RNS Number : 8425J
TMN Group PLC
10 December 2008
TMN Group PLC
Interim Results
10 December 2008. TMN Group plc (AIM: TMN, the "Group" or the "Company"), UK's premier digital marketing group, has published its
interims results for the six months to 31 October 2008.
Highlights
* Group revenues, including acquisitions, up 72% to �15.5m (2007: �9.0m)
* Online Research up 30%
* Lead Generation increased to 9% of Group revenue
* Adjusted* profit before tax �0.5m (2007: �1.4m)
* Adjusted* basic earnings per share were 0.5p (2007: 2.2p)
* New �4m banking facilities secured - Group net debt as at 31 October 2008 �2m
* New products and services launched, including new consumer websites and increased Affiliate services
Mark Smith, TMN Chief Executive, commented,
"We have reacted swiftly to the challenges in display advertising in September and October by rebasing our costs and improving our
operational efficiencies; although other channels have performed well, launching new products and services during the first six months of
the current financial year.
"Our increased banking facilities and the Group's enhanced scale based on five business channels - Affiliate Marketing, Email Marketing,
Publishing, Lead Generation and Online Research - as well as the continued demand for online marketing, enables us to be cautiously
confident about the second half when the Group traditionally is stronger."
Enquiries:
TMN Group plc www.Tmnplc.com 020 7440 9310
Peter Harkness, Chairman
Mark Smith, CEO
Craig Dixon, CFO
Investec Investment Banking, NOMAD and broker to TMN 020 7597 4000
Erik Anderson / Ben Poynter
College Hill 020 7457 2815
Adrian Duffield/Rozi Morris
* Adjusted profits before tax excludes share-based payment charges of �11,000 (2007: �15,000) and the amortisation of acquisition
related intangible assets of �1.1m (2007: �182,000).
Overview
The first six months of the current financial year to 31 October 2008 are the first full reporting period for the enlarged TMN Group,
following the acquisitions completed in early 2008 and coincide with a very challenging economic environment. However, despite a sharp
reduction in email display advertising, a diversified revenue and client base helped to mitigate the effects of this downturn which ensured
the Group was profitable and remains both financially and operationally sound.
The Group has recently renewed its bank facilities which now provide TMN with a committed facility of �4m, �2m more than the net debt
at 31 October 2008, along with a further �1m for potential acquisition purposes. The Group has also swiftly cut its cost base and
restructured to maintain its margins, ensuring TMN is well positioned to take advantage of the shifts to and within online advertising and
marketing sectors.
Strategy
The Group is one of the largest online advertising and research suppliers in Europe, offering a multi-channel internet advertising
solution and global online research offering. Over 50 million display adverts are dispatched monthly through a network of highly branded
responsive databases and over 120,000 website partners signed up to display the Group's performance-based adverts.
The acquisitions of TAPPS and AffiliateFuture have increased the Group's range of services. Across the Group, over 40 million visitors
were sent to advertisers during the period generating in excess of �75 million of online sales. Over 2 million prospect leads were sourced
for clients and over 600,000 research survey responses were generated.
Financial Review
For the period ended 31 October 2008 revenues were �15.5m, an increase of 72% compared with 2007 revenues of �9.0m. On a pro forma
basis, 2007 revenues were �17.7m.
Reported Reported Proforma
�'m 2008 2007 2007
Email marketing 5.6 6.3 7.8
Affiliate marketing 7.1 0.6 7.6
Research 1.6 1.2 1.2
Publishing 1.2 0.9 1.1
Total 15.5 9.0 17.7
United Kingdom 13.8 9.0 16.2
Netherlands 1.7 - 1.5
Total 15.5 9.0 17.7
Gross profit increased by 40% to �6.7m (2007: �4.8m), although gross profit margin was 43% (2007: 54%) reflecting the change in revenue
mix, primarily as a result of the acquisition of the lower margin AffiliateFuture in February 2008.
