Final Results

RNS Number : 2496R
Deal Group Media PLC
28 April 2009
 




Press Release

28 April 2009



Deal Group Media plc


('DGM' or the 'Group')


Final Results 


Deal Group Media plc (AIM:DGM), the independent online marketing group, today announces its final results for the year ended 31 December 2008.  


Highlights


Sales increased by 56% to £14.7 million (2007: £9.4 million)

Gross profit increased by 45% to £4.2 million (2007: £2.9 million)

Increase in gross profit predominantly reinvested in new Asian operations

Strong growth from Group's new Asian operations in Singapore and India

£608,000 provision made against outstanding lease obligations in the UK

Loss from continuing operations increased by 14% to £2.4 million (2007: loss £2.1 million)

Confident of trading profitably by the end of the financial year



Commenting on the results, Adrian Moss, Chief Executive, said: 'I am encouraged by our headline growth in the year, especially as our new Asian operations delivered 75% of our growth at gross profit level. This growth has facilitated our planned investment in the new operations. 


'Our loss from continuing operations is similar to last year before account is taken of a full provision of £608,000 against the remaining lease obligations relating to our former UK premises. 


'The Internet in the Asian marketplace is already significantly larger in terms of users than Europe or the US notwithstanding relatively low penetration. This opportunity, combined with our early establishment of operations in this region, gives us confidence that the Group is in an excellent position to benefit from the inevitable further adoption of digital advertising in Asia and the macro economic upturn.


'I am confident that the Group will be trading profitably by the end of the current period.'



- Ends -



For further information, please contact:


Deal Group Media plc


Adrian Moss, Chief Executive 

Tel: 00 65 6508 9202


www.dealgroupmediaplc.com


Daniel Stewart & Company plc


Paul Shackleton / Stewart Dick

Tel: +44 (0) 20 7776 6550


www.danielstewart.co.uk


Abchurch Communications


Chris Lane / Nick Probert

Tel: +44 (0) 20 7398 7715

nick.probert@abchurch-group.com

www.abchurch-group.com



Chairman's statement

I am pleased to present the results for the financial year ended 31 December 2008. 


Financial Results

Trading

The Group's performance in the period has been encouraging in terms of headline growth. Sales for the period showed a 56% increase to £14.7 million (2007: £9.4 million) and gross profit showed a 45% increase to £4.2 million (2007: £2.9 million).  


The Board is particularly encouraged by the contribution that the new Asian operations have made to our results by delivering 53% of the total increase in sales and 75% of the increase in gross profit. The two territories driving the Group's Asian growth are Singapore and India.  


Despite strong headline growth, results were affected by the slower than anticipated adoption of the Internet as an advertising medium across Asia, the initial impact of the recession causing clients to delay expenditure, and certain client losses in the established DGM Australia business being only partly mitigated by new business.


The cash generated by the increase in gross profit provided funding for the investment in the Group's new operations. The net impact of increased gross profit and increased investment in the operations leaves the contribution from our business units showing a marginal improvement on the previous period. 


Central costs, consisting of Group management, the Group's stock market quotation and other central services including the finance, human resources and technical functions, showed a material reduction of 32% to £1.2 million (2007: £1.8 million). This reduction in central costs has been achieved through cost control, improved support function efficiency and the lower cost of human resource in Singapore.  


Most central costs are incurred in Singapore and it is notable that central costs appear 7% higher that they would otherwise when reported in Sterling due to its material depreciation against the Singapore Dollar during 2008. 


In addition the Group has taken a full provision against outstanding lease commitments relating to the former premises in London amounting to £608,000. The Board believes that while such a provision is appropriate it notes that any future sublet arrangement for these premises would result in revenue recognition in future periods.


As a result of the above the Group incurred a 14% increase in loss from operations of £2.4 million (2007: loss £2.1 million). 


Working Capital

The Group's trading losses, combined with current macro economic factors, have put a strain on working capital. 


Accordingly, throughout 2008 increased emphasis was placed on working capital management with increased attention to credit control and to taking full advantage of suppliers' credit terms where possible.


Since the year-end the Group arranged a sales ledger credit facility with Commonwealth Bank in Australia. It is anticipated that we will utilise this facility through the current period.


A key focus of the Group is to achieve a positive trading cash flow at the earliest opportunity. This ensures sufficient strength in the balance sheet in order to allow the Group to participate fully in the sector and economic upturn. The Board expects to be trading profitably by the end of the current year and are continuously assessing the sufficiency of cash resource.  


