TIDMFUZ8
RNS Number : 4128J
Fuse 8 PLC
30 June 2011
Date: 30 June 2011
On behalf of: Fuse 8 plc ('Fuse 8' or 'the Company')
Embargoed until: 0700hrs
Fuse 8 plc
Preliminary results for the 12 months ended 31 March 2011
Fuse 8 plc (AIM: FUZ 8), the full service digital marketing
agency, is pleased to announce its preliminary results for the 12
months ended 31 March 2011.
Financial Highlights
-- Turnover increased by 12% to GBP5.06 million (2010: GBP4.51
million)
-- Revenue increased by 8% to GBP3.60 million (2010: GBP3.35
million)
-- Headline Operating Profits increased by 14% to GBP684,000
(2010: GBP601,000)
-- Increase in Headline Operating Profit margin to 19% (2010:
18%)
-- No bank debt and cash balance of GBP0.2 million (2010: GBP0.3
million)
-- Headline Earnings Per Share increased to 4.03 pence (2010:
3.96 pence)
Operational Highlights
-- Completion of reverse acquisition and admission to AIM in
July 2010
-- First step of strategic plan implemented with the acquisition
of Delete Digital Marketing, the London-based digital agency,
during November 2010
-- Good new business wins now contributing to current year
revenues
-- Investments into technological capabilities delivering strong
results for clients
Outlook
-- Encouraging level of sizeable new business opportunities
within H1 of the current year
Commenting on the preliminary results Nigel Hunter, Chief
Executive Officer, said:
"Our maiden year on AIM has been successful and we are very
pleased with the results reported today showing, as they do, five
years of consistent revenue growth.
"Our proposition is strong; the challenging economic climate of
the last two years has meant that marketeers are looking for more
measurable value from their marketing investments, and the
data-rich results achieved through digital communications have
ensured that demand for these services has remained robust.
"We look forward to developing the Company further, both through
organic growth and strategic acquisitions, with the ultimate goal
of delivering enhanced shareholder value."
[1] "Headline" means the results excluding the non-recurring
exceptional costs of GBP437,000
For Further Information please contact:
Fuse 8 plc
Nigel Hunter/Graeme Burns Tel +44 (0)113 260 4600
FinnCap
Geoff Nash/ Charlotte Stranner Tel +44 (0) 20 7600 1658
Redleaf Polhill
Rebecca Sanders-Hewett/ Jenny Tel +44 (0) 20 7566 6720
Bahr
Notes to editors:
Fuse 8 is a full service digital marketing specialist covering a
wide spectrum of services, ranging from creative development
services to Search Engine Optimisation (SEO). Fuse 8, has offices
in London, Leeds and Russia and centres most of its services around
enhancing clients' reputations by helping to market and build their
brands. The Group's principal expertise is in assisting its clients
to build, grow and develop their online brands and, through this,
help to drive sales and market share growth.
Fuse 8's current service offering encompasses the six main
sectors below:
-- Online Design & Build
-- Digital Marketing
-- Creative Services
-- Media Planning & Buying
-- Marketing Consultancy
-- Online Press & Public Relations, Online Content
Fuse 8 was founded in 2000 by Mark Walton and Andy Hutchinson.
As an early adopter of online technology, the Company has spent 11
years developing and refining its digital marketing offering and
has grown rapidly in a fragmented marketplace. The business now
services more than 100 clients across the UK, Continental Europe,
and the USA. Major clients currently include: Arla Foods, Alton
Towers, Unilever, Ikea, Manpower, McArthur Glen, Miele, Persimmon
Homes, Soreen and UK Trade & Investment.
Fuse 8 is listed on the London Stock Exchange under the symbol
FUZ8. Further information on the Company can be found at
www.fuse8.com
Chairman's Statement
It gives me great pleasure to introduce the Company's maiden
results following the admission to the AIM market in July 2010. The
Company has enjoyed a good year with turnover increasing to more
than GBP5 million for the first time and our highest ever headline
operating profits of GBP0.7 million.
It is an exciting time to be involved in digital marketing
communications. The dramatic shift of marketing investment to
online activity experienced during the last five years continues
unabated, as the technology and techniques available to marketeers
constantly evolve. This evolution has led to the ability to monitor
and measure activity in real-time.
