Final Results
CSS Stellar PLC
22 March 2004
22 March 2004
CSS Stellar plc
('CSS' or 'the Group')
Preliminary Results
for the year ended 31 December 2003
CSS Stellar plc, the global entertainment and sports management and marketing
group, today announces its preliminary results for the year ended 31 December
2003.
Summary:
• Turnover of £72.9m (2002: £48.5m), with adjusted operating profits
from continuing operations (excluding goodwill) of £2.2m (2002: £2.5m).
• Loss after tax and minority interests of £4.5m (2002: loss of
£438,000) primarily due to disposal of the underperforming ARB business within
Events division and continued weakening of the US dollar.
• Year of transition and consolidation with significant reduction in
Group cost base.
• Following sale of ARB in December, all four divisions operating
profitably.
• The three core global divisions, Talent Management, Marketing and
Television, all performed in line with expectation in first two months of
current year, with Events having its best start since becoming part of the
Group.
• Net assets per share of 149p (2002: 160p).
• Improvements in working capital: £5m cash generated from operations
and £2m debt repaid.
• Greatly improved performance from North America.
Commenting on the results John Webber, Chairman, stated:
'Overall sentiment in our chosen markets is now improving, and this coupled with
the Group's lowered overhead base gives us renewed cause for optimism. We
believe we are well positioned to deliver improved results this year and going
forward.'
For further information please contact:
CSS Stellar Tel: 020 7466 5000 (am)
Sean Kelly, Joint CEO Tel: 020 7078 1400 (thereafter)
Kevin Rose, Finance Director
Buchanan Communications Tel: 020 7466 5000
Bobby Morse/Catherine Miles
CHAIRMAN'S STATEMENT
Overview and Strategy
In the last three years CSS Stellar has transformed itself into a global
entertainment and sports management and marketing business using, as a core, the
CSS Stellar business that had within it an established client base and a 30 year
track-record in the industry.
This transformation has occurred against a backdrop of some of the most
challenging trading conditions seen in our chosen markets.
However, overall sentiment in these markets is now improving and this, coupled
with the Group's lower overhead base, gives us renewed grounds for optimism. We
believe we are well positioned to deliver improved results this year and going
forward.
We now own businesses which are highly regarded in their specialist areas, with
experienced senior management teams and comprehensive plans for the next three
years. The plans provide for sustainable growth in each division and for the
Group as a whole.
In last year's statement and at the half year it was made clear that 2003 would
be a year of transition. This has resulted in the Group now being structured
into four operating divisions with three core global divisions and, following
the sale of ARB within Events, each division is operating profitably.
The process of consolidation has led to a re-evaluation of certain units and has
enabled us to significantly reduce costs in certain areas. This process has
continued into 2004 and the Group going forward is considerably leaner and more
focused. As part of this re-structuring, the Group has invested in improving
its internal controls and Group reporting. Although some one-off costs have
been incurred as a result, we believe it is important to establish this
infrastructure both in terms of overall efficiency and to make senior
operational management more accountable for their businesses going forward.
All the large acquisitions made over the past three years, being GEM, PFD, GEM
Europe and Echo, are now generating greater operating profits than when they
were acquired. The process of Group integration will be completed in 2004 with
the merger of The GEM Group and Echo over the course of the year.
The overall results for the year are not as good as we had hoped at the interim
stage, but are in line with the pre-close trading statement made in January. As
we said last September, taking action to address the underperformance of the
Events division was a priority and the sale of ARB adversely affected the Group,
as expected, with a trading loss of £1.0million and an exceptional loss on
disposal of £2.1million for 2003.
However, we had expected better results within our Talent Management division.
One of the actions we took as a result of the relative underperformance was to
close the Newcastle office of Stellar Financial Partners in September 2003.
Neither had we expected, like many others, the continuing weakening of the US
dollar, which ended the year more than 10% lower than we had budgeted at the
beginning of 2003.
On a positive note, the Group experienced a significant improvement in its North
American operations with profits increasing. The improvement would have been
more visible but for the weakness in the US dollar.
Financial Results
The full year's results were in line with our January 2004 trading statement.
On turnover of £72.9m (2002: £48.5m), adjusted operating profits from continuing
operations (excluding goodwill) were £2.2m (2002: £2.5m). The loss after tax and
minority interests was £4.5m (2002: loss of £438,000).
The fully diluted loss per share was 17.15p (2002: loss per share 1.84p) and the
adjusted fully diluted earnings per share before exceptional items was 2.56p
(2002: 10.15p).
