HNT.L Regulatory News (HNT)

Audited preliminary results for the year ended 31 December 2011

Global and multi-office mandates now 48% of Group revenue

Huntsworth PLC, the global public relations and healthcare communications group, today announces its preliminary results for the year ended 31 December 2011.

Financial highlights1

Revenue

·; Revenue up 1.5% to £176.3m (2010: £173.6m)

·; Like-for-like2 revenue growth of 1.1%

·; Like-for-like2 growth of 9.9% in global and multi-office revenues now representing 48% of the Group (2010: 44%)

·; Average fees per client up 10% at £77,000

·; Retainer base grown by 6.2% year-on-year

Profits

·; Operating profit margin before central costs 17.5% (2010: 21.3%)

·; Operating profit post central costs £23.5m (2010: £29.6m)

·; Profit before tax £19.1m (2010: £26.7m)

·; Profit before tax after highlighted items £10.6m (2010: £21.8m)

Diluted earnings per share

·; Before highlighted items 6.2p (2010: 8.4p)

·; After highlighted items 3.9p (2010: 7.1p)

Cash flow and net debt

·; Cash flow from operating activities of £27.6m, representing a cash conversion of 118% (2010: 104%)

·; Net debt at £71.1m (2010: £52.9m)

·; Banking facilities of £110m

Dividend

·; Proposed final dividend of 2.50p (2010: 2.60p), giving a total 2011 dividend of 3.50p (2010: 3.50p)

Notes:

1) All results in this statement are stated before taking account of highlighted items unless otherwise stated. Highlighted items comprise amortisation of intangible assets of £4.4m, restructuring costs of £2.4m, litigation costs of £1.0m and acquisition related costs of £0.7m in 2011. Highlighted items in 2010 comprise amortisation of intangibles £4.3m and acquisition related costs £0.6m.

2) Like-for-like revenues are stated at constant exchange rates and are adjusted to include pre-acquisition revenues and exclude disposals/closures.

Peter Chadlington, Chief Executive of Huntsworth, said:

"Management has taken action to reduce the cost base across the Group, as well as make it more flexible and better able to match clients' requirements and spending patterns. The Group's revenue and profit profile is expected to be delivered more evenly over each quarter of the year than historically has been the case. By having a greater proportion of larger long term contracts, we reduce our reliance on project income in the traditionally strong Q4.

"In the current year, we anticipate Q1 like-for-like revenue growth of 3.0% and about one quarter of 2012 budgeted profits to be earned in Q1 - a significantly higher proportion than in previous years. The Group's new business pipeline is strong and we expect the improvement in profitability to be maintained both in the first half and for the year as a whole."

Contacts:

A presentation to analysts will take place at 11.00am on Tuesday 3 April 2012 at the offices of Numis Securities Limited, 5th Floor, London Stock Exchange, 10 Paternoster Square, London, EC4M 7LT.

To view an interview with Lord Chadlington and Sally Withey on the preliminary results and the outlook for Huntsworth, please view the following link: http://62.233.101.119/HNT/

CHIEF EXECUTIVE'S STATEMENT

Review of the year

Group revenues rose by 1.5% to £176.3 million (2010: £173.6 million). Operating profits after central costs fell by 20.6% to £23.5 million (2010: £29.6 million).

During the first three quarters of 2011, the Group performed well with improved like-for-like revenue growth, reaching our target of 7.0% in Q3. However, Q4 saw the cancellation of certain scheduled year-end projects, principally in Grayling and Huntsworth Health, due to global economic uncertainty. This resulted in a 6.4% like-for-like revenue decline which had a £4.0 million impact to revenues and profit.

Overall, the Group saw like-for-like revenue growth of 1.1% in the year. PR revenues grew by 2.0% with 3.0% growth in the UK, 1.7% growth in the Eurozone and 1.0% growth in the rest of the World. Huntsworth Health showed a decline of 1.0%, impacted by a 15% decline in Q4.

