RNS Number:3420M
Ten Alps Communications PLC
16 June 2003
Ten Alps Communications PLC ("the Group")
Preliminary Results for the year ended 31 March 2003
Group financial headlines 2002/3:
* Cash increased by 31% to #3.3m (2002: #2.5m). Positive cash flow of
#1.3m before #0.5m net cash outflow on acquisitions.
* Revenues increased by 25% to #13.06m (2002: #10.45m)
* EBITDA of #596,000 (2002: #709,000).
* Profit after tax of #88,000 (2002: #444,000), after ongoing goodwill write
off increased by #184,000 to #404,000 (2002: #220,000).
* Two TV production company acquisitions completed for cash.
* No new shares issued.
* Net asset position improved to #6.62m (2002: #6.53m).
Operational Headlines 2002/3:
* Advertising, corporate party and commentator representation divisions
showed strong increases in profits. TV and radio division showed good
profits, plus was boosted by acquired companies' profits.
* Weak performance in corporate events division, as highlighted in interims,
due to economic downturn and the war.
* TV company Brook Lapping (acquired during year) has since produced or had
commissioned programmes for Channel 4, ITV, BBC, Discovery, Five. BAFTA
awards for 'The Fall of Milosevic.'
* New marketing clients included O2, British Airways, Ralph Lauren,
Cacherel, Redken, P&O Ocean Village. Plus over 50 repeat-business clients
including Microsoft, Sony, BBC, Stannah, Sunsail, Corus, EMI.
* Development of TV and events content in which intellectual property
retained.
* Entered animation business with acquisition of Red Welly Studios.
Trading in April and May 2003:
* Advertising agencies and events companies traded above 2002 levels.
* TV/Radio have over 10 shows in production or negotiation, including a
2-year, 4-5 hour Middle East project in the vein of 'The Fall of Milosevic.'
Most will reach the bottom line beyond the current accounting period.
Chairman Brian Walden:
'Create and communicate. That is what we do for our clients. And this year the
Group significantly grew its revenues and its cash - against the difficult
backdrop of a marketing recession.
This year, Ten Alps bought two more TV production companies without issuing any
shares, and still ended up with more cash than it started with.
Our advertising and TV activities were significantly larger than last year. And
we were able to start investing in our own content, which we believe is vital
for long-term growth. In 2003/4 we will make further steps in this direction
through committing cash to content investment with a 2-3 year horizon.
However - as we warned in our interims - higher ongoing goodwill write off
impacted our net profits. These are a near-inevitable consequence of buying
creative companies where the assets are talent-based, and are an accounting
necessity even when (as in this case) the companies are performing acceptably.
This effect will continue.
As we also warned in our interims, one of our events companies was hit by the
exhibition industry downturns in the Summer of 2002, and then again by the
unforeseeable Iraq war.
Meanwhile our overall client base was better than ever in 2002/3 - with a broad
range of blue-chip names. Our production work won awards, loyalty from key
customers, and praise (mostly) from the press.
Our management remained stable, with no significant staff losses. Meanwhile,
our most recently started-up company, political commentator representation
agency Know Comment, went through the roof, with turnover increased more than
tenfold.
For much of the past six months, our cash has constituted over 50% of our market
capitalisation. We believe that this cash gives us the foundation to go after
more growth.'
Chief Executive Alex Connock said:
The run-up to the new Communications Bill is changing the media landscape in our
key areas - like independent TV production. There has been a flurry of venture
capital investment in the sector, based on possible increases in overall
production demand. We believe that the sector will see more consolidation.
With the cash we made this year through doing more business - we too are now
targeting growth in three ways.
First, we are again looking at acquisitions of companies with creative talent
that have been able to also make profits. In both Brook Lapping and Red Welly
we achieved those goals this year - and after a period of consolidation, we are
now actively looking for similar situations going forward.
Second, and in an important strategic evolution, we are now investing more
heavily in our own content, taking a slice of the cash flow and committing it to
intellectual property development projects in events and TV. At Brook Lapping
we are using our money to top up funding from broadcasters so as to retain
rights, and at Red Welly we are investing in childrens' animation. We believe
we have sufficient cash and attractive enough projects for this to now make
sense as a tactical choice. Insofar as it is written off in each period (and
not capitalised) this increased investment will lower profits on the one-year
horizon. Nothing is certain, but the benefits of success would be radically
steeper long term growth.
Third, we are developing commercially. Happily, every one of our operating
companies is still run by the entrepreneurs who started it, and they are
constantly looking for opportunities to drive more business. That might be a
trade relationship which has already yielded British Airways as an events
client. It might be a job (we trust) well done for Stannah which has simply
produced more sales. Or it might be Dr Party's new series of promotional events
around the country for O2. We will continue to help our talented managers in
their sales activities, and look to invest more actively in bringing in the
right new people from the outside.