Net asset value per share at the year end was 149p (2002: 160p).
During the year the Group significantly improved its cash inflow from operating
activities to £5.0m (2002: £1.9m) and repaid £2m of debt in the year.
Exceptional costs of £2.3m (2002: £nil) were incurred during the year. These
comprised the write-off following the disposals of ARB (£2.1m) and PFMA (£0.2m).
Losses were incurred in discontinued operations, being ARB, PFMA and SFP's
Newcastle operation, of £1.6m (2002: £0.4m).
Current Trading
2004 has begun particularly well in the Events Division which, without ARB, has
had its best start since becoming part of the Group three years ago. The Talent
Management, Marketing and Television divisions have all performed in line with
expectation in the first two months.
Board Changes
On 22 July 2003 we announced that Kevin Rose had been appointed Group Finance
Director and Treasurer, replacing Sean Kelly and Julian Hill respectively and
combining the roles for the first time. On the same date, Julian Jakobi became
Deputy Chairman and Joint Chief Executive with Sean Kelly.
I am pleased to announce that from 1 May 2004 I will become non-Executive
Chairman and Sean Kelly will become Group Chief Executive. Sean Kelly will also
return to the UK with effect from that date, joining Kevin Rose who relocated on
1 March 2004. The Group's day to day operating activities will be managed by
senior executives through a Group Operating Executive Board chaired by Sean
Kelly. Julian Jakobi, in addition to being Deputy Chairman, will be further
developing the sports client business.
The process of recruiting a second independent non-executive director has taken
longer than we anticipated but we hope to make an appointment in the near
future.
Dividends
The Group paid a final dividend of 1p per share in 2003, based on the 2002
results. As a result of the Group's performance in the year, a final dividend
is not being proposed. It is the intention of the Board to resume dividend
payments once the Group returns to profitability.
Share Options
The Board believes that the granting of share options is an important method of
motivating and incentivising the Group's key employees, particularly as a people
business. Grants of certain existing options were made at a time when market
conditions were very different with the result that these options are no longer
serving the motivating factor for which they were intended.
To that end, options over 1.2 million ordinary shares are today being granted to
certain key employees of the Group through the existing CSS Stellar Executive
(unapproved) Share Option Scheme, at a price of 50p per share. Directors will be
granted options over 373,500 shares and will waive existing entitlements over
608,500 shares. Most options granted to senior employees are contingent on them
reaching their divisional 2004 financial targets.
Outlook
The results of the previous two years make us cautious about forecasting 2004.
We know that many of our competitors expect market conditions to be much
improved this year. We agree that there are a number of economic indicators
which justify this view but will comment further when we see more tangible
benefits flowing through to our businesses.
I must again express my thanks to all our employees worldwide for their efforts
in another challenging year. In particular I would like to thank all those who
contributed to the production of the Group's Business Plan, which has set solid
and realistic objectives for the Group's development over the next three years.
JOHN WEBBER
JOINT CHIEF EXECUTIVES' OPERATIONAL REVIEW
For the first time, the Group is presenting its results by its four divisions:
• Talent Management
• Marketing
• Television
• Events
Talent Management
Overall, revenues for the Division showed a small increase to £11.9m (2002:
£11.5m). Operating profits for the year were £1.1m (2002: £1.1m).
During the year significant investments were made in the future development of
both the entertainment and sports business, principally in the US and Asia.
In Europe, PFD had a satisfactory 2003, and a number of awards were won by
clients reflecting the strength and depth of the client base including:
• Kevin Macdonald whose documentary film 'Touching The Void' won the
BAFTA for Outstanding British Film Of the Year as well as Best Film at the
Evening Standard British Film Awards;
• Eduardo Serra received an Academy Award nomination and won The LA
Critics Association Award for Best Cinematography for 'Girl With A Pearl
Earring';
• Steve Knight won a number of awards for his second produced feature
film 'Dirty Pretty Things', including four awards at The British Independent
Film Awards as well as an Academy Award nomination for best original screenplay;
• Ricky Gervais and Stephen Merchant won a Golden Globe award for 'The
Office' and Ricky Gervais also won a Golden Globe for Best Actor in a Comedy
Role for his portrayal of David Brent in the series;
• At the 2003 Evening Standard Theatre Awards Tom Hardy won the award
for Outstanding Newcomer for his roles in 'Blood' and 'In Arabia We'd All Be
Kings;
• Novelist Nick Hornby was given the writer's writer 2003 London Award
after taking part in the Orange Word International Writer's Season;
• Children's author Russell Ayto won the Smarties Award for 'Best
Children's Book for the under 5s' for 'The Witches Children and the Queen.'