Historically, Q4 revenues have been 10% to 15% higher than Q3 revenues buoyed by project income, but in 2011 the increase did not materialise as Q4 scheduled projects were unexpectedly cut by clients at short notice, too late to protect the 2011 results.

Single office retainer and project revenues have proved more vulnerable in the tough macro-economic environment, declining by 5.8% in 2011 on a like-for-like basis.

However, following the rationalisation to four brands in 2010, we are winning and delivering larger multi-office remits. These revenues now represent 48% of Group revenues, growing on a like-for-like basis by 9.9% and driving an increase in our retainer base which has grown by 6.2% year-on-year. Average fees per client are now up 10% at £77,000.

Engaging with clients on longer term contracts resulted in a more evenly spread quarterly revenue profile in 2011, which we expect to be sustained in the future. Our 2012 budgets reflect this, showing reduced reliance on one-off projects which have previously driven this historic Q4 revenue spike.

Our cost base has been restructured to reflect this new revenue profile and to produce margin improvement from Q1 2012. The staff cost to revenue ratio is expected to improve by 3 percentage points and in addition the operating cost to revenue ratio is expected to improve by 1 percentage point in the year.

Historically, the Group has produced 15% to 17% of full year operating profits post central costs in Q1. Flatter quarterly revenues and a restructured cost base has enabled management to anticipate 24% of annual operating profit in Q1 2012. This much stronger start to 2012 than in previous comparable periods means that even with modest full year revenue growth, management expects to deliver significant margin improvement compared to 2011.

Balance Sheet, Cash flow and Dividends

Our balance sheet remains robust. We refinanced the Group in March 2011, increasing our available banking facilities to £110 million and extending our term to 2015. The resulting incremental cost of finance for the year was £1.4 million. The available banking facilities reduce by £3 million each six months from March 2013 to £95 million by March 2015 as the term loan is repaid.

Net debt at 31 December 2011 was £71.1 million (2010: £52.9 million). The Group remains comfortably within the terms of its banking facilities. At 31 December 2011, adjusted net debt to continuing EBITDA was at a ratio of 2.75 times and interest cover (excluding highlighted items and imputed interest) was 7.41 times.

Our continued focus on working capital management resulted in cash conversion of 118%, well ahead of our annual target. Operating cash flow was £27.6 million, before a £3.1 million cash impact relating to exceptional items.

Other principal movements in net debt during 2011 were net payments for interest, tax and fixed assets of £9.1 million, acquisition and earn-out payments of £24.9 million, dividends of £7.7 million and purchase of shares under the share buyback programme of £0.5 million.

Deferred consideration payments peaked in the year at £18.2 million, as the initial 'buy and build' phase of the Group completed. £17.1 million was paid in cash. The Group has a significantly reduced deferred contingent consideration profile with future earn-out payments as at 31 December 2011 estimated at £15.8 million of which £8.9 million is payable in cash or shares at the Group's discretion. The timing of these payments is £5.3 million in 2012, £4.7 million in 2013 and £5.8 million in following years.

The proposed total dividend has been held at 2010 levels at 3.50p.

Citigate

·; 15.2% of Group revenues

·; Operating margins of 19.2%

·; Like-for-like revenue growth of 3.0%

·; 67% of annual revenues on retainers

Citigate performed well in 2011, particularly in the UK and Western Europe, in spite of transactional activity being subdued. Year-on-year retainer fees grew by £1.1 million.

Citigate continues to hold a strong position in the M&A market and was ranked third in the mergermarket league table of PR advisors to European M&A and fifth globally for 2011. High profile deals included ABB's US$3.9bn agreed acquisition of Thomas & Betts; private investment firm OpCapita's acquisition of Comet from Kesa Electricals; Bank of Georgia's tender offer for all outstanding shares; and the IPO of China Vehicle Components Technology.

Financial uncertainty continues to exist in financial institutions, including banks who rely heavily on capital market transactions. IPO markets are also relatively quiet in Asia but we have seen activity from global companies looking to raise their profile in the region.

