TIDMMSQ
RNS Number : 1363H
Media Square PLC
24 May 2011
Media Square plc
Preliminary results for the 12 months ended 28 February 2011
Media Square plc (AIM:MSQ), the international marketing
communications group, today reports its preliminary audited results
for the 12 month period ended 28 February 2011.
Overview
-- Strong revenue growth in a competitive environment
-- Significant improvement in profitability
o Year-on-year headline operating profit increase of GBP3.3
million
o Average agency operating margin now in line with industry
norms
-- Small reduction in underlying net debt
Key financial data
-- Revenue of GBP45.4 million (2010 restated: GBP39.6 million),
representing a 15% year-on-year increase.
-- Headline EBITDA of GBP2.9 million (2010 restated: loss of
GBP0.3 million).
-- Headline operating profit of GBP2.1 million (2010 restated:
loss of GBP1.2 million).
-- Underlying net debt of GBP19.5 million (2010: GBP19.9
million).
-- Loss before tax of GBP0.4 million (2010: loss of GBP13.3
million)
Operational highlights
-- New bank facility signed
-- arken and twentysix New York sold
-- CST and The Gate merged
-- Launch of 26 Mobile - specialist mobile unit
-- New CFO appointed
Roger Parry, Chairman of Media Square plc comments:
"The results for the past year show a healthy growth in
revenues, mostly from organic new business, and a significant
improvement in profitability. The Group is now stable and well
positioned for further growth; however, the level of debt and
finance costs remain unacceptably high and the Board plans to take
steps to address this in the coming year."
Peter Reid, Chief Executive Officer of Media Square plc
comments:
"The Group has made a solid start to the new financial year and,
after two months, remains on budget, and on track to deliver a
further year of operating profit growth. However, the Board's
optimism remains tempered by the uncertain impact of spending cuts
on consumer confidence in the UK in particular and hence the medium
term outlook for marketing budgets."
- ends -
Enquiries to:
Media Square plc www.mediasquare.co.uk
----------------------------- ----------------------
Roger Parry/Peter Reid/Dean
Wright 020 3026 6600
----------------------------- ----------------------
Collins Stewart Europe Ltd
----------------------------- ----------------------
Adrian Hadden/Adam Miller 020 7523 8350
----------------------------- ----------------------
CHAIRMAN'S STATEMENT
Dear Fellow Shareholder,
Over the past twelve months the Media Square Group has made
substantial progress towards our goal of being a focused and
profitable group of marketing communications agencies. The painful
and long period of restructuring is over. The emphasis now is on
continuing to win new business, improving margins and reducing
debt.
For the twelve month period revenues were GBP45.4 million, which
represents an increase of 15% over the previous twelve months, much
of this growth was new business wins. Headline operating profit was
GBP2.1 million compared to a loss of GBP1.2 million last year. This
substantial improvement reflects the closure or sale of loss-making
businesses and an improvement in margins on the back of revenue
growth. Over the period, many individual agencies have demonstrated
a solid performance, winning new accounts, creative awards and
praise from clients, industry peers and trade media.
During the year we agreed new bank facilities with Lloyds
Banking Group, which run until July 2013. However, the Group
continues to carry an unacceptably high burden of debt and
associated finance costs, reflecting past acquisition activity and
losses made by certain agencies which have now been sold or closed.
The top priority remains getting this debt level down. In this
context, a dividend will not be paid and the Group will be
exploring the options available to strengthen its balance sheet and
to add additional scale to the Group.
At the end of the period, we sold our point-of-purchase
manufacturing business, arken, for GBP750,000 and the buyers have
been granted the option to acquire the freehold premises which
arken occupies for GBP3.25 million. If this option is not exercised
by its expiry date on 31 December 2011, then the Group will explore
the sale of the property on the strength of the 10 year lease
entered into by arken at the time of the sale. The proceeds from
the freehold property disposal will be used to reduce bank
debt.
The Board
Bruce Winfield, the Group's Chief Operating Officer and Chief
Financial Officer, passed away in March 2011 after a lengthy
illness. He has been succeeded as CFO by Dean Wright who was the
Group's Financial Controller. The role of COO is now being
performed by Peter Reid, the Chief Executive Officer. Bruce played
a major part in the successful turnaround of Media Square which was
his final job in a long and successful career. He was widely
respected and liked in the Media Square Group and the broader
marketing services industry. He will be greatly missed.
Prospects
The Media Square Group now consists of ten marketing
communications agencies, each of which has a clearly focused
service proposition. In the first two months of the year the Group
has traded profitably and in line with budget.
The turnaround of Media Square has been achieved under the most
difficult conditions as the reconstruction process started in late
2007 just before the collapse of Northern Rock and continued
throughout the period of the credit crunch which proved to be a
particular challenge for Media Square as a number of our agencies
are focused on financial services clients.
