Final Results

RNS Number : 1715G
Progressive Digital Media Group PLC
02 March 2015
 



                                                                                                                                                                       

2 March 2015

For release

Progressive Digital Media Group Plc

Final Results For The Year Ended 31 December 2014

 

 

Highlights

Recent acquisitions performing well, whilst adverse exchange rate movements impacted organic growth.

 

Key achievements in 2014

§  Revenue and earnings growth

§  Acquisition of Pyramid Research completed 1 January 2014

§  Acquisition of Current Analysis completed 30 July 2014

§  Cash and bank facilities to fund future growth

 

Financial performances

§  Group revenue increased by 16.2% to £63.2m (2013: £54.3m)

§  Business Intelligence revenue increased by 17.6% to £38.5m (2013: £32.7m)

§  Adjusted EBITDA(1) increased by 1.8% to £12.0m (2013: £11.8m)

§  Adjusted EBITDA margin(1) decreased to 19.0% (2013: 21.7%)

§  Reported EBITDA(2) reduced by 62.0% to £3.8m (2013: £9.9m)

§  Reported profit before tax from continuing operations of £0.3m (2013: £7.3m) inclusive of £2.6m restructuring costs and £4.4m share based payments charge

§  Group loss for the year of £2.2m, which includes tax and loss from discontinued operations

§  Deferred Revenue increased by 50.3% to £21.5m (2013: £14.3m)

§  Net (debt)/ cash(3) of (£8.7m) (2013: net cash of £8.3m)

 

Our business

·      Premium business information services

·      A strong and scalable asset base

·      Significant contracted and visible revenue streams

·      Globally exploitable business model

 

Simon Pyper, Chief Executive of Progressive Digital Media Group Plc, commented:

"We have during 2014 made good progress towards achieving our objective of building an authoritative presence in the Global Consumer and ICT business information markets. Additionally, we have over the past year continued to invest in our content sets and delivery platforms and as we start the new financial year we are better placed than ever to serve our growing blue chip customer base on a local, regional and global basis."

 

Note 1: Adjusted EBITDA: Earnings before interest, tax, depreciation and amortisation, exchange rate losses, impairment, share based payments, adjusted for costs associated with derivatives, acquisitions, integration and restructure of the Group. Adjusted EBITDA margin is defined as; Adjusted EBITDA as a percentage of revenue.

 

Note 2: EBITDA: Earnings before interest, tax, depreciation, amortisation and impairment. Includes a non-cash charge of £4.4 million for share based payments (2013: £1.1 million).

 

Note 3: Net (debt)/ cash: Cash and cash equivalents less short and long-term borrowings.

 

  

 

Enquiries:

 

Progressive Digital Media Group Plc

0207 936 6400

Mike Danson, Chairman


Simon Pyper, Chief Executive




N+1 Singer

0207 496 3000

James Maxwell


Alex Wright




Hudson Sandler

0207 796 4133

Michael Sandler


 



CHAIRMAN'S STATEMENT 

 

I am pleased to report results that show good revenue and earnings growth, with revenues tempered by adverse exchange rates. We have, during 2014, made progress towards achieving our key strategic objective of becoming a leading provider of premium business information to the Global Consumer and ICT markets. In 2014 we completed three acquisitions; one small "bolt-on" for our Consumer proposition and two more substantial acquisitions which address the ICT market. Additionally, we continued to re-engineer the business and its processes, investing heavily in content sets and delivery platforms which better serve the needs of our growing blue chip customer base.

 

Our business model

We produce premium business information for the Global Consumer and ICT markets. We supply our customers with research, analysis and tactical intelligence across a multiple of platforms, which enables our customers to gain a competitive advantage in their markets. We have a simple business model, which is designed to generate revenues off a relatively fixed operating cost base allowing for operational gearing to drive profit growth and margin. Its key features are:

 

1.     Strong asset base with scalable business model - premium intelligence and customer datasets

2.     Global coverage of consumer and technology information markets

3.     Focus on subscription and contracted revenues - high quality recurring income, with high barriers to entry and pricing power

 

Our employees

We work in a dynamic global market, with customer needs ever changing and where success both today and in the future is entirely dependent upon the professionalism, commitment and hard work of our employees. On behalf of the Board I would like to thank our employees for their contribution and to welcome those new employees who have joined the Group from our recent acquisitions.

 

Current trading and outlook

We expect 2015 to be another year of progress, as we seek to leverage our recent acquisitions and continue to invest in our content and delivery platforms.

 

 

 

 

 

Mike Danson

Chairman 

2 March 2015

 

 

 

 

CHIEF EXECUTIVE'S REVIEW

 

We have during 2014 made good progress towards achieving our objective of building an authoritative presence in the Global Consumer and ICT business information markets. Additionally, we have over the past year continued to invest in our content sets and delivery platforms and as we start the new financial year we are better placed than ever to serve our growing blue chip customer base on a local, regional and global basis.

 

Operational review

 

Group performance

Group revenues grew by 16.2% to £63.2m.

 

Business Intelligence revenues grew by 17.6% and now account for 61.0% of total revenues (2013: 60.3%). Over the medium term our goal is to increase Business Intelligence revenues to 75.0% of total Group revenues. Eliminating the benefit of our recent acquisitions underlying revenues grew by 4.8% which reflects the higher mix of non-sterling denominated revenues.

 

Events and Marketing revenues grew by 14.1% to £24.6m and now account for 39.0% of total revenues (2013: 39.7%). The majority of revenues in this area are denominated in sterling and thus not subject to exchange rate movements.

 

Adjusted EBITDA grew by just under 2% to £12.0m (2013: £11.8m) whilst Adjusted EBITDA margin decreased by 2.7% to 19.0% (2013: 21.7%). Margins were adversely impacted by both the part-year effect of our recent acquisitions and the effect of exchange rates and in particular the strength of sterling against both the US dollar and Euro from which the majority of Group revenues derive.