The Board is comfortable that, with the plans that are in place, there are sufficient funds to achieve trading breakeven in current markets. The Group cannot discount additional funding being required if opportunities are identified that would lead to a superior market position, and ultimately a better return for shareholders.  


Group Offering

The Group continues to operate three business units covering three distinct areas of supply in the digital advertising sector. These businesses are currently managed along geographical lines but it is anticipated that as the Group evolves a more business unit based management approach will be adopted.


DGM - a specialist online direct marketing company focusing on the delivery of consumers to advertisers through search engine marketing, affiliate marketing and display advertising, servicing both agencies and clients direct.  


This business delivered the bulk of Group sales in 2008, predominantly from its established Australian operation launched in 2003. Over the last two years DGM has expanded into India with a base in Delhi and satellite operations in offices in Mumbai and Bangalore, and the wider Asia region, from a Singapore base. 


The Indian DGM business has been generating consistent contribution since March 2008, less than twelve months post launch. The South East Asia business, which was much later to launch is expected to show positive contribution within the current year.


The DGM business employed fifty-three people as at 31 December 2008.  


Achievements within the year include:  

  • Strategic deal with Omnicom Media Group (OMG), part of the Omnicom Group to power a region wide search engine marketing offering  

  • Widening operating geography with campaigns in 17 markets, up from 6 in December 2007  

  • Recognition as a market leader through various regional industry Awards (e.g. IAB Search Award for Australia and Digital Media Asia Award)  

  • Finalist in the Australian AdNews Employer of the Year Awards 2008  


AKTIV - advertising sales network working with digital media owners to monetise their inventory of advertising slots (banners, emails, SMS) through an in-house team selling to both agencies representing advertisers, and advertisers direct.  


This business was launched in South East Asia from a Singapore base in Q3 2007. Though sales levels are much lower than those of DGM, so too is the cost base which has resulted in the business generating consistent contribution since the second quarter of 2008, less than twelve months post launch. Since that time AKTIV has demonstrated consistent growth.  


The AKTIV business employed eight people as at the 31 December 2008.  


Achievements within the year include:  

  • Delivery of a positive contribution within twelve months of launch  

  • Signing of 30 exclusive representation contracts with major publishers to sell their advertising space e.g. TripAdvisor, Virtual Tourist, Imeem, Crunchyroll, MySpace, Invest Asia, Tribal Football, Reuters and Invest Asia 

  • Signing of strategic deals with several international media buying agencies


Deploy Digital - A digital communications planning and implementation agency.


This business was launched in South East Asia from a Singapore base in Q2 2008 in response to a gap that exists in the communications market and to drive forward digital marketing as a whole. The business also allows for close alignment with clients from an educational and strategic perspective. 


The Deploy Digital business employed three people as at the 31st December 2008.

 

Achievements within the year include:

  • Appointment as digital partners to Nestle (AOR), PepsiCo (AOR) in the Philippines and SingTel in Singapore

  • Project work for J&J, P&G, Merck, and PhilWeb in the Philippines

  • Strategic deal with BBDO Asia Pacific to launch Proximity Deploy, an online media consultancy combining both companies' skill sets to service BBDO Asia Pacific's existing and future client base.


Markets

With an estimated 650 million Internet users (2007: 511 million users), Asia represents over 40% of the world Internet users (2007: 39%) but this percentage has been achieved with only 17.2% of the population online. The Asian Internet user growth in one year alone, from 2007 to 2008, represents 36% of the total estimated current European user base of 390 million. In Europe 48.5% of the population is already online suggesting the growth upside is more limited there than in Asia (Source: Internetworldstats.com).  


In terms of absolute user numbers, future growth prospects of those users, and level of media consumption and interactivity, Asia represents a material opportunity for advertisers. This creates a substantial opportunity for the suppliers of digital marketing related services.  


Forrester Research suggested in a February 2009 paper that 'In 2009 APAC marketing will enter its digital decade'  


The Board estimates that between 2% and 4% of total advertising spend in Asia is allocated to the digital channel whereas in the more mature markets of Europe and North America this allocation often exceeds 15% (UK 17%, Europe 15% and 15% for North America - Source: Internet Advertising Bureau 2008).  


It is generally expected that current low digital advertising spend levels will increase in the same manner as has happened in more mature regions like Europe and North America. Some countries in Asia are expected to grow to as much as 7% of total media spend (Source: Zenith Optimedia 2009).  


Outlook

Over the last eighteen months the Group has established two new operations, in addition to extending an existing successful business from Australia into India and the South East Asia region.  


All operations are either contributing to, or expected to contribute to Group profitability within the current year.


