RNS Number:1207Y
Proactive Sports Group PLC
29 April 2004
29 APRIL 2004
PROACTIVE SPORTS GROUP PLC
interim Results Statement for the six months ended
29 February 2004
Proposed change of name to Formation Group Plc
Proactive Sports Group Plc ("Proactive" or the "Group"), a leading holistic
sports business, is pleased to announce its interim results for the six months
ended 29 February 2004.
HIGHLIGHTS
Financial
* Turnover increased by 33 per cent to #5.5 million (2003: #4.2 million).
* Operating profit before goodwill amortisation increased to #210,000
(2003: #59,000)*.
* Profit before taxation and goodwill amortisation #210,000 (2003:
#94,000).
* Net cash inflow from operating activities of #0.6 million (2003: cash
outflow of #0.4 million).
* Period end cash position of #0.9 million after payment of #2.1 million in
consideration for acquisitions and taxation of #0.3 million.
* Committed future gross profits of #2.8 million (2003: #3.2 million)
* Underlying IIMR earnings per share of 0.13p (2003: 0.06p). Basic loss per
share 0.27p (2003: loss per share 0.64p).
Operational
* Proposed change of name for holding company, from Proactive Sports Group
Plc to Formation Group Plc.
* Establishment of new Wealth Management Division by the acquisition of
Kingsbridge Asset Management Limited. Excellent progress made in the
integration of the company.
* Initial trading period of new Legal Services joint venture.
* Board enhanced by appointment of Non-Executive with a strong Marketing
background.
* Goodwill amortisation of #0.4 million (2003: #0.7 million).
John Lawrence, Chairman of Proactive, commented:
" The prospects for the Group have moved into a new stage of its development.
The acquisition of Kingsbridge Asset Management and the joint venture with
Couchman Harrington made in the last period have been integrated and their
success has reinforced our strategy of developing the Group as a holistic sports
business.
" All divisions are trading profitably and the prospects for the Group remain
optimistic. The long-term benefits of the implementation of our strategy are
just starting to be derived with the majority of the upside still to be
realised."
Enquiries:
Proactive Sports Group PLC Tel: 01625 536411
Neil Rodford, Chief Executive
Mark Page, Finance Director
ICIS Limited Tel: 020 7628 1114
Archie Berens
Caroline Evans Jones
Chairman's Statement
It gives me great pleasure to present the Group's results for the six months
ended 29 February 2004. We have achieved much in this period mainly through the
implementation of the Group's strategy outlined at the year-end and at flotation
in May 2001. We continue to make good progress in all divisions and believe that
we are very much on track towards achieving our aim of creating Europe's first
business to provide sports clients (both athletes and corporate organisations)
with a holistic service. Our client base has historically been predominately
football orientated. However, as our business has grown, so too has the range of
our clients and we see this trend continuing.
During the period the Board has recently completed a strategic review of the
Group to ensure the Group's business model remained relevant to the current
market and customer base.
This review re-affirmed the Board's view on its long term prospects and
position. Since the Group was brought to market in May 2001, the dynamics of the
industry have changed significantly. Our strategy of delivering a holistic
approach has enabled us to meet the challenges of a developing market, and we
now operate four distinct cost centres and revenue streams.
The Directors believe that as the Group continues to build its business around a
more diverse range of related operating divisions, each individual division
should retain its own brand identity in its chosen field, under a group umbrella
holding company. Whilst there is recognition and awareness to the Proactive
brand, its heritage is linked to the founding entity of the Representation
division. This does not reflect the individual brand values that exist within
the other operating divisions and is considered to be inappropriate in
delivering a clear message to our stakeholders. As a result the Directors
recommend to the Company's shareholders that Proactive Sports Group Plc's name
should be changed to Formation Group Plc.
A notice of extraordinary general meeting is therefore being sent to
shareholders with the Interim Report. The extraordinary general meeting will
take place on the 20 July 2004 at the Company's registered office in Wilmslow,
Cheshire. If thought fit, the Company will pass the resolution to approve the
change of name of the Group to Formation Group Plc as from this date.
