The AIM-listed Progressive Digital Media Group (formerly TMN Group) that was subjected to a reverse takeover last June (see TMN’s re-emergence on AIM as Progressive Digital Media Group lacks clarity), has taken the opportunity to write down a number of assets ahead of the deal date and will thereby provide the enlarged group with a better starting position for future financial reporting. In a preliminary announcement of the former TMN Group’s results for the year to 30 April 2009 the company disclosed that it had made provisions and other exceptional charges totalling £13 million. The company has also accelerated the timing of charges for database acquisition costs. These various charges contributed to a loss of £16.4 million for the year.
The components of the £13 million charge included impairment provisions of £9.5 million in respect of intangible assets and investments. In addition an extra £2 million provision was made for bad debts. Provisions were also made for reorganisation costs of £0.7 million and onerous lease-related items of £0.8 million.
As to how the component members of the merged group are performing, investors will have to await the publication of the half-year results in January next year. Even then it may be difficult to discern which elements of the group are making a healthy profit and which are not.
The group is now under the dominant control of executive chairman Mike Danson who owns 85.5% of the shares.
© Fintellect Ltd
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For five years the accounts of Leagas Delaney London have shown that it has issued share capital of just over £1,250,000. Such capital is regarded as the bedrock of most businesses and gives suppliers comfort that a company is well funded for the longer term.
It sometimes happens that shares are issued on either a partly paid or unpaid basis, in which case this is made clear in the accounts. No such concerns would have been aroused at Leagas Delaney London because its accounts stated quite explicitly that preference shares with a face value of £1.25 million had been “fully paid”.
So it may come as a surprise to learn that those preference shares have never been paid for. The holder of the shares – parent company Leagas Delaney – simply left the unpaid amount as an outstanding debt.
Now the group has faced up to reality. It has acknowledged that the preference shares had not been paid for. It has explained that the shares were originally issued to provide some security for an amount borrowed by the parent from Lloyds TSB Bank to purchase the Leagas Delaney agencies back from the administrators when they became insolvent at the end of 2003. And as that banking arrangement was extinguished in August 2006, the company has decided to unwind the preference share issue that had never been paid for and to cancel the shares.
So everything’s sorted out – except for the reason why Leagas Delaney London published accounts for several years showing £1.25 million of share capital had been paid for when that was never the case.
Fortunately things have been looking up at Leagas Delaney recently. With partially owned subsidiaries operating in Italy, Czechoslovakia and Germany, its revenues and profits benefitted from favourable foreign currency movements of about £150,000 last year.
Group profits before tax – including those attributable to minority shareholders in each subsidiary – totalled a healthy £775,680. After deducting those minority interests and tax, a little over £260,000 of the group’s profit was left for parent company shareholders Tim Delaney and Margaret Johnson to enjoy.
Ostensibly Lloyds TSB Bank also has an interest in any profits accruing to the parent company’s shareholders as it is entitled to receive £150,000 out of any distributable profits earned after September 2006. Alas it's not too clear whether sufficient of the group’s profits have flowed up to the parent company to enable such a dividend to be paid.
The takeover battle for control of the Canadian listed marketing group Cossette came alive yesterday when Cosmos Capital - lead by Cossette’s co-founder and former vice chairman François Duffar - made a formal unconditional cash offer of Canadian$5.25 for each of the company’s shares that are currently listed on the Toronto stock market.
That would value the company at nearly $88 million now that the special shares previously held by chief executive Claude Lessard and fellow director Pierre Delegrave have also been converted into listed shares.
The first closing date for acceptance of the Cosmos offer is 7 December. Holders of about 37% of Cossette’s listed shares are reported to be committed to the Cosmos offer (and any further increase in the offer) unless it is eventually outbid by another company.
Cossette has responded by saying it will consider the offer in accordance with its obligation to maximise value to shareholders (see also Cossette auction rumbles quietly on). Meanwhile the board recommended shareholders should defer making any decision until it has had an opportunity to fully review the Cosmos offer, compare it to the results of its strategic review process and make a formal recommendation as to the merits of the offer. Cossette added that all the written expressions of interest it had already received from potential acquirers were “financially superior” to the Cosmos bid. Doubtless this news encouraged the price of Cossette shares to rise to $5.90 by close of trading yesterday.
Cossette's UK operations include Miles Calcraft Briginshaw Duffy, Elvis Communications, Band and Brown, Dare Digital and Identica.
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Asia Digital, the financially-stretched AIM-listed digital advertising sales company, has raised an additional £1.2 million in share capital by means of an institutional share placing.
The shares were priced at 0.5p each, compared with a market price of around 0.9p this morning. Some of the additional capital is required to pay outstanding bills from creditors.
The prospect of a share placing (and the potential dilution in value of existing shares) will have been a significant influence on the rapid fall in Asia Digital’s share price this month (see Asia Digital shares fall by another 42%). After the announcement the shares fell to 0.75p.