The Board believes that the growth delivered through 2008 in an embryonic marketplace augurs well for growth prospects as the sector evolves.


As an organisation that has ten years experience participating in the evolution of Europe and Australia from the early stages of the advertiser adoption of the digital advertising medium through to the current high user base and high digital advertising spend, the Group is well positioned to benefit from the expected upturn in advertising budgets placed online within the Asian marketplace.  


The Board and senior management believe passionately that Deal Group Media is in the right region with the right business offering and the right management team to deliver value for our shareholders.  


The Board is pleased with progress through 2008, and is enthused by the potential for the future, especially following the two key strategic alliances announced on the Regulatory News Service ('RNS') in the fourth quarter, one between the DGM business and Omnicom, and the second between Deploy and BBDO. Both of these alliances are expected to deliver incremental business within the current period.  


Staff

The Directors wish to extend their gratitude to the worldwide team of management and staff through whose endeavours the Group has proven that Deal Group Media have a collective resilience behind a strong product offering and strategy.  




David Lees

Chairman

27 April 2009


Consolidated income statement

For the year ended 31 December 2008







2008

 Restated

2007


Notes

£'000

£'000

Continuing operations




Revenue

2

14,700

9,432

Cost of sales


(10,511)

(6,487)

Gross profit


4,189

2,945

Administrative expenses




 - amortisation


(274)

(293)

 - depreciation


(148)

(23)

 - shareߛbased payments


(179)

(177)

 - other administrative expenses


(6,021)

(4,598)



(6,622)

(5,091)

Loss from operations

3

(2,433)

(2,146)

Interest received


4

16

Interest payable


(25)

(4)

Share of loss of associates


(343)

(10)

Loss before tax


(2,797)

(2,144)

Income tax


(41)

81

Total loss after taxation from continuing operations 


(2,838)

(2,063)

Discontinued operations

Loss after tax from discontinued operations and its disposal



-


(5,072)

Total loss


(2,838)

(7,135)

Earnings per share




Basic and diluted loss per share


(0.62p)

(1.69p)

Basic and diluted loss per share from continuing operations


(0.62p)

(0.49p)

Basic and diluted loss per share from discontinued operations


-

(1.20p)


Consolidated balance sheet

As at 31 December 2008






2008

2007


Notes

£'000

£'000

Assets




Nonߛcurrent assets




Property, plant and equipment


190

234

Other intangible assets


404

678

Investment in associates


135

478



729

1,390

Current assets




Trade and other receivables


4,230

3,166

Cash and cash equivalents


528

670



4,758

3,836

Total assets

2

5,487

5,226

Equity and liabilities




Equity




Called up share capital


4,537

4,537

Capital redemption reserve


13,188

13,188

Shareߛbased payment reserve


883

704

Share premium account


22,683

22,683

Translation reserve


(470)

54

Retained earnings


(41,660)

(38,823)

Total equity


(839)

2,343

Current liabilities




Trade and other payables 


5,677

2,883

Lease commitments provision


608

-

Corporation tax


41

-

Total liabilities

2

6,326

2,883

Total equity and liabilities


5,487

5,226

These financial statements were approved by the Board, authorised for issue and signed on their behalf on 27 April 2009 by:


Adrian Moss

Director

 

 

Consolidated cash flow statement

For the year ended 31 December 2008






2008

2007



£'000

£'000

Operating activities




Loss after tax


(2,838)

(7,135)

Depreciation


148

320

Amortisation


274

293

Shareߛbased payment


179

177

(Increase)/decrease in receivables


(1,063)

32

Increase/(decrease) in payables


3,402

(938)

Foreign exchange differences 


(524)

72

Finance income


21

(7)

Share of loss from associated undertakings


343

10

Loss on disposal of subsidiary


-

4,804

Tax charge/(credit)


41

(81)

Net cash inflow/(outflow) from operations


(17)

(2,453)

Investing activities




Purchase of property, plant and equipment


(104)

(118)

Purchase of shares in associated undertakings


-

(42)

Consideration for disposal of subsidiary (net of cash disposed)


-

924

Disposal of subsidiary net assets


-

268

Purchase of intangible assets


-

(399)

Interest received


4

21

Net cash (used)/generated in investing activities


(100)

654

Financing activities




Issue of ordinary share capital


-

1,899

Interest paid


(25)

(14)

Net cash (used)/generated from financing activities


(25)

1,885

Net (decrease)/increase in cash and cash equivalents


(142)

