Losses deepen at Real Affinity

MARKETING services company Real Affinity has seen its losses deepen but chairman John Ross is confident that the benefits of restructuring and management changes can begin to be seen next year.

The Bradford-based AIM-listed group today said that while turnover on continuing businesses increased to £11.46m in the six months to September 30 compared to £7.77m for the same period in 2006, pre-tax losses were £1.4m for the half-year against £462,000 last time. The figure included a £668,000 impairment charge on intangible assets.

Full year losses in the year to March 2007 were £4.14m.

Executive chairman John Ross said: "The financial performance in the half year was again below our expectations and trading conditions, particularly for

winning new business, remain very challenging.

"However, we are pleased that the business has clearly improved its operational performance compared with the second half of last year, particularly as the benefits of the management and structural changes to the business carried out in the last six months have yet to manifest themselves fully in our trading performance."

The group is to hold an extraordinary general meeting as the impairment charge on intangible assets has seen its net assets falling below 50 per cent of the share capital.

At the EGM the directors plan to reorganise the share capital in an attempt to better reflect the market price of the shares by making them more attractive to investors.

Mr Ross has supported Real Affinity through a combination of loans and equity investment and in August his Red Kite Capital Partners company agreed to provide a £1m funding facility.

Red Kite is the owner of double glazing firm Safestyle UK and the shirt sponsor of Leeds United.

In October the group appointed new finance director Martyn Archer after a period of uncertainty following the departure of chief executive Gerard Corcoran who

left in July four months after he warned that full-year turnover wouldn't meet expectations. Chairman Mr Ross assumed his executive responsibilities.

Mr Ross said that the recent restructure into two divisions would help growth and said that recent new business wins including AXA and WH Smith.

"Both divisional businesses, Real Affinity Agency and Real Affinity Events are expected to deliver positive earnings in the year to March 31 but central costs remain too high and it is likely that an overall loss before tax will be recorded.

"However, the board believes that a platform for further growth has been put in place and that next year will be the end of the loss-making and restructuring

phase of the business. Then further expansion both organically and by selective acquisition can be planned," he added.

There is no dividend.