27 Aug 2009 07:00
Huntsworth PLC
Interim results for the six months to 30 June 2009
Gathering momentum: branding for growth
Huntsworth PLC, the global public relations and healthcare communications group, today announces its interim results for the six months to 30 June 2009.
Highlights1
Revenue
Total revenue at £76.5m (H1 '08: £80.5m)
Net new business wins £20.3m
90% of annual revenues committed for 2009
Organic2 revenue decline of 4.2%
Profits
Operating margin post central costs at 14.2% (H1 '08: 16.5%)
Profit before tax at £11.0m (H1 '08: £12.2m)
Profit before tax after highlighted items of £1.5m (H1 '08: £10.4m)
Basic earnings per share
Cashflow and net debt
Strategic rebranding initiative
Other highlights
Notes:
1. All results are stated before taking account of highlighted items unless otherwise stated. These comprise
amortisation of intangible assets, profit/loss on disposal of subsidiaries, impairment of investment in associates,
rebranding costs in 2009.
2. Organic revenues are at actual exchange rates and adjusted to include pre-acquisition revenues and exclude
disposals.
Peter Chadlington, Chief Executive of Huntsworth, said:
"Given the challenging economic climate, we are pleased to report a good first half. With 90% of 2009 revenues committed and the new business pipeline gaining momentum, we are on track to meet full year management expectations. We have also made excellent progress on the Group's strategic branding initiative which we believe will enable us to compete for, and win, the type of large international mandates that will drive the top line growth of the business."
Contacts:
Huntsworth PLC | +44 (0)207 224 8778 |
Peter Chadlington, Chief Executive | |
Sally Withey, Chief Operating Officer | |
Citigate Dewe Rogerson | +44 (0)207 638 9571 |
Simon Rigby | |
George Cazenove | |
A presentation to analysts will take place at 9.30am on 27 August 2009 at the offices of Numis Securities Limited, 5th Floor, 10 Paternoster Square, London, EC4M 7LT.
CHIEF EXECUTIVE'S STATEMENT
Overview
Given the challenging economic climate, we are pleased to report a good first half with profits and earnings per share 10% ahead of market expectations. Revenue and profit before tax are at 48% of the consensus full year forecast and earnings per share at 49%. Underlying margins before central costs have been sustained over our internal 20% target and some 90% of our 2009 revenues are committed.
Our revenues are broadly spread across business sectors with no significant exposure other than healthcare at 29%. Our top 25 clients account for 16.3% of revenues (2008:15.3%) and average Public Relations fees are approximately £59,000 (2008: £49,000).
Our client attrition levels at 3.5% are at the lower end of our normal range and all of our previous year top 25 clients have been retained. At the end of 2008, the sharp downturn began to have an effect on clients and we saw annual retainer budget cuts in January and February amounting to around £10 million. Since then, momentum has increased as confidence returns month on month and net monthly wins are now closer to 2008 levels.
Significant first half wins include the London Stock Exchange, ING Investment Management, Qatar Shipping and Navigation merger, Royal Mail Group, Coca-Cola Austria, P&G Switzerland, Samsung UK, Habitat and GlaxoSmithKline over nine countries.
Cash conversion has remained strong at 72% with closing net debt on target despite some one off costs including £5.2 million of rebranding costs, £2.1 million of share purchases and £2.0 million of foreign exchange impact.
The interim dividend has been increased by 7.1% on last year to 0.75p.
Global Brands
The first stage of Huntsworth's growth was to buy and build our capabilities, accelerating our ability to win larger mandates, improving the size of the business wins and the margins delivered. The second was to enable our companies to win more business and more multi-office clients through the development of an international network and through greater understanding and co-operation between group companies.
In March we indicated that we were looking to move into the third phase of development through restructuring the branding of the group in order to make the whole of the network more accessible both to our existing and potential clients, positioning the group to compete for and win the large multinational mandates that will carry the group into the next phase of its growth.
Huntsworth currently has 26 major international brands, many of which co-operate with each other well to service joint clients and which have built up a good track record of developing international business within individual brands. For example, in the first half, 33% of our business was handled in more than two offices. However, with the exception of Huntsworth Health, the group has yet to break through to win high value global mandates.
Global clients demand a seamless global service which is easier to provide and, critically, easier to demonstrate if the brand and organisation are consistent around the world.
Our initial plan was to restructure the group and carry out a far reaching rebranding exercise over a two to three year period. However, the sharp downturn and global recession has enabled us to compress that timetable significantly.
We are therefore in the process of rationalising our 26 brands into four, comprising three public relations brands - Grayling, Citigate, Red - and one healthcare brand - Huntsworth Health.
Huntsworth Health
Huntsworth Health is the furthest advanced and has already entered the third stage of the development process. This division is showing 7.9% organic growth in the first half as we have started to win larger mandates across the whole of Europe and the US. In the last six months, Huntsworth Health has won five mandates over $1 million including one for Wyeth with $10 million in fees over four years. The division now represents circa 30% of group revenues and employs 420 people including over 100 executives with a PhD qualification. Its dedicated digital element has grown by 92% over 2008 and now represents 12% of the division's revenues.
Grayling
Grayling is merging with a number of other brands including Trimedia and Mmd. The combination is highly complementary with a compelling geographic fit and extensive combined network. Trimedia is strong in the UK and Western Europe, Mmd is strong in Eastern Europe and Grayling is established in the US and UK.
New Grayling will, at circa 44% of group revenues, be a worldwide top three independent brand led by Michael Murphy who has proven global experience. With a comprehensive business mix, it will have the opportunity to leverage local client contracts at a global level and be a natural and highly credible candidate for global pitch lists.
Citigate
Citigate is a leading financial public relations brand which is respected worldwide. It is currently circa 18% of group revenues with a top three agency in London and some smaller operations in Europe and Asia. Under a new holding company, we will expand the brand into the key financial centres around the world within 18 months through start-ups, investment programmes and utilising existing network operations.
Red
Red is a leading UK agency with smaller offices in the US. Revenues grew by 21% organically in the first half and represent circa 8% of group revenues. It is a specialist agency with a strong digital element and a reputation for creative excellence. For the forthcoming PR Week 2009 awards, Red is shortlisted in every category. With great care to preserve its unique culture, we would expect Red steadily to expand overseas in the coming years.
