TIDMDMP
RNS Number : 8722O
DM Plc
26 September 2011
DM plc: Ticker: DMP / Index: AIM / Sector: Leisure
facilities
DM plc
("DM" or the "Group")
INTERIM RESULTS
FOR THE SIX MONTHS ENDED 30 JUNE 2011
DM, the direct marketing group specialising in customer
recruitment and database management announces its interim results
for the six months ended 30 June 2011.
Stable Financial Position with Net Cash
Recent Business Disruption
Difficult Trading Conditions
-- Continued cash management resulting in robust balance
sheet with net cash surplus of GBP0.28 million (2010:
net debt GBP2.54 million);
-- Significantly reduced turnover and materially lower
EBITDA and profit after tax for the period due to
the impact of OFT action on Group promotion activity;
-- Turnover down 38 per cent. to GBP8.40 million (2010:
GBP13.45 million);
-- Group EBITDA down 82 per cent. to GBP0.58 million
(2010: GBP3.18 million);
-- Profit before tax down 86 per cent. to GBP0.41 million
(2010: GBP2.98 million);
-- Earnings per share down 77 per cent. to 0.30 pence
(2010: 1.32 pence);
-- 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;
-- Court ruling in OFT case on 17 March 2011 with respect
to promotion design materially impacted Group financial
performance;
-- Court ruling in OFT case appealed and referred to
the European Court of Justice; and
-- Difficult market conditions across all business
activities.
DM Chairman, Adrian Williams said:
"2011 has, for many reasons, been one of the most challenging
periods in the Group's history, but the Group continues to be well
managed and its resilience in these difficult times means that it
is still well placed to benefit when market conditions start to
improve."
CHAIRMAN'S STATEMENT
Introduction
The Group remains stable and well managed with all businesses
focused on keeping a tight control over costs, cash management and
on identifying and exploiting new business opportunities. Across
all activities we have carefully selected and introduced the best
people to the Group's businesses to address the challenges which we
face. The Group is working extensively on developing and refining
new promotions within the legal framework as currently interpreted
and improving the quality and value of our databases and direct
marketing activities.
Overall, the first half of 2011 has been a very difficult period
for the Group with financial performance materially impacted by the
Court ruling in the OFT case in respect of the design of certain
Group promotions. This has been set in the context of continued
challenging and uncertain market conditions.
Financial results
For the six months ended 30 June 2011, revenue was GBP8.40
million, down 38 per cent. (2010: GBP13.45 million). EBITDA for the
period was GBP0.58 million (2010: GBP3.18 million), with Group
consolidated profit before tax GBP0.41 million (2010: GBP2.98
million). Basic earnings per share was 0.30 pence (2010: 1.32
pence).
For the period the Group was broadly cash neutral from operating
activities after taking account of corporation tax payments and
debt repayment. As at 30 June 2011, the Group had a net cash
surplus of GBP0.28 million (2010: net debt GBP2.54 million). At the
current levels and taking into account revised budgeted performance
any covenant breach is unlikely and moreover the Group's strong
cash balance puts it in a position where the full bank debt could
be repaid should it be appropriate.
The Board is not recommending an interim dividend for the period
ended 30 June 2011 (2010: nil). During the period the Group did not
buy back any shares.
Business Review
The Group is now a stable integrated, multi-channel business
with activities 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 major event during the period was the outcome of the
proceedings that were taken by the Office of Fair Trading ("OFT")
in relation to certain promotions undertaken by certain Group
companies.
Following a hearing which took place in January 2011, on 2
February 2011 the High Court handed down a judgment in relation to
those proceedings. On 17 March 2011, following a period of
consultation, the Court accepted undertakings ("the Undertakings")
from certain Group executives and from the Group companies
concerned in respect of certain promotions carried out by those
Group companies.
The OFT proceedings did not result in a fine of any kind on the
Group and subsequently the Court decided that the Group companies
would be responsible for 85% of the allowable costs of the OFT
incurred in the proceedings as determined by a detailed assessment
of those costs. These costs have not yet been finalised. The
financial results to 30 June 2011 include a provision based on the
Board's estimates of the costs likely to recoverable by the
OFT.
In March 2011, the Court granted the Group's executives and the
Group companies involved leave to appeal to the Court of Appeal.