The Group's staff, bank and professional advisers have been
hugely supportive during the restructuring and, on behalf of the
shareholders, I would like to take this opportunity to thank
them.
Roger Parry
Chairman
23 May 2011
BUSINESS REVIEW
Chief Executive Officer's Review
The 2010/11 financial year was an important period for Media
Square, marking a return to growth after the period of the
turnaround and recession.
Against a market backdrop that remained challenging, the Group's
agencies delivered strong revenue growth and a significant increase
in profitability over the prior year.
At the same time, the sale of arken was an important step in
completing the Group's strategic transformation which has been
underway for the past three years. The Group is now solely
comprised of marketing communications agencies, each with their own
clear and differentiated positioning across the disciplines of
advertising, public relations, research, marketing and design.
Set against these positive developments, the primary issues for
the Group remain the high level of debt and the overall level of
profitability.
The challenge now is to build on the positive momentum of the
past year and to drive further sustained increases in profitability
(on the back of continued revenue growth and the current high level
of operational gearing), while at the same time strengthening the
Group's balance sheet, which is a priority for the current
financial year.
Overview: Strong growth in revenue and profitability
The most pleasing aspect of the Group's performance over the
past twelve months was the return to a strong level of top line
growth. The Group delivered a like-for-like revenue increase of 15%
over the prior year.
Moreover, given the high level of operational gearing that
exists within the Group, this revenue growth resulted in a
disproportionately strong growth in headline operating profit and
headline EBITDA. Headline operating profit and headline EBITDA over
the year represented an increase of GBP3.3 million and GBP3.2
million respectively over the prior year to February 2010. At the
same time, the headline operating profit margin from continuing
operations (i.e., before central costs) increased from 3% in the
prior year to 10%.
At a PBT level, the Group also made progress, reducing the loss
before tax to GBP0.4 million from GBP13.3 million in the prior
year.
However, it is recognised that the absolute level of both the
operating profit and PBT figures remain materially below the
Group's longer-term aspirations. This is especially true at a PBT
level, where the current level of debt and associated financing
costs remain a significant burden, and this will continue to
depress the Group's results until the overall level of debt is
reduced.
Segmental Summary: Strong growth in advertising and
marketing
Media Square consists of ten agencies which have historically
been reported in three segments, the breakdown of their revenue and
headline operating profit by segment is shown below:
Year ended
Year ended 28 February
28 February 2011 2010
Headline Headline
operating operating
Revenue profit/(loss) Revenue profit/(loss)
GBPm GBPm GBPm GBPm
Advertising* 27.3 3.2 22.1 0.8
Marketing 11.0 0.8 10.3 0.3
Design 7.1 0.3 7.2 0.3
Central - (2.2) - (2.6)
Total 45.4 2.1 39.6 (1.2)
*Advertising includes Market Research and Public Relations.
The advertising and marketing segments performed strongly over
the past year.
The core agencies within these segments grew at approximately
20% over the prior year, although the average revenue growth within
the marketing segment was adversely affected by a weaker
performance at the London office of twentysix, which was closed
midway through the year.
Advertising benefited from the recovery in financial services
spend and strong new business wins, as well as the acquisition of
CST. The marketing segment benefited from the trend of strong
growth within digital marketing and associated new business wins in
this area. Both segments continue to be well placed for future
growth.
Compared with advertising and marketing, the design segment had
a less strong year, with essentially flat revenue and operating
profit over the prior year. However, over the past six months we
have taken a number of steps to refine our overall design offering,
both in improving our digital capabilities and in increasing the
level of shared resources across the design agencies.
Geographical Summary: Strong Asian growth
Year ended February 2011 2010
Revenue Revenue
GBPm GBPm
United Kingdom 34.9 31.6
Rest of Europe &
World 10.9 8.1
Eliminations (0.4) (0.1)
Total 45.4 39.6
The majority of the Group's business continues to be in the UK,
from where approximately 75% of its revenues are derived. Against
the backdrop of a flat overall market, the performance of the
Group's agencies in the UK was strong. Overall the agencies
delivered a 10% year-on-year revenue increase, a level which very
few of our peers were able to match.
The performance of our overseas businesses was perhaps even more
pleasing, with an overall revenue increase of 35%. Our Asian
businesses in particular had a very encouraging year and, over the
course of the year, we both strengthened our businesses in China
and have developed a fledgling presence in India. In line with the
more positive Asian macro environment, these agencies are
particularly well positioned for further growth over the coming
years.
Client Spending / New Business: Recovery in spending and new
business wins
The Group's growth in new revenue over the year was a function
both of a rebound in client spending (where clients, in previous
years, had been retained but had materially reduced their level of
spend) and a strong new business performance over a number of the
Group's agencies.
Recovery in spend has been particularly marked in the financial
services sector which is a key sector for the Group. This
improvement was partially offset by the reduction in public sector
spending over the year.