Board
As we move into the next stage of our development, we are strengthening Huntsworth's Board with the appointment of two new non-executive directors who have significant operational experience building brands capable of winning global mandates. John Farrell, whose appointment was announced in July, headed up all of Publicis' non advertising business and in particular built and managed their international PR firms. Michael Birkin, whose appointment is announced today, recently left Omnicom where amongst other things he built DAS - the non-advertising side of Omnicom - from virtually nothing to a $2bn business in just five years.
Digital
Digital is also a key area for growth across the group. It plays directly to our strengths in public relations and is integrated into all our work. Pure digital businesses comprise 4% of group revenues and 12% of Huntsworth Health, having doubled in the past year.
The strategic branding initiative, driven by a world-class team, puts us firmly on the road to build organic growth at a faster pace. We expect this initiative to be profit neutral in 2010 and show revenue growth from 2011.
Outlook
With 90% of 2009 revenues committed and the new business pipeline gaining momentum, we are on track to meet full year management expectations. We have also made excellent progress on the Group's strategic branding initiative which we believe will enable us to compete for, and win, the type of large international mandates that will drive the top line growth of the business.
Peter Chadlington
Chief Executive
27 August 2009
REVIEW OF FINANCIAL RESULTS
SUMMARY OF FINANCIAL RESULTS
2009 | Organicgrowth | 2008 | Organic growth | ||
£'m | £'m | ||||
Revenue | |||||
Public Relations | 54.3 | (8.4%) | 59.9 | 9.7% | |
Huntsworth Health | 22.3 | 7.9% | 20.6 | (0.5%) | |
Eliminations | (0.1) | - | |||
Total operations | 76.5 | (4.2%) | 80.5 | 6.9% | |
Operating profit | Margin | Margin | |||
Public Relations | 10.9 | 20.0% | 12.9 | 21.5% | |
Huntsworth Health | 4.0 | 17.9% | 4.1 | 20.0% | |
Total operations | 14.9 | 19.4% | 17.0 | 21.1% | |
Central costs | (4.0) | (3.7) | |||
Profit before highlighted items | 10.9 | 14.2% | 13.3 | 16.5% | |
Operating highlighted items | (8.3) | (0.8) | |||
Reported operating profit | 2.6 | 12.5 | |||
Adjusted basic EPS | 3.8p | 4.2p | |||
Reported basic EPS | 0.1p | 0.5p | |||
Introduction
In the commentary below, all results are stated before taking account of highlighted items unless otherwise stated. Highlighted items comprise amortisation of intangible assets, profit/loss on disposal of subsidiaries, impairment of investment in associates, acquisition payments deemed as remuneration and net restructuring and other non-recurring items including rebranding costs in 2009.
Organic growth is based on revenues at actual exchange rates, adjusted to include pre-acquisition revenues and exclude disposals.
Revenue and profits
Group revenue in the six months to 30 June 2009 fell by 4.9% to £76.5 million compared to the same period last year. However, new business has improved month on month through the year and is now closer to 2008 levels.
Revenues grew organically in our Huntsworth Health businesses by 7.9% whilst Public Relations was down 8.4% giving an overall organic revenue decline of 4.2%.
Group operating profits before central costs in the first half decreased by 12.7% to £14.9 million (H1 2008: £17.0 million). However, our margin and bonus policies ensured the Group continued to report strong margins. Group operating margin before central costs was 19.4% (H1 2008: 21.1%) which reflected a 20.0% margin for Public Relations businesses and 17.9% for Huntsworth Health. Underlying margins adjusted for charges not repeated in the second half (holiday pay and US payroll taxes) were 20.7% which is above our internal minimum of 20%.
Operating margin after central costs was 14.2% (H1 2008: 16.5%). Underlying margins after central costs were 15.5%. Operating profit after central costs for the period was £10.9 million (H1 2008: £13.3 million).
Profit before tax was £11.0 million (H1 2008: £12.2 million).
Currency
The weakening of sterling against the euro over the last year has had a marked impact on the average exchange rates used to translate the Group's overseas results into sterling for the first halves of 2008 and 2009. In the first half of 2009, the net translation impact of currency changes compared with the same period last year was to increase revenue by £8.1 million and trading profit by £1.3 million.
The Group has taken out protection to manage the translation risk from a strengthening of sterling on a significant proportion of the Group's euro and US dollar 2009 profits.
Highlighted items
Operating highlighted items of £8.3 million comprise £2.4 million for amortisation of intangible assets, £0.1 million of loss on disposal of subsidiaries, £0.5 million of non-cash share-based acquisition payments deemed as remuneration and £5.3 million of rebranding and restructuring costs.
Our strategic brand initiative will give us the ability to win global clients and represents our next key opportunity for growth. We are in the process of reducing 26 brands to one healthcare brand and three public relations brands. The costs to date of £5.3 million include severance charges of £4.3 million and property costs of £1.0 million as we restructure our teams and offices to align to the new structure. £3.3 million is a direct result of the re-branding, reducing senior duplicated headcount and merging office locations and £2.0 million has resulted from a strategic review of all brands including the removal of peripheral locations and non-profitable revenues.
This will initially result in the loss of some revenues, expected to be in the region of £5 million annually. Estimated annualised cost savings are more or less in line with the anticipated loss of revenues. We have not lost any key clients and the cost of the initiative is expected to be equivalent to the annual contribution from one or two global clients.
The rationalisation is expected to be complete by the end of 2009 at a total cash cost of approximately £8 million.
Total highlighted items in the first six months of £9.6 million include £1.3 million for the impairment of the Group's investment in associates.
After these highlighted items, statutory reported operating profit was £2.6 million (H1 2008: £12.5 million).
Tax
The tax charge of £1.2 million comprises an underlying tax charge of £3.1 million together with a credit of £1.9 million on highlighted items. The underlying tax charge is based on the expected full year underlying tax rate of 28%.
Earnings
Profits attributable to ordinary shareholders were £7.8 million (H1 2008: £8.6 million). Profits after highlighted items attributable to ordinary shareholders amounted to £0.2 million (H1 2008: £1.0 million).
Basic earnings per share were 3.8p (H1 2008: 4.2p). Diluted earnings per share were 3.7p (H1 2008: 4.1p). Basic and diluted earnings per share after highlighted items were 0.1p (H1 2008: 0.5p).
Dividends
The Board has continued its progressive dividend policy. The interim dividend has been increased by 7.1% to 0.75p per share (H1 2008: 0.7p). The record date for this dividend will be 2 October 2009 and it is payable on 6 November 2009. A scrip dividend alternative will be available.
Balance sheet and cash flow
Our continued focus on the strength of our balance sheet has ensured that the Group remains in a strong financial position and our businesses continue to generate good operating cash flows.