The matter was subsequently referred from the Court of Appeal to
the European Court of Justice. At present it is not known when a
ruling will be provided by the European Court of Justice, but
typically the process takes at least a year, potentially
significantly longer.
The Undertakings related to certain changes that were required
to the design and content of new promotions undertaken by the
relevant Group companies after 17 March 2011. At the time it was
not possible to accurately assess the likely level of adverse
effect that these changes would have on financial performance.
However, following the Undertakings becoming binding, due to the
uncertainty over current promotion design and the requirement to
develop and test new compliant promotions, the trading of the Group
was significantly impacted.
Since the Court ruling in the OFT case the Group's gamecard and
promotional activities have been at a very low level as new
compliant promotional formats are being designed and tested. Whilst
the Group is developing and testing new designs this area is
expected to continue to run an operational loss.
The Group's direct mail activities similarly suffered a period
of disappointing results during the first half of 2011. However,
towards the end of the period direct mailings saw significant
improvements with new recruitment campaigns generating useful
contributions.
In the Group's consumer lifestyle and direct marketing
activities the market activity has remained unpredictable and at a
very low level. During the period we have concentrated on upgrading
the form and quality of our data. There has also been a focus on
cost savings in relation to external data collection services and
investment in the sales and marketing function. Whilst within the
various products and services the Group provides there are areas of
very low activity, overall the direct marketing and database
activities are contributing to the wider Group. Data sales are
still disappointing but we firmly believe that our data quality is
now among the very best in the industry and we continue to recruit
valuable, content rich data.
Wendy Ruck and John Gommes
It was with great sadness that during the period executive
director, Wendy Ruck, and non-executive director, John Gommes, both
passed away. Both Wendy and John had made huge contributions to the
development and success of the Group and will be sorely missed.
Wendy Ruck passed away suddenly in April 2011. Wendy was a
director of the Group since its formation in 2004. She was
responsible for recruitment and training for the Group as well as
directing prize fulfilment operations in Ross on Wye. She was
incredibly well liked and respected by all who knew and met her and
she will be remembered not only for her professionalism, but also
for her great warmth and kindness and her consideration for her
fellow colleagues and for her advice and help, which she gave
selflessly. The Group would not be as successful as it is today
without Wendy's contribution.
Like Wendy, 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
2011 has been one of the most difficult and challenging periods
in the Group's history. The markets in which the Group operates
have remained severely depressed and shown no sign of improvement
since 2010. The effects of the OFT action on the Group's promotion
and gamecard activity has likewise had a material adverse effect on
the recent financial performance of the Group. Within the Group
there is a considerable wealth of experience in promotional design
which is focused on developing new and attractive gamecards. We
continue to test these formats via a tried and tested methodology
and hope to report improved response and performance over the
coming months. Within the direct marketing and database management
activities the Group has a market leading database and we believe
we will be in a strong position from which to capitalise on our
market leading, multi-channel offering when the level of direct
marketing activity eventually increases.
At this point we always acknowledge the contribution that the
Group's employees have made to its success. This is particularly
poignant with the sad loss of Wendy Ruck and John Gommes, two
senior and influential figures in the creation and development of
the Group. We miss them and their contribution very much and would
like to thank everybody within the Group for their hard work and
commitment during this difficult time.
We remain confident that the Group has the skills and resources
to develop successfully and that we will be able to leverage our
extensive consumer lifestyle database to generate shareholder
returns going forward.