At the same time new business momentum was maintained throughout
the year, with major new client wins over the second six months of
the year including 1MDB, Bennetts, Franklin Templeton, Friends
Life, Kuehne + Nagel, McCain, Office Depot, Orange, RBS, Siemens,
Skandia, Wella and Unilever.
Looking forward, new business will remain an absolute priority
for the Group and its agencies, with a particular focus on
improving our ability to win larger transformational pieces of
business as well as to derive greater value from cooperation across
the Group.
Agency Portfolio: Focused group of marketing communications
agencies
Following the sale of arken in February 2011, the Group has now
completed its transformation into a coherent set of marketing
communications agencies focused around the disciplines of
advertising, public relations, research, marketing and design.
Each of the Group's ten agencies has its own clear and
distinctive positioning within one of these discipline areas and an
established digital offering. Similarly, each agency places
excellence in client service at the heart of its offering and
increasingly this will be emphasised at a Group level as a common
point of differentiation.
The majority of the Group's agencies are now at least at a
minimum level of scale in terms of profitability, number of staff
and breadth of clients, which in turn strengthens their overall
proposition to clients. This process of building scale within our
agencies has continued in recent months with the merger of CST and
The Gate to form CST The Gate, which has strengthened our overall
advertising proposition, and an increase in the level of
integration between our two design and branding agencies, Holmes
& Marchant and Lloyd Northover.
There remain a limited number of agencies or offices which are
below an ideal level of scale and/or overly dependent on a small
number of large clients; however, the Group continues to make
progress in this area.
Goal: Delivering sustained operating profit growth
Having built a stable agency portfolio and a track record of
profitability, the Group's focus will now be on driving sustained
operating profit growth within each of its agencies. This growth
will be driven by the successful execution of individual growth
strategies, tailored to the individual agency's position and
prospects. Generally, they will combine a mix of organic growth
(driven by both new business and geographic expansion) and limited
tuck-in acquisitions to bolster this growth.
At the same time, these strategies will be supplemented by a
greater focus on more proactively deriving benefits from
inter-agency cooperation, and improving the ability of the Group's
agencies to work together in areas where clients desire them to do
so.
In parallel, at a corporate level, the Board will look to
strengthen the Group's balance sheet as a matter of priority, as
well as considering selected opportunities to expand the scale of
the Group's operations to better leverage its central costs. This
reflects the fact that there are only limited opportunities to
derive further reductions in the Group's central costs (after the
radical reductions of the past three years); however, the Group's
existing infrastructure could comfortably cope with a materially
larger organisation.
Remuneration: Reinforcing the growth imperative
One area that will be critical in helping to drive the
successful implementation of the Group's new strategy will be
enabling its senior managers to share in the value that they create
by delivering sustained operating profit growth within their
agencies.
As such, we are currently in the process of implementing an
innovative, new long term incentive plan which will replace the
existing restricted stock scheme and which will provide key senior
managers across the Group with a compelling reward for delivering
high levels of operating profit growth over the next four years.
The scheme will only begin to pay out if minimum levels of annual
operating profit growth are achieved, with the Group retaining a
level of flexibility to settle awards in either cash or shares at
the end of the period.
Current Trading and Outlook: Cautious Optimism
Building on the progress of the past twelve months, the Group
has made a solid start to the new financial year and, after two
months, remains on budget and on track to deliver a further year of
operating profit growth.
However, the Board's optimism remains tempered by the uncertain
impact of spending cuts on consumer confidence in the UK in
particular and hence the medium term outlook for marketing budgets.
At the same time, the Group's prospects are likely to remain
constrained until the Group's balance sheet has been successfully
strengthened.
Peter Reid
Chief Executive Officer
23 May 2011
Chief Financial Officer's Statement
Financial Review
During the financial year to February 2011, the Group delivered
strong revenue growth and a significant increase in profitability
over the prior year. Revenue for the period was up 15% to GBP45.4
million, headline EBITDA increased by GBP3.2 million to GBP2.9
million and headline operating profit increased by GBP3.3 million
to GBP2.1 million.
Over the course of the year the Group made material progress in
improving the underlying profitability of the Group. For the year
under review the Group's headline operating profit margin from
continuing operations (i.e. before central costs) was 10%. This
represents a significant improvement over the prior year figure of
3%, although it remains short of the Group's long-term goal of 15%
as the economic environment improves. At a Group level, after
central costs, the operating margin was 5%. Looking forward, we
would expect that the gap between the operating profit margin from
operations and the operating profit margin at a Group level would
narrow as the overall scale of the Group's operations
increases.
Income Statement
During the year under review, the Group achieved revenue of
GBP45.4 million (2010 restated: GBP39.6 million), headline EBITDA
of GBP2.9 million (2010 restated: loss of GBP0.3 million) and
headline operating profit of GBP2.1 million (2010 restated: loss of
GBP1.2 million).