Financial Director Nitil Patel:
We produce advertising campaigns, TV and Radio programmes and event marketing
which we can sell, here and now, to paying customers. It's not always sexy -
but it is a good starting point and is one reason why we have kept hold of our
cash.
We have not so far capitalised content creation on our balance sheet, and any
content investment has been fully written off in the same year. As investment
is increased, consideration will be given to the appropriate capitalisation of
development costs in accordance with GAAP.
Trading Analysis
Group turnover grew by 25% to #13.06m with acquisitions contributing #1.44m. The
gross profit increased by 16% to #4.28m (2002: #3.68m).
Administrative expenses continue to be controlled and represent 29% of turnover
(2002: 29%). An argument for further acquisitions would be a possible decrease
in the average impact of this cost.
The Group's EBITDA has fallen by 16% to #596,000 (2002: #709,000) reflecting the
adverse conditions in the Events Sector. The profit after tax (PAT) was #88,000
(2002; #444,000) reflecting a goodwill amortisation charge of #404,000 (2002:
#220,000) for the year.
The basic earnings per share fell from 1.36p in 2002 to 0.20p in 2003. Once
accounting for goodwill and profits on disposals of businesses, the restated
earnings per share is 1.11p in 2003 compared to 1.91p in 2002.
Group Balance Sheet
Shareholders funds have increased from #6.53m to #6.62m, reflecting the results
for the year. The profit and loss account shows the deficit being reduced to #
(191,000) (2002: #(279,000)).
The long term debt at the year end reflects loans from the European Union for
development of programmes of #276,000 and finance leases of #71,000 (2002:
#64,000).
Share Price
The mid-market share price of the Group has fluctuated between 10p and 22.5p
during the year. At the yearend the mid-market closing price was 10p giving the
Group a market capitalisation of #4.4m. The group balance sheet as at 31 March
2003 was #6.62m, of which #3.3m was held in cash.
Division Reports
Ten Alps RMA
Advertising agency, based in Fareham, Hampshire
With a number of new client wins and significant projects on behalf of existing
clients, this year the agency has achieved a significant year on year increase
in revenues.
Continuing to outperform its sales targets for Stannah Stairlifts, RMA has
benefited from higher agreed incentive bonuses. The agency has worked with Ski
and Board magazine, with the brief to improve the presentation of the
publication and reposition the magazine - which this year became arguably the
premium ski magazine on the UK market.
We are also moving forward in the holiday and maritime sectors, with work on
behalf of client P&O to advertise the launch of their new cruise liner, Ocean
Village. Following its appointment with the BMF (British Marine Federation),
the agency was briefed to produce the creative work announcing the new venue for
the London International Boat Show at ExCel exhibition centre in London
Docklands.More recently the agency worked in collaboration with a new Ten Alps
member, Red Welly, to produce an animated TV commercial for Computer Quote.
Ten Alps MTD
Advertising agency, based in Edinburgh
Despite a depressed advertising and marketing communications market in Scotland,
the business outperformed its targets, and saw year on year growth in revenues.
MTD positioned itself as a 'Top Ten' Agency in Scotland, according to industry
surveys.
MTD was active internationally for Ahlstrom FiberComposites in Europe, North
America and Asia producing a wide range of brochures and promotional material.
The direct marketing campaign for Kwik Fit Insurance Services developed and
grew. Stewart Milne the house builder invested in a strong advertising
programme, and work for many of Scotland's Further Education colleges continued
to develop, with a TV campaign produced.
MTD is now working closely with our Events team, and for the establishment of a
Scottish branch of Ten Alps sister company Know Comment.
Brook Lapping
TV production company based in London
100% of the equity in leading documentary production company Brook Lapping was
acquired for cash with a self-financing earnout component by Ten Alps in October
2002 (for details of the acquisition, see Ten Alps' website).
In 2002-3 Brook Lapping and its directors have won five awards: the first
documentary award given by the annual television news journalists' annual
conference, News World; the International Current Affairs award of the Royal
Television Society; the Alan Clarke award given by BAFTA for its "outstanding
creative contribution to television"; the Harvey Lee award of the Broadcasting
Press Guild for its "distinguished and innovatory contribution to television
documentary"; and a gold medal from the New York Film and Television Festival
for its programme I MET ADOLF EICHMANN.
