TIDMMSQ
RNS Number : 4168V
Media Square PLC
02 November 2010
Media Square Plc
INTERIM REPORT
FOR THE SIX MONTHS ENDED
31 AUGUST 2010
+--+------------------------------------------------------------------+
| Y| Total revenue up 9% to GBP25.6 million (2009 restated: GBP23.5 |
| | million) |
+--+------------------------------------------------------------------+
| Y| Like-for-like revenue up 10%, reflecting partial recovery in |
| | client spending and improved new business results |
+--+------------------------------------------------------------------+
| Y| Headline EBITDA of GBP1.2 million, an increase of GBP1.9 million |
| | over the prior year (2009 restated: loss of GBP0.7 million) |
+--+------------------------------------------------------------------+
| Y| Headline Operating Profit of GBP0.7 million (2009 restated: loss |
| | of GBP1.2 million) |
+--+------------------------------------------------------------------+
| Y| Underlying net debt of GBP20.5 million, stable since February |
| | 2010 (GBP19.9 million), but up on August 2009 (GBP15.5 million) |
+--+------------------------------------------------------------------+
| Y| New bank facility signed providing platform for recovery |
+--+------------------------------------------------------------------+
Peter Reid, Chief Executive commented:
"The Group has made solid progress over the first six months of the year".
"We have seen a promising recovery in spend and the Group now has a much more
solid platform to build on as the market recovers."
"That said, we remain acutely aware of the need to drive further increases in
the profitability of the Group over time and to reduce the debt to a more
appropriate level for a Group of this size."
These results show the early signs of the benefits of the three year structural
turnaround which started in 2007. Whilst a number of the agencies in the Media
Square Group are still operating below industry norms, the Group as a whole is
now more stable and well positioned for future improvement. The cash costs of
the turnaround are now behind us and we should see the benefits of better
margins and more efficient operations in the future.
Profitable Trading
Comparing the six months to 31 August 2010 with the same period in the prior
year, Group revenues are up by 9% and the Group has been profitable each month
at a headline operating level. The revenue increase reflects that the Group has
retained the majority of its clients during the recession (even if they cut back
on spending). There has also been an improvement in new business performance,
which for the first time in three years, is now more than compensating for
reductions in budgets by existing clients and the loss or resignation of
accounts. At the same time, on the cost side, the Group is benefitting from the
restructuring, during which loss making agencies were sold or closed, agency and
central costs were reduced, and the Group's property portfolio was rationalised.
New Bank Facilities
The major event of the past six months has been the signing of a new three year
bank facility with Lloyds Banking Group which reflects their commitment to Media
Square and provides stability and clarity to the Group. Media Square continues
to carry an unacceptably high level of net debt which was GBP20.5m at 31 August
2010 against an underlying net debt of GBP15.5m at 31 August 2009. This debt
was originally incurred to support the overambitious acquisition programme which
ended in 2005. The increase year on year primarily reflects the cash outflow in
the 6 months to 28 February 2010 driven by the cash costs of the restructuring
initiatives, increased working capital needs relating to higher levels of
trading activity and financing costs.
Dividend
Given the high level of debt, the Board does not recommend an interim dividend
with any surplus cash instead to be used to pay down debt.
Strengthening the Board
In May, Tim Lindsay joined us a Non-Executive Director. He has substantial
experience in advertising and marketing as the past President of TBWA, the
Chairman of Publicis and the President of Lowe Worldwide. The Board now
comprises of two Executive and four independent Non-Executive Directors.
Company Articles
Over the next six months, following advice from the Group's lawyers and requests
from certain shareholders, the Group will be developing a new set of Articles of
Association to bring them up to date with recent company legislation. After
appropriate consultation, the revised Articles will be put to a shareholder vote
at a future General Meeting.
Future Opportunities
All of us in business have experienced an extraordinarily disruptive period -
probably the worst of our careers - following the global banking crisis. Media
Square went into this recession in an extremely weak condition. In 2007 we had
more than forty agencies, many of which were loss making. We now have a core of
eleven stronger units. Annual central costs have been reduced from more than
GBP6m a year to close to GBP2m in the current period.
With confirmed bank facilities, a coherent group of strong creative agencies and
a small efficient corporate centre we can now focus all efforts on winning new
clients. Additional fee income will have a dramatic impact on the bottom line
which in turn will allow us to pay down debt and then seek further growth
opportunities.
The dedication and hard work of all Media Square staff has been quite
extraordinary throughout this difficult period and on behalf of the shareholders
I would like to thank them. The Group still has some way to go before we can
claim that the performance is up to industry standards and we need to explore
various ways to reduce the debt burden and associated financing costs. But most
of the structural work has now been done and moving forward it is a matter of
winning more new business by doing effective and creative work.
Roger Parry
Non-Executive Chairman
1 November 2010
Overview
The Group has made solid progress in the first six months of the financial year.
Over the period, the Group delivered a headline operating profit of GBP0.7m and
headline EBITDA of GBP1.2m. This is a significant improvement over the same
period last year, in which the Group incurred a GBP1.2m headline operating loss
and a headline EBITDA loss of GBP0.7m. While we are pleased with the return to
operating profitability, this performance remains materially below our
longer-term aspirations.
Perhaps most pleasing is that revenue for the period was up 9% in total and 10%
on a like-for-like basis. This performance compares favourably with the
majority of Media Square's peers (especially given the bulk of the Group's
revenue is generated in the UK which has seen only limited growth in advertising
budgets) and demonstrates that the Group is making progress in driving net new
revenue (which will be critical to its long-term recovery), as well as
benefitting from the cost cutting programme that was initiated last year.
Client Spending / New Business
As the revenue increase over the period illustrates, client spending has
rebounded relatively strongly compared with last year. In general, the Group
has benefited from its focus on retaining clients through the recession, even if
spend was materially reduced from previous years, and from a solid performance
in new business.
The recovery in spend has been particularly marked in the financial services
sector, which is a key sector for the Group. This improvement has been
partially offset by the well-publicised reductions in public sector spending,
which, while a relatively limited proportion of overall Group revenue, has
adversely affected the short-term prospects of two of the Group's agencies.
