Mc Mining Regulatory News (MCM)

Motivcom plc

("Motivcom", "the Company" or "the Group")

Final Results for the year ended 31 December 2010

Motivcom plc (AIM:MCM), a leading UK business services group offering marketing communications, events and incentive expertise to blue-chip corporate clients, is pleased to announce its final results for the year ended 31 December 2010.

HIGHLIGHTS

·; Gross profit increased by 22% to £27,776,000 (2009: £22,775,000)

·; Headline operating profit* increased by 24% to £4,763,000 (2009: £3,830,000)

·; Headline profit before tax† increased by 34% to £4,686,000 (2009: £3,503,000)

·; Headline basic earnings per share‡ increased by 31% to 11.48 pence (2009: 8.75 pence)

·; Operating profit increased by 32% to £4,463,000 (2009: £3,391,000)

·; Profit before tax increased by 43% to £4,386,000 (2009: £3,064,000)

·; Basic earnings per share increased by 40% to 10.72 pence (2009: 7.65 pence)

·; Interim dividend of 1.0 pence per share paid 5 November 2010 and final dividend of 2.2 pence per share to be paid on 22 June 2011, making a total dividend of 3.2 pence per share (2009: total dividend of 2.5 pence per share), an increase of 28%

·; Net cash balances at 31 December 2010 of £6,239,000 (2009: £1,834,000)

·; Equity increased by 13% to £20,448,000 (2009: £18,061,000)

·; Diverse service offering provides an excellent platform for future growth and development

* Operating profit of £4,463,000 (2009: £3,391,000) plus amortisation of intangible assets of £300,000 (2009: £439,000).

† Profit before tax of £4,386,000 (2009: £3,064,000) plus amortisation of intangible assets of £300,000 (2009: £439,000).

‡ See reconciliation in Note 5

Commenting on the results, Colin Lloyd, Chairman of Motivcom plc, said:

"I am pleased to report another period of strong growth; Motivcom has achieved a 24% increase in headline operating profit for the financial year ended 31 December 2010. The Group's growth has been organic and has been driven by many of our largest clients increasing their spending, as well as new business wins".

"The Group has a clear direction and strategy which has delivered good results for the period which were ahead of market expectations and our position in our markets remains strong. The Board has confidence in making further progress in the current financial year, but is mindful of any significant increases in client expenditure given the ongoing challenging economic climate."

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CHAIRMAN'S STATEMENT

I am pleased to report another period of strong growth; Motivcom has achieved a 24% increase in headline operating profit for the financial year ended 31 December 2010. The final dividend has been increased to 2.2 pence making a total of 3.2 pence for the full year, an increase of 28%.

The Group's growth has been organic and has been driven by many of our largest clients increasing their spending, as well as new business wins. Given the ongoing challenging economic climate, the Group continued to take a prudent view of investments and overheads during the period.

Financial update

Headline operating profit increased by 24% to £4,763,000 (2009: £3,830,000) on a gross profit that increased by 22% to £27,776,000 (2009: £22,775,000). Headline profit before tax increased by 34% to £4,686,000 (2009: £3,503,000). Headline basic earnings per share increased by 31% to 11.48 pence (2009: 8.75 pence).

I am also pleased to report that the Group's disciplines in cash management have resulted in net cash balances at 31 December 2010 of £6,239,000 (2009: £1,834,000), underlining the positive cash flow fundamentals of the Group, with £6,514,000 of cash generated from operating activities. The Group only has a liability of £75,000 in respect of deferred consideration on prior acquisitions.

Dividends

In view of the cash generative nature of the Group's business, a final dividend for 2010 of 2.2 pence per share will be paid. This makes a total dividend per share of 3.2 pence for 2010 (2009: total dividend of 2.5 pence), an increase of 28%. This final dividend will be paid on 22 June 2011 to shareholders on the register at close of business on 15 April 2011.

The Board intends to grow the dividend in real terms whilst aiming for earnings cover of two times over the medium term.

Strategy

In order to further progress the Group's strategy, the senior management team has considered the next five years in order to identify prospective growth opportunities and new product areas for the business units. As a result a number of initiatives have been identified. These are now being pursued actively by teams throughout the business and I am pleased that even in these early stages of development the market response has been encouraging and new business has already been won. Specific progress is identified in Divisional Performance below. In addition, we continue to review acquisition opportunities.

