Final Results
Real Affinity plc
Preliminary Results for the period ended 31 March 2007
Significant increase in turnover; restructuring completed
Real Affinity plc ("Real Affinity" or "the Company"), the AIM quoted
marketing services group, announces its Preliminary Results for the
period ended 31 March 2007.
Highlights
* Turnover increased to �19.58m (2006: �9.91m)
* Loss before tax �4.12 m post exceptional items of �2.88m (2006
Loss: �1.22m)
* Group gross profit increased marginally
* Continuing businesses turnover fell slightly but gross margin
improved
* Venues Unlimited acquisition performed well; sales up 16%; net
profit 98%
* Corporate Hospitality Services acquired December 2006
* Significant new client wins
Post period events
* Restructuring into two operating divisions (Real Affinity Agency
and Real Affinity Events) completed
* Board restructured
John Ross, Executive Chairman, Real Affinity plc commented:
"Whilst it is disappointing to report a year of continuing losses, I
am able to confirm that progress is being made on both restructuring
and re-focussing the Group and, most importantly, resolving its
underlying problems. During February we started the process of
simplifying the structure of our operating businesses into two
business streams. It is pleasing to note that since completion of
the reorganisation, the two new divisions Real Affinity Agency and
Real Affinity Events are sharing information and working together on
many more client assignments.
"The strategy for the business is to grow through a combination of
organic growth and acquisition. However, the significant
restructuring means that the changes need to bed down and for them to
show real delivery before the Group commits further resource to
acquisitions.
"First quarter trading to 30th June 2007 has been encouraging with
operating performance above budget in both divisions.
"Whilst it is too early to predict the outcome for the year we are
confident that the continuing businesses are in better shape, the
primary loss-making businesses have been discontinued and the
restructuring has been completed".
27 September 2007
ENQUIRIES:
Real Affinity plc 0113 290 8730
John Ross, Chairman
Brent Fitzpatrick, Non-executive Director
HB Corporate 0207 510 8600
Edward Hutton
Bankside Consultants 0207 367 8888
Michael Padley / Susan Scott
CHAIRMAN'S STATEMENT AND OPERATING REVIEW
This is my first statement to shareholders since I became chairman in
October last year. Whilst it is disappointing to report a year of
continuing losses, I am able to report that progress is being made on
both restructuring and re-focussing the Group and, most importantly,
resolving its underlying problems.
During the year, we have acquired a profitable and cash generative
events and conference business and this has continued to perform well
since acquisition.
We have also consolidated the various group subsidiaries into two
main divisions and Real Affinity now operates as the two distinct
brands: Real Affinity Agency and Real Affinity Events. It is also
pleasing to note that since completion of the reorganisation, the two
divisions are sharing information and working together on many more
client assignments. The new structure took effect from June 2007.
The Group continues to employ loyal and hardworking staff looking
after our equally loyal blue chip clients, most of whom appreciate
the highly professional service we provide. I wish to place on
record my thanks to our people at all levels and for their continued
belief in what we are trying to achieve.
With the changes made this year, I expect to report a much improved
result next year. Thereafter, a return to a more solid financial
basis will enable the Board to develop a strategy aligned to long
term sustainable growth and an improved share price performance.
Financial Review
An equity placing was completed on 29th June 2006, to raise funds for
the initial cash consideration and costs of acquiring Venues
Unlimited, which was completed simultaneously, (the trading style of
Conferaccom Ltd), an event management and venue sourcing business.
�1.01m gross was raised at 0.13p per ordinary share.
Venues Unlimited has performed well during the year and successfully
achieved its earn out target for the period to 31 March 2007. There
is a second earn-out year and progress to date suggests that targets
will be met.
The Group also acquired Corporate Hospitality Services Limited in
December 2006, which brought both PR expertise and further events
management experience into the Group. The acquisition also added a
number of new high quality clients, including KPMG.
Evolve Sport Ltd was sold on 30th March 2007 and Navigator:The Sports
Business Limited has been closed down post the year end.
The addition of Venues Unlimited to the Group gave rise to
significant changes in the analysis of financial performance for the
period. Gross sales and gross profit percentage are of a different
scale to the previous operating companies of the Group. In addition
to this change, the discontinuation of the Group's sports marketing
businesses makes comparison from year to year difficult.
Total turnover was �19,575,531 including �580,829 from discontinued
businesses and �10,898,421 from the acquisitions (Venues Unlimited
was included for 9 months) compared to �9,905,033 in 2006.
Due to the losses experienced in the discontinued businesses, gross
profit increased only marginally to �5,459,208 from �5,372,188 in
2006.