Results
Turnover for the period increased by 33 per cent. to #5.5 million (2003: #4.2
million) and the profit before taxation and goodwill amortisation was #210,000
(2003: #94,000). Goodwill amortisation of #442,000 (2003: #735,000) created a
loss before taxation of #232,000 (2003: #641,000). IIMR headline earnings per
share were 0.13p (2003: 0.06p).
The Group had committed future gross profit of #2.8 million (2003: #3.2 million)
at 29 February 2004 of which #1.7 million (2003: #1.9 million) will be
recognised in this financial year ending 31 August 2004.
At 29 February 2004, the Group had cash reserves of #0.9 million, having
generated cash of #0.6 million from operations during the period (2003: cash
outflow of #0.4 million). The Directors are not recommending the payment of an
interim dividend in respect of the financial period, whilst remaining committed
to paying a final dividend for the year at the year end.
Trading
Proactive has four operating divisions trading as individual profit centres. The
divisions of the Group now consist of:
*Sports Marketing, trading as Fox Advertising;
*Wealth Management, trading as Kingsbridge Asset Management Limited;
*Representation, trading as Proactive Sports Management; and
*Legal and Professional services, trading under two arrangments. One as a
joint venture with Couchman Harrington Associates and the other with KPMG in
the UK
We are pleased with the trading performance of each and all are trading in line
with management forecasts at the start of the period. Whilst the sports sector
and football industry still faces many challenges we are increasingly confident
that our unique business model will deliver long term growth and thus
shareholder value.
Sports Marketing - Trading under the name Fox Advertising
Turnover for the period increased by 15 per cent. to #2.9 million (2003: #2.5
million) and the contribution for the division was #0.6 million (2003: #0.8
million). Whilst divisional contribution is slightly down year on year, it is
performing in line with our expectations and with the European Championships in
Portugal in the second period we remain confident of the division's outturn for
the year.
We continue to act for many of the UK's leading brands with regards to their
sports marketing requirements. Short-term objectives are to invest in attracting
the very best people in the industry as we continue to be retained by an
increasing number of companies. During this period we have acted for a large
number of brands in various capacities which demonstrates the scope and scale of
the operation, making the division one of the UK leading sports marketing
agencies in its own right. Our current roster of clients includes Northern Rock,
Proctor & Gamble, EA Sports and Partypoker.com.
Wealth Management - Trading under the name Kingsbridge Asset Management Limited
The acquisition of Kingsbridge Asset Management Limited at the start of the
period on 13 October 2003 has been successfully integrated into the Group in
line with the Board's expectations. Turnover for the period was #1.4 million and
the contribution for the division was #0.3 million. As this is the Division's
first year of trading in the Group there are no comparative figures.
The opportunities that we saw prior to acquisition to expand the business have
proven to be well founded and we remain confident of the division's future
growth prospects. Kingsbridge acts for in excess of 1,600 clients predominantly
being professional football players and coaches based in the UK. Kingsbridge
provides advice to its clients in all areas of wealth management including, debt
management, insurance, tax and investments.
Representation - Trading under the name of Proactive Sports Management
The Representation Division currently acts for 271 players throughout the world
of whom 134 have represented their country at international level. 111 players
are based in the UK, 129 in Europe and 31 in the rest of the world.
The division's turnover was #1.2 million (2003: #1.6 million) and contribution
of #164,000 (2003: #38,000). We completed 33 transfers or contract renewals in
the period, an increase of 22 per cent year on year and in line with our
expectations. Turnover has reduced in the period as a result of the impact of
the disposal of Proactive Sports Management Europe at the end of the last
financial year.
Having 14 licensed agents based out of seven locations, we remain committed to
this division and are becoming increasingly confident about its medium term
prospects after a significant period of instability and uncertainty. We are
committed to attracting and signing the best young football talent in the world.
Legal & Professional Services - Trading under Joint Venture with Couchman
Harrington Associates and a new alliance with KPMG in the UK
This division was created by entering into a joint venture with Couchman
Harrington Associates, a leading specialist sports law practice. This alliance
has given the Group a specialist in-house legal service underpinned by one of
the country's pre-eminent sports law firms. In its first period of trading as
part of the Group, it has generated a small amount of turnover and a small loss.
