6 Sep 2010 07:00
6 September 2010
Murgitroyd Group PLC ("Murgitroyd" or "the Group")
Preliminary Results for the year ended 31 May 2010
Murgitroyd (AIM:MUR), the European Patent and Trade Mark Attorney, is pleased to announce its audited results for the year ended 31 May 2010.
Highlights
Ninth consecutive year of sales and earnings growth
Turnover increased by 2% to £29.4m (2009: £28.9m)
Operating profit increased by 14% to £4.0m (2009: £3.5m)
Profit on ordinary activities before tax increased by 23% to £3.8m (2009: £3.1m)
Earnings per share (before impact of property revaluations) of 30.0p (2009: 28.4p)
Basic earnings per share of 31.8p (2009: 24.2p)
Proposed final dividend of 2p per share, giving a total dividend for the year of 10p (2009: 9.5p)
New office opened in Helsinki, Finland
Ian Murgitroyd, Chairman of Murgitroyd Group PLC said:
"I am pleased to report that Murgitroyd has performed in line with expectations in what has been a challenging economic environment. We have delivered record turnover and profits whilst continuing our long-term strategy of investing in organic growth. We opened a new Nordic office in Finland during the year, expanded our strategically key US operations and, since the year end, opened a new business development office in Tokyo, Japan. The Board believes that Murgitroyd remains positioned to take advantage of current and future opportunities in the market and is well placed to continue to deliver value to shareholders."
For further information, please contact:
Keith Young, Murgitroyd T: 07802 951913
Sandy Fraser, Brewin Dolphin Limited (NOMAD) T: 0845 213 2072
Catherine Maitland, Cardew Group T: 0207 930 0777
Notes to Editors:
Murgitroyd Group PLC, the holding company of Murgitroyd & Company Limited ("Murgitroyd & Company"), a European Patent and Trade Mark Attorney practice, was floated on AIM on 30 November 2001. The practice has European offices in Aberdeen, Belfast, Dublin, Edinburgh, Glasgow, Helsinki, London, Milan, Muenster, Munich, Newcastle, Nice and York, and Sales Offices in Raleigh, North Carolina and Tokyo, Japan. Murgitroyd Group PLC specialises in the provision of Intellectual Property services, including filing, prosecuting, litigating, licensing, assigning and renewing Patents, Trade Marks and Designs, advising on Copyright and generally assisting clients with the management of their Intellectual Property. Patent services span the major sectors of the global economy including engineering, electronics, chemistry and biotechnology with clients ranging from large multi-national corporations to individual inventors and both in-house and external Patent Attorneys. The practice services major Trade Mark clients from the personal care, clothing, food and drinks, tobacco, pharmaceuticals, chemicals and oil industries together with service sector, sport and entertainment and retail industry clients. Trade Mark services are also provided to other private practice Trade Mark Attorneys.
Murgitroyd Group PLC
Chairman's Statement
Financial review
The Group has continued to show resilience during the year, with performance in line with expectations in spite of the continued challenging economic backdrop. For the year ended 31 May 2010, Group turnover increased by 2% to £29.4 million (2009: £28.9 million) as we won new contracts and improved market share. Gross profit was flat at £18.3 million (2009: £18.4 million) due to continued pressure on margins, which was anticipated by the Group and was to some degree offset by increased volumes. Gross margin was 62.3% (2009: 63.7%), again an anticipated change, and reflecting the mix of work, particularly new types of work won at lower margins in a competitive market place. Operating profit rose by 14% to £4.0 million (2009: £3.5 million).
Murgitroyd's head office, Scotland House, is owned by the Group and is revalued annually as at the financial year end date. The annual revaluation of the head office building resulted in a property revaluation credit of £156,000 as compared to an exceptional charge of £355,000 being made against profit in the previous year. Excluding the impact of property revaluations (both years), profit before income tax increased by over 6% to £3.67 million (2009: £3.45 million).
As announced in the interim statement, the Group completed its annual review of facilities with Clydesdale Bank as at 30 November 2009. Net debt as at 31 May 2010 was reduced to £5.8 million (2009: £7.0 million). We continue to trade comfortably within our trading and cash flow banking covenants, and the Group has sufficient headroom across all facilities. The Board believes the Group's banking facilities are competitively priced and are sufficient for our current purposes.
