Jaywing Regulatory News (JWNG)

Date: 23 November 2010

On behalf of: Digital Marketing Group plc ("DMG", "the Company" or "the Group")

Embargoed: 0700hrs

Digital Marketing Group plc

Interim Results 2010/2011

Digital Marketing Group plc (AIM: DIGI), the UK's largest digital marketing agency, today announced its interim results for the six months ended 30 September 2010.

Performance Highlights

·; Gross profits £17.90m (2009: £17.44m)

·; EBITDA before share based payments £2.47m (2009: £3.63m)

·; Profit before tax ("PBT") before amortisation and share based payment charges £1.95m (2009: £2.93m)

·; Profit after tax £0.32m (2009: £0.14m)

·; Net debt £6.07m (£7.26m 31 March 2010); undrawn banking facilities of £3.28 million

·; Adjusted basic earnings per share 1.57 pence (2009: 3.20 pence)

·; Basic earnings per share 0.42 pence (2009: 0.20 pence)

Commenting on the results, Stephen Davidson, Chairman of Digital Marketing Group plc, said: "We continue to operate in a difficult and uncertain market place however we have still produced positive results with an increase in profit after tax and reduced debt."

Ben Langdon, Chief Executive of Digital Marketing Group plc, added: "The results for the six months are reflective of a mixed performance. Our ecommerce division delivered exceptional growth in profits of 28% yr/yr. Voice marketing also delivered strong levels of new business and achieved significant growth in both gross profits and PBT yr/yr. Conversely, our data services division continues to underperform."

"We have reduced the number of office locations in our marketing agency division and this will show positive results through efficiency and resource allocation for the benefit of clients."

"We are in a strong position to take advantage of recoveries within our market and should also continue to see organic growth within our ecommerce division."

Enquiries:

Digital Marketing Group plc

Ben Langdon, Chief Executive

Keith Sadler, Group Finance Director

finnCap

Tom Jenkins/Sarah Wharry 020 7600 1658

INTERIM RESULTS

Our profit before tax for the six months ended 30 September 2010 was £0.6 million compared to £0.7 million for the six months ended 30 September 2009 and our profit after tax, as a result of a reduced tax charge, increased from £0.1 million to £0.3 million. Gross profits increased from £17.4 million to £17.9 million.

The performance from our ecommerce division has continued to produce excellent results. Gross profit has increased by 68% and profit before tax has increased by 28%. This reflects a movement in the retail sector to establish business critical systems for their online offering. Our team are strategically placed to take advantage of this shift. They are a Tier 1 IBM reseller for IBM's global leading ecommerce platform, Websphere.

As I stated in the annual report and accounts, recovery in our DMG pillar and in particular our data services division is linked to the speed of recovery in financial services and we have still to see any signs of improvement in this sector. In addition, continuing delays in client decisions within our marketing agency division has meant our new business conversion has not been as we had anticipated.

During the period we received partial settlement on a contractual obligation from a client who has gone into liquidation, amounting to £0.9 million, which has been disclosed within other income.

Operating expenses increased as a result of the increase in staff costs within our ecommerce business in order to deliver the successful increase in its revenues. We have consolidated the 20:20 agency business around our largest office based in Newbury, Berkshire, which has resulted in the closure of the Bristol office and the relocation of a number of staff from our Swindon office. This will mean a more efficient process and allocation of resource to client assignments.

Net debt has been reduced by £1.2 million in the six months to 30 September 2010 to £6.1 million. The cost of financing this debt has fallen from £375,000 for the six months ended 30 September 2009 to £256,000 for the six months under review.

Recent client wins include Royal Bank of Scotland, Promethean, Homeserve, Weight Watchers and Informa World.

Outlook

There is still uncertainty within our market sector which is delaying our return to significant growth. We are managing our cost base robustly to ensure it is appropriate for the business but are mindful of the fact that we need to invest to protect the assets that we have. We expect to produce profitable operating results above those reported in the first six months.

Ben Langdon

Chief Executive

22 November 2010

Consolidated Interim Statement of Comprehensive Income (unaudited)

Consolidated interim balance sheet (unaudited)

Consolidated interim cash flow statement (unaudited)

Consolidated interim statement of changes in equity (unaudited)

1. General Information

Digital Marketing Group plc (the "Company") is incorporated and domiciled in the United Kingdom. The Company is listed on the AIM market of the London Stock Exchange. The registered address is 30-33 Minories, Tower Hill, London, EC3N 1DD.

The interim financial information was approved for issue on 22 November 2010.

2. Basis of preparation

The consolidated interim financial statements for the six months ended 30 September 2010 have been prepared in accordance with applicable accounting standards and under the historical cost convention except for certain financial instruments that are carried at fair value.

The financial information for the year ended 31 March 2010 set out in this interim report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 31 March 2010 have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain statements under Section 498 (2) or Section 498 (3) of the Companies Act 2006.

The consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 March 2010, which have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

3. Accounting policies

Except as described below, the principal accounting policies of Digital Marketing Group plc and its subsidiaries ("the Group") are consistent with those set out in the Group's 2010 annual report and financial statements.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 April 2010.

·; IAS 27 Consolidated and Separate Financial Statements (Revised 2008) (effective 1 July 2009). 

·; Amendment to IAS 39 Financial Instruments: Recognition and Measurement - Eligible Hedged Items (effective 1 July 2009). 

·; Group Cash-settled Share-based Payment Transactions - Amendment to IFRS 2 (effective 1 January 2010). 

·; IFRIC 17 Distributions of Non-cash Assets to Owners (effective 1 July 2009). 

·; IFRIC 18 Transfers of Assets from Customers (effective prospectively for transfers on or after 1 July 2009). 

·; Amendment to IAS 32 Classification of Rights Issues (effective 1 February 2010). 

4. Segment information (unaudited)

The chief operating decision-maker has been identified as the Group Chief Executive. The Group Chief Executive reviews the Group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports. 20:20 provide full agency services for clients on digital platforms together with ecommerce services. DMG provide digital direct marketing, data and data related services and voice services to clients.

The Group Chief Executive assesses the performance of the operating segments based on gross profit and operating profit before interest and tax.

Total assets exclude intangible assets, cash and external borrowings which have not been allocated to operating segments.

No single client accounts for more than 10% of Group revenue. All the Group's activities are carried out within the UK.

5. Tax expense (unaudited)

A reconciliation of the charge that would result from applying the standard UK corporation tax rate to profit before tax to the tax charge is given below.

6. Earnings per share (unaudited)

Earnings per share have been calculated by dividing the profit attributable to shareholders by the weighted average number of ordinary shares in issue during the period. The calculations of basic and diluted earnings per share are:

Adjusted earnings per share have been calculated by dividing the profit attributable to shareholders before amortisation, impairment and charges for share based payments by the weighted average number of ordinary shares in issue during the period. The numbers used in calculating the basic and diluted adjusted earnings per share are reconciled below:

7. Bank overdraft, borrowings and loans (unaudited)

As the loans are at variable market rates their carrying amount is equivalent to their fair value.

In 2007 the Group purchased an interest rate swap of 6.19% for the period 2007 to 2012 for £4.0 million of its borrowings.

The borrowing facilities available to the Group at 30 September 2010 was £10.36 million (2009: £11.13 million) and, taking into account cash balances within the Group, there was £3.28 million (2009: £3.28 million) of available borrowing facilities.

A composite accounting system is set up with the Group's bankers, which allows debit balances on overdraft to be offset across the Group with credit balances.

8. Financial derivatives (unaudited)

In 2007 the Group purchased an interest rate swap of 6.19% for the period 2007 to 2012 for £4.0 million of its borrowings. This swap is designated a hedge of the interest expense relating to the Group loans. The contract was marked to market at 30 September 2010 and was a net liability of £363,000 (2009: £424,000).

9. Provisions (unaudited)

Provisions relate to leases in the Group where the commercial benefit has either ceased or will cease before the normal expiry period.

10. Share capital (unaudited)

Authorised:

Allotted, issued and fully paid

The shares issued in the period were as a result of the exercise of share options by employees and directors.

11. Related party transactions (unaudited)

There were no significant changes in the nature and size of related party transactions for the period from those disclosed in the Annual Report for the year ended 31 March 2010.

INDEPENDENT REVIEW REPORT TO DIGITAL MARKETING GROUP PLC

Introduction

We have been engaged by the company to review the interim financial information in the interim report for the six months ended 30 September 2010 which comprises the consolidated interim statement of comprehensive income, the consolidated interim balance sheet, the consolidated interim cash flow statement and the consolidated interim statement of changes in equity and the related notes 1 to 11. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the interim financial information.

This report is made solely to the company in accordance with guidance contained in ISRE (UK and Ireland) 2410, "Review of Interim Financial Information performed by the Independent Auditor of the Entity". Our review work has been undertaken so that we might state to the company those matters we are required to state to them in a 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 conclusion we have formed.

Directors' responsibilities

The interim report is the responsibility of, and has been approved by, the directors. The AIM rules of the London Stock Exchange require that the accounting policies and presentation applied to the interim financial information are consistent with those which will be adopted in the annual accounts having regard to the accounting standards applicable for such accounts.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The interim financial information in the interim report has been prepared in accordance with the basis of preparation in note 2.

Our responsibility

Our responsibility is to express to the company a conclusion on the interim financial information in the interim 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.

Based on our review, nothing has come to our attention that causes us to believe that the interim financial information in the interim report for the six months ended 30 September 2010 is not prepared, in all material respects, in accordance with the basis of accounting described in note 2.

Grant Thornton UK LLP

Chartered Accountants

Sheffield

22 November 2010