Perform Group plc

 

Full year results for the 12 months ended 31 December 2011

 

53% revenue growth in 2011; strong momentum for 2012

 

Key Financial Metrics	2011 FY	2010 FY	Change
Revenue (£'000)	103,194	67,430	53%
Adjusted EBITDA (£'000)*	18,474	10,345	79%
Adjusted profit after tax (£'000)*	14,692	10,133	45%
Profit after tax (£'000)	3,717	9,448	-61%
Adjusted earnings per share (basic and diluted) (pence)	6.3	4.5	40%

 

* 'Adjusted EBITDA' excludes exceptional costs relating to the IPO (£3.2m; 2010: £0.6m) and acquisitions (£1.8m; 2010: £0.1m), share based payments relating to the Group's Growth Share Option Plan (£4.8m; 2010: £nil) and other share based payment charges (£0.3m; 2010: £0.1m), and profits from joint ventures (£nil; 2010: £0.5m).  Adjusted profit after tax excludes these items and also excludes the amortisation of acquisition intangibles (£0.9m; 2010: £0.4m)

 

 

Key Operational Metrics	2011 FY	2010 FY	Change
Watch&Bet licencees	35	23	+12
Live Watch&Bet events streamed	11,376	8,129	40%
ePlayer territories	20	13	+7
ePlayer total video on demand streams viewed (millions)	3,606	1,068	240%
ePlayer average annual sell through rate (%)	23	22	1pp
ePlayer average monthly unique users (millions)	80	25	220%
Total video and data subscribers at year end (thousands)	375	249	+126

 

Excellent full year performance with strong growth across all business areas:

 

·     Increase in Watch&Bet licensees to 35 (2010: 23); further two new licensees signed in 2012; 11,376 live events streamed in the year, ahead of 10,000 target.

 

·     Strong Q4 ePlayer growth in audience to 1.1 billion streams and sell through rate to 35% (up from 19% in Q3).  ePlayer is now no. 1 in the latest comScore online sport video rankings in UK, France, Turkey and Italy, no. 2 in Spain and the US and no. 3 in Germany.

 

·     29 LIVESPORT.tv channels now live; launch of range of Goal.com data subscription products in Middle East, Africa and Asia.

 

·     Strong growth in technology and production revenues driven by new customers including Premiership Rugby, Al Jazeera Sport and the Norwegian Professional Football League.

 

Focused on our strategy for growth and expansion:

 

·        Significant increase in our digital rights portfolio with over 11,000 live events now under contract for 2012.  New rights acquired in the year included: WTA, Copa America, Turkish Super Lig and World Snooker, with the majority on multi-year deals.

 

·        Continued geographical expansion with the ePlayer launched in seven new territories, including Korea, Turkey and Japan; 70% of Group revenues now from outside UK.

                                             

·        Continued development of new products and new platforms; new commercial arrangement signed with Google for the development of branded YouTube channels for LIVESPORT.tv and Goal.com brands and launch of a range of Google Chrome applications for Goal.com and a number of clients.

 

·        Total acquisition related spend during the year of £25.1m relating to the acquisitions of Goal.com (£18.0m), Spox media GmBH and mediasports Digital GmbH in the important German market (combined initial consideration of £3.0m), the purchase of the non-controlling interests in WatchandTrade Ltd (£0.5m) and Global Sports Media B.V (£3.3m) and the purchase of an additional 11% in Sportal Australia Pty Limited (£0.3m).

 

Good start to 2012:

 

·        2012 has started well with January and February showing strong year-on-year revenue and EBITDA growth.

 

·        Significant visibility over full year revenues, with in excess of £90m already contracted.

 

·        Remain on-track to deliver strong full year revenue and EBITDA growth in line with the Board's expectations.

 

Oliver Slipper, joint Chief Executive Officer of Perform Group plc commented:

 

"These results highlight the strong operational and financial performance we have delivered since coming to market.  We've reported substantial increases in revenues and earnings whilst significantly expanding our rights portfolio, licensees, video streams and subscriber numbers.

 

"The opportunities for long-term sustainable growth are significant. The exciting developments in mobile and connected technology, innovation in digital sports rights and international expansion offer ever greater prospects.  We will continue to augment this with strategic acquisitions, consolidating our position as the world's leading digital sports business.

 

"We enter this year with increasing momentum driven by our operational performance and the structural drivers in our core growth sectors.  We have significant visibility over full year revenues, with in excess of £90m already contracted, and remain confident that we will deliver strong full year revenue and EBITDA growth in line with the Board's expectations."

 

 Analyst presentation

 A presentation for analysts will be held at 9.00 a.m. today at UBS (1 Finsbury Avenue, EC2M 2AN), which will be webcast live via www.performgroup.co.uk/Investors. 

 

Enquiries

 

Perform Group plc                                                                              +44 (0) 203 372 0600

Oliver Slipper, Joint CEO

David Surtees, CFO

 

Tulchan Communications                                                                  +44 (0) 207 353 4200

Stephen Malthouse

James Macey-White

 

About Perform

 

Perform is a global market leader in the commercialisation of multimedia sports content across multiple platforms.  Perform owns one of the largest portfolios of digital sports rights in the world, through contracts relating to more than 200 sports leagues, tournaments and events.  The management is focused on driving profitable, organic, earnings growth through leveraging its content across new digital platforms, new products and across new geographies, taking advantage of favorable technology trends such as growth in digital media consumption and online video viewership.  The Company will look to supplement this organic growth with strategic acquisitions.

 

Perform provides live sports video to online bookmakers via its Watch&Bet service.  It also provides sports news and sports data to customers including, global media companies, mobile operators, telecommunications companies and broadcasters through its OMNISPORT news and GSM data services.

 

Perform generates video advertising and sponsorship revenues through the sale of pre-roll video advertisements on its video on demand (VOD) broadcast platform the ePlayer.  The ePlayer is embedded on the websites of leading publishers and sports portals in 20 territories and includes a range of locally relevant sports video clips.  Users are presented with a video advert prior to viewing this selected content.

 

Perform generates display advertising and sponsorship revenues through the sale of display advertisements on the Group's websites including Goal.com, which is the world's largest football website, and by acting as an advertising sales agent for a network of third party sports websites.

 

Perform generates revenues from its subscription product LIVESPORT.tv and from the management of over 100 internet delivered video subscription products on behalf of football clubs (e.g. Chelsea Football Club), sports bodies (e.g. ATP World Tour) and broadcasters (e.g. Fox Sports).

 

Perform generates technology and production revenues from designing, building and managing websites, mobile service and products (e.g. for Chelsea Football Club); ingesting, encoding and streaming live video and video on demand content (e.g. for Abu Dhabi Media Company); and the filming and production of live and non-live content (e.g. Premiership Rugby).

BUSINESS REVIEW

Content distribution

 

The Group provides live sports video, sports news and sports data to customers including online bookmakers, global media companies, mobile operators, telecommunications companies and broadcasters.

