RNS Number:3142K
Proactive Sports Group PLC
24 April 2003
PROACTIVE SPORTS GROUP PLC
Interim Results Statement for the six month period to 28 February 2003
Proactive Sports Group PLC ("Proactive" or the "Company"), a leading sports
management and marketing agency, announces its interim results statement for the
six month period to 28 February 2003.
HIGHLIGHTS
> Turnover for the period of #4.2m (2002 - #3.3m)
> Gross profit of #2.7m (2002 - #2.3m)
> Profit before taxation and goodwill amortisation of #0.1m (2002 - #0.7m)*
> Cash reserves of #1.9m (2002 - #1.5m)
> Future income from existing contracts of #3.2m
> Successful integration of two acquisitions - Fox Advertising & ISM
> Strong growth in Sports Marketing and Events divisions
* Goodwill amortisation of #0.7m (2002: #0.6m)
John Lawrence, Chairman of Proactive Sports Group PLC commented:
"Despite a sharp decline in player transfers compared to last year, Proactive
remains committed to expanding its Player Representation and Sports Marketing
divisions domestically and internationally.
In the period, Sports Marketing and Events have shown impressive organic growth,
which has helped to offset the current downturn in trading in Player
Representation. The Sports Marketing division was further strengthened by the
acquisition of Fox Advertising, a perimeter rights and sports advertising
business.
Whilst remaining cautious on the short term prospects in Player Representation
relating to the summer transfer window, the contribution made by Sports
Marketing and Events to the overall results endorses Proactive's business model,
which is underpinned by its three complementary revenue streams."
24 April 2003
ENQUIRIES:
Proactive Sports Group PLC Tel: 020 7457 2020 today
Paul Stretford, Chief Executive 01625 536411 thereafter
Neil Rodford, Chief Operating Officer
Mark Page, Finance Director
College Hill Tel: 020 7457 2020
Clare Warren
Chairman's Statement
Over the period, Proactive has continued to cement its position as a market
leader in its core Player Representation Division both domestically and
internationally. Despite a sharp decline in player transfers compared to last
year, the Board remains focussed on growing its presence and has pursued a
strategy of extending the Division into other key markets.
Moreover, since flotation in May 2001 the Group has actively pursued a policy of
developing its Sports Marketing and Events Divisions, the benefits of which can
be seen in these interim results. The Sports Marketing Division, which has shown
impressive organic growth to date, was further strengthened by the acquisition
of Fox Advertising in September 2002. The Events Division continues to develop
in line with the Board's expectations.
Both Sports Marketing and Events have traded ahead of budget at the interim
stage and helped the Group to offset some of the lost revenue as a result of the
downturn in trading activity in the Player Representation Division. The
continued expansion of these divisions remain key to Proactive's long-term
strategy of reducing the Group's dependence on revenues from the Player
Representation Division.
The performance of the Player Representation Division in the period needs to be
considered in the context of the new FIFA regulations, which were introduced in
September 2001 and came into full effect for the start of the current football
season. The rule changes mean that transfers can only be completed during two
windows per annum. The winter transfer window in January, and the summer
transfer window, between the end of the domestic football season (usually May)
until the last day in August. As a result, the effective trading period for the
Player Representation Division in these interim results has been reduced from a
26 week period to a 4 week period.
Results
The Group's turnover was #4.2m (2002: #3.3m), an increase of 26.2 per cent. on
the prior year period. The Group's gross profit increased by 17.6 per cent. to
#2.7m (2002: #2.3m). Operating profit before goodwill amortisation and
depreciation was #0.1m (2002: #0.7m). Losses on ordinary activities before
taxation were #641,000 (2002: profit #31,000). The decline in profitability was
a result of the limited trading activity in the Player Representation Division
during the period. IIMR earnings per share are 0.06p (2002: 0.45p). At 28
February 2003, the Group has committed future gross profit from existing
contracts of #3.2m, of which #1.3m relates to future financial years and #1.9m
which will be recognised in the second half of the financial year.
Cash flow
The Group had cash reserves of #1.9m (2002: #1.5m) at the end of the period
compared to #3.5m at 31 August 2002. During the period the Group spent #0.9m on
acquisitions (net of cash acquired from subsidiaries) and #0.2m on interest,
taxation and capital expenditure. There has been a #0.4m reduction in cash
reserves due to trading and changes in working capital reflecting the reduced
profitability in the period and the seasonal pattern of the Group's trading,
especially that of Fox Advertising.
