Final results
SPECTRUM INTERACTIVE PLC
Preliminary Announcement
Year to 30 June 2008
Spectrum Interactive PLC
30 September 2008
Spectrum Interactive plc (LSE:SIN), the leading provider of public
internet access and payphone services, is pleased to announce its
preliminary results for the year ended 30 June 2008.
Highlights
* Interactive turnover up 39% to �7.9m (2007: �5.7m), of which WiFi
turnover up 132% to �3.7m (2007: �1.6m)
* Interactive business (WiFi and internet desks) now comprises 45%
of Group turnover, up from 32% in 2007 and 21% in 2006
* Total turnover down 2.3% to �17.4m (2007: �17.9m) due to 21%
decline in payphone turnover
* EBITDA up 8% to �3.16m (2007: �2.92m)
* Profit before tax (PBT) of �1.0m (2007: loss of �4.5m)
* Profit before tax, amortisation of goodwill and impairment
charges (PBTA) of �1.2m (2007: �0.6m)
* New projects include the roll-out of WiFi services to over 332
Travelodge hotels, extension of WiFi services to 229 Premier Inn
hotels, new WiFi contracts with Birmingham, Newcastle and
Leeds/Bradford airports, the installation of internet desks and
payphones into Heathrow Terminal 5, and a long-term contract with
Clear Channel for media advertising on the street payphone estate
* Rapid removal of over 1,000 underperforming UK payphones; total
UK payphone units now under 5,000
Lord Young of Graffham, Chairman of Spectrum Interactive commented:
"This has been a year of solid achievement during which we have
continued to build our rapidly developing interactive business. At
the same time, we have undertaken a comprehensive rationalisation of
our UK payphone business. Whilst Spectrum will not be immune to the
impact of an economic slowdown, we are confident that the current
year will deliver profitable growth, and we believe that our focus on
airports and mid-market hotels will make the business reasonably
resilient to any downturn. During the next 12 months, our priorities
will be to continue the rationalisation of the payphone business, the
development of new internet desk and WiFi sites, the development of
new interactive products and services, and selectively the pursuit of
acquisitions which deliver complementary products and locations for
our interactive business."
+-------------------------------------------------------------------+
| Spectrum Interactive plc | Seymour Pierce |
| Tel: 01442 205515 | Tel: 020 7107 |
| Mark Lewarne | 8032 |
| Chief Executive | Mark Percy / Matt |
| Officer | Thomas |
| Philip Congdon | |
| Chief Financial Officer | |
| Daniel Gray | |
| Head of Marketing & Communications | |
+-------------------------------------------------------------------+
CHAIRMAN'S STATEMENT
INTRODUCTION
I am pleased to report our final results for the year ended 30 June
2008. This has been a year of solid achievement during which we have
continued to build our rapidly developing interactive business.
Interactive turnover grew by 39% from �5.7m to �7.9m, within which
growth in WiFi revenues was particularly strong, increasing 132% to
�3.7m. Growth in WiFi was partly driven by the rapid rollout of a
new contract with Travelodge to install WiFi services in all 332 of
their UK hotels.
At the same time, we have undertaken a comprehensive rationalisation
of our UK payphone business, removing 1,300 unprofitable units to
leave an estate of just 5,000 units, mostly in high-revenue street
and airport locations. We also signed a contract with Clear Channel
in October 2007 for exclusive outdoor advertising on our payphone
kiosks. Despite a 21% decline in payphone turnover during the year,
the average monthly revenue per payphone declined by only 3.4%,
underlining the effectiveness of our rationalisation strategy.
We announced last year that it was our intention to exit our German
payphone operation. Unfortunately our efforts to find a buyer for
this business were not successful, and with regret we placed the
German company into administrative receivership in July 2008. We do
not expect this development to materially impact upon the Group's
overall financial performance or position.
Financial Review
Group turnover fell by 2.3% during the period from �17.9m to �17.4m
reflecting the 21% decline in payphone turnover. Gross margin from
interactive activities accounted for 39% of overall gross margin, up
from 30% in the previous year.