Adjusted operating profit, excluding the impact of the non cash items; share-based payment charges of �11,000 (2007: �15,000) and the
amortisation of acquisition related intangible assets of �1.1m (2007: �182,000), was �0.6m (2007: �1.4m).). The lower operating profit is
due to the dilutive effect of the lower margin affiliate marketing business, higher headcount costs and higher charges for depreciation and
amortisation reflecting investment in infrastructure, internal development and databases.
Adjusted profit before tax was �0.5m (2007: �1.4m) and adjusted basic earnings per share were 0.5p (2007: 2.2p). The reported loss
before tax was �0.7m (2007: profit of �1.2m) and the basic loss per share was 0.6p
Since the beginning of the period, the Group has reduced its operating cost base and expenditure by �1m on an annualised basis which
will have a material impact in the second half of the current financial year, although there will be a one off exceptional restructuring
cost of around �0.3m.
The Group disposed of Sweatband.com Limited, the loss-making E-commerce business acquired as a result of the purchase of Internet
Business Group in October 2008, realising a profit of �0.2m
Net debt at 31 October was �2.0m compared to �0.3m at 30 April 2008. The increase in net debt reflects operating cash flow of �0.6m,
less �0.7m of interest and tax paid, capital expenditure of �1.3m and a net cash outflow from acquisitions and disposal of �0.2m.
The Group has recently renewed its bank facilities resulting in �2m of committed headroom over the net debt position at 31 October 2008.
Operations
Email marketing showed a marked reduction in revenues in September and October 2008 compared to the equivalent period last year.
However, as a result of the diversified revenue and client base, the Group was able to mitigate the effects of this revenue reduction with
several other channels continuing to grow organically.
AffiliateFuture showed growth over the second half of the last financial year and Online Research has taken advantage of the ongoing
migration from marketing to research with revenues increasing by 30% year on year. Lead Generation now represents 9% of the Group's revenue
with over 150 clients utilising these services during the period. Publishing through a combination of growth and new website launches has
grown its revenues by 9%.
Industry wide, display advertising has suffered from the UK media downturn. During the previous half year, finance advertising alone was
worth in excess of �4.5 million - it accounted for around 30% of that figure in the period under review - but the Group has successfully
replaced some lost revenues with other verticals.
The Group's mix of verticals has altered significantly from 12 months ago when finance and automotive advertising accounted for over 27%
of revenues. Today the three most important verticals are travel, at 17% of revenues, and telecoms and finance, at 10% each.
The Group's market leading position has been recognised through a number of awards. EDR won two awards from Connect and Data Strategy
for their work with their bespoke lead generation tool Pure Lead. tmnmedia won the list manager of the year for its work with ASOS at the
Connect Awards and AffiliateFuture won its inaugural award at the prestigious IMA event for its work with Sunshine.
Technology plays an important part in the ongoing success of the Group. Lead generation site, Survey Central, was launched during the
period and Pure Lead, the award winning data cleansing tool, helped generate over 2 million prospect leads for over 150 clients.
AffiliateFuture launched a number of new initiatives to add to its innovative tracking solution, Veracitag, including Project Xenon, which
allows retailers to promote its specific product listings on affiliated websites.
Opportunities to further expand the Group's services within existing and new territories are also being explored. Recent developments
include exploration of opportunities in Benelux, expanding operations from the Netherlands. The Research reach was increased recently to
include a satellite operation in Melbourne, Australia which, with the UK and US offices, now gives 24 hour coverage to a growing list of
online qualitative research customers.
Outlook
The Directors fully recognise the challenges within the marketplace, yet equally consider the Group to be well positioned to take
advantage of the shifts to and within online advertising. The Group has slimmed down its cost base and secured considerable banking
headroom.
Recent reports from the IAB and Enders suggest that growth in 2009 will be challenging for display advertising, although performance
based advertising, which represents over 50% of the Group's revenues through the Affiliate and Publishing channels, offers a manageable and
highly transparent alternative to traditional fixed-rate advertising.
CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED 31 OCTOBER 2008
6 months ended 6 months ended Year
31 October 2008 31 October 2007 ended
30 April
2008
Unaudited Unaudited Audited
Note �'000 �'000 �'000
Revenue 15,463 8,993 22,534
Cost of sales (8,805) (4,157) (10,804)
Gross profit 6,658 4,836 11,730
Administrative expenses (5,741) (3,196) (7,489)
Other administrative expenses
* Amortisation of intangibles (1,671) (423) (1,530)
* Exceptional costs - - (225)
Operating (loss) / profit (754) 1,217 2,486
Profit on disposal of 189 - -
subsidiary undertakings 5 29 42
Interest on bank deposits
Interest payable and similar (111) - (51)
charges
(Loss) /Profit on ordinary (671) 1,246 2,477
activities before tax
Tax 195 (254) (635)
(Loss) /profit on ordinary (476) 992 1,842
activities after tax
(Loss) /earnings per share
Basic (pence) 2 (0.63)p 2.0p 3.3p
Diluted (pence) 2 - 1.9p 3.1p
All amounts relate to continuing operations.
CONSOLIDATED BALANCE SHEET
AT 31 OCTOBER 2008
31 October 2008 31 October 2007 30 April
2008
Unaudited Unaudited Audited
�'000 �'000 �'000
Non-current assets
Goodwill 11,525 6,361 11,370
Other intangible assets 10,640 1,319 11,280
Property, plant and equipment 758 199 948
Investments 108 - 108
23,031 7,879 23,706
Current assets
Inventories - - 277
Trade and other receivables 9,414 6,433 9,450
Cash and cash equivalents 1,015 1,040 2,702
10,429 7,473 12,429
Total assets 33,460 15,352 36,135
Current liabilities
Financial liabilities - bank 3,018 - 3,032
overdraft
Trade and other payables 6,493 3,601 7,438
Current tax liabilities 406 379 924
Deferred tax liabilities - 32 -
Provisions 979 465 1,408
10,896 4,477 12,802
Non-current liabilities
Provisions 786 - 786
Deferred tax 1,738 136 2,046
2,524 136 2,832
Total liabilities 13,420 4,613 15,634
Net assets 20,040 10,739 20,501
EQUITY
Called up share capital 108 105 108
Share premium account 7,748 6,215 7,748
Merger reserve 7,174 - 7,174
Equity shares to be issued 356 356 356
Share option reserve 454 441 443
Other reserves 150 121 146
Retained earnings 4,050 3,501 4,526
Total equity 20,040 10,739 20,501
CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 31 OCTOBER 2008
6 months ended 6 months ended Year
31 October 2008 31 October 2007 ended
30 April
2008
Unaudited Unaudited Audited
�'000 �'000 �'000
Cash flows from operating
activities
Operating (loss) / profit (754) 992 2,486
Adjustments for:
Depreciation 243 53 182
Amortisation 1,671 423 1,530
Interest receivable - (29) -
Taxation expense recognised in - 254 -
profit and loss account
Loss on investments - - 9
Foreign exchange - - 25
Share based payments expense 11 15 27
Increase in inventories - - 32
Increase in receivables (53) (1,899) (2,395)
(Decrease)/ increase in (402) 935 1,405
payables
(Decrease)/ increase in (129) (82) (105)
provisions
Cash generated from operations 587 662 3,196
Interest paid (110) - (51)
Income tax paid (629) (311) (444)
Net cash (utilised in) / (152) 351 2,701
generated from operating
activities
Cash flows from Investing
activities
Interest received 5 29 42
Proceeds from disposal of 149 - -
subsidiary undertaking
Purchases of plant, property (298) (103) (384)
and equipment
Purchases of intangible assets (1,048) (454) (1,567)
Acquisition of subsidiaries (329) (200) (2,539)
Net cash (used in) investing (1,521) (728) (4,448)
activities
Financing activities
Proceeds on issue of shares - - 75 75
share options exercised
Purchase of own shares - (109) (109)
Loan note repaid - (100) (100)
Net cash (used in) financing - (134) (134)
activities
Net (decrease) in cash and (1,673) (511) (1,881)
cash equivalents
Cash and cash equivalents at (330) 1,551 1,551
the beginning of the period
Cash and cash equivalents at (2,003) 1,040 (330)
the end of the period
CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 31 OCTOBER 2008
Called up share
capital
�'000 Share premium Equity shares to be Share option reserve
account issued �'000
�'000 Merger reserve �'000
Other Retained earnings
�'000
reserves �'000
�'000
�'000
At 1 May 2007 105 5,809 - 687 426
121 2,618 9,766
Profit for the financial year - - - - -
- 1,842 1,842
Issue of shares 3 1,864 7,174 (331) -
- - 8,710
Share options exercised - 75 - - -