At a segment level, performance was particularly strong in advertising and
marketing but the design segment experienced a decline in revenue, compared to
the same period last year, mainly as a result of the ending of the CBS London
Underground contract at arken, our point-of-purchase agency.
Major new client wins over the period include Admiral Insurance, Beiersdorf,
Friends Life, House of Fraser, Infineum, Kellogg's, National Accident Helpline,
Nichols, Office Depot, RBS Global Banking & Markets, Southern Comfort, Towry,
Trebor and Westfield.
Importantly, most parts of the Group continue to have a relatively high level of
operational gearing, which should enable the Group to drive significant
improvements in profitability if it is able to maintain the current revenue
growth momentum over the long term. With this in mind, considerable effort is
currently being invested in improving the Group's overall new business
capability and efforts, particularly focussed on its ability to win larger, more
transformational, pieces of business.
Income Statement
During the six months under review, the Group achieved revenue of GBP25.6m (2009
restated: GBP23.5m), headline EBITDA of GBP1.2m (2009 restated: loss of GBP0.7m)
and headline operating profit of GBP0.7m (2009 restated: loss of GBP1.2m).
After inclusion of share-based payments the post-exceptional operating profit is
GBP0.4m (2009 restated: loss of GBP2.0m).
The Group has a significant financing burden relating to its high level of debt.
The finance costs for the 6 months to 31 August 2010 were GBP1.1m (2009:
GBP0.9m). However, included in the finance costs were GBP433k of non-cash
finance costs, of which GBP266k relates to loan arrangement fees incurred in
2005 which were being amortised over the life of the loan and were released in
full when the existing facility was terminated in July 2010 and GBP167k relates
to the movement in the fair value of the Group's interest rate hedge derivative
which is required to be recognised under IFRS.
The Group made a loss on disposal of subsidiary undertakings of GBP351k, which
relates to the disposal of twentysix New York, and 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).
Taking the finance costs and loss on disposal and closure into account the Group
made a loss before tax of GBP1.5m (2009 restated: loss of GBP2.9m).
Where like-for-like figures have been reported, these exclude businesses that
were disposed of or closed over the past twelve months (twentysix New York,
twentysix London, Symmetry and Brightlights) and businesses that were acquired
over the same period (the creative agency, CST, which was acquired in January
2010).
Balance Sheet, Cash Flow and Net Debt
Underlying net debt at 31 August 2010 of GBP20.5m represented a significant
increase on the comparable figure at 31 August 2009 of GBP15.5m. However, this
primarily reflects the significant restructuring costs incurred by the Group
over the second half of the financial year to February 2010 in response to the
recession. Over the six month period since 28 February 2010, there was only a
small increase in underlying net debt from GBP19.9m to GBP20.5m.
The Consolidated Statement of Cash Flow includes the impact of the unwind of the
GBP6.0m of cash held for use on specific client projects at 28 February 2010
which was spent over the 6 months under review as these projects completed. On
an underlying basis, excluding the effect of the unwind of cash held for use on
specific client projects, the Group's cash flow from operations over the period
was modestly positive.
The finance costs paid in the period, as shown in the cash flow statement, were
GBP0.8m (2009: GBP0.8m).
New Bank Facilities
The most significant event over the past six months was the signing of the
GBP26.6m new bank facility with Lloyds Banking Group, as announced on 30 July
2010, which provides the Group with facilities that run until July 2013.
Importantly, these facilities provide the Group with a solid platform on which
to continue its recovery and grow operating profit over time.
In light of the current tight credit conditions, the Group believes that the
overall terms of the facility negotiated represent a good deal for the Group and
shareholders and would like to thank Lloyds Banking Group for its on-going
support.
One of the features of the new facility is the ability to make voluntary
pre-payments against the facilities, 100% of which can be applied to the
mezzanine facility (subject to the property loan being repaid first in the event
of a sale of Media Square's freehold property). This is beneficial to the Group
as reducing the mezzanine facility is an essential part of the Group's overall
plan to strengthen its balance sheet and reduce its finance costs over time.
As part of the refinancing process, the Group entered into a new interest rate
hedge with a lower notional amount and a lower swap rate than the previous hedge
that was to run until April 2011.
Disposal / Restructuring
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.
Over the period, the Group completed the disposal of twentysix New York, a
Microsoft-focussed software consultancy company to Tallan Inc., a leading
provider of similar software services in the north east of the United States.
In addition, at the end of August, the Group took the decision to close
twentysix London (the small London office of its digital agency twentysix). This
decision reflected the Group's strategy of embedding digital capabilities within
each of its core agencies (rather than seeking to solely build stand-alone
digital capabilities), with the London office's digital capability being
integrated within Lloyd Northover London, the Group's branding agency.
Current Trading
While prospects for the Group are much stronger than twelve months ago and we
remain on track to meet management expectations for the full year, we remain
cautious about the longer term trading environment. While we are confident that
the Group has achieved a level of stability, it remains a challenging economic
environment in which to further grow operating profit, given the current caution
of clients and the on-going cut backs in the public sector.
That said, Media Square is a stronger business than it was prior to the
recession and we believe that the Group is well positioned to benefit from a
recovery in marketing spend particularly in the UK when it materialises.
