RNS Number:7681W
First Artist Corporation PLC
22 March 2004
22 March 2004
Immediate Release
First Artist Corporation Plc
("First Artist" or "the Company")
Final Resultsfor the sixteen months ended 31 October 2003
First Artist Corporation is a leading European management and representation
company looking after the commercial interests of footballers and other high
profile personalities in the football and television market.
Summary
Results for the sixteen months ended 31 October 2003
* The financial and regulatory constraints which continue within the
football sector have had a major impact on sales during the reporting
period.
* Sales of #4.2 million for the period after reported sales at 30 June 2003
of #2.5 million (2002: #6.7 million).
* Operating loss before goodwill amortisation and restructuring costs of
#2.6 million after reporting a loss of #2.7 million for the year ended 30
June 2003 (profit of #2.0 million to June 2002).
* Operating cash outflow of #0.6 million in the period. Debt reduced from
#1.1 million at 30 June 2002 to #0.4 million.
* Provisions for bad and doubtful debts of #0.8 million (June 2003 #0.3
million) have been booked during the period as a result primarily of the
extended delay in the receipt of monies owed by European clubs.
* #0.5 million of non-recurring exceptional costs incurred arising fromthe
restructuring of the group and transaction abort fees.
* Goodwill arising from the acquisition of FIMO Sport Promotion AG written
off.
Current trading
* Evidence of improvement in the UK following the completion of the media
deal between the Premier League and BSkyB.
* Around #0.6 million of new business was written in the winter trading
window (January), from 12 deals, of which 8 were written in the UK.
* The arrangements for media rights have not yetfinalised in the
Continental markets so the situation remains unpredictable.
Business diversification
* First Artist announced that talks which would have resulted in a
reversal of the Outside Group into First Artist (as announced on 17 July 2003)
ended in the Autumn. Costs of #0.1 million were incurred.
* Business development during the period:
* Media division continues to maintain a solid sales and profits profile
* Snooker management and academy launched
* US representational office established with minimal investment
Headline numbers Sixteen months ended Year ended 30 Year ended 30
31
June 2003 June 2002
October 2003
(Audited)
(Unaudited) (Audited)
#m #m #m
Sales 4.2 2.5 6.7
Operating (loss)/profit* (2.6) (2.7) 2.0
(Loss)/profit before tax* (2.7) (2.7) 2.0
(Loss)/earnings per share (pence)* (4.21)p (3.87)p 3.45p
Fully diluted (loss)/earnings per share (4.21)p (3.87)p 3.39p
(pence)*
* Stated before goodwill amortisation and impairment of #11.8 million (June
2003: #11.5m; June 2002 #1.4m) and restructuring of #0.5 million (June 2003:
#0.3m; June 2002 #nil)
For further information please contact:
First Artist Corporation plc 020 8900 1818
Jon Smith, Chief Executive
Jonathan Lees, Finance Director
WMC Communications 020 7591 3999
Scott Learmouth / Jo Livingston
Chairman's Statement
For the sixteen months ended 31 October 2003
In my last report for the interim twelve months to 30 June 2003, I reported that
the continental European marketplace had continued to decline significantly.
This was due to premier clubs dramatically reducing their expenditure to shore
up their financial defences after the introduction of FIFA imposed trading
windows and in light of the TV rights uncertainties across Europe. However, I
also reported that we were encouraged by the impact that the BSkyB television
rights deal had on the UKmarket in the period immediately following this
reporting period. This resulted in a busy summer period for the London office,
although European deal activity remained stagnant.
During this current reporting period we initiated a major rationalisation
programme which resulted in the closure of some offices and the termination of a
number of employment contracts. Head-count of the Group was reduced by around
40%. The Group started to benefit from the resulting savings of #1.6 million on
an annualised basis, from March 2003. The cost of this restructuring was around
#0.4 million. The remainder of the non recurring exceptional costs were
incurred in relation to the aborted transaction with Outside Group in the summer
of 2003.
We have remained alert to the priority of cash management throughout the whole
period. We achieved a successful summer trading window and took the opportunity
to sort out a number of balance sheet issues.
As previously reported in our last results statement, the Board has reviewed its
valuation of acquired goodwill. In the light of current market conditions and
the trading restrictions being imposed by the football authorities and in
accordance with Financial Reporting Standards Nos. 10 and 11, the Board has
carried out a review of the balance sheet values of goodwill arising from
football acquisitions. As at 31 October 2003, additional provisions totalling
#9.7 million have been made to reduce the carrying value of goodwill to zero.