Murgitroyd benefitted from low interest rates during the financial year and, as anticipated, interest charges for the year were substantially lower than in the previous period. The Group also continued to benefit from careful foreign exchange management. As a net purchaser of the Euro, and with growing operations in both the United States and Japan, we will continue to carefully monitor exchange rates and movements thereon.
Both capital expenditure and working capital have been managed to optimise cash flow. The programme of carefully restricting capital expenditure that commenced in the last financial year continued during the year under review, with expenditure unchanged year on year. Debtor days have lengthened by just one day as compared with 31 May 2009, and the Group's bad debt provision, and experience, both remain at less than 1% of sales. The Group will continue to closely manage cash flows.
Management continued to monitor the Group's overheads, resulting in an overall reduction during the year and, excluding the property revaluation credit of £156,000, administrative expenses have fallen as a percentage of turnover. The tight control of costs, combined with the savings accrued from reduced interest charges and our foreign exchange management, has allowed us to continue to invest in our business development activities. The streamlining of administrative processes has also allowed Murgitroyd's fee earners to focus more time on revenue generation.
Operating review
The Group operated fourteen offices in nine countries during the year, and the growth and development of Murgitroyd's offices and network is ongoing. As announced previously, the Helsinki Office in Finland was formally opened in March 2010 to represent clients' interests in the Nordic countries. Since the year end the Group opened its fifteenth office: a new business development office in Tokyo, Japan, replicating the US business development office.
The Group's US business development office in Raleigh, North Carolina, remains of key strategic importance to the Group, as new US business offset reductions in sales in other geographic areas. Sales to US clients increased by £1.9 million during the year to £5.8 million (2009: £3.9 million). Reflecting the importance of the US market to the Group, I have taken on the role of Global Head of Business Development based in the Raleigh office. The office expanded to seven people over the year, an increase from three as reported in last year's Directors' report and financial statements. We continue to look to recruit new staff to meet expected growth in this key region as our IP Portal service attracts new clients. The team based in Raleigh will relocate to larger offices in the autumn.
In addition to pursuing organic growth, Murgitroyd continues to look for and evaluate suitable acquisition opportunities which are assessed against our highly-selective acquisition criteria. We will only consider acquisitions that are immediately earnings enhancing, competitively priced and complementary to the Group's existing offering.
People
The total number of employees as at 31 May 2010 was 221, a slight reduction compared with the previous year, due to those leaving the Group not necessarily being replaced immediately. However, since the year end the Group has successfully recruited three qualified Attorneys for roles in the Newcastle, Helsinki and London offices. In addition, since the year end, five part-qualified Attorneys have been recruited to the London, Belfast, Dublin, Edinburgh and Glasgow offices, and two new trainee Attorneys have been recruited to the Dublin and Belfast offices.
The average age of all fee earners at Murgitroyd remains under 40, which is relatively young for the industry, and the Group remains committed to investing in in-house training, as the lead-time for new graduates is generally between five to seven years. We view our fee earners as a long-term asset to the Group and our recruitment, training processes and career development are aimed at maximising staff retention. In line with our long-term growth strategy, the Group continues to look to recruit new professional and support staff.
I would like to take this opportunity to thank all our staff for their continued commitment to the Group. The Group's Deputy Chairman, David Castle, has announced his intention to leave the Group at this year's AGM. David leaves by mutual agreement and with the good wishes of the Board, to pursue other interests. On expiry of his contractual obligations, or by agreement of the Board, David may return to the IP profession either in the UK or abroad but has no firm plans to do so at present. I would like to take this opportunity to thank David for his valuable contribution to Murgitroyd since he joined us in 2005, when we acquired David W.J. Castle & Co. Limited.
The market
Against a difficult economic backdrop, Patent applications at the European Patent Office ("EPO") in the calendar year 2009 fell by 7.6%, whilst Community Trade Mark applications were flat. According to the EPO Future Filings Survey, 2009, Patent applications are expected to fall by a modest 2.4% in 2010 before returning to growth in 2011.
The Group continues to see a number of opportunities to tender for work and gain market share, albeit under price pressure. Given the Group's resilient performance in difficult markets, investment in business development and fee earners, and its continuing tight control over costs, we believe we will be well placed to take advantage of what is hoped will be an improving marketplace.