A J Williams
Chairman
26 September 2011
**ENDS**
Enquiries:
Adrian Williams Tel: 01989 769 292
Chairman
Adrian Reed Tel: 0845 505 4343
Altium, Financial advisor to DM
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six month Six month Year to
period to period to 31 December
30 June 2011 30 June 2010 2010
GBP000 GBP000 GBP000
Revenue 8,395 13,454 27,562
Cost of Sales (4,358) (6,399) (14,226)
-------------- -------------- --------------
Gross Profit 4,037 7,055 13,336
Administrative
expenses (3,586) (3,994) (8,071)
-------------- -------------- --------------
Operating
Profit 451 3,061 5,265
Investment
Income 12 - -
Finance costs (50) (79) (144)
-------------- -------------- --------------
Profit before
tax 413 2,982 5,121
Income tax
expense 84 (783) (1,275)
-------------- -------------- --------------
Profit for the
period 497 2,199 3,846
Total
Comprehensive
Income for the
period 497 2,199 3,846
Earnings per
share
From continuing
operations-
- basic 0.30p 1.32p 2.31p
- diluted 0.30p 1.32p 2.31p
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 December
30 June 2011 30 June 2010 2010
GBP000 GBP000 GBP000
Assets Non
Current
Assets
Goodwill 12,824 12,824 12,824
Other
intangible
assets 506 682 608
Property,
plant and
equipment 138 128 161
-------------- -------------- --------------
13,468 13,634 13,593
-------------- -------------- --------------
Current
Assets
Inventories 122 337 167
Trade and
other
receivables 4,636 6,551 5,842
Corporation
tax
refundable 128 - -
Cash and
cash
equivalents 2,706 1,821 4,374
-------------- -------------- --------------
7,592 8,709 10,383
-------------- -------------- --------------
Total Assets 21,060 22,343 23,976
-------------- -------------- --------------
Current
Liabilities
Trade and
other
payables (3,143) (3,805) (5,022)
Borrowings (2,422) (1,937) (3,391)
Current tax
payable - (733) (565)
-------------- -------------- --------------
(5,565) (6,475) (8,978)
-------------- -------------- --------------
Non Current
Liabilities
Borrowings - (2,422) -
Deferred Tax (1) (1) (1)
-------------- -------------- --------------
(1) (2,423) (1)
-------------- -------------- --------------
Net Assets 15,494 13,445 14,997
Equity
attributable to
equity holders
of the parent
Ordinary
shares 1,647 1,663 1,647
Capital
redemption
reserve 32 16 32
Merger
reserve
account (3,108) (3,108) (3,108)
Share
premium
account 3,685 3,685 3,685
Profit and
Loss
account 13,238 11,189 12,741
-------------- -------------- --------------
Total Equity 15,494 13,445 14,997
CONSOLIDATED STATEMENT OF CASH FLOWS
Six months Six months Year to
to 30 June to 30 June 31 December
2011 2010 2010
GBP000 GBP000 GBP000
Cash flows from
operating activities
Profit before
taxation 413 2,982 5,121
Depreciation and
Amortisation 124 118 239
Loss on disposal of
property, plant and
equipment 6 - -
Investment income (12) - -
Finance costs 50 79 144
Decrease/(Increase)
in inventories 45 (58) 112
Decrease in trade
and other
receivables 1,206 521 1,230
Decrease in trade
and other payables (1,879) (1,228) (11)
-------------- -------------- --------------
Cash generated from
operations (47) 2,414 6,835
Interest paid (50) (79) (144)
Interest received 12 - -
Income taxes paid (609) (438) (1,096)
-------------- -------------- --------------
Net cash
(outflow)/inflow
from operating
activities (694) 1,897 5,595
-------------- -------------- --------------
Cash flows from
investing
activities
Sale of property,
plant and
equipment 20 - 5
Purchase of
property, plant and
equipment (25) (10) (64)
Purchase of intangible
assets - - (32)
-------------- -------------- --------------
Net cash used by
investing activities (5) (10) (91)
-------------- -------------- --------------
Cash flows from
financing activities
Repayment of
borrowings (969) (968) (1,937)
Shares bought back for
cancellation - - (95)
-------------- -------------- --------------
Net cash used by
financing activities (969) (968) (2,032)
-------------- -------------- --------------
Net
(decrease)/increase
in cash and cash
equivalents (1,668) 919 3,472
Cash and cash
equivalents at
beginning of
period 4,374 902 902
-------------- -------------- --------------
Cash and cash
equivalents at end of
the period 2,706 1,821 4,374
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months Six months Year to
to 30 June to 30 June 31 December
2011 2010 2010
GBP000 GBP000 GBP000
Opening
Equity 14,997 11,246 11,246
Profit for
the period
attributable
to equity
shareholders 497 2,199 3,846
Buy back of
share
capital - - (95)
-------------- -------------- --------------
Total changes
in equity 497 2,199 3,751
-------------- -------------- --------------
Closing Equity 15,494 13,445 14,997
1. Basis of preparation and accounting policies
1.1 Reporting Entity
This interim financial report is the unaudited Consolidated
Financial Statements of DM plc, a company registered in England and
Wales, and its subsidiaries (hereafter the 'Group') for the six
months ended 30 June 2011.
1.2 Statement of compliance
This interim financial report has been prepared on the basis of
the recognition and measurement requirements of IFRS in issue that
are either endorsed by the EU and effective (or available for early
adoption) at 31 December 2010.