The continuing businesses, RP&F Ltd, Onstate Ltd, Holly Benson
Communications Ltd and Quadrant Exhibitions Ltd suffered a reduction
of 9.8% in sales but improved the gross profit margin from 50.4% in
the year ended 31 March 2006 to 55.4% in the year ended 31 March
2007. Venues Unlimited improved sales in the period to 31 March 2007
by 16.0% and net profit before tax by 98.2%, compared to the same
period in 2006.
Overhead costs rose by 3.0% in the year on a like for like basis.
Nonetheless, the combined continuing businesses recorded a small
trading profit in the year and this was further augmented by the
trading profit from Venues Unlimited.
Goodwill is amortised on a straight line basis after the
consideration of the overall issue of impairment. In the current
year all goodwill relating to the sports businesses has been written
off and a charge of �251,160 has been made for the amortisation of
goodwill on continuing businesses and acquisitions.
Total exceptional items are �2,879,905, and the exceptional items in
the continuing businesses are related to the write down of the value
of the goodwill associated to sports marketing businesses and
provisions for redundancies.
Interest payable was �204,243, against �152,687 in 2006 and this
overall performance has resulted in a loss before tax of �4,118,171.
In a full year the staff reductions already effected will create a
saving in excess of �300,000 in the overhead costs of the continuing
businesses.
The acquisition of Venues Unlimited brought significant cash balances
into the Group and whilst the borrowings in the other Group companies
increased, these balances broadly match the Group's bank
indebtedness.
Operating Performance Review
RP&F Ltd traded in the year under two brands, Ladders and David,
delivering our direct marketing and creative services respectively.
RP&F has performed well and profitably overall, with Ladders in
particular showing real growth and sustained profitability. David
has had a more challenging year.
Quadrant Exhibitions Ltd produced record results delivering a
commendable performance and this excellent trading performance has
continued into the current year.
Onstate Ltd, our digital and internet marketing business had a
challenging year. The business was significantly affected by staff
changes and its small scale. As part of the Real Affinity Agency
division the current year is showing more promising signs. Digital
and internet marketing is a key area of growth, with clients
investing more and more in on-line activities and we are equally
clear about the need to be effectively structured and committed to
this sector.
After many years of consistent profit delivery, Holly Benson
Communications Ltd, our marketing communications subsidiary, had a
difficult year. Sales declined and as part of the re-structuring,
the business was split in two, its marketing services arm being
integrated into Real Affinity Agency, and its conference and events
division being merged into Real Affinity Events. This restructuring
should deliver more focus and return these activities to profit.
Both Evolve Sport Ltd and Navigator: The Sports Business Ltd made
continuing losses during the period and the Board decided to exit
from this sector of the Group's business. This decision has
necessitated substantial write-offs of goodwill, inter-company
balances and other items and the financial effects have been fully
reflected in these financial statements.
Restructuring Programme
During February we started the process of simplifying the structure
of our operating businesses into two business streams. This has now
been successfully completed.
The Board decided to integrate the direct marketing, digital and
internet marketing, creative, advertising and design services under a
new brand, 'Real Affinity Agency', and our events management, venue
identification and event services businesses under the new 'Real
Affinity Events' brand. It was also decided that the individual
brand names of the previous businesses would no longer be used post
year-end, and the individual limited companies would cease to trade.
This change has allowed the Board to reduce the number of management
teams from eight to two, with one management team appointed for each
business stream, reporting directly to the main Board. This provides
for a more streamlined, focused and accountable management structure,
as well as a much simpler brand positioning and sales approach to
clients and potential clients. Jean Gambold, who has a strong track
record in the management of direct marketing businesses, has been
appointed Head of Real Affinity Agency. Anita Lowe has been
appointed as Head of Real Affinity Events. Anita came into the Group
as Chief Executive and Founder of Venues Unlimited and has a wealth
of experience and connections in the sector.
The other key decision taken was to end the losses made in the sports
marketing businesses in the Group, which were undercutting the more
promising performance elsewhere. It was decided to dispose of Evolve
Sport Ltd and to close down Navigator: The Sports Business Ltd. The
Group is therefore no longer involved in sports management or
sponsorship.
Strategic Review
The strategy for the business is to grow through a combination of
organic growth and acquisition. However, the significant
restructuring means that the changes need to bed down and for them to
show real delivery before the Group commits further resource to
acquisitions. The simplification and integration of the operating
businesses, and the clearer positioning, means that we can pursue
incremental business from our existing client base and new business
from new clients, more effectively. It is this aspect of growth that
we will concentrate on in the immediate future. The business has
invested further during the year in better quality sales and client
management staff to support this approach and the Group sales effort
is now managed through a new Group Sales Director, Simon Webster.