 

Content distribution had a very strong year with revenues increasing by 58% to £64.9m (2010: £41.1m).  The majority of this growth has been driven by increased licence fees from sales of the Watch&Bet service, reflecting the new three year licensing period which was set out in detail at the half-year, and new licensees added. 

 

During the year 12 new licensees have been sold the service, increasing the total number of licensees to 35 (2010: 23) and, in 2012 to date, a further two licensees have been added.   The majority of new licensees of the service have licensed single or multiple European territories.  This trend has continued the geographical diversification of Watch&Bet revenues, with the largest territory, the UK, representing 7% of Group revenues and no other territory representing more than 4% of Group revenues. 

 

During 2011, we grew our rights portfolio by over 40%, delivering 11,376 live events. New rights added include World Snooker, Copa America, a number of football leagues (including Turkish and Swedish) and a range of new WTA and ATP 250 and ATP Challenger tennis tournaments, and remain on track to deliver over 12,000 rights in 2012 and 14,000 in 2013. The majority of these rights are on multi-year and multi-platform (web, mobile and connected TV) deals.

 

We remain positive about the potential impact on the service of regulation within the European sports betting sector, with good revenue momentum in recently regulated markets, such as France, with new market entrants licensing the service and established operators acquiring more content.  Given the geographical diversity of our revenues and the long term nature of our contracts (with most contracts running until the end of 2013) the Directors believe the Group is not exposed to material financial risk arising from regulatory change.

 

Discussions continue with new potential licensees in Europe, Asia, Australia and Latin America and we remain confident we will continue to add new customers to the service throughout 2012.

 

Revenues from the Group's other content distribution products such as OMNISPORT, GSM and Watch&Trade have all experienced strong growth across the year.  In December, we acquired the non-controlling interests of WatchandTrade Ltd and Global Sports Media B.V.

 

Advertising and sponsorship (video)

 

The Group generates video advertising and sponsorship revenues through sales of pre-roll video advertisements on its video on demand (VOD) broadcast platform the ePlayer.  The ePlayer is embedded on the websites of over 1,000 publishers and sports portals in 20 territories and includes a range of locally relevant sports video clips.

 

Advertising and sponsorship (video) revenues increased by 129% to £6.8m (2010: £3.0m), with significant Q4 on Q3 increases in revenues (over 52%) and the headline sell through rate (35% in Q4 compared to 19% in Q3), continuing the strong momentum built up throughout the year.  The ePlayer network grew considerably with the number of live territories increasing to 20.  These new territories, in particular the US, together with improved sales in the United Kingdom and Italy, delivered the majority of the year-on-year growth. 

 

The table below separates the ePlayer business into three territory categories; the United States and the United Kingdom, FIGS (France, Italy, Germany, Spain) and the rest of the World (including Turkey, India, South Korea).  The territory of a stream and a unique user is determined by geographic location of the unique user and is based on data from Omniture. 

 

	Quarter ended 31 December 2011	Quarter ended 30 September 2011	Quarter ended 30 June 2011	Quarter ended 31 March 2011
Number of territories	20	19	18	17
Total for all territories
Total streams (millions)	1,090	985	946	585
Total streams sold (millions)	378	188	170	85
Average monthly unique users (millions)	94	86	80	58
Sell through rate (%)	35%	19%	18%	15%
United States and United Kingdom
Total streams (millions)	393	254	223	130
Total streams sold (millions)	279	147	100	52
Average monthly unique users (millions)	37	27	25	17
Sell through rate (%)	71%	58%	45%	40%
FIGS
Total streams (millions)	363	407	463	257
Total streams sold (millions)	83	32	58	27
Average monthly unique users (millions)	22	24	29	19
Sell through rate (%)	23%	8%	13%	11%
Rest of World
Total streams (millions)	334	324	260	198
Total streams sold (millions)	16	9	12	6
Average monthly unique users (millions)	35	35	26	22
Sell through rate (%)	5%	3%	5%	3%

 

Advertising and sponsorship (display)

 

The Group generates display advertising and sponsorship revenues through sales of display advertisements on the Group's websites including Goal.com, Soccerway.com and Sportal.com.au and by acting as an advertising sales agent for a network of third party sports websites.

 

Advertising and sponsorship (display) revenues increased by 90% to £7.0m (2010: £3.7m).  £4m of this related to revenues generated on Goal.com (representing ten months of post-acquisition revenues).  Display revenues on the UK third party network declined year-on-year as the Group focused on sales of its wholly owned network and the ePlayer.

 

Subscription

 

Perform generates revenues from the management of over 100 internet delivered video subscription products on behalf of football clubs (e.g. Chelsea Football Club), sports bodies (e.g. ATP 1000 Series) and broadcasters (e.g. Fox Sports).  The Group also has a number of its own products which generate subscription revenues such as its LIVESPORT.tv, Goal.com and Sportal Scoreboard products.

 

Subscription revenues increased by 19% to £9.5m (2010: £8.0m).  This increase was primarily due to the launch of LIVESPORT.tv channels and subscriber growth to the Group's own and client branded products, helped by the launch of new mobile and tablet services for Goal.com and clients such as FoxSoccer.tv and Tennistv.com.  Total subscribers grew to 375,000 from 249,000 in 2010, with SMS and data subscriptions being the principal driver.  Subscriber churn remains low with rates of less than 3.7%.

 

Technology and production

 

Perform generates technology and production revenues from designing, building and managing websites, mobile service and products (e.g. for Chelsea Football Club); ingesting, encoding and streaming live video and video on demand content (e.g. for Abu Dhabi Media Company); and the filming and production of live and non-live content (e.g. Premiership Rugby).

 

Technology and production revenues increased by 28% to £15.0m (2010: £11.7m). This increase was driven by new customers including Al Jazeera Sport and the Norwegian Football League and delivery of a significant number of tablet and smartphone applications to a range of new and existing clients.

 

Prospects and outlook

 

We believe that demand for the our products and services will continue to increase as a result of international expansion, increasing penetration of residential broadband connections and smart phones and the impact of digital technology on the sales and marketing strategies of the sports and media industries. These industries will need innovative solutions to generate new revenue streams and protect existing revenues.

 

Perform is well placed to deliver these solutions and we will continue to look for strategic acquisitions to strengthen our position as the world's leading digital sports business.

 

The Group has made a positive start to 2012, with January and February showing strong year-on-year growth in revenues, EBITDA and operational metrics in line with expectations.  We have significant visibility over full year revenues, with in excess of £90m already contracted, and remain confident that we will deliver strong full year revenue and EBITDA growth in line with the Board's expectations.