We anticipate that as the division becomes more established that the range of
legal services offered to both athletes and brands will be expanded and will
encompass areas such as providing advice on athlete image rights, brand and
federation sponsorship, club and federation rights consultancy, conveyancing,
family law and wills.
The Group is also delighted to announce that as from immediate effect we have
agreed a strategic alliance with KPMG in the UK to act as our exclusive
nominated advisor to our athlete client bank in the areas of taxation planning
and management. This is a significant development for our clients and the Group
as a whole as it aligns one of the UK's leading advisors in taxation with our
Wealth Management and Representation divisions. It also once again demonstrates
our desire to work with the best of breeds in their chosen fields. KPMG is the
global network of professional services firms who provide audit, tax and
advisory services. KPMG LLP operates from 22 offices across the UK with 9,000
partners and staff. KPMG recorded a UK fee income of #1,008 million in the year
ended September 2003. KPMG LLP, a UK limited liability partnership is the UK
member firm of KPMG International, a Swiss co-operative.
Employees
The Group currently has over 80 employees in six countries throughout the world.
We are increasingly able to attract the best talent in their respective fields
as the Group develops. Being a service business it remains at the core of our
objectives to attract and retain the very best people. Neil Rodford, previously
Chief Operating Officer, was appointed Chief Executive of the Group at the
commencement of the period. Alec Craig has made a positive impact to the Board
since joining as a Non-Executive on 1 September 2003, and I am delighted to be
able to announce our latest Non-Executive appointment in Jim Smith who comes
with an enviable CV in the Marketing arena to add greater depth and experience
to this area of the Group. I remain excited about the role and committed to
developing the Company's status in a public company environment.
We have also added depth at the middle management level over the last twelve
months in all divisions the benefits of which will be seen in future years. We
continue our progress to a fully rounded corporate entity by adding depth in our
intellectual property as we add additional personnel. The introduction of a
group profit share scheme for our employees at the commencement of this period
for the current financial year can only serve to underpin this.
Outlook
All divisions are trading profitably and the prospects for the Group remain
optimistic. We expect to increase our range of services offered to both athletes
and corporate organisations and their associated brands who wish to be
associated with sport. Trading during the second half of the year is expected to
benefit from the European Championships, particularly in the Sports Marketing
and Representation Divisions. The Wealth Management division continues to
perform in line or slightly ahead of the Board's expectations at the time of
acquisition. The long-term benefits of the implementation of our strategy are
just starting to be derived with the majority of the upside still to be
realised.
John Lawrence
Non-executive Chairman
Consolidated profit and loss account
For the six months ended 29 February 2004
6 months 6 months 6 months Year
ended ended ended ended
29 Feb. 29 Feb. 28 Feb. 31 Aug.
2004 2004 2003 2003
Before
goodwill Goodwill Total
Note (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000 #'000 #'000
Turnover
Continuing
operations 4,146 - 4,146 4,167 9,365
Acquisitions 1,389 - 1,389 - -
Discontinued
operations - - - - 700
--------- --------- --------- --------- --------
3 5,535 - 5,535 4,167 10,065
Cost of (2,043) - (2,043) (1,445) (3,493)
sales --------- --------- --------- --------- --------
Gross profit 3,492 - 3,492 2,722 6,572
Other
Administrative
expenses (3,223) - (3,223) (2,582) (5,011)
Amortisation
of goodwill - (442) (442) (735) (1,261)
Impairment of
goodwill - - - - (12,409)
Depreciation
and other
amortisation (59) - (59) (81) (154)
--------- --------- --------- --------- --------
Administrative
Expenses (3,282) (442) (3,724) (3,398) (18,835)
--------- --------- --------- --------- --------
Operating
profit/(loss)
Continuing
operations (23) (325) (348) (676) (12,177)
Acquisitions 308 (117) 191 - -
Discontinued