The company was previously known as Deal Group Media.
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It’s hard to comprehend the language used by Canadian listed marketing group MDC Partners in announcing its results for the nine months to 30 September. Described as “strong results”, the company was in euphoric mood when it reported its figures this morning: "We are thrilled with our best in class financial performance in the third quarter”, the statement said.
So what were the results that gave such a thrill?
The only mildly positive picture was the improvement in operating profit margin for the nine months to 5.3% from 4.3%, but none of that improvement came in the latest quarter. And anyway the margin is roughly half what any self-respecting competitor would have hoped for.
All of this sheds a different and rather less dazzling light on the company’s preliminary announcement last week (see MDC presents partial results to 30 September). And, if the group has ambitions to use its massive increase in borrowing facilities to acquire another business (like Cossette perhaps?), shareholders should think carefully about whether MDC's management has yet proved itself capable of making good money from its existing business and whether it is comfortable with the 11% interest coupon attached to much of its new debt pile.
WPP Group revenues jumped by 24.5% in the nine months to 30 September as the company continued to benefit from the acquisition of Taylor Nelson Sofres last year. But among all WPP’s business categories, its research activities (which it now calls “consumer insight”) still showed the biggest decline in revenues on a like-for-like basis when compared with the same period last year, albeit the rate of decline has slowed.
Favourable currency movements made the biggest contribution to the 24.5% revenue growth. They contributed 16.5%.
Taking the business as a whole, like-for-like revenues for the nine months (ignoring acquisitions and currency movements) have fallen by 8.4% compared with the same period last year, and fell by 8.7% in the latest quarter. This bigger decline in the latest quarter is consistent with the trend already identified at Interpublic and Publicis (see Currency movements and digital business minimises Publicis revenue fall) and does not bode well for a swift economic recovery.
Publicis Groupe was able to restrict its revenue decline to 2.3% in the first nine months of 2009 with the help of a €130 million windfall from favourable currency movements and a sizeable contribution from its digital activities.
But despite positive noises about future prospects, Publicis revenues in the latest quarter suffered a bigger fall than the average for the year to date. A similar trend emerged from Interpublic this morning when it reported a 16.2% fall in revenue for the year to date and a bigger fall in the latest quarter. So it may be premature to assume the worst of the recession has passed.
Notwithstanding Interpublic's further revenue fall, it was able to report a modest post-tax profit for ordinary shareholders of $17.2 million for the third quarter, reversing the loss-making trend experienced in the first six months. The turnround benefitted from shedding staff at a severance cost of $95 million over the nine month period. Whether profits also benefitted from the $82.8 million spent on professional fees in the period remains to be seen.
Shares in Asia Digital lost another 42% of their value in stock market today after some six million shares changed hands. This is the second large fall in share price in the last week (see Asia Digital shares slide by a further 30%).
The AIM-listed digital advertising sales company previously known as Deal Group Media has seen its share price fall 60% so far this month - from 2p on 1 October to 0.80p today - reducing the company's market value to £4 million.
Last month the company reported a further post-tax loss of £1 million for the half year to 30 June, increasing the deficiency of shareholders' funds to £1.9 million (see Asia Digital reliant on Eastern promise after reporting another loss).
MDC Partners, the Canadian listed marketing group that owns Crispin Porter & Bogusky, announced on Saturday (23 October) that it had successfully raised US$225 million in the form of senior unsecured notes repayable in 2016 and also entered into a new 5-year US$75 million revolving credit facility. The new funding arrangements replace previous borrowing facilities of US$185 million. See MDC Partners to pay high price for increased debt after refinancing.
Favourable currency movements helped reduced the fall in revenue at the French-based global marketing group Havas for the nine months to 30 September. Revenues were E1.026 billion - a fall of 8.2% from the corresponding period last year, much less than the 15.4% fall experienced by Omnicom Group. However, if currency movements are excluded, both companies suffered almost similar revenue declines - 9.5% at Omnicom and 9.2% at Havas. Nevertheless currency movements have a real impact on profits and cannot be ignored. Indeed, just as Havas benefited from favourable movements in the period to 30 September, it has warned that it expects its results for the final quarter of 2009 to suffer from the recent sharp fall in the value of the US dollar against that of the euro. The Havas performance in the most recent quarter showed little change from earlier periods. © Fintellect Ltd
Favourable currency movements helped reduced the fall in revenue at the French-based global marketing group Havas for the nine months to 30 September.
Revenues were E1.026 billion - a fall of 8.2% from the corresponding period last year, much less than the 15.4% fall experienced by Omnicom Group. However, if currency movements are excluded, both companies suffered almost similar revenue declines - 9.5% at Omnicom and 9.2% at Havas.