 

Profit before tax from continuing operations decreased by £7.0m to £0.3m (2013: £7.3m), which is after a £4.4m (2013: £1.1m) non-cash charge for share based payments reflecting the award of additional share options under the long term inventive plan for senior management and the significant increase in share price since the scheme was first introduced in January 2011. Profit before tax also includes £2.6m of largely acquisition related restructuring costs.

 

Loss for the year of £2.2m (2013: profit of £4.5m) is net of tax and losses associated with discontinued operations.

 

Acquisitions

We completed three acquisitions during 2014, one "bolt-on" acquisition addressing the Consumer market and two complementary acquisitions which address the ICT market.

 

Pyramid Research and Current Analysis are two well-regarded and complementary businesses which provide practical market intelligence to leading professionals in the ICT sector. Pyramid Research focuses on market and service opportunities, whilst Current Analysis is focused on innovation and on how companies in the ICT space can better compete. Both companies satisfy all of our acquisition criteria, providing subscription based business information services to blue chip companies operating in a global sector.

 

Common Systems

The Group has a number of common systems and processes from sales management, to content production and client delivery. We seek to constantly improve these systems and processes in order to drive improved efficiencies and operating margins. Moreover, these common systems and processes ease expansion into new geographies and reduce integration risk. 

 

Looking ahead

We are a focused business with one clear goal: to become a leading provider of premium business information to the Global Consumer and ICT markets. Last year was a step in the right direction; this year should prove to be another as we build on the solid foundation we have established.

 

The key objectives for the forthcoming year are:

 

·      Focus on high-quality, subscription based Business Information services and products

 

·      Expand our sales footprint in high-growth Consumer and ICT markets

 

·      Integration, investment and growth from our recent acquisitions

 

We are an ambitious and growing company; that we have achieved so much in such a relatively short period of time is testament to the passion, commitment and contribution of our employees.

 

 

 

 

 

 

Simon Pyper

Chief Executive

2 March 2015

 

 

 

 

 

FINANCIAL REVIEW

 

Financially the Group has performed well with improved revenues and earnings at an Adjusted level.

 

Financial highlights

 

·      Increased the Group's revenue by 16.2% year on year

 

·      Increased profitability at the Adjusted EBITDA level by 1.8%

 

·     

 

The increased share based payments charge of £4.4m (2013: £1.1m) is largely related to additional options granted to existing scheme members, new hires and employees joining the Group via acquisitions.

 


2014

2013

 

Movement

Continuing operations

£000s

£000s






Revenue

63,161

54,342

16.2%





Profit before tax

294

7,283


Depreciation

547

562


Amortisation

2,425

1,725


Finance costs

484

311


EBITDA1

3,750

9,881

(62.0%)

Restructuring costs

2,237

392


Property related provisions

(221)

(222)


Revaluation of short and long-term derivatives

15

(24)


Share based payments charge

4,371

1,127


Exceptional property costs

13

93


Unrealised foreign exchange loss

787

-


M&A costs

431

45


Deal costs

146

154


Exceptional legal costs

-

141


Exchange rate losses

498

231


Adjusted EBITDA2

12,027

11,818

1.8%

Adjusted EBITDA margin2

19.0%

21.7%


 

Note 1: EBITDA: Earnings before interest, tax, depreciation, amortisation and impairment. Includes a non-cash charge of £4.4 million for share based payments (2013: £1.1 million).

 

Note 2: Adjusted EBITDA: Earnings before interest, tax, depreciation and amortisation, exchange rate losses, impairment, share based payments, adjusted for costs associated with derivatives, acquisitions, integration and restructure of the Group. Adjusted EBITDA margin is defined as: Adjusted EBITDA as a percentage of revenue.

 

Earnings per share

Basic loss per share from continuing operations was (0.78) pence per share (2013: earnings of 6.90 pence per share).

 

 

 

 

 

 

FINANCIAL REVIEW

 

Cash flow

The Group generated £12.0 million of Adjusted EBITDA in 2014, which excludes £0.3 million paid in relation to onerous leases. Working capital movements reduced the cash generated from continuing operations to an inflow of £3.1 million.

 

Trade and other receivables were significantly higher than the previous year at £33.0 million (2013: £24.9 million), reflecting the balance sheet impact of the acquisitions made during the year combined with strong sales towards the end of 2014 in line with expectations. Banking facilities were renegotiated with The Royal Bank of Scotland in the year, resulting in a cash inflow of £10.0 million which was used to partially fund the acquisition of Current Analysis Inc.

 

Capital expenditure (excluding balances in relation to acquisitions) was £2.3 million in 2014 (£0.4 million in 2013). This included £1.1 million on software (£0.1 million in 2013).

 

Currency rate risk

The Group's primary objective in managing foreign currency risk is to protect against the risk that the eventual Sterling net cash flows will be affected by changes in foreign currency exchange rates. To do this, the Group enters into foreign exchange contracts that limit the risk from movements in US dollar, Euro and Indian Rupee exchange rates with Sterling. Whilst commercially this hedges the Group's currency exposures, it does not meet the requirements for hedge accounting and accordingly any movements in the fair value of the foreign exchange contracts are recognised in the income statement.

 

Liquidity risk and going concern

The Group's approach to managing liquidity risk is to ensure, as far as possible, that it has sufficient liquidity to meet its liabilities as they fall due with surplus facilities to cope with any unexpected variances in timing of cash flows. The Group meets its day-to-day working capital requirements through free cash flow. The Group has an overdraft facility of £2 million, which was not utilised as at 31 December 2014 and management do not forecast utilisation of this facility in the next 18 months.

 

Based on cash flow projections, the Group considers the existing financing facilities to be adequate to meet short-term commitments. The Directors have a reasonable expectation that there are no material uncertainties that cast significant doubt about the Group's ability to continue as a going concern. Accordingly, the Group has prepared the annual report and financial statements on a going concern basis.