Peter Reid
Chief Executive Officer
Consolidated income statement for the six months ended 31 August 2010
+--------------------------------------+------+------------+------------+----------+
| 1 November 2010 | | 6 months | 6 months | Year |
| | | ended | ended | ended |
+--------------------------------------+------+------------+------------+----------+
| | | 31 August | 31 August | 28 |
| | | 2010 | 2009 | February |
| | | | | 2010 |
+--------------------------------------+------+------------+------------+----------+
| | | GBP'000 | GBP'000 | GBP'000 |
+--------------------------------------+------+------------+------------+----------+
| |Note | Unaudited | Unaudited | Audited |
+--------------------------------------+------+------------+------------+----------+
| | | | Restated | |
+--------------------------------------+------+------------+------------+----------+
| | | | | |
+--------------------------------------+------+------------+------------+----------+
| Revenue | 3 | 25,596 | 23,494 | 47,298 |
+--------------------------------------+------+------------+------------+----------+
| | | | | |
+--------------------------------------+------+------------+------------+----------+
| Administrative expenses | | (24,945) | (24,739) | (48,183) |
+--------------------------------------+------+------------+------------+----------+
| | | | | |
+--------------------------------------+------+------------+------------+----------+
| Headline operating profit/ (loss) | 3 | 651 | (1,245) | (885) |
+--------------------------------------+------+------------+------------+----------+
| | | | | |
+--------------------------------------+------+------------+------------+----------+
| Exceptional items | 4 | - | (523) | (17,740) |
+--------------------------------------+------+------------+------------+----------+
| Share-based payments | | (243) | (234) | (465) |
+--------------------------------------+------+------------+------------+----------+
| | | | | |
+--------------------------------------+------+------------+------------+----------+
| Operating profit/ (loss) | 3 | 408 | (2,002) | (19,090) |
+--------------------------------------+------+------------+------------+----------+
| | | | | |
+--------------------------------------+------+------------+------------+----------+
| Loss on disposal of subsidiary | 10 | (351) | - | - |
| undertakings | | | | |
+--------------------------------------+------+------------+------------+----------+
| Loss on closure of subsidiary | 11 | (479) | - | - |
| undertakings | | | | |
+--------------------------------------+------+------------+------------+----------+
| | | | | |
+--------------------------------------+------+------------+------------+----------+
| Profit/ (loss) on sale of an | | 173 | - | (118) |
| investment | | | | |
+--------------------------------------+------+------------+------------+----------+
| | | | | |
+--------------------------------------+------+------------+------------+----------+
| Finance cost | | (871) | (805) | (1,633) |
+--------------------------------------+------+------------+------------+----------+
| Finance cost relating to | | (266) | (106) | (212) |
| amortisation of loan arrangement | | | | |
| fees | | | | |
+--------------------------------------+------+------------+------------+----------+
| Finance (cost)/ income relating to | | (167) | 24 | 165 |
| derivative | | | | |
+--------------------------------------+------+------------+------------+----------+
| Finance income | | 5 | 15 | 25 |
+--------------------------------------+------+------------+------------+----------+
| Net finance cost | | (1,299) | (872) | (1,655) |
+--------------------------------------+------+------------+------------+----------+
| | | | | |
+--------------------------------------+------+------------+------------+----------+
| Loss from continuing operations | | (1,548) | (2,874) | (20,863) |
| before tax | | | | |
+--------------------------------------+------+------------+------------+----------+
| | | | | |
+--------------------------------------+------+------------+------------+----------+
| Tax on loss | | 309 | 302 | (626) |
+--------------------------------------+------+------------+------------+----------+
| | | | | |
+--------------------------------------+------+------------+------------+----------+
| Loss from continuing operations | | (1,239) | (2,572) | (21,489) |
+--------------------------------------+------+------------+------------+----------+
| | | | | |
+--------------------------------------+------+------------+------------+----------+
| Loss from discontinued operations | | - | (315) | (3,079) |
+--------------------------------------+------+------------+------------+----------+
| | | | | |
+--------------------------------------+------+------------+------------+----------+
| Loss for the period | | (1,239) | (2,887) | (24,568) |
+--------------------------------------+------+------------+------------+----------+
| | | | | |
+--------------------------------------+------+------------+------------+----------+
| | | | | |
+--------------------------------------+------+------------+------------+----------+
Consolidated statement of comprehensive income for the six months ended 31
August 2010
+--------------------------------+---+-----------+-----------+------------+
| | | 6 months | 6 months | Year ended |
| | | ended | ended | |
+--------------------------------+---+-----------+-----------+------------+
| | | 31 August | 31 | 28 |
| | | 2010 | August | February |
| | | | 2009 | 2010 |
+--------------------------------+---+-----------+-----------+------------+
| | | GBP'000 | GBP'000 | GBP'000 |
+--------------------------------+---+-----------+-----------+------------+
| | | Unaudited | Unaudited | Audited |
+--------------------------------+---+-----------+-----------+------------+
| | | | Restated | |
+--------------------------------+---+-----------+-----------+------------+
| | | | | |
+--------------------------------+---+-----------+-----------+------------+
| Loss for the period | | (1,239) | (2,887) | (24,568) |
+--------------------------------+---+-----------+-----------+------------+
| | | | | |
+--------------------------------+---+-----------+-----------+------------+
| Other comprehensive income: | | | | |
+--------------------------------+---+-----------+-----------+------------+
| Exchange differences on | | 60 | 144 | (16) |
| translating foreign operations | | | | |
+--------------------------------+---+-----------+-----------+------------+
| Other comprehensive income/ | | 60 | 144 | (16) |
| (expense) for the period | | | | |
+--------------------------------+---+-----------+-----------+------------+
| | | | | |
+--------------------------------+---+-----------+-----------+------------+
| Total comprehensive expense | | (1,179) | (2,743) | (24,584) |
| for the period | | | | |
+--------------------------------+---+-----------+-----------+------------+
Consolidated statement of financial position as at 31 August 2010
+-------------------------------+------+-----------+-----------+-------------+
| | | At | At | At |
| | | 31 August | 31 August | 28 February |
| | | 2010 | 2009 | 2010 |
+-------------------------------+------+-----------+-----------+-------------+
| | | GBP'000 | GBP'000 | GBP'000 |
+-------------------------------+------+-----------+-----------+-------------+
| | Note | Unaudited | Unaudited | Audited |