This interim financial report should be read in conjunction with
the Report and Accounts for the year ended 31 December 2010, which
were approved for issue by the Board of Directors on 11 March 2011,
as it provides an update of previously reported information. The
comparative figures for the year ended 31 December 2010 are not the
company's statutory accounts for the financial year.
The comparative figures for the year ended 31 December 2010 were
derived from the statutory accounts for that year which have been
delivered to the Registrar of Companies. Those accounts received an
unqualified audit report which did not contain statements under
sections 498 (2) or (3) of the Companies Act 2006.
1.3 Significant accounting policies
The accounting policies used and the presentation for this
interim financial report are consistent with those used in the
Group's financial statements for the year ended 31 December
2010.
The preparation of Interim Financial Statements requires
management to make estimates and assumptions that affect the
reported amounts of revenues, expenses, assets and liabilities at
the date of the Interim Financial Statements. If in future such
estimates and assumptions, which are based on management's best
judgment at the date of the Interim Financial Statements, deviate
from the actual circumstances, the original estimates and
assumptions will be modified as appropriate in the period in which
the circumstances change.
The Group operates in a sector where no significant seasonal or
cyclical variations in total sales and profits are experienced
during the financial year.
2. Income tax expense
The income tax charge for the period ended 30 June 2011 has been
calculated at a rate of 26.5% (28% for both the full year to 31
December 2010 and the interim period to 30 June 2010).
3. Segmental information
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.
4. Earnings per share
Basic earnings per share and diluted earnings per share are
calculated using the profit on ordinary activities after tax and a
weighted average number of ordinary shares as follows: -
Basic Diluted
- Period to 30 June 2011 164,684,094 164,684,094
- Period to 30 June 2010 166,309,094 166,309,094
- Year to 31 December 2010 166,162,176 166,162,176
5. Dividends
In the period ended 30 June 2011, the Group did not pay a
dividend. (For the period ended 30 June 2010 and for the year ended
31 December 2010: Dividend paid was GBPnil.)
6. Analysis of net cash and cash equivalents
Six months Six months
to to Year to 31
30 June 2011 30 June 2010 December 2010
GBP000 GBP000 GBP000
Cash and
cash
equivalents 2,706 1,821 4,374
-------------- -------------- --------------
Net cash and
cash
equivalents 2,706 1,821 4,374
7. Risks and Uncertainties
The main risk is judged to arise from potential legislative
changes and regulatory challenges and this situation is constantly
under review.
As has been announced on 27 June 2011 there is pending legal
appeal, to be heard by the European Court Of Justice, relating to
the interpretation of recently implemented EU regulation. The
Office of Fair Trading ("OFT") had, in the context of the recently
implemented EU legislation, reassessed the promotional formulae
which the Group currently adheres to and which were agreed in 2007.
That reassessment meant that the OFT sought alternative assurances
drafted in wider and less specific terms than previously agreed. DM
plc was not prepared to accept the alternative assurances in their
current form and therefore elected for definitive legal
interpretation and specific direction by the court rather than
agree to comply with what the Board believes are ambiguous
proposals which could risk inadvertent breach in the future. The
High Court hearing took place in the first quarter of 2011 and the
Group has been complying with the Undertakings given in the light
of that judgment in all marketing campaigns. The Board believed
that there were grounds to appeal on aspects of the judgment and
was granted leave to appeal. An appeal hearing took place, at the
Court Of Appeal, in June 2011 and the court decided to refer the
appeal to the European Court Of Justice. A date for the hearing of
the appeal by the European Court of Justice has yet to be set.
The possibility of a postal strike is judged to be a risk. The
Board keeps this matter under review so that, in the event that
there is a postal strike, the impact on profits is kept to a
minimum by forward planning.
8. Related party transactions
The Group continues to trade on standard commercial terms with
related parties as described in the Group Report and Accounts for
the year ended 31 December 2010.
9. The interim report was approved by the Board on 23 September
2011. Copies of the interim report are being posted to all of the
Company's shareholders as soon as practicable and will be available
at the Company's Registered Office at Green Heys, Walford Road,
Ross on Wye, Herefordshire, HR9 5DB
For further information visit www.dmplc.com or contact:
Adrian Williams Tel: 01989 769292
DM plc Chairman email: ajw@dmplc.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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