Sportsworld Media Group plc, the sports TV production, sponsorship and event marketing company, announced today its preliminary results for the year ended 30 June 2000.
(* Note: the previous accounting period to 30 June 1999 was fourteen months, of which Sportsworld was only included from 9 December 1998)
Commenting on the results and prospects, Sportsworld’s Chief Executive Geoff Brown said:
‘These results were ahead of the Board’s previous expectations, which reflects strong organic growth in all aspects of our business and that acquisitions have bedded down quickly and effectively. We have benefited from increasing our portfolio of sports media businesses in an expanding market, which is experiencing an unprecedented demand for sports programming and a reallocation of advertising budgets from traditional television advertising to programme and sports sponsorship.
‘The Group is continuing to build an international business focused on sports-related TV production, marketing and sponsorship, and is confident that it will continue to benefit from the current strong market environment.
‘The current year has started strongly, as the Group establishes itself as a major international sports media business. Recent customer and market feedback to the Group indicates a positive environment on all fronts, and the momentum in the market shows no sign of slowing down.’
GROUP CHIEF EXECUTIVE’S REVIEW
Financial Summary
Sportsworld Media Group plc announced its results for the year ended 30 June 2000, achieving record revenue and profit growth, reflecting good organic growth and the Group’s ability to successfully and rapidly integrate acquisitions. The Group’s strategic aim of building a global sports-related marketing, event management and television production and distribution company through earnings enhancing acquisitions, resulted in substantial growth in revenues to £20.7m for the year, over the previous fourteen month period (£5.56m*). Pre-tax profits, before goodwill amortisation and including minority contributions, also rose to £5.59m (£1.77m*). Operating profits, excluding goodwill amortisation and including minority contributions, increased by 323% to £3.98m (£0.94m*). The sale of an interest in Sports Internet Group plc produced an exceptional gain of £1.1m in addition to this.
Earnings per share before amortisation improved by 21% to 10.8p (8.9p*). Earnings per share, excluding goodwill and exceptional profits, of 8.6p (5.2p*). In line with the Group’s current development policy there will be no dividend.
During the year, two substantial fund raisings have occurred in order to finance the acquisitions of both AMH and SOMI. These were well received and have allowed the Group to acquire substantial funds for further expansion. New acquisitions generated £1.54m of operating profit, before goodwill amortisation.
Operating cash flow is strongly positive, with net cash balances of £19.6m as at 30 June. It is expected to improve significantly in the next 12 months.
(* Note: the previous accounting period to 30 June 1999 was fourteen months, of which Sportsworld was only included from 9 December 1998)
Market Dynamics
The market environment in which the Group operates provides further opportunities for substantial growth, including:
As a result of these market conditions, Sportsworld has greatly increased its television sales, event management, sponsorship and sports stadia business and anticipates further strong growth.
Group Development
The sports marketing industry is highly fragmented and undergoing rapid consolidation to meet the global demands of television networks and the international advertisers.
Since its listing, the Group has established itself as a preferred acquirer in this consolidating market, and its management experience, market knowledge and highly incentivised performance-related remuneration policy has enabled it to attract world-class talent. The Group has successfully completed and integrated eight acquisitions and expanded its expertise in television, event management, sponsorship, sports stadia advertising and new media.
Sportsworld’s acquisition criteria are focused on sports-related companies, with proven management, which consolidate the Group’s capabilities and broaden its geographic coverage. During the current financial year there were five primary acquisitions. These included:
In December 1999, the Group expanded into the Asia Pacific region with the purchase of Australia Media Holdings (AMH), a media sales representation, event marketing and sponsorship company. AMH was acquired for £22.4m and has already exceeded its projected contribution to the Group.
In addition to providing airtime sales representation to television stations and pay TV networks in Asia Pacific, AMH has been responsible for significant sponsorships in Australian Rugby and major event staging including a series of Telstra sponsored post-Olympic celebration parades in all the major Australian cities.
Through the AMH acquisition the Group has an interest in the global rights to Popstars, the hit TV series that attracted record audiences on Network Seven Australia during this year. Popstars is currently being launched in several additional markets included the USA, UK (through LWT), Canada, Germany and the Philippines.
In March the Group made its largest acquisition with the purchase of Sports and Outdoor Media International (SOMI), an AIM listed company. SOMI was purchased for £54m and is meeting its projections. It will be significantly earnings enhancing for the current year.