In addition, there was continued success for Robert Harris, whose book 'Pompeii'
remains in the American Bestseller Lists and Richard Curtis, who wrote and
directed 'Love Actually'.
PFD's New York office is now fully operational and has already in 2004
successfully sold books for London-based clients such as Charles Chadwick as
well as attracting clients based in the USA, such as Garry Kasparov and Howell
Rainer, the former editor of the New York Times.
The investment in the US motor sports business in 2003 has already reaped
rewards in 2004, with the representation of Milka Duno leading to a
multi-million dollar sponsorship deal with CITGO, the Venezuelan Oil Company,
and the management of their sponsorship programme in the Rolex Sports Car
Series. Duno recently became the first woman ever to secure a victory in this
series.
In 2003, the sports business saw Sir Bobby Robson become a client. The Group
also produced two books for the victorious World Cup England Rugby Team and
co-produced 'We are the Champions', shown on ITV in December 2003. In motor
racing Juan Pablo Montoya contracted to drive for McLaren in the Formula 1 World
Championship from January 2005, while continuing to drive for the Williams team
in 2004. Richard Burns was forced to end prematurely his World Rally
Championship bid and is unable to race in 2004, despite having a contract with
Subaru.
The financial services business Stellar Financial Partners broke even in the
year, its first full year of operation, having been expected to do better than
this at the interim stage. The business was set up to service the Group's
client base and also attract investment into film schemes, with opportunities in
the latter being curtailed by the Inland Revenue last month. SFP is now
focussing on offering the Group's clients a comprehensive range of financial
services to complement the excellent agency service provided by PFD.
Marketing
2003 showed a significant improvement with revenues increasing to £48.6m (2002:
£26.5m). Operating Profits also increased marginally to £1.0m (2002: £0.9m).
In the USA GEM significantly increased its activities in motorsports marketing
with an extension of its contract with UPS and Domino's Pizza and a new contract
with the Sun Trust Bank. New client wins included Schwans and Polaris.
In Canada the Atlantic Lottery Corporation became a major new client and we
undertook a major campaign for Alliance Atlantis on 'The Lord Of The Rings:
Return Of The King', which subsequently won 11 Academy Awards. We are currently
producing an Olympic TV commercial for the Toronto Stock Exchange.
GEM Europe was named principal sponsorship agency for Powergen, beating off
stiff competition to run many high profile sponsorships, including 'The Powergen
Cup' (rugby union), 'The Powergen Challenge' (rugby league) and Ipswich Town
Football Club.
In the UK the CSS sponsorship business was integrated successfully into GEM
Europe during the year.
The US economy is now experiencing a revival in corporate spending and should
benefit from fiscal stimulation ahead of the November Presidential election. We
are optimistic about reaching our targets for 2004, but remain cautious about
the volatility of the US dollar and are therefore making sure that as far as is
possible any dollar weakness only results in a translation loss, with dollar
revenues matched by dollar costs.
As referred to in the Chairman's Statement, the merger of GEM and Echo will be
implemented in stages during the year. We expect there to be operational
synergies in particular in Canada, and an improved offering to corporate clients
going forward.
Television
Turnover for the year was £4.9m (2002:£2.1m). For the purposes of divisional
analysis, last year's figure has been amended to include the gross amount of
income received by Target for distributed programmes, which is the conventional
industry treatment.
Operating profit in 2003 was £44,000 (2002: £46,000). The lack of improvement in
profit was due to the necessary investment in overheads made in the second half
of the year. The investment has continued into 2004 and is essential to evolve
our Television division from being a pure programme distributor to being both a
distributor and producer of programmes. This will mean Target can own as well as
manage intellectual property rights and develop production initiatives with PFD
and GEM.
Part of the investment in 2003 went into establishing the New York operation for
Target, the benefits of which should begin to be seen this year.
In January 2004 Target won the mandate to manage the international distribution
of BSkyB's programme catalogue.
Events
Turnover in 2003 was £7.5m (2002: £9.8m). However, turnover from ongoing
operations was £5.2m (2002: £5.5m).
Gross profits in the year from continuing operations were £2.3m (2002: £2.1m).
Operating profits in 2003 from continuing operations were £0.1m (2002: £0.5m).