Motivcom's overarching strategy is to become a market leader in its sector. We will continue to deliver leading products and services to our markets with the objective of being a top three UK provider of products and services in each of our business segments; the Group's current market position is strong.

Divisional Performance

Motivation

Spree, our pre-paid card, continued to deliver exceptional growth with load values exceeding £85 million, a 130% increase on 2009 when load values were £38 million which was substantially up on 2008 when load values were £5 million. The 'hero product' status assigned to it by the new strategic plan will ensure appropriate resource focus and as a result growth is expected to continue into 2011 where some of the advantages of the increasing scale will be realised.

Notwithstanding Spree, the long term nature of the division's contracts has reflected in a recessionary lag effect on the division's results. Overall revenues were up 12% to £38 million but operating profits fell by 46% to £443,000. Whilst this was ahead of management expectations it reflects the low margin nature of the business wins achieved in 2009 and the fact that additional investment was made in 2010 in sales and marketing which will benefit 2011.

The retail voucher / gift card market stabilised in the second half of 2010 and is expected to return to growth in 2011. A significant number of new clients were added to the portfolio during the year and both volumes and margins are expected to improve as the overall spending levels gradually increase as the economy recovers.

Following a number of cancellations in 2009, full service motivation programmes remained under margin pressure during 2010. However, Q4 saw some evidence of the resurgence of sales incentives and employee recognition programmes which are expected to contribute to strong bottom line growth in 2011.

Events

2010 has been an excellent year for the events and communications division with record turnover, income and profit. We have seen many clients returning to more robust and substantial sales and marketing activity and events continue to be an integral element of success in this arena. We have continued to grow our content development and live production capabilities, and have won a number of new clients in this area. We are also seeing early signs of a recovery in the incentive travel sector with a significant increase in the number of enquiries. We have invested in new IT infrastructure and technology in our venue find and strategic meetings management services, and we are confident of sustained growth in 2011 driven by these services.

As part of the Group's strategic plan we will be expanding our live communication capabilities, and will be investing modestly in developing an international congress management division, broadening our range of services and further strengthening our market leading position.

Promotions

Sales Promotions

The division produced an excellent result overall with the Filmology and Fotorama business units the outstanding performers. This was helped in part by a strong order book around major events and a strong catalogue of films in cinema. All business units now have a much better breadth of clients and increased their share of activity in all areas we work in.

New product development remains important with the launch of a new online dynamic travel portal and Job Safe, which allows brands to give consumers comfort and protection if they lose their jobs after buying their products.

Employee Benefits and Publishing

The first half of 2010 was impacted by recessionary pressures on both sales and profitability. However this trend reversed in the second half, especially within the employee benefit sector, with over 80 new client programmes launched. Uncertainty was created during the year with the government's announcements on salary sacrifice products; we believe these issues are behind us and our product suite re-calibrated to take account of the HMRC changes.

Digital is playing a major part in both areas of delivery and client offerings. As a result we are expecting this to become a further step change in our development in 2011 and beyond.

The strategic plan included accelerated growth on our 'hero products' and brings products together to maximise earnings and give the Group a market differential. Focus has been given to child care to maximise our opportunity, and this is already showing signs of being productive. Following a cross-company initiative the Group is in the latter stages of producing a 'total employee engagement model', and this is in the final throws of research.

Although the outlook for Employee Benefits this year will still be challenging, the signs are positive with increased activity and pitch levels at an all time high both in quality and size of client.

Outlook

The Group has a clear direction and strategy which has delivered good results for the period which were ahead of market expectations and our position in our markets remains strong. The Board has confidence in making further progress in the current financial year, but is mindful that the ongoing challenging economic climate may impact increases in client expenditure levels.

My thanks

I am fully aware of the commitment that my board colleagues, management and staff across the group have made in 2010. On behalf of Motivcom shareholders and myself I would like to thank them for their professionalism and dedication in delivering this commendable result for 2010.

Colin Lloyd

Chairman

5 April 2011

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2010

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2010

CONSOLIDATED BALANCE SHEET

AT 31 DECEMBER 2010

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2010

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2010

NOTES TO THE FINANCIAL INFORMATION

1 Basis of information in this announcement

The financial information in this announcement does not constitute the Company's statutory accounts for the years ended 31 December 2010 or 31 December 2009 but is derived from those accounts.

