TIDMDMP
RNS Number : 8328C
DM Plc
14 March 2011
DM plc: Ticker: DMP / Index: AIM / Sector: Leisure
facilities
DM plc
("DM" or the "Group")
FINAL RESULTS
FOR THE YEAR ENDED 31 DECEMBER 2010
DM, the direct marketing group specialising in customer
recruitment and database management, announces its final results
for the year ended 31 December 2010.
Continued Growth,
Increasing Turnover and Profit,
and Strong Cash Generation
-- Continued growth in turnover, EBITDA and profit after
tax for the year ended 31 December 2010;
-- Turnover up 7.7 per cent. to GBP27.56 million (2009:
GBP25.59 million);
-- Group EBITDA up 0.9 per cent. to GBP5.50 million (2009:
GBP5.45 million);
-- Profit after tax up by 10.3 per cent. to GBP3.84 million
(2009: GBP3.48 million);
-- Earnings per share up 6.0 per cent. to 2.31 pence
(2009: 2.18 pence);
-- Strong cash generation resulting in an improved balance
sheet with net cash surplus of GBP0.98 million (2009:
net debt GBP4.43 million);
-- Fully integrated business with all previous acquisitions
now restructured and operating profitably;
-- One of the UK's largest owners and providers of consumer
lifestyle data to the direct marketing industry underpinned
by extensive multi-media database assets across post,
phone, mobile, email and internet;
-- Initial OFT ruling on 2 February 2011 and on-going
discussions with OFT as to the form of the final Court
order on promotion design and content;
-- Progress across all business activities in continued
challenging market conditions.
DM Chairman, Adrian Williams said:
"2010 has been another challenging year for the Group and we are
quietly satisfied with the results. Progress has, and continues to
be made across all business activities and the Group continues to
be well placed to benefit when market conditions finally start to
improve."
CHAIRMAN'S STATEMENT
Introduction
I am pleased to report DM's final results for the year ended 31
December 2010. Slightly unusually I am happy to report that the
year ended consistent with the first half as relatively uneventful.
In the context of the recent difficult and uncertain market
conditions, this is better than just satisfactory.
The Group is stable and well managed with all businesses
restructured and fully integrated. We have made selective
improvements and investment where required and have been able to
deliver another year of growth. Whilst everybody may desire faster
growth in whatever they do, we have not seen the market conditions
to support that in the sectors which the Group operates. During
2010, the market conditions did not improve and we have no reason
to believe from current indicators that 2011 will be significantly
better. That said, DM is in good operational and financial health,
the Group now has net cash, has always been highly cash generative
and is nimble enough to adapt to market conditions.
Financial results
For the year ended 31 December 2010, revenue reached a record
GBP27.56 million, up 7.7 per cent. (2009: GBP25.59 million). This
growth is purely organic with no acquisitions made during 2010.
EBITDA for the period was up 0.9 per cent. to GBP5.50 million
(2009: GBP5.45 million), with Group consolidated profit before tax
increasing 12.0 per cent. to GBP5.12 million (2009: GBP4.57
million). Basic earnings per share were 2.31 pence (2009: 2.18
pence).
For the period the Group generated GBP5.60 million of operating
cash flow and as at 31 December 2010, the Group had a net cash
surplus of GBP0.98 million (2009: net debt GBP4.43 million).
The Board is not recommending a dividend for the year ended 31
December 2010 (2009: nil). During the year ended 31 December 2010,
the Group bought back 1,625,000 ordinary shares of 1 pence each,
for a total cost of GBP0.09 million, at an average price of 5.8
pence per share.
Business Review
The Group is now an integrated, multi-channel business with the
resources and market presence to compete across the complementary
activities of consumer lifestyle database management and direct
marketing, alongside the historic core customer recruitment
activities of gamecard and direct marketing mailings.
The Group has yet again performed well in at best a flat market.
DM's strength is in its multi--channel activities where having a
diversity of business areas provides a buffer against extremes of
trading conditions in any one sector. Throughout the year there are
inevitably periods of low activity, fluctuations in response rates
and changing demands of customers. During 2010, no one area
suffered or prospered particularly and the overall outcome was
pleasing if a little underwhelming, given our high standards and
expectations.
The major expansion in Group activities over recent years has
been in the consumer lifestyle and direct marketing sector. These
services are most efficient and profitable when the economy is
growing and/or our customers are looking to acquire or develop
market share. Whilst historically the most active area of direct
marketing has been financial services, which remains at depressed
levels, direct marketing should be a leading indicator of economic
growth and we have not yet seen any major improvement in the levels
of general market activity.