The change in operating profit between 2003 and 2002 is primarily due to the
allocation of a central overhead.
The loss on the sale of ARB was a total of £2.1m, including £0.4m of goodwill
written off. In addition ARB incurred trading losses of £1m prior to disposal
on 29 December 2003. The Group was guaranteeing liabilities in ARB of £0.8m
prior to disposal which were transferred to the vendor.
Icon is now the only business in the Events division and has started 2004 ahead
of expectations. It also expects to generate revenue from Euro 2004.
Asia
The Asian operation was launched in 2003 with turnover of £216,000 and a loss of
£184,000.
The SARS epidemic coincided with our launch into this region and meant our Asian
Business, which is focused on North Asia, did not meet original forecasts.
Notwithstanding this, considerable progress has been made in both the areas of
Television and Marketing, an example being the sale of 'The Real Beckhams' by
Target in Japan.
In 2004 we expect to see some significant growth in the region, with the outlook
including developing prospects for advertiser-funded programmes which will
combine the Group's Television and Marketing divisions.
Future Prospects
Following completion of the Group's three-year plan for 2004-2006, priorities
have been set both for the Group's expansion and financial and corporate targets
for each division. These priorities are as follows:
• Expansion in Asia, in particular in Marketing and Television.
• Growth of the UK Television business.
• Expansion of our Talent Management services in the USA.
The plan envisages each of the Global Divisions expanding organically so that by
2006 they are recognized as Global Leaders in their area of expertise. The plan
does not envisage acquisitions at this stage but we will as ever adopt a
pragmatic approach to opportunities.
Sean Kelly
Julian Jakobi
22 March 2004
CSS STELLAR PLC
FINANCIAL REVIEW
The purpose of this review is to highlight matters of interest to shareholders
and to provide guidance on reasons for alterations in some of the key operating
areas of the business.
Group Profit and Loss Account
Turnover
There has been a substantial rise in turnover, which has increased 50% to £72.9
million (2002: £48.5 million). Turnover was split between Europe £27.3 million,
North America £45.4 million and Asia £0.2 million. The majority of the increase
is attributable to the Marketing division.
Talent
Talent saw a modest rise in turnover to £11.9 million (2002: £11.5 million).
Marketing
The increase in Turnover is mainly due to the first full year of consolidated
results after the acquisition of the Echo group in July 2002 which, as part of
its activities, undertakes buying for clients. Echo's turnover consolidated in
2003 was £30.5 million (2002: £11.3 million).
Television
The increase in turnover for the Television division, to £4.9 million (2002:
£0.7 million), was due to including gross billing in 2003 rather than commission
received and the first full year of consolidated results after the acquisition
of Target in September 2002. The comparable gross billing figure for the period
in 2002 post acquisition was £2.1 million.
Events
The decrease in turnover in the Events division, to £7.5 million (2002: £9.8
million), was due to the poor performance of ARB. This business was disposed of
at the year end.
Cost of Sales
Cost of Sales in 2003 was £37.6 million (2001: £15.1 million). The increase is
due to the first full year of consolidated results after the acquisitions of
Echo and Target during 2002 as noted above.
Administration Costs
These have risen 16.4% to £34.6 million (2002: £29.7 million), largely as a
result of including the overheads of GEM Europe and Echo for a full year
following their acquisition in April 2002 and July 2002 respectively. The
largest component is staff costs, which have increased to £24.2 million (2002:
£20.8 million). The average number of employees was 575 (2002: 484).
The average cost per employee was £42,106 in 2003, against £42,966 in 2002, a
decrease of 2.0%. This compares with an average salary in 2001 of £45,700.
However Group staff costs as a proportion of gross profit rose to 68.6% (2002:
62.3%). Higher salary costs in the Talent division were the main reason for
this.
Exceptional Costs
During the year the Group incurred exceptional costs of £0.2 million, full
details of which are set out in note 2. Provisions have been made in relation to
the restructuring of GEM Europe and the merger of GEM and Echo in Canada.
In addition, ARB was sold at the end of 2003 with a write off of £2.1 million.
ARB had consistently lost money and was a drain on the Group's cash resources
and management time. The sale has also enabled the Group to reduce its central
overheads. In addition, PFMA was closed with a write off of £0.2 million.
Discontinued Operations
Losses on discontinued operations relate to PFMA and 24/7, both sold on 17 April
2003, the sale of ARB on 29 December 2003, and the closure of the Newcastle
division of Stellar Financial Partners in September. Losses were £0.05 million,
£1.0 million, and £0.6 million respectively.