+-------------------------------+------+-----------+-----------+-------------+
| Non-current assets | | | | |
+-------------------------------+------+-----------+-----------+-------------+
| Intangible assets | | 90 | - | 100 |
+-------------------------------+------+-----------+-----------+-------------+
| Goodwill | | 23,670 | 40,289 | 23,670 |
+-------------------------------+------+-----------+-----------+-------------+
| Property, plant and equipment | | 5,460 | 5,743 | 5,625 |
+-------------------------------+------+-----------+-----------+-------------+
| Financial assets | | 348 | 533 | 415 |
+-------------------------------+------+-----------+-----------+-------------+
| Deferred tax | | 1,776 | 2,303 | 1,500 |
+-------------------------------+------+-----------+-----------+-------------+
| | | 31,344 | 48,868 | 31,310 |
+-------------------------------+------+-----------+-----------+-------------+
| Current assets | | | | |
+-------------------------------+------+-----------+-----------+-------------+
| Inventories | | 1,218 | 1,308 | 1,022 |
+-------------------------------+------+-----------+-----------+-------------+
| Trade and other receivables | | 19,038 | 17,767 | 19,322 |
+-------------------------------+------+-----------+-----------+-------------+
| Corporation tax | | 18 | 183 | 127 |
+-------------------------------+------+-----------+-----------+-------------+
| Cash and cash equivalents | | 4,789 | 9,152 | 8,634 |
+-------------------------------+------+-----------+-----------+-------------+
| | | 25,063 | 28,410 | 29,105 |
+-------------------------------+------+-----------+-----------+-------------+
| Total assets | | 56,407 | 77,278 | 60,415 |
+-------------------------------+------+-----------+-----------+-------------+
| | | | | |
+-------------------------------+------+-----------+-----------+-------------+
| Current liabilities | | | | |
+-------------------------------+------+-----------+-----------+-------------+
| Trade and other payables | | (25,349) | (28,100) | (31,079) |
+-------------------------------+------+-----------+-----------+-------------+
| Corporation tax | | - | - | (35) |
+-------------------------------+------+-----------+-----------+-------------+
| Borrowings | 7 | (176) | (1,167) | (3,367) |
+-------------------------------+------+-----------+-----------+-------------+
| Financial liabilities | | (12) | (5) | (4) |
+-------------------------------+------+-----------+-----------+-------------+
| | | (25,537) | (29,272) | (34,485) |
+-------------------------------+------+-----------+-----------+-------------+
| Non-current liabilities | | | | |
+-------------------------------+------+-----------+-----------+-------------+
| Borrowings | 7 | (25,113) | (19,805) | (19,172) |
+-------------------------------+------+-----------+-----------+-------------+
| Financial liabilities | | (1,207) | (1,182) | (1,040) |
+-------------------------------+------+-----------+-----------+-------------+
| Provisions for liabilities | | (1,517) | (1,187) | (1,749) |
+-------------------------------+------+-----------+-----------+-------------+
| | | (27,837) | (22,174) | (21,961) |
+-------------------------------+------+-----------+-----------+-------------+
| Total liabilities | | (53,374) | (51,446) | (56,446) |
+-------------------------------+------+-----------+-----------+-------------+
| | | | | |
+-------------------------------+------+-----------+-----------+-------------+
| Net assets | | 3,033 | 25,832 | 3,969 |
+-------------------------------+------+-----------+-----------+-------------+
| | | | | |
+-------------------------------+------+-----------+-----------+-------------+
| Shareholders' funds | | | | |
+-------------------------------+------+-----------+-----------+-------------+
| Share capital | | 3,617 | 3,317 | 3,617 |
+-------------------------------+------+-----------+-----------+-------------+
| Share premium account | | 37,866 | 37,686 | 37,866 |
+-------------------------------+------+-----------+-----------+-------------+
| Capital redemption reserve | | 13,268 | 13,268 | 13,268 |
+-------------------------------+------+-----------+-----------+-------------+
| Merger reserve | | 5,078 | 5,078 | 5,078 |
+-------------------------------+------+-----------+-----------+-------------+
| Share-based payment reserve | | 957 | 1,034 | 714 |
+-------------------------------+------+-----------+-----------+-------------+
| Investment in own shares | | (1,385) | (905) | (1,385) |
+-------------------------------+------+-----------+-----------+-------------+
| Translation reserve | | 271 | 371 | 211 |
+-------------------------------+------+-----------+-----------+-------------+
| Retained earnings | | (56,639) | (34,017) | (55,400) |
+-------------------------------+------+-----------+-----------+-------------+
| | | | | |
+-------------------------------+------+-----------+-----------+-------------+
| Total equity | | 3,033 | 25,832 | 3,969 |
+-------------------------------+------+-----------+-----------+-------------+
Consolidated statement of change in equity for the six months ended 31 August
2010
+----------------+---------+---------+------------+---------+-------------+------------+-------------+----------+----------+
| | | Share | Capital | | Share-based | Investment | | Retained | Total |
| | Issued | premium | redemption | Merger | payment | in own | Translation | earnings | equity |
| | capital | account | reserve | reserve | reserve | shares | reserve | | |
+----------------+---------+---------+------------+---------+-------------+------------+-------------+----------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------+---------+---------+------------+---------+-------------+------------+-------------+----------+----------+
| Balance at 28 | 3,317 | 37,686 | 13,268 | 5,078 | 800 | (905) | 227 | (31,130) | 28,341 |
| February 2009 | | | | | | | | | |
+----------------+---------+---------+------------+---------+-------------+------------+-------------+----------+----------+
| Exchange gain | | - | | | | | | - | (16) |
| arising on | - | | - | - | - | - | (16) | | |
| consolidation | | | | | | | | | |
+----------------+---------+---------+------------+---------+-------------+------------+-------------+----------+----------+
| Net expense | - | - | | - | - | | | - | (16) |
| recognised | | | - | | | - | (16) | | |
| directly in | | | | | | | | | |
| other | | | | | | | | | |
| comprehensive | | | | | | | | | |
| income | | | | | | | | | |
+----------------+---------+---------+------------+---------+-------------+------------+-------------+----------+----------+
| Loss for the | - | - | - | - | - | - | - | (24,568) | (24,568) |
| financial year | | | | | | | | | |
+----------------+---------+---------+------------+---------+-------------+------------+-------------+----------+----------+
| Total | - | - | - | - | | | (16) | (24,568) | (24,584) |
| recognised | | | | | - | - | | | |
| expense for | | | | | | | | | |
| the year | | | | | | | | | |
+----------------+---------+---------+------------+---------+-------------+------------+-------------+----------+----------+
| Shares issued | 300 | 180 | - | - | - | (480) | - | - | - |
| to employee | | | | | | | | | |
| benefit trust | | | | | | | | | |
+----------------+---------+---------+------------+---------+-------------+------------+-------------+----------+----------+
