CHW.L Regulatory News (CHW)

25 Aug 2009 07:00



CHIME COMMUNICATIONS PLC

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30TH JUNE 2009

Chime Communications PLC, the leading marketing services group, today announces its interim results for the six months ended 30th June 2009.

Highest first half pretax profit in the history of the company

Operating income up 7% to £58.4 million (H1 2008: £54.5 million)

- 100% organic

Operating profit up 3% to £9.4 million (H1 2008: £9.1 million)

- 100% organic 

First half operating profit margin of 16.1% (H1 2008: 16.8% and Full Year 2008: 16.2%) 

Profit before tax up 4% to £8.5 million (H1 2008: £8.2 million)

Diluted earnings per share from continuing operations up 5% to 10.32p (H1 2008: 9.86p) 

Net cash at 30th June 2009 of £18.1 million (30th June 2008 net debt of £13.2 million - 31st December 2008 net cash of £6.3 million)

Interim dividend increased by 4% to 1.60p per share (H1 2008: 1.54p)

Commenting on the results, Lord Bell, Chairman of Chime Communications, said:

"Having delivered the highest profit in our history we have outperformed the market and our competition and achieved first half results ahead of expectation. We are delighted and remain cautiously optimistic for the full year."

For further information please contact:

Lord Bell, Chairman 020 7861 8515

Chime Communications 

Christopher Satterthwaite, Chief Executive 020 7861 8515

Chime Communications 

Charles Cook/Emma Kent/Victoria Geoghegan 020 7861 3232

Bell Pottinger Corporate & Financial

SUMMARY OF RESULTS (All growth organic)

REVIEW OF OPERATIONS

Overall the Group continues to perform ahead of the marketplace.

Our productivity improved (income per head in the first half year increased to £58,000 from £55,000 in the first half of 2008). We consolidated our business, with clients using more than one company increasing to 169 in the first half year from 159 in the first half of 2008 and our 30 top clients being 57% of income (H1 2008: 46%). Our income per client rose to £64,000 in the first half of 2009 from £51,000 in the first half of 2008. Nearly half of our operating income came from international work (H1 2008: 34%).

The consequence of this consolidation is that the Group acted for 908 clients in the first half of 2009 compared to 1,066 in the first half of 2008 and the number of clients paying us over £50,000 fell from 190 to 164.

Our two largest clients represented 20.4% of total operating income (H1 2008: 15.6%). Both clients have been retained since 2003, are high margin and have normal renewal terms. They are both covered by more than one contract covering the various different services provided to the client so that the ending of one contract would be unlikely to lead to all the contracts for the same client coming to an end.

HIGHLIGHTS OF THE SIX MONTHS

26 awards won across the Group in 2009 to date - most notably Resonate: Gold winner of Guardian Media Award and Gold Cannes Lion. Good Relations: Gold Cannes Lion for best integrated campaign for BPEX. VCCP: Silver and Gold at British Television Advertising Awards for Home Office binge drinking and Silver Creative Circle Award. Teamspirit: 2 Golds, 2 Silvers, 2 Bronzes at Money Marketing Awards

Emirates' sponsorship of World Twenty 20 - Fast Track

HSBC's sponsorship of British and Irish Lions Tour - Fast Track

Gabon election campaign - Bell Pottinger

Ukraine election campaign - Bell Pottinger

Kazakhstan online promotion - Bell Pottinger

Tunisia tourism promotion - Bell Pottinger

VCCP wins Merck Sharp and Dohme

VCCP wins Muller Rice

Bell Pottinger wins Bupa

Chime wins another Big Tick

Compare the Meerkat increases traffic by 83%

VCCP wins npower

VCCP wins Southern Trains

VCCP Search enters the top 15 search companies in the UK

The O2 becomes the world's most successful entertainment venue

Bell Pottinger wins Daiichi Sankyo Europe

Bell Pottinger wins National Grid

Bell Pottinger wins National Express

Caucus World wins the Department of Health's Adult Autism Strategy

Fast Track brings Usain Bolt to the UK for Aviva

Fast Track wins BP Olympic strategy

Fast Track wins the Lawn Tennis Association

Bell Pottinger wins RHJ bid for Opel

Bell Pottinger represents Heritage Oil in $6 billion merger

Acquisition of Ptarmigan in Leeds whose clients include Camelot and Alibaba

Bell Pottinger wins Duke Street

Bell Pottinger retains Hewlett Packard

Bell Pottinger retains Qatar Foundation on two year contract

VCCP wins Emirates UK

DIVISIONAL PERFORMANCE

Trading conditions remained difficult in the first half of 2009 but our diversified business model enabled us to maintain our profit performance. Those businesses that were affected by the difficult conditions were offset by businesses that continued to grow.

We have continued to focus on costs and whilst headcount has risen in those businesses that are doing well, overall our headcount has reduced since the end of 2008.