 

 

 

 

 

 

Simon Pyper

Chief Executive

2 March 2015

 

 

 

 

Consolidated Income Statement


Notes

Year ended 31 December 2014

Year ended 31 December 2013



£000s

£000s

Continuing operations




Revenue

3

63,161

54,342

Cost of sales


(39,294)

(31,657)

Gross profit


23,867

22,685

Distribution costs


(792)

(878)

Administrative costs


(12,991)

(11,744)

Other expenses

4

(9,306)

(2,469)

Operating profit


778

7,594





Analysed as:




Adjusted EBITDA1


12,027

11,818

Items associated with acquisitions and restructure of the Group

4

(2,606)

(603)

Exchange rate losses


(498)

(231)

Other adjusting items

4

(5,173)

(1,103)

EBITDA2


3,750

9,881

Amortisation


(2,425)

(1,725)

Depreciation


(547)

(562)

Operating profit


778

7,594





Finance costs


(484)

(311)

Profit before tax from continuing operations


294

7,283

Income tax expense


(887)

(2,146)

(Loss)/ profit for the year from continuing operations


(593)

5,137

Loss for the year from discontinued operations

9

(1,628)

(633)

(Loss)/ profit for the year


(2,221)

4,504





Attributable to:




Equity holders of the parent


(2,106)

4,487

Non-controlling interest


(115)

17





(Loss)/ earnings per share attributable to equity holders from continuing operations:

5



Basic (loss)/ earnings per share (pence)


(0.78)

6.90

Diluted (loss)/ earnings per share (pence)


(0.70)

6.48

Loss per share attributable to equity holders from discontinued operations:




Basic loss per share (pence)


(1.99)

(0.87)

Diluted loss per share (pence)


(1.79)

(0.82)

Total basic (loss)/ earnings per share (pence)


(2.77)

6.02

Total diluted (loss)/ earnings per share (pence)


(2.50)

5.66

 

1 We define Adjusted EBITDA as EBITDA adjusted for costs associated with acquisition, integration, restructure of the Group, share based payments, impairment, exchange rate losses and impact of foreign exchange contracts. See note 4 of the preliminary financial statements for details. We present Adjusted EBITDA as additional information because we understand that it is a measure used by certain investors and because it is used as the measure of segment profit or loss. However, other companies may present Adjusted EBITDA differently. EBITDA and Adjusted EBITDA are not measures of financial performance under IFRS and should not be considered as an alternative to operating profit or as a measure of liquidity or an alternative to net income as indicators of our operating performance or any other measure of performance derived in accordance with IFRS.

2 EBITDA is defined as earnings before interest, tax, depreciation, amortisation and impairment.

 

Consolidated Statement of Comprehensive Income

 





Year ended 31 December 2014

Year ended 31 December 2013


£000s

£000s

(Loss)/ profit for the year

(2,221)

4,504

Other comprehensive income



Items that will be classified subsequently to profit or loss:



Translation of foreign entities

(166)

15

Other comprehensive (loss)/ income, net of tax

(166)

15

Total comprehensive (loss)/ income for the year

(2,387)

4,519

Attributable to:



Equity holders of the parent

(2,272)

4,502

Non-controlling interest

(115)

17

 

 

 



Consolidated Statement of Financial Position






 

Notes

 

31 December 2014

 

31 December 2013

 



£000s

£000s

 

Non-current assets




 

Property, plant and equipment


1,510

831

 

Intangible assets


42,403

24,807

 

Deferred tax assets


457

1,490

 



44,370

27,128

 

Current assets




 

Inventories


150

155

 

Trade and other receivables


33,049

24,877

 

Short-term derivative assets


106

6

 

Cash and cash equivalents


8,261

14,178

 



41,566

39,216

 

Total assets


85,936

66,344

 

Current liabilities




 

Trade and other payables


(32,567)

(26,763)

 

Short-term borrowings

7

(1,283)

-

 

Current tax payable


(1,240)

(917)

 

Short-term derivative liabilities


(89)

-

 

Short-term provisions


(368)

(644)

 



(35,547)

(28,324)

 

Non-current liabilities




 

Long-term provisions


(84)

(58)

 

Long-term derivative liabilities


(26)

-

 

Long-term borrowings

7

(15,651)

(5,851)

 



(15,761)

(5,909)

 

Total liabilities


(51,308)

(34,233)

 

Net assets


34,628

32,111

 

Equity




 

Share capital

8

154

153

 

Share premium account


200

-

 

Other reserve


(37,128)

(37,128)

 

Special reserve


48,422

48,422

 

Foreign currency translation reserve


(126)

40

 

Retained profit


23,106

20,508

 

Equity attributable to equity holders of the parent


34,628

31,995

 

Non-controlling interest


-

116

 

Total equity


34,628

32,111

 

 



Consolidated Statement of Changes in Equity

 


Share capital

Share premium account

Other reserve

 

Special reserve

Foreign currency translation reserve

Retained profit/ (loss)

Equity attributable to equity holders of the parent

Non-controlling interest

Total equity


£000s

£000s

£000s

£000s

£000s

£000s

£000s

£000s

£000s

Balance at 1 January 2013

153

71,368

(37,128)

-

25

(7,942)

26,476

107

26,583

Profit for the year

-

-

-

-

-

4,487

4,487

17

4,504

Other comprehensive income:










Translation of foreign entities

-

-

-

-

15

-

15

-

15

Total comprehensive income for the year

-

-

-

-

15

4,487

4,502

17

4,519

Transactions with owners:










Transfer between reserves

-

25

-

-

-

(25)

-

-

-

Capital reduction

-

(71,393)

-

48,422

-

22,971

-

-

-

Dividends

-

-

-

-

-

-

-

(8)

(8)

Share based payments charge

-

-

-

-

-

1,127

1,127

-

1,127

Excess deferred tax on share                                   based payments

-

-

-

-

-

(110)

