Media Corporation PLC
MEDIA CORPORATION PLC
('Media Corp' or 'the Group')
Preliminary audited results for the year ended 30 September 2007
Financial Highlights
-- Pre-tax profit increased 20% to £3.0m (2006: £2.5m)
-- Exceptional gain of £2.5m on the sale of www.casino.co.uk
-- Cash balances at the year end £6.3m (2006: £5.3m)
-- Consolidated net assets of £19.5m (2006: £17.1m)
-- Earnings per share of 0.97p (2006: 0.88p)
Other Highlights
-- Successful re-positioning of the Group to focus on two main divisions:
Internet Publishing and Advertising Sales network.
-- Strengthened senior management team with significant industry experience
during the second half of the financial year
Publishing Highlights
-- Acquisition of Result Online Limited, the owner of
www.creditcardexpert.co.uk
-- Acquisition of Flight Comparison Limited, the owner of
www.flightcomparison.com
-- Successful re-launch of market leading websites www.onthebox.com and
www.gambling.com
Advertising Network Highlights
-- Expansion of advertising network business Eyeconomy with new Manchester
office and significantly expanded sales team
-- Acquisition after the financial year end of Nash Digital, a profitable
digital advertising business
Justin Drummond, Chief Executive of Media Corp, said:
'I am pleased to announce Media Corp's preliminary results showing an
exceptional outcome after a challenging year.
'Profit before tax has increased to £3 million during the year and the Group now
has in excess of £6 million of cash to invest in growth and further
acquisitions. Our publishing and advertising businesses have performed very
strongly during 2007 and the Board believes there is significant value in excess
of the Group's market capitalisation in these Internet assets. The Group is well
placed to deliver significant shareholder value as we pursue our growth strategy
in the forthcoming year.'
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For further information please contact:
Media Corporation plc
Justin Drummond, Chief Executive
+44 (0)20 7618 9000
Buchanan Communications
Charles Ryland/Suzanne Brocks/Susanna Gale
+44 (0)20 7466 5000
Canaccord Adams Limited
Mark Ashurst, Managing Director
+44 (0)20 7050 6500
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Notes to editors:
Listed on the AIM market of the London Stock Exchange, Media Corp is a leading
internet media and advertising group focused on website publishing and online
advertising.
The Group has two principal divisions:
Website Publishing - Media Corp has a diverse publishing division specializing
in online media. Our impressive portfolio of websites includes a number of
market leading sites including www.gambling.com, www.creditcardexpert.co.uk,
www.onthebox.com and www.flightcomparison.co.uk.
Online Advertising - Formed in 1996, Eyeconomy specialises in mass reach
campaigns to over 30 Million unique consumers per month via its own proprietary
ad-serving and tracking technology for clients including AOL, Dell and
AmericanExpress. www.eyeconomy.co.uk
www.mediacorpplc.com
Chairman's Statement
I am pleased to report significant progress for Media Corporation during the
2007 financial year.
Following a challenging start to the financial year, the Board acted quickly to
diversify the business and to reduce the Group's reliance on advertising revenue
from the online gaming industry. This goal was achieved in a number of ways. In
the Internet Publishing division we acquired two businesses at the beginning of
the financial year, the first in the personal finance sector
(www.creditcardexpert.co.uk) and the second in the travel market
(www.flightcomparison.com). In August 2007, we successfully completed the sale
of www.casino.co.uk to Cryptologic for a cash consideration of up to £3.625
million.
During the second half of the financial year, the Board rapidly expanded the
Group's advertising network business with a new Manchester office and through
the recruitment of senior management and sales people. In addition, this
division has been enhanced by the acquisition of Nash Digital after the year
end. The acquisition brings further managerial and sales experience to the
Group.
As the Group has in excess of £6m cash, the Board is seeking to invest in the
Group's existing publishing assets as well as proactively sourcing strategic,
value-enhancing opportunities to develop the media businesses further.
The value of the Group's publishing assets was highlighted by the sale of
www.casino.co.uk. In the view of the Board, the publishing assets have a
significantly higher value than the Group's current market capitalisation. To
address this gap in value, the Group will be seeking shareholder approval at the
Annual General Meeting (AGM) to authorise a share buyback which will commence
following the AGM if approval is granted.
