TIDMMUR
RNS Number : 1972Y
Murgitroyd Group PLC
07 September 2015
7 September 2015
Murgitroyd Group PLC ("the Group")
Preliminary Results for the year ended 31 May 2015
The Group (AIM:MUR), is pleased to announce its audited results
for the year ended 31 May 2015.
Highlights
-- Revenue increased to GBP39.8m (2014: GBP38.4m)
-- Profit before income tax increased to GBP4.16m (2014: GBP4.10m)
-- Basic earnings per share of 35.0p (2014: 33.2p)
-- Proposed final dividend of 10.5p per share, giving a total
dividend for the year of 14.75p (2014: 13.25p), an increase of
11.3% year on year
-- Net cash of GBP0.71m (31 May 2014 net debt: GBP0.38m)
Ian Murgitroyd, Chairman of Murgitroyd Group PLC said:
"We are pleased to be able to report an increase in pre-tax
profits to GBP4.16m together with record revenues of GBP39.8m, the
latter continuing the Group's record of unbroken revenue growth
since its flotation in 2001. We are also reporting for the first
time a positive net cash position at the year end.
"Increased revenues continue to be achieved through organic
growth as a result of our continued investment in infrastructure,
people and processes, and a focus on business development. Over the
next year we will continue to drive growth in the USA while also
increasing our focus on Europe, with the aim of reversing the
recent contraction of revenues in this market as economic activity
increases.
"Despite the challenging trading environment, these results are
encouraging and reinforce the Board's confidence in the Group's
ability to deliver sustainable, long-term growth and value for
shareholders. This, combined with the Group's strong cash flows,
underpins our commitment to a continued progressive dividend
policy.
"Trading since the year end has been in line with management
expectations. We look to the future with confidence."
For further information, please contact:
Keith Young, Murgitroyd T: 07802 951913
Sandy Fraser, N+1 Singer (NOMAD and Broker) T: 0207 496 3000
Nadja Vetter/Emma Crawshaw, Cardew Group T: 0207 930 0777
Murgitroyd Group PLC
Chairman's Statement
Financial review
During 2015 the Group generated record revenue of GBP39.8m, an
increase of 3.8% over the previous year. This continues the record
of unbroken revenue growth since the Group's flotation in 2001,
with pre-tax profits increasing to GBP4.2m (2014: GBP4.1m).
Importantly 2015 saw a return to year-on-year earnings growth,
after unfavourable foreign exchange rate movements contributed to
earnings falling back in 2014, the only decline since
flotation.
Revenue growth continues to be driven organically by the Group's
ongoing investment in business development, principally in the USA
where revenue from US clients increased by more than 20%
year-on-year to GBP15.7m. The USA now represents almost 40% of the
Group by revenue.
This growth was partially offset by a further contraction of
GBP0.9m in revenues from the Group's longstanding UK client base
which once dominated the business. Revenue from UK clients peaked
at GBP19.5m in 2011. The return to growth in this market, and in
Europe more generally, is an area of strategic focus for the Group
in the medium term.
The Group remains committed to its strategy of achieving
sustainable long-term growth, through continued investment in its
business development, sales and marketing.
Gross profit was unchanged year-on-year at GBP22.1m, with the
gross margin percentage decreasing slightly to 55.4% (2014: 57.6%).
This continues to reflect the ongoing changes in our client and
sales mix highlighted previously, as well as the continuing price
pressure in the market for professional Intellectual Property
advisory services.
Operating profit increased by 1.2% reflecting a strong focus on
controlling costs. Administrative expenses reduced to GBP17.9m
(2014: GBP18.0m).
Profit before tax increased by 1.5% to GBP4.2m (2014: GBP4.1m);
the result of the organic revenue growth and good control of
overheads, offset by the impact of the reduction in gross
margin.
Basic earnings per share increased to 35.00p (2014: 33.16p) as a
consequence of the growth in profit and a reduction in applicable
corporate tax rates. The Group's effective tax rate decreased to
24.9% (2014: 28.0%) principally as a result of the continuing
decline in UK corporate tax rates.
Net cash flow from operating activities was GBP2.5m (2014:
GBP2.9m) and, for the first time since flotation, the Group is
reporting a positive net cash position at the year end. At 31 May
2015, net funds stood at GBP0.7m (31 May 2014: net debt:
GBP0.4m).
Operating review
As we reported at the time of our interim results, the Group's
operating businesses continue to service clients from fifteen
offices in eight countries, with all operations rebranded as
"MURGITROYD" on 1 July 2014.
In my Chairman's Statement last year I highlighted that Edward
Murgitroyd had taken on day-to-day leadership of the management
teams of the operational businesses during the preceding year.