In recent years, management time has been spent on carefully
re-sizing and integrating acquired businesses, often bought when
they were loss making or in financial distress. These businesses
are now working efficiently and are all profitable. All this was
done without losing sight of DM's core disciplines of operational
flexibility and careful margin and cashflow management. It is these
basics which we continue to do well and have allowed us to deliver
the results that we have. The Group is lean, cost conscious, will
not chase revenue growth at the expense of margin and always
ensures that its products and services are customer focused.
The one area of uncertainty has been in relation to the Group's
decision to seek a definitive ruling from the Court with respect to
the action taken by the Office of Fair Trading ("OFT") following
the implementation of certain EU legislation covering the Group's
proprietary range of response orientated promotions.
DM has always applied the highest levels of care to the design
of its promotions. The OFT reassessed the promotional formulae that
the Group had previously agreed with the OFT that it would adhere
to. In order to obtain regulatory clarity, the Group elected to
gain a definitive Court ruling on the changes sought by the OFT.
This procedure commenced in January 2010. Following a hearing which
took place in January 2011, the High Court handed down a judgment,
made on 2 February 2011, in relation to those proceedings.
The major issues in this case have not been previously tested
before a Court. The Court has now delivered a detailed and
considered judgment and DM welcomes the clarity brought by it. In
making its decision the Court decided that in certain respects the
promotions concerned did infringe the relevant regulations. In
other respects the Court did not accept the OFT's contentions of
infringement. The Group is now in a period of discussion with the
OFT before a final order is made by the Court which will determine
the exact amendments which will need to be made to the Group's
promotions. It is therefore not possible at this stage to quantify
the likely effect on response and profitability. The proceedings
will not result in a fine of any kind on the Group and at this
stage there has been no ruling in relation to costs.
John Gommes
It was with great sadness that the Group announced that its
non-executive director, John Gommes, passed away on 15 February
2011. John had been a director of the Group since its formation in
2004 and his wealth of experience in the direct marketing industry,
wise counsel and friendship will be sorely missed by all of his
fellow directors and colleagues. We thank him and his family for
the contribution that he made to the Group which exists today.
Outlook
2010 has been a period of quiet and cautious progress. The Group
is now managed and operating in an efficient and integrated way.
While there is little sign of significant market improvement, as
and when the level of direct marketing activity eventually
increases, DM will be in a strong position from which to capitalise
on its market leading, multi-channel offering. The Board has made
careful investments in people and systems and has a complementary
suite of activities, utilising the core skills of customer
recruitment, creative marketing, campaign design, and database
management. There is however still a degree of uncertainty due to
the ongoing OFT case since the final order of the Court has not yet
been made.
As always, what we have achieved could not have been done
without the commitment and hard work of all of the Group's staff,
who I would like to take this opportunity to thank. We are
confident of the Group's current position and future prospects and
look forward to continuing the hard work to maximise shareholder
returns going forward.
A J Williams
Chairman
11 March 2011
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2010
Group Group
2010 2009
GBP'000 GBP'000
Continuing Operations
Revenue 27,562 25,590
Cost of sales (14,226) (11,775)
--------- ---------
Gross Profit 13,336 13,815
Administrative expenses (8,071) (8,885)
--------- ---------
Operating Profit 5,265 4,930
Finance Costs (144) (356)
--------- ---------
Profit Before Tax 5,121 4,574
Income tax expense (1,275) (1,095)
--------- ---------
Profit and total comprehensive
income attributable to
equity holders of the
parent 3,846 3,479
========= =========
Earnings Per Share
From continuing operations
Basic 2.31p 2.18p
Diluted 2.31p 2.18p
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2010
Group Group
2010 2009
GBP'000 GBP'000
Assets
Non-current assets
Property, plant and equipment 161 135
Goodwill 12,824 12,824
Other intangible assets 608 782
-------- --------
13,593 13,741
Current assets
Inventories 167 279
Trade and other receivables 5,842 7,072
Cash and cash equivalents 4,374 902
-------- --------
10,383 8,253
Total assets 23,976 21,994
Liabilities
Current liabilities
Trade and other payables (5,022) (5,033)
Borrowings (3,391) (1,937)
Current tax payable (565) (386)
-------- --------
(8,978) (7,356)
Assets less current liabilities 14,998 14,638
Non-current liabilities
Borrowings - (3,391)
Deferred tax (1) (1)
-------- --------
(1) (3,392)
-------- --------
Net assets 14,997 11,246