Fuse 8's services are a strong proposition for marketeers;
having been involved in digital communications for over a decade,
and with a deep understanding of how to harness the technology
available to engage with customers, Fuse 8 can give brands, and
therefore sales, real momentum. Fuse 8 acts as reliable counsel in
a complex business discipline.
This is also an exciting time for the Company. The blend of its
digital communications heritage, together with award winning work
and relentless attention to its clients' needs, means it is an
attractive partner to its clients and the Company's reputation
attracts a strong new business pipeline. This is apparent as the
Company achieved its fifth consecutive year of revenue growth,
despite the challenging economic environment.
Securing a London base last year was a strategic step forward
and involvement in this market will help the business grow in the
future. Fuse 8 continues to move ahead in line with its stated
acquisition strategy and looks forward to both organic growth and
further strategic acquisitions to drive the Company's growth.
Our business thrives due to the skill and dedication of each
member of our team, both in the UK and in Russia, and I would like
to offer my thanks to all of them.
Mark Walton
Non-Executive Chairman
29 June 2011
Chief Executive Officer's Statement
It gives me great pleasure to report Fuse 8's maiden results on
behalf of the Board.
During the year to 31 March 2011, the Company increased turnover
by 12% to GBP5.1 million and, more importantly, revenues by some 8%
to GBP3.6 million, representing a solid performance and our fifth
year of consecutive revenue growth. Top line growth has been
achieved while maintaining good operating margins.
We have experienced good levels of new client activity which
gives us confidence for the future. The most encouraging aspect to
the new financial year is the scale of the opportunity we see ahead
of us. Blue chip clients are seeking us out and the opportunities
this brings are exciting, from both a technological and business
perspective. It is also great to see that existing clients have
reaped the benefits of our services and are now looking to digital
communications to help them deliver a richer customer
experience.
Recent enhancements in technology, delivered by our R&D
investments, have produced excellent results for our clients and,
in turn, created stronger relationships, and therefore recurring
revenues. Our team of talented people has been expanded throughout
the year and is bringing new insight and a fresh perspective to our
client offering.
Fuse 8's client offering combines fully integrated online and
digital marketing solutions, supported by conventional marketing
services, which enables the Company to provide clients with a
seamless service across all media channels. The value of the
digitally focused services we provide to our clients is reflected
in our continued revenue and profits growth. The challenging
economic climate of the last two years has meant that marketeers
are looking for more measurable value in their marketing spend, and
the data-oriented results achieved through digital communications
have ensured that demand for these services has remained
robust.
Increasing proportions of our clients' budgets are being spent
on digital communications. This is partly due to our clients'
desire to explore the opportunities afforded to them with better
customer engagement through social media channels. Fuse 8 is
helping many of its clients steer a safe strategic passage through
the minefield of user generated content and viral communication
that, potentially, threatens their brand messages at every turn.
The Company's 11 year heritage in digital marketing means that
clients need, and value, the expertise we can apply to servicing
their individual business requirements.
Clients continue to utilise the skills of Fuse 8 for both their
digital and traditional marketing, however we are seeing a marked
shift in the majority of activity into the digital arena; both from
current clients and our new business pipeline. Demand and appetite
for new technology has grown steadily over the period with clients
old and new looking particularly to mobile and tablet technology
plus applications to form part of their overall digital
communications strategy.
Fuse 8 is not immune to the economic difficulties affecting the
UK and Europe. During the year under review the Company has seen
some clients, most noticeably in the public sector, being slower to
commit to previously agreed plans or spend. However, a diverse
client base and a focus on new business has allowed the Company to
continue growing revenue and to invest in its digital service offer
for clients, producing measurable results and ensuring that Fuse 8
remains an attractive partner in this value conscious
environment.
Fuse 8's office in Russia is an offshore technology and digital
production centre that has been successfully established for the
last eight years. There are currently 32 highly skilled staff in
Russia, and as our Centre of Technical Excellence, they continue to
deliver a high quality and cost effective service for clients.
Strategy
As stated at the time of Fuse 8's admission to AIM, the
Company's plan is to grow revenue and profits, steadily over time,
both organically and by acquisition, to become one of the
pre-eminent digital marketing agencies in the UK. The financial and
operational achievements of the last year have been positive steps
in the Group's strategy. The next steps are to:
-- Achieve sustained organic growth by investing in our client
services, focusing on digital communications and targeting client
sectors that provide long term clients who we can support in
building brands.