Amortisation
The charge for the year of £2.3 million (2002: £2.0 million) results from the
acquisition programme undertaken in the period since flotation. Overall, the
Group has accumulated goodwill of £39.7 million since flotation, with
amortisation being spread over periods of 5 to 20 years.
Taxation
The Group's tax charge was £0.3 million (2002: £0.4 million). The tax charge
relates predominantly to the Echo group of companies. As far as possible the
Group has taken steps to minimise its overall tax liability. The Group utilised
the available tax losses of ARB through group relief at 31 December 2003.
Dividend
There will be no dividend for the year ended 31 December 2003.
Earnings per Share
Unadjusted earnings per share on a basic and fully diluted basis shows a loss of
17.15p per share (2002: loss of 1.84p). The diluted loss per share is equivalent
to the basic loss per share as any dilutive effect would decrease the net loss
per share. Once the figure is adjusted for amortisation and non-recurring items
the fully diluted earnings per share is 2.56p (2002: 10.15p). However, this is
against the backdrop of a very challenging market and the substantial
improvements in the infrastructure of the business made in 2002.
Foreign Exchange
The Group's earnings have been impacted by the weakening of the US Dollar. The
average US Dollar rate in 2003 was $1.64 to the Pound (2002: $1.50). The US
Dollar rate at 31 December 2003 was $1.78 to the Pound (2002: $1.60).
Cash flow
The Group's net borrowings at 31 December 2003 were £1.8 million compared with
£3.3 million in 2002. The Group benefited from improved working capital
management at the end of 2003. Cash flow from operating activities was £5.0
million (2002: £1.9 million). In addition, as part of the sale of ARB the Group
has released itself from £0.8 million of bank guarantees. During the year £2.0
million of borrowings were repaid.
Share Capital and Acquisitions
There were no acquisitions made during 2003.
During 2003 769,957 shares were issued at an average issue price of 268p for
deferred consideration provided for in 2002.
Deferred consideration has been accrued in the 2003 financial statements as
shares to be issued. The total number of shares accrued for 2003 is 1.6 million
in relation to the former shareholders of GEM Europe and The Sponsorship
Consultancy. The minimum share values of these transactions are 170p and 270p
respectively.
The only businesses which could receive a substantial payment are GEM Europe,
Echo and Stellar Financial Partners. As far as can be determined these amounts
have been provided in the Financial Statements. The minimum price at which
shares can be issued is 180p, 190p, and 250p respectively.
Transition to International Financial Reporting Standards
CSS Stellar has established a working party to timetable IFRS implementation.
The working party will review group accounting policies in order to assess the
changes required under IFRS. The 2003 accounts will also be reviewed to
understand and quantify the impact of IFRS adoption. Further, the financial
reporting system will be reviewed to ensure that it is sufficient to capture
IFRS data. The result of the above assignment by the working party will be the
production of the 2004 opening balance sheet.
The remainder of the financial information is explained in the notes to the
Financial Statements.
Kevin Rose
Group Finance Director
CSS STELLAR PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Year ended 31 December 2003
Unaudited Audited
2003 2002
Notes £000 £000
Turnover
- Continuing operations 70,349 43,554
- Discontinued operations 2,567 4,903
Group Turnover 1 72,916 48,457
Cost of sales (37,628) (15,069)
Gross profit 35,288 33,388
Exceptional administrative expenses 2 (167) (1,547)
Amortisation of goodwill (2,283) (1,955)
Other administrative expenses (34,557) (29,676)
Administrative expenses - total (37,007) (33,178)
Operating (loss)/profit
- Continuing operations (99) 580
- Discontinued operations (1,620) (370)
1 (1,719) 210
Exceptional item - loss on disposal of subsidiary (2,326) -
undertaking
(4,045) 210
Interest receivable 176 230
Interest payable (343) (434)
(Loss)/profit on ordinary activities before taxation 1 (4,212) 6
Tax on (loss)/profit on ordinary activities 3 (252) (388)
Loss on ordinary activities after taxation (4,464) (382)
Minority interests (10) (56)
(4,474) (438)
Proposed dividend - (258)
Transferred from reserves (4,474) (696)
Loss per Ordinary share (pence) 4 p. p.