The Group is well positioned to expand its online media businesses, and the
Board is optimistic of generating further strong growth in the coming financial
year. Consequently, we continue to view the future with confidence.
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Jason Drummond
Chairman
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Business Review
Media Corporation has made excellent progress during 2007 whilst formulating and
consolidating its ongoing strategy. The Group has undergone a transformation
during the financial year and has reduced its reliance on advertising revenue
from the online gaming sector.
The Group has two principal divisions, Internet Publishing and Advertising
Network:
Internet Publishing
Media Corporation has a diverse publishing division specialising in premium
destinations and portals.
Our impressive portfolio of websites includes a number of market-leading sites
including www.gambling.com (a comprehensive gambling and sports portal providing
industry news, tips and strategies), www.creditcardexpert.co.uk (a credit card
comparison website), www.onthebox.com (the UK's definitive TV listings and
entertainment guide) and www.flightcomparison.co.uk (a leading flight booking
portal).
The Group has in depth expertise in developing and monetising online brands and
has significant value in its publishing division. This was clearly illustrated
in the value achieved by the sale of www.casino.co.uk in August 2007.
Highlights
-- Significant investment in senior management, technical infrastructure
and internet publishing assets completed during the second half of the
2007 financial year
-- Recruitment of a team of highly experienced internet publishing
specialists during the second half in Technical, Search Engine
Optimisation and Copywriters/Content writers
-- Successful re-launch of market leading web-sites: www.onthebox.com and
www.gambling.com during the second half of 2007
-- Ongoing premium domain name acquisitions and new websites under
development
Advertising Network
The Advertising Network business Eyeconomy was established in 1996 and is a
separate operating division of Media Corporation. Eyeconomy specialises in
online media planning as well as buying and managing online media campaigns for
clients including AOL, Dell and American Express.
The business currently specialises in:
-- producing dynamic and engaging online advertising solutions including
exit traffic (Subsites), rich-media floating toolbar (SubLines) and has
recently launched a new online advertising division
-- offering a total reach of 30 million unique users every month, from over
750 quality host sites in all major channels including Finance, Travel,
Motors, Sport, Male/Female, Student/Youth, Property, Entertainment,
Film, Music and TV, Mobile/Gadget and Recruitment
-- producing in-house creative media
-- a wealth of new products on traditional display advertising following
acquisition of Nash Digital
-- transition from TV budgets to online, driven by penetration of internet
access to a majority of the UK population as more time is spent online
than watching TV in many homes
Eyeconomy:
-- provides very large scale media spaces with reach comparable to TV but
traceable and online, and currently reaches over 30 million people in
the UK each month
-- is working with American Express, Sky, AOL, World Wildlife Fund and
Dating Direct, and there are major new client pitches underway
-- is working on a high proportion of long term (over three month)
campaigns
-- is expanding - the sales team has more than doubled in size during the
second half of the financial year
-- is securing rights to broad traffic sites, representing over 750
websites
-- is working on geographical expansion
-- is seeing return value on significant presence at trade shows and in
trade PR
Financial Overview
The audited results for the year ended 30 September 2007 show significant profit
growth despite turnover having decreased by 30% to £8.3m (2006: £11.9m). Profit
before interest and tax increased by 22% to £2.8m (2006: £2.3m). These results
highlight the continuing shift of the Group towards high margin Advertising
Network and Internet Publishing businesses and away from its gaming operations.
At the end of the period, consolidated net assets were £19.4 million (2006:
£17.1million) and the net cash balance was £6.3 million (2006: £5.3 million).
Segmental Analyses
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Turnover Turnover Profit Profit
before tax (loss)
and before tax
interest and interest
2007 2006 2007 2006
£000 £000 £000 £000
Advertising
Network 1,752 1,529 89 15
Internet
Publishing 6,557 10,372 2,714 2,285
8,309 11,901 2,803 2,300
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Key Policies
Dividend policy
No dividend has been declared for the year. It is the opinion of the Board that
shareholders will be best served by utilising the Group's cash to fund growth,
both organic and by acquisition.