SOMI is the leading rights agent for major stadia in the UK and Australia for the sale of perimeter advertising space and the stadia’s high definition video screens. These are all high profile stadia including all the ECB Test Cricket grounds, Sydney Olympic Stadium and the Melbourne Cricket Ground. All are held under long term contracts.
As the stadia stage more international sporting events with wider television coverage, the media value of the properties will further increase. There is also considerable opportunity to significantly expand the number of stadia under management as a result of the Group’s increased global presence.
SOMI also has an excellent sports sponsorship and consultancy business with close ties to over half the Premier League clubs in the UK and with the English Cricket Board.
In addition, SOMI has a profitable outdoor advertising business, however, it does not fit the Group’s strategic media portfolio and negotiations are at an advanced stage to dispose of it.
In March the Group acquired a 70% share of TJ Sports, a Los Angeles based producer and distributor of sports programmes. This acquisition gave the Group a presence in the large and important US market. TJ Sports’ golf magazine programmes are sold internationally through the Group’s sales division. TJ has also developed a fantasy league television internet model, which it recently launched for the new NFL season. The Group has opened an office in New York and is currently reviewing several acquisitions to further expand its US presence.
In June, the Group acquired UK based Pro-Active Television, a producer of extreme sports programmes. Pro-Active owns and produces a number of highly successful television programmes including Watersports World, Sports Unlimited, Moto + and Destination Adventure. The company has a 10-year relationship with BSkyB.
Pro-Active is an excellent fit with SSM Freesports and the combined catalogue and additional 3,000 hours of library footage that Pro-Active owns has considerable global potential.
In March, the Group acquired the remaining 49% of SSM Freesports to enable it to fully capitalise on the rapid growth in popularity of extreme sports for television networks and advertisers.
Acquisitions will continue to play an important part in Sportsworld’s future and several additional targets have been identified and are being evaluated.
Operations
1.Television Programming and Distribution:
Television sales represent 55% of the Group’s revenue on a pro-forma basis.
The Group’s television sales strategy has focused on building strong long-term relationships with leading terrestrial, cable and satellite networks by providing quality sports programmes; magazine formats and original productions including the live televising of sports events.
The global television programme sales market is growing strongly, fuelled by new sports channels in all markets and increased outsourcing by the networks to independent producers such as Sportsworld.
The Group continues to produce quality, cost effective magazine programmes which have expanded in numbers following acquisitions made during the year (Pro-Active and TJ Sports). New contract sales of magazine programmes have more than doubled, reflecting an increase in the number of new contracts written and a significant increase in the value of each contract. Not only has this positively affected the current year, it has also increased the pre-booked sales value for the year 2001.
Significant new business has been achieved with leading networks in all regions: Europe, Asia Pacific, Latin America, the USA, the Middle East and Africa. The Group has greatly expanded its business with UK based networks and currently sells to Channel 4 (Mountain Bike Britain, and the first ever terrestrial windsurf show in the UK), BSkyB (Watersports World ), ITV (Dream League) and Rapture (windsurfing, Chilli).
The Group has also recorded significant sales in originally produced programmes, including the Adidas sponsored series featuring Ian Thorpe and other international athletes, The Chilli Factor, The Arctic Challenge and the Trans-Atlantic Windsurf Race.
In May, Sportsworld was appointed by the International Triathlon Union as its exclusive global media and marketing partner. The Group worked with the ITU to gain Olympic recognition for the sport, and the recent success of the women’s and men’s triathlons at the Sydney Olympic Games has assured significant new television and sponsorship sales.
The Group has an interest in Five Divas Pty Limited, which owns the global rights to the Popstars brand and intellectual property. Five Divas Pty Limited has generated sales from the entertainment programme Popstars. The 13-part series was the number one rating show in Australia earlier this year. Income was generated from license fees (Network Seven), record sales and merchandising. It is expected that Popstars will be launched in the United States, the UK, Canada and the Philippines and several other countries during this year.
The Group has recently secured a new entertainment contract with the New York based Ford Model Agency to produce an eight-part series (similar to Popstars) for the Ford Supermodel of the Year contest. The show will air in Australia in October and will feature world famous supermodels, including Jerry Hall and Naomi Campbell. The concept will be sold to the global television market at MIP in January as a global property, which can be packaged locally to appeal to both programme buyers and advertisers. These programmes meet the growing trend for reality TV shows such as Big Brother and Survivor.
2.Sports Marketing and Sponsorship:
Sports marketing and sponsorship represent 15% of the Group’s revenue on a pro-forma basis.