| Purchase of | - | - | - | - | - | - | - | (255) | (255) |
| minority | | | | | | | | | |
| interest | | | | | | | | | |
+----------------+---------+---------+------------+---------+-------------+------------+-------------+----------+----------+
| Employee | | - | - | | | | | - | 467 |
| share-based | - | | | - | 467 | - | - | | |
| compensation | | | | | | | | | |
+----------------+---------+---------+------------+---------+-------------+------------+-------------+----------+----------+
| Share-based | | - | - | | | | | 553 | - |
| compensation | - | | | - | (553) | - | - | | |
| vested in the | | | | | | | | | |
| year | | | | | | | | | |
+----------------+---------+---------+------------+---------+-------------+------------+-------------+----------+----------+
| Balance at 28 | 3,617 | 37,866 | 13,268 | 5,078 | 714 | (1,385) | 211 | (55,400) | 3,969 |
| February 2010 | | | | | | | | | |
+----------------+---------+---------+------------+---------+-------------+------------+-------------+----------+----------+
| Exchange loss | | - | - | | | | | - | 60 |
| arising on | - | | | - | - | - | 60 | | |
| consolidation | | | | | | | | | |
+----------------+---------+---------+------------+---------+-------------+------------+-------------+----------+----------+
| Net profit | - | - | - | - | - | | | - | 60 |
| recognised | | | | | | - | 60 | | |
| directly in | | | | | | | | | |
| equity | | | | | | | | | |
+----------------+---------+---------+------------+---------+-------------+------------+-------------+----------+----------+
| Loss for the | - | - | - | - | - | - | - | (1,239) | (1,239) |
| period | | | | | | | | | |
+----------------+---------+---------+------------+---------+-------------+------------+-------------+----------+----------+
| Total | - | - | - | - | | | 60 | (1,239) | (1,179) |
| recognised | | | | | - | - | | | |
| loss for the | | | | | | | | | |
| period | | | | | | | | | |
+----------------+---------+---------+------------+---------+-------------+------------+-------------+----------+----------+
| Employee | | - | - | | | | | - | 243 |
| share-based | - | | | - | 243 | - | - | | |
| compensation | | | | | | | | | |
+----------------+---------+---------+------------+---------+-------------+------------+-------------+----------+----------+
| Balance at 31 | 3,617 | 37,866 | 13,268 | 5,078 | 957 | (1,385) | 271 | (56,639) | 3,033 |
| August 2010 | | | | | | | | | |
+----------------+---------+---------+------------+---------+-------------+------------+-------------+----------+----------+
Consolidated cash flow statement for the six months ended 31 August 2010
+----------------------------------+------+-----------+-----------+------------+
| | | 6 months | 6 months | Year ended |
| | | ended | ended | 28 |
| | | 31 | 31 August | February |
| | | August | 2009 | 2010 |
| | | 2010 | | |
+----------------------------------+------+-----------+-----------+------------+
| | | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------+------+-----------+-----------+------------+
| |Note | Unaudited | Unaudited | Audited |
+----------------------------------+------+-----------+-----------+------------+
| Cash outflow from operating | | | | |
| activities | | | | |
+----------------------------------+------+-----------+-----------+------------+
| Cash outflow from operating | 8 | (5,779) | (666) | (1,070) |
| activities before tax | | | | |
+----------------------------------+------+-----------+-----------+------------+
| Corporation tax received/ (paid) | | 109 | 9 | (43) |
+----------------------------------+------+-----------+-----------+------------+
| Net cash outflow from operating | | (5,670) | (657) | (1,113) |
| activities after tax | | | | |
+----------------------------------+------+-----------+-----------+------------+
| | | | | |
+----------------------------------+------+-----------+-----------+------------+
| Cash inflow/ (outflow) from | | | | |
| investing activities | | | | |
+----------------------------------+------+-----------+-----------+------------+
| Finance income received | | 4 | 15 | 25 |
+----------------------------------+------+-----------+-----------+------------+
| Acquisition of subsidiary | | 280 | (99) | (577) |
| undertakings | | | | |
+----------------------------------+------+-----------+-----------+------------+
| Purchase of property, plant and | | (400) | (346) | (738) |
| equipment | | | | |
+----------------------------------+------+-----------+-----------+------------+
| Disposal of subsidiary | | 11 | 33 | (329) |
| undertakings | | | | |
+----------------------------------+------+-----------+-----------+------------+
| Disposal of investment | | 240 | - | - |
+----------------------------------+------+-----------+-----------+------------+
| Proceeds from disposals of | | 1 | 1 | 1 |
| property, plant and equipment | | | | |
+----------------------------------+------+-----------+-----------+------------+
| Net cash inflow/ (outflow) from | | 136 | (396) | (1,618) |
| investing activities | | | | |
+----------------------------------+------+-----------+-----------+------------+
| | | | | |
+----------------------------------+------+-----------+-----------+------------+
| Cash inflow from financing | | | | |
| activities | | | | |
+----------------------------------+------+-----------+-----------+------------+
| Finance cost paid | | (780) | (778) | (1,611) |
+----------------------------------+------+-----------+-----------+------------+
| Borrowings advanced | | 2,800 | 1,000 | 3,200 |
+----------------------------------+------+-----------+-----------+------------+
| Repayment of borrowings | | (156) | (190) | (929) |
+----------------------------------+------+-----------+-----------+------------+
| Fees in relation to refinancing | | (160) | - | - |
+----------------------------------+------+-----------+-----------+------------+
| Capital element of hire purchase | | 8 | (2) | (3) |
| agreements | | | | |
+----------------------------------+------+-----------+-----------+------------+
| Net cash inflow from financing | | 1,712 | 30 | 657 |
| activities | | | | |
+----------------------------------+------+-----------+-----------+------------+
| | | | | |
+----------------------------------+------+-----------+-----------+------------+
| Net decrease in cash and cash | | (3,822) | (1,023) | (2,074) |
| equivalents | | | | |
+----------------------------------+------+-----------+-----------+------------+
| | | | | |
+----------------------------------+------+-----------+-----------+------------+
| Cash and cash equivalents at | | 8,634 | 11,001 | 11,001 |
| beginning of period | | | | |
+----------------------------------+------+-----------+-----------+------------+
| | | | | |
+----------------------------------+------+-----------+-----------+------------+
| Effect of exchange rate changes | | (23) | (826) | (293) |
| on the balance of cash held in | | | | |
| foreign subsidiaries | | | | |
+----------------------------------+------+-----------+-----------+------------+
| Cash and cash equivalents at end | | 4,789 | 9,152 | 8,634 |
| of period | | | | |
+----------------------------------+------+-----------+-----------+------------+
Notes to the consolidated financial statements for the six months ended 31
August 2010
1. GENERAL INFORMATION
Media Square plc and its subsidiaries' principal activities are marketing
communications and marketing services.