Statutory Accounts for 2009 have been delivered to the Registrar of Companies and those for 2010 will be delivered following the Company's annual general meeting. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain any statement under section 498 (2) or (3) of the Companies Act 2006.

This announcement has been prepared on the basis of the Group's accounting policies. These are set out in its Annual Report and Accounts for the year ended 31 December 2009 which is available on the Group's website (www.motivcom.com). The Group has adopted the following revisions and amendments to IFRS which are relevant to and effective for the Group's financial statements for the annual period beginning 1 January 2010:

(i) IFRS 3 Business Combinations (Revised 2008);

(ii) IAS 27 Consolidated and Separate Financial Statements (Revised 2008); and

(iii) Amendment to IAS 39 Financial Instruments: Recognition and Measurement - Eligible Hedged Items.

IFRS 3 Business Combinations (Revised 2008) (IFRS 3R) introduces major changes to the accounting requirements for business combinations. The most significant changes in IFRS 3R that had an impact on the Group in 2010 are:

(i) Acquisition-related costs are recorded as an expense in the income statement where previously they would have been accounted for as part of the acquisition;

(ii) The assets acquired and liabilities assumed are generally measured at their acquisition-date fair values unless IFRS 3R provides an exception and provides specific measurement rules; and

(iii) Any contingent consideration is measured at fair value at the acquisition date. If the contingent consideration arrangements give rise to a financial liability, any subsequent changes are generally recognised in profit or loss. Previously contingent consideration was recognised at the acquisition date only if its payment was probable.

For the twelve months ended 31 December 2010, the adoption of IFRS 3R has affected the accounting for the acquisition of the trade of Peppermint Productions Limited by increasing the Group's expenses related to acquisition-related costs by £4,000.

IAS 27 Consolidated and Separate Financial Statements (Revised 2008) (IAS 27R) introduces changes to the accounting requirements for the loss of control of a subsidiary and for changes in the interest in subsidiaries. These changes are applied prospectively. During the period the Group had no transactions with non-controlling interests. IAS 39 Financial Instruments: Recognition and Measurement - Eligible Hedged Items (IAS 39R) applies to cash flow hedges. The Group did not have any transactions that required accounting for under IAS 39R in the current financial period.

The financial statements are prepared on a going concern basis. In considering going concern, the directors have reviewed the Group's future cash requirements and earnings projections. The directors believe these forecasts have been prepared on a prudent basis and have also considered the impact of a range of potential changes to trading performance. The directors have concluded that the Group should be able to operate within its current facilities and comply with its banking covenants for the foreseeable future and therefore believe it is appropriate to prepare the financial statements of the Group on a going concern basis. This is supported by the Group's liquidity position at the year end.

2 Segment information

At 31 December 2010 the Group is organised into three main business segments - (1) development and administration of third party motivation and incentive programmes ("Motivation") - (2) the provision of incentive travel, live events and venue find ("Events") - (3) trade and consumer sales promotions, employee benefit products and communications ("Promotions"). Unallocated costs represent corporate and share-based payment expenses.

The segment results for the year ended 31 December 2010 are as follows:

The segment results for the year ended 31 December 2009 are as follows:

The home country of the Company and its subsidiaries is England. The Group's sales are mainly in countries within the UK and the eurozone and, allocated on the basis of the country in which the customer is located, are as follows:

No client represented greater than 10% of Group revenue in either 2010 or 2009.

3 Interest expense

There are no gains or losses in respect of the hedged bank loans.

4 Income tax expense

The tax on the Group's profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated companies as follows:

The weighted average applicable tax rate was 29.0% (2009: 27.3%).

5 Earnings per share

Basic

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period.

Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all contracted dilutive potential ordinary shares. The Company has only one category of dilutive potential ordinary shares, share options.

The calculation is performed for the share options to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding share options and taking account of the yet unexpensed share based payment charge relating to those options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options. Tranches two to four of the options granted to C T Lloyd have been excluded from this calculation as all the conditions attaching to the proposed options had not been met at 31 December 2010.

Headline basic

Headline basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company plus the amortisation of intangible assets by the weighted average number of ordinary shares in issue during the period.

6 Dividends

The proposed final dividend for the year ended 31 December 2010 of 2.2 pence per share is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. The total amount proposed is £637,600.

7 Cash generated from operations