(110)

-

(110)

Balance at 31 December 2013

153

-

(37,128)

48,422

40

20,508

31,995

116

32,111

Loss for the year

-

-

-

-

-

(2,106)

(2,106)

(115)

(2,221)

Other comprehensive income:










Translation of foreign entities

-

-

-

-

(166)

-

(166)

-

(166)

Total comprehensive loss for the year

-

-

-

-

(166)

(2,106)

(2,272)

(115)

(2,387)

Transactions with owners:










Issue of share capital: ERC acquisition

-

200

-

-

-

-

200

-

200

Issue of share capital: Share based payments scheme

1

-

-

-

-

(1)

-

-

-

Dividends

-

-

-

-

-

-

-

(1)

(1)

Share based payments charge

-

-

-

-

-

4,371

4,371

-

4,371

Excess deferred tax on share                                   based payments

-

-

-

-

-

334

334

-

334

Balance at 31 December 2014

154

200

(37,128)

48,422

(126)

23,106

34,628

-

34,628

 

 

 

 

Consolidated Statement of Cash Flows

 

 

Continuing operations

Year ended

31 December

2014

Year ended

31 December

2013

Cash flows from operating activities

£000s

£000s

(Loss)/ profit for the year from continuing operations

(593)

5,137

Adjustments for:



Depreciation

547

562

Amortisation

2,425

1,725

Finance costs

484

311

Taxation recognised in profit or loss

887

2,146

Profit on disposal of subsidiary

(106)

-

Loss on disposal of property, plant and equipment

8

8

Revaluation of foreign currency loan

902

-

Share based payments charge

4,371

1,127

Increase in trade and other receivables

(5,927)

(7,544)

Decrease in inventories

5

25

Increase in trade payables

396

680

Revaluation of short and long-term derivatives

15

(24)

Movement in provisions

(299)

(642)

Cash generated from continuing operations

3,115

3,511

Interest paid (continuing operations)

(220)

(214)

Income taxes paid (continuing operations)

(1,364)

(623)

Net cash from operating activities (continuing operations)

1,531

2,674

Net decrease in cash and cash equivalents from discontinued operations

(1,281)

(114)

Total cash flows from operating activities

250

2,560

Cash flows from investing activities (continuing operations)



Acquisition of Pyramid Research

(2,006)

-

Acquisition of ERC Group

(543)

-

Acquisition of Current Analysis Inc

(11,168)

-

Proceeds from disposal of subsidiary

58

-

Purchase of property, plant and equipment

(1,212)

(213)

Purchase of intangible assets

(1,128)

(149)

Net cash used in investing activities (continuing operations)

(15,999)

(362)

Net increase/ (decrease) in cash and cash equivalents from discontinued operations

4

(24)

Total cash flows from investing activities

(15,995)

(386)

Cash flows from financing activities (continuing operations)



Repayment of short-term borrowings

-

(500)

Proceeds from long-term borrowings

10,000

-

Net cash used in financing activities (continuing operations)

10,000

(500)

Net decrease in cash and cash equivalents from discontinued operations

(6)

(8)

Total cash flows from financing activities

9,994

(508)

Net (decrease)/ increase in cash and cash equivalents

(5,751)

1,666

Cash and cash equivalents at beginning of year

14,178

12,497

Effects of currency translation on cash and cash equivalents

(166)

15

Cash and cash equivalents at end of year

8,261

14,178

 

The accompanying notes form an integral part of this financial report.

 

Notes to the Condensed Consolidated Financial Statements

 

1.             General information

 

Basis of preparation

These condensed consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretations Committee (IFRIC) interpretations as adopted by the European Union (EU). 

 

The financial statements have been prepared under the historical cost convention as modified by the revaluation of derivative financial instruments. These condensed financial statements are for the year ended 31 December 2014 and should be read in conjunction with the Annual Report and Accounts for the year ended 31 December 2013 that was sent to all shareholders and is available on the Company's website. These financial statements are presented in Pounds Sterling (£).

 

This preliminary announcement does not constitute the Group's full financial statements for the year ended 31 December 2014. The auditors have reported on the Group's statutory accounts for the year ended 31 December 2014 under s495 of the Companies Act 2006, which do not contain statements under s498(2) or s498(3) of the Companies Act 2006 and are unqualified. The statutory accounts for the year ended 31 December 2014 will be filed with the Registrar of companies in due course.

 

Critical accounting estimates and judgements

The Group makes estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

 

In the future, actual experience may deviate from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year relate to valuation of acquired intangible assets, provisions for bad debt, share based payments and carrying value of goodwill and other intangibles.

 

Valuation of acquired intangibles

Management identified and valued acquired intangibles on acquisitions that were made during the periods disclosed in the financial statements. Management has applied judgements in identifying and valuing intangible assets separate from goodwill that consist of assessing the value of brands, software, IP rights and customer relationships.

 

Provisions for bad debt

The Group is required to judge when there is sufficient objective evidence to require the impairment of individual trade receivables. It does this on the basis of the age of the relevant receivables, external evidence of the credit status of the customer entity and the status of any disputed amounts.

 

Share based payments

The Group operates a share based compensation plan under which the entity receives services from employees as consideration for equity instruments (options) of the Group. The fair value of the employee services received in exchange for the grant of the options and awards is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted, excluding the impact of any non-market service and performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period). Non-market vesting conditions are included in assumptions about the number of options and awards that are expected to vest. The total amount expensed is recognised over the vesting period, which is the period over which all of the specified existing conditions are to be satisfied. At each reporting date, the entity revises its estimates of the number of options and awards that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the Income Statement, with a corresponding adjustment to the share option reserve within equity.