Player Representation
Turnover for the Division was #1.6m in the period (2002: #2.4m). The operating
loss after goodwill amortisation was #0.6m (2002: profit #0.7m). This result
reflects the reduced effective trading period and the decrease in the number of
transfers and contract negotiations completed worldwide during the January
transfer window. As an example, there were 57 transfers completed in the
Premiership during the January transfer window compared to 127 in the period
from November 2001 to January 2002. The Group undertook a total of 27 transfers
and contract negotiations in the period (2002: 46).
The Board has pursued a strategy of extending the Player Representation Division
into key markets in Europe and the rest of the world. In September 2002, the
Group acquired certain assets of International Sports Management Group Limited
("ISM"). This acquisition has further strengthened the Group's presence in
Scandinavia, the UK, and the USA. ISM has 105 contracted players including Sami
Hyypia (Liverpool), Stephen Wright (Sunderland), Craig Bellamy (Newcastle
United) and David Thompson (Blackburn Rovers). The Group also opened a new
office in Oslo, Norway as a result of the acquisition.
The Group is also pleased to announce that it has opened two further offices.
The first, opened post period end, is a fully owned direct subsidiary based in
Vincenza, Italy. This office will initially concentrate on developing sports
marketing revenue streams and will actively seek to develop the player
representation side of the business in the medium term. The second has been
opened to service the Group's exclusive agreement with one of Portugal's leading
football representation agencies "Gesti Fute", which represents a number of
exceptional talents including Ronaldo and Quaresma both of Sporting Lisbon who
recently starred in the England v Portugal U21 fixture. The agreement with
"Gesti Fute", initially for a minimum term of three years, allows both parties
to represent each other's clients in their respective territories. The transfer
of Hugo Viana from Sporting Lisbon to Newcastle United is a testament to the
value of this relationship.
The Board believes that the focused development of Central and Southern Europe
is key to the Division's long-term objectives and remains committed to expanding
its presence in France, Germany and Spain.
The Group now has 18 (2002:12) licensed agents operating from ten offices in
eight countries. The Division continues to attract and retain the highest
calibre talent with the development of the youth division already yielding
significant results. Wayne Rooney, Francis Jeffers and James McEveley all play
regularly for their respective Premier League teams. Three players contracted to
the Group made their senior English International debuts during the period:
Francis Jeffers (Arsenal), Jermaine Jenas (Newcastle United) and Wayne Rooney
(Everton). Sean Davis (Fulham) was also called into the squad but did not enter
the field of play. Michael Dawson (Nottingham Forest) has also become an
established member of the England U21 Squad.
The Group's focus remains on attracting and retaining leading talent in order to
support and underpin its position within the sector. Concentrating at the elite
end of the market has been the strategy of the Group since conception. The Board
remains confident of the business model that has been developed for the future,
whilst recognising the challenges that the industry faces in the short to medium
term.
Review of Operations
Given the uncertainties in the football sector and the reduced level of transfer
activity, the Board has undertaken a strategic review of its Player
Representation Division, and its development to date. The result of this review
has been the decision to close the Group's offices in Greece and Nottingham and
reduce the headcount in the Division as a whole. Key parts of the Greek and
Nottingham businesses have been transferred into the Group's other offices. The
Board has also reduced overheads to improve and align the cost base with the
Group's anticipated short-term performance, whilst preserving the strengths that
will underpin the Division's future growth potential. The associated cost
savings with the internal restructuring are approximately #0.4m on an annualised
basis and will be fully reflected in the Division's financial performance for
the year ended 31 August 2004.
Sports Marketing
The Sports Marketing Division has had an excellent trading period. Turnover for
the period was #1.9m (2002: #0.2m) and operating profit after goodwill
amortisation was #0.6m (2002: #0.1m), a significant increase on the prior year
period.
This Division has shown consistent organic growth since flotation. It has
continued to develop into a multi-faceted sports marketing agency and is now a
stand alone business in its own right. The success of Proactive in attracting
elite players via the Player Representation Division will present future organic
growth opportunities as the Group uses its skills and knowledge to leverage the
value of its clients image rights, enabling the Group to further extend its
services to a wider range of blue-chip companies. The Division offers a range of
skills to brand owners ranging from consultancy, rights research and
acquisition, monitoring and evaluation of existing properties owned by a brand,
press and media management, and general project management all based around
football. The acquisition of Fox Advertising in September 2002, a leading
perimeter advertising and sports marketing business, added another service
offering and new revenue stream. This acquisition allows the Group to offer
brand owners the opportunity to purchase perimeter advertising at the majority
of UK Premier League grounds as well as managing the signage at any domestic or
international sporting event. The trading performance of Fox Advertising has
been excellent during the period under review and has exceeded the Board's
expectations at the time of acquisition.