Grayling

·; 49.6% of Group revenues

·; Operating margins of 16.2%

·; Like-for-like revenue growth of 1.0%

·; 25% like-for-like growth in multi-office revenues

During 2011, Grayling has made significant progress growing existing client relationships such as Google, National Grid, Nabucco and the EU Commission and won important contracts such as the Qatar Foundation, BA and DHL helping to drive a 25% like-for-like increase in multi-office revenues. Grayling continues to develop its digital capabilities, is growing in brand recognition and was awarded the Agency of the Year at the European Excellence Awards in December 2011.

Since the start of 2012, Grayling has won new remits from Kapsch and The World Water Forum. Although client nervousness remains in Western Europe and public affairs revenues in the US are expected to remain subdued in the run up to the presidential election in November, we expect strong growth to be delivered from digital revenues in Atomic and larger fee wins in 2011, particularly in the Middle East, will assist in driving margin improvement in 2012.

Huntsworth Health

·; 28.1% of Group revenues

·; Operating margins of 18.7%

·; Like-for-like revenue decline of 1.0%

·; Digital revenues grew by 18.4% for the full year

Huntsworth Health provides medical communications, marketing communications and public relations with a strategy to increase the number and value of global accounts and integrated brand remits. During 2011, the division continued to focus on developing larger value, long-term, global clients and to be included on global supplier lists of major pharmaceutical companies such as Roche, Novartis, Pfizer and J&J.

Huntsworth Health successfully competes against the 6 major holding companies and our flexibility, ability to fully integrate services, and our boutique client service approach provide considerable competitive advantage. We successfully pitched for the network business at Merck as a member of the IN Network an example of our competitive strength.

Digital revenues will help drive growth in 2012 underpinned by large contract wins in 2011.

Red

·; 7.1% of Group revenues

·; Operating margins of 18.1%

·; Like-for-like revenue growth of 7.0%

Major client wins in the year included Boots, Adobe, Symantec and Gatwick Airport, which helped to produce double digit revenue growth in Q3 and Q4. Strong growth was seen in sectors such as health, consumer technology, financial services and well-being.

Industry awards included Marketing magazine PR agency of the Year and Holmes Report UK Consultancy of the Year.

Growth prospects remain good for 2012 with continued progress in corporate, social and healthcare public relations.

Group Outlook

Management has taken action to reduce the cost base across the Group as well as make it more flexible and better able to match clients' requirements and spending patterns. The Group's revenue and profit profile is expected to be delivered more evenly over each quarter of the year than historically has been the case. By having a greater proportion of larger long term contracts, we reduce our reliance on project income in the traditionally strong Q4.

In the current year, we anticipate Q1 like-for-like revenue growth of 3.0% and about one quarter of 2012 budgeted profits to be earned in Q1 - a significantly higher proportion than in previous years. The Group's new business pipeline is strong and we expect the improvement in profitability to be maintained both in the first half and for the year as a whole.

Staff

I would like to thank our dedicated staff for their support during this challenging year for the Group. I would also like to thank Gene Beard, David Puttnam and Colin Adams for their valued service to the Huntsworth Board.

To view an interview with Lord Chadlington and Sally Withey on the preliminary results and the outlook for Huntsworth, please view the following link:

http://www.huntsworth.com 

FINANCIAL RESULTS

Introduction

All results are stated before taking account of highlighted items unless otherwise stated. In the current year these comprise amortisation of intangible assets, restructuring costs, litigation costs and acquisition related costs. Highlighted items in 2010 comprise amortisation of intangible assets and acquisition related costs.

Like-for-like revenues are stated at constant exchange rates and are adjusted to include pre-acquisition revenues and exclude disposals/closures.

Results for the year

Group revenues rose by 1.5% to £176.3 million (2010: £173.6 million). Operating profits after central costs decreased by 20.6% to £23.5 million (2010: £29.6 million).

