After a year of turmoil in the music industry, Chrysalis says it's "back on track" as it focuses on its core music publishing business. On an annualised sales basis, the net publisher's share (NPS equalling income after royalties) rose from £11.3m to £13.4m and by 7 per cent to £12.1m on a constant currency basis. The surprise performer was UK-based DVD and book marketer Lasgo Chrysalis, which turned in an "exceptional performance" in the second half of 2009: a big help here was the absence of Woolworths as a competitor.
But not everything is going Chrysalis' way. Some 10 years ago, it took out a £69m securitisation facility running to 2021. For many years, having an interest cap at just over 7 per cent was a blessing, but now a 5 per cent collar means the company is paying a high level of interest and, under international accounting standards, the derivative cost or gain has to be disclosed. So, last year there was a net interest cost of £6.09m (including a £3.23m negative derivative adjustment) compared to a net credit of £1.16m in 2007-08 after allowing for a £2.23m derivative gain. UK interest rates are more than likely to stay fairly low, Chrysalis is considering escaping the cap and collar at the "not insignificant" cost of between £3m and £5m. The interest rate derivative can also be blamed for pushing net assets from a £1.612m surplus to a £4.82m negative.
Broker Peel Hunt believes the latest results are "gently better than expected" and forecasts adjusted breakeven this year against a £700,000 loss on little change in sales.
CHRYSALIS (CHS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 99.5p | MARKET VALUE: | £66.8m | |
| TOUCH: | 97.75-101p | 12-MONTH HIGH: | 109.25p | LOW: 45.5p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | * | NET CASH: | £21.5m | |
| Year to 31 Aug | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2005 | 134 | 1.0 | 0.25 | 1.3 |
| 2006 | 68 | -2.3 | -0.21 | 1.3 |
| 2007 | 56 | -6.0 | -2.50 | 1.4 |
| 30 Sep | ||||
| 2008† | 54 | -18.8 | -20.62 | nil |
| 2009 | 63 | -3.8 | -5.74 | nil |
| % change | +27%• | – | – | – |
Entertainment. *Negative shareholders' funds. †13 months •Annualised | ||||