Net debt at 30 June 2009 was £39.9 million (31 December 2008: £33.5 million), well within the Group's £90 million debt facilities and on target despite some one off costs including £5.3m of re-branding costs, £2.1m of share purchases and £1.7m of foreign exchange impact.
Cash inflow from operating activities amounted to £7.8 million and cash conversion of operating profit into operating cash flows was 72%, well ahead of the 56% reported for the same period last year. Operating cash conversion in the first half is always below our full year target of 100% due to the payment of bonuses relating to the prior year.
This is before a £5.2 million cash impact relating to highlighted items (H1 2008: £2.2 million).
For the full year, Huntsworth expects cash conversion to achieve the Group's minimum target of 100%.
Other principal cash flows during the period were net payments for interest, tax and fixed assets of £2.7 million, dividends received from associates of £1.6 million, purchase of shares for employee incentives and the share buyback programme of £2.1 million and a net outflow in respect of acquisitions and disposals of £4.2 million. The debt was also increased by £2.0m due to the revaluation of non sterling balances.
The Group continues to operate well within its banking covenants and facilities which comprise a revolving credit facility and a committed overdraft totalling £90 million in place until July 2010 with £87 million continuing until 2011 and £82.5 million until July 2012 as a term loan is repaid. Net debt to EBITDA was at a ratio of 1.5 times at 30 June 2009 and interest cover (excluding highlighted items and imputed interest) was 8.4 times (H1 2008: 8.2 times).
Earn-out payments
Future earn-out payments as at 30 June 2009 are estimated at £21.6 million, comprising £13.4 million payable in cash and £8.2 million payable in cash/shares at Huntsworth's option. The timing of the aggregate of these payments is £4.7 million in 2009, £3.6 million in 2010, £12.2 million in 2011 and £1.1 million in 2012 and beyond.
Key risks and uncertainties
As detailed on page 19 of the 2008 Annual Report and Accounts, the Group's key risks and uncertainties are identified as: dependence on key personnel and relationships with clients; management of growth; failure of information systems; competition in the provision of services; fluctuations of revenues, expenses and operating results; currency rate risk; and exposure to a downturn in the public relations industry. These risks are not considered to have changed since the 2008 Annual Report and Accounts were published.
Notes to Editors:
1. Huntsworth PLC is a global public relations and healthcare communications
group with 71 principal offices in 30 countries, and 2,100 clients. The Group
provides services to 49 companies in the FTSE 100, 99 in the Fortune 500 and
106 in the Eurotop 300 and 39 of the world's 50 largest healthcare companies.
2. At 30 June the group employed approximately c.1,580 staff with an average
annual fee income per head of £99,000.
3. Group revenue comprises the following key areas of activity: Corporate
Communications accounts for 25% of Group revenue; Consumer for 19%; Public
Affairs for 7%; Financial non-deal led Public Relations work is 15%; Financial deal
led Public Relations is 1%; Huntsworth Health is 29% and other activities are 4%.
4. By industry sector the revenue profile is broadly 29% Pharmaceuticals; 13%
Financial Services; 9% Technology; 6% Food and Drink, 7% Retail & Leisure, 6%
Government & Public Sector and 5% Industrial.
5. Geographically, 42% of Group revenue in the first half of 2009 was from the UK;
26% from other European countries; 28% from the US; and 4% from the Rest of
the World. Operating margins for the six months to 30 June 2009 were 21% in
the UK; 19% in Europe; 15% in the US and 34% in the Rest of the World.
6. The Group now represents 168 clients in more than one country and 273 by more
than one company. The largest client/Huntsworth Health brand represents 1.6%
of continuing revenue with the top 10 clients/brands accounting for 8.2% and the
top 25 clients/brands 16.3%. Average annual fee income per client is £74,000.
33% of revenues were earned through companies working together with other
group companies.
7. As at August 2009 shareholdings of Directors, employees and employee trusts
represent approximately 14% of the Group's issued share capital. Institutional
shareholdings hold approximately 78%, with the top 10 holding some 65% as of
August 2009.
Unaudited consolidated income statement
for the six months ended 30 June 2009
Audited | |||||
| Six months | Six months | Year | ||
|
| ended | ended | ended | |
|
| 30 June | 30 June | 31 December | |
|
| 2009 | 2008 | 2008 | |
| Notes | £000 | £000 | £000 | |
Turnover | 100,280 | 106,915 | 209,870 | ||
Revenue | 3 | 76,513 | 80,455 | 159,132 | |
Operating expenses - excluding highlighted items | (65,659) | (67,178) | (132,814) | ||
Operating expenses - highlighted items |
| (8,300) | (779) | (1,501) | |
Operating expenses - total |
| (73,959) | (67,957) | (134,315) | |
Operating profit before highlighted items | 3 | 10,854 | 13,277 | 26,318 | |
Highlighted items - operating expenses | 4 | (8,300) | (779) | (1,501) | |
Operating profit | 2,554 | 12,498 | 24,817 | ||
Share of profit of associates | 1,285 | 1,045 | 2,373 | ||
Highlighted item - impairment of associates | 4 | (1,285) | (1,045) | (2,373) | |
Finance income | 5 | 267 | 442 | 385 | |
Finance costs | 5 | (1,366) | (2,560) | (5,058) | |
Profit before tax and highlighted items | 11,040 | 12,204 | 24,018 | ||
Highlighted items | 4 | (9,585) | (1,824) | (3,874) | |
Profit before tax | 1,455 | 10,380 | 20,144 | ||
Taxation | 6 | (1,221) | (9,184) | (10,085) | |
Profit for the period | 234 | 1,196 | 10,059 | ||
Attributable to: | |||||
Parent company's equity shareholders |
| 193 | 1,011 | 9,777 | |
Minority interests |
| 41 | 185 | 282 | |
| 234 | 1,196 | 10,059 | ||
Earnings per share: | |||||
Basic - pence | 8 | 0.1 | 0.5 | 4.8 | |
Diluted - pence | 8 | 0.1 | 0.5 | 4.7 | |
Adjusted basic - pence* | 8 | 3.8 | 4.2 | 8.5 | |
Adjusted diluted - pence* | 8 | 3.7 | 4.1 | 8.3 |
*Adjusted basic and diluted earnings per share are calculated based on the profit for the period adjusted for highlighted items and the related tax effects (Note 8).