Media Square plc, a Public Limited Company is incorporated and domiciled in the
United Kingdom.
The financial information set out in the interim report does not constitute
statutory accounts as defined in Section 434 of the Companies Act 2006. The
Group's statutory financial statements for the year ended 28 February 2010,
prepared under International Financial Reporting Standards (IFRS), have been
filed with the Registrar of Companies. The auditor's report on those financial
statements was unqualified and did not contain a statement under Sections 498
(2) or (3) of the Companies Act 2006.
The interim report was approved by the Board on 1 November 2010.
2. BASIS OF PREPARATION
This consolidated financial information for the six months ended 31 August 2010
has been prepared in accordance with IAS 34, "Interim Financial Reporting" as
adopted by the European Union. The half yearly consolidated financial report
should be read in conjunction with the annual financial statements for the year
ended 28 February 2010, which have been prepared in accordance with IFRS as
adopted by the European Union.
This interim financial information has been prepared using the accounting
policies set out in the Group's 2010 statutory accounts.
Copies of the interim results for the six months ended 31 August 2010 are being
sent to all shareholders. A copy can also be found on the Company's website at
www.mediasquare.co.uk.
Going concern
The interim report has been prepared on the basis that the Group is a going
concern. The Group's loan finance funding is secured and committed until July
2013.
Prior year restatement of income statement
The income statement for the six months ended 31 August 2009 has been restated
to separate the income statement and cash flows of the discontinued Lloyd
Northover Marlow and Dubai operations from those of the continuing operations as
required under IFRS 5 Non Current Assets Held for Sale and Discontinued
Operations.
3. segmental analysis
+-----------------------+-------------+-----------+---------+-------------+--------------+---------+
| 6 months ended 31 | Advertising | Marketing | Design | Unallocated | Eliminations | Total |
| August 2010 | | | | | | |
+-----------------------+-------------+-----------+---------+-------------+--------------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-----------------------+-------------+-----------+---------+-------------+--------------+---------+
| Revenue | | | | | | |
+-----------------------+-------------+-----------+---------+-------------+--------------+---------+
| From external | 14,892 | 5,497 | 5,207 | - | - | 25,596 |
| customers | | | | | | |
+-----------------------+-------------+-----------+---------+-------------+--------------+---------+
| From other segments | 40 | 28 | 15 | - | (83) | - |
+-----------------------+-------------+-----------+---------+-------------+--------------+---------+
| Segment revenues | 14,932 | 5,525 | 5,222 | - | (83) | 25,596 |
+-----------------------+-------------+-----------+---------+-------------+--------------+---------+
| Headline operating | 1,721 | 168 | (75) | (1,163) | - | 651 |
| profit/ (loss) | | | | | | |
+-----------------------+-------------+-----------+---------+-------------+--------------+---------+
The unallocated operating loss relates to central costs.
+-----------------------+-------------+-----------+---------+-------------+--------------+---------+
| 6 months ended 31 | Advertising | Marketing | Design | Unallocated | Eliminations | Total |
| August 2009 | | | | | | |
+-----------------------+-------------+-----------+---------+-------------+--------------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-----------------------+-------------+-----------+---------+-------------+--------------+---------+
| Revenue | | | | | | |
+-----------------------+-------------+-----------+---------+-------------+--------------+---------+
| From external | 12,713 | 5,127 | 5,654 | - | - | 23,494 |
| customers | | | | | | |
+-----------------------+-------------+-----------+---------+-------------+--------------+---------+
| From other segments | 75 | 5 | - | - | (80) | - |
+-----------------------+-------------+-----------+---------+-------------+--------------+---------+
| Segment revenues | 12,788 | 5,132 | 5,654 | - | (80) | 23,494 |
+-----------------------+-------------+-----------+---------+-------------+--------------+---------+
| Headline operating | 229 | (86) | 137 | (1,525) | - | (1,245) |
| profit/ (loss) | | | | | | |
+-----------------------+-------------+-----------+---------+-------------+--------------+---------+
The unallocated operating loss relates to central costs.
+-----------------------+-------------+-----------+---------+-------------+--------------+---------+
| Year ended 28 | Advertising | Marketing | Design | Unallocated | Eliminations | Total |
| February 2010 | | | | | | |
+-----------------------+-------------+-----------+---------+-------------+--------------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-----------------------+-------------+-----------+---------+-------------+--------------+---------+
| Revenue | | | | | | |
+-----------------------+-------------+-----------+---------+-------------+--------------+---------+
| From external | 25,720 | 10,331 | 11,247 | - | - | 47,298 |
| customers | | | | | | |
+-----------------------+-------------+-----------+---------+-------------+--------------+---------+
| From other segments | 45 | 20 | 31 | - | (96) | - |
+-----------------------+-------------+-----------+---------+-------------+--------------+---------+
| Segment revenues | 25,765 | 10,351 | 11,278 | - | (96) | 47,298 |
+-----------------------+-------------+-----------+---------+-------------+--------------+---------+
| Headline operating | 935 | 318 | 463 | (2,601) | - | (885) |
| profit/ (loss) | | | | | | |
+-----------------------+-------------+-----------+---------+-------------+--------------+---------+
The unallocated operating loss relates to central costs.