Reflecting this, Edward was appointed Chief Executive Officer of
the MURGITROYD operating subsidiaries in October 2014, and, with
his management team, has led the continued investment in both
revenue growth and internal efficiencies.
The return on the investment from business development and
marketing is evidenced by the increase in reported revenue, whilst
the return on our investment in systems and processes is
demonstrated by the increase in revenue being achieved in parallel
with a reduction in overall headcount.
At 31 May 2015, the Group employed 240 people, down from a peak
of more than 260. This reduction is anticipated to continue in the
new financial year through further internal efficiencies. Total
staff numbers have been reduced by six since the end of the
financial year.
As well as a reduction in overall headcount, notwithstanding
continuing growth in revenue, the number of qualified Attorneys
required, and employed, by the Group also continues to fall,
reflecting the transfer of a number of revenue-generating areas
from Attorneys to paralegals, specialist formalities staff, and
Patent and Trade Mark Administrators. At 31 May 2015 the Group
employed 61 qualified Attorneys and generated GBP39.8m revenue in
the year to that date. This compares with a qualified Attorney
complement at 31 May 2009 of 70, the end of a financial year in
which the Group's total revenue was more than GBP10m lower at
GBP29.4m.
The Group will continue to recruit and train paralegals,
specialist formalities staff, and Patent and Trade Mark
Administrators whilst at the same time restructuring how it
delivers services to clients to generate greater efficiencies. This
restructuring is on course and remains a key component of the
Group's strategy of continuing to grow both revenue and
earnings.
The market
The markets in which MURGITROYD operate showed steady growth in
the period under review. As reported in the Interim Results,
statistics available from the European Union's Office for Trade
Marks and Designs ("OHIM") continue to show an increase in
Community Trade Mark ("CTM") applications and a stable demand for
Registered Community Design ("RCD") applications. The year-on-year
growth in CTM applications, to 31 May 2015, was 4.4% whilst RCD
applications were unchanged.
The European Patent Office's ("EPO") most recent published
statistics for the calendar year 2014 report an annual increase of
3% in European Patent applications to 273,000, which is an all-time
high. As also reported in the Interim Results, the composition of
these filings very much reflect MURGITROYD's experience, with
applications from the USA increasing by 6.7%, Japanese originating
applications falling by 3.8% and European originating applications
remaining virtually unchanged.
As stated previously, we continue to monitor developments
concerning the introduction of the new European Unitary Patent,
which is still expected to be ratified by sufficient member states
of the European Union ("EU") and enter into force during the course
of 2017.
OHIM's and the EPO's statistics are considered good indicators
of the current state of the market in which the Group operates.
However, whilst the market as a whole remains buoyant as measured
by the numbers of Patents and Trade Marks being filed, price
pressures remain. Critically assessing and investing in
improvements in the Group's working practices, service delivery and
cost control remains a priority.
Although we are monitoring any impacts that the outcome of the
proposed referendum on the UK's membership of the EU may have on
the business, we are confident that the geographic spread of the
Group's activities and customer base will enable us to deal with
any resultant changes or uncertainties.
Board
The Group announced in February 2015 that non-Executive Director
David Gray had resigned from the Board. In that announcement
David's contribution to the Group was acknowledged and the Board
wishes him well for the future. I am pleased to report that, as
announced in August 2015, Dr Christopher Masters and John Reid have
been appointed as non-Executive Directors. On 12 August 2015 the
Board was further enhanced by the appointment of an additional
Executive Director, Gordon Stark, MURGITROYD's Chief Operations
Officer. I am delighted to welcome them all. Christopher and John
will both add to the breadth and depth of commercial expertise and
public company experience of the Board, whilst Gordon brings
operational, as well as IP industry, insight.
Consistent with the new Board appointments and the previously
announced reduction in my executive role, I intend to move from
being Executive to non-Executive Chairman during the current
financial year, at which point the Board will comprise five
non-Executive and four Executive Directors.
Share price
(MORE TO FOLLOW) Dow Jones Newswires
September 07, 2015 02:00 ET (06:00 GMT)
During the period, the middle market price of the company's
shares fluctuated between 461p and 628p. The current middle market
price is 520p.
Dividend
An increased interim dividend of 4.25p per share was paid during
the year, reflecting the Board's confidence in the performance of
the Group. The near elimination of Group borrowings, and the net
funds position as at 31 May 2015 noted above, provides flexibility
for the Board to sustain a more progressive dividend policy. A
final dividend of 10.5p per share is therefore being proposed,
giving a total dividend for the year of 14.75p (2014: 13.25p), an
increase of 11.3% year-on-year.
Subject to approval at the Annual General Meeting, the final
dividend will be paid on 13 November 2015 to shareholders on the
register on 2 October 2015. The ex-dividend date is 1 October
2015.