86

Cash and cash equivalents at start of period


670

584

Cash and cash equivalents at end of period


528

670


Consolidated statement of changes in equity

For the year ended 31 December 2008










Capital

redemption

reserve

Share based

payment

reserve





Share

capital

Share

premium

Translation

reserve

Retained

earnings

Total

equity



£'000 

£'000

£'000

£'000

£'000

£'000

£'000

As at 1 January 2007

3,816

21,505

13,188

527

(18)

(31,688)

7,330

Exchange difference on translation of foreign operations

-

-

-

-

72

-

72

Net income recognised directly in equity 

-

-

-

-

72

-

72

Retained loss for the year

-

-

-

-

-

(7,135)

(7,135)

Total recognised (expense)/
income for the year

-

-

-

-

72

(7,135)

(7,063)

Share option grants

-

-

-

177

-

-

177

Shares issued in the year

721

1,178

-

-

-

-

1,899

As at 31 December 2007

4,537

22,683

13,188

704

54

(38,822)

2,344

Exchange difference on translation of foreign operations

-

-

-

-

(524)

-

(524)

Net loss recognised directly in equity

-

-

-

-

(524)

-

(524)

Retained loss for year

-

-

-

-

-

(2,838)

(2,838)

Total recognised (expense) / for the year

-

-

-

-

(524)

(2,838)

(3,362)

Share option grants

-

-

-

179

-

-

179

As at 31 December 2008

4,537

22,683

13,188

883

(470)

(41,660)

(839)


Notes to the financial information 

For the year ended 31 December 2008


1    Publication of non-statutory accounts

The financial information set out in this announcement does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985.


The financial information for the year ended 31 December 2008 has been extracted from the group's financial statements to that date which have been prepared in accordance with IFRS as adopted in the EU and which have received an unmodified auditor's report but have not yet been delivered to the Registrar of Companies.  


The financial information for the year ended 31 December 2006 (the comparative financial information) is extracted from the same accounts and differs from the information reported in the 2006 financial statements as the comparative financial information has been restated in respect of conversion to IFRS and in respect of a prior period adjustment.


2    Revenue and segmental information

All revenue relates to the supply of online marketing services. The Directors regard this as a single class of business.


Geographical segment is considered the primary segment with UKAustralia, Asia Pacific and Rest of the World identified as geographical segments.


The 'Central and plc' segment is not allocated to geographical segments as it is represented by the costs of the Company and central overheads. This cannot be specifically allocated to provide meaningful comparison so is deemed by Directors to constitute a separate segment for reporting purposes. 



Australia

Asia

Pacific

Rest of

World

Central

and plc

Total

UK

UK

Associates 


Year to 31 December 2008

£'000

£'000

£'000

£'000

£'000

(Discontinued)

£'000

External revenue

11,391

2,940

369

-

14,700

-

-

Segment result

943

(607)

(228)

(2,946)

(2,838)

-

-

Segment assets

2,854

1,773

125

735

5,487

-

-

Segment liabilities

3,732

1,279

245

1,070

6,326

-

-

Capital expenditure

15

80

9

-

104

-

-

Additions to other intangibles

-

-

-

-

-

-

-

Depreciation and amortisation

38

38

3

343

422

-

-



Australia

Asia

Pacific

Rest of

World

Central

and plc 

Total

UK

UK

Associates


Year to 31 December 2007

£'000

£'000

£'000

£'000

£'000

(Discontinued)

£'000

External revenue

8,489

139

804

-

9,432

11,639

336

Segment result 

914

(709)

(90)

(2,178)

(2,063)

(5,072)

(96)

Segment assets

2,615

393

385

1,833

5,226

2,281

196

Segment liabilities

2,153

211

112

407

2,883

1,757

147

Capital expenditure

25

70

-

-

95

23

30

Additions to other intangibles

-

-

-

399

399

-

-

Depreciation and amortisation

27

7

45

237

316

297

10


3    Loss from operations

Loss from operations is stated after charging: 


2008

2007


£'000

£'000

Foreign exchange gains / (losses)

(478)

5

Amortisation of intangible assets

274

293

Depreciation of property, plant and equipment 

148

320

Auditor's remuneration for auditing of accounts and associates of the Group

68

71

Auditor's remuneration for nonߛaudit services *

45

33

Operating lease rentals

461

249

Lease commitment provision

608

-

Shareߛbased payment costs

179

177

*Auditor's remuneration for nonߛaudit services comprised other services relating to taxation of £42,000 (2007: £15,000) and all other services £3,000 (2007: £18,000).


Copies of the financial statements will be sent to shareholders and are available from the Company's registered office at 19 Cavendish SquareLondonW1A 2AW

 

-End-




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