Unaudited consolidated balance sheet
As at 30 June 2009
Audited | ||||
30 June | 30 June | 31 December | ||
2009 | 2008 | 2008 | ||
| Notes | £000 | £000 | £000 |
Non-current assets | ||||
Intangible assets | 9 | 250,232 | 236,502 | 258,857 |
Property, plant and equipment | 4,854 | 5,596 | 5,605 | |
Investment in associates |
| 1,845 | 3,606 | 3,802 |
Derivative financial assets | 10(c) | 96 | 432 | 52 |
Deferred tax assets | 2,693 | 3,788 | 3,844 | |
|
| 259,720 | 249,924 | 272,160 |
Current assets | ||||
Work in progress |
| 1,345 | 1,180 | 1,340 |
Trade and other receivables | 40,422 | 46,291 | 45,666 | |
Corporation tax receivable | 1,918 | 1,346 | 1,679 | |
Derivative financial assets | 10(c) | 366 | 3 | - |
Cash and short-term deposits | 10(d) | 6,848 | 6,343 | 13,774 |
|
| 50,899 | 55,163 | 62,459 |
Current liabilities | ||||
Bank loans and overdrafts | 10(d) | (11) | (163) | - |
Obligations under finance leases | 10(c) | (140) | (198) | (242) |
Trade and other payables |
| (45,891) | (48,163) | (51,783) |
Corporation tax payable |
| (6,395) | (7,797) | (5,771) |
Provisions |
| (11,878) | (11,500) | (6,750) |
|
| (64,315) | (67,821) | (64,546) |
Non-current liabilities | ||||
Bank loans and overdrafts | 10(c) | (46,071) | (48,054) | (46,172) |
Obligations under finance leases | 10(c) | (133) | (175) | (94) |
Provisions |
| (16,046) | (20,104) | (18,544) |
Trade and other payables |
| (263) | (316) | (313) |
Derivative financial liabilities | 10(c) | (849) | - | (818) |
Deferred tax liabilities |
| (3,001) | (5,410) | (3,879) |
|
| (66,363) | (74,059) | (69,820) |
Net assets |
| 179,941 | 163,207 | 200,253 |
Equity | ||||
Called up share capital |
| 106,006 | 105,017 | 106,006 |
Share premium account |
| 23,760 | 23,623 | 23,760 |
Merger reserve |
| 51,122 | 50,866 | 51,122 |
Foreign exchange translation reserve |
| 17,097 | 4,191 | 33,279 |
Hedging reserve | (783) | 98 | (752) | |
Investment in own shares |
| (6,749) | (5,564) | (5,965) |
Retained earnings |
| (11,537) | (15,923) | (8,196) |
Equity attributable to equity holders of the parent | 178,916 | 162,308 | 199,254 | |
Minority interests |
| 1,025 | 899 | 999 |
Total equity |
| 179,941 | 163,207 | 200,253 |
Audited | ||||
Six months | Six months | Year | ||
ended | ended | ended | ||
30 June | 30 June | 31 December | ||
2009 | 2008 | 2008 | ||
| £000 | £000 | £000 | |
Profit for the period | 234 | 1,196 | 10,059 | |
Other comprehensive (expense)/income | ||||
Movement in financial instruments | (31) | 374 | (476) | |
Currency translation differences | (16,182) | 4,096 | 33,160 | |
Currency translation on disposal of subsidiaries | - | 736 | 760 | |
Tax recognised directly in equity | (288) | (78) | 463 | |
Other comprehensive (expense)/ income for the period | (16,501) | 5,128 | 33,907 | |
Total comprehensive (expense)/income for the period | (16,267) | 6,324 | 43,966 | |
Total comprehensive (expense)/income attributable to: | ||||
- owners of the company | (16,308) | 6,139 | 43,684 | |
- minority interests | 41 | 185 | 282 |
Unaudited consolidated cash flow statement
For the six months ended 30 June 2009
Audited | ||||
Six months | Six months | Year | ||
ended | ended | ended | ||
30 June | 30 June | 31 December | ||
2009 | 2008 | 2008 | ||
| Notes | £000 | £000 | £000 |
Cash inflow from operating activities | ||||
Cash inflow from operations | 10(a) | 2,596 | 5,227 | 24,471 |
Interest paid |
| (966) | (2,189) | (4,309) |
Interest received | 223 | 222 | 411 | |
Corporation tax paid |
| (993) | (2,086) | (4,323) |
Net cash inflow from operating activities |
| 860 | 1,174 | 16,250 |
Cash (outflow)/ inflow from investing activities | ||||
Acquisition of subsidiaries |
| (3,643) | (2,828) | (6,593) |
Repayment of loan notes issued as acquisition consideration |
| - | (1,137) | (1,137) |
Disposal of subsidiaries |
| (328) | 15,341 | 13,979 |
Acquisition of minority interests |
| (315) | (2,517) | (2,517) |
Cost of internally developed intangible assets | (168) | - | (240) | |
Purchases of property, plant and equipment |
| (758) | (744) | (1,628) |
Proceeds from sale of property, plant and equipment |
| - | 68 | 56 |
Proceeds from sale of associates |
| - | 231 | 231 |
Dividends received from associates |
| 1,642 | 1,127 | 2,114 |
Net cash acquired with subsidiaries |
| 162 | - | - |
Net (cash)/overdraft disposed of with subsidiaries |
| (47) | - | 154 |
Net cash (outflow)/inflow from investing activities |
| (3,455) | 9,541 | 4,419 |
Cash outflow from financing activities | ||||
Proceeds from issue of ordinary shares |
| - | 20 | 20 |
Purchase of own shares |
| (2,129) | (137) | (216) |
Repayment of finance lease liabilities |
| (24) | (114) | (249) |
Drawdown/(repayment) of borrowings |
| 49 | (11,161) | (13,055) |
Dividends paid to minority interests |
| (11) | (14) | (14) |
Dividends paid to shareholder of acquired business | - | (321) | (321) | |
Dividends paid to equity holders of the parent |
| - | - | (4,708) |
Net cash outflow from financing activities |
| (2,115) | (11,727) | (18,543) |
(Decrease)/increase in cash and cash equivalents | (4,710) | (1,012) | 2,126 | |
Movements in cash and cash equivalents | ||||
(Decrease)/increase in cash and cash equivalents | (4,710) | (1,012) | 2,126 | |
Effects of exchange rate fluctuations on cash held | (2,227) | 330 | 4,786 | |
Cash and cash equivalents at 1 January |
| 13,774 | 6,862 | 6,862 |
Cash and cash equivalents at end of period | 10(c), (d) | 6,837 | 6,180 | 13,774 |
Unaudited consolidated statement of changes in equity
for the six months ended 30 June 2009
| Called | | | Foreign | | | | | | |
| up | Share | | currency | | Investment | | | | |
| share | premium | Merger | translation | Hedging | in own | Retained | | Minority | Total |
| capital | account | reserve | reserve | reserve | shares | earnings | Total | interests | equity |
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 |
At 1 January 2008 | 105,000 | 23,620 | 50,866 | (641) | (276) | (5,427) | (14,664) | 158,478 | 1,960 | 160,438 |