Goodwill and other intangibles
Goodwill and other intangibles on all acquisitions since incorporation is
capitalised and, under UK GAAP, is subject to annual reviews to test impairment.
Treasury, foreign exchange and financial instruments
The aim of Treasury is to ensure a robust and prudent financial profile while
driving value throughout the Group to attain the businesses' full potential.
The Group partially hedges against foreign currency exposure by matching, where
possible, costs in the same currency as its foreign denominated revenues. In
addition, the Board considers the implications of foreign currency exchange
movements and determines the costs against the benefits of buying financial
hedging instruments. See notes 1 and 18 to the financial statements.
Furthermore, the Board is proactively seeking acquisition targets valued in the
currency of its foreign income.
Taxation
The fundamental tenets of Media Corporation's approach to taxation are to
enhance the Group's competitive position while engaging with tax authorities on
a basis of full disclosure, full co-operation and full legal compliance. The
Board considers and approves the management of the Group's tax affairs in the
context of the Group's commercial objectives.
The Board seeks to bring about timely agreement of tax affairs and to remove
uncertainty on business transactions.
The Group's taxation strategy is to mitigate the burden of taxation in a
responsible manner for competitive advantage, and so enhance long-term
shareholder value.
Financial controls
The Board understands the need for robust financial controls and a high quality,
but effective, internal control environment.
Corporate Responsibility
General
The Group Chief Executive has direct responsibility at Board level for leading
the Group's initiatives on all corporate responsibility related matters, with
the relevant senior managers reporting to him.
Environmental
Notwithstanding its low overall environmental impact, Media Corporation
recognises the need to manage the impact of its activities on the environment in
such areas as internal processes, recycling, energy use and encouraging its
suppliers to act responsibly regarding environmental impacts and risk.
Employees and equal rights
Media Corporation is committed to achieving equality of opportunity for all its
employees and recognises the legal requirements under relevant Acts and Codes of
Practice. The Group aims to ensure that all actual or potential employees are
treated equally regardless of age, disability, family responsibility, marital
status, race, colour, ethnicity, nationality, religion or belief, gender, sexual
orientation, social class, trade union activity and unrelated criminal
conviction.
The Group's employment policies are designed to attract, retain, train and
motivate the very best people, recognising that this can be achieved only
through offering equal opportunities.
To ensure employees can share in our success, the Group offers competitive pay
packages and, wherever possible, links rewards to individual and team
performance. The Group is committed to providing an environment that encourages
the continuous development of all its employees
Risk management
In most of the areas commonly associated with corporate responsibility, other
than the Group's role as an employer and in its non-core business as an online
and mobile gaming operator, the Board considers that the social impact of the
Group's activities is relatively low. Nonetheless, as part of the Group's
general risk management review processes, the significant risks to the Group's
short and long term value arising from social, environmental and ethical
matters, and the opportunities to enhance value from an appropriate response,
are incorporated as a specific consideration. This review has identified no
specific risks in this area other than a low probability of incidence or low
potential financial impact on the Group, and with respect to gaming, Media
Corporation Plc is committed to encouraging responsible gaming.
Current trading and prospects incorporating principal risks and uncertainties
The Board is aiming for continued growth during 2008 as we seek to maximise the
potential of the Group's internet publishing assets and media businesses. The
Group clearly owns very valuable internet assets, as was demonstrated by the
recent sale of the Casino.co.uk business for up to £3.625 million. This business
only accounted for a small proportion of the Group's existing Internet asset
portfolio.
With an existing significant web site portfolio still owned by the Group, the
Board will continue to develop rapidly and enhance the value of its core
Internet assets, and maximise their value for the benefit of shareholders.
Board changes
Nilesh Jagatia was appointed as Group Finance Director during the year. Paul
Tuson stepped down from the Board, and the Directors would like to thank him for
his significant contribution to the Group.
In addition, Michael Hawkes was appointed as a Non-executive Director of the
Group on 20th November 2006.