Basic (17.15) (1.84)
Diluted (17.15) (1.84)
Adjusted Earnings per Ordinary share (pence) 4
Basic 2.64 10.93
Diluted 2.56 10.15
£'000 £000
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND
LOSSES
Loss for the financial year (4,474) (438)
Translation adjustment on opening reserves 18 (78)
Total gains and losses recognised since last annual (4,456) (516)
report
CSS STELLAR PLC
CONSOLIDATED BALANCE SHEET
As at 31 December 2003
Unaudited Audited
2003 2002
Notes £000 £000 £000 £000
FIXED ASSETS
Intangible assets 5 39,775 39,293
Tangible assets 6 3,007 4,990
Investments 7 1,056 1,093
43,838 45,376
CURRENT ASSETS
Stocks and work in progress 252 344
Debtors 15,964 16,963
Cash at bank and in hand 4,803 5,302
21,019 22,609
CREDITORS: AMOUNTS FALLING
DUE WITHIN ONE YEAR (23,646) (23,355)
Net current liabilities (2,627) (746)
Total assets less current 41,211 44,630
liabilities
CREDITORS: AMOUNTS FALLING DUE
AFTER MORE THAN ONE YEAR (1,726) (3,523)
Minority interests 163 169
39,648 41,276
CAPITAL AND RESERVES
Called up share capital 8 13,265 12,880
Share premium 8 24,654 22,976
Shares to be issued 8 4,863 4,098
Revaluation reserve 171 171
Profit and loss account (3,305) 1,151
Equity shareholders' funds 9 39,648 41,276
CSS STELLAR PLC
CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 December 2003
Unaudited Audited
2003 2002
£000 £000 £000 £000
Note
Cash inflow from operating activities 10 5,023 1,892
Returns on investments and servicing of
finance
Interest paid (261) (324)
Interest received 176 230
Interest element of finance lease payments (82) (110)
Net cash outflow from returns on investments (167) (204)
and servicing of finance
Taxation (848) (1,026)
Capital expenditure and financial investment
Purchase of tangible fixed assets (1,028) (1,072)
Purchase of intangible fixed assets (104) (10)
Sale of tangible fixed assets net of relocation 128 94
costs
Net cash outflow from capital
expenditure and financial investment (1,004) (988)
Acquisitions and disposals
Purchase of subsidiaries (1,064) (5,586)
Net cash from purchase of subsidiaries - 2,016
Disposal of subsidiaries (551) -
Purchase of investments - (894)
Sale of investments - 66
Net cash outflow from acquisitions and (1,615) (4,398)
disposals
Equity dividends paid (258) -
Net cash inflow/(outflow) before 1,131 (4,724)
financing
Financing
New shares issued for cash - 9,937
Less associated costs - (580)
Repayment of borrowings 12 (2,004) (1,973)
Capital element of finance lease 12 (796) (881)
rentals
Net cash (outflow)/inflow from (2,800) 6,503
financing
(Decrease)/increase in cash 12 (1,669) 1,779
CSS STELLAR PLC
NOTES TO THE FINANCIAL INFORMATION
Year Ended 31 December 2003
1. Analysis of Trading and Net Assets
Class of Business
Profit before
Divisions Turnover Taxation Net Assets
2003 2002 2003 2002 2003 2002
£000 £000 £000 £000 £000 £000
Talent Management 11,906 11,499 1,064 1,075 18,704 22,234
Marketing 48,599 26,453 972 949 19,044 17,584
Television 4,874 696 44 46 483 517
Events 7,537 9,809 104 465 1,417 941
72,916 48,457 2,184 2,535 39,648 41,276
Goodwill amortisation (2,283) (1,955)
Operating loss on discontinued operations (1,620) (370)
Operating (loss)/ profit (1,719) 210
Net interest (167) (204)
Exceptional item (2,326) -
Group (loss)/profit before taxation (4,212) 6
Geographical market
Turnover Profit before Net Assets
Taxation
2003 2002 2003 2002 2003 2002
£000 £000 £000 £000 £000 £000
Europe 27,300 24,783 1,413 2,002 26,546 28,820
North America 45,400 23,674 955 533 13,148 12,456
Rest of the world 216 - (184) - (46) -
72,916 48,457 2,184 2,535 39,648 41,276
The origin and destination of turnover, profit before taxation and net assets are not materially
different.
Turnover for the Television division in 2003 represents gross billings rather than commissions
received.
The comparable figure for 2002 was £2,149,000.