Nevertheless currency movements have a real impact on profits and cannot be ignored. Indeed, just as Havas benefited from favourable movements in the period to 30 September, it has warned that it expects its results for the final quarter of 2009 to suffer from the recent sharp fall in the value of the US dollar against that of the euro.
The Havas performance in the most recent quarter showed little change from earlier periods.
The publicly listed European digital marketing and technology group LBi International reported a surprisingly disappointing performance for the third quarter of 2009 and year to date.
Sales were down by 15.2% (or 13.2% after excluding adverse currency movements) for the nine months and operating profits were wiped out by a £63 million write-down of past acquisition costs attributed mainly to goodwill arising from the Framfab merger. Restructuring costs also added nearly £4 million to the operating burden.
The outcome for the nine months to 30 September was a £63.1 million loss attributable to LBi shareholders compared with a £4.7 million post-tax profit in the same period last year. The group barely broke even in the latest quarter, even before the big goodwill write-off.
Without the goodwill write-off and restructuring charges, the group's operating profit margin for the nine months would have been almost unchanged at 9.8%, still low by industry standards. Staff and freelance costs continued at a high level, accounting for 72% of revenue over the nine month period. Nevertheless chief executive Luke Taylor claimed operating performance had improved in the third quarter.
Movements in currency exchange rates continued to eat into profits earned by Omnicom from the United Kingdom and continental Europe as the group today revealed a continuing double digit fall in revenues and profits for the third quarter and for the year to date.
Roughly 40% of the $165 million fall in post-tax profits for the nine months was due to adverse currency movements. But even without that damage, profits would have been down by 9.5% over the period.
The decline in revenue and profit in the latest quarter was similar to that in earlier quarters this year, although there appears to have been a very small reduction in the rate of fall. That may be explained by the fact that the comparative figures would also have been affected by the economic downturn by this stage in 2008.
Omnicom's operating profit margin in the latest quarter was 10.4% compared with 11.3% in the same quarter last year and 11.5% for the current year to date. So the group is clearly feeling the pinch between what clients will pay and the cost of delivering the services.
Profits have also been hit by rising interest costs - up from $50.4 million in the nine month period last year to $72.1 million in the latest nine months.
Contrary to earlier indications Canadian listed marketing group MDC Partners will be paying interest at 11% on the new loan notes it is issuing - much higher than the coupon on some of the debt it is replacing. At the same time the total face value of the notes on offer has been increased from US$200 million to $225 million (see Cossette auction rumbles quietly on).
The new debt issue is intended to allow MDC to repay existing borrowings as well as to meet obligations to acquire further stakes in various companies where it has made partial investments - such as an $8.5 million commitment arising on the purchase of the final tranche of shares in Crispin Porter & Bogusky.
MDC is also hoping to arrange an additional US$75 million revolving credit facility which is likely to carry an interest rate of about 3.25% above the London Interbank offered rate for Eurodollar deposits, although any drawdown on this facility will be subject to quite tight restrictions.
The maximum borrowings now available are expected to total US$300 million, compared with a $185 million borrowing capacity previously, but it will clearly place an even heavier burden on the group's income and balance sheet (see MDC presents partial results to 30 September).
Shares in the AIM listed digital advertising sales company Asia Digital Holdings lost 30% of their already diminished value today as 800,000 of them were dumped on the stock market over several hours. By the end of the day the share price had fallen to 1.13p, valuing the whole company at £7.4 million.
Last month the company - previously known as Deal Group Media - reported a further post-tax loss of £1 million for the half year to 30 June, increasing the deficiency of shareholders' funds to £1.9 million (see Asia Digital reliant on Eastern promise after reporting another loss).
Optimistic noises made by Next Fifteen Communications Group in August were proved well founded today when the group reported a profit for the year to 31 July that was better than some had expected (see Next Fifteen makes optimistic noises while predicting a one-off dent to profits).
After suffering exceptional costs related to forward currency contract losses, restructuring initiatives, an aborted deal in China and a takeover approach from Chime Communications, it would not have been surprising if shareholders' profits after tax had fallen to around £1 million from last year's £3.9 million.
However, good fortune was smiling on the group as its foreign currency contract losses were lower than expected and the profit available to Next Fifteen shareholders reached £1.9 million after tax. If the exceptional costs were to be ignored, the post-tax profit would have been slightly ahead of last year.
To celebrate the result and use up some of the group's healthy cash resources, Next Fifteen announced today that it is acquiring a further 30% stake in the US public policy consulting business 463 Communications for which it will pay $1.4 million in cash and a further £0.7 million in shares.
Next Fifteen became a 40% partner in the 463 business in 2006 for a nominal consideration. The latest deal brings its stake up to 70% for a total outlay of $2.1 million, valuing the entire business at $7 million. The 463 profit before tax in the year to 31 July was $0.96 million, suggesting Next Fifteen's cumulative stake has cost it about seven times last year's pre-tax profit (equivalent to roughly 10 times last year's post-tax profit).
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