After inclusion of share-based payments the operating profit is
GBP1.8m (2010 restated: loss of GBP11.5m).
The Group made a loss on closure of subsidiary undertakings of
GBP479k, which relates to the closure of twentysix London (the
small London office of the Group's digital agency twentysix). In
addition, the Group made a profit on the sale of investment of
GBP0.2 million, relating to the sale of the 1,080,000 Ordinary
shares in Rivington Street Holdings plc held at 28 February 2010,
and a fair value movement on warrant derivative of GBP0.1 million,
which has arisen from the annual fair value review of the warrants
granted to Lloyd Banking Group as part of the bank facility
refinancing.
As discussed above, the Group has a significant financing burden
relating to its high level of debt. As such, the net finance costs
for the year to 28 February 2011 were GBP2.1m (2010: GBP1.7m).
Included in the finance costs for the year was a one off non-cash
finance cost of GBP0.2 million relating to the accelerated
amortisation of loan arrangement fees (incurred in 2005), which was
triggered when the existing facilities were terminated and replaced
by the new bank facilities in July 2010.
Taking the above into account, the Group made a loss before tax
of GBP0.4 million (2010 restated: loss of GBP13.3 million - a
figure which included a non-cash goodwill writedown of
GBP7.8m).
Disposals / Discontinued Operations
The Group continues to follow a strategy of increasing the scale
of its core agencies and exiting from any businesses that do not
fit with the Group's overall marketing communications focus or that
are below a minimum scale. In the year under review, the Group
completed the disposal of three subsidiaries: twentysix New York, a
Microsoft-focussed software consultancy company, on 20 August 2010
to Tallan Inc.; arken, a point-of-purchase and manufacturing
business, on 28 February 2011 to Writtle Holdings Limited; and the
Hong Kong office of Lloyd Northover on 28 February 2011 to existing
management.
The results of these operations in the period, a loss of GBP0.5
million, were classified within discontinued operations in the
income statement, and the results for the prior year, a loss GBP7.6
million (including goodwill impairments of GBP8.1 million), have
been restated to discontinued operations (see note 5 for further
details). The loss on disposal of these operations was GBP2.0
million (including a goodwill write-off of GBP0.5 million) and this
has also been classified within discontinued operations.
Net Debt and Debt Facilities
Underlying net debt was GBP19.5 million (2010: GBP19.9 million)
at the period end, excluding GBP5.1 million (2010: GBP6.0 million)
of restricted cash which is included in the reported net debt of
GBP14.4 million (2009: GBP13.9 million). This cash represents
advanced receipts from clients and in the Board's opinion
underlying net debt is a more representative figure of the position
at the year end.
The Group's net debt balance represents gross debt of GBP22.3
million (2010: GBP22.5 million) less cash of GBP7.9 million (2010:
GBP8.6 million) held by the Group, of which GBP5.1 million (2010:
GBP6 million) represents advanced receipts from clients.
In addition to the proceeds from the sale of arken, the Group
has also entered into an option agreement to sell the freehold
property which is occupied by arken for GBP3.25 million. If this
sale is completed, these proceeds would be used to further reduce
debt. This option expires at the end of December 2011. If the
purchaser chooses not to exercise this option, then the Group would
explore the sale of the property on the strength of the 10 year
lease entered into by arken at the time of the sale.
As has previously been disclosed, the Group entered into a new
bank facility with Lloyds Banking Group in July 2010. These
facilities run until July 2013. In addition, the Group has recently
agreed a further increase to its revolving credit facility from
GBP4 million to GBP6 million which the Board believes provides the
Group with a more appropriate facility to support growth and
execute the Group's strategic plan.
Balance Sheet and Cash Flow
Net assets reduced by GBP2.3 million from GBP4.0 million at
February 2010 to GBP1.7 million at February 2011. This reflects a
decrease in assets of GBP4.1 million, partially offset by a
decrease in liabilities of GBP1.8 million and predominantly relates
to the effects of the disposal of arken and twentysix New York and
the closure of the twentysix London office.
The freehold property which is occupied by arken has been
reclassified in the balance sheet from property, plant and
equipment to investment property in line with accounting
requirements.
In the period there was a movement in share-based payment
reserves and investment in own shares which primarily reflects the
vesting of restricted stock units issued to senior managers and
executives during the year which were satisfied by a transfer from
the shareholding of Tenon (IOM) Corporate Services Ltd, sole
trustee of the Group's employee benefit trust.
Over the year, the Group produced cash inflow from operations of
GBP1.4 million (2010: outflow of GBP1.1 million) and after
financing and capital expenditure costs are taken into account,
there was a small overall cash outflow of GBP0.3 million (2010:
GBP2.1 million). This small overall cash outflow includes the
impact of a net unwind of GBP0.9 million of the GBP6.0 million cash
held for use on specific client projects at 28 February 2010, which
was spent as these projects completed. On an underlying basis,
excluding the effect of the unwind of cash held for use on specific
client projects, there was a cash inflow from operations of
GBP2.3m, and an overall cash inflow of GBP0.6 million over the
period.