  

Carrying value of goodwill and other intangibles

The carrying value of goodwill and other intangibles is assessed at least annually to ensure that there is no need for impairment. Performing this assessment requires management to estimate future cash flows to be generated by the related cash generating unit, which entails making judgements including the expected rate of growth of sales, margins expected to be achieved, the level of future capital expenditure required to support these outcomes and the appropriate discount rate to apply when valuing future cash flows.

 

Going concern

The Group meets its day-to-day working capital requirements through free cash flow. The Group has an overdraft facility of £2 million, which was not utilised as at 31 December 2014 and management do not forecast utilisation of this facility in the next 18 months.

 

Based on cash flow projections, the Group considers the existing financing facilities to be adequate to meet short-term commitments. The Directors have a reasonable expectation that there are no material uncertainties that cast significant doubt about the Group's ability to continue as a going concern. Accordingly, the Group has prepared the annual report and financial statements on a going concern basis.

 

2.             Accounting policies

 

This report has been prepared based on the accounting policies detailed in the Group's financial statements for the year ended 31 December 2014.



 

3.             Segmental analysis

 

The principal activity of Progressive Digital Media Group Plc (PDMG) and its subsidiaries ('the Group') is the provision of premium business information through multiple channels. The Group supplies its customers with research, analysis and tactical intelligence enabling them to gain a competitive advantage in their markets.

 

IFRS 8 "Operating Segments" requires the segment information presented in the financial statements to be that which is used internally by the chief operating decision maker to evaluate the performance of the business and to decide how to allocate resources. The Group has identified the executive directors as its chief operating decision maker.

 

Business information is provided to customers through multiple channels by a dedicated content team that is centrally managed by research directors who report directly to the executive directors. Business information is therefore considered to be the operating segment of the Group.

 

The Group profit or loss is reported to the executive directors on a monthly basis and consists of earnings before interest, tax, depreciation, amortisation, central overheads and other adjusting items. The executive directors also monitor revenue within the operating segment and have decided to include an additional voluntary disclosure analysing revenue by sub-category, being Business Intelligence and Events and Marketing.

 

A reconciliation of Adjusted EBITDA to profit before tax from continuing operations is set out below:

 


Year ended 31 December

2014

Year ended 31 December 2013


£000s

£000s

Business Intelligence

38,513

32,742

Events and Marketing

24,648

21,600

Total Revenue

63,161

54,342




Adjusted EBITDA

12,027

11,818

Foreign exchange losses

(498)

(231)

Other expenses (see note 4)

(9,306)

(2,469)

Depreciation

(547)

(562)

Amortisation (excluding amortisation of acquired intangible assets)

(898)

(962)

Finance costs

(484)

(311)

Profit before tax from continuing operations

294

7,283

 

Geographical analysis

 

From continuing operations

 

 

Year ended 31 December 2014

UK

Europe

North America

Rest of World

Total


£000s

£000s

£000s

£000s

£000s

Revenue from external customers

17,906

22,447

15,640

7,168

63,161

 

Year ended 31 December 2013

UK

Europe

North America

Rest of World

Total


£000s

£000s

£000s

£000s

£000s

Revenue from external customers

16,543

20,157

11,961

5,681

54,342

 

 

 

4.             Other expenses

 


Year ended 31 December 2014

Year ended 31 December 2013


£000s

£000s

Restructuring costs

2,237

392

Property related provisions

(221)

(222)

Exceptional property costs

13

93

Exceptional legal costs

-

141

Deal costs

146

154

M&A costs

431

45

Items associated with acquisitions and restructure of the Group

2,606

603

Share based payments charge

4,371

1,127

Revaluation of short and long-term derivatives

15

(24)

Unrealised foreign exchange loss

787

-

Amortisation of acquired intangibles

1,527

763

 Total other expenses

9,306

2,469

 

·              Restructuring costs relates to redundancies and other restructuring, largely in relation to the integration of acquisitions made during the year. Redundancies were announced prior to 31 December 2014.

·              Property related provisions relate to the consolidated income statement impact of the provision made for onerous property leases and dilapidations.

·              Exceptional property costs relate to additional costs incurred on properties that are not occupied and are provided for within the onerous property lease provision.

·              Deal costs represent costs incurred in respect of the refinancing of loans issued by the Royal Bank of Scotland in 2014 (see note 7).

·              The M&A costs relate to due diligence and corporate finance activity during the year.

·              The share based payments charge relates to the share option plan (see note 6).

·              The revaluation of short and long-term derivatives relates to movement in the fair value of the short and long-term derivatives.

·              Unrealised foreign exchange loss relates to the retranslation of short and long-term loan and trade receivable amounts denominated in foreign currency which were held at 31 December 2014.

  

 

5.             Earnings per share

 

The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders of the parent company divided by the weighted average number of shares in issue during the year. The Group has a share options scheme in place and therefore the Group has calculated the dilutive effect of these options. The below table shows earnings per share for both continuing and discontinued operations:


Year ended 31 December

 2014

Year ended 31 December 2013

Continuing operations





(593)

5,137

75,941

74,487

(0.78)

6.90



(593)

5,137

84,300

79,262

Diluted (loss)/ earnings per share (pence)

(0.70)

6.48

Discontinued operations



Basic



Loss for the year attributable to ordinary shareholders from discontinued operations (£000s)

(1,628)

(633)

Less minority interest (£000s)

(115)

17

Loss for the year attributable to ordinary shareholders of the parent company (£000s)

(1,513)

(650)

Weighted average number of shares (000s)

75,941

74,487

Basic loss per share (pence)

(1.99)

(0.87)

Diluted



Loss for the year attributable to ordinary shareholders of the parent company (£000s)

(1,513)

(650)

Weighted average number of shares* (000s)

84,300

79,262

Diluted loss per share (pence)

(1.79)

(0.82)

Total



Basic



(Loss)/ profit for the year attributable to ordinary shareholders of the parent company (£000s)

(2,106)

4,487

Weighted average number of shares (000s)

75,941

74,487

Basic (loss)/ earnings per share (pence)

(2.77)

6.02

Diluted



(Loss)/ profit for the year attributable to ordinary shareholders of the parent company (£000s)

(2,106)

4,487

Weighted average number of shares* (000s)

84,300

79,262

Diluted (loss)/ earnings per share (pence)

(2.50)

5.66

 

Reconciliation of basic weighted average number of shares to the diluted weighted average number of shares:


31 December

2014

No'000s

31 December

2013

No'000s

Basic weighted average number of shares

75,941

74,487

Share options in issue at end of year

8,359

4,775

Diluted weighted average number of shares

84,300

79,262

 

* The share options in issue are anti-dilutive in respect of the diluted loss per share calculation in 2014.