 

KPIs

	Quarter ended 31 Dec 2011	Quarter ended 30 Sept 2011	Quarter ended 30 June 2011	Quarter ended 31 Mar 2011	Quarter ended 31 Dec 2010	Quarter ended 30 Sept 2010	Quarter ended 30 June 2010	Quarter ended 31 Mar 2010
Content distribution
Watch&Bet licensees at quarter end	35	34	30	26	23	23	23	23
Watch&Bet live events streamed during the quarter	2,766	3,256	2,586	2,768	2,018	2,436	1,695	1,980
Omnisport licensees at quarter end	97	93	80	59	48	33	31	31
GSM data licensees at quarter end	173	161	147	136	132	102	102	100
WatchandTrade licensees at quarter end	54	47	44	42	35	31	25	19
Advertising and sponsorship
ePlayer launch territories at quarter end	20	19	18	17	13	12	10	6
Video on demand streams viewed across the ePlayer network during the quarter (millions)	1,090	985	946	585	282	346	222	217
Average monthly unique users across the ePlayer network during the quarter (millions)	94	86	80	58	26	28	24	23
Subscription
Total web TV, smartphone application and SMS subscribers at quarter end (thousands)	375	358	323	248	249	236	199	200
Livesport.tv channels live at quarter end	29	26	25	14	1	1	1	1

 

To assist in understanding these results included below are quarterly revenue comparatives for 2010 and 2011. 

 

2011 Revenue

 

	Quarter to 31 December £'000	Quarter to 30 September £'000	Quarter to 30 June £'000	Quarter to 31 March £'000
Content distribution	18,281	17,387	14,803	14,472
Subscription	2,668	2,461	2,233	2,173
Technology and production	4,861	3,857	3,192	3,043
Advertising and sponsorship (video)	2,735	1,799	1,377	881
Advertising and sponsorship (display)	2,152	1,901	1,827	1,091
Total	30,697	27,405	23,432	21,660

 

2010 Revenue

 

	Quarter to 31 December £'000	Quarter to 30 September £'000	Quarter to 30 June £'000	Quarter to 31 March £'000
Content distribution	11,539	10,853	10,060	8,637
Subscription	2,315	2,134	1,823	1,755
Technology and production	3,577	3,076	2,709	2,319
Advertising and sponsorship (video)	649	572	909	841
Advertising and sponsorship (display)	938	1,052	833	839
Total	19,018	17,687	16,334	14,391

 

 

FINANCIAL REVIEW

 

Income Statement

 

The Group's total revenue increased to £103.2m in 2011, an increase of £35.8m (53%) from £67.4m in 2010. Adjusted EBITDA (defined as earnings before interest, tax, depreciation and amortisation and excluding amounts in respect of the Group's joint ventures, share based payments and exceptional items) increased by 79% to £18.5m in 2011 from £10.3m in 2010. The Group's profit after tax decreased to £3.7m from £9.4m in 2010 primarily due to exceptional items relating to the Group's listing on the London Stock Exchange (£3.2m) and in relation to the acquisition of subsidiaries (£1.8m) and exceptional share based payment charges (£4.8m) offsetting the increase in underlying EBITDA.

 

Revenue

 

The following table sets out Revenue for the years ended 31 December 2010 and 2011:

 

	Year to 31 December 2011 £'000	Year to 31 December 2010 £'000
Content distribution	64,943	41,089
Subscription	9,535	8,027
Technology and production	14,953	11,681
Advertising and sponsorship (video)	6,792	2,971
Advertising and sponsorship (display)	6,971	3,662
Total	103,194	67,430

 

Refer to the Business Review for an explanation of the movements in Revenue.

 

Cost of sales

 

The following table sets out Cost of Sales for the years ended 31 December 2010 and 2011:

 

	Year to 31 December 2011 £'000	Year to 31 December 2010 £'000
Content costs	35,831	21,340
Publisher shares	2,715	2,500
Technical and software fees	6,221	4,842
Production	6,947	2,205
Other	1,386	1,107
Total	53,100	31,994

 

Cost of sales increased from £32.0m in 2010 to £53.1m, an increase of £21.1m (66%). The increase during the period was primarily a result of the increased volume and mix of content acquired by the Group to support its product and revenue development.

 

Content costs increased by £14.5m (68%) to £35.8m due to the increased number and mix of sports events and rights acquired.

 

Publisher shares increased by £0.2m (8%) to £2.7m due to the increased advertising and sponsorship sales under which publishers are contractually entitled to a share.

 

Technical and software fees increased by £1.4m (29%) to £6.2m due to the increased number of end users, customers, new products and new services.

 

Production costs increased by £4.7m (214%) to £6.9m due to a number of new production contracts, the costs of multi-lingual commentary to the Watch&Bet service, editorial content produced for goal.com and editorial content for the new suite of OMNISPORT products.

 

Gross profit

 

The Group's gross profit increased from £35.4m in 2010 to £50.1m in 2011, an increase of £14.7m (42%). Gross profit margin was 49% in 2011 compared to 53% in 2010. This decrease was as a result of the Group acquiring additional rights primarily for the ePlayer in the US and the launch of the new suite of OMNISPORT products which impacted gross margin in the first half of 2011.

 

Administrative expenses

 

The Group's administrative expenses increased from £28.5m in 2010 to £46.3m in 2011, an increase of £17.8m (62%). This increase was primarily a result of increased staff employed (from an average of 382 in 2010 to an average of 590 in 2011) and their related costs as well as higher accommodation costs as the Group expanded its leased property space and higher depreciation and amortisation charges.

 

The average cost of an employee decreased from £51,000 in 2010 to £41,000 in 2011.  Administrative expenses in 2011 included the impact of exceptional items of £5.0m relating to the Listing and acquisitions (2010: £0.7m) and share based payment charges of £5.1m (2010: £0.1m). 

 

Adjusted EBITDA

 

Adjusted EBITDA is defined as earnings before interest, tax, depreciation and amortisation and excludes amounts in respect of the Group's joint ventures, share based payments and exceptional items and is considered by the Directors to be a key measure of its financial performance. Adjusted EBITDA increased from £10.3m in 2010 to £18.5m in 2011, an increase of £8.2m (79%).  This increase was as a result of the improved financial and operational performance of the Group.

 

Exceptional items

 

During the year the Group incurred exceptional costs of £5.0m (2010: £0.7m) relating to professional fees in respect of the Group's corporate and strategic development including the Listing (£3.2m) and the acquisitions of goal.com and Spox.com, mediasports Digital and the acquistions of the non controlling interests in Watchandtrade and GSM (£1.8m). These costs were considered exceptional by the Directors as they were items that were material in size and were unusual and infrequent in nature.

 

Share based payments

 

The Group incurred share based payment charges of £5.1m (2010: £0.1m) relating to the Group's Growth Securities Ownership Plan (GSOP) (£4.8m) and the Group's ongoing Performance Share Plan (£0.3m) for senior management. 

 

 Amortisation and depreciation

 

Amortisation and depreciation increased from £2.2m in 2010 to £3.7m in 2011, an increase of £1.5m (68%). The increase was primarily due to the increased investment in the Group's technical infrastructure and software development.