- - 75
Share options cancelled - - - - (10)
- 10 -
Deferred tax on share options - - - - -
- 165 165
Purchase of own shares - - - - -
- (109) (109)
Net income recognised directly - - - - -
25 - 25
in equity
Share-based payment - - - - 27
- - 27
At 1 May 2008 108 7,748 7,174 356 443
146 4,526 20,501
Net income recognised directly - - - - -
4 - 4
in
Equity
Loss for the period - - - - -
- (476) (476)
Share - based payment - - - - 11
- - 11
At 31 October 2008 108 7,748 7,174 356 454
150 4,050 20,040
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 OCTOBER 2008
1. Basis of preparation
These interim condensed consolidated financial statements are for the six months ended 31 October 2008. They have been prepared in
accordance with IAS 34 "Interim Financial Reporting".
These financial statements have been prepared under the historical cost convention.
These consolidated interim financial statements have been prepared in accordance with the accounting policies used in the year ended 30
April 2008 which are based on the recognition and measurement principles of IFRS in issue as adopted by the European Union (EU).
Nature of operations and general information
TMN Group plc and subsidiaries' ('the Group') principal activities include the provision of online marketing and online market research
services.
TMN Group plc is the Group's ultimate parent company. It is incorporated and domiciled in Great Britain. The address of TMN Group plc's
registered office, which is also its principal place of business, is 69-73 Theobalds Road, London, WC1X 8TA. TMN Group plc's shares are
listed on the Alternative Investment Market of the London Stock Exchange.
TMN Group plc's consolidated interim financial statements are presented in Pounds Sterling (�), which is also the functional currency of
the parent company.
These consolidated condensed interim financial statements have been approved for issue by the Board of Directors on 9 December 2008.
The financial information set out in this interim report does not constitute statutory accounts as defined in Section 240 of the
Companies Act 1985. The Group's statutory financial statements for the year ended 30 April 2008, prepared under IFRS, have been filed with
the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain a statement's under
Section 237(2) of the Companies Act 1985.
2. (Loss) /Earnings per share
The calculation of earnings per share is based on the following results and number of shares:
6 months ended 6 months ended Year
ended
31 October 2008 31 October 2007 30
April 2008
Number of shares Pence per share Number of shares Pence per share Number of
shares Pence per share
Loss '000 Profit '000 Profit
'000
�'000 �'000 �'000
Basic (loss) / earnings per (476) 75,383 (0.63) 992 50,309 2.0 1,842
56,111 3.3
share
Dilutive effect of securities:
Share options - - - - 1,530 -
1,789
Deferred consideration to be
settled in shares - - - - - -
1,176
Diluted (loss) / earnings per - - - 992 51,839 1.9 1,842
59,071 3.1
share
In the period ended 31 October 2008 the group made a loss and therefore the effect of share options and deferred share based
consideration are anti-dilutive and as such no diluted EPS has been presented.
An adjusted earnings per share has also been calculated based on the profit for the period before amortisation of acquisition related
intangibles and share-based payments amounting to a total of �825,000 (2007: �127,000). The adjusted earnings per share is therefore based
on the adjusted net profit for the period of �349,000 (2007: �1,119,000) divided by the weighted average number of shares in issue during
the period of 75,382,759 (2007: 50,309,000) which results in an adjusted earnings per share of 0.46p pence (2007: 2.2 pence). The diluted
profit per share is based on a weighted average number of shares in issue on a fully diluted basis after adjusting for the dilutive impact
of the share options and the deferred consideration to be settled in shares which results in an adjusted diluted earnings per share of 0.45
pence (2007: 2.2 pence)
This information is provided by RNS
The company news service from the London Stock Exchange
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