-------- --------
Equity attributable to
equity holders of the
parent
Ordinary shares 1,647 1,663
Capital redemption reserve 32 16
Merger reserve (3,108) (3,108)
Share premium 3,685 3,685
Retained earnings 12,741 8,990
-------- --------
Total equity 14,997 11,246
-------- --------
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2010
Group Group
2010 2009
GBP'000 GBP'000
Cash flows from operating activities
Profit before taxation 5,121 4,574
Adjustments for:
Depreciation and amortisation 239 236
Finance costs 144 356
Impairment loss - 266
Loss on disposal of property,
plant and equipment - 21
Decrease/(Increase) in trade and
other receivables 1,230 (2,823)
Decrease/(increase) in inventories 112 (45)
(Decrease)/increase in trade and
other payables (11) 1,757
Cash generated from operations 6,835 4,342
Interest paid (144) (356)
Income taxes paid (1,096) (980)
Net cash from operating activities 5,595 3,006
-------- --------
Cash flows from investing activities
Sale of property, plant and equipment 5 4
Acquisition of subsidiaries, net
of cash acquired - (266)
Purchase of property, plant and
equipment (64) (85)
Purchase of intangible assets (32) -
Net cash (used in) investing activities (91) (347)
-------- --------
Cash flows from financing activities
Net proceeds from the issue of
share capital - 1,000
Shares bought back for cancellation (95) -
Proceeds from long term borrowings - -
Repayment of borrowings (1,937) (1,937)
Dividends paid - -
-------- --------
Net cash used in financing activities (2,032) (937)
-------- --------
Net increase/(decrease) in cash
and cash equivalents 3,472 1722
Cash and cash equivalents at beginning
of year 902 (820)
-------- --------
Cash and cash equivalents at end
of year 4,374 902
-------- --------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2010
Attributable to equity holders of the parent
Capital
Ordinary Redemption Merger Share Retained
Group Shares Reserve Reserve Premium Earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1
January 2009 1,455 16 (3,108) 2,893 5,511 6,767
Changes in
equity for
2009
Total
comprehensive
income for
the year - - - - 3,479 3,479
Issue of share
capital 208 - - 792 - 1,000
--------- ----------- -------- -------- --------- --------
Balance at 31
December 2009 1,663 16 (3,108) 3,685 8,990 11,246
Changes in
equity for
2010
Total
comprehensive
income for
the year - - - - 3,846 3,846
Buy back of
share
capital (16) 16 - - (95) (95)
Balance at 31
December 2010 1,647 32 (3,108) 3,685 12,741 14,997
========= =========== ======== ======== ========= ========
This preliminary announcement does not consist of statutory
accounts for the year ended 31 December 2010, within the meaning of
Section 435 Companies Act 2006.
Accounting policies
The principal accounting policies applied in the preparation of
these financial statements are set out below. These policies have
been applied consistently to all the years presented, unless
otherwise stated.
1. Basis of preparation
These financial statements have been prepared in accordance with
IFRS as adopted by the European Union, and with those parts of the
Companies Act 2006 applicable to companies reporting under
IFRS.
The preparation of financial statements in conformity with IFRS
requires management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts in the
financial statements. The areas involving a higher degree of
judgement or complexity, or areas where assumptions or estimates
are significant to the financial statements are disclosed in Note
3.
1.1 Adoption of standards effective in 2010
The Directors have reviewed each of the new standards,
interpretations and amendments effective for the first time from 1
January 2010, none have had a material effect on the financial
statements.
1.2 Recent accounting developments
The financial statements are prepared in accordance with
International Financial Reporting Standards and Interpretations in
force at the reporting date. The company has not adopted any
standards or interpretations in advance of the required
implementation dates. It is not expected that adoption of standards
or interpretations which have been issued by the International
Accounting Standards Board but have not been adopted will have a
material impact on the financial statements.
2. Accounting policies
2.1 Consolidation
Subsidiaries are all entities over which the Group has the power
to govern the financial and operating policies so as to obtain
benefit from their activities. Subsidiaries are fully consolidated
from the date on which control is transferred until the date that
the control ceases.
The purchase method of accounting is used to account for the
acquisition of subsidiaries by the Group.
Inter-company transactions, balances and unrealised transactions
between Group companies are eliminated.
2.2 Goodwill
Goodwill on acquisitions comprises the excess of the fair value
of the consideration plus any associated costs for investments in
subsidiary undertakings over the fair value of the net identifiable
assets acquired. Adjustments are made to fair values to bring the
accounting policies of acquired businesses into alignment with
those of the Group. The costs of integrating and reorganising
acquired businesses are charged to the post acquisition income
statement.