 

Amortisation of acquisition intangibles increased from £0.4m in 2010 to £0.9m in 2011.  The increase of £0.5m was due to the amortisation of acquired goal.com intangibles.

 

Finance costs

 

The Group's net finance costs increased from £0.1m in 2010 to £0.3m in 2011.  Investment income of £0.8m (2010: £nil) primarily related to bank interest receivable on funds raised during the Group's IPO.  These were offset by finance costs of £1.1m (2010: £0.1m) primarily relating to bank interest on the Group's borrowings.

 

Taxation

 

The Group recognised a tax credit of £2.2m in 2010 compared to a credit of £0.2m in 2011. The decrease in the tax credit was primarily due to the recognition of a deferred tax asset in the prior year.

 

Profit after tax

 

Profit after tax decreased from £9.4m to £3.7m in 2011, a decrease of £5.7m (61%). Adjusted profit after tax, excluding exceptional items, share based payments, profit from joint ventures and amortisation of acquisition intangibles increased from £10.1m in 2010 to £14.7m in 2011.

 

Earnings per share

 

Adjusted basic and diluted earnings per share are based on profit attributable to equity holders of the parent plus exceptional items, share based payments and amortisation of acquisition intangibles divided by the adjusted weighted average number of ordinary shares outstanding in 2011 in the period between Listing and 31 December 2011.

 

Adjusted earnings per share (basic and diluted) grew by 40% to 6.3p (2010: 4.5p).

 

Statutory earnings per share reflects the Group's statutory profit and was based on the average number of ordinary shares outstanding in 2011 of 218 million under the Group's post-Listing capital structure (2010: 197 million).  Statutory earnings per share (basic and diluted) decreased to 1.4p from 4.6p. 

 

Dividend

 

The Directors do not recommend the payment of a dividend (2010: £nil).

 

Acquisitions/Listing

 

In February the Group acquired the entire share capital of Goal.com (Holdco) S.A. for $30m. Goal.com is the biggest football website in the world. The acquisition was majority financed by a £17m term loan facility.

 

In April the Group successfully completed its listing on the London Stock Exchange, raising net primary proceeds of £69.7m to pursue strategic acquisitions to accelerate the Group's development.

 

In December the Group acquired two related German businesses Spox Media GmbH and mediasports Digital GmbH for initial cash consideration of €3.65m with a maximum deferred cash consideration of €12.35m payable. Contingent cash consideration of €4.2m has been provided.

 

In December the Group acquired the non controlling interests in both WatchandTrade Limited for £0.5m initial cash consideration with a maximum deferred consideration of £5.85m payable and Global Sports Media B.V. for €4.3m.

 

 Capital expenditure

 

During the year the Group continued to capitalise expenditure on additions and improvements to its technical software as new functionality and services were developed. Internal staff costs of £2.1m were capitalised in 2011 (2010: £1.0m). Further external development and software costs were capitalised of £2.2m (2010: £1.0m).  Therefore total intangible asset additions were £4.3m (2010: £2.0m).  This included investment in enhancements to the ePlayer, subscription and Watch&Bet products.

 

The Group continued its investment program to update and improve the equipment used to support its technical hardware platform and invested £4.0m during 2011 (2010: £3.1m).

 

Of the total £8.3m (2010: £5.1m) invested relating to technical software and hardware, £4.9m (2010: £3.3m) related to investment in new products, £2.1m (2010: £1.0m) related to additional supply side capacity, £0.9m (2010: £0.5m) related to back office and £0.4m (2010: £0.3m) related to renewals.

 

In addition, the Group invested £0.4m in leasehold improvements and furniture and fittings (2010: £0.8m).

 

Cash flow and net debt

 

Cash generated from operating activities was £15.2m (2010: £12.6m).

 

Cash flow used in investing activities was £34.1m (2010: £6.4m) of which £7.8m (2010: £5.8m) related to purchases of fixed assets, £25.1m (2010: £0.7m) related to acquisitions of subsidiaries and non-controlling interests and £1.8m (2010: £nil) related to exceptional costs attributable to acquisitions.  These cash out flows were offset by £0.5m of investment income (2010: £0.1m).

 

Cash flow from financing activities was £77.9m (2010: £0.3m) of which £69.7m (2010: £nil) represented net IPO proceeds, £16.6m (2010: £nil) represented borrowings (net of fees) offset by £3.2m (2010: £nil) related to exceptional costs attributable to the IPO.  The cash inflows were offset by £4.2m related to borrowings capital repayments and £1.0m (2010: £0.3m inflow) related to finance lease capital repayments and interest charges, net of proceeds from sale and finance lease backs.

 

Closing cash was £75.9m (2010: £16.9m) and closing net funds were £62.9m (2010: £16.4m).

  

Risks

 

The Directors believe that the Group's success in creating value for its customers' digital rights, the length and nature of existing contracts and its international customer base will protect future revenues.

 

To deliver and expand its range of services the Group needs to invest continuously in software development and technical hardware to remain able to provide an innovative, scalable technical platform and to deliver new and improved products to market and its customers.  The Group plans to maintain its investment to deliver new products and services. 

 

The licensing of sports rights is critical to the success of the business.  Such rights are usually licensed for periods of between three to five years.  In some instances, rights are acquired for periods longer than the relevant revenue contracts.  The Directors monitor the level of this contract exposure and endeavour, wherever possible, to progress revenue contract renewal negotiations well before the contracts are due to terminate, thus limiting the financial risk of such exposure.  Revenue contracts are also worded to ensure rights may be replaced with rights of similar value if a rights renewal is unsuccessful during the period of the relevant contract.

 

While global economic conditions impact the sports and betting industries, they have not been, and are not anticipated to be, as affected by the economic conditions as have many other sectors and thereby such conditions have not, to date, had a detrimental effect on the Group's operations and revenue.  The Director's believe that the Group's success in creating value for its customers' digital rights, the length and nature of its existing contracts and its international customer base will limit any material effect that potentially detrimental global economic conditions may have on its revenue over the medium term.

 

Going concern

 

The Group had cash balances of £75.9m at the year end (of which £75.4m was unrestricted) and £13.0m of debt relating to borrowings of £12.5m and finance leases of £0.5m.  Having reviewed cash flow forecasts and budgets for the year ahead the Directors have a reasonable expectation that the Group has sufficient resources to continue in operational existence for the foreseeable future.  For this reason, they continue to adopt the going concern basis in preparing the accounts.