Although the Board believes that the marketplace will recover, it feels that
general uncertainty and the less predictable earnings visibility demands this
prudent approach.
During the period the Board changed its accounting treatment of fixed asset
investments to comply with Section 131 of the Companies Act. The only effect of
this change on the Group financial statements is to reduce the share premium
account by #8.3 million and to create a merger reserve of a similar amount.
Thismerger reserve has subsequently been released to the profit and loss
account following the impairment of the related goodwill.
During the forthcoming financial year, the Board will be seeking approval from
its shareholders and confirmation by the High Court to restructure its balance
sheet to remove the deficit on the profit and loss account by the cancellation
of the share premium account.
Outlook and current operations:
Deal activity in January has increased three fold yearon year which is
encouraging. The Group has written around #0.6 million of business, from 12
deals in the month of which 8 were written in the UK. However, ahead of any new
media rights deals being completed in Europe, the market outside the UK remains
highly unpredictable.
Whilst the Board remains optimistic about the level of business available to be
written during the 2004 summer transfer window, the uncertainty in the market
makes it impossible to forecast earnings.
Our business diversification strategy leveraging core skills into non-football
related sectors continues to be a priority. Although our efforts to grow this
element of the business organically are progressing well, we are disappointed
that we were unable toconclude or agree terms with the Outside Group on a basis
that would be satisfactory to the shareholders of First Artist.
We announced on 2 October 2003 that, in view of the unpredictable nature of the
soccer market, a full, independent strategic review would be conducted to assess
a way forward for First Artist. The focus of the review was agreed to be an
increase in shareholder value. This was carried out by myself and Alex Johnston,
the two independent directors of First Artist. Baker Tilly were appointed to
manage the review.
We are discussing our options with the executive directors and with our
advisers. We conclude that whatever other strategic options are identified, the
absolute short-term priority is to strengthen the core business by reducing
overheads without damaging our revenue earning capacity, and to improve our cash
position and balance sheet by continuing to negotiate acceptable payment terms
with our overdue debtors.
Whilst the directors cannotpredict the future trading and funding requirements
of the Group with certainty, they consider that these actions, if successfully
concluded, combined with the continued support of the Company's bankers, will
provide sufficient finance to enable theGroup to meet its liabilities as they
fall due.
I am indebted to Alex Johnston for the substantial time he devoted to the
review.
I would like to pay tribute to the efforts of all management and staff who have
worked with great commitment in such a volatile and difficult environment.
Chairman
Brian Baldock
22 March 2004
Chief Executive's Review
As we announced last year, we have changed the year end to 31 October in order
to incorporate the entire summer trading window in one accounting period. This
has been an incredibly difficult period for everybody involved in the industry.
The combination of the trading restrictions imposed by FIFA (which have
effectively limited us to only four months of deal activity in each calendar
year) and the general economic downturn in the football sector has impacted our
football agency business.
There remains continued financial uncertainty in continental Europe,
particularly in Italy. However, as anticipated, through the strength of our
relationships with clubs and through the quality of our client list, deal
activity in the summer trading window (June - August) increased year on year in
the UK market, helped by the signing of a new television rights deal between the
Premier League and BSkyB.
During the summer trading window the Group wrote over #2.0 million of business,
from over 30 deals, of which over 75% was written in the UK. In the recent
January trading window the improving trend has continued with sales increasing
three-fold year on year to around #0.6 million.
As a result of the busy summer in the UK, sales in the Group increased from #2.5
million at 30 June 2003 to #4.2 million at 31 October 2003 (#6.7 million for the
year ended 30 June 2002). The number of deals increased from 32 at 30 June 2003
to 66 at 31 October 2003, compared to 83 in the year ended 30 June 2002. The
operating loss before restructuring and goodwill amortisation and impairment for
the yearended 30 June 2003 of #2.7 million fell to #2.6 million by 31 October
2003. This loss was exacerbated by #0.2 million of foreign exchange losses,
mostly unrealised, and #0.8 million of additional debtor provisions booked
during the period, up from a charge of #0.3 million as at 30 June 2003. These
debtor provisions primarily emanate from our European client base, which has
continued to extend payment terms.