Total comprehensive income for the period | — | — | — | 4,832 | 374 | — | 933 | 6,139 | 185 | 6,324 |
Shares issued for cash | 17 | 3 | — | — | — | — | — | 20 | — | 20 |
Acquisition of minority interests | — | — | — | — | — | — | — | — | (1,158) | (1,158) |
Purchase of own shares | — | — | — | — | — | (137) | — | (137) | — | (137) |
Credit for share-based payments | — | — | — | — | — | — | 978 | 978 | — | 978 |
Equity dividends | — | — | — | — | — | — | (3,244) | (3,244) | — | (3,244) |
Dividends to minority interests | — | — | — | — | — | — | — | — | (14) | (14) |
Transfers | — | — | — | — | — | — | 74 | 74 | (74) | — |
Balance at 30 June 2008 | 105,017 | 23,623 | 50,866 | 4,191 | 98 | (5,564) | (15,923) | 162,308 | 899 | 163,207 |
Total comprehensive income for the period | — | — | — | 29,088 | (850) | — | 9,307 | 37,545 | 97 | 37,642 |
Acquisition of subsidiaries | 559 | — | 256 | — | — | — | — | 815 | — | 815 |
Currency translation differences | — | — | — | — | — | — | — | — | 3 | 3 |
Purchase of own shares | — | — | — | — | — | (401) | — | (401) | — | (401) |
Share issue costs | — | (13) | — | — | — | — | — | (13) | — | (13) |
Credit for share-based payments | — | — | — | — | — | — | 460 | 460 | — | 460 |
Scrip dividend | 430 | 150 | — | — | — | — | — | 580 | — | 580 |
Equity dividends | — | — | — | — | — | — | (2,040) | (2,040) | — | (2,040) |
Balance at 31 December 2008 (audited) | 106,006 | 23,760 | 51,122 | 33,279 | (752) | (5,965) | (8,196) | 199,254 | 999 | 200,253 |
Total comprehensive income for the period | — | — | — | (16,182) | (31) | — | (95) | (16,308) | 41 | (16,267) |
Acquisition of minority interests | — | — | — | — | — | — | — | — | (4) | (4) |
Purchase of own shares | — | — | — | — | — | (1,853) | — | (1,853) | — | (1,853) |
Credit for share-based payments | — | — | — | — | — | — | 1,427 | 1,427 | — | 1,427 |
Vesting of share incentive schemes | — | — | — | — | — | 1,069 | (592) | 477 | — | 477 |
Equity dividends | — | — | — | — | — | — | (4,081) | (4,081) | — | (4,081) |
Dividends to minority interests | — | — | — | — | — | — | — | — | (11) | (11) |
Balance at 30 June 2009 | 106,006 | 23,760 | 51,122 | 17,097 | (783) | (6,749) | (11,537) | 178,916 | 1,025 | 179,941 |
1. Basis of preparation
These consolidated interim financial statements, which are condensed and unaudited for the six months ended 30 June 2009, have been prepared in accordance with the Listing Rules of the Financial Services Authority. They have also been prepared in accordance with the accounting policies which the Group expects to adopt in its 2009 Annual Report and are consistent with those adopted in the consolidated financial statements for the year ended 31 December 2008, except as noted below. These accounting policies are based on the EU-adopted International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretations Committee (IFRIC) interpretations that the Group expects to be applicable at that time. The IFRS and IFRIC interpretations that will be applicable at 31 December 2009, including those that will be applicable on an optional basis, are not known with certainty at the time of preparing these interim financial statements.
These consolidated interim financial statements for the six months ended 30 June 2009 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, Interim Financial Reporting, as adopted by the EU and under the historical cost convention, as modified by the revaluation of derivative financial instruments at fair value.
The information relating to the six months ended 30 June 2009 and 30 June 2008 is unaudited and does not constitute statutory financial statements as defined in Section 240 of the Companies Act 1985. They have however been reviewed by the auditors and their report to the Board of Huntsworth PLC is set out at the end of this document. The comparative figures for the year ended 31 December 2008 have been extracted from the Group Report and Accounts, on which the auditors gave an unqualified opinion and did not include a statement under section 237 (2) or (3) of the Companies Act 1985. The Group Report and Accounts for the year ended 31 December 2008 have been filed with the Registrar of Companies.
Changes in accounting policies
The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 January 2009.
IAS 1 (revised), 'Presentation of financial statements'. The revised standard prohibits the presentation of 'non-owner changes in equity' in the statement of changes in equity. All 'non-owner changes in equity' are required to be shown in a performance statement. The Group has elected to present two statements: an income statement and a statement of comprehensive income. The interim financial statements have been prepared under the revised disclosure requirements.
IFRS 8, 'Operating segments'. IFRS 8 replaces IAS 14, 'Segment reporting'. The standard requires a 'management approach' under which segment information is presented on the same basis as that used for internal reporting purposes. This has not led to a change in the classification of the Group's operating segments.
Operating segments are reported in a manner consistent with the internal reporting provided to the Board of Directors. The Board of Directors have been identified as the chief operating decision maker that makes strategic decisions.
The following new standards, amendments to standards and interpretations are mandatory for the first time for the financial year beginning 1 January 2009, but have no impact on the Group:
IFRIC 13, 'Customer loyalty programmes';
IFRIC 15, 'Agreements for the construction of real estate';
IFRIC 16, 'Hedges of a net investment in a foreign operation';
IAS 23 (amendment), 'Borrowing Costs'; and
IAS 39 (amendment), 'Financial instruments: Recognition and measurement'.
Going concern
After reviewing the Group's performance and future cash flows, the Directors consider that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the Group's financial statements.