Group operating profits before central costs declined by 16.2% to £30.9 million (2010: £36.9 million). Margins before central costs are 17.5% (2010: 21.3%) and post central cost margins are 13.3% (2010: 17.1%).

Profits before tax and highlighted items were down 28.5% to £19.1 million (2010: £26.7 million).

Currency

Changes in exchange rates have had very little impact on the Group's results in the year.

Highlighted Items

Highlighted items of £8.5 million include £4.4 million for non-cash amortisation of intangible assets, £2.4 million of restructuring costs, £1.0 million of litigation costs and £0.7 million of acquisition related costs. An additional £0.6m of restructuring costs are forecast in H1 2012. Acquisition related costs represent changes in value of contingent consideration and corporate transaction costs.

Litigation costs represent on-going legal cases against former employees in respect of restriction breaches. After highlighted items, the statutory reported operating profit was a profit of £15.0 million (2010: £24.8 million).

Tax

The total tax expense of £0.8 million comprises an underlying tax expense of £3.5 million together with a credit of £2.7 million on highlighted items. The full year underlying tax rate is 18.5% (2010: 22.0%). Net corporation tax paid in the year was £3.4 million (2010: £3.1 million).

Earnings

Profits attributable to ordinary shareholders before highlighted items were £15.6 million (2010: £20.8 million). Profits after highlighted items attributable to ordinary shareholders amounted to £9.7 million (2010: £17.5 million).

Before highlighted items, basic earnings per share for 2011 is 6.5p (2010: 8.7p) and diluted earnings per share is 6.2p (2010: 8.4p).

Basic earnings per share after highlighted items is 4.1p (2010: 7.4p) and diluted earnings per share after highlighted items is 3.9p (2010: 7.1p).

Dividends

The Board will propose at the forthcoming AGM a final dividend of 2.50p per share which will provide a total dividend of 3.50p, in line with the total 2010 dividend of 3.50p. The record date for this dividend will be 1 June 2012 and it is payable on 6 July 2012. A scrip dividend alternative will be available.

Share Buyback Programme

In 2009, the Company commenced a share buyback programme. During 2011, a total of 0.9 million shares were purchased at a cost of £0.5 million and are held in treasury. As at 31 December 2011, the Group holds 3.1 million shares in Treasury.

Key risks and uncertainties

The Group faces a range of market, operational, financial and legal risks which are continually reviewed with a view to identifying any emerging risks and mitigating all risks as effectively as possible. The Group undertakes a comprehensive annual risk assessment exercise involving all senior management teams around the Group to identify, report and evaluate operational risks facing the business and ensure appropriate actions are undertaken to manage these risks. A record of all risks and how they are being mitigated is maintained in a risk register. The process is designed to manage rather than to eliminate the risks inherent in achieving the Group's business objectives and can therefore provide only reasonable and not absolute assurance against material misstatement or loss.

The Group's key risks and uncertainties are considered to be:

Forward Looking Statements

The preliminary announcement contains certain forward looking statements in respect of Huntsworth 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.

Notes to Editors:

1. Huntsworth PLC is an international public relations group with 71 principal offices in 31 countries. During 2011 the Group worked for circa 2,300 clients and provided services to 43 companies in the FTSE 100, 93 in the Fortune 500, 92 in the FTSEurofirst 300 and 39 of the world's 50 largest healthcare companies.

2. The Group comprises some of the world's leading public relations agencies in our four divisions Grayling, Citigate, Red and Huntsworth Health. At 31 December 2011, the Group employed 1,678 staff with an average fee income per head of £105,000.

3. By industry sector the revenue profile is broadly 26% Pharmaceuticals, 12% Financial Services, 10% Information Technology, 7% Retail & Leisure, 7% Healthcare, 6% Government & Public Sector, 5% Industrial and 5% Food & Drink.

4. Geographically, 41% of Group revenue came from the UK, 34% from the US, 21% from European countries and 4% from the rest of the World.