Football is the biggest entertainment platform in the world and we believe that
in the short-term the agreement of new rights deals coupled with a more prudent,
financially responsible industry culture should result in the sector returning
to prosperity.
However, we continue to seek ways to use our core strengths to reduceour
dependence on football. The strategic review has considered all such options.
We have invested around #0.1 million in snooker management and in a snooker
academy based in Northampton. The roster of managed players total nine and
includePeter Ebdon and Ding Junhui, who recently performed well at the Wembley
Masters. The academy has seen around twenty young players through its doors
since September, mostly from the Middle East and Asia.
Group and Financial Review
Sales
The Group generated sales of #4.2 million in the sixteen months ended 31 October
2003 compared to #2.5 million for the twelve months ended 30 June 2003, which
was down 63% from #6.7 million last year. There were 66 deals in the period up
from 32 at June 30 2003 which compares to 83 deals in the previous year.
Operating profit before goodwill amortisation and exceptionals
The operating loss of #2.7 million reported in our last statement for the twelve
months ended 30 June 2003 (2002:profit of #2.0 million) has reduced to a loss of
#2.6 million before goodwill amortisation and impairment and one-off exceptional
costs for the sixteen months ended 31 October 2003. This is stated after
deducting fees payable to third-parties of #1.15 million, up from #0.9 million
at 30 June 2003, and administrative expenses of #5.7 million, up from #4.2
million at 30 June 2003. Administrative expenses include foreign exchange losses
of #0.2 million incurred as a result of the strengthening Swiss franc versus the
primary trading currencies, and bad and doubtful debt provisions of #0.8
million, up from #0.3 million as at 30 June 2003, resulting primarily from the
extended delay in the receipt of monies owed by Italian clubs.
Operating loss after goodwill amortisation and exceptionals
The operating loss of #14.9 million is stated after #0.5 million of exceptional
charges arising from the Group's restructuring and its aborted transaction with
Outside Group and #11.8 million of goodwill amortisation and impairment. The
restructuring costs include the costs of office closure, one-off employee
settlements and associated legal costs. The charge for goodwill amortisation and
impairment includes a one-off impairment charge of #9.7 million primarily in
respect of the acquisition of FIMO Sport Promotion AG.
Liquidity and capital resources
At 31 October 2003 the net cash balance of the Group was #19,000 down from a
cash balance of #1.5 million as at 30 June 2002. #0.6 million was paid as
deferred consideration, #0.1 million in tax and #0.2 million was spent on
investments, capex and finance costs. There was also a #0.6 million operating
cash outflow, incorporating #0.5 million of one-off restructuring costs, derived
from the Group operating losses before amortisation and depreciation of #3.0
million. Non-cash net current assets have declined from #2.2 million to #0.7
million. Net current assets include #1.3 million of trade receivables net of
provisions,trade creditors, trade accruals and deferred consideration. Debt at
31 October 2003 was down from #1.1 million at 30 June 2002 to #0.4 million,
comprising #0.3 million of deferred consideration and #0.1 million of finance
leases.
Consolidated Profit and Loss Account
For the sixteen months ended 31 October 2003
Notes Sixteen Year ended 30 Year ended
months June 2003 30
ended 31 June 2002
October 2003 (Unaudited)
(Audited) #000's (Audited)
#000's #000's
Sales 4,229 2,463 6,700
Cost of sales (1,147) (900) (1,246)
Gross profit 3,082 1,563 5,454
Administrative (5,622) (4,136) (3,445)
expenses
Exceptional (480)(300) -
charge
Operating
(loss)/profit (3,020) (2,873) (2,009)
before goodwill
Goodwill (11,820) (11,525) (1,376)
impairment and
amortisation
Group operating
(loss)/profit (14,840) (14,398) 633
Share of
operating loss of (97) (97) (45)
associates
Total operating
(loss)/profit (14,937) (14,495) 588
Loss on disposal (26) (26) -
of investment
(14,963) (14,521) 588
Investment income 11 9 82
(14,952) (14,512) 670