Sportsworld’s event and sponsorship revenue continues to grow strongly. The Group stages more than 50 events per year and is the leading event manager of freesports based on its involvement with windsurfing, triathlon, mountain biking, inline skating, surfing and snowboarding. The rapidly growing popularity of these sports with television networks and advertisers ensures that this growth will continue.
The Group is experiencing record growth in sponsorship sales as international advertisers shift advertising budgets from traditional advertising to sport-related sponsorships. New sponsorship clients include American Express, Freeserve, Vodafone, Toyota, Telstra, Adidas, Nike, O’Neill, The North Face and Yellow Pages.
3. Sports Stadia:
Sports stadia represents 20% of the Group’s revenue on a pro-forma basis.
A significant new income stream for the Group is the sports stadia business, acquired with the completion of the purchase of Sports and Outdoor Media International in March. The Group manages sports stadia advertising under long-term contracts for major international stadia, including all of the ECB Test Cricket grounds, a number of Premier League clubs, Sydney’s Olympic Stadium and the Melbourne Cricket Ground. Currently, the Group manages 43 stadia.
There is significant opportunity to expand this business both geographically and in the range of services by integrating other parts of the Group’s business. Sportsworld can provide athletes for freesports events and marshal its group resources to manage the event, produce and distribute the television programme and arrange sponsorships.
Sportsworld plans to capitalise on its expertise in this category by expanding the number of stadia it represents and establishing a presence in all major markets. The Group also expects to generate further income for sports stadia naming rights and has recently appointed a highly experienced executive with expertise in this new emerging and substantial category.
4. New media:
New media represents 10% of the Group’s revenue on a pro-forma basis.
Sportsworld has experienced considerable success in developing its Dream League television/internet model. As official partner to Euro 2000, the Group generated income from television sales and merchandising. Following the launch of a Dream League television programme in the United States for the new NFL season that will also generate significant income, it is planned to roll out the Dream League programme to global markets at Sportel in November.
The Group is ideally placed to exploit the worldwide popularity of on-line gaming. The recent partnership with Coral Eurobet will generate growing income this year.
Management
The Group’s assets are its significant library of television content, its global brands (Dream League, Chilli, Kids Talk sports, Popstars) and its intellectual property.
During the year, the Group has assembled a world-class management team to further exploit these assets. The Global Management Team comprising 10 Executives, chaired by the Chief Strategic Officer, has international experience in television, brands, intellectual property, media and sponsorship.
In the past year the Group has integrated all its businesses, including the acquisitions, into a regional structure, with regional heads in Europe, Asia Pacific, USA, Canada, the Middle East and Latin America.
Recently, the Group has restructured its Board of Directors, appointing Mr John Bernbach as Non-Executive Chairman. Mr Bernbach, formally head of DDB Needham advertising and a founding director of Omnicom, has extensive international marketing and advertising experience.
Current Trading & Outlook
The new financial year has started strongly, with trading for the first three months of this year comfortably in line with the Board’s expectations. As the Group establishes itself as a major international sports media business, overall customer and market feedback indicates a positive environment on all fronts, illustrated at MipCom last week, when the Group recorded record sales for that market. The Group is confident that it will benefit from current market momentum, which is showing no sign of slowing down, and an environment in which there are significant opportunities for growth.
In the current year, Sportsworld expects to sign many new programme contracts in major television markets, increasingly for terrestrial TV. The recently launched Chilli Television, a new youth and sports-lifestyle production company, has already attracted 17 hours of programme commission from Channel 4. Also, in the programming division, the Group is developing further brand-sponsored series, including an Adidas sponsored series focusing on top Olympic champions Cathy Freeman and Ian Thorpe.
In new media, the Group is working with a leading global telecoms provider to enhance the content of sports events. Such technology and its applications will open up new revenue streams, increase loyalty and extend the relationship between the sports fan and club beyond the physical boundaries of stadia by creating the concept of a digital stadium, not too dissimilar to digital television.
Sportsworld Media Group is creating new rules for every market segment in which it operates. New rules in television production, sponsorship, event management, sports stadia management and new media, that strengthen its partnerships with television networks, advertisers, stadia owners and the sporting bodies that it represents. New rules in its personality and in its incentivisation policy that it has created to attract world class talent.
Sportsworld Media Group remains committed to become a truly unique global company in sports marketing.
Enquiries:
Geoff Brown, Chief Executive
Sportsworld Media Group plc
Tel: 020 7831 3113 (09/10/00)
Andy Fletcher, Chief Financial Officer
Tel: 020 7240 9626 (thereafter)