-- Identify and acquire complementary businesses with good
quality management and profit streams.
-- Expand the Company's production capacity in lower cost
environments to allow continued investment in service and R&D,
while achieving good margins.
-- Ensure the Company's organic growth is supported by
investment in the marketing technology toolbox used to deliver
services that help to continually enhance our client offering.
New Business
There have been a number of significant new client wins during
the period. Wins include Ikea, London Stock Exchange, McArthurGlen,
Peel Holdings, Soreen and Unilever.
The new business pipeline continues to grow at pace, with Fuse
8's core digital services providing the Company with a stronger
foothold with existing clients and also offering many new business
opportunities. New business activity is the lifeblood of any
business and we approach ours with relentless enthusiasm.
Fuse 8 has three strategic areas from which it targets new
business; cross selling of services to its current clients; winning
new clients; and through strategic partnerships.
Acquisitions
Fuse 8 completed its first acquisition, Delete Digital Marketing
('Delete'), in November 2010. This gave the Group the foothold in
London that it sought and a complementary team of experienced
digital marketing specialists. The Delete team has been integrated
into the enlarged business successfully and we have seen
encouraging increases in new client interest and opportunities to
offer additional expertise to more clients.
The Board recognises that a larger business will help increase
the Company's efficiency and profile and also fulfil our strategic
plans. To that end, it is regularly appraising acquisition
opportunities.
Financial Review
Turnover increased by 12% to GBP5.1 million whilst revenue
increased by some 8% to GBP3.6 million. This means we have grown
our revenues for five consecutive years.
Administrative overheads increased due to the increased sales
volumes, investment into additional development of technology
solutions and, of course, the incremental costs associated with
being a listed company. The operating margin achieved increased
modestly from the previous year to 19%, a performance that is in
the top quartile of our sector.
As well as monitoring operating margin, the Company uses other
KPI's including; revenue per head, overheads per head, and the
ratio of compensation expenses to revenue to monitor the
performance of the business.
Exceptional costs incurred in the year represent the one-off
costs (both cash and non-cash) arising from the reverse acquisition
which achieved the admission to AIM and the acquisition of
Delete.
Taxation charge of GBP0.2 million represents an effective rate
of 29% of headline profit before tax. The Company's expectation is
that the long term effective rate should generally be around the UK
corporation tax rate (currently 28%) plus a modest increase due to
some expenses being non-deductible items.
Our balance sheet remains robust for our size and we have
positive cash balances of GBP0.2 million and an unused overdraft
facility. Operational cashflow was 67% of operating profits due to
material working capital movements in Q4. The Company's target is
to convert 100% of operating profits to operating cashflow in the
medium term.
Capital expenditure was higher than average during the year due
to a number of renewals in the Company's vehicle fleet.
The Company is in a growth phase and therefore the Board does
not propose a dividend for the year under review.
Summary & Outlook
It is pleasing to see yet another year of revenue growth and
good margins delivered by the Company, against the backdrop of a
flat economy.
This solid performance is only possible due to the intelligence,
tenacity and endeavour of all the Fuse 8 team. We are proud of the
service our team delivers to our clients and I would like to thank
each member of our team for their contribution to our achievements
this year.
Our future looks bright. However we can show no complacency in
continually striving to provide clients with world class solutions
to their marketing requirements. We are looking to achieve further
growth in the year ahead and our new business pipeline remains
encouraging.