Notes to the financial statements
for the six months ended 30 June 2009
2. Acquisitions
The following acquisitions were made during the period:
(i) Momentum
On 16 February 2009, the Group purchased 100% of the issued share capital of Momentum International Limited ('Momentum') for initial cash consideration of US$2,800,000 (£2,000,000). Deferred consideration is payable dependent on the future financial performance of Momentum and will be payable in cash or cash and shares at Huntsworth's discretion. The maximum total consideration payable is US$12,000,000.
(ii) Connecting Point
On 24 April 2009, the Group purchased 100% of the ownership interest in Connecting Point Communications LLC ('Connecting Point') for cash consideration of US$1,063,000 (£723,000). Deferred consideration is payable dependent on the future financial performance of Connecting Point and will be payable in cash or cash and shares at Huntsworth's discretion. The maximum total consideration payable is US$2,500,000.
(iii) Huntsworth Health minority interest
On 15 May 2009, the Group purchased the remaining 20% stake of the issued share capital of Huntsworth Healthcare Group Limited and Huntsworth Healthcare Group Inc taking the total ownership interest to 100%. The cash consideration was US$448,000 (£298,000).
The total net assets acquired with the above acquisitions was £320,000, resulting in goodwill and intangible assets of £5,860,000.
3. Segmental analysis
BUSINESS SEGMENTS
The following is an analysis of the Group's revenue and operating profit before highlighted items by reportable segment.
Public | Huntsworth | |||
Relations | Health | Total | ||
6 months ended 30 June 2009 | £000 | £000 | £000 | |
Revenue | ||||
Total revenue | 54,333 | 22,254 | 76,587 | |
Intra-group eliminations | (67) | (7) | (74) | |
Segment revenue | 54,266 | 22,247 | 76,513 | |
Segment operating profit before highlighted items | 10,875 | 3,976 | 14,851 |
Public | Huntsworth | |||
Relations | Health | Total | ||
6 months ended 30 June 2008 | £000 | £000 | £000 | |
Revenue | ||||
Total revenue | 59,842 | 20,618 | 80,460 | |
Intra-group eliminations | (5) | - | (5) | |
Segment revenue | 59,837 | 20,618 | 80,455 | |
Segment operating profit before highlighted items | 12,874 | 4,129 | 17,003 |
3. Segmental analysis (continued)
Public | Huntsworth | |||
Relations | Health | Total | ||
Year ended 31 December 2008 | £000 | £000 | £000 | |
Revenue | ||||
Total revenue | 118,253 | 41,093 | 159,346 | |
Intra-group eliminations | (214) | - | (214) | |
Segment revenue | 118,039 | 41,093 | 159,132 | |
Segment operating profit before highlighted items | 24,779 | 8,687 | 33,466 |
A reconciliation of segment operating profit before highlighted items to total profit before tax is provided below:
Six months | Six months | Year | |
ended | ended | ended | |
30 June | 30 June | 31 December | |
2009 | 2008 | 2008 | |
£000 | £000 | £000 | |
Segment operating profit before highlighted items | 14,851 | 17,003 | 33,466 |
Group costs | (3,997) | (3,726) | (7,148) |
Operating profit before highlighted items | 10,854 | 13,277 | 26,318 |
Highlighted items | (8,300) | (779) | (1,501) |
Operating profit | 2,554 | 12,498 | 24,817 |
Share of profit of associates | 1,285 | 1,045 | 2,373 |
Highlighted items - impairment of investment in associates | (1,285) | (1,045) | (2,373) |
Net finance costs | (1,099) | (2,118) | (4,673) |
Profit before tax | 1,455 | 10,380 | 20,144 |
3. Segmental analysis (CONTINUED)
ADDITIONAL INFORMATION
The table below presents revenue and operating profit before highlighted items by geographical origin:
Six months | Six months | Year | |
ended | ended | ended | |
30 June | 30 June | 31 December | |
2009 | 2008 | 2008 | |
£000 | £000 | £000 | |
Revenue | |||
United Kingdom | 32,053 | 36,373 | 70,861 |
Other European | 19,832 | 20,854 | 42,033 |
USA | 21,283 | 20,547 | 40,592 |
Rest of World | 3,419 | 2,686 | 5,860 |
Eliminations | (74) | (5) | (214) |
Total | 76,513 | 80,455 | 159,132 |
Operating profit before highlighted items | |||
United Kingdom | 6,827 | 8,288 | 16,554 |
Other European | 3,743 | 4,097 | 7,722 |
USA | 3,119 | 3,860 | 7,616 |
Rest of World | 1,162 | 758 | 1,574 |
Unallocated expenses | (3,997) | (3,726) | (7,148) |
Total | 10,854 | 13,277 | 26,318 |
Unallocated expenses comprise central head office costs.
4. Highlighted items
Six months | Six months | Year | |
ended | ended | ended | |
30 June | 30 June | 31 December | |
2009 | 2008 | 2008 | |
£000 | £000 | £000 | |
Charged to operating profit | |||
Amortisation of intangible assets | 2,387 | 2,759 | 5,026 |
Loss/(profit) on disposal of subsidiaries | 140 | (2,350) | (4,147) |
Acquisition payments to employees deemed to be remuneration | 451 | 370 | 616 |
Net brand rationalisation and other non-recurring costs | 5,322 | - | 6 |
8,300 | 779 | 1,501 | |
Charged to profit before tax | |||
Impairment of investment in associates | 1,285 | 1,045 | 2,373 |
| 9,585 | 1,824 | 3,874 |
4. Highlighted items (continued)
Highlighted items charged to profit before tax comprise significant non-cash charges and non-recurring items which are highlighted in the income statement because, in the opinion of the Directors, separate disclosure is helpful in understanding the underlying performance of the business.
Amortisation of intangible assets
Intangible assets are amortised systematically over their estimated useful lives, which vary from 3 to 20 years depending on the nature of the asset. These are significant non-cash charges which arise as a result of acquisitions.
Profit/loss on disposal of subsidiaries
The profit on disposal of subsidiaries in 2008 principally arose from the sale of the CapitalBridge business (£2.2 million) and the release of provisions for indemnities and accruals on previous disposals that are no longer required (£1.8 million).
Acquisition payments to employees deemed to be remuneration
Certain payments of consideration to non-shareholding employees of acquired businesses under arrangements set up prior to acquisition are deemed to be remuneration in the post-acquisition period. These costs will cease once the relevant earn-outs have been settled. This remuneration is not payable to the individuals concerned until the end of the earn-out period. In the meantime, the related assets and liabilities are held in a separately managed fund within the Group. The balance on the fund is included in trade and other receivables.