Post Year-end Events
Since the year end, and following the restructuring, Gerard Corcoran
our Group Chief Executive resigned from the Group to pursue other
business interests and I shall assume the role of interim Executive
Chairman. Gerard was in office during a difficult time for the Group
and we wish him well in his new pursuits.
Paul Thompson, our Finance Director has also agreed to step down from
the Group role after the Annual General Meeting to assume the role as
Finance Director of the Real Affinity Agency division. Paul has
worked closely with Gerard during this transitional period and his
expertise will be especially valuable in that division.
The Board are actively seeking to appoint a new Group Finance
Director.
Geoff Hedges also retired from the Board on 30th April 2007. Geoff
had been Managing Director of Holly Benson Communications Ltd for
many years and stepped down from this post during the year. I would
like to express my thanks to Geoff for his support and contribution.
Those staff affected by the overall reduction in staff numbers mostly
left the business during the March to May period. A review of
business locations has resulted in plans to vacate two sites as
quickly as possible.
Finally, the Head Office and northern based staff relocated from
Bradford to Leeds in June. Leeds is a leading marketing and media
centre and a city with a vibrant business and corporate ethos and
provides us with the opportunity to accelerate our sales efforts and
also gives us with more visibility within the business community.
Current Trading and Prospects
First quarter trading to 30th June 2007 has been encouraging with
operating performance above budget in both divisions. Cash remains a
concern as the costs of restructuring have been borne largely from
our working capital resources and we continue to examine ways of
releasing extra working capital from our assets.
It is too early to predict the outcome for the year but we are
confident that the continuing businesses are in better shape, the
primary loss-making businesses have been discontinued and the
restructuring has been completed.
John S Ross
Executive Chairman
27 September 2007
Real Affinity plc
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31 March 2007
Notes 2007 2006
� �
TURNOVER:
- - continuing 8,096,281 8,980,736
- - discontinued 580,829 924,297
- - acquisitions 10,898,421 -
19,575,531 9,905,033
Cost of sales (14,116,323) (4,532,845)
GROSS PROFIT 5,459,208 5,372,188
Other operating expenses
(net) (6,548,131) (5,843,365)
Exceptional
administration costs (2,879,905) (750,082)
OPERATING (LOSS):
- - continuing (1,259,459) (1,051,277)
- - discontinued (2,964,217) (169,982)
- - acquisitions 254,848 -
(3,968,828) (1,221,259)
Interest receivable 54,910 2,741
Interest payable (204,243) (152,687)
LOSS ON ORDINARY ACTIVITIES
BEFORE TAXATION (4,118,161) (1,371,205)
Taxation 2 (50,707) 8,208
LOSS FOR THE FINANCIAL
YEAR (4,168,868) (1,362,997)
BASIC AND DILUTED LOSS
PER ORDINARY SHARE 2 (0.15)p (0.20)p
No separate Statement of Total Recognised Gains and Losses has been
presented as all such gains and losses have been dealt with in the
profit and loss account.
Real Affinity plc
CONSOLIDATED BALANCE SHEET
31 March 2007
Notes 2007 2006
� �
FIXED ASSETS
Intangible assets 4,529,871 3,374,522
Tangible assets 594,351 310,553
5,124,222 3,685,075
CURRENT ASSETS
Stocks 250,763 642,942
Debtors due within one year 4,376,817 2,010,461
Cash at bank and in hand 2,104,358 220,267
6,731,938 2,873,670
CREDITORS: Amounts falling
due within one
year (9,836,514) (3,402,109)
NET CURRENT LIABILITIES (3,104,576) (528,439)
TOTAL ASSETS LESS CURRENT
LIABILITIES 2,019,646 3,156,636
CREDITORS:
Amounts falling due after
more than one year (351,686) (430,965)
PROVISIONS FOR LIABILITIES
AND
CHARGES (32,788) -
NET ASSETS 1,635,172 2,725,671
CAPITAL AND RESERVES
Called up share capital 3,249,188 1,621,853
Shares to be issued 1,400,000 462,500
Share premium account 5,979,087 5,465,553
Merger reserve 426,992 426,992
Profit and loss account (9,420,095) (5,251,227)
EQUITY SHAREHOLDERS' FUNDS 1,635,172 2,725,671
The financial statements on pages 16 to 46 were approved by the board
of directors and authorised for issue on 27 September 2007 and are
signed on its behalf by:
J S Ross
Executive Chairman
N B Fitzpatrick
Director
Real Affinity plc
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 March 2007
2007 2006
Notes � �
Net cash outflow from
operating activities 3 (699,445) (646,376)
Returns on investments and
servicing of finance (149,333) (149,946)
Taxation (5,163) 8,208
Capital expenditure and
financial investment (93,298) (13,244)
Acquisitions and disposals 388,303 (22,985)
CASH (OUTFLOW) BEFORE
MANAGEMENT OF LIQUID
RESOURCES AND FINANCING (558,936) (824,343)
Financing 832,136 1,182,876
INCREASE IN CASH IN THE
PERIOD 273,200 358,533
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN DEBT
2007 2006
Notes � �
Increase in cash in the
year 3 273,200 358,533
Cash inflow/(outflow) from
increase in debt and
leasefinancing 73,049 (79,976)
Change in net debt
resulting from cash flows 346,249 278,557
New finance leases (15,528) (36,642)
Deferred consideration
loans (133,410) -
MOVEMENT IN NET DEBT IN THE
YEAR 197,311 241,915
NET (DEBT) AT 1 APRIL 2006 (999,825) (1,241,740)
NET (DEBT) AT 31 MARCH 2007 (802,514) (999,825)
Notes to the financial statements
1. Basis of Preparation
The financial statements have been prepared under the historical cost
convention and in accordance with applicable accounting standards.