Capital expenditure continued to be carefully managed and kept
to 76% of depreciation. In the new financial year, the Group will
have one material capital expenditure commitment relating to the
new office of Illuminas, the Group's research agency, following the
expiration of its existing lease, which will likely result in
capital expenditure being slightly in excess of depreciation for
the year. Beyond this year the Group would expect capital
expenditure to remain below the annual depreciation charge for the
foreseeable future.
The finance costs paid in the period, as shown in the cash flow
statement, were GBP1.7m (2010: GBP1.6m).
Other significant cash flow movements in the period include cash
inflows from acquisition, disposal and closure of subsidiary
undertakings of GBP0.5 million, relating to net proceeds from the
disposals discussed above, the closure of twentysix London (the
small London office of the Group's digital agency twentysix) and
the finalisation of the CST acquisition. A further cash inflow from
sale of investment of GBP0.6 million, relates to the sale of the
1,080,000 Ordinary shares in Rivington Street Holdings plc held at
28 February 2010.
Working capital management remains strong. Over the period,
there was a modest reduction in creditor days and a corresponding
decrease in debtor days, leaving the overall position largely
unchanged.
Property
In December 2010 the Group agreed a deal with Airline Services
to take on the lease of the Group's one excess property lease,
which related to the former operations of Symmetry in Manchester,
and released the property provision associated with this property.
As a result, the Group's portfolio of property is now highly
utilised, with no significant excess space.
Financial Risk Management
As part of the new bank facility agreement with Lloyds Banking
Group, the Group terminated its existing interest rate hedge over
GBP18.75 million at a rate of 4.78% and entered into new interest
rate hedging arrangements over GBP15m for the duration of the
facility with rates fixed at 2.00% to 30 April 2011, 3.55% from 1
May 2011 to 30 April 2012 and 4.68% from 1 May 2012 to 31 July
2013.
The Group has some currency risk, with approximately 25% of its
revenues being generated outside of the UK. The Group does not
currently enter into any currency hedging arrangements other than
on short term intercompany loan balances where cash movements are
probable.
Taxation
The total tax credit for the year was GBP0.1 million (2010:
charge of GBP0.6 million). During the year the Group received net
tax refunds of GBP58,000 (2010: paid GBP43,000).
For the immediate future, the Group expects to have limited tax
liabilities since it continues to hold significant deferred tax
assets. At the end of the financial year it held on its books a
deferred tax asset of GBP1.8 million (2010: GBP1.5 million).
However, in addition to this figure it has unrecognised deferred
tax assets of GBP2.6 million.
Dean Wright
Chief Financial Officer
23 May 2011 CONSOLIDATED INCOME STATEMENT
For the year ended 28 February 2011
2011 2010
GBP'000 GBP'000
Note Restated
----------------------------------------------- ---- -------- --------
Revenue 3 45,377 39,598
----------------------------------------------- ---- -------- --------
Administrative expenses (43,315) (40,806)
----------------------------------------------- ---- -------- --------
Headline operating profit/ (loss) 2,062 (1,208)
Exceptional items 4 - (9,844)
Share-based payments (282) (465)
----------------------------------------------- ---- -------- --------
Operating profit/ (loss) 1,780 (11,517)
Loss on closure of subsidiary undertakings (479) -
Profit/(loss) on sale of investment 173 (118)
Fair value movement of warrant derivative 137 -
Finance costs (1,808) (1,632)
Finance costs relating to amortisation
of loan arrangement fees (410) (213)
Finance income relating to derivative 155 165
Finance income 13 25
Net finance cost (2,050) (1,655)
Loss from continuing operations before
taxation (439) (13,290)
Tax on loss 110 (557)
----------------------------------------------- ---- -------- --------
Loss from continuing operations (329) (13,847)
----------------------------------------------- ---- -------- --------
Loss from discontinued operations 5 (2,427) (10,721)
----------------------------------------------- ---- -------- --------
Loss for the year attributable to shareholders (2,756) (24,568)
----------------------------------------------- ---- -------- --------
Basic and diluted loss per share from
total operations 6 (8.41p) (76.21p)
----------------------------------------------- ---- -------- --------
Basic and diluted loss per share from
continuing operations 6 (1.00p) (42.95p)
----------------------------------------------- ---- -------- --------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 28 February 2011
2011 2010
GBP'000 GBP'000
Loss for the year (2,756) (24,568)
Other comprehensive income:
Exchange differences on translating
foreign operations 165 (16)
------------------------------------- -------- ---------
Other comprehensive income for the
year 165 (16)
Total comprehensive expense for the
year (2,591) (24,584)
------------------------------------- -------- ---------
CONSOLIDATED BALANCE SHEET
As at 28 February 2011
2011 2010
Note GBP'000 GBP'000
--------------------------------- ---- -------- --------
Non-current assets
Intangible assets 163 100
Goodwill 23,381 23,670
Property, plant and equipment 1,854 5,625
Investment property 3,160 -
Financial assets 8 415
Deferred tax 1,801 1,500
--------------------------------- ---- -------- --------
3 30,367 31,310