Outlook
In the context of a continuation of the challenging trading
environment, these results are encouraging and reinforce the
Board's confidence in the Group's ability to deliver sustainable,
long-term growth and value to shareholders through ongoing
investment and our established market presence. We are pleased to
report that trading since the year end has been in line with
management expectations.
Ian G Murgitroyd
Chairman
7 September 2015
This preliminary announcement was approved by the Board of
Directors on 7 September 2015.
Consolidated statement of comprehensive income
for the year ended 31 May 2015
Note Year Year
ended ended
31 May 31 May
2015 2014
GBP'000 GBP'000
Revenue 39,819 38,353
Cost of sales (17,750) (16,268)
--------- ---------
Gross profit 22,069 22,085
Administrative expenses (17,887) (17,952)
--------- ---------
Operating profit 4,182 4,133
Financial income 3 4
Financial expense (22) (37)
--------- ---------
Profit before income
tax 4,163 4,100
Income tax (1,039) (1,150)
--------- ---------
Profit for the year attributable
to equity holders of
the parent 3,124 2,950
========= =========
Other comprehensive income
Items that will not be
reclassified to profit
or loss:
Revaluation of property,
plant and equipment - 50
Items that are or may
be reclassified subsequently
to profit or loss:
Foreign exchange translation
differences
- equity accounted investments 75 (118)
--------- ---------
Profit for the financial
year and total comprehensive
income all attributable
to equity holders of
the parent 3,199 2,882
========= =========
Earnings per share 2
Basic 35.00p 33.16p
Diluted 34.51p 32.67p
Consolidated balance sheet
at 31 May 2015
31 May 31 May
2015 2014
GBP'000 GBP'000
Assets
Non-current assets
Property, plant
and equipment 2,360 2,462
Intangible assets
and goodwill 14,924 14,936
Deferred tax asset - 28
--------- ----------
Total non-current
assets 17,284 17,426
--------- ----------
Current assets
Work in progress 254 671
Trade and other
receivables 16,086 14,515
Taxation recoverable 12 125
Cash and cash
equivalents 1,617 1,457
--------- ----------
Total current assets 17,969 16,768
--------- ----------
Total assets 35,253 34,194
--------- ----------
Current liabilities
Other interest-bearing
loans and
borrowings (304) (795)
Trade and other
payables (5,980) (5,998)
Total current liabilities (6,284) (6,793)
--------- ----------
Non-current liabilities
Other interest-bearing
loans and
borrowings (607) (1,045)
Deferred tax liabilities (21) -
--------- ----------
Total non-current
liabilities (628) (1,045)
--------- ----------
Total liabilities (6,912) (7,838)
--------- ----------
Net assets 28,341 26,356
========= ==========
Equity
Share capital 893 893
Share premium 3,368 3,368
Merger reserve 6,436 6,436
Revaluation reserve 47 47
Foreign currency
translation reserve (43) (118)
Retained earnings 17,640 15,730
--------- ----------
Total equity attributable
to equity
holders of the
parent 28,341 26,356
========= ==========
Consolidated statement of cash flows
for the year ended 31 May 2015
Year Year
ended ended
31 May 31 May
2015 2014
GBP'000 GBP'000
Cash flows from operating
activities
Profit for the year 3,124 2,950
Adjustments for:
Depreciation 285 255
Amortisation 52 65
(Gain)/loss on disposal
of property, plant and
equipment - (15)
Other reserves movements 75 (118)
Financing costs 19 33
Income tax expense 1,039 1,150
--------- ---------
4,594 4,320
Increase in trade and other
receivables (1,571) (647)
Decrease/(increase) in
work in progress 417 (48)
(Decrease)/increase in
trade and other payables (20) 302
Decrease in provision for
liabilities - (55)
--------- ---------
3,420 3,872
Interest paid (21) (43)
Interest received 3 4
Income tax paid (896) (947)
--------- ---------
Net cash from operating
activities 2,506 2,886
--------- ---------
Cash flows from investing
activities
Acquisition of property,
plant and equipment (150) (320)
Acquisition of intangible
fixed assets (40) (87)
Proceeds from disposal
of property, plant and
equipment - 15
Net cash used in investing
activities (190) (392)
--------- ---------
Cash flows from financing
activities
Proceeds from exercise
of share options - 145
Repayment of borrowings (929) (1,054)
Dividends paid (1,227) (1,113)
--------- ---------
Net cash used in financing
activities (2,156) (2,022)
--------- ---------
Net increase in cash and
cash equivalents 160 472
Cash and cash equivalents
at start of year 1,457 985
--------- ---------
Cash and cash equivalents
at year end 1,617 1,457
========= =========
Notes to the announcement:
1. Basis of preparation
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