Sports Marketing continues to develop strong links to major brands that operate
in the marketing and sponsorship areas of football. During the period the
Division became the official retained agency of EA Sports following a long
relationship based on individual briefs and project work. The Board believes
this demonstrates the increasing recognition of the Group's specialist knowledge
and skills with regard to sports marketing and football in particular.
This Division is well placed to continue to build on the growth achieved in the
period under review as Proactive is now able to deliver an increased range of
services to a wider blue-chip client base. The Board is confident that the
Sports Marketing Division will continue to be a major contributor to the
profitability of the Group.
Events
Turnover for the period in the Events Division was #0.6m (2002: #0.7m). The
Division generated operating profit after goodwill amortisation of #0.1m. During
the period the Division has focussed on buying its product more effectively. As
a result the operating margin has improved to 13 per cent. compared to 2 per
cent. in the six months to 28 February 2002.
The Division is continuing to broaden its activities into an "ownership model"
which involves organising events for which the Group provide hospitality
services. In the second half of the year the division is looking to organise two
new events, in golf and tennis.
Employees
During the period Charles Green resigned from his position as Chairman of the
Group to enable him to concentrate on his other business interests. Charles was
instrumental in bringing the Group to market and we would like to express our
thanks to him for his valued contribution to the Group. John Lawrence, an
existing Non-Executive director, is acting as Chairman whilst a long-term Non-
Executive Chairman is found. The Board has compiled a short list of candidates
for the Non-Executive Chairman position and expect to make an announcement in
the near future.
The acquisition of Fox Advertising and ISM has brought to the Group experienced
and successful personnel. Their contribution has already been of great benefit.
The Board is conscious of the need to control costs in this area, which is the
Group's largest overhead. To this end there has been a planned and managed
reduction in the number of employees within the Group, the benefits of which
will be borne in future periods.
Outlook
The results for the period have been affected by the downturn in the football
representation market, and the decline in the number of transfers and contract
negotiations in the January transfer window. The Board anticipates a difficult
summer period as clubs look to address their income to expenditure ratios. The
Group therefore remain cautious on the short to medium term outlook and thus the
year on year performance of the Player Representation Division. The Board do
however feel that this presents Proactive with opportunities to reinforce its
position within the football sector, as the industry moves through a period of
consolidation.
The success of the Sports Marketing division has been extremely encouraging.
This period included the successful integration of Fox Advertising into the
Group. The Board is looking to further strengthen this Division in the coming
period with an increased product range being actively sought for the 2003/4
football season via Fox Advertising. As a step to generate further economies of
scale the Sports Marketing and Events Divisions will be merged into one division
in the second half of the current financial year.
Although trading continues to be difficult in the Player Representation
Division, the period has seen the Group take important steps in achieving its
objective of becoming the leading football sports management and marketing
agency within Europe. It has made two important acquisitions and integrated them
successfully into the business during the period. Sports Marketing and Events
have shown significant growth in profitability. The Board continues to remain
positive about their prospects. The Group's cost base is being controlled in a
manner that will preserve the strengths of the business, ensuring the reduction
in overheads will not limit the future growth potential of the Group. The Board
believes that Proactive has the opportunity to continue to reinforce its
position at the forefront of player representation and the sports marketing
industry, which will reflect in long term benefits for stakeholders.