 

6.             Share based payments

 

The Group created a share option scheme during the year ended 31 December 2010 and granted the first options under the scheme on 1 January 2011 to certain senior employees. Each option granted converts to one ordinary share on exercise. A participant may exercise their options (subject to employment conditions) at any time during a prescribed period from the vesting date to the date the option lapses.  For these options to be exercised the Group's earnings before interest, taxation, depreciation and amortisation, as adjusted by the Remuneration Committee for significant or one-off occurrences, must exceed certain targets. The fair values of options granted were determined using the market value at the date of grant. The market values were compared to the Black-Scholes model and there were no significant differences.

 

The following assumptions were used in the valuation:

Award Tranche

Grant Date

Fair Value of Share Price at Grant Date

 

Exercise

Price

(Pence)

Estimated Forfeiture rate p.a.

Weighted Average of Remaining Contractual Life







Award 1

 1 January 2011

£1.09

0.0714p

15%

2.5

Award 2

1 August 2011

£1.32

0.0714p

0%

2.5

Award 3

1 May 2012

£1.87

0.0714p

15%

2.5

Award 4

7 March 2014

£2.55

0.0714p

15%

2.5

Award 5

8 September 2014

£2.575

0.0714p

15%

2.7

Award 6

22 September 2014

£2.525

0.0714p

15%

2.5

Award 7

9 December 2014

£2.075

0.0714p

15%

2.6

Award 8

31 December 2014

£2.025

0.0714p

15%

2.5

 

The estimated forfeiture rate assumption is based upon management's expectation over the number of options that will lapse over the vesting period. The assumptions were determined when the scheme was set up in 2011 and are reviewed annually. Management believe the current assumptions to be reasonable based upon the rate of lapsed options.

 

Each of the above awards are subject to the following vesting criteria:


Vesting Criteria


Group Achieves £10m EBITDA

Group Achieves £18.5m EBITDA

Group Achieves £23.5m EBITDA

Award 1-4

20% Vest

40% Vest

40% Vest

Award 5

N/a

30% Vest

70% Vest

Award 6

N/a

50% Vest

50% Vest

Award 7

N/a

40% Vest

60% Vest

Award 8

N/a

50% Vest

50% Vest

 

During 2013 the first vesting criteria of the Group achieving £10m Adjusted EBITDA was met. As a result 1,701,156 options were exercised during 2014 at a weighted exercise price of 0.0714 pence. The weighted average price of shares exercised was £2.55.

 

The Remuneration Committee has increased the second and third vesting criteria to £18.5 million and £23.5 million respectively as a result of the acquisitions made during 2014 (2013: £15 million and £20 million respectively).

 

 

The total charge recognised for the scheme during the twelve months to 31 December 2014 was £4,371,000 (2013: £1,127,000). The awards of the scheme are settled with ordinary shares of the Company. Reconciliation of movement in the number of options is provided below.


Option price

(pence)

Number of

options




31 December 2013

1/14th

4,775,050

Granted

1/14th

5,553,436

Vested

1/14th

(1,701,156)

Forfeited

1/14th

(268,450)

31 December 2014

1/14th

8,358,880

 

The following table summarises the Group's share options outstanding at 31 December 2014:

 

 

Reporting date

Options

outstanding

Option price

(pence)

Remaining

life (years)





31 December 2011

5,004,300

1/14th

3.7

31 December 2012

4,931,150

1/14th

4.3

31 December 2013

4,775,050

1/14th

3.3

31 December 2014

8,358,880

1/14th

2.5

 

7.             Borrowings


31 December

2014

31 December

2013


£000s

£000s

Current



Loans due within one year

1,283

-




Non-current



Long-term loans

15,651

5,851

 

Overdraft

The Group currently has a £2 million overdraft facility, which was not drawn down upon at 31 December 2014. Interest is charged on the overdraft at 2.25% over the Bank of England Base Rate.

 

Term loan and RCF

US$17m term loan and £20m RCF provided by The Royal Bank of Scotland

 

In July 2014, the Group refinanced its debt position. A US$17 million term loan was issued by The Royal Bank of Scotland to partially fund the acquisition of Current Analysis Inc (refer to acquisitions detailed in note 10). This is repayable in quarterly instalments over 4 years. The first instalment is due for repayment in July 2015, with total repayments due in 2015 being US$2 million.

 

Additionally, The Royal Bank of Scotland issued a £20 million revolving capital facility (RCF). As at 31 December 2014, the Group had drawn down £6.4 million of this facility. The £2 million overdraft discussed above and £1 million for potential interest rate hedging also offset against the RCF leaving a remaining undrawn balance of £10.6 million as at 31 December 2014.

 

Interest is charged on the term loan and drawn down RCF at a rate of 2.25% over the London Interbank Offered Rate. Interest is charged on the undrawn RCF at 0.9%.

 

These new arrangements replaced the existing £6 million RCF which was arranged in October 2011 and was due for repayment in 2015.