Profit before tax (PBT) was �1.0m (2006: loss of �4.5m). PBT,
excluding the prior year impairment charges, doubled from �0.5m to
�1.0m as a result of the reduced dependency on payphone revenues and
robust interactive growth. As in previous years the business was
EBITDA positive, with growth from �2.9m to �3.2m. Capital
expenditure during the year was �2.1m, and net debt increased, mainly
as a result of this capital expenditure, from �4.5m to �5.2m.
Growth Factors
The Company has continued its strategy of using cash from its
payphone business to fuel growth in its interactive business. The
main development project in the year was the rollout of WiFi into
Travelodge hotels. The introduction of an online pre-booking service
for WiFi utilising the Travelodge website has been a great
success.
Additionally we have extended our service to Whitbread who own the
Premier Inn hotel estate. The Spectrum WiFi service is operational
in 229 Premier Inn hotels in the UK and Ireland.
Importantly, both these site owners have continued to acquire and
build new properties in defiance of gloomy economic predictions.
This, along with new contract wins in a number of independent hotels,
is providing Spectrum with good organic growth and we now operate
WiFi in over 900 locations and in excess of 50,000 rooms.
We have continued to win new airport contracts, adding WiFi deals
with Leeds/Bradford, Newcastle and Birmingham to our existing
internet desk service at these airports. We also completed work at
Heathrow Terminal 5 where we operate both internet desks and
payphones. However, growth in our internet desk business has been
handicapped to a degree by various significant airport terminal
reorganisations. Usage on our internet desks is beginning to migrate
away from e-mail to services such as on-line games, social networking
sites and entertainment websites such as BBC i-player. This
development is central to our strategy for growing and increasing the
profitability of this product line.
On the payphone side our rationalisation programme, combined with the
new Clear Channel deal, has engendered a leaner business with
improved margins. We are projecting a further decline in payphone
turnover but envisage this business remaining profitable for the
foreseeable future.
CHAIRMAN'S STATEMENT (continued)
Outlook
We are confident that 2008-9 will deliver profitable growth. Whilst
Spectrum will not be immune from the impact of an economic slowdown,
our focus on airports and mid-market hotels should make the business
reasonably resilient to any downturn.
During the next 12 months, our priorities will be to continue the
rationalisation of the payphone business, the development of new
internet desk and WiFi sites, the development of new interactive
products and services, and selectively the pursuit of acquisitions
which deliver complementary products and locations for our
interactive business.
Our strategy always foresaw that 2008-9 would be a peak year for debt
repayments and in the light of the current situation in the credit
markets we will be managing our cash very carefully, with capital
expenditure expected to be lower than in the previous two years.
In view of the continued evolution and development of the company,
the directors are not recommending the payment of a dividend for the
year.
Finally I extend my thanks and congratulations to the management and
employees for their work this year in achieving the objectives and
targets set out by the business. After a difficult period, we can now
look forward with confidence to delivering further profitable growth
over the coming year and beyond.
LORD YOUNG OF GRAFFHAM
Chairman
CONSOLIDATED INCOME STATEMENT
YEAR TO 30 JUNE 2008
2008 2007
Note � �
Revenue 1 17,436,986 17,850,427
Cost of sales (10,519,367) (10,649,536)
Gross profit 6,917,619 7,200,891
Impairment of German goodwill and - (5,005,065)
plant, property and equipment
Other administrative expenses (5,594,086) (6,310,925)
Total administrative expenses (5,594,086) (11,315,990)
OPERATING PROFIT (LOSS) 1,323,533 (4,115,099)
Investment revenues 6,202 11,422
Finance costs (355,498) (390,897)
PROFIT (LOSS) BEFORE TAX 974,237 (4,494,574)
Tax (551,320) (294,267)
PROFIT (LOSS) FOR THE YEAR 422,917 (4,788,841)
Earnings (loss) per share - 3 1.26p (14.25)p
basic
Earnings (loss) per share - diluted 3 1.24p (14.12)p
EBITDA 3,160,661 2,919,099
PBTA 1,214,883 591,853