operations (75) - (75) - (86)
--------- --------- --------- --------- --------
Operating
profit/(loss) 3 210 (442) (232) (676) (12,263)
--------- ---------
Loss on
disposal of
discontinued
operations - - (182)
--------- --------- --------
Loss on
ordinary
activities
before
interest (232) (676) (12,445)
Finance income
(net) - 35 54
--------- --------- --------
Loss on
ordinary
activities
before
taxation (232) (641) (12,391)
Tax on loss on
ordinary
activities 4 (65) (28) (384)
--------- --------- --------
Loss on
ordinary
activities
after taxation (297) (669) (12,775)
Dividends 5 (10) - (64)
--------- --------- --------
Loss for the
financial
period (307) (669) (12,839)
--------- --------- --------
(Loss)/
earnings per
share
Basic 6 (0.27)p (0.64)p (12.25)p
Diluted 6 (0.27)p (0.64)p (12.25)p
IIMR 6 0.13p 0.06p 0.99p
headline --------- --------- --------
Consolidated statement of total recognised gains and losses
For the six months ended 29 February 2004
6 months ended 6 months ended Year ended
29 Feb. 2004 28 Feb. 2003 31 Aug. 2003
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Loss for the financial period (297) (669) (12,775)
Deemed consideration received
on disposal of discontinued - - (234)
operations
(Loss)/gain on foreign currency
translation (6) 45 60
----------- ---------- ----------
Total losses relating to the
period (303) (624) (12,949)
----------- ---------- ----------
Consolidated balance sheet
As at 29 February 2004
29 Feb. 2004 28 Feb. 2003 31 Aug. 2003
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Fixed assets
Trademarks and other
rights 59 7 49
Goodwill 16,967 25,955 11,628
--------- --------- --------
Intangible assets 17,026 25,962 11,677
Tangible assets 404 618 542
--------- --------- --------
17,430 26,580 12,219
--------- --------- --------
Current assets
Debtors 3,800 3,443 4,597
Cash at bank and in hand 923 1,873 2,730
--------- --------- --------
4,723 5,316 7,327
Creditors: amounts
falling due within one
year (6,511) (3,829) (5,768)
--------- --------- --------
Net current
(liabilities)/assets (1,788) 1,487 1,559
--------- --------- --------
Total assets less
current liabilities 15,642 28,067 13,778
Creditors: amounts
falling due after more
than one year (2,396) (3,046) (1,168)
Provisions for
liabilities and charges - - (1)
--------- --------- --------
Net assets 13,246 25,021 12,609
--------- --------- --------
Capital and reserves
Called-up share capital 1,149 1,044 983
Shares to be issued - 26 26
Share premium account 18 9,529 -
Capital redemption
reserve 61 - 61
Special reserve 6,558 - 6,558
Merger reserve 3,688 13,868 2,896
Profit and loss account 1,772 554 2,085
--------- --------- --------
Equity shareholders'
funds 13,246 25,021 12,609
--------- --------- --------
Consolidated cash flow statement
For the six months ended 29 February 2004
6 months 6 months Year
ended ended ended
29 Feb. 2004 28 Feb. 2003 31 Aug.2003
Note (Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Net cash inflow/(outflow)
from operating activities 7 576 (437) 1,100
Returns on investment and
servicing of finance - (44) (24)
Taxation paid (275) (141) (704)
Capital expenditure and
financial investment 103 (58) (89)
Acquisitions and disposals (2,137) (928) (1,011)
Dividends (74) - -
--------- --------- ---------
Cash outflow before
management of liquid
resources and financing (1,807) (1,608) (728)
Management of liquid
resources 373 316 (373)
Financing - - (23)
--------- --------- ---------
Decrease in cash in the
period (1,434) (1,292) (1,124)
--------- --------- ---------
Reconciliation of net cash flow to movements in net
funds:
Decrease in cash in the
period (1,434) (1,292) (1,124)
Cash (inflow)/outflow from
(decrease)/increase in
liquid resources (373) (316) 373
--------- ---------- ---------
Change in net funds
resulting from cash flows (1,807) (1,608) (751)
New finance leases (43) - -
--------- ---------- ---------
Movement in net funds during
the period (1,850) (1,608) (751)
Net funds at the start of
the period 2,730 3,481 3,481
--------- ---------- ---------
Net funds at the end of the
period 880 1,873 2,730
--------- ---------- ---------
Notes to the Interim Information
For the six months ended 29 February 2004
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 2003 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 2003 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 273(2) or (3) of
the Companies Act 1985.