Net brand rationalisation and other non-recurring costs
As a result of the strategic brand initiative, rebranding costs of £5.3 million were incurred in the six months ended 30 June 2009. This charge includes £4.3 million of severance costs and £1.0 million of property costs relating to the restructuring of teams and offices to align to the new structure.
Impairment of investment in associates
The recoverable amount of Sard Verbinnen is a fixed amount, determined by the sale agreement of 14 February 2006. Consequently all profits recognised subsequently are matched by an equal and opposite impairment of the Group's investment in the entity.
5. Finance costs and income
Six months | Six months | Year | |
ended | ended | ended | |
30 June | 30 June | 31 December | |
2009 | 2008 | 2008 | |
£000 | £000 | £000 | |
Bank interest payable | 940 | 2,175 | 4,241 |
Loan note interest | - | 5 | 5 |
Finance lease interest | 15 | 20 | 37 |
Financial instruments | - | - | 32 |
Imputed interest on property provisions | 80 | 127 | 202 |
Imputed interest on deferred consideration | 331 | 233 | 541 |
Finance costs | 1,366 | 2,560 | 5,058 |
Bank interest receivable | (24) | (78) | (132) |
Financial instruments | (44) | (239) | - |
Other interest receivable | (199) | (125) | (253) |
Finance income | (267) | (442) | (385) |
Net finance costs | 1,099 | 2,118 | 4,673 |
6. Taxation
The tax charge for the six months ended 30 June 2009 has been based on an estimated effective tax rate on profit before highlighted items for the full year of 28.0% (year ended 31 December 2008: 26.1%). The tax charge is analysed as follows:
Six months | Six months | Year | |
ended | ended | ended | |
30 June | 30 June | 31 December | |
2009 | 2008 | 2008 | |
£000 | £000 | £000 | |
Before highlighted items: | |||
Current tax | 2,480 | 3,185 | 5,299 |
Deferred tax | 609 | 171 | 963 |
3,089 | 3,356 | 6,262 | |
Highlighted items: | |||
Current tax | (1,180) | 2,084 | 1,394 |
Deferred tax | (688) | 3,744 | 2,429 |
(1,868) | 5,828 | 3,823 | |
Total: | |||
Current tax | 1,300 | 5,269 | 6,693 |
Deferred tax | (79) | 3,915 | 3,392 |
Total tax charge | 1,221 | 9,184 | 10,085 |
7. Dividends
| Six months | Six months | Year |
| ended | ended | ended |
| 30 June | 30 June | 31 December |
| 2009 | 2008 | 2008 |
| £000 | £000 | £000 |
Equity dividends on ordinary shares: | |||
Final dividend for 2007 - 1.85 pence | - | 3,825 | 3,825 |
Interim dividend for 2008 - 0.7 pence | - | - | 1,459 |
Final dividend for 2008 - 2.0 pence | 4,081 | - | - |
4,081 | 3,825 | 5,284 |
The final dividend for the year ended 31 December 2008 of 2.0 pence per share was approved by shareholders at the Annual General Meeting on 14 May 2009 and was paid on 3 July 2009. This dividend is included in creditors at 30 June 2009.
The proposed 2009 interim dividend of 0.75 pence per share was approved by the Board on 26 August 2009 and in accordance with IFRS has not been included as a deduction from equity at 30 June 2009. The dividend will be paid on 6 November 2009 to those shareholders on the register on 2 October 2009.
8. Earnings per share
The data used in the calculation of the earnings per share numbers is summarised in the table below:
Six months ended | Six months ended | Year ended | ||||||
30 June 2009 | 30 June 2008 | 31 December 2008 | ||||||
Weighted | Weighted | Weighted | ||||||
average number | average number | average number | ||||||
| Earnings £000 | of shares 000's | Earnings £000 | of shares 000's | Earnings £000 | of shares 000's | ||
Basic | 193 | 205,670 | 1,011 | 204,570 | 9,777 | 205,034 | ||
Diluted | 193 | 209,383 | 1,011 | 208,130 | 9,777 | 208,613 | ||
Adjusted basic | 7,833 | 205,670 | 8,621 | 204,570 | 17,395 | 205,034 | ||
Adjusted diluted | 7,833 | 209,383 | 8,621 | 208,130 | 17,395 | 208,613 |
The basic earnings per share calculation is based on the profit for the period attributable to parent company shareholders divided by the weighted average number of ordinary shares outstanding during the period.
Diluted earnings per share is calculated based on the profit for the period attributable to parent company shareholders divided by the weighted average number of ordinary shares outstanding during the period adjusted for the potentially dilutive impact of employee share option schemes.
Adjusted earnings per share is calculated in order to provide information to shareholders about continuing trading performance and is based on the profit attributable to parent company shareholders excluding highlighted items together with related tax effects as set out below:
Six months | Six months | Year | |
ended | ended | ended | |
30 June | 30 June | 31 December | |
2009 | 2008 | 2008 | |
£000 | £000 | £000 | |
Earnings: | |||
Profit for the period attributable to parent company's shareholders | 193 | 1,011 | 9,777 |
Highlighted items (net of tax) attributable to parent company's shareholders | 7,640 | 7,610 | 7,618 |
Adjusted earnings | 7,833 | 8,621 | 17,395 |
9. Intangible fixed assets
| Customer | Software development | |||
| Brands | relationships | Goodwill | costs | Total |
| £000 | £000 | £000 | £000 | £000 |
Cost | |||||
At 1 January 2009 | 25,216 | 20,314 | 250,850 | 265 | 296,645 |
Arising on acquisitions in the period | 344 | 554 | 4,962 | - | 5,860 |
Adjustments to prior year acquisitions | - | - | 2,881 | - | 2,881 |
Capitalised development costs | - | - | - | 168 | 168 |
Exchange differences | (1,778) | (1,416) | (14,655) | (24) | (17,873) |
At 30 June 2009 | 23,782 | 19,452 | 244,038 | 409 | 287,681 |
Amortisation and impairment charges | |||||
At 1 January 2009 | 7,403 | 16,288 | 14,074 | 23 | 37,788 |
Charge for the period | 589 | 1,798 | - | 45 | 2,432 |
Exchange differences | (497) | (1,072) | (1,200) | (2) | (2,771) |
At 30 June 2009 | 7,495 | 17,014 | 12,874 | 66 | 37,449 |
Net book value at 30 June 2009 | 16,287 | 2,438 | 231,164 | 343 | 250,232 |
Net book value at 31 December 2008 | 17,813 | 4,026 | 236,776 | 242 | 258,857 |
Brands and customer relationships are being amortised over their useful economic lives of between 3 and 20 years. Details of acquisitions made during the period are set out in Note 2.
