SHARES STRONGLY UP/DOWN this week 26/12/05 (Master RSI)

RAF

Real Affinity seeks new equity
Real Affinity said pretax losses have widened to £1.06m for the six months ended September 30th 2005.
This compared with a loss of £251,000 in the same period last year.
The AIM-listed marketing services company said it has doubled turnover in the period to £5.01m, which included record sales in September of £1.29m, compared with £2.51m in the same period last year.
The company reduced staff costs by £555,000 net on an annualised basis, representing a decrease of 19.5% on 2005 full-year costs, and made a significant reduction in office rental costs of £121,000 on an annualised basis.
It said it viewed the half-year period as a time to implement a 'radical restructure' particularly in relation to high fixed costs to its performance, and specifically in relation to the direct marketing business, Ladders, and the digital marketing agency, Onstate.

A statement from the company said Holly Benson and its subsidiary Quadrant Exhibitions contributed an operating profit of £82,000 on turnover of £3m in the six months and is currently on target to achieve earnout targets at December 2005. Ladders and Onstate have continued to produce good quality work to satisfy their clients but financial performance has been hampered by an excessive cost base.
Meanwhile Navigator, its sports marketing subsidiary, has conformed to the pattern of previous years and the seasonality of the business in producing trading losses in the first half.
The statement added that on September 30th, Real Affinity announced it was subject to a takeover bid by Langbar International Ltd, which subsequently lapsed after Langbar was unable to produce the required Offer documents. Langbar was unable to provide Real Affinity with funding for identified acquisitions and for working capital purposes, which would have allowed Real Affinity to capitalise on the benefits of the cost reductions and improved sales.
As a consequence, Real Affinity is now in the process of seeking new equity and to restructure its bank facilities, to provide further working capital to support both the restructure of the business and new business growth and is also in talks with Langbar regarding the costs arising from the lapsed takeover bid.
The statement added that Real Affinity's ability to make acquisitions 'remains a challenge given the company's market capitalisation' and the likelihood is that, under the AIM Rules, any acquisition of an interesting size would be a reverse takeover, with an attendant level of cost.