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Justin Drummond Nilesh Jagatia
Chief Executive Group Finance Director
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Group Profit and Loss Account
For the year ended 30 September 2007
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Notes Total Total
2007 2006
£000 £000
Turnover 2 8,309 11,901
Cost of sales (5,799) (7,140)
Gross profit 2,510 4,761
Selling and distribution costs (281) (467)
Administrative expenses: (1,941) (1,994)
Group operating profit before exceptional
items 288 2,300
Exceptional one-off gain on asset disposal 2,513 -
Group operating profit after exceptional
items 2,801 2,300
Interest receivable and similar income 213 154
Profit on ordinary activities before taxation 3,014 2,454
Taxation 3 (184) -
Profit on ordinary activities for the year 2,830 2,454
Minority interest (3) (3)
Profit for the year attributable to members
of the parent company 2,827 2,451
Earnings per share - basic 4 0.97p 0.88p
Earnings per share - diluted 4 0.91p 0.87p
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Statement of total recognised gains and losses
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2007 2006
£000 £000
Profit for financial year 2,827 2,451
Prior year adjustment - (154)
Currency translation differences (471) (311)
Total recognised gains 2,356 1,986
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Balance sheets
As at 30 September 2007
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Consolidated Consolidated Company Company
Notes 2007 2006 2007 2006
£000 £000 £000 £000
Fixed assets
Intangible assets 12,467 11,422 0 235
Tangible assets 806 381 409 59
Investments - - 15,268 12,769
13,273 11,803 15,677 13,063
Current assets
Debtors 955 808 1,056 2,355
Cash at bank and in hand 6,253 5,253 4,202 867
7,208 6,061 5,257 3,222
Creditors: amounts
falling due within
one year (997) (752) (2,474) (355)
Net current assets 6,211 5,309 2,783 2,867
Net assets 19,484 17,112 18,460 15,930
Capital and reserves
Called up share capital 5 4,764 4,764 4,764 4,764
Share premium account 5 12,917 12,917 12,917 12,917
Other reserve 6 1,422 1,422 1,422 1,422
Profit and loss account 6 377 (1,992) (643) (3,173)
Shareholders' funds 19,480 17,111 18,460 15,930
Minority interests 4 1 - -
19,484 17,112 18,462 15,930
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The financial statements were approved by the board of directors on 26 November
2007 and signed on his behalf by:
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J Drummond (Chief Executive) N Jagatia (Finance Director)
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Consolidated statement of cash flows
For the year ended 30 September 2007
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Notes 2007 2006
£000 £000
Net cash (outflow)/inflow from operating
activities 7 (227) 2,214
Returns on investments and servicing
of finance
Interest received 213 154
Taxation
Corporation tax - -
Capital expenditure
Payments to acquire tangible fixed assets (647) (246)
Proceeds from disposal of intangible fixed
assets 2,748 -
2,101 (246)
Acquisitions and disposals
Acquisition of subsidiary undertakings (net
of cash acquired) (1,087) (6)
Net cash inflow before management of liquid
resources and financing (1000) 2,116
Management of liquid resources
Bank deposits 4,000 -
Financing
Issue of ordinary share capital - 328
(Decrease)/increase in cash (3,000) 2,444
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Consolidated statement of cash flows
For the year ended 30 September 2007
Reconciliation of net cash flow to movement in net funds
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2007 2006
£000 £000
(Decrease)/increase in cash (3,000) 2,444
Movement in liquid resources 4,000 -
Movement in net funds 1,000 2,444
Net funds at 1 October 2006 5,253 2,809
Net funds at 30 September 2007 6,253 5,253
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Notes to the accounts
As at 30 September 2007
1. Accounting policies
Fundamental accounting concept - going concern
The accounts have been prepared on the assumption that the group is a going
concern. The accounts of the group for the year ended 30 September 2007 show a
profit for the year of £2,830 million. At the date of these financial statements
the Group's ability to continue as a going concern reflects the net funds
available to the Group at the year end and the forecasts for the Group for the
current financial year. On this basis, in the opinion of the Directors, the
accounts have been properly prepared on the assumption that the group is a going
concern.