 

Non-current borrowings can be reconciled as follows:


31 December

2014

31 December

2013


£000s

£000s




Term loan issued by The Royal Bank of Scotland

9,619

-

RCF issued by The Royal Bank of Scotland

6,375

6,000

Capitalised fees, net of amortised amount

(343)

(149)


15,651

5,851

 

8.             Equity

 

Share capital

 

ERC Acquisition

The Group issued 76,191 ordinary shares as part of the consideration for ERC Group Limited and its subsidiaries (as discussed in note 10). These shares rank pari passu with the existing PDMG ordinary shares in issue.

 

Share Option Scheme

The Group issued 1,400,000 ordinary shares on 7 March 2014 and 305,080 ordinary shares on 14 March 2014 following the exercise of options by employees pursuant to the vesting of the Company's Capital Appreciation Plan (as discussed in note 6). These shares rank pari passu with the existing PDMG ordinary shares in issue.

 

Allotted, called up and fully paid:


31 December  2014

31 December 2013

 


       No'000

       £000s

        No'000

         £000s






Ordinary shares at 1 January (1/14th 
pence)

74,487

53

-

-

Sub-division of ordinary share capital

-

-

74,487

53

Issue of shares: partial consideration ERC

76

-

-

-

Issue of shares: other

4

-

-

-

Issue of shares: share based payments scheme

1,701

1

-

-

Ordinary shares c/f 31 December (1/14th pence)    

76,268

54

74,487

53






Deferred shares of £1.00 each

100

100

100

100


76,368

154

74,587

153

 

Capital management

The Group's capital management objectives are:

·      To ensure the Group's ability to continue as a going concern

·      To fund future growth and provide an adequate return to shareholders and, when appropriate, distribute dividends

 

In order to enable the directors to pay dividends in the future when considered appropriate, at the Annual General Meeting on 24 April 2013 shareholders approved the cancellation of the parent company's share premium account (the "Capital Reduction"). The Capital Reduction took effect on 23 May 2013 following confirmation by the Court. By way of undertaking to the Court, the Company has constituted a special reserve for the protection of its creditors as at the effective date of the Capital Reduction. In respect of equity, the Board has decided, in order to maximise flexibility in the near term with regards to growth opportunities, not to return any cash by way of a dividend at this time.

 

The Board is committed to keeping this policy under constant review and will evaluate alternative methods of returning cash to shareholders when appropriate.

 

The Company has two classes of shares. The ordinary shares carry no right to fixed income and each share carries the right to one vote at general meetings of the Company.

 

The deferred shares do not confer upon the holders the right to receive any dividend, distribution or other participation in the profits of the Company. The deferred shares do not entitle the holders to receive notice of or to attend and speak or vote at any general meeting of the Company. On distribution of assets on liquidation or otherwise, the surplus assets of the Company remaining after payments of its liabilities shall be applied first in repaying to holders of the deferred shares the nominal amounts and any premiums paid up or credited as paid up on such shares, and second the balance of such assets shall belong to and be distributed among the holders of the ordinary shares in proportion to the nominal amounts paid up on the ordinary shares held by them respectively.

 

There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both governed by the general provisions of the Articles of Association and prevailing legislation. The Directors are not aware of any agreements between holders of the Company's shares that may result in restrictions on the transfer of securities or on voting rights.

 

No person has any special rights of control over the Company's share capital and all its issued shares are fully paid.

With regard to the appointment and replacement of Directors, the Company is governed by its Articles of Association, the principles of the UK Corporate Governance Code, the Companies Act and related legislation. The Articles themselves may be amended by special resolution of the shareholders. The powers of Directors are described in the Board Terms of Reference, copies of which are available on request.

 

9.             Discontinued operations

 

As the business becomes more focussed on its Business Information offering, a number of legacy non-core business units have been discontinued in recent years.

 

During 2012, the Group made the decision to close the TMN email marketing business unit, including the TMN, EDR and TAPPS businesses. During 2013, the Group discontinued the US and European arms of its affiliate marketing business. The email marketing and US / European affiliate marketing businesses formed part of the Group's B2C Digital Marketing division.

 

Following a review of the performance of the Group's German subsidiary, it was decided that it was no longer viable and its activities ceased in June 2014. Additionally, on 1 July 2014, the Group disposed of its 75% shareholding in Office Solutions Media Limited ('OSM'). The subsidiary company was no longer deemed to be a strategic fit with the remainder of the Group; therefore the shares were sold to OSM's minority shareholder. Additionally, towards the end of 2014, the Group decided to discontinue the PDM (which was engaged in business to business lead generation) and Market Research business units. The key factors affecting this decision were a combination of continued under-performance of these business units and lack of strategic fit with the remainder of the group.

 

Pursuant to the provisions of IFRS 5 the above operations have been classified as discontinued.

 

a)    The results of the discontinued operations are as follows:




Year ended

 31 December 2014

Year ended

31 December 2013




£000s

£000s

Discontinued operations





Revenue



1,338

2,670

Cost of sales



(1,958)

(2,580)

Gross (loss)/ profit



(620)

90

Distribution costs



(19)

(32)

Administrative costs



(453)

(768)

Other income



86

77

Operating loss from discontinued operations



(1,006)

(633)

Finance costs



-

-

Loss before tax from discontinued operations



(1,006)

(633)

Income tax expense



(622)

-

Loss for the year from discontinued operations



(1,628)

(633)

 

b)    Loss before tax

 




Year ended 31 December 2014

Year ended 31 December 2013

This is arrived after charging:



£000s

£000s

Depreciation



6

-

 

 

 

c)    Cash flows from discontinued operations




Year ended

31 December 2014

Year ended 31 December 2013




£000s

£000s

Cash outflows from operating activities



(1,281)

(114)

Cash inflows/ (outflows) from investing activities



4

(24)

Cash outflows from financing activities



(6)

(8)

Total cash outflows from discontinued operations



(1,283)

(146)

 

10.          Acquisitions

 

Pyramid Research

On 1 January 2014 the Group acquired the business and assets of Pyramid Research for cash consideration of US$3,250,000 (£2,006,173).Pyramid is a leading provider of business information and market analysis for the ICT industry. Pyramid has a well regarded brand name and an expanding presence in some of the world's fastest growing markets.