5. The Group now services 240 multi-office clients, of which the top four have annual revenues exceeding £3 million each. The remaining multi-office clients represent 35% of revenue.

6. The top 15 clients each generate in excess of £1 million of annual revenue. Our largest client represents 4% of revenue with the top 10 clients accounting for 19% and the top 25 clients 28%.

7. Shareholdings of Directors, employees and employee trusts represent approximately 11% of the Group's issued share capital. Institutional shareholdings hold 81% with the top 10 holding some 60% as of 7 March 2012.

Consolidated Income Statement

for the year ended 31 December 2011

1 Adjusted basic and diluted earnings per share are calculated based on profit for the year adjusted for highlighted items and the related tax effects (Note 9).

Consolidated Statement of Comprehensive Income and Expense

for the year ended 31 December 2011

Consolidated Balance Sheet

as at 31 December 2011

The financial statements were approved by the Directors on 2 April 2012 and signed on their behalf by:

Consolidated Cash Flow Statement

for the year ended 31 December 2011

Consolidated Statement of Changes in Equity

for the year ended 31 December 2011

Notes to the Preliminary Consolidated Financial Statements

1. Basis of preparation

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards ('IFRS'), as adopted in the European Union and as applied in accordance with the provisions of the Companies Act 2006. On 2 April 2012 the consolidated financial statements of the Group and this preliminary announcement were authorised for issue in accordance with a resolution of the Directors and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. Statutory accounts for the year ended 31 December 2010 have been filed with the Registrar of Companies. The auditors' reports on the financial statements for the years ended 31 December 2011 and 31 December 2010 are unqualified and do not contain any statement under Section 498 (2) or (3) of the Companies Act 2006.

The annual financial information presented in this preliminary announcement for the year ended 31 December 2011 is based on, and is consistent with, that in the Group's audited financial statements for the year ended 31 December 2011. This preliminary announcement does not constitute statutory accounts of the Group within the meaning of Section 235 of the Companies Act 2006. Whilst the information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of IFRS, this announcement does not itself contain sufficient information to comply with IFRS. The Consolidated financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds (£000) except where otherwise indicated.

Going concern

The Group's activities, financial performance, position, cashflows and borrowing facilities are described in the Review of the Year.

After reviewing the Group's performance, future forecasted profits and cash flows, and ability to draw down on its facilities, 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 Company's and the Group's financial statements.

2. Significant accounting policies

The preliminary consolidated financial statements have been prepared in accordance with the accounting policies of the Group which are set out on pages 41 to 46 of the 2010 Annual Report and Accounts, with the exception of the following new standards and amendments to standards were mandatory for the first time for the financial year beginning 1 January 2011, but had no impact on the Group:

·; IAS 24 (revised) Related Party Disclosures (effective for accounting periods beginning on or after 1 January 2011). The definition of a related party has been clarified to simplify the identification of related party relationships, particularly in relation to significant influence and joint control.

·; IFRS 1 (amendment) - First-time Adoption of International Financial Reporting Standards - Limited Exemption from Comparative IFRS 7 Disclosures for First-time Adopters (effective for accounting periods beginning on or after 1 January 2011);

·; IAS 32 (amendment) - Financial Instruments: Presentation - Classification of Rights Issues (effective for accounting periods beginning on or after 1 February 2010);

·; IFRIC 14 (amendment) - Prepayments of a Minimum Funding Requirement (effective for accounting periods beginning on or after 1 January 2011).

·; IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (effective for accounting periods beginning on or after 1 July 2010).

3. Acquisitions

Atomic

On 22 March 2011, the Group acquired the entire share capital of Atomic Communications, LLC (a company incorporated in the United States), 100% of the voting shares of Atomic Communications Holdings Limited (a company incorporated in the United Kingdom) and the bespoke web-based data analytics application ComContext (together "Atomic").