We are monitoring with interest the UK Government's proposals on a "Patent Box" and its possible beneficial effect on Corporation Tax rates applicable to profits derived from patented products.
Share price
During the period, the middle market price of the Company's shares fluctuated between 225p and 302.5p. The current middle market price is 272.5p.
Change of adviser
As announced previously, the Group was pleased to appoint Brewin Dolphin Limited as sole Nominated Adviser and Broker to the Group in March 2010.
Dividend
Two interim dividends, of 3p and 5p per share respectively, were paid during the year, reflecting the Board's confidence in the continued performance of the Group. A final dividend of 2p per share is being proposed, giving a total dividend for the year of 10p (2009: 9.5p).
Subject to approval at the Annual General Meeting, the final dividend will be paid on 3rd December 2010 to shareholders on the register on 5th November 2010.
Outlook
Despite the continued challenging economic backdrop, Murgitroyd has continued to perform robustly and gain market share, increasing sales and profits. We continue to successfully pursue organic growth in the new financial year in addition to continuing to review acquisition opportunities where appropriate, and where they meet our highly selective criteria, whilst keeping careful control of costs across the Group.
Given the Group's prudent management and robust performance in difficult markets, the Board believes that Murgitroyd is well positioned to take advantage of current and future opportunities within the market. We remain confident of our ability to generate long-term growth and value for shareholders, as we continue to invest in business development activities, such as the recent opening of our Tokyo office, replicating the IP Portal concept used to establish the Group in the US.
Ian G Murgitroyd
Chairman
3 September 2010
This preliminary announcement was approved by the Board of Directors on 3 September 2010. Consolidated income statement
for the year ended 31 May 2010
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| Note | Year ended 31 May 2010 £'000 | Year ended 31 May 2009 £'000 |
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| Revenue |
| 29,429 | 28,904 |
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|
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| Cost of sales |
| (11,095) | (10,503) |
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| Gross profit |
| 18,334 | 18,401 |
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| Administrative expenses (including property revaluation uplift of £156,000; 2009: property revaluation deficit of £355,000) |
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(14,326) |
(14,907) |
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| Operating profit before property revaluation uplift (2009: property revaluation deficit) |
|
3,852 |
3,849 |
| Property revaluation uplift/(deficit) |
| 156 | (355) |
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| Operating profit |
| 4,008 | 3,494 |
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| Financial income |
| 4 | 9 |
| Financial expense |
| (187) | (411) |
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| Profit before income tax |
| 3,825 | 3,092 |
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| Income tax |
| (1,123) | (1,040) |
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| Profit for the year attributable to equity holders of the parent |
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2,702 |
2,052 |
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| Earnings per share | 2 |
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| Basic |
| 31.83p | 24.23p |
| Diluted |
| 31.23p | 23.75p |
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Consolidated balance sheet
at 31 May 2010
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| 31 May 2010 £'000 | 31 May 2009 £'000 |
| Assets |
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| Non-current assets |
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| Property, plant and equipment |
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| 1,941 | 1,921 |
| Intangible assets |
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| 14,820 | 14,806 |
| Total non-current assets |
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| 16,761 | 16,727 |
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| Current assets |
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| Work in progress |
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| 618 | 479 |
| Trade and other receivables |
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| 10,780 | 10,156 |
| Cash and cash equivalents |
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| 2,012 | 2,143 |
| Total current assets |
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| 13,410 | 12,778 |
| Total assets |
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| 30,171 | 29,505 |
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| Current liabilities |
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| Bank overdraft |
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| (1,096) | (1,386) |
| Other interest-bearing loans and borrowings |
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(1,768) |
(1,699) |
| Trade and other payables |
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| (5,585) | (5,178) |
| Taxation payable |
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| (141) | (135) |
| Total current liabilities |
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| (8,590) | (8,398) |
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| Non-current liabilities |
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| Other interest-bearing loans and borrowings |
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(4,977) |
(6,057) |
| Other payables |
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| - | - |
| Provisions for liabilities |
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| (52) | (45) |
| Deferred tax liabilities |
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| (9) | (19) |
| Total non-current liabilities |
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| (5,038) | (6,121) |
| Total liabilities |
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| (13,628) | (14,519) |
| Net assets |
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| 16,543 | 14,986 |
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| Equity |
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| Share capital |
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| 850 | 848 |
| Share premium |
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| 2,582 | 2,557 |
| Merger reserve |
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| 6,436 | 6,436 |
| Revaluation reserve |
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| - | - |