John Lawrence
Chairman
24 April 2003
Consolidated profit and loss account
For the six months ended 28 February 2003
6 months ended
6 months ended 28 Feb. 2002 Year ended
28 Feb. 2003 Restated 31 Aug. 2002
Note (Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Turnover
Continuing operations 2,358 3,302 8,070
Acquisitions 1,809 - -
8 4,167 3,302 8,070
Cost of sales (1,445) (987) (1,790)
Gross profit 2,722 2,315 6,280
Other administrative expenses (2,582) (1,602) (3,505)
Amortisation of goodwill (735) (643) (1,276)
Depreciation and other amortisation (81) (61) (125)
Administrative Expenses (3,398) (2,306) (4,906)
Operating (loss)/profit 3
Continuing operations (1,013) 9 1,374
Acquisitions 337 - -
(676) 9 1,374
Finance income (net) 35 22 41
(Loss)/profit on ordinary activities before taxation (641) 31 1,415
Tax on (loss)/ profit on ordinary activities 4 (28) (208) (802)
(Loss)/profit for the financial period (669) (177) 613
(Loss)/earnings per share
Basic 5 (0.64)p (0.17)p 0.58p
Diluted 5 (0.64)p (0.17)p 0.58p
IIMR headline 5 0.06p 0.45p 1.80p
Consolidated statement of total recognised gains and losses
For the six months ended 28 February 2003
6 months ended 6 months ended Year ended
28 Feb. 2003 28 Feb. 2002 31 Aug. 2002
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
(Loss)/profit for the financial period (669) (177) 613
Gain/(loss) on foreign currency translation 45 (16) 3
Total(losses)/gains relating to the period (624) (193) 616
Consolidated balance sheet
As at 28 February 2003
28 Feb. 2003 28 Feb. 2002 31 Aug. 2002
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Fixed assets
Trademarks 7 5 7
Goodwill 25,955 24,332 23,471
Intangible assets 25,962 24,337 23,478
Tangible assets 618 598 589
26,580 24,935 24,067
Current assets
Debtors 3,443 3,036 3,586
Investments - 7,300 -
Cash at bank and in hand 1,873 1,532 3,481
5,316 11,868 7,067
Creditors: amounts falling due within one year
Borrowings - (7,303) -
Other creditors (3,829) (2,890) (4,288)
(3,829) (10,193) (4,288)
Net current assets 1,487 1,675 2,779
Total assets less current liabilities 28,067 26,610 26,846
Creditors: amounts falling due after more than one year
Other creditors (3,046) (200) (930)
(3,046) (200) (930)
Provisions for liabilities and charges - (3) -
Net assets 25,021 26,407 25,916
Capital and reserves
Called-up share capital 1,044 1,044 1,044
Shares to be issued 26 1,597 297
Share premium account 9,529 9,529 9,529
Merger reserve 13,868 13,868 13,868
Profit and loss account 554 369 1,178
Equity shareholders' funds 25,021 26,407 25,916
Consolidated cash flow statement
For the six months ended 28 February 2003
6 months ended 6 months ended Year ended
28 Feb. 2003 28 Feb. 2002 31 Aug. 2002
Note (Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Net cash (outflow)/inflow from operating activities 6 (437) 468 2,580
Returns on investment and servicing of finance (44) 11 75
Taxation paid (141) (240) (394)
Capital expenditure and financial investment (58) (279) 6,965
Acquisitions (1,396) (324) (337)
Cash (outflow)/inflow before management of liquid resources (2,076) (364) 8,889
and financing
Management of liquid resources 316 772 (90)
Financing - (97) (7,399)
(Decrease)/increase in cash in the period (1,760) 311 1,400
Reconciliation of net cash flow to movements in
net cash/(debt):
(Decrease)/increase in cash in the period (1,760) 311 1,400
Cash outflow from decrease in lease financing - 4 6
Cash (inflow)/outflow from (decrease)/increase in liquid (316) (772) 90
resources
Change in net cash resulting from cash flows (2,076) (457) 1,496
Repayment of loan notes - - 7,300
(2,076) (457) 8,796
Net cash /(debt) at the start of the period 3,481 (5,315) (5,315)
Cash acquired with subsidiaries 468 - -
Net cash /(debt) at the end of the period 1,873 (5,772) 3,481
Notes to the financial statements
For the six months ended 28 February 2003
1. The interim financial statements have been prepared using accounting policies
stated in the Annual Report and Financial Statements for the year ended 31
August 2002 and are unaudited.
2. The comparative figures are an abridged version of the Group's full financial
statements and, together with other financial information contained in these
interim results, do not constitute statutory financial statements of the
Group within the meaning of section 240 of the Companies Act 1985.
Statutory financial statements for the year ended 31 August 2002 have been filed
with the Registrar of Companies for England and Wales and have been reported on
by the Group's auditors. The report of the auditors was not qualified and did
not contain a statement under section 237(2) or (3) of the Companies Act 1985.