A reconciliation of segment headline operating profit/ (loss) to loss from
continuing operations before tax is provided below:
+-----------------------------+--------------+------------+---------------+
| | | | |
| | 6 months | 6 months | Year ended |
| | ended | ended | 28 February |
| | 31 August | 31 August | 2010 |
| | 2010 | 2009 | |
+-----------------------------+--------------+------------+---------------+
| | GBP'000 | GBP'000 | GBP'000 |
+-----------------------------+--------------+------------+---------------+
| Segment headline operating | 651 | (1,245) | (885) |
| profit/ (loss) | | | |
+-----------------------------+--------------+------------+---------------+
| Exceptional items | - | (523) | (17,740) |
+-----------------------------+--------------+------------+---------------+
| Share-based payments | (243) | (234) | (465) |
+-----------------------------+--------------+------------+---------------+
| Operating profit/ (loss) | 408 | (2,002) | (19,090) |
+-----------------------------+--------------+------------+---------------+
| Loss on disposal of | (351) | - | - |
| subsidiary undertakings | | | |
+-----------------------------+--------------+------------+---------------+
| Loss on closure of | (479) | - | - |
| subsidiary undertakings | | | |
+-----------------------------+--------------+------------+---------------+
| Profit/ (loss) on sale of | 173 | - | (118) |
| an investment | | | |
+-----------------------------+--------------+------------+---------------+
| Net finance costs | (1,299) | (872) | (1,655) |
+-----------------------------+--------------+------------+---------------+
| Loss from continuing | (1,548) | (2,874) | (20,863) |
| operations before tax | | | |
+-----------------------------+--------------+------------+---------------+
4. EXCEPTIONAL ITEMS
+--------------------------------+---------+---------+----------+
| | 6 | 6 | Year |
| | months | months | ended |
| | ended | ended | 28 |
| | 31 | 31 | February |
| | August | August | 2010 |
| | 2010 | 2009 | |
+--------------------------------+---------+---------+----------+
| | GBP'000 | GBP'000 | GBP'000 |
+--------------------------------+---------+---------+----------+
| Restructuring and | - | (681) | (1,416) |
| reorganisation costs | | | |
+--------------------------------+---------+---------+----------+
| Property related provisions, | - | - | (740) |
| costs and impairments | | | |
+--------------------------------+---------+---------+----------+
| Release of acquisition | - | 158 | 359 |
| provisions | | | |
+--------------------------------+---------+---------+----------+
| Goodwill impairment | - | - | (15,943) |
+--------------------------------+---------+---------+----------+
| | - | (523) | (17,740) |
+--------------------------------+---------+---------+----------+
5. 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.
Given the loss incurred in the six months ended 31 August 2010, the six months
ended 31 August 2009 and the year ended 28 February 2010 the effect of the share
options and retained consideration are anti dilutive and as such 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:
+-------------------+---------+------------+---------+---------+------------+---------+----------+------------+----------+
| | 6 months ended | 6 months ended | Year ended |
| | 31 August 2010 | 31 August 2009 | 28 February 2010 |
+-------------------+--------------------------------+--------------------------------+----------------------------------+
| Basic loss per | Loss | Weighted | Loss | Loss | Weighted | Loss | Loss | Weighted | Loss |
| share | | average | per | | average | | | average | |
| | | number | share | | number | per | | number | per |
| | | of | | | of | share | | of | share |
| | | shares | | | shares | | | shares | |
+-------------------+---------+ +---------+---------+ +---------+----------+ +----------+
| | GBP'000 | | pence | GBP'000 | | pence | GBP'000 | | pence |
+-------------------+---------+------------+---------+---------+------------+---------+----------+------------+----------+
| Basic loss per | | | | | | | | | |
| share from total | | | | | | | | | |
| operations | | | | | | | | | |
+-------------------+---------+------------+---------+---------+------------+---------+----------+------------+----------+
| Loss attributable | (1,239) | 32,238,713 | (3.84p) | (2,887) | 32,238,713 | (8.96p) | (24,568) | 32,238,713 | (76.21p) |
| to ordinary | | | | | | | | | |
| shareholders | | | | | | | | | |
+-------------------+---------+------------+---------+---------+------------+---------+----------+------------+----------+
| Basic loss per | | | | | | | | | |
| share on | | | | | | | | | |
| continuing | | | | | | | | | |
| operations | | | | | | | | | |
+-------------------+---------+------------+---------+---------+------------+---------+----------+------------+----------+
| Loss attributable | (1,239) | 32,238,713 | (3.84p) | (2,572) | 32,238,713 | (7.98p) | (21,489) | 32,238,713 | (66.66p) |
| to ordinary | | | | | | | | | |
| shareholders | | | | | | | | | |
+-------------------+---------+------------+---------+---------+------------+---------+----------+------------+----------+
| Basic loss per | | | | | | | | | |
| share on | | | | | | | | | |
| discontinued | | | | | | | | | |
| operations | | | | | | | | | |
+-------------------+---------+------------+---------+---------+------------+---------+----------+------------+----------+
| Loss attributable | - | 32,238,713 | - | (315) | 32,238,713 | (0.98p) | (3,079) | 32,238,713 | (9.55p) |
| to ordinary | | | | | | | | | |
| shareholders | | | | | | | | | |
+-------------------+---------+------------+---------+---------+------------+---------+----------+------------+----------+
6. Dividend
The Board of Directors does not recommend the payment of a dividend.