Goodwill is carried at cost less accumulated impairment losses.
Goodwill is tested for impairment annually. Gains and losses on the
disposal of an entity include the carrying amount of goodwill
relating to the entity sold.
2.3 Other intangible assets
Other intangible assets are shown at historical cost less
accumulated amortisation and impairment losses.
Amortisation is charged to profit or loss on a straight-line
basis over the estimated useful lives of the intangible asset
unless such lives are indefinite. Intangible assets with an
indefinite useful life are tested for impairment at each balance
sheet date. Other intangible assets are amortised from the date
they are available for use. The useful lives are as follows:
-- Lists/databases - 2 - 5 years
Amortisation periods and methods are reviewed annually and
adjusted if appropriate.
2.4 Property, plant and equipment
All property, plant and equipment assets are stated at cost less
accumulated depreciation.
Depreciation of property, plant and equipment is provided to
write off the cost, less residual value, on a reducing balance
basis over the estimated useful life, as follows:
-- Fixtures and fittings - 10%-25% reducing balance
-- Computer equipment - 25% reducing balance
-- Motor cars - 25% reducing balance
Residual values, remaining useful lives and depreciation methods
are reviewed annually and adjusted if appropriate.
Gains or losses on disposal are included in profit or loss.
2.5 Impairment of assets
The Group assesses annually whether there is any indication that
any of its assets have been impaired. If such indication exists,
the asset's recoverable amount is estimated and compared to its
carrying value.
For goodwill, intangible assets that have an indefinite life and
intangible assets not yet available for use, the recoverable amount
is estimated at each balance sheet date and whenever there is an
indication of impairment.
An impairment loss is recognised for the amount by which the
asset's carrying amount exceeds its recoverable amount. Impairment
losses are recognised in the profit or loss.
2.6 Financial instruments
The Group classifies financial instruments, or their component
parts, on initial recognition as a financial asset, a financial
liability or an equity instrument in accordance with the substance
of the contractual arrangement.
Financial instruments are recognised on the balance sheet at
fair value when the Group becomes a party to the contractual
provisions of the instrument.
2.6.1 Trade receivables
Trade receivables are stated at their amortised cost as reduced
by appropriate allowances for estimated irrecoverable amounts. They
are recognised on the trade date of the related transactions.
2.6.2 Trade payables
Trade payables are stated at their amortised cost. They are
recognised on the trade date of the related transactions.
2.6.3 Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair
value less attributable transaction costs.
Subsequent to initial recognition, interest-bearing borrowings
are stated at amortised cost with any difference between cost and
redemption value being recognised in the profit or loss over the
period of the borrowings on an effective interest rate basis.
2.7 Share based payments
Options are measured at fair value at grant date using the
Black-Scholes model. The fair value is expensed on a straight-line
basis over the vesting period, based on an estimate of the number
of options that will eventually vest.
Cash settled share based payment transactions results in the
recognition of a liability at its current fair value.
2.8 Retirement benefit
Contributions to defined contribution plans are recognised as an
expense as the contributions accrue.
2.9 Revenue
Revenue comprises sales and services to external customers
(excluding VAT and other sales taxes). Consideration received from
customers is only recorded as revenue to the extent that the Group
has performed its contractual obligations in respect of that
consideration.
2.10 Inventories
Inventories are valued at the lower of cost and net realisable
value on a first-in-first out basis. Cost comprises purchase cost
of goods, direct labour and those overheads related to manufacture
and distribution based on normal activity levels.
2.11 Leases
Payments made under operating leases are recognised in the
income statement on a straight-line basis over the term of the
lease. Benefits received as an incentive to sign a lease, whatever
form they may take, are credited to the income statement on a
straight-line basis over the lease term.
2.12 Deferred taxation
Deferred tax is provided in full using the balance sheet
liability method. Deferred tax is the future tax consequences of
temporary differences between the carrying amounts and tax bases of
assets and liabilities shown on the balance sheet. Deferred tax
assets and liabilities are not recognised if they arise in the
following situations: the initial recognition of goodwill; or the
initial recognition of assets and liabilities that affect neither
accounting nor taxable profit. The amount of deferred tax provided
is based on the expected manner of recovery or settlement of the
carrying amount of assets and liabilities, using tax rates enacted
or substantially enacted at the statement of financial position
date.