 

 

 

Consolidated income statement

Year ended 31 December 2011

All results relate to continuing operations	Notes	2011 £'000	2010 £'000
Revenue	2	103,194	67,430
Cost of sales	2	(53,100)	(31,994)
Gross profit		50,094	35,436
Administrative expenses	2	(46,343)	(28,519)
Share of results of joint ventures		-	516
Group operating profit		3,751	7,433
Analysed as:
Adjusted EBITDA* (excluding joint ventures, exceptional items and share‑based payments)		18,474	10,345
Share of results of joint ventures		-	516
Adjusted EBITDA* (excluding exceptional items and share‑based payments)		18,474	10,861
Exceptional items	3	(4,998)	(724)
Exceptional share-based payments (GSOP)	6	(4,770)	-
Other share-based payments	6	(352)	(111)
EBITDA*		8,354	10,026
Amortisation and depreciation		(3,748)	(2,227)
Amortisation of acquisition intangibles		(855)	(366)
Group operating profit		3,751	7,433
Loss on disposal of joint ventures		-	(5)
Investment income		834	47
Finance costs		(1,099)	(122)
Group profit before tax		3,486	7,353
Taxation	4	231	2,095
Group profit for the year		3,717	9,448
Profit attributable to:
Equity holders of the parent		3,129	9,051
Non controlling interests		588	397
		3,717	9,448
Basic earnings per share
Basic (pence)	5	1.4	4.6
Adjusted (pence)	5	6.3	4.5
Diluted earnings per share
Diluted (pence)	5	1.4	4.6
Adjusted (pence)	5	6.3	4.5

 

*EBITDA is defined as earnings before interest, tax, depreciation and amortisation. Adjusted EBITDA (excluding exceptional items and share based payments) is defined as earnings before interest, tax, depreciation and amortisation excluding amounts in respect of the Group's share based payments and exceptional items. Adjusted EBITDA (excluding joint ventures, exceptional items and share based payments) is Adjusted EBITDA excluding the Group's share of results of its Joint Ventures. EBITDA and both measures of Adjusted EBITDA are considered by the Directors to be key measures of financial performance.

Adjusted basic and diluted earnings per share are based on profit attributable to equity holders of the parent plus exceptional items, share based payments and amoritsation of acquisition intangibles divided by the weighted average number of ordinary shares outstanding in the period between when the Group listed on the London Stock Exchange and 31 December 2011.

 

 

Consolidated statement of comprehensive income

	Year ended 31 December 2011
					2011 £'000		2010 £'000
Profit for the year					3,717		9,448
Other comprehensive income:
Exchange differences on translating foreign operations					23		130
Total comprehensive income for the year					3,740		9,578
Total comprehensive income for the year attributable to:
Equity holders of the parent					3,152		9,151
Non controlling interests					588		427
					3,740		9,578

 

  

Consolidated statement of changes in equity

Year ended 31 December 2011

 

 

	Issued share capital £'000	Share premium £'000	Capital redemption reserve £'000	Profit and loss account £'000	Foreign exchange reserve £'000	Total attributable to owners of the parent £'000	Non- controlling interests £'000	Total equity £'000
At 1 January 2010	43,242	-	-	9,743	56	53,041	770	53,811
Profit for the year	-	-	-	9,051	-	9,051	397	9,448
Exchange differences on translating foreign operations	-	-	-	-	100	100	30	130
Total comprehensive income for the year	-	-	-	9,051	100	9,151	427	9,578
Credit to equity for share based payments	-	-	-	111	-	111	-	111
Non controlling interests acquired	-	-	-	(181)	-	(181)	(24)	(205)
At 31 December 2010 and 1 January 2011	43,242	-	-	18,724	156	62,122	1,173	63,295
Profit for the year	-	-	-	3,129	-	3,129	588	3,717
Exchange differences on translating foreign operations	-	-	-	-	23	23	-	23
Total comprehensive income for the year	-	-	-	3,129	23	3,152	588	3,740
Credit to equity for share based payments	-	-	-	351	-	351	-	351
Re-classification and issue of share capital/premium (net of fees)	1,360	68,323	-		-	69,683	-	69,683
Cancellation of deferred shares	(38,342)	-	38,342	-	-	-	-	-
Non controlling interests acquired	-	-	-	(2,604)	-	(2,604)	(1,611)	(4,215)
At 31 December 2011	6,260	68,323	38,342	19,600	179	132,704	150	132,854

 

 

 

Consolidated statement of financial position

Year ended 31 December 2011

 

 

	Notes	2011 £'000	2010 £'000
Non-current assets
Goodwill		57,192	38,642
Acquisition intangibles		11,862	396
Other intangible assets		5,453	2,273
Property, plant and equipment		6,327	4,562
Deferred tax asset		5,515	7,835
		86,349	53,708
Current assets
Trade and other receivables		24,269	13,839
Cash and cash equivalents	7	75,863	16,937
		100,132	30,776
Total assets		186,481	84,484
Current liabilities
Trade and other payables		(36,929)	(20,885)
Current borrowings	7	(5,534)	-
Current tax liabilities		(498)	(90)
		(42,961)	(20,975)
Non current liabilities
Non current borrowings	7	(6,926)	-
Non current contingent consideration		(3,547)	-
Non current finance lease obligations	7	(193)	(214)
Total liabilities		(53,627)	(21,189)
Net assets		132,854	63,295
Equity
Called-up share capital		6,260	43,242
Share premium		68,323	-
Capital redemption reserve		38,342	-
Retained earnings		19,600	18,724
Foreign exchange reserve		179	156
Equity attributable to equity holders of the parent		132,704	62,122
Non-controlling interest		150	1,173
Total equity		132,854	63,295

 

  

Consolidated statement of cash flows

Year ended 31 December 2011

 

	2011 £'000	2010 £'000
Operating activities
Group operating profit	3,751	7,433
Share of result of joint ventures	-	(516)
Depreciation and amortisation	4,603	2,593
Employee share based costs	5,122	111
Net changes in working capital	1,678	2,974
Cash flow from operating activities	15,154	12,595
Investing activities
Purchases of property, plant and equipment	(3,699)	(3,798)
Purchase of intangible assets	(4,094)	(1,969)
Acquisition of subsidiaries (net of cash acquired)	(20,553)	(388)
Acquisition of non controlling interests	(4,480)	(314)
Exceptional and other items directly attributable to acquisitions	(1,770)	-
Investment income	513	47
Cash flow used in investing activities	(34,083)	(6,422)
Financing activities
Proceeds from sale and finance lease backs	487	908
Finance lease capital repayments	(449)	(451)
Borrowings (net of bank fees and costs)	16,590	-
IPO proceeds (net of bank fees and costs)	69,683	-
Exceptional items directly attributable to listing	(3,228)	-
Borrowings capital repayment	(4,248)	-
Interest and finance lease charges paid	(980)	(122)
Cash flow from/(used in) financing activities	77,855	335
Net increase in cash and cash equivalents in the period
(all continuing operations)	58,926	6,508
Cash and cash equivalents at start of period	16,937	10,429
Cash and cash equivalents at end of period	75,863	16,937

 

 

 Notes to the consolidated preliminary results

 

Year ended 31 December 2011

 

1.     Basis of preparation of accounting policies

 

Perform Group plc (the "Company") is a limited liability company incorporated in Great Britain and domiciled within the United Kingdom whose shares are publicly traded. The consolidated preliminary results of the Company as at and for the year ended 31 December 2011 comprise the Company and its subsidiaries (together referred to as the "Group").

