Mc Mining Regulatory News (MCM)

Motivcom plc

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

Final Results for the year ended 31 December 2011

Motivcom plc (AIM:MCM), a leading business services group offering marketing communications, events, motivation and incentive expertise to major blue-chip corporate clients, is pleased to announce its final results for the year ended 31 December 2011.

HIGHLIGHTS

·; Gross profit increased by 6% to £29,504,000 (2010: £27,776,000)

·; Headline operating profit* decreased by 16% to £4,017,000 (2010: £4,763,000)

·; Headline profit before tax† decreased by 16% to £3,952,000 (2010: £4,686,000)

·; Headline basic earnings per share‡ decreased by 13% to 9.97 pence (2010: 11.48 pence)

·; Operating profit decreased by 23% to £3,426,000 (2010: £4,463,000)

·; Profit before tax decreased by 25% to £3,280,000 (2010: £4,386,000)

·; Basic earnings per share decreased by 24% to 8.14 pence (2010: 10.72 pence)

·; Excellent cash generation of £3,897,000 from operating activities

·; Proposed final dividend of 2.85 pence per share to be paid on 20 June 2012, making a total dividend of 4.0 pence per share (2010: 3.2 pence per share), an increase of 25%

·; Net cash balances at 31 December 2011 of £5,639,000 (2010: £6,239,000) despite the use of £2,517,000 for acquisitions, which are both performing according to expectations

·; Equity increased by 7% to £21,946,000 (2010: £20,448,000)

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

* Operating profit of £3,426,000 (2010: £4,463,000) plus amortisation of intangible assets of £479,000 (2010: £300,000) and acquisition expenses of £137,000 (2010: £nil) less contingent consideration adjustment credit of £25,000 (2010: £nil)

† Profit before tax of £3,280,000 (2010: £4,386,000) plus amortisation of intangible assets of £479,000 (2010: £300,000), acquisition expenses of £137,000 (2010: £nil) and unwinding of discount relating to contingent consideration liability of £81,000 (2010: £nil), less contingent consideration adjustment credit of £25,000 (2010: £nil)

‡ See reconciliation in Note 5

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

"Whilst we had advised in September 2011 that business intake during the year had slowed due to the wider economic conditions, we are pleased that the Group has exceeded the revised guidance for the full year. The two acquisitions made during the period are performing to expectations. Our five year stated strategy continues to progress to plan, and Motivcom's strong cash balances put the Group in an excellent position to capitalise on future opportunities as they arise, both acquisitive and organic. The total dividend of 4.0 pence represents an increase of 25% on 2010's 3.2 pence."

- Ends -

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CHAIRMAN'S STATEMENT

I am pleased to report the results for Motivcom for the year ended 31 December 2011. The Group announced at the time of its interim results on 27 September 2011 that business intake for the previous few months had slowed as a result of UK business conditions and that the full year results would fall short of original expectations. This has proved to be the case but, pleasingly, the revised guidance has been marginally exceeded. Despite a challenging business climate the gross profit of the Group, being one of our key measures, increased by 6% albeit that headline operating profit decreased by 16% as a result of cost pressures which have subsequently been addressed.

During the year your Group acquired two businesses - Allsave, in the employee benefits sector, and Goldserve, a digital global events prospecting company. Both of these businesses, which were acquired for a total initial consideration of £3.1 million in cash, have been fully integrated and are performing to expectations. I am pleased that after the cash outflow from the two acquisitions, the Group ended the year with net cash balances of £5.6 million (2010: £6.2 million). The Group is well positioned to make further strategic acquisitions and earning enhancing acquisitions and finance new initiatives as opportunities arise.

As a result of the cash balances and Group prospects, the Board has declared an increase of 25% in the total dividend continuing the Group's progressive dividend policy.

I was particularly pleased that in February 2012 Motivcom was placed in the Sunday Times top 100 companies in the UK to work for. This is encouraging as much of our work is advising corporations in the areas of performance improvement, employee motivation and benefits. It is always good to practice what one preaches.

Financial update

Headline operating profit decreased by 16% to £4,017,000 (2010: £4,763,000) on a gross profit that increased by 6% to £29,504,000 (2010: £27,776,000). Headline profit before tax decreased by 16% to £3,952,000 (2010: £4,686,000). Headline basic earnings per share decreased by 13% to 9.97 pence (2010: 11.48 pence).

I am pleased to report that the Group's disciplines in cash management have resulted in net cash balances at 31 December 2011 of £5,639,000 (2010: £6,239,000) despite the use of £2,517,000 for acquisitions, net of cash acquired. This underlines the positive cash flow fundamentals of the Group, with £3,897,000 of cash generated from operating activities.

Dividends

In view of the cash generative nature of the Group's business, the Company proposes a final dividend for 2011 of 2.85 pence per share. This makes a total dividend per share of 4.0 pence for 2011 (2010: total dividend of 3.2 pence), an increase of 25%. This final dividend will be paid on 20 June 2012 to shareholders on the register at close of business on 10 April 2012.

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

Strategy

As stated in my report last year the Board has set a clear and achievable five year strategy for Motivcom covering people and client development, new products and services and appropriate acquisitions as they arise. This strategy is being met through the various developments set out in this report. The Board believes that the strategy will continue to build on the core strengths of the Group and places it in an excellent position to take advantage of any upturn in the economy.

Divisional Performance

Motivation

The Motivation division exceeded the challenging growth objectives it was set for 2011. Divisional gross profit increased by 24% to £5.4 million and divisional operating profits by 166% to £1.2 million. The sales and marketing investment made in 2010 has delivered well with all areas performing on or above management expectations. These initiatives continue into 2012 for which the division maintains a positive outlook.

Motivation programme activity delivered a solid result in 2011; our clients continue to recognise the positive impact of employee engagement on productivity, customer satisfaction and employee attrition. Whilst client budgets remain under scrutiny, the development of new and innovative communication techniques using social media-style interfaces has helped to maintain a good flow of business wins.

The voucher operation has benefited from the addition of a comprehensive retailer gift card capability, adding improved functionality and efficiency. Total 2011 voucher / gift card volumes were up 7% on 2010 to £61 million - broadly similar to pre-recession levels in 2008. Continued sales effort and a gradually improving sentiment in this area are expecting to deliver similar gains into 2012.

Spree, our prepaid MasterCard product, has continued to expand rapidly. Load values in 2011 were up 82% to £155 million (2010: £85 million). This growth continues to be driven by the ongoing expansion of existing card programmes coupled with the introduction of new ones. Two new programmes have launched in early 2012 and a number of significant opportunities are under discussion.

Events

2010 saw rapid growth as the economy rebounded with gross profit increasing by 38% on 2009. The UK economic slowdown in the second half of 2011 impacted on the Events division slowing growth to 7%. In recent months we have seen many clients face challenging budget issues and reduce both spend per delegate and delegate numbers. We made significant reductions in costs during 2011 and continue to monitor costs closely.

We have seen some good pockets of growth and achieved several new client successes which will replace and enhance existing client positions. In 2011 we have focussed investment in new technology to improve efficiency and service attractiveness to maintain our leading position. We also strengthened the quality and experience of our teams to ensure that we are in the strongest position to take advantage of any future upturn in the economy. Based on current market activity we only see modest growth in 2012.

Promotions

Sales Promotion

In our interim statement I highlighted the caution within the marketing community which resulted in brand owners either prolonging or deferring decisions. This continued in the second half of 2011, with some positive signs from early December 2011 where brands are beginning to re-engage. As a result, we are more optimistic about 2012 and beyond.

The contribution made by Filmology and Fotorama were key highlights for the division, both businesses exceeded budget having