EARNINGS BEFORE INTEREST, IMPAIRMENT,
TAX , DEPRECIATION AND AMORTISATION
(EBITDA)
Operating profit / (loss) 1,323,533 (4,115,099)
Add back : depreciation 1,596,482 1,947,771
Add back : amortisation 240,646 81,362
Add back : impairment - 5,005,065
3,160,661 2,919,099
PROFIT BEFORE TAX AND AMORTISATION
(PBTA)
Profit before tax 974,237 (4,494,574)
Add back : amortisation 240,646 81,362
Add back : impairment - 5,005,065
1,214,883 591,853
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
YEAR TO 30 JUNE 2008
2008 2007
� �
Exchange difference on translation of foreign (362,670) 46,594
operations
Net (expense) income recognised directly in (362,670) 46,594
equity
Profit (loss) for the financial year 422,917 (4,788,841)
Total recognised income and expense for the 60,247 (4,742,247)
year
CONSOLIDATED BALANCE SHEET
30 JUNE 2008
2008 2007
� �
NON CURRENT ASSETS
Goodwill 4,198,055 4,198,055
Other intangible assets 1,497,463 1,724,876
Property, plant and equipment 5,421,621 4,921,292
Deferred tax asset 1,649,431 2,200,751
12,766,570 13,044,974
CURRENT ASSETS
Inventories 138,293 29,877
Trade and other receivables 1,841,196 2,782,967
Cash and cash equivalents 963,667 1,336,847
2,943,156 4,149,691
TOTAL ASSETS 15,709,726 17,194,665
CURRENT LIABILITIES
Trade and other payables (2,903,717) (4,730,527)
Current tax liabilities (154,840) (134,260)
Obligations under finance leases (467,362) (336,972)
Overdrafts (864,558) -
Borrowings (1,638,476) (1,215,825)
Provisions (360,980) (446,240)
Deferred revenue (100,363) (48,505)
(6,490,296) (6,912,329)
NET CURRENT LIABILITIES (3,547,140) (2,762,638)
NON-CURRENT LIABILITIES
Borrowings (2,437,729) (3,590,389)
Obligations under finance leases (726,680) (697,173)
(3,164,409) (4,287,562)
TOTAL LIABILITIES (9,654,705) (11,199,891)
NET ASSETS 6,055,021 5,994,774
EQUITY
Called up share capital 339,035 339,035
Share premium account 5,459,283 5,459,283
Own shares (2,553) (2,553)
Share-based payment reserve 118,705 112,555
Retained earnings 140,551 86,454
TOTAL EQUITY 6,055,021 5,994,774
CONSOLIDATED CASH FLOW STATEMENT
YEAR TO 30 JUNE 2008
2008 2007
� �
Net cash from operating activities 2,944,328 2,754,484
Investing activities
Interest received 6,202 11,422
Purchase of plant, property and equipment (2,095,519) (1,749,380)
Purchase of intangible assets (1,194,464) -
Proceeds from the disposal of plant, property - 24,127
and equipment
Acquisitions - (198,110)
Net cash used in investing activities (3,283,781) (1,911,941)
Financing activities
Dividend paid - (406,882)
Repayment of borrowings (1,386,953) (1,273,000)
Repayment of obligations under finance leases (455,411) (162,173)
New bank loans raised 350,000 -
Proceeds from sale and leaseback 550,064 977,190
Proceeds from the exercise of share options - 1,352
Net cash used in financing activities (942,300) (863,513)
Net decrease in cash and cash equivalents (1,281,753) (20,970)
Cash and cash equivalents at the beginning of 1,336,847 1,266,480
the year
Effect of foreign exchange rate changes 44,015 91,337
Cash and cash equivalents at the end of the
year 99,109 1,336,847
(including bank overdraft)
KEY PERFORMANCE INDICATORS
Increase
(decrease)
2006-7 2007-8 %
Payphones
Units installed at year end 8,038 6,715 (16.4%)
Average units earning revenue during 8,747 7,109 (18.7%)
the year
Total revenue � 12,176,619 9,563,948 (21.5%)
Average revenue per unit per month � 116 112 (3.4%)
WiFi
Units installed at year end 621 1,016 +63.6%
Average units earning revenue during 557 884 +58.7%
the year
Total revenue � 1,586,111 3,686,919 +132.5%
Average revenue per unit per month � 237 348 +46.8%
Internet desks
Units installed at year end 1,934 1,968 +1.8%
Average units earning revenue during 1,907 1,917 +0.5%
the year
Total revenue � 4,087,697 4,186,119 +2.4%
Average revenue per unit per month � 179 182 +1.7%
Return on capital employed 7.6% 15.5% +104%
1. Basis of preparation
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 30 June 2008 or
2007, but is derived from those accounts. Statutory accounts for 2007
have been delivered to the Registrar of Companies and those for 2008
will be delivered following the Company's annual general meeting. The
auditors have reported on those accounts; their reports were
unqualified, did not draw attention to any matters by way of emphasis
without qualifying their report and did not contain statements under
s237(2) or (3) Companies Act 1985.