Cost of sales, amounts written off goodwill and administrative expenses are analysed between
continuing and discontinued operations below:
Continuing Discontinued Total Continuing Discontinued Total
operations operations operations operations
2003 2003 2003 2002 2002 2002
£'000 £'000 £'000 £'000 £'000 £'000
Cost of sales 35,816 1,812 37,628 12,334 2,735 15,069
Exceptional 167 - 167 1,092 455 1,547
administrative
expenses
Amortisation 2,253 30 2,283 1,924 31 1,955
of goodwill
Other 32,212 2,345 34,557 27,624 2,052 29,676
administrative
expenses
CSS STELLAR PLC
NOTES TO THE FINANCIAL INFORMATION (continued)
Year Ended 31 December 2003
2. Exceptional administrative expenses
2003 2002
£000 £000
Relocation costs of the Group's head - 395
office
Provision for significant bad debts 50 914
Cost of restructuring 117 238
167 1,547
3. Tax on (Loss)/Profit on Ordinary
Activities
Current tax
United Kingdom corporation tax (17) 516
Adjustment in respect of prior year charge 40 (9)
23 507
Overseas taxation 265 104
Adjustment in respect of prior year charge - (122)
288 489
Deferred Tax
United Kingdom
- current year (55) (19)
- prior year - (85)
Overseas - current year 19 3
(36) (101)
252 388
The tax charge assessed for the period is higher than the standard rate of corporation
tax in the UK (30%). The differences are explained below:
Tax charge reconciliation
(Loss)/profit on ordinary activities before taxation (4,212) 6
(Loss)/profit on ordinary activities multiplied by the standard (1,264) 2
rate of corporation tax (30%)
Goodwill amortisation 661 586
Capital allowances in excess of depreciation 35 16
Expenses not deductible for tax purposes 137 114
Higher tax rate on overseas earnings 27 21
Losses in overseas subsidiaries 55 71
Unutilised losses 76 -
Use of losses from previous periods - (57)
Adjustment to tax charge in respect of previous period 40 (131)
Exchange differences on inter-company balances - (55)
Loss on disposal of subsidiaries 524 -
Deferred tax unprovided (17) -
Other timing differences 14 (78)
Tax charge on (loss)/profit on ordinary activities 288 489
CSS STELLAR PLC
NOTES TO THE FINANCIAL INFORMATION (continued)
Year Ended 31 December 2003
4. Earnings Per Share
Weighted Basic Adjusted
average per share per share
Earnings no. of shares amount amount
2003 £000 Shares Pence Pence
Attributable to ordinary
shareholders:
(Loss) (4,474)
Adjusted earnings 688
(Loss) / earnings per share 26,088,513 (17.15) 2.64
Dilutive effect of securities
Options, warrants and shares to 806,422
be issued
(Loss) / earnings per share 26,894,935 (17.15) 2.56
2002
Attributable to ordinary
shareholders:
(Loss) (438)
Adjusted earnings 2,600
(Loss) / earnings per share 23,783,309 (1.84) 10.93
Dilutive effect of securities
Options, warrants and shares to 1,830,331
be issued
(Loss) / earnings per share 25,613,640 (1.84) 10.15
The Adjusted earnings per share is based on the (loss)/profit on ordinary
activities after taxation and minority interests, adjusted by the amortisation
of goodwill, losses relating to subsidiaries disposed of and the exceptional
administrative expenses net of taxation at 30%.