Nigel Hunter
Chief Executive Officer
29 June 2011
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2011
2011 2010
GBP'000 GBP'000
Note
----------------------------------------------------- ---- ------- -------
Revenue 3,602 3,347
----------------------------------------------------- ---- ------- -------
Administrative expenses 2,918 2,746
----------------------------------------------------- ---- ------- -------
Headline operating profit 684 601
Exceptional costs 4 437 -
Operating profit 247 601
Finance costs (19) (17)
Finance income 2 1
Net finance cost (17) (16)
Profit from continuing operations before tax 230 585
Taxation charge 193 180
----------------------------------------------------- ---- ------- -------
Profit for the period and total comprehensive income 37 405
----------------------------------------------------- ---- ------- -------
Attributable to:
Parent company's shareholders 37 405
Basic earnings per share from total operations 5 0.3p 4.0p
----------------------------------------------------- ---- ------- -------
Diluted earnings per share from total operations 5 0.3p 4.0p
----------------------------------------------------- ---- ------- -------
GROUP STATEMENT OF FINANCIAL POSITION
As at 31 March 2011
2011 2010 2009
GBP'000 GBP'000 GBP'000
Non-current assets
------------------------------ ------- ------- -------
Goodwill 7 558 - -
Property, plant and equipment 350 315 193
------------------------------ ------- ------- -------
908 315 193
Current assets
Trade and other receivables 1,588 1,226 777
Cash and cash equivalents 243 284 96
------------------------------ ------- ------- -------
1,831 1,510 873
------------------------------ ------- ------- -------
Total assets 2,739 1,825 1,066
------------------------------ ------- ------- -------
Current liabilities
Trade and other payables 999 744 631
Corporation tax 173 180 32
Financial liabilities 20 30 33
------------------------------ ------- ------- -------
1,192 954 696
------------------------------ ------- ------- -------
Non-current liabilities
Financial liabilities 114 103 7
Deferred tax 9 9 9
------------------------------ ------- ------- -------
123 112 16
------------------------------ ------- ------- -------
Total liabilities 1,315 1,066 712
------------------------------ ------- ------- -------
Net assets 1,424 759 354
------------------------------ ------- ------- -------
Shareholders' funds
Share capital 252 204 204
Capital redemption reserve 318 - -
Share premium account 2,042 - -
Merger reserve (1,964) (184) (184)
Retained earnings 776 739 334
Total equity 1,424 759 354
------------------------------ ------- ------- -------
GROUP STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2011
Capital Share
Issued redemption premium Merger Retained Total
capital reserve account reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at
1 April 2008 204 - - (184) 272 292
Comprehensive
income - - - - 62 62
-------------- -------- ---------- -------- -------- --------- ---------
Balance at
1 April 2009 204 - - (184) 334 354
-------------- -------- ---------- -------- -------- --------- ---------
Comprehensive
income - - - - 405 405
-------------- -------- ---------- -------- -------- --------- ---------
Balance at
31 March 2010 204 - - (184) 739 759
-------------- -------- ---------- -------- -------- --------- ---------
Reverse
acquisition 23 318 1,667 (1,780) - 228
Shares issued 25 - 375 - - 400
Comprehensive
income - - - - 37 37
Balance at
31 March 2011 252 318 2,042 (1,964) 776 1,424
-------------- -------- ---------- -------- -------- --------- ---------
GROUP STATEMENT OF CASH FLOWS
For the year ended 28 February 2011
2011 2010
Note GBP'000 GBP'000
Cash inflow from operating activities 6
Cash inflow from operating activities before tax 166 364
Corporation tax paid (200) (32)
------------------------------------------------------ ---- ------- -------
Net cash (outflow) / inflow from operating activities
after tax (34) 332
Cash inflow/ (outflow) from investing activities
Finance income received 2 1
Cash acquired on reverse acquisition 82 -
Cash acquired on acquisition of subsidiary 53 -
Purchase of property, plant and equipment (68) (128)
Proceeds from disposals of property, plant and
equipment 82 -
------------------------------------------------------ ---- ------- -------
Net cash inflow/ (outflow) from investing activities 151 (127)
------------------------------------------------------ ---- ------- -------
Cash outflow from financing activities
Finance cost paid (19) (17)
Capital repayment of finance leases (139) -
Net cash outflow from financing activities (158) (17)
------------------------------------------------------ ---- ------- -------
Net (decrease) / increase in cash and cash equivalents (41) 188
------------------------------------------------------ ---- ------- -------
Cash and cash equivalents at beginning of year 284 96
Cash and cash equivalents at end of year 243 284
------------------------------------------------------ ---- ------- -------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2011
1. GENERAL INFORMATION
Fuse 8 plc is a holding Company. The Group's principal
activities are digital marketing communications services.
Fuse 8 plc, a public limited company, is the Group's ultimate
parent company. It is incorporated and domiciled in the United
Kingdom.
The financial statements for the year ended 31 March 2011
(including the comparatives for the year ended 31 March 2010 and 31
March 2009) were approved by the board of directors on 29 June
2011. Amendments to the financial statements are not permitted
after they have been approved.