| Retained earnings |
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| 6,675 | 5,145 |
| Total equity attributable to equity holders of the parent |
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| 16,543 | 14,986 |
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Consolidated statement of cash flows
for the year ended 31 May 2010
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| Year ended 31 May 2010 £'000 | Year ended 31 May 2009 £'000 |
| Cash flows from operating activities |
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| Profit for the year |
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| 2,702 | 2,052 |
| Adjustments for: |
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| Depreciation |
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| 222 | 261 |
| Amortisation |
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| - | 7 |
| Loss on disposal of property, plant and equipment |
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| - | 1 |
| Provision for "Onerous Lease" |
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| (38) | (39) |
| Provision for leasehold property dilapidations |
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| 45 | - |
| Property revaluation (surplus)/deficit |
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| (156) | 355 |
| Financing costs |
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| 183 | 402 |
| Equity settled share-based payment expense |
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| 63 | 27 |
| Income tax expense |
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| 1,123 | 1,040 |
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| 4,144 | 4,106 |
| Increase in trade and other receivables |
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| (624) | (432) |
| (Increase)/decrease in work in progress |
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| (139) | 125 |
| Increase in trade and other payables |
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| 411 | 525 |
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| 3,792 | 4,324 |
| Interest paid |
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| (164) | (329) |
| Interest received |
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| 4 | 9 |
| Income tax paid |
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| (1,130) | (1,107) |
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| Net cash from operating activities |
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| 2,502 | 2,897 |
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| Cash flows from investing activities |
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| Acquisition of property, plant and equipment |
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| (86) | (85) |
| Proceeds from disposal of property, plant and equipment |
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| - | - |
| Acquisition of subsidiaries, net of cash acquired |
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| (314) | (961) |
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| Net cash used in investing activities |
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| (400) | (1,046) |
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| Cash flows from financing activities |
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| Proceeds from exercise of share options |
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| 27 | 91 |
| Loans received |
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| 300 | 1,531 |
| Repayment of borrowings |
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| (1,038) | (1,486) |
| Payment of finance lease liabilities |
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| - | - |
| Dividends paid |
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| (1,232) | (806) |
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| Net cash used in financing activities |
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| (1,943) | (670) |
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| Net increase in cash and cash equivalents |
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| 159 | 1,181 |
| Cash and cash equivalents at start of year |
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| 757 | (424) |
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| Cash and cash equivalents at year end |
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| 916 | 757 |
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Notes to the announcement:
1. Basis of preparation
The financial statements are prepared on the historical cost basis except that freehold property is stated at fair value. The preparation of the financial statements requires the Directors to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. These consolidated financial statements are presented in Pounds which is the parent company's functional currency. All financial information presented in Pounds has been rounded to the nearest thousand.
The financial information set out in this announcement does not constitute the statutory accounts for the years ended 31 May 2010 or 2009 but is derived from those accounts. Statutory accounts for 2009 have been delivered to the Registrar of Companies, and those for 2010 will be delivered in due course. The Auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the Auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
2. Earnings per share
Earnings per 10p ordinary share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potential dilutive shares.
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Profit for the year
£'000 |
Weighted average number of shares Number | 2010 Earnings per share
p |
Profit for the year
£'000 |
Weighted average number of shares Number | 2009 Earnings per share
p |
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| Basic earnings per share | 2,702 | 8,489,485 | 31.83p | 2,052 | 8,470,636 | 24.23p |
| Dilutive share options | - | 163,916 | 0.60p | - | 173,171 | 0.48p |
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| Diluted earnings per share | 2,702 | 8,653,401 | 31.23p | 2,052 | 8,643,807 | 23.75p |
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3. Annual General Meeting
The Annual General Meeting of the company will be held at 12 Suffolk Street, London SW1Y 4HG at 11am on 28 October 2010.
4. Further copies
Further copies of the Directors' report and financial statements will be available, free of charge, for a period of one month following posting to shareholders from the company's Nominated Adviser and Broker, Brewin Dolphin Limited, 12 Smithfield Street, London EC1A 9BD, telephone: 0845 213 2000. Copies of the full financial statements will be posted to shareholders as soon as practicable.
A copy of this announcement will be made available on the company's website: www.murgitroyd.com