2. Segmental information
The Board considers the primary segments to be the three main
business areas, payphones, internet desks and WiFi. This is the
information that the board itself concentrates on, particularly given
the very different dynamics of the three areas. The secondary segment
split is geographical, i.e. the split between the UK business and
Germany.
Payphones Desks WiFi Other Total
Year to 30 � � � � �
June 2008
Revenue 9,563,948 4,186,119 3,686,919 - 17,436,986
Gross profit 4,098,681 1,528,516 1,290,422 - 6,917,619
Depreciation (636,599) (661,533) (237,900) (60,450) (1,596,482)
Amortisation - (84,228) (156,418) - (240,646)
Segment 3,462,082 782,755 896,104 (60,450) 5,080,491
result
Unallocated (3,756,958)
corporate
expenses
Operating 1,323,533
profit
Interest 6,202
receivable
and similar
income
Interest (355,498)
payable and
similar
charges
Profit 974,237
before tax
Tax (559,581)
Profit after 414,656
tax
Other
information
Capital 116,024 695,310 1,152,878 131,307 2,095,519
additions
Balance
sheet
Assets
Segment 5,741,376 4,982,082 2,613,384 - 13,336,842
assets
Unallocated - - - 2,372,884 2,372,884
corporate
assets
Consolidated 15,709,726
total assets
Liabilities
Segment (4,052,664) (1,137,564) (441,000) - (5,631,228)
liabilities
Unallocated - - - (4,023,477) (4,023,477)
corporate
liabilities
Consolidated (9,654,705)
total
liabilities
2. Segmental information (continued)
Year to 30 June 2007
Payphones Desks WiFi Other Total
� � � � �
Revenue 12,176,619 4,087,697 1,586,111 - 17,850,427
Gross profit 5,048,321 1,518,125 634,445 - 7,200,891
Depreciation (1,159,593) (653,305) (44,230) (90,643) (1,947,771)
Amortisation - (81,362) - - (81,362)
Impairment (5,005,065) - - - (5,005,065)
Segment (1,116,337) 783,458 590,215 (90,643) 166,693
result
Unallocated (4,281,792)
corporate
expenses
Operating (4,115,099)
loss
Interest 11,422
receivable
and similar
income
Interest (390,897)
payable and
similar
charges
Loss before (4,494,574)
tax
Tax (294,267)
Loss after (4,788,841)
tax
Other
information
Capital 330,979 2,032,270 492,181 75,181 2,930,611
additions
Balance
sheet
Assets
Segment 6,832,858 5,456,026 1,746,535 - 14,035,419
assets
Unallocated - - - 3,159,246 3,159,246
corporate
assets
Consolidated 17,194,665
total assets
Liabilities
Segment (4,419,624) (1,866,975) - - (6,286,599)
liabilities
Unallocated - - - (4,913,292) (4,913,292)
corporate
liabilities
Consolidated (11,199,891)
total
liabilities
3. Earnings per share
The calculation of the basic and diluted earnings per share is based
on the following data:
Earnings 2008 2007
� �
Earnings for the purpose of basic and diluted 414,656 (4,788,841)
earnings per share
2008 2007
Number of shares No No
Weighted average number of ordinary shares for
the purpose of basic 33,648,166 33,602,865
earnings per share
Effect of dilutive potential ordinary shares: 468,337 300,512
share options
Weighted average number of ordinary shares for
the purpose of diluted 34,116,503 33,903,377
earnings per share
2008 2007
Earnings per share p p
Basic 1.26 (14.25)
Diluted 1.24 (14.12)
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