--------------------------------- ---- -------- --------
Current assets
Inventories 924 1,022
Trade and other receivables 17,048 19,322
Corporation tax - 127
Cash and cash equivalents 7,945 8,634
25,917 29,105
--------------------------------- ---- -------- --------
Total assets 3 56,284 60,415
--------------------------------- ---- -------- --------
Current liabilities
Trade and other payables (30,237) (31,079)
Corporation tax (161) (35)
Borrowings (176) (3,367)
Financial liabilities (1) (4)
(30,575) (34,485)
--------------------------------- ---- -------- --------
Non-current liabilities
Borrowings (22,167) (19,172)
Financial liabilities (942) (1,040)
Provisions for liabilities (940) (1,749)
--------------------------------- ---- -------- --------
(24,049) (21,961)
--------------------------------- ---- -------- --------
Total liabilities (54,624) (56,446)
--------------------------------- ---- -------- --------
Net assets 1,660 3,969
--------------------------------- ---- -------- --------
Shareholders' funds
Share capital 3,617 3,617
Share premium account 37,866 37,866
Capital redemption reserve 13,268 13,268
Merger reserve 5,078 5,078
Share-based payment reserve 309 714
Investment in own shares (953) (1,385)
Translation reserve 376 211
Retained earnings (57,901) (55,400)
--------------------------------- ---- -------- --------
Total equity shareholders' funds 1,660 3,969
--------------------------------- ---- -------- --------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 28 February 2011
Share Capital Share-based Investment
Issued premium redemption Merger payment in own Translation Retained
capital account reserve reserve reserve shares reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- ------- ------- ---------- ------- ----------- ---------- ----------- -------- --------
Balance at 28
February
2009 3,317 37,686 13,268 5,078 800 (905) 227 (31,130) 28,341
Exchange loss
arising on
consolidation - - - - - - (16) - (16)
-------------- ------- ------- ---------- ------- ----------- ---------- ----------- -------- --------
Net expense
recognised
directly in
other
comprehensive
expense - - - - - - (16) - (16)
Loss for the
financial
year - - - - - - - (24,568) (24,568)
-------------- ------- ------- ---------- ------- ----------- ---------- ----------- -------- --------
Total
recognised
expense for
the year - - - - - - (16) (24,568) (24,584)
Shares issued
to employee
benefit
trust 300 180 - - - (480) - - -
Purchase of
minority
interest - - - - - - - (255) (255)
Employee
share-based
compensation - - - - 467 - - - 467
Share-based
compensation
vested in the
year - - - - (553) - - 553 -
-------------- ------- ------- ---------- ------- ----------- ---------- ----------- -------- --------
Balance at 28
February
2010 3,617 37,866 13,268 5,078 714 (1,385) 211 (55,400) 3,969
Exchange gain
arising on
consolidation - - - - - - 165 - 165
-------------- ------- ------- ---------- ------- ----------- ---------- ----------- -------- --------
Net income
recognised
directly in
other
comprehensive
income - - - - - - 165 - 165
Loss for the
financial
year - - - - - - - (2,756) (2,756)
Total
recognised
expense for
the year - - - - - - 165 (2,756) (2,591)
Employee
share-based
compensation - - - - 282 - - - 282
Share-based
compensation
vested in the
year - - - - (687) 432 - 255 -
-------------- ------- ------- ---------- ------- ----------- ---------- ----------- -------- --------
Balance at 28
February
2011 3,617 37,866 13,268 5,078 309 (953) 376 (57,901) 1,660
-------------- ------- ------- ---------- ------- ----------- ---------- ----------- -------- --------
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 28 February 2011
2011 2010
Note GBP'000 GBP'000
---------------------------------------------- ---- ------- -------
Cash inflow/ (outflow) from operating
activities
Cash inflow/ (outflow) from operating
activities before taxation 7 1,391 (1,070)
Corporation tax received/ (paid) 58 (43)
---------------------------------------------- ---- ------- -------
Net cash inflow/ (outflow) from operating
activities after taxation 1,449 (1,113)
Cash inflow/ (outflow) from investing
activities
Finance income received 8 25
Acquisition of subsidiary undertakings 415 (577)
Purchase of property, plant and equipment (776) (738)
Disposal/ closure of subsidiary undertakings 79 (329)
Sale of investment 580 -
Proceeds from disposals of property,
plant and equipment - 1
Net cash inflow/ (outflow) from investing
activities 306 (1,618)
---------------------------------------------- ---- ------- -------
Cash (outflow)/ inflow from financing
activities
Finance cost paid (1,736) (1,611)
Repayment of borrowings (1,011) (929)
Drawdown of revolving credit facility 700 3,200
Capital element of hire purchase agreements (5) (3)
---------------------------------------------- ---- ------- -------
Net cash (outflow)/ inflow from financing
activities (2,052) 657
---------------------------------------------- ---- ------- -------
Net decrease in cash and cash equivalents (297) (2,074)
---------------------------------------------- ---- ------- -------
Cash and cash equivalents at beginning
of year 8,634 11,001
Effect of exchange rate changes on the
balance of cash held in foreign subsidiaries (392) (293)
---------------------------------------------- ---- ------- -------
Cash and cash equivalents at end of
year 7,945 8,634
---------------------------------------------- ---- ------- -------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 28 February 2011
1. GENERAL INFORMATION
Media Square plc and its subsidiaries' principal activities are
advertising, marketing and design services.