Based on operating income, Public Relations continues to be our largest division at 55% (2008 full year: 55%), Advertising and Marketing Services was 40% (2008 full year: 39%) and Research was 5% (2008 full year: 6%).

Public Relations - Bell Pottinger Group including Good Relations, Harvard,   Insight and Corporate Citizenship

The Public Relations Division has performed extremely well in the first half of 2009. Cost control remained good with the 10% increase in revenue resulting in a 25% increase in operating profit. Margin improved to 20.9%.

Less good performance in public affairs, financial public relations and technology public relations was offset by strong performance in geopolitical, corporate and social responsibility, the Middle East and consumer.

Advertising and Marketing Services - VCCP Group, Fast Track and Teamspirit

The operating income in the Advertising and Marketing Services Division increased by 10% in the first half of 2009 but operating profit decreased by 4%. Income in this division particularly in VCCP and Fast Track is weighted towards the second half of the year, but costs remain constant, therefore we expect the second half to show an increase in profit.

VCCP Digital and VCCP Search continued to grow at a fast rate (up over 50% in operating profit) as they have done since our initial investment two years ago.

Overall this division is expected to show operating profit growth for the full year 2009.

Research - Opinion Leader, Facts International and Caucus World

A very disappointing first half year. The marketplace remains difficult but this was compounded by lower profits at Opinion Leader and continued investment in Caucus World, our digital platform.

The launch of Caucus World was delayed but it has now started to generate income and should become profitable during the second half of 2009. The second half of 2009 is likely to remain difficult at Opinion Leader as further restructuring plans are put in place. 

Facts International, after a difficult first quarter, has had an extremely good second quarter with several new client wins. These client wins should lead to strong growth in the second half of 2009.

Overall the year is likely to remain difficult but we expect the Division to return to making profits in the second half of 2009.

During the course of the remainder of the year we will bring in new management and reposition the Research Division with the expectation of a strong performance in 2010.

CASH FLOW, BANKING ARRANGEMENTS AND DEFERRED CONSIDERATIONS

Net cash at 30th June 2009 was £18.1 million compared to net debt at 30th June 2008 of £13.2 million and net cash at 31st December 2008 of £6.3 million. The Group continued to focus on improving its credit control and cash collection processes but also benefited, once again, from unusually high cash receipts close to the period end. Without these receipts the cash balance would probably have been similar to the balance at 31st December 2008.

The Group generated cash from trading activities in the first half of 2009 of £17.6 million (H1 2008: £1.0 million) representing a cash conversion of 206% (H1 2008: 12%). Excluding the improvement in working capital, cash generated from trading in the first half of 2009 was £10.3 million and cash conversion was 121%.

The Group continued to operate well within its banking covenants and has a borrowing facility of £32 million which continues until July 2013.

Deferred considerations still payable total a maximum of £35.5 million, comprising £18.5 million payable in cash and £17.0 million payable in shares or cash at Chime's discretion. No payments are payable in the remainder of 2009, £9.9 million is payable in 2010, £2.1 million in 2011 with the balance payable between 2012 and 2014, subject to targets being met.

TAXATION

The effective tax charge for the first half of 2009 was 31.6% in line with the full year 2008. This is expected to continue for the full year 2009.

DIVIDENDS

The Board has declared an interim dividend of 1.60p per share (H1 2008: 1.54p).

The interim dividend will be payable on 16th October 2009 to shareholders on the register at 25th September 2009. The ex dividend date is 23rd September 2009.

OUTLOOK

The outlook is good although economic uncertainty hangs over the market.

Our business model is becoming more attractive and more relevant to clients.

Reputation management is now more important than ever.

Our digital work and expertise is growing and expanding and our international model is becoming more competitive.

It appears that this year being a one stop shop, integrated and diversified, channel neutral and low cost is the new black.

Big is not as beautiful or as safe as it once was.

As marketing expenditure continues to decline, internet solutions become more effective. We think this is a permanent change.

Our small cost base compared to the big four gives us a real competitive advantage.

The new business pipeline is strong, a large proportion of second half operating income is committed (nearly 90%), our costs are under control, our cash management is strong and we have the opportunity to make some strategic acquisitions to develop our business ready for a possible upturn at some point in 2010.

We have had a good first half and by delivering the highest pretax profit in our history we have outperformed the market and our competition. 

We remain cautiously optimistic for the full year.

  Condensed Consolidated Income Statement

Six months ended 30 June 2009 

Condensed Consolidated Statement of Recognised Income and Expense 

Six months ended 30 June 2009 

Condensed Consolidated Balance Sheet as at 30 June 2009

Condensed Consolidated Cash Flow Statement

Six months ended 30 June 2009 

Condensed Reconciliation of Equity Attributable to Equity Holders of the Parent

Notes:

1. Business Segments

For management purposes, the group is organised into three operating divisions - Public Relations, Advertising and Marketing Services and Research. 