5. Intangible Assets
Goodwill Intellectual Total
property
rights
£000 £000 £000
Cost:
At 1 January 2003 42,453 259 42,712
Additions 3,374 104 3,478
Disposals (590) - (590)
At 31 December 2003 45,237 363 45,600
Amortisation:
At 1 January 2003 3,313 106 3,419
Charge for the year 2,283 202 2,485
Disposals (79) - (79)
At 31 December 2003 5,517 308 5,825
Net book value at 31 December 2003 39,720 55 39,775
Net book value at 31 December 2002 39,140 153 39,293
CSS STELLAR PLC
NOTES TO THE FINANCIAL INFORMATION (continued)
Year Ended 31 December 2003
6. Tangible Fixed Assets
Plant & Furniture
Freehold Motor event and
property vehicles equipment equipment Total
£000 £000 £000 £000 £000
The Group
Cost or valuation:
1 January 2003 530 1,822 2,394 5,703 10,449
Translation - - - 55 55
Additions - 255 155 895 1,305
Disposals - (1,261) (2,223) (681) (4,165)
At 31 December 2003 530 816 326 5,972 7,644
Accumulated depreciation:
1 January 2003 30 1,173 723 3,533 5,459
Translation - - - 39 39
Charge for the year 15 265 375 787 1,442
Disposals - (995) (825) (483) (2,303)
At 31 December 2003 45 443 273 3,876 4,637
Net book value:
At 31 December 2003 485 373 53 2,096 3,007
At 31 December 2002 500 649 1,671 2,170 4,990
7. Investments
At 1 January 2003 1,093
Additions during the year:
Business International (HK) 19
Limited
Sportsunite (Asia) Limited - transfer to subsidiary (56)
At 31 December 2003 1,056
CSS STELLAR PLC
NOTES TO THE FINANCIAL INFORMATION (continued)
Year Ended 31 December 2003
8. Called Up Share Capital
The following is the movement in shares, share capital and share premium during in the year:
Date Shares Share Share Share
Price Capital Premium
No. £ £000 £000
At 1 January 2003 25,761,545 12,880 22,976
Acquisition of:
The GEM Group, Inc. 30 July 705,186 2.70 353 1,547
Deferred consideration
for:
The GEM Group, Inc. 30 July 64,771 2.52 32 131
At 31 December 2003 26,531,502 13,265 24,654
Shares to be issued 1 January Movements 31 December
2003 2003
Issued during the year 2,063 (2,063) -
Shares to be issued as deferred 2,035 2,828 4,863
consideration
4,098 765 4,863
CSS STELLAR PLC
NOTES TO THE FINANCIAL INFORMATION (continued)
Year Ended 31 December 2003
9. Reconciliation of Movements in Shareholders' Funds
2003 2002
£000 £000
Loss for the financial year (4,474) (438)
Dividend - (258)
(4,474) (696)
Translation adjustment on opening reserves 18 (78)
New shares issued (including share premium) - 13,347
Costs of issuing shares charged to share premium - (580)
Shares to be issued 2,828 1,166
Net addition to equity shareholders' funds (1,628) 13,159
Opening equity shareholders' funds 41,276 28,117
Closing equity shareholders' funds 39,648 41,276
10. Reconciliation of Operating (Loss)/Profit to Net Cash Inflow
from Operating Activities
Operating (loss)/profit (1,719) 210
Depreciation charge 1,442 1,508
Amortisation of intangible assets 2,485 2,061
Increase in stocks (113) (78)
Decrease in debtors 616 1,210
Increase/(decrease) in creditors 2,312 (3,019)
Cash inflow from operating activities 5,023 1,892
11. Reconciliation of net cash flow to movement in net debt
(Decrease)/increase in cash in period (1,669) 1,779
Cash outflow from increase in net debt and lease financing 2,800 2,854
Net debt eliminated/(acquired) on disposal/acquisition 656 (912)
Change in net debt 1,787 3,721
Inception of finance leases (272) (1,237)
1,515 2,484
Net debt brought forward (3,276) (5,760)
Net debt carried forward (1,761) (3,276)
CSS STELLAR PLC
NOTES TO THE FINANCIAL INFORMATION (continued)
Year Ended 31 December 2003
12. Analysis of net debt
At 1 At 31
January Non-cash December
2003 Cash Flow Disposal items 2003
£000 £000 £000 £000
Cash at bank 5,302 (499) - - 4,803
Overdrafts (2,099) (1,170) - - (3,269)
3,203 (1,669) - - 1,534
Bank debt due after 1 year (1,250) 750 - - (500)
Bank debt due within 1 year (875) 151 - - (724)
GEM loan notes (440) 440 - - -
Echo loan notes (394) 394 - - -
Unsecured loan stock 2004 (82) 12 - - (70)
Guaranteed loan notes (1,947) 257 - - (1,690)
Finance leases (1,491) 796 656 (272) (311)
Total (3,276) 1,131 656 (272) (1,761)
13. Principal Accounting Policies
The principal accounting policies of the Group are set out in the Group's 2002 Annual Report and
Financial Statements. The policies have remained unchanged from the previous Annual Report.
14. Financial Information
The financial information set out in this preliminary announcement does not constitute Statutory
Accounts as defined in Section 240 of the Companies Act 1985. The summarised Balance
Sheet at 31 December 2003 and the summarised Profit and Loss Account, the summarised Cash
Flow Statement and associated notes for the year then ended have been extracted from the
Group's unaudited Financial Statements. Those Financial Statements have not yet been delivered to the
Registrar, nor have the auditors reported on them.
The financial information relating to the period ended 31 December 2002 is extracted from the
statutory accounts, which incorporated an unqualified audit report and which has been filed with the Register
of Companies.
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