As a result of the post balance sheet events, the directors consider
it appropriate to prepare the accounts on a going concern basis.
The consolidated financial statements incorporate those of Real
Affinity plc and all of its subsidiary undertakings for the year.
Subsidiaries acquired during the year are consolidated using the
acquisition method. Their results are incorporated from the date
that control passes. The difference between the cost of acquisition
of shares in subsidiaries and the fair value of the separable net
assets acquired is capitalised as goodwill. The value of these
assets is subject to an annual review.
In the year ended 31 March 2004 the acquisition of Navigator: The
Sports Business Limited was accounted for as a merger in accordance
with FRS 6.
2. Earnings per Ordinary Share
The calculation of basic loss per ordinary share is based on a loss
of (�4,168,868) (2006: (�1,362,997)) and is based on 2,717,790,934
(2006: 673,595,470) Ordinary shares, being the weighted average
number of ordinary shares in issue during the year. The calculation
of loss per ordinary share for discontinued businesses takes into
account the loss in the discontinued statutory companies only. Losses
arising from the write off of investments in the discontinued
companies which are held in continuing companies are included in the
calculation of the loss per ordinary share for continuing companies.
Share options and deferred consideration have not been taken into
account in calculating the number of shares for diluted loss per
share as this would reduce the reported loss per share.
2007 2006
Earnings per share:
Before exceptional items (0.05)p (0.09)p
Exceptional items less attributable tax (0.10)p (0.11)p
(0.15)p (0.20)p
3. Cash Flows
+-------------------------------------------------------------------+
| | 2007 | 2006 |
|---------------------------------+------------------+--------------|
| | � | � |
|---------------------------------+------------------+--------------|
| Reconciliation of losses to net | | |
| cash flow from | | |
| activities | | |
|---------------------------------+------------------+--------------|
| Operating activities | | |
|---------------------------------+------------------+--------------|
| Operating loss on ordinary | (3,968,828) | (1,221,259) |
| activities before | | |
| interest | | |
|---------------------------------+------------------+--------------|
| Impairment review | 1,553,368 | 49,598 |
|---------------------------------+------------------+--------------|
| Fixed asset write off | - | 17,314 |
|---------------------------------+------------------+--------------|
| Depreciation of tangible fixed | 184,143 | 116,348 |
| assets | | |
|---------------------------------+------------------+--------------|
| Amortisation of intangible | 253,494 | 20,423 |
| assets | | |
|---------------------------------+------------------+--------------|
| Loss on disposal of intangibles | 49,621 | - |
|---------------------------------+------------------+--------------|
| Loss on sale of fixed assets | 29,842 | 3,204 |
|---------------------------------+------------------+--------------|
| (Increase)/decrease in stocks | 392,179 | (84,207) |
|---------------------------------+------------------+--------------|
| (Increase)/decrease in debtors | (1,449,026) | 856,520 |
|---------------------------------+------------------+--------------|
| Increase/(decrease) in | 2,255,762 | (404,317) |
| creditors | | |
|---------------------------------+------------------+--------------|
| Net cash flow from operating | (699,445) | (646,376) |
| activities | | |
+-------------------------------------------------------------------+
- ---END OF MESSAGE---
Real Affinity (LSE:RAF)
Historical Stock Chart
From May 2024 to Jun 2024
Real Affinity (LSE:RAF)
Historical Stock Chart
From Jun 2023 to Jun 2024