 

The consolidated preliminary results of the Group for the year ended 31 December 2011 were approved by the directors on 28 February 2012. The Annual General Meeting of Perform Group plc will be held at Hanover House, Plane Tree Crescent, Feltham, Middlesex, TW13 7JJ on 17 April 2012.   These consolidated preliminary results have been prepared in accordance with the recognition and measurement criteria of IFRS. They do not include all the information required for full annual financial statements to comply with IFRS, and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 December 2010.

 

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Business and Financial Reviews.  The Financial Review also includes a summary of the Group's financial position and its cash flows.

 

The Group had cash balances of £75.9m at the year end (of which £75.4m was unrestricted) and £13.0m of debt relating to borrowings of £12.5m and finance leases of £0.5m.  Having reviewed cashflow forecasts and budgets for the year ahead the Directors have a reasonable expectation that the Group has sufficient resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the Financial Statements.

 

The financial information for the year ended 31 December 2011 does not constitute statutory accounts as defined in sections 435 (1) and (2) of the Companies Act 2006. Statutory accounts for the year ended 31 December 2010 have been delivered to the Registrar of Companies and those for 2011 will be delivered following the Company's annual general meeting convened for 17 April 2012. The auditor has reported on these accounts; their report was unqualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis of matter and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

 

Significant accounting policies

 

The accounting policies applied by the Group in these consolidated preliminary results are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2010 except as described below.

 

Adoption of new and revised standards

 

At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards have been published by the IASB but are not yet effective, and have not been adopted early by the Group. Management anticipates that all of the relevant pronouncements will be adopted in the Group's accounting policies for the first period beginning after the effective date of the pronouncement. Information on new standards, amendments and interpretations that are expected to be relevant to the Group's financial statements is provided below. Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Group's financial statements.

 

IFRS 9 Financial Instruments (IFRS 9) - The IASB aims to replace IAS 39 Financial Instruments: Recognition and Measurement in its entirety. IFRS 9 is being issued in phases. To date, the chapters dealing with recognition, classification, measurement and derecognition of financial assets and liabilities have been issued. These chapters are effective for annual periods beginning 1 January 2013. Further chapters dealing with impairment methodology and hedge accounting are still being developed. The Group's management have yet to assess the impact of this new standard on the Group's consolidated financial statements. However, they do not expect to implement IFRS 9 until all of its chapters have been published and they can comprehensively assess the impact of all changes.

 

Consolidation Standards - A package of consolidation standards are effective for annual periods beginning or after 1 January 2013. Information on these new standards is presented below. The Group's management have yet to assess the impact of these new and revised standards on the Group's consolidated financial statements.

 

IFRS 10 Consolidated Financial Statements (IFRS 10) -IFRS 10 supersedes IAS 27 Consolidated and Separate Financial Statements (IAS 27) and SIC 12 Consolidation - Special Purpose Entities. It revised the definition of control together with accompanying guidance to identify an interest in a subsidiary. However, the requirements and mechanics of consolidation and the accounting for any non-controlling interests and changes in control remain the same.

 

IFRS 11 Joint Arrangements (IFRS 11) - IFRS 11 supersedes IAS 31 Interests in Joint Ventures (IAS 31). It aligns more closely the accounting by the investors with their rights and obligations relating to the joint arrangement. In addition, IAS 31's option of using proportionate consolidation for joint ventures has been eliminated. IFRS 11 now requires the use of the equity accounting method, which is currently used for investments in associates.

 

IFRS 12 Disclosure of Interests in Other Entities (IFRS 12) - IFRS 12 integrates and makes consistent the disclosure requirements for various types of investments, including unconsolidated structured entities. It introduces new disclosure requirements about the risks to which an entity is exposed from its involvement with structured entities.

 

Consequential amendments to IAS 27 and IAS 28 Investments in Associates and Joint Ventures (IAS 28) - IAS 27 now only deals with separate financial statements. IAS 28 brings investments in joint ventures into its scope. However, IAS 28's equity accounting methodology remains unchanged.

 

IFRS 13 Fair Value Measurement (IFRS 13) - IFRS 13 does not affect which items are required to be fair-valued, but clarifies the definition of fair value and provides related guidance and enhanced disclosures about fair value measurements. It is applicable for annual periods beginning on or after 1 January 2013. The Group's management have yet to assess the impact of this new standard.

 

Amendments to IAS 1 Presentation of Financial Statements (IAS 1 Amendments) - The IAS 1 Amendments require an entity to group items presented in other comprehensive income into those that, in accordance with other IFRSs: (a) will not be reclassified subsequently to profit or loss and (b) will be reclassified subsequently to profit or loss when specific conditions are met. It is applicable for annual periods beginning on or after 1 July 2012. The Group's management expects this will change the current presentation of items in other comprehensive income; however, it will not affect the measurement or recognition of such items.

 

 

2.     Segment information

 

Operating segment information for the year ended 31 December 2011 and 2010 is as follows:

 

	2011 £'000	2010 £'000
Revenue
Content distribution	64,943	41,089
Subscription	9,535	8,027
Technology and production	14,953	11,681
Advertising and sponsorship (video)	6,792	2,971
Advertising and sponsorship (display)	6,971	3,662
Total revenue	103,194	67,430
Cost of sales
Content	(35,831)	(21,340)
Publisher shares	(2,715)	(2,500)
Technical and software fees	(6,221)	(4,842)
Production	(6,947)	(2,205)
Other	(1,386)	(1,107)
Total cost of sales	(53,100)	(31,994)
Gross profit	50,094	35,436
Staff costs	(24,415)	(19,413)
Other administrative costs	(7,205)	(5,678)
Adjusted EBITDA (excluding joint ventures exceptional items and share‑based payments)	18,474	10,345
Share of results of joint ventures	-	516
Adjusted EBITDA (excluding exceptional items and share‑based payments)	18,474	10,861
Exceptional items	(4,998)	(724)
Exceptional share-based payments	(4,770)	-
Share-based payments	(352)	(111)
EBITDA	8,354	10,026
Amortisation and depreciation	(3,748)	(2,227)
Amortisation of acquisition intangibles	(855)	(366)
Group operating profit	3,751	7,433
Loss on disposal of joint ventures	-	(5)
Investment income	834	47
Finance costs	(1,099)	(122)
Group profit before tax	3,486	7,353
Total assets	186,481	84,484
Total liabilities	53,627	21,189

 

Geographical revenue information for the years ended 31 December 2011 and 2010 is presented below.