Principal activities of these divisions are as follows:

Public Relations

The Public Relations division comprises some of the leading names in the industry, including Bell Pottinger, Good Relations, Harvard, Insight, Resonate, De Facto and Corporate Citizenship. It is the ranked number 1 PR Group in the UK in the PR Week public relations consultancy league table for 2008. It serves major UK and international brands, as well as governments, government departments, pharmaceutical and healthcare companies, charities, not-for-profit organisations, professional service firms, consumer brands and famous people. 

Advertising and Marketing Services ('AMS')

The AMS division possesses specialist skills in advertising and marketing services - direct marketing, digital communication, sponsorship exploitation, point of sale, sales promotion and specialist media planning and buying. It also specialises in the niche market of financial services.

Research and Engagement

The Research and engagement division is made up of Opinion Leader, Ledbury Research and Facts International. Opinion Leader Research is one of the UK's leading research consultancies and Ledbury Research provides research and advice to brands who market and sell to high net worth consumers.

The group's operations are located in the United Kingdom, Germany, Spain, the Middle East and USA.   

As required by IFRS8 (Operating Segments) the prior comparatives for the 6 months to 30 June 2008 have been restated to reflect the change in management reporting of TTA Public Relations within the group. TTA Public Relations was previously reported within advertising and marketing services, it is now included within public relations. The effect of this change is as follows for 6 months to 30 June 2008: revenue £1,931,000, operating income £1,522,000, operating profit £236,000. The results to 31 December 2008 were reported using these segments and therefore no change is necessary to these numbers.

2. Basis of preparation

The results for the 6 months ended 30 June 2009 are unaudited and do not constitute statutory accounts within the meaning of section 240 of the Companies act 1985. 

The information for the year ended 31 December 2008 does not constitute statutory accounts as defined in section 240 of the Companies Act 1985.  A copy of the statutory accounts for that year has been delivered to the Registrar of Companies.  The auditors reported on those accounts: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 237(2) or (3) of the Companies Act 1985.

The condensed consolidated income statement, balance sheet, statement of recognised income and expense, cash flow statement and reconciliation of equity attributable to equity holders of parent have been prepared in accordance with International Accounting Standard (IAS) 34 'Interim Financial Reporting', as adopted by the European Union. 

The annual financial statements of Chime Communications Plc are prepared in accordance with IFRSs as adopted by the European Union. The accounting policies adopted in the preparation of the half year condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2008, except for the adoption of IFRS 8 Operating Segments. This standard requires disclosure of information about the Group's operating segments and replaces the requirement to determine primary (business) and secondary (geographical) reporting segments of the Group. Adoption of this standard did not have any effect on the financial position or performance of the Group. The Group determined that the operating segments were the same as the business segments previously identified under IAS14 Segment Reporting.

Going Concern Basis

The Directors have prepared cash flow forecasts which indicate that the Group has adequate resources to continue in operational existence for the foreseeable future. In preparing these forecasts the directors have taken into account the following key factors:

a. The possible impact of the continued economic downturn on the Group's business;

b. Key client account renewals;

c. The level of committed and variable costs; and

d. Current new business targets compared to levels achieved in previous years.

The Group currently has a borrowing facility of £32 million which continues until July 2013. This facility is subject to banking covenants. 

At 30 June 2009 the Group was not utilising its loan facility.

The Directors have concluded, based on the cash flow forecasts, that it is appropriate to prepare the accounts on a going concern basis.

3. Earnings per share

From continuing operations

The calculation of the basic and diluted earnings per share is based on the following data:

4. Dividends

The proposed interim dividend was approved by the Board on 20 August 2009 and has not been included as liability as at 30 June 2009. The dividend will be paid on 16 October 2009 to those shareholders on the register at 25 September 2009. The expected ex-dividend date is 23 September 2009.

  Under an agreement dated 3 April 1996, The Chime Communications Employee Trust which holds 895,477

ordinary shares representing 1.57% of the company's called-up share capital, has agreed to waive all dividends.

5. Notes to the consolidated cash flow statement

6. Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. There were no significant transactions between the Group and its associates.

Forward looking statements 

The interim management report contains certain forward looking statements in respect of Chime Communications plc and the operation of its subsidiaries. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that may or may not occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements and forecasts. Nothing in this announcement should be construed as a profit forecast.

Responsibility statement

We confirm that to the best of our knowledge;

a. the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';

b. the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

c. the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein).

By order of the board

Mark Smith

Finance Director

24 August 2009

INDEPENDENT REVIEW REPORT TO CHIME COMMUNICATIONS PLC

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2009 which comprises the condensed consolidated income statement, the condensed consolidated statement of recognised income and expense, the condensed consolidated balance sheet, the condensed consolidated cash flow statement, the condensed reconciliation of equity attributable to equity holders of the parent and related notes 1 to 6. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Deloitte LLP

Chartered Accountants and Registered Auditors

London, United Kingdom

24 August 2009