Basis of preparation
The financial information has been prepared under the historical cost convention
and in accordance with applicable United Kingdom accounting standards.
Basis of consolidation
The group accounts consolidate the results of Media Corporation plc and its
subsidiary undertakings from their respective dates of acquisition.
No profit and loss account is presented for Media Corporation plc as permitted
by section 230 of the Companies Act 1985.
Goodwill
The directors have undertaken an impairment review of goodwill at 30 September
2007 in accordance with the provisions of Financial Reporting Standard ('FRS')
10, which shows that the capitalised value of the cash flows derived from future
income streams is greater than the carrying value shown in the Group's
consolidated balance sheet at 30 September 2007. Impairment reviews will
continue to be carried out at the end of each reporting period.
Other intangible fixed assets
Amortisation is provided on the following intangible fixed assets at rates
calculated to write off the cost or valuation, less estimated residual value
based on prices prevailing at the date of acquisition or revaluation, of each
asset evenly over its expected useful life as follows:
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Trademarks 10% per annum
Domain names 0% per annum
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The carrying values of intangible fixed assets are reviewed for impairment in
years if events or changes in circumstances indicate the carrying value may not
be recoverable.
Depreciation on tangible fixed assets
Depreciation is provided on the following tangible fixed assets at rates
calculated to write off the cost or valuation, less estimated residual value
based on prices prevailing at the date of acquisition or revaluation, of each
asset evenly over its expected useful life as follows:
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Fixtures and fittings 25% reducing balance
Office equipment 25% reducing balance
Computer equipment 33.3% per annum
Websites 33.3% per annum
Software licence 20% per annum
Software development 33.3% per annum
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The carrying values of tangible fixed assets are reviewed for impairment in
periods if events or changes in circumstances indicate the carrying value may
not be recoverable.
Fixed asset investments
Fixed asset investments are carried at cost.
The carrying values of fixed asset investments are reviewed for impairment in
periods if events or changes in circumstances indicate the carrying value may
not be recoverable.
Deferred taxation
Deferred tax is provided in full in respect of taxation deferred by timing
differences between the treatment of certain items for taxation and accounting
purposes. Deferred tax assets are only recognised when they are regarded as
recoverable. The Group has not adopted a policy of discounting deferred tax
assets and liabilities.
Foreign currencies
The trading results of overseas subsidiary undertakings are translated into
sterling using average rates of exchange ruling during the relevant financial
period.
The balance sheets of overseas subsidiary undertakings are translated into
sterling at the rates of exchange ruling at 30 September. Exchange differences
arising between the translation into sterling of the net assets of these
subsidiary undertakings at rates ruling at the beginning and end of the year are
dealt with through reserves as are exchange differences on foreign currency
borrowings raised to finance overseas assets.
Exchange differences on financial instruments entered into for foreign currency
net assets hedging purposes are dealt with through reserves.
The cost of the Group's investments in overseas subsidiary undertakings is
translated into sterling at the rate ruling at the date of investment.
All other foreign currency assets and liabilities of the Group and its United
Kingdom subsidiary undertakings are translated into sterling at the rate ruling
at 30 September except if forward cover has been arranged, in which case this
forward rate is used.
Foreign currency transactions during the year are translated into sterling at
the rate of exchange ruling on the date of the transaction except when forward
exchange contracts are in place, when the forward contract rate is used. Any
exchange differences are dealt with through the profit and loss account.
Leasing
Rentals payable under operating leases are charged in the profit and loss
account on a straight-line basis over the lease term.
Capital instruments
Shares are included in shareholders' funds. Other instruments are classified as
liabilities if they contain an obligation to transfer economic benefit and if
not they are included in shareholders' funds.
2. Turnover
The Group accounts for revenue as goods and services are delivered. Cash
received for services yet to be delivered are classified as deferred income and
credited to the profit and loss account in the year in which delivery takes
place.