Adjustments to prior year acquisitions comprise changes to estimated contingent deferred consideration and costs of acquisition.
Notes to the financial statements
for the six months ended 30 June 2009
10. Cash flow analysis
(a) Reconciliation of operating profit to net cash inflow from operations
Six months | Six months | Year | |
ended | ended | ended | |
30 June | 30 June | 31 December | |
2009 | 2008 | 2008 | |
£000 | £000 | £000 | |
Operating profit | 2,554 | 12,498 | 24,817 |
Depreciation | 1,269 | 1,233 | 2,467 |
Share-based payment charge | 1,171 | 897 | 1,335 |
Loss on disposal of property, plant and equipment | 1 | 1 | 19 |
Amortisation of intangible assets | 2,432 | 2,759 | 5,047 |
Loss/(profit) on disposal of subsidiaries | 140 | (2,350) | (4,147) |
Increase in work in progress | (68) | (206) | (195) |
Decrease in debtors | 2,095 | 1,931 | 8,774 |
Decrease in creditors | (6,798) | (10,721) | (10,627) |
Decrease in provisions | (200) | (815) | (3,019) |
Net cash inflow from operations | 2,596 | 5,227 | 24,471 |
10. Cash flow analysis (continued)
(a) Reconciliation of operating profit to net cash inflow from operations (continued)
Net cash inflow from operations is analysed as follows:
| Six months | Six months | Year |
ended | ended | ended | |
| 30 June | 30 June | 31 December |
| 2009 | 2008 | 2008 |
| £000 | £000 | £000 |
Before highlighted items | 7,764 | 7,401 | 28,824 |
Highlighted items | (5,168) | (2,174) | (4,353) |
Net cash inflow from operations | 2,596 | 5,227 | 24,471 |
Of the highlighted cash flows, £1.1 million relates to the cash impact of amounts provided for in prior periods and £4.1 million is in respect of brand rationalisation.
(b) Reconciliation of net cash flow to movement in net debt
Six months | Six months | Year | |
ended | ended | ended | |
30 June | 30 June | 31 December | |
2009 | 2008 | 2008 | |
£000 | £000 | £000 | |
(Decrease)/ increase in cash and cash equivalents in the period | (4,710) | (1,012) | 2,126 |
Cash (inflow)/outflow from debt (drawdown)/repayment | (49) |
11,161 | 13,055 |
Purchase of financial instruments | 444 | - | - |
Loan notes repaid | - | 1,137 | 1,137 |
Repayment of capital element of finance leases | 24 | 114 | 249 |
Change in net debt resulting from cash flows | (4,291) | 11,400 | 16,567 |
Amortisation of loan fees | (72) | (89) | (101) |
Movement in fair value of derivative financial instruments | (65) | 686 | (512) |
Translation differences | (1,966) | 325 | 4,683 |
(Increase)/decrease in net debt | (6,394) | 12,322 | 20,637 |
Net debt at beginning of period | (33,500) | (54,137) | (54,137) |
Net debt at end of period | (39,894) | (41,815) | (33,500) |
10. Cash flow analysis (continued)
(c) Analysis of net debt
1 January |
| 30 June | ||
2009 | Cash flow | Other | 2009 | |
£000 | £000 | £000 | £000 | |
Cash and short-term deposits | 13,774 | (4,698) | (2,228) | 6,848 |
Bank loans and overdraft (current) | - | (12) | 1 | (11) |
Net cash and cash equivalents | 13,774 | (4,710) | (2,227) | 6,837 |
Bank loans and overdrafts (non-current) | (46,172) | (49) | 150 | (46,071) |
Derivative financial assets | 52 | 444 | (34) | 462 |
Derivative financial liabilities | (818) | - | (31) | (849) |
Obligations under finance leases | (336) | 24 | 39 | (273) |
Net debt | (33,500) | (4,291) | (2,103) | (39,894) |
(d) Cash and cash equivalents
| 30 June | 30 June | 31 December |
| 2009 | 2008 | 2008 |
| £000 | £000 | £000 |
Cash and short-term deposits | 6,848 | 6,343 | 13,774 |
Bank loans and overdrafts (current) | (11) | (163) | - |
Cash and cash equivalents | 6,837 | 6,180 | 13,774 |
11. RELATED PARTY TRANSACTIONS
The ultimate controlling party of the Group is Huntsworth PLC (incorporated in the United Kingdom). The Group has a related party relationship with its associates and with directors and executive officers.
During the period the Group and its associate Sard Verbinnen LLC carried out work on behalf of each other's clients. Aggregate amounts included in turnover and cost of sales in the consolidated income statement in respect of transactions with associates were £48,000 (2008: £73,000) and £25,000 (2008: £10,000) respectively. At 30 June 2009, there was a net trading balance due from associates of £36,000 (2008: £48,000).
12. POST BALANCE SHEET EVENTS
On 10 July 2009, the Group acquired the entire share capital of Tonic Life Communications Limited, a company incorporated in the UK, and its US-based subsidiaries (together "Tonic") for initial cash consideration of £3.0 million. Additional consideration is payable dependent on the future performance of Tonic for the four years to 30 June 2013 and will be paid in cash or a combination of cash and shares at Huntsworth's discretion. The maximum total consideration payable is £12.5 million.
On 19 August 2009, the Group acquired the entire share capital of Sund Kommunikation i Malmö AB ("Sund"), a leading public relations company operating in Sweden, for initial cash consideration of SEK 18.0 million (£1.5 million). Additional cash consideration may be payable, with an interim payment based on the profits for the twelve months to 30 June 2010 and a final payment based on the profits for the three years to 31 December 2012. The maximum total consideration payable is SEK 145.0 million.
Statement of Directors' responsibilities
for the six months ended 30 June 2009
We confirm that to the best of our knowledge this interim report:
has been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union;
includes a fair review of the information required by the Financial Services Authority's Disclosure and Transparency Rules ("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
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
Sally Withey
Chief Operating Officer
Tymon Broadhead
Group Finance Director
Independent review report to Huntsworth PLC
Introduction
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 consolidated income statement, consolidated balance sheet, consolidated statement of comprehensive income, consolidated cash flow statement, consolidated statement of changes in equity and related notes 1 to 12. 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 guidance contained in ISRE 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our 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 enquiries, 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.
Ernst & Young LLP
London
27 August 2009