Interest payable (54) (29) (28)
(Loss)/profit on
ordinary
activities before (15,006) (14,541) 642
taxation
Taxation 3 414 603 (321)
(Loss)/profit on
ordinary
activities after (14,592) (13,938) 321
taxation
Dividends - - -
Retained
(loss)/profit for (14,592) (13,938) 321
the period
Adjusted
(loss)/earnings 4 (4.21) pence (3.87) pence 3.45 pence
per share
Adjusted fully
diluted 4 (4.21) pence (3.87) pence 3.39 pence
(loss)/earnings
per share
Basic
(loss)/earnings 4 (27.08) (25.86) pence 0.65 pence
per share pence
Diluted
(loss)/earnings 4 (27.08) (25.86) pence 0.64 pence
per share pence
Consolidated Balance Sheet
As at 31 October 2003
Notes As at As at As at
31 October 30 June 2003 30 June 2002
2003 (Unaudited) (Audited)
(Audited) #000's #000's
#000's (as restated)
FIXED ASSETS
Intangible - 366 12,062
assets
Tangible assets 811 807 957
Investments - - 75
811 1,173 13,094
CURRENT ASSETS
Debtors 3,504 4,009 6,832
Cash at bank and 156 166 1,480
in hand
3,660 4,175 8,312
CREDITORS:
Amounts falling (2,908) (3,049) (4,668)
due within one
year
NET CURRENT 752 1,126 3,644
ASSETS
TOTAL ASSETS
LESS CURRENT 1,563 2,299 16,738
LIABILITIES
CREDITORS:
Amounts falling
due in greater (87) (158) (672)
than one year
Provision for
liabilities and - - (7)
charges
NET ASSETS 1,476 2,141 16,059
CAPITAL AND
RESERVES
Called up share 135 135 134
capital
Shares to be - - 150
issued
Share premium 6,217 6,217 6,118
account
Merger reserve - - 8,283
Profit and loss (4,876) (4,211) 1,374
account
6 1,476 2,141 16,059
Consolidated Cash Flow Statement
For the sixteen months ended 31 October 2003
Notes Sixteen Year ended Year ended
months ended 30 June 2003 30 June 2002
31 October
2003 (Unaudited) (Audited)
(Audited) #000's #000's
#000's
Cash (outflow)/inflow
from operating 5 (623) (961) 131
activities
Returns on
investments and (43) (20) 54
servicing of finance
Taxation (97) - (934)
Capital expenditure 43 57 (671)
Investments (141) (121) (3,074)
Cash (outflow)/inflow
before financing (861) (1,045) (4,494)
FINANCING:-
Issue of shares (net
of costs) - - 4,176
Payments of deferred
cash consideration (545) (580) (1,628)
Repayment of
directors loans - - 1,043
Capital element of
finance lease rental (55) (48) (8)
payments
(600) (628) 3,583
(Decrease)/increase
in cash in the period (1,461) (1,673) (911)
Cash used to decrease
debt financing 600 552 1,636
New finance leases (104) (67) (74)
Deferred 1,627 1,249 (4,107)
consideration
Movement in net 662 61 (3,456)
(debt)/funds
Net (debt)/funds at
the beginning of the (1,065) (1,065) 2,391
period
Net (debt)/funds at
the end of the period (403) (1,004) (1,065)
Statementof Total Recognised Gains and Losses
For the sixteen months ended 31 October 2003
Sixteen months Year ended Year ended
ended 30 June 2003 30 June 2002
31 October 2003
(Audited) (Unaudited) (Audited)
#000's #000's #000's
(Loss)/profit for the
financial period (14,592) (13,938) 321
Exchange adjustments
59 70 120
Total recognised gains
and losses (14,533) (13,868) 441
Notes to the Interim Accounts:
For the sixteen months ended 31 October 2003
1. Basis of preparation
The financial information contained in this report does not constitute statutory
accounts within the meaning of Section 240 of the Companies Act 1985. During
the period the Board changed its accounting treatment of fixed asset investments
to comply with Section 131 of the Companies Act. The only effect of this change
on the group financial statements is to reduce the share premium account by #8.3
million and to create a merger reserve of a similar amount. This merger reserve
has subsequently been released to the profit and loss account following the
impairment of the related goodwill. Prior year figures have been restated
accordingly.
In all other respects the financial information has been prepared on the basis
of the accounting policies set out in the statutory accounts of the group for
the year ended 30 June 2002.
Subject to the restatement referred to above, the figures for the year ended 30
June 2002 have been extracted from the statutory accounts filed with the
Registrar of Companies which contained an unqualified audit report and no
adverse statement under Section 237 (2) or (3) of the Companies Act 1985.
The figures for the year ended 30 June 2003 are unaudited.