The Group does not recognise deferred tax liabilities, or
deferred tax assets, on temporary differences associated with
investments in subsidiaries, joint ventures and associates as it is
not considered probable that the temporary differences will reverse
in the foreseeable future. It is the Group's policy to reinvest
undistributed profits arising in Group companies.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised. The carrying amount of the
deferred tax assets are reviewed at each balance sheet date and
reduced to the extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of the asset
to be recovered.
2.13 Provisions
Provisions are recognised in the statement of financial position
when there is a present legal or constructive obligation as a
result of a past event, and it is probable that an outflow of
economic benefits will be required to settle the obligation.
2.14 Exceptional items
Exceptional items are identified as being items which arise from
events or transactions that fall within the ordinary activities of
the Group where the Board believes, due to their nature and
significance, it is useful to shareholders to disclose such items
on the face of the consolidated statement of comprehensive income
to the extent that this does not conflict with any applicable
IFRS.
2.15 Cash and cash equivalents
Cash includes cash in hand and balances with banks and
investments in money market instruments net of outstanding bank
overdrafts. Bank overdrafts are presented within Borrowings in the
statement of financial position.
3. Accounting estimates and judgements
The estimates and judgements that have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are as follows:
3.1 Key sources of estimation uncertainty
Key assumptions have been made in the following area when
preparing the Group accounts:
Goodwill - Goodwill is tested for impairment annually. The
recoverable amounts of cash generating units have been estimated
based on value in use calculations. These calculations require the
use of estimates. If the discount rate used to assess the
recoverable amount was to be increased by 1% then there would be no
impact on impairment.
Economic life of databases - The economic life of a database
affects the amortisation charge and therefore the reported profit.
The view of the Board is that small databases with a limited number
of variables per individual have a useful life of two years or, in
some cases, less than one year in which case the cost of the
database is expensed. Larger databases where there is a greater
range of data per individual have a useful life of up to five
years. In both cases the judgement is based on extensive market
experience. If the economic life of the large databases had been
reduced by one year then the effect on the profit before tax this
year would have been a reduction of GBP66k.
4. Segment reporting
All DM's business activities relate to the recruitment to,
maintenance of and monetisation of databases. Therefore the
business is managed by the chief operating decision maker ("CODM")
as one business segment. The CODM receives reports at consolidated
level and uses those to assess business performance. It is not
possible to assess performance properly using the financial
information collected at the subsidiary level because data
generated by one subsidiary may be shared within the group database
structure, (insofar as this complies with all relevant
legislation), without charging other subsidiaries. Subsidiary level
information is only used by the CODM as drill down information and
it is not used to determine allocation of resources.
All turnover arises in the UK and Eire. The amount arising in
Eire is not material to group turnover. All turnover relates to the
monetisation of databases.
5. Earnings per share
2010 2009
GBP'000 GBP'000
Reconciliation of net profit to basic earnings:
Net profit attributable to equity holders
of the parent 3,846 3,479
------------ ------------
Basic earnings 3,846 3,479
------------ ------------
Reconciliation of basic earnings to diluted
earnings:
Basic earnings 3,846 3,479
Diluted earnings 3,846 3,479
------------ ------------
Reconciliation of basic weighted average
number of ordinary shares to diluted weighted
average number of ordinary shares: Number Number
Basic weighted average number of ordinary
shares 166,162,176 159,645,339
Dilutive effect of share options - -
------------
Diluted weighted average number of ordinary
shares 166,162,176 159,645,339
------------ ------------
Share options granted before DM plc was formed by the reversal
of Strike Lucky Games Ltd into Hawthorn Holdings plc, in 2004,
could potentially dilute basic earnings per share in the future,
but were not included in the calculation of diluted earnings per
share as they are anti--dilutive for the period presented.
Share options granted by DM plc under an EMI scheme could
potentially dilute basic earnings per share in future but were not
included in the calculation of diluted earnings per share as they
are anti-dilutive for the period presented.
6. Cash and cash equivalents
2010 2009
GBP'000 GBP'000
Cash in hand and balances with banks 4,374 902
Cash and cash equivalents 4,374 902
-------- --------
The full statutory accounts, upon which the auditors have
expressed an unqualified opinion, will be filed with the Registrar
of Companies before 30 June 2011.
The annual report and accounts will be posted to shareholders as
soon as practicable and will be available upon application from the
Company's registered office at Green Heys, Walford Road, Ross on
Wye, Herefordshire, HR9 5DB.
* * ENDS * *
For further information visit www.dmplc.com or contact
Adrian Williams Tel: 01989 769 292
Chairman
Adrian Reed Tel: 0845 505 4343
Altium, Financial advisor to
DM
This information is provided by RNS
The company news service from the London Stock Exchange
END
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