Brook Lapping brings a strong history of series documentary production to the
group. Transmitted programmes during the whole of 2002-3 included AVENGING
TERROR (two hours made for Channel 4, PBS and transmitted in 20 other
countries), THE FALL OF MILOSEVIC (three 90 minute programmes transmitted on
BBC2 and sold to 15 countries), and MAGGIE: THE FIRST LADY (four one hour
programmes for ITV and PBS in America.)
The company has a range of new programmes in production and development. It
remains based at its Kentish Town offices, into which Ten Alps Broadcasting has
been merged, so that back office and production synergies can be targetted.
Ten Alps Broadcasting
TV and Radio Production company based in London
Ten Alps Broadcasting has developed in two clear niches. In political
programming, our SUNDAY SERVICE Radio 5 Live programme evolved into our new
co-production with the BBC, the 3-hour, weekly JULIAN WORRICKER SHOW, presenting
a mix of investigative journalism and current affairs. In entertainment, the
company produced a range of shows, such as further series of TASTEFUL TV,
BRITAIN VS THE WORLD and SPY SCHOOL for Bravo and Tech TV in the US, and PRIVATE
EYES for BBC UK Horizons. The company is actively discussing new political and
business formats with broadcasters at present.
In radio music and entertainment programming there was a diverse range,
including the successful ARTHUR SMITH LECTURES reached their 8th series on Radio
2, and a number of music documentaries, such as the ALICE COOPER STORY,
presented by former Sex Pistol John Lydon.
Ten Alps Know Comment
Political commentator representation agency, based in London
Know Comment, a recent in-house startup, increased turnover tenfold. The agency
has expanded its representation of commentators to around 40 people across the
political spectrum from Charlie Whelan to Steve Norris, and Amanda Platell to
Yasmin Alibhai Brown. During the year the company has added several clients to
its list including former Arab League ambassador Ghayth Armanazi, David Seymour,
Roy Greenslade and ex Downing Street supremo James Humphreys.
In addition to the agency side the company has grown its media training and
public affairs portfolio with a range of clients from both public & private
sector. Know Comment has also been active in government communications and this
year did work for the Home Office, Department of Work and Pensions and the
Greater London Authority.
The company has branched into the political and press consultancy sector, and
clients include the Professional Contractors Group.
In the summer of 2003 we will be launching Know Comment Scotland.
Dr Party
Corporate party company based in London
In a tough year in the corporate events sector, Dr Party maintained revenues and
achieved margins improvement this year.
Existing clients such as Sony Computer Entertainment Europe and Microsoft
returned to commission repeat business. Significantly, during this year, Dr
Party has also added several household names to its roster of client brands,
including O2, Courvoisier, Escada and L'Oreal. The cosmetics group
commissioned a launch for Polo Blue, the new fragrance from Ralph Lauren and
another for their hair product brand Redken. The broadcasting group Flextech
commissioned a 10th anniversary party for UK Gold, and launches for Bravo and
FTN.
Dr Party shares an office with Ten Alps Events.
Ten Alps Events
Corporate events company based in London
Ten Alps Events found that amid the general uncertainty in the markets, many
larger brands reconsidered their communication strategies, and spent less on
their corporate communications, conferences and exhibitions.
Events revenue dropped, and the company delivered a six-figure loss, in contrast
to six-figure profits in each of the previous four years.
The Company continued to work with core clients including Ford Motor Company,
EMI, Corus and RMC. It organised a major conference for the Office of National
Statistics, and the launch of the national census in 2002. The company has
also been developing its expertise in other arenas which include consumer facing
PR activities - most notably, for British Airways. The first two months of
2003-4 have seen revenues above the 2002-3 levels for the period.
The company is also looking for real long term value in generating its own brand
of consumer events, such as Firedance and Winter City, and these will be a focus
of investment by the plc in the forthcoming year.
Ten Alps Red Welly
Animation company based in Derby
Red Welly was 100% acquired during September 2002 for cash with an earnout
component related to profitability over the next two and a half years. (For
details, please see the press releases section on the Ten Alps website).
Red Welly has a talented team of designers producing both 2-D and 3-D animated
material, and has worked for a wide range of major corporations (from Virgin to
the Ministry of Defence) mostly as a subcontractor. It has also done a
substantial amount of graphic design and TV titles work for Ten Alps, which it
will of course continue to handle. Furthermore Red Welly had 10 directly
invoiced clients for 2002/3 and has shown a clear ability to generate work from
commercial sectors as well as animation customers such as the BBC. Ten Alps
subsidiaries RMA and MTD have used Red Welly for production work on commercials.
The PLC will this year invest in Red Welly's production of rights-owned
animation projects.