Media Square plc, a Public Limited Company, is incorporated and
domiciled in the United Kingdom.
The financial statements for the year ended 28 February 2011
(including the comparative for the year ended 28 February 2010)
were approved by the Board of directors on 23 May 2011. Amendments
to the financial statements are not permitted after they have been
approved.
The financial information set out in this preliminary
announcement does not constitute statutory accounts within the
meaning of section 435 of the Companies Act 2006. The group income
statement, the group statement of changes in equity, the group
balance sheet, the group cash flow statement and the associated
notes for the year ended 28 February 2011 have been extracted from
the group's financial statements upon which the auditor's opinion
is unqualified and does not include any statement under Section 237
(3) of the Companies Act 1985. The statutory accounts for the year
ended 28 February 2011 will be delivered to the Registrar of
Companies following the Group's Annual General Meeting.
2. ACCOUNTING POLICIES
These consolidated financial statements have been prepared using
the required measurement bases specified under International
Financial Reporting Standards (IFRS) and in accordance with
applicable IFRS as adopted by the European Union and IFRS as issued
by the International Accounting Standards Board.
3. segmental analysis
Year ended 28
February 2011 Advertising Marketing Design Unallocated Eliminations Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ------------ ------------ ----------- ----------- ------------ ------------
Revenue
From
external
customers 27,273 11,018 7,086 - - 45,377
From other
segments 17 29 15 - (61) -
---------------- ------------ ------------ ----------- ----------- ------------ ------------
Segment revenues 27,290 11,047 7,101 - (61) 45,377
---------------- ------------ ------------ ----------- ----------- ------------ ------------
Headline
operating
profit/ (loss) 3,251 758 294 (2,241) - 2,062
Share-based
payments - - - (282) - (282)
---------------- ------------ ------------ ----------- ----------- ------------ ------------
Operating
profit/ (loss) 3,251 758 294 (2,523) - 1,780
---------------- ------------ ------------ ----------- ----------- ------------ ------------
Loss on closure
of subsidiary
undertakings (479)
Profit on sale
of investment 173
Fair value
movement of
warrant
derivative 137
Net finance
costs (2,050)
---------------- ------------ ------------ ----------- ----------- ------------ ------------
Loss before tax (439)
Taxation 110
---------------- ------------ ------------ ----------- ----------- ------------ ------------
Loss after tax (329)
---------------- ------------ ------------ ----------- ----------- ------------ ------------
Segmental assets 38,207 9,510 4,852 3,715 - 56,284
Other segment
information:
Capital
expenditure 379 125 136 27 - 667
Depreciation 444 180 158 85 - 867
The unallocated operating loss, share-based payments and
segmental assets relate to central costs.
The capital expenditure and depreciation charge disclosed
relates to continuing operations only and as such does not agree to
the figures disclosed in the consolidated cash flow statement and
note 7 respectively.
Year ended 28
February 2010 Advertising Marketing Design Unallocated Eliminations Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Restated Restated Restated Restated Restated Restated
Revenue
from
external
customers 22,050 10,331 7,217 - - 39,598
from other
segments 16 20 31 - (67) -
---------------- ------------ ------------ ----------- ----------- -------------- ------------
Segment revenues 22,066 10,351 7,248 - (67) 39,598
---------------- ------------ ------------ ----------- ----------- -------------- ------------
Headline
operating
profit/ (loss) 795 318 280 (2,601) - (1,208)
Exceptional
items (6,013) (682) (2,441) (708) - (9,844)
Share-based
payments - - - (465) - (465)
---------------- ------------ ------------ ----------- ----------- -------------- ------------
Operating
profit/ (loss) (5,218) (364) (2,161) (3,774) - (11,517)
---------------- ------------ ------------ ----------- ----------- -------------- ------------
Loss on sale of
investment (118)
Net finance
costs (1,655)
---------------- ------------ ------------ ----------- ----------- -------------- ------------
Loss before tax (13,290)
Taxation (557)
---------------- ------------ ------------ ----------- ----------- -------------- ------------
Loss after tax (13,847)
---------------- ------------ ------------ ----------- ----------- -------------- ------------
Segmental assets 40,040 8,786 10,751 838 - 60,415
Other segment
information:
Capital
expenditure 193 115 274 62 - 644
Depreciation 461 202 119 101 - 883
Goodwill
impairment 5,846 600 1,352 - - 7,798
The unallocated operating loss, exceptional items, share-based
payments and segmental assets relate to central costs.