7. BORROWINGS
+---------------------------------+-----+----------+----------+----------+
| | | At | At | At |
| | | 31 | 31 | 28 |
| | | August | August | February |
| | | 2010 | 2009 | 2010 |
+---------------------------------+-----+----------+----------+----------+
| | | GBP'000 | GBP'000 | GBP'000 |
+---------------------------------+-----+----------+----------+----------+
| Borrowings (current) | | (176) | (1,167) | (3,367) |
+---------------------------------+-----+----------+----------+----------+
| Borrowings (non-current) | | (25,113) | (19,805) | (19,172) |
+---------------------------------+-----+----------+----------+----------+
| | | (25,289) | (20,972) | (22,539) |
+---------------------------------+-----+----------+----------+----------+
As at 31 August 2010, bank loans amounted to GBP25,505,000 consisting of three
term loan facilities (mezzanine facility of GBP11,600,000, senior term facility
of GBP9,110,000, property loan facility of GBP1,795,000) and the revolver
facility of GBP3,000,000. All bank loans are repayable in July 2013. Loan
arrangement costs to date in respect of these facilities, amounting to
GBP216,000, have been deducted from the gross proceeds of the bank loans and are
being amortised over the expected periods of the facilities as part of the
finance costs.
8. Net cash OUTFLOW from operating activities
+--------------------------------------+-----------+----------+----------+
| | 6 months | 6 months | Year |
| | ended | ended | ended |
| | 31 | 31 | 28 |
| | August | August | February |
| | 2010 | 2009 | 2010 |
+--------------------------------------+-----------+----------+----------+
| | GBP'000 | GBP'000 | GBP'000 |
+--------------------------------------+-----------+----------+----------+
| Operating profit/ (loss) | 408 | (2,002) | (19,090) |
+--------------------------------------+-----------+----------+----------+
| Operating loss from discontinued | - | (315) | (1,623) |
| operations | | | |
+--------------------------------------+-----------+----------+----------+
| Depreciation | 532 | 549 | 1,062 |
+--------------------------------------+-----------+----------+----------+
| Loss on disposal of property, plant | - | 13 | 18 |
| & equipment | | | |
+--------------------------------------+-----------+----------+----------+
| Impairment of goodwill | - | - | 16,169 |
+--------------------------------------+-----------+----------+----------+
| Amortisation of intangible asset | 10 | - | - |
+--------------------------------------+-----------+----------+----------+
| Share-based payment | 243 | 234 | 465 |
+--------------------------------------+-----------+----------+----------+
| Increase in inventories | (198) | (315) | (90) |
+--------------------------------------+-----------+----------+----------+
| (Increase)/ decrease in receivables | (424) | 2,373 | 957 |
+--------------------------------------+-----------+----------+----------+
| (Decrease)/ increase in payables | (6,350) | (1,203) | 1,062 |
+--------------------------------------+-----------+----------+----------+
| Net cash outflow from operating | (5,779) | (666) | (1,070) |
| activities | | | |
+--------------------------------------+-----------+----------+----------+
The decrease in payables for the 6 months ended 31 August 2010 predominantly
relates to the unwind of cash held for use on specific client projects at 28
February 2010 of GBP6.0m. On an underlying basis, excluding the effect of the
unwind of cash held for use on specific client projects, the cash outflow
arising from the decrease in payables was GBP350k resulting in a net cash inflow
from operating activities of GBP221k.
9. ANALYSIS OF CHANGES IN NET DEBT
+-------------------------------+----------+----------+--------------+----------+
| | At | Cash | Non cash | At |
| | 28 | flows | transactions | 31 |
| | February | | | August |
| | 2010 | | | 2010 |
+-------------------------------+----------+----------+--------------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-------------------------------+----------+----------+--------------+----------+
| Cash at bank | 8,634 | (3,822) | (23) | 4,789 |
+-------------------------------+----------+----------+--------------+----------+
| | | | | |
+-------------------------------+----------+----------+--------------+----------+
| Borrowings | (22,539) | (2,484) | (266) | (25,289) |
+-------------------------------+----------+----------+--------------+----------+
| Obligations under finance | (4) | (8) | - | (12) |
| lease and hire purchase | | | | |
| agreements | | | | |
+-------------------------------+----------+----------+--------------+----------+
| Net debt | (13,909) | (6,314) | (289) | (20,512) |
+-------------------------------+----------+----------+--------------+----------+
| Cash held for use on specific | (6,007) | 6,007 | - | - |
| client projects | | | | |
+-------------------------------+----------+----------+--------------+----------+
| Underlying net debt | (19,916) | (307) | (289) | (20,512) |
+-------------------------------+----------+----------+--------------+----------+
Cash and cash equivalents held for use on specific client projects was Nil at 31
August 2010 (28 February 2010: GBP6.0m). Underlying net debt, which excludes
cash for use on specific client projects, has moved from GBP19.9m at 28 February
2010 to GBP20.5m at 31 August 2010.
10. disposal of SUBSIDIARY undertakings
On 20 August 2010 the Group disposed of the trade and certain assets of
twentysix New York for an up-front consideration of GBP97,000. The loss on
disposal was:
+-----------------------------------------------------------+----------+
| | |
+-----------------------------------------------------------+----------+
| | GBP'000 |
+-----------------------------------------------------------+----------+
| | |
+-----------------------------------------------------------+----------+
| Cash consideration | 97 |
+-----------------------------------------------------------+----------+
| Transaction costs | (319) |
+-----------------------------------------------------------+----------+
| | |
+-----------------------------------------------------------+----------+
| less assets disposed of: | |
+-----------------------------------------------------------+----------+
| Property, plant and equipment | (32) |
+-----------------------------------------------------------+----------+
| Receivables | (97) |
+-----------------------------------------------------------+----------+
| Loss on disposal | (351) |
+-----------------------------------------------------------+----------+
The net assets that the Group has retained are valued at GBP426,000 in the
consolidated statement of financial position. These assets will generate a
cash inflow as they unwind over the coming months.
11. Closure of SUBSIDIARY undertakings
At the end of August 2010 the Group took the decision to close its twentysix
London operation. The loss on closure was:
+--------------------------------------------------+----------+---------+
| | | |
+--------------------------------------------------+----------+---------+
| | | GBP'000 |
+--------------------------------------------------+----------+---------+
| | | |
+--------------------------------------------------+----------+---------+
| Loss on closure of subsidiary undertakings | | (479) |
+--------------------------------------------------+----------+---------+
This information is provided by RNS
The company news service from the London Stock Exchange
END
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