3. Segment information
6 month 6 months Year
ended ended ended
29 Feb. 2004 28 Feb. 2003 31 Aug.2003
(Unaudited) (Unaudited) (Audited)
Operating Operating Operating
Turnover profit Turnover profit Turnover profit
#'000 #'000 #'000 #'000 #'000 #'000
By class of
business:
Representation 1,230 164 1,646 38 4,509 1,359
Sports Marketing 2,909 625 2,521 777 5,556 1,482
Wealth Management 1,389 308 - - - -
Legal &
Professional 7 (8) - - - -
-------- --------- -------- ---------- -------- ----------
5,535 1,089 4,167 815 10,065 2,841
-------- -------- --------
Common costs (879) (756) (1,434)
--------- ---------- ----------
Profit before
goodwill
amortisation and
impairment* 210 59 1,407
--------- ---------- ----------
* The goodwill amortisation charge of #442k (6 months to 28 February 2003 -
#735k, Year ended 31 August 2003 - #1,261k) relates to the Representation
division #269k (6 months to 28 February 2003 - #682k, Year ended 31 August 2003
- #1,155k), the Sports Marketing division #56k (6 months to 28 February 2003 -
#53k, Year ended 31 August 2003 - #106k) and the Wealth Management division
#117k (6 months to 28 February 2003 - #Nil, Year ended 31 August 2003 - #Nil).
The goodwill impairment charge of #12,409k in the year ended 31 August 2003
relates to the Representation division.
Common costs include the costs of providing security and other costs to a
Director of the Company who is involved in non-defendant proceedings.
The costs for the period were #59,000.
4. The taxation charge at 31.0% of loss, before goodwill
amortisation, is based on the estimated effective rate of tax for the full year
ending 31 August 2004.
5. The dividend in the period relates to the final dividend paid on
shares issued post year end. The dividend was 0.065p per ordinary share and
the number of shares issued post year end ranking for dividend was 15,851,667.
6. (Loss) /Earnings per share are based on the following profits and numbers of shares:
6 months ended 6 months ended Year ended
29 Feb. 2004 28 Feb. 2003 31 Aug. 2003
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Loss for the financial period -
basic and diluted earnings per
share (297) (669) (12,775)
Adjustment for goodwill
amortisation 442 735 1,261
Adjustment for goodwill
impairment - - 12,409
Loss on disposal of discontinued
operations - - 142
----------- ----------- ---------
Profit for the financial period -
IIMR earnings per share 145 66 1,037
----------- ----------- ---------
Number of Number of Number of
shares shares shares
'000 '000 '000
Weighted average number of shares:
Basic and IIMR 110,612 104,448 104,279
----------- ----------- ---------
Diluted 110,933 105,182 105,014
----------- ----------- ---------
Any difference between the weighted average number of shares and diluted
number of shares is due to the potential dilutive effect of the shares to
be issued.
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.
7. Reconciliation of operating loss to operating cash flows
6 months ended 6 months ended Year ended
29 Feb. 2004 28 Feb. 2003 31 Aug. 2003
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Operating loss (232) (676) (12,263)
Depreciation and amortisation 501 816 1,415
Impairment of goodwill - - 12,409
Loss on sale of fixed assets (1) - (4)
Decrease/(increase) in debtors 796 1,071 (689)
(Decrease)/increase in creditors (482) (1,697) 165
Other (6) 49 67
----------- ----------- ---------
576 (437) 1,100
----------- ----------- ---------
8. Acquisition of subsidiary
As detailed in the Annual Report for the year ended 31 August 2003, the
Company acquired Kingsbridge Asset Management Limited on 13 October 2003.
The initial consideration was #1,109,000 in cash and the issue of 15,851,667
new ordinary shares at a price of 6 pence per share. There is a further
deferred payment of #400,000 payable in cash on 1 September 2004, with a
maximum of #3m of deferred and contingent consideration becoming payable
in cash dependent on the trading performance of Kingsbridge Asset Management
Limited in the period to 31 August 2006.
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 29 February 2004 which comprises the consolidated profit
and loss account, the consolidated statement of total recognised gains and
losses, the consolidated balance sheets, the consolidated cash flow statement
and related notes 1 to 8. 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 29 February 2004.
Deloitte and Touche LLP
Manchester
29 April 2004
This information is provided by RNS
The company news service from the London Stock Exchange
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