Ten Alps Communications plc
Consolidated Profit and Loss Account
For the year ended 31 March 2003
2003 2002
#'000 #'000
Notes
Turnover - continuing operations 11,622 10446
- acquisitions 1,437 -
13,059 10,446
Cost of sales (8,779) (6,763)
Gross profit 4,280 3,683
Administrative expenses (3,832) (3,079)
Amortisation of goodwill (404) (220)
Operating profit-continuing operations 32 384
-acquisitions 12 -
44 384
Discontinued operations: Profit on disposal of businesses - 41
Profit on ordinary activities before interest 44 425
Net interest receivable 35 52
Profit on ordinary activities
before tax 79 477
Taxation 9 (33)
Retained profit for the year 88 444
Basic earnings per share 2 0.20p 1.36p
Earnings per share before goodwill amortisation
and profit on disposal of businesses. 2 1.11p 1.91p
A statement of total recognised gains and losses is not included as there are
no recognised gains or losses other than those disclosed above.
Ten Alps Communications plc
Consolidated Balance Sheet
As at 31 March 2003
31 March 2003 31 March 2002
#'000 #'000
Fixed Assets
Intangible assets 3,717 3,588
Tangible assets 560 358
4,277 3,946
Current assets
Work in progress 482 44
Debtors 2,215 2,104
Bank 3,339 2,545
6,036 4,693
Creditors
Amounts falling due within one year (3,344) (2,041)
Net current assets 2,692 2,652
Total assets less current liabilities 6,969 6,598
Creditors
Amounts falling due after one year (347) (64)
Net assets 6,622 6,534
Capital and reserves
Called up share capital 883 883
Share premium account 2,999 2,999
Merger reserve 2,930 2,930
Profit and loss account (191) (279)
Equity shareholders' funds 6,621 6,533
Equity minority interest 1 1
6,622 6,534
Ten Alps Communications plc
Consolidated Cash Flow Statement
For the year ended 31 March 2003
2003 2002
#'000 #'000
Net cash inflow from operating activities 1,579 56
Return on investments and servicing of finance 35 52
Taxation (124) (113)
Capital expenditure and financial investment (166) (127)
Acquisitions and disposals (505) (183)
Net cash inflow/(outflow) before financing 819 (315)
Financing
- issue of ordinary share capital - 2,772
- capital element of finance lease rentals (25) (27)
Net cash (outflow)/inflow from financing (25) 2,745
Increase in cash 794 2,430
Reconciliation of net cash flow
movement to movement in net debt
Increase in cash in the period 794 2,430
Cash outflow from decrease in debt and lease financing 25 27
Change in net debt resulting from cash flows 819 2,457
Finance leases (34) (114)
Loans acquired with subsidiaries (414) -
Movements in loans 1 -
Exchange adjustments (39) -
333 2,343
Net funds at 1 April 2002 2,458 115
Net funds at 31 March 2003 2,791 2,458
Notes
1. No final dividend is being proposed
2. Earnings per share
The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders of
#88,000 (2002 - #444,000) and on 44,172,080 shares (2002- 32,676,703 shares) being the weighted average number of
ordinary shares in issue during the year.
The adjusted earnings per share have been provided in order that the effects of goodwill amortisation and profit on
disposal of businesses on reported earnings can be fully appreciated. This is based on earnings calculated as
follows:
2003 2002
#'000 #'000
Retained profit for the year 88 444
Goodwill amortisation 404 220
Profit on disposal of businesses 0 (41)
Profit before goodwill amortisation profit on disposal of businesses 492 623
The calculation is also based on 44,172,080 shares (2002 - 32,676,703 shares) being the weighted
average number of ordinary shares in issue during the year.
The warrants and options granted over ordinary shares are considered to be non-dilutive.
3. The financial information relating to the year ended 31 March 2003 set out above does not constitute
the Company's statutory accounts for that year, but have been extracted from the statutory accounts, which received
an unqualified auditors' report and which have not yet been filed with the Registrar of Companies. The financial
information relating to the year ended 31 March 2002 has been extracted from the 2002 Annual Report and Accounts
which received an unqualified auditors' report and have been delivered to the Registrar of Companies.
4. Copies of the Company's Annual Report and Accounts for 2003 will be sent to shareholders as soon as is
practicable. Copies of this announcement are available at the Company's head office at 10 Blue Lion Place, 237 Long
Lane London SE1 4PU and copies of the Annual Report and Accounts will
also be available on request.
For further information please contact:
Press Contact: Sheila Gunn - mobile 07884 437 934
Office: Alex Connock - office 0207 428 3100
alex@tenalps.tv
Nitil Patel- office 0207 089 3686
nitil@tenalps.com
www.tenalps.com
END
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