Atomic has contributed £8.1 million to revenue and £1 million to profit before tax for the period between the date of acquisition and the balance sheet date. If the acquisition of Atomic had been completed on the first day of the financial year, Group revenues for the period would have been £177.5 million and Group post highlighted operating profit would have been £15.5 million.

The fair value of the net assets at the date of acquisition were as follows:

The fair value of trade and other receivables includes trade receivables with a fair value of £774,000 and a gross contractual value of £790,000. The best estimate at the acquisition date of contractual cash flows not to be collected is £16,000.

Goodwill comprises the value of expected synergies arising from the acquisition and other intangible assets that do not qualify for separate recognition. To the extent that goodwill arises in the United States, it is expected to be tax deductible as part of the total tax deductible consideration paid on acquisition.

The fair value of the contingent consideration payment is based on forecast average profits for the period from acquisition to 31 December 2015. The potential undiscounted range of future payments that Huntsworth plc could be required to make under the contingent consideration arrangement is between nil and £23 million and will be paid in cash or a combination of cash and shares at Huntsworth's discretion.

Acquisition related costs of £0.5 million were incurred and these are included within highlighted items in the income statement.

4. Segmental analysis

The following is an analysis of the Group's revenue and operating profit before highlighted items by reportable segment. The reportable segments are identified based on the Group's four brands.

Business segments

The following is an analysis of the Group's revenue and operating profit before highlighted items by reportable segment.

Highlighted items are not presented to the Board on a segmental basis.

A reconciliation of segment operating profit before highlighted items to total profit before tax is provided below:

Unallocated expenses comprise central head office costs which are not considered attributable to any segment.

Geographical information

The tables below present revenue from external customers and segment non-current assets by geographical origin:

Non-current assets exclude financial instruments and deferred tax assets.

5. Highlighted items

Highlighted items charged to profit before tax comprise significant non-cash charges and/or 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. The following highlighted items have been recognised in arriving at profit for the year:

Amortisation of intangible assets

Intangible assets are amortised systematically over their estimated useful lives, which vary from three to 20 years depending on the nature of the asset. These are significant non-cash charges which arise as a result of acquisitions.

Restructuring costs

Restructuring costs derive from cost saving initiatives announced by the end of December and include severance payments, property and other contract termination costs. The associated cash outflows were mostly incurred in the first quarter of 2012.

Litigation costs

Litigation costs relate to legal costs and settlements of cases pending final judgement. All costs have been incurred as at 31 December 2011. Whilst these costs may be recoverable, a contingent asset will not be recognised until this is virtually certain.

Acquisition related costs

In line with the requirements of IFRS 3 (revised) 'Business Combinations', costs incurred in relation to acquisitions and any adjustments to the fair value of deferred consideration liabilities are taken to the Income Statement rather than being included as part of the cost of investment or as an adjustment to goodwill. These costs are presented as highlighted items as the Directors consider that this gives a clearer understanding of the underlying performance of the business. The balance includes a credit of £0.6 million (2010 - £nil) relating to revaluation of deferred consideration (refer to Note 11) and a charge of £1.3 million (2010 - £0.5 million) relating to acquisition and transaction costs.

Taxation

Further details of the tax credits on highlighted items are disclosed in Note 7.

6. Finance costs and income

7. Taxation

The charge for the year can be reconciled to the profit per the income statement as follows:

The income tax expense for the year is based on the United Kingdom effective statutory rate of corporation tax of 26.5% (2010: 28%). Overseas tax is calculated at the rates prevailing in the respective jurisdictions.

8. Dividends

Shareholdings under the Group's Employee Benefit Trust of 8,537,327 shares waived their rights to both the 2010 final and 2011 interim dividends (2009 final dividend: 6,160,673 and 2010 interim dividend: 6,184,938 shares respectively).

A 2011 final dividend of 2.50 pence per share has been proposed for approval at the Annual General Meeting in 2012.

