited)
�000 �000 �000
Bank overdraft 387 - 417
Bank loan 906 1,189 1,044
Convertible loan notes 187 200 200
Loan notes issued in 236 262 223
settlement of deferred
consideration
1,716 1,651 1,884
Analysed as:
Current liabilities 1,103 738 1,120
Non-current liabilities 613 913 764
1,716 1,651 1,884
The bank loan is repayable in monthly instalments of �28,712, and interest is charged at 1.75% above Coutts' base rate from time to
time.
8. Provisions
The Directors' best estimate of the fair value of future deferred consideration is set out below:
Shares Cash Total
�000 �000 �000
At beginning of period 3,937 1,472 5,409
Adjustments to existing provisions (511) (448) (959)
Deferred consideration settled during the period (3,006) (70) (3,076)
At end of period 420 954 1,374
The future obligations have been discounted using a rate of 4.65%, and the total obligation expected to be paid before discounting is
�1.389 million, of which �773,000 is dependent on future profitability. The discounting charge taken to the profit and loss account for the
period was �3,000. All the above provisions fall due for settlement within the next twelve months.
9. Net current liabilities
A significant portion of the Group's net current liabilities are capable of settlement by the issue of shares. Those liabilities
expected to be settled in the form of shares are indicated below.
As at: 30 June 2008 30 June 2007 31 December 2007
(unaudited) (unaudited) (audited)
�000 �000 �000
Expected to be settled in
the form of:
Shares 420 2,689 2,960
Cash 1,532 261 1,147
Net current liabilities 1,952 2,950 4,107
10. Share capital
The Company's authorised share capital is �4 million, comprising 400 million ordinary shares of 1p each.
Called-up, allotted and fully-paid Number of 1p Nominal
ordinary value
shares �000
At beginning of period 134,394,338 1,344
Issued in part settlement of the consideration for 27,914,110 279
the business and assets of Tree
Issued in part settlement of the deferred 55,988,484 560
consideration for Cubo
At end of period 218,296,932 2,183
11. Net cash flow from operating activities
6 months ended 6 months ended Year ended
30 June 2008 30 June 2007 31
(unaudited) (unaudited) December
2007
(audited)
�000 �000 �000
Operating profit/(loss) 234 (180) (547)
Charge in respect of share 7 - 6
option scheme
Depreciation 62 44 103
Decrease/(increase) in debtors 131 (588) (710)
Increase in creditors 90 558 676
Net cash flow from operating 524 (166) (472)
activities
12. Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not
disclosed in this note. Other transactions with related parties are described below.
Steve Mattey became a director of the Company on 20 May 2008. On that date he was owed �313,000 in respect of deferred consideration for
Tree. Interest is accruing on the outstanding balance at a rate of two percent above the base rate of the Bank of England. Mr. Mattey is
expected to become entitled to additional consideration, payable in cash and shares, in respect of Tree's financial performance during 2008.
Kerry Simpson became a director of the Company on 2 July 2008. On 30 June 2008 and on the date of his appointment he was owed �118,000
in the form of a loan note and accrued premium in respect of deferred consideration for Cubo. Interest is accruing on the outstanding
balance at a rate of two percent above the base rate of the Bank of England.
During the period �13,334 of convertible loan notes were repaid to Alex Hambro, non-executive Chairman of the Company. At 30 June 2008
�86,666 of the convertible loan notes remained outstanding. Interest is accruing on the outstanding balance at a rate of two percent above
the base rate of the Bank of England.
13. Availability to public
Copies of these interim results will be available at the Company's offices at Holden House, 57 Rathbone Place, London W1T 1JU, and at
the Company's website at www.cagneyplc.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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