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2007 2006
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Turnover Operating Net Assets Turnover Operating Net Assets
Results Results
----------------------------------------------------------------------------------------------
£000 £000 £000 £000 £000 £000
----------------------------------------------------------------------------------------------
Continuing operations
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Advertising Network 1,752 127 673 1,529 32 181
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Internet Publishing 2,193 166 18,798 4,188 2,228 16,908
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3,945 293 19,471 5,717 2,288 17,089
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Discontinued operations 4,364 (5) 13 6,184 12
----------------------------------------------------------------------------------------------
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8,309 19,484 11,901 17,112
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Operating profit before
exceptional items 288 2,300
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Exceptional gain on
sale of intangible
asset 2,513
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Interest Receivable 213 154
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Profit before taxation 3,014 2,454
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3. Taxation
The taxation charge for the year comprises:
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Group Group
2007 2006
£000 £000
Corporation tax 14 -
Deferred tax charge 170 -
Total tax charge 184 -
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Factors affecting the tax charge for the year:
The tax assessed for the year is lower (2006: lower) than the standard rate of
corporation tax in the UK of 30% (2006:30%). The differences are explained
below:
Reconciliation of tax charge (credit)
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Group Group
2007 2006
£000 £000
Profit on ordinary activities before taxation 3,009 2,454
Tax charge on profit on ordinary activities before
taxation at standard rate of 28% (2006:30%) 844 736
Factors affecting tax charge:
Expenses not deductible for tax purposes 14 6
Depreciation of tangible assets 64 18
Exercise of warrants - (406)
Capital allowances (70) (15)
Tax losses carried forward - 354
Utilisation of tax losses (129) (51)
Rollover relief (632)
Profits not taxable in year (77) (642)
Current tax charge 14 -
Factors that may affect future tax charges
Group Group
2007 2006
£000 £000
Deferred tax assets provided for:
Losses carried forward 78 217
Depreciation over capital allowances (25) 10
Share based payments 4 -
57 227
Deferred tax assets not provided for:
Losses carried forward 660 660
Depreciation over capital allowances 3 4
663 664
Movement in deferred tax balances:
Brought forward 227 227
Charge to the profit and loss account (170) -
Carried forward 57 227
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4. Earnings per share
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2007 2006
£000 £000
Profit attributable to shareholders 2,827 2,451
Weighted average number of shares in issue 291,027,298 280,054,421
Dilution effects of share warrants 20,400,000 1,900,000
Diluted weighted average number of shares in issue 311,427,298 281,954,541
Basic earnings per share 0.97 0.88
Diluted earnings per share 0.91 0.87
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Basic earnings per share are calculated on the results attributable to ordinary
shares divided by the weighted average number of shares in issue during the
year.
Diluted earnings per share calculations adjust the weighted average number of
ordinary shares in issue to include all dilutive potential ordinary shares.
These consist of warrants currently granted at an exercise price lower than the
average market price of Media Corporation's shares during the year.
5 Consolidated Reserves
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Group Share Other Profit and
premium reserve loss
account account
£000 £000 £000
At 1 October 2006 12,917 1,422 (1,992)
Retained profit for the period - - 2,827
Share based payment - - 13
Currency fluctuations - - (471)
At 30 September 2007 12,917 1,422 377
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6 Reconciliation of movements in shareholders' funds
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Group Group
2007 2006
£000 £000
Profit for the financial year 2,830 2,454
Other recognised gains and losses (471) (311)
2,359 2,143
Proceeds from issue of shares - 328
Share based payment 13 -
Net Addition to shareholders' funds 2,372 2,471
Opening shareholders' funds 17,112 14,641
At 30 September 2007 19,484 17,112
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7. Notes to the statement of cash flows
Reconciliation of operating profit to net cash (outflow) inflow from operating
activities
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2007 2006
£000 £000
Operating profit 2,801 2,300
Depreciation 228 118
Share based payment 13 -
Profit on disposal of intangible assets (2,513) -
(Increase)/ decrease in debtors (198) 193
(Decrease) in creditors (288) (227)
Net exchange currency differences (270) (170)
(227) 2,214
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Analysis of changes in net funds
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1 October Cash flow 30 September
2006 2007
£000 £000
£000
Net cash - Cash at bank and in hand 5,253 (3,000) 2,253
Liquid resources - bank deposits - 4,000 4,000
Net funds 5,253 1,000 6,253
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Ends