 

The amounts recognised for each class of assets and liabilities at the acquisition date were as follows:

 



Carrying Value

Fair Value Adjustments

 

Fair Value



£000s

£000s

£000s

Intangible assets consisting of:





Software


-

51

51

Brand


-

503

503

Customer relationships


-

420

420






Net assets acquired consisting of:





Tangible fixed assets


24

-

24

Accounts receivable


643

(184)

459

Trade and other payables


(163)

(64)

(227)

Deferred revenue


(457)

-

(457)

Fair value of net assets acquired


47

726

773






Cash consideration




2,006

Less net assets acquired




(773)

Goodwill




1,233

 

Pyramid Research has generated revenues of £2.4m and a contribution loss of £0.4m in the year ended 31 December 2014.

 

The goodwill that arose on the combination can be attributed to revenue and cost synergies expected to arise upon the integration of Pyramid Research into Progressive Digital Media Group.

 

The Group incurred legal and professional costs of £105,000 in relation to the acquisition, which were recognised in other expenses (note 4).

 

ERC

On 28 March 2014, the Group acquired ERC Group Limited and its subsidiaries ('ERC') for total consideration of £804,000. The consideration comprised of £604,000 in cash consideration and £200,000 in equity. The equity issued was 76,191 ordinary shares in PDMG at a price of £2.625 (which rank pari passu with the existing PDMG ordinary shares in issue). ERC is a provider of business information and market analysis for the Consumer market. ERC has a well regarded brand name and a dedicated client base which will be used as a solid base for growth.

 

The amounts recognised for each class of assets and liabilities at the acquisition date were as follows:

 



Carrying Value

Fair Value Adjustments

 

Fair Value



£000s

£000s

£000s

Intangible assets consisting of:





Intellectual property


-

485

485

Customer relationships


-

101

101

Deferred tax liability upon creation of intangible assets


-

(117)

(117)






Net assets acquired


-

-

-

Fair value of net assets acquired


-

469

469






Total consideration




804

Less net assets acquired




(469)

Goodwill




335

 

In line with the provisions of IFRS 3, further fair value adjustments may be required within the 12 month period from the date of acquisition. Any fair value adjustments will result in an adjustment to the goodwill balance reported above.

 

In 2013 ERC had revenues of £0.4m and profits before tax of £nil. ERC has generated revenues of £0.3m and a contribution of £0.1m in the period from acquisition to 31 December 2014. If the acquisition had occurred on 1 January 2014, the Group year to date revenue for 2014 would have been £63.2m and the Group profit before tax from continuing operations would have been £0.3m.

 

The Group incurred legal and professional costs of £16,000 in relation to the acquisition, which were recognised in other expenses (note 4).

 

The goodwill that arose on the combination can be attributed to revenue and cost synergies expected to arise upon the integration of ERC into Progressive Digital Media Group.

 

 

 

The total cash cost of the acquisition is reconciled as follows:

 



£000s

Cash consideration


604

Cash acquired as part of opening balance sheet


(165)

Cash returned to seller representing net assets as at completion date


104

Total cash cost


543

 

Current Analysis

On 30 July 2014, the Group acquired Current Analysis Inc and its subsidiaries ('Current Analysis') for cash consideration of US$19,600,000 (£11,529,412). Current Analysis is an established and well regarded business which provides subscription based business intelligence services to the ICT industry. The acquisition supports the Group's strategy of expanding its premium subscription based services into global markets.

 

The amounts recognised for each class of assets and liabilities at the acquisition date were as follows:

 



Carrying Value

Fair Value Adjustments

 

Fair Value



£000s

£000s

£000s

Intangible assets consisting of:





Customer relationships


-

2,543

2,543

Brand


-

1,390

1,390

Deferred tax liability upon creation of intangible assets


-

(1,573)

(1,573)






Net liabilities acquired consisting of:





Tangible fixed assets


41

-

41

Intangible assets


257

-

257

Cash and cash equivalents


361

-

361

Trade receivables


1,340

-

1,340

Prepayments and other receivables


383

-

383

Trade and other payables


(1,116)

461

(655)

Deferred revenue


(3,701)

-

(3,701)

Short and long-term provisions


(49)

(218)

(267)

Fair value of net assets acquired


(2,484)

2,603

119






Total consideration




11,529

Less net assets acquired




(119)

Goodwill




11,410

 

In line with the provisions of IFRS 3, further fair value adjustments may be required within the 12 month period from the date of acquisition. Any fair value adjustments will result in an adjustment to the goodwill balance reported above.

 

In 2013 Current Analysis had revenues of US$13.3m and profits before tax of US$0.2m. Current Analysis has generated revenues of £3.6m and a contribution of £1.2m in the period from acquisition to 31 December 2014. If the acquisition had occurred on 1 January 2014, the Group year to date revenue for 2014 would have been £67.6m and the Group loss before tax from continuing operations would have been £0.6m.

 

The Group incurred legal and professional costs of £286,000 in relation to the acquisition, which were recognised in other expenses (note 4).

 

The goodwill that arose on the combination can be attributed to revenue and cost synergies expected to arise upon the integration of Current Analysis into Progressive Digital Media Group, the highly skilled assembled workforce and penetration into the valuable US ICT business information sector.

 

As part of the acquisition of Current Analysis, US$2million of the purchase consideration was transferred to an Escrow account to cover unpaid historic US sales tax. A claim will be made against the Escrow monies to extinguish the liability once the exact value is agreed with the relevant tax authorities. The liability is estimated to be no more than US$1.85m.

 

The total cash cost of the acquisition is reconciled as follows:



£000s

Cash consideration


11,529

Cash acquired as part of opening balance sheet


(361)

Total cash cost


11,168

 


This information is provided by RNS
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