The capital expenditure and depreciation charge disclosed
relates to continuing operations only and as such does not agree to
the figures disclosed in the consolidated cash flow statement and
note 7 respectively.
The Group's revenue from external customers and its geographic
allocation of total non-current assets may be summarised as
follows:
Year ended Year end
28 February 2011 28 February 2010
Non-current Non-current
Revenues assets Revenues assets
GBP'000 GBP'000 GBP'000 GBP'000
Restated Restated
--------------- -------- ----------- -------- -----------
United Kingdom 34,875 23,874 31,620 24,737
Rest of World 10,856 6,493 8,103 6,573
Eliminations (354) - (125) -
--------------- -------- ----------- -------- -----------
Total 45,377 30,367 39,598 31,310
--------------- -------- ----------- -------- -----------
4. Exceptional ITEMS
2011 2010
GBP'000 GBP'000
Restated
Restructuring and reorganisation
costs - (1,306)
Property related provisions, costs
and impairments - (740)
Goodwill impairment - (7,798)
----------------------------------- ------- --------
- (9,844)
----------------------------------- ------- --------
5. DISCONTINUED OPERATIONS
During the year the Group disposed of arken, twentysix New York
and the Hong Kong office of Lloyd Northover.
The results of the discontinued operations are analysed as
follows:
2011 2010
GBP'000 GBP'000
Restated
------------------------------------------------ ------- --------
Trading loss for Marlow and Dubai operations - (1,480)
Loss on disposal of assets of Marlow operations - (1,599)
Trading loss for arken, twentysix New York and
Lloyd Northover Hong Kong (453) (7,642)
Loss on disposal of arken, twentysix New York
and Lloyd Northover Hong Kong (1,974) -
Loss from discontinued operations (2,427) (10,721)
------------------------------------------------ ------- --------
6. LOSS PER SHARE
The calculation of the basic loss per share is based on the loss
on ordinary activities after tax and on the weighted average number
of Ordinary shares in issue during the year.
In 2010 and 2011, a loss was generated from total, continued and
discontinued operations. As the effect of share options on the loss
per share is anti-dilutive no diluted earnings per share figure has
been produced.
The loss and weighted average number of shares used in the
calculations are set out below:
2011 2010
--------------- ------- ---------- -------- -------- ---------- --------
Weighted Weighted
Basic and average average
diluted loss number Loss per number Loss per
per share Loss of shares share Loss of shares share
---------- ----------
GBP'000 pence GBP'000 pence
--------------- ------- ---------- -------- -------- ---------- --------
Basic and
diluted loss
per share from
total
operations
Loss
attributable
to ordinary
shareholders (2,756) 32,772,740 (8.41p) (24,568) 32,238,713 (76.21p)
--------------- ------- ---------- -------- -------- ---------- --------
Basic and
diluted loss
per share on
continuing
operations
Loss
attributable
to ordinary
shareholders (329) 32,772,740 (1.00p) (13,847) 32,238,713 (42.95p)
--------------- ------- ---------- -------- -------- ---------- --------
Basic and
diluted loss
per share on
discontinued
operations
Loss
attributable
to ordinary
shareholders (2,427) 32,772,740 (7.41p) (10,721) 32,238,713 (33.26p)
--------------- ------- ---------- -------- -------- ---------- --------
7. Net cash inflow from operating activities
2011 2010
GBP'000
GBP'000 Restated
----------------------------------------------------- ------- ---------
Operating profit/ (loss) 1,780 (11,517)
Operating loss from discontinued operations (453) (9,196)
Depreciation 1,021 1,062
Amortisation of intangible assets 37 -
Loss on disposal of property, plant & equipment 1 18
Impairment of goodwill - 16,169
Share-based payment 282 465
Increase in inventories (309) (90)
(Increase)/ decrease in receivables (428) 957
(Decrease)/ increase in payables (540) 1,062
----------------------------------------------------- ------- ---------
Net cash inflow/ (outflow) from operating activities 1,391 (1,070)
----------------------------------------------------- ------- ---------
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR DXLFLFEFXBBK
Media Square (LSE:MSQ)
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