The financial information set out in this preliminary
announcement does not constitute statutory accounts within the
meaning of section 435 of the Companies Act 2006. The group
statement of comprehensive income, the group statement of financial
position, the group statement of changes in equity, the group
statement of cash flows and the associated notes for the year ended
31 March 2011 have been extracted from the group's financial
statements upon which the auditor's opinion is unqualified and does
not include any statement under Section 498 of the Companies Act
2006. The statutory accounts for the year ended 31 March 2011 will
be delivered to the Registrar of Companies following the Group's
Annual General Meeting.
2. ACCOUNTING POLICIES
The consolidated financial statements of Fuse 8 plc has been
prepared under the historical cost convention and in accordance
with International Financial Reporting Standards as adopted by the
EU and the International Financial Reporting Standards as issued by
the International Accounting Standards Board.
3. SEGMENTAL ANALYSIS
The Group operates in one business segment, the provision of
digital marketing communications services, and operates in one
geographic segment, the United Kingdom. As such, no further
segmental information has been disclosed. No individual customer
constitutes 10% or more of the revenue of the Group.
4. REVERSE ACQUISITION
On the 19 July 2010, Fuse 8 plc (formerly Award International
Holdings plc) acquired all of the issued share capital of Fuse 8
Group Limited. The transaction has been accounted for as a reverse
acquisition under International Financial Reporting Standards. The
non-cash fair value of shares awarded was assessed based on the
fair value of Fuse 8 Group Limited on the day of acquisition. The
amounts recognised for each class of assets, liabilities and
contingent liabilities recognised at the acquisition date were as
follows:
GBP'000
Trade and other receivables 41
Cash 82
Trade and other payables (5)
-------
Net assets acquired 118
Non cash fair value of shares issued 228
Acquisition fees 327
-------
555
Exceptional cost of acquisition recognised in the
income statement 437
=======
All acquisition fees have been recorded within the income
statement within exceptional costs.
5. EARNINGS PER SHARE
The calculation of the basic earnings per share is based on the
profit on ordinary activities after tax and on the weighted average
number of Ordinary shares in issue during the year.
As a result of the reverse acquisition, the weighted average
number of shares up until the reverse acquisition is deemed to be
the number of shares that were issued by Fuse 8 plc for the reverse
acquisition.
The diluted earnings per share figure is the same as the basic
earnings per share as no diluting shares or options exist.
The profit and weighted average number of shares used in the
calculations are set out below:
Basic and diluted Profit Weighted average number Earnings per share
earnings per share GBP'000 of shares Number '000 Pence
----------------------- -------- ----------------------- ------------------
Year ended 31 March
2011 37 11,767 0.3p
Year ended 31 March
2010 405 10,215 4.0p
6. NET CASH INFLOW FROM OPERATING ACTIVITIES
2011 2010
GBP'000 GBP'000
---------------------------------------------------- ------- -------
Operating profit 247 601
Non-cash element of acquisition costs written off 110 -
Depreciation 111 98
Profit on disposal of property, plant and equipment (11) -
Increase in receivables (254) (448)
(Decrease) / increase in payables (37) 113
---------------------------------------------------- ------- -------
Net cash inflow from operating activities 166 364
---------------------------------------------------- ------- -------
7. BUSINESS COMBINATION
On 30 November 2010, Fuse 8 plc acquired 100% of the issued
share capital of Delete Digital Marketing Limited, a Company
incorporated in the United Kingdom.
1,250,000 of shares were issued as consideration to acquire
Delete Digital Marketing Limited on 30 November 2010 when the share
price was 32p. The consideration has been valued at its fair value
on that date of GBP400k.
The amounts recognised for acquiree's assets and liabilities at
the acquisition date are as follows:
Carrying amount Adjustments Fair value
GBP'000 GBP'000 GBP'000
Total assets 199 (69) 130
Total liabilities (287) - (288)
------------------ ----------------- ----------------
Net liabilities (88) (69) (158)
------------------ -----------------
Fair value of purchase
consideration 400
------------------
Goodwill 558
=============
The primary reason for the acquisition of Delete Digital
Marketing Limited was the expected synergies and business
opportunities that can be derived from the consolidated entity of
Fuse 8 plc and Delete Digital Marketing Limited.
The goodwill that arose on the combination can be attributed to
the synergies expected to be derived from the combination and the
value of the workforce of Delete Digital Marketing Limited which
cannot be recognised as an intangible asset under IAS 38
"Intangible Assets".
This information is provided by RNS
The company news service from the London Stock Exchange
END
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