3. Segment information
6 months ended 6 months ended Year ended
28 Feb. 28 Feb. 31 Aug.
2003 2002 2002
(Unaudited) (Unaudited) (Audited)
Turnover Operating Turnover Operating Turnover Operating profit
(loss)/profit (Restated) profit
#'000 #'000 #'000 #'000 #'000 #'000
By class of business:
Representation 1,646 (644) 2,416 673 5,876 2,575
Sports marketing 1,937 649 150 94 612 418
Events 584 75 736 15 1,582 80
4,167 80 3,302 782 8,070 3,073
Common costs (756) (773) (1,699)
Operating (loss)/ profit (676) 9 1,374
Operating (loss) /profit is stated after goodwill amortisation.
4. The taxation charge at 30% of profit, before goodwill amortisation, is based
on the estimated effective rate of tax for the full year ending 31 August 2003.
5. Earnings per share are based on the following profits and numbers of shares:
6 months ended 6 months ended Year ended
28 Feb. 2003 28 Feb. 2002 31 Aug. 2002
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
(Loss)/profit for the financial period - basic and (669) (177) 613
diluted earnings per share
Adjustment for goodwill amortisation 735 643 1,276
Profit for the financial period - IIMR earnings per 66 466 1,889
share
Number of Number of Number of
shares shares shares
'000 '000 '000
Weighted average number of shares:
Basic and IIMR 104,448 103,509 104,926
Diluted 105,182 103,981 104,926
An additional measure of earnings per share has been recommended by the
Institute of Investment Management and Research ("IIMR") which requires the
adjustment of earnings to eliminate certain items, adjusted for their tax
effect. The IIMR earnings per share has been presented as the directors consider
that this gives a better understanding of the Group's earnings.
6. Reconciliation of operating (loss)/profit to operating cash flows
6 months ended 6 months ended Year ended
28 Feb. 2003 28 Feb. 2002 31 Aug. 2002
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Operating (loss)/profit (676) 9 1,374
Depreciation and amortisation 816 704 1,401
Loss on sale of fixed assets - 10 8
Decrease/(increase) in debtors 1,071 171 (637)
(Decrease)/increase in creditors (1,697) (412) 431
Other 49 (14) 3
(437) 468 2,580
7. Acquisition of subsidiaries
During the period the Company made two acquisitions. Fox Advertising, a leading
perimeter and sports management business, was acquired on 7 September 2002. On 4
September 2002 the Company acquired certain assets from International Sports
Management Group Limited, an international football representation agency.
The details of the acquisitions are as follows:
Fox Advertising ISM
#'000 #'000
Tangible fixed assets 46 -
Debtors 913 -
Cash 468 -
Creditors less than one year (1,622) -
Provisions 15 -
Net liabilities (180) -
Goodwill 2,112 1,745
1,932 1,745
Satisfied by:
Cash consideration 700 125
Expenses incurred 51 95
Deferred consideration 1,181 1,525
1,932 1,745
The net (liabilities)/assets acquired are stated at provisional fair value to
the Group
8. The policy for recognising revenue from the Sports Marketing division was
changed in the year ending 31 August 2002 so that revenue recognised reflects
the net amount receivable by the Group. The figures for the six months ended 28
February 2002 have been restated to reflect the new policy.
The effects are as follows:
6 months ended
28 Feb. 2002
(Unaudited)
#'000
Profit and loss account
Turnover (528)
Cost of sales 528
Effect on profit for the financial period -
9. Copies of the interim report will be sent to all shareholders. Further copies
will be available upon request for members of the public at the Company's
registered office at 9-13 Manchester Road, Wilmslow, Cheshire, SK9 1BQ.
INDEPENDENT REVIEW REPORT TO PROACTIVE SPORTS GROUP PLC
Introduction
We have been instructed by the company to review the financial information for
the six months ended 28 February 2003, which comprises the profit and loss
account, the balance sheet, the cash flow statement and related notes 1 to 9. We
have read the other information contained in the interim report and considered
whether it contains any apparent misstatements or material inconsistencies with
the financial information.
This report is made solely to the company, in accordance with Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the company, for our review work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are also responsible for ensuring that the accounting polices and presentation
applied to the interim figures are consistent with those applied in preparing
the preceding annual accounts except where any changes, and the reasons for
them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom auditing standards and therefore
provides a lower level of assurance than an audit. Accordingly, we do not
express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 28 February 2003.
Deloitte & Touche
Chartered Accountants
Manchester
24 April 2003
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR UOAWROKRSUAR