9. Earnings per share

The data used in the calculations of the earnings per share numbers is summarised in the table below:

The basic earnings per share calculation is based on the profit for the year attributable to Parent Company shareholders divided by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share takes the basic earnings per share and adjusts for the potentially dilutive impact of employee share option schemes and shares to be issued as part of contingent consideration on acquisitions of subsidiaries.

Adjusted earnings per share is calculated in order to provide information to shareholders about underlying trading performance and is based on the profit attributable to Parent Company shareholders excluding highlighted items.

10. Intangible assets

1. Details of acquisitions made during the year are set out in Note 3.

2. Adjustments to goodwill on prior year acquisitions represent changes to contingent deferred consideration payable for acquisitions completed prior to 1 January 2010.

11. Provisions

Deferred contingent consideration for acquisitions

Acquisitions made by the Group typically involve an earn-out arrangement whereby the consideration payable includes a deferred element, payable in either cash or a combination of cash and shares at the Company's option,that is contingent on the future financial performance of the acquired entity. The Group anticipates settling the deferred consideration provisions over the next five years. The amount arising in the year represents the change in the estimated earn-out based on the latest financial performance of the acquired businesses. The amount utilised in the year represents the cash paid or shares issued under the earn-out arrangements.

Property provisions

Provisions for property represent amounts set aside in respect of property leases which are onerous and the unavoidable costs of restoring leasehold properties to the condition specified in the lease at the end of the contractual term. The quantification of these provisions has been determined based on external professional advice and is dependent on the Group's ability to exit the leases early or to sublet the properties. In general, property costs are expected to be incurred over a range of one to five years.

Reorganisation and other provisions

This provision relates principally to employee termination benefits arising as a result of the restructuring initiative implemented in December 2011. The cash outflows were mostly incurred in the first quarter of 2012. In addition, when acquiring businesses provisions have been made to cover the best estimate of the Group's exposure to liabilities arising due to the acquisition.

12. Cash flow analysis

(a) Reconciliation of operating profit to net cash inflow from operations

Net cash inflow from operations is analysed as follows:

(b) Reconciliation of net cash flow to movement in net debt

(c) Analysis of net debt

At 31 December 2011 the Group had undrawn committed facilities of £32 million (2010: £23 million) available.

(d) Cash and cash equivalents

13. Contingent liabilities

In the normal course of business, the Group is, from time to time, subjected to legal actions, contractual disputes, employment claims and tax assessments. In the opinion of the Directors the ultimate resolution of these matters will not have a material adverse effect on the Consolidated Financial Statements.

The Company and its subsidiaries have entered into a number of indemnifications, performance and financial guarantees, in the normal course of business, which give rise to obligations to pay amounts or fulfil obligations to external parties should certain conditions not be met or specified events occur. As at the date of this report, no matter has come to the attention of the Group which indicates that any material outflow will occur as a result of these indemnities and guarantees.

14. 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 subsidiaries, associates and with its Directors.

Transactions between the Company and its subsidiaries have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.

Loans to Directors

In connection with the award of share interests in 2009, it was considered and agreed by the Remuneration Committee at that time that loans should be made from the Huntsworth Employee Benefit Trust to Lord Chadlington and Sally Withey of £12,000 and £7,380 respectively in order to finance the personal costs of acquiring these awards. The loans are unsecured and interest free and are repayable within 7 days of the vesting or lapse of the awards or at a later date to be agreed by the parties.

Directors' responsibility statement

The Annual Report and Accounts comply with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority in respect of the requirement to produce an annual financial report. The responsibility statement below has been prepared in connection with the Company's Annual Report, certain parts of which are not included within this announcement.

We confirm on behalf of the Board that to the best of our knowledge:

·; the Group financial statements have been prepared in accordance with the applicable set of accounting standards and give a true and fair view of the assets, liabilities, financial positions and profit and loss of the Company and the undertakings included in the consolidation taken as a whole; and

·; the Annual Report and Accounts include a fair review of the development and performance of the business and the positions of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.