  

2011	United Kingdom £'000	Europe £'000	Asia Pacific £'000	Americas £'000	Middle East and North Africa £'000	Rest of world £'000	Total £'000
Content distribution	9,824	37,135	11,870	1,426	4,568	123	64,946
Subscription	6,202	1,139	511	1,551	122	9	9,534
Technology and production	9,505	1,395	1,623	132	2,378	-	15,033
Advertising and sponsorship	5,748	2,647	1,225	3,764	131	166	13,681
Total revenue	31,279	42,316	15,229	6,873	7,199	298	103,194

 

 

2010	United Kingdom £'000	Europe £'000	Asia Pacific £'000	Americas £'000	Middle East and North Africa £'000	Rest of world £'000	Total £'000
Content distribution	6,804	22,192	9,076	1,094	1,880	43	41,089
Subscription	5,083	732	1,139	997	67	9	8,027
Technology and production	8,108	786	1,338	130	1,319	-	11,681
Advertising and sponsorship	4,708	1,020	662	193	50	-	6,633
Total revenue	24,703	24,730	12,215	2,414	3,316	52	67,430

 

3.     Exceptional costs

 

	2011 £'000	2010 £'000
Costs in relation to the Group's listing on the London Stock Exchange	3,228	569
Costs in relation to the Group's acquisition of subsidiaries	1,770	155
	4,998	724

 

During the year the Group listed on the London Stock Exchange. The transaction incurred professional fees which given their size and nature have been separately classified as exceptional items by the Directors. In addition, during the year the Group acquired Goal.com (Holdco) S.A., Spox Media GmbH and mediasports Digital GmbH as well as acquiring the non-controlling interests of Global Sports Media B.V. and WatchandTrade Limited. The associated costs have been classified as exceptional items by the Directors.

  

4.     Taxation

 

	2011 £'000	2010 £'000
Current tax:
UK corporation tax at 26.5% (2010: 28%)	303	90
Foreign tax:
Overseas tax	194	159
Deferred tax:
Current year originating temporary differences	(813)	(2,394)
Adjustment in respect of prior years	85	50
Tax credit for the year	(231)	(2,095)

 

 5.     Earnings per share

 

	2011 £'000	2010 £'000
Profit for the period attributable to equity holders (£'000)	3,129	9,051
Exceptional items (£'000)	4,998	724
Share based payments (£'000)	5,122	111
Amortisation of acquisition intangibles (£'000)	855	366
Adjusted earnings (£'000)	14,104	10,252
Weighted average number of shares in issue (000s) - basic	218,370	197,352
Dilutive effect of performance share plan (000s)	468	-
Weighted average number of shares in issue (000s) - dilutive	218,838	197,352
Adjusted weighted average number of shares in issue - basis	225,376	225,376
Dilutive effect of performance share plan (000s)	468	-
Adjusted weighted average number of shares in issue (000s) - dilutive	225,844	225,376
Basic earnings per share
Statutory (pence)	1.4	4.6
Adjusted (pence)	6.3	4.5
Diluted earnings per share
Statutory (pence)	1.4	4.6
Adjusted (pence)	6.3	4.5

 

Adjusted basic and diluted earnings per share are based on profit attributable to equity holders of the parent plus exceptional items, share based payments and amortisation of acquisition intangibles divided by the adjusted weighted average number of ordinary shares outstanding in 2011 in the period between when the Group listed on the London Stock Exchange and 31 December 2011.

 

6.     Share based payments

 

A total charge of £5,122,000 (2010: £111,000) relating to the Group's share based payment schemes has been included in the Income Statement.

 

Growth Securities Ownership Plan (GSOP)

In March 2010, the Board resolved to put in place a Growth Securities Ownership Plan (the "GSOP"). Under the GSOP, certain key non‑shareholding employees were given the opportunity to purchase a financial instrument which tracks the Company's enterprise value (defined as market capitalisation for these purposes) over a set period, being the period ending 12 months after the occurrence of an exit event.

 

As at 31 December 2010 and 2011, 21 senior employees (none of whom is a Director or a current shareholder in the Company) held a total of 35 units under the plan. The terms of the GSOP provide for cash payments, on a pro-rata basis, by the Company to participants (subject to such participant's continued employment at the Group at the date payable) if the Company's enterprise value at the end of the relevant period exceeds a floor amount. The amount payable to participants increases up to a maximum aggregate amount of £6 million which is payable if the Company's enterprise value at such time is not less than £450 million.

 

The Admission to the London Stock Exchange ("Admission") constituted an exit event. Therefore, the company will be required to pay up to £6 million at the date falling 12 months and 40 days after Admission to participants under the GSOP.

 

The fair values of the financial instruments entered into under this scheme were calculated and were purchased by the participants at this price.

 

In accordance with IFRS 2, the Group has recognised a charge of £4,770,000 in the year (2010: £nil) in respect of this cash settled scheme.

 

Performance Share Plan (PSP)

On 24 June 2011 the Group put in place a Performance Share Plan ("PSP") which uses shares to provide long-term incentives to executive Directors and senior management of the Group. Awards made under the PSP are subject to a matrix of non market based performance targets (based on adjusted earnings per share and revenue compound growth) and are measured over a performance period to 31 December 2013. Awards will vest in June 2014, subject to continued employment.

 

In accordance with IFRS 2, the Group has recognised a charge of £352,000 (2010: £nil) in respect of this equity settled scheme.

  

7.     Net funds

 

	2011 £'000	2010 £'000
Cash and cash equivalents	75,863	16,937
Borrowings	(12,460)	-
Finance leases	(500)	(530)
	62,903	16,407

 

 

8.      Acquisitions

 

Global Sports Media BV

On 9 January 2009 the Group acquired 51% of the shares in Global Sports Media BV, a Dutch company which owns and runs the soccerway.com sports information website and provides sports statistics and data to a wide range of international customers. The Group exercised its option to acquire the remaining 49% of shares in December 2011 for €4.3 million.

 

WatchandTrade Ltd

In December 2011 the Group acquired the remaining 40% of shares of WatchandTrade Limited for £550,000 with additional consideration based on the annual results of WatchandTrade over the period to 31 December 2013.

 

Sportal

On 29 July 2009 the Group acquired 66% of the shares in Sportal Australia Pty Ltd, an Australian company which owns and runs the Sportal.com.au sports website and provides sports data and website and mobile solutions to a wide range of customers to Australia. A contractual commitment was also made to acquire the remaining shareholding in three tranches in 2010, 2011 and 2012. Accordingly, in 2010 and 2011 the Group acquired an additional 22% (11% in each year) of the shares in Sportal for £314,000 and £311,000 respectively. The remaining 12% not currently owned by the Group will be acquired (in line with terms of the original acquisition) in or before April 2012.

 

Spox Media GmbH and media sports Digital GmbH

In December 2011 the Group acquired the entire share capital of Spox Media GmbH (Spox) and media sports Digital GmbH (msd) for initial consideration of €3,650,000. Contingent consideration of up to €12,350,000 is payable based on the combined results of Spox and msd for the years to 31 December 2012, 2013 and 2014 (the "Earn-out Period"). The Directors' best estimate of the discounted fair value contingent consideration is £3,547,000. The discount (10%) applied will be unwound through the Income Statement over the Earn-out Period.