The auditors report on the Group's statutory accounts for the sixteen month
period ended 31 October 2003 draws readers' attentionto the directors'
statements in the accounts regarding going concern issues. These issues are set
out in note 2 below.
2. Going concern
In view of the losses and the consequent deterioration of the financial position
of the Group, the directors have embarked on restructuring the business. During
the period under review the directors initiated a major rationalisation
programme, which resulted in the closure of certain offices and the termination
of a number of employment contracts.They continue to closely monitor and
control the situation and through diversification to seek new ways in which to
reduce reliance on traditional deal based revenue and to review opportunities in
sports other than football.
The directors have considered in detail the trading and cash flow forecasts for
the next twelve months. Whilst the directors cannot predict the future trading
and funding requirements of the group with certainty, they consider that the
above actions, combined with further acceptable negotiation of payment terms
with overdue debtors, if successfully concluded, and the continued support of
the Company's bankers, will provide sufficient finance to enable the Group to
meet its liabilities as they fall due. Thereforeit is appropriate for the
financial statements to be prepared on a going concern basis. The financial
statements do not include any adjustment that might result from the directors'
forecasts not being met.
3. Tax credit
The tax credit is based on the estimated effective rate for the period as a
whole.
Sixteen months ended Year ended Year ended
31 October 2003
30 June 2003 30 June 2002
(Audited)
#000's
(Unaudited) (Audited)
#000's #000's
UK corporation tax credit/(charge) 66 459 (130)
Adjustments in respect of prior periods (8) (43) (8)
Foreign taxes 294 (187) (187)
352 (325) (325)
Origination and reversal of timing differences 62 4 4
Tax on ordinary activities 414 (321) (321)
4.Earnings per share
The calculations of earnings per share are based on the following profits and
numbers of shares:
The adjusted earnings per share is based on profit after tax before the goodwill
amortisation charge.
Sixteen months Year ended Year ended
ended
30 June 30 June
31 October
2003 2002
2003
(Audited)
(Unaudited) (Audited)
Number
Number Number
Weighted average number of 0.25 pence ordinary
shares in issue during the period
For basic earnings per share 53,893,666 53,890,339 49,241,709
Exercise of share options - - 860,254
For diluted earnings per share 53,893,666 53,890,33950,101,963
(Loss)/profit for the financial period #000's #000's #000's
(Loss)/profit for adjusted earnings per share (2,266) (2,087) 1,697
Adjustment for goodwill amortisation (11,820) (11,525) (1,376)
Adjustment for restructuring (480) (300) -
Adjustment for loss on disposal of investment (26) (26) -
(Loss)/profit for earnings per share (14,592) (13,938) 321
5. Reconciliation of operating profit to net operating cash flow
Sixteen months Year ended Year ended
ended 31 October
2003 30 June 30 June
(Audited) 2003 2002
#000's (Unaudited) (Audited)
#000's #000's
Operating (loss)/profit (14,937) (14,495) 588
Depreciation 166 123 89
Amortisation of goodwill 11,820 11,525 1,376
Loss/(profit) on disposal of fixed assets 41 38 3
Decrease/(increase) in debtors 2,232 2,225 (3,010)
(Decrease)/increase in creditors (101) (544) 920
Share of operating loss of associates 97 97 45
Exchange 59 70 120
Net cash (outflow)/inflow from operating activities (623) (961) 131
6. Reconciliation of movement in shareholders' funds
Sixteen months Year ended Year ended
ended 31 October
30 June 30 June
2003
2003 2002
(Audited)
(Unaudited) (Audited)
#000's
#000's #000's
(Loss)/profit for the financial period (14,592) (13,938) 321
Foreign exchange adjustment 59 70 120
(14,533) (13,868) 441
New share capital subscribed net of costs - - 12,651
Cancellation of shares to be issued (50) (50) -
(Decrease)/increase in shareholders' funds (14,583) (13,918) 13,092
Opening shareholders' funds 16,059 16,059 2,967
Closing shareholders' funds 1,476 2,141 16,059
Shareholders' funds are entirely attributable to equity interests.
7. Annual Report
Copies of the Annual Report and Financial Statements will be circulated to
shareholders shortly and may be obtained after the posting date from the Company
Secretary, First Artist Corporation plc, First Artist House, 87 Wembley Hill
Road, Wembley, Middlesex, HA9 8BU.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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