 

The following table sets out the book values of the identifiable assets and liabilities acquired and their provisional fair value to the Group at the acquisition date:

 

  

	Book value on acquisition £'000	Fair value adjustment £'000	Fair value to the Group £'000
Non-current assets:
Intangible assets	745	1,980	2,725
Property, plant and equipment	88	(88)	-
Current assets:
Trade and other receivables	961	-	961
Cash	598	-	598
Total assets	2,392	1,892	4,284
Current liabilities:
Trade and other payables	(2,801)	(186)	(2,987)
Deferred tax liability	-	(706)	(706)
Total liabilities	(2,801)	(892)	(3,693)
Net assets acquired	(409)	1,000	591
Goodwill arising			6,035
Fair value of total consideration			6,626

 

Fair value adjustments relate primarily to the following:

 

·     elimination of intangible assets (£0.7m) and tangible assets (£0.1m) that were replaced as part of the acquisition accounting process

·     recognition of an intangible asset for the domain name and associated trademarks, valued at £1.8m, using the relief from royalty method which reflects the discounted future cash flows saved from not incurring royalty payments. The domain name has an indefinite life.

·     recognition of customer relationships, website architecture and content archives which in total are valued at £1.0m. These amounts will be written off over 3 years.

 

The goodwill arising on the acquisition is largely attributable to the anticipated synergies created by the highly complementary business activities. The acquisition enables the Group to increase its scale and reach in the German digital sports media market in addition to realising technology cost synergies.

 

The fair value of consideration is comprised of:

	£'000
Initial cash consideration	3,079
Contingent cash consideration	3,547
	6,626

 

The Group's results for the year reflect post acquisition revenue from Spox and mediasports Digital of £0.2m and a profit before tax of £0.1m.  Had Spox and mediasports Digital been acquired on 1 January 2011, it would have contributed revenue of £6.3m and a loss before tax of £0.6m.

 

Goal.com (Holdco) S.A.

On 18 February 2011 the Group acquired the entire share capital of Goal.com (Holdco) S.A. for a total acquisition price of US $30 million. The acquisition was funded, in part, with a £17 million term loan facility.

 

The following table sets out the book values of the identifiable assets and liabilities acquired and their provisional fair value to the Group at the acquisition date:

 

	Book value on acquisition £'000	Acquisition related adjustme-nts £'000	Fair value adjustments £'000	Fair value to the Group £'000
Non-current assets:
Intangible assets	5,971	(5,971)	9,331	9,331
Property, plant and equipment	9	(9)	-	-
Current assets:
Trade and other receivables	641	-	(144)	497
Cash	26	-	-	26
Total assets	6,647	(5,980)	9,187	9,854
Current liabilities:
Deferred tax liability	-	-	(2,426)	(2,426)
Trade and other payables	(1,239)	-	(583)	(1,822)
Non current liabilities
Loans and other borrowings	(1,734)	1,734	-	-
Total liabilities	(2,973)	1,734	(3,009)	(4,248)
Net assets acquired	3,674	(4,246)	6,178	5,606
Goodwill arising				12,508
Fair value of total consideration				18,114
Net cash outflows in respect of the acquisition comprised:
Gross cash consideration				18,114
Cash acquired				(42)
				18,072

 

Acquisition related adjustments relate to the elimination of intangible assets which were replaced as

part of the acquisition accounting process and financing-related adjustments arising on the transaction.

 

Fair value adjustments relate principally to the recognition of the following acquisition intangibles and related deferred tax liabilities:

 

·    the domain name and associated trademarks, valued at £8m using the relief from royalty method, which reflects the discounted future cash flows saved from not incurring royalty payments. The domain name has an indefinite life.

·    customer relationships, valued at £0.75m, using the excess earnings valuation method, with a deduction for contributory assets. The customer relationships will be amortised over 3 years.

·    software and content related intangible assets, which together are valued at £0.5m. The software and content assets will be amortised over 3 years.

 

The goodwill arising on the acquisition of goal.com reflects buyer-specific synergies. The acquisition enables the Group to increase its scale and reach in the digital sports market in addition to realising technology cost synergies and improving global advertising sales.

 

The Group's results for the year reflect post acquisition revenue from goal.com of £4.0m and a loss before tax of £0.9m (after exceptional items recorded in goal.com).  Had goal.com been acquired on 1 January 2011, it would have contributed revenue of £4.2m and a loss before tax of £1.1m.

 

$3 million of the acquisition price has been retained in an escrow account until 29 February 2012 (or, if later, the date on which goal.com's accounts for the financial period ending 31 December 2011 have been finalised) in order to satisfy any adjustment to the net current asset value, warranty claims, tax indemnity claims or any claims for financial indebtedness of Goal.com remaining outstanding after the date of the acquisition.

 

 9. Commitments

 

(a) Operating leases

At the balance sheet date, the Group had total outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

 

	2011 £'000	2010 £'000
Within one year	892	754
In the second to fifth years inclusive	1,092	534
After five years	-	-

 

Operating lease payments represent rentals payable by the Group for office property and computer equipment costs.

 

(b) Rights commitments

At 31 December 2011 the Group had commitments to acquire internet content rights of £101m (2010: £29m) of which £39m (2010: £13m) is due in the next year and the remaining £62m (2010: £16m) is due in the next two to five years.

 

(c) Acquisition related commitments

The Group has a contractual commitment to acquire the remaining shareholding of Sportal Australia Pty Ltd in 2012 (11% remaining) for a sum based on Sportal's financial performance in 2011. The Directors estimate that the payment in 2012 will be approximately £300,000. The Group has a contractual commitment to pay contingent consideration in 2013, 2014 and 2015 in relation to the acquisitions of Spox and msd. The Group has a contractual commitment to pay contingent consideration in 2012, 2013 and 2014 in relation to the acquisition of the non controlling interest of WatchandTrade Ltd. This contingent consideration is dependent on the EBITDA of WatchandTrade in 2011, 2012 and 2013 and the maxmium consideration is £6.4m. The Directors expect the total payments based on WatchandTrade's annual results to 31 December 2013 will be approximately £4m.

 

10.      Publication of Annual Report and Accounts

 

This preliminary statement is not being posted to shareholders. The Annual Report and Accounts will be posted to shareholders in due course and will be delivered to the Registrar of Companies following the Annual General Meeting of the Company.

 

 11.      Responsibility statement of the Directors on the annual report

 

The responsibility statement below has been prepared in connection with the company's full annual report for the year ending 31 December 2011. Certain parts of the annual report are not included within this announcement.

 

We confirm that, to the best of our knowledge:

 

a)    the financial statements, prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and

 

b)    the management report, which is incorporated into the directors' report, includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face.

 

 

On behalf of the Board

 

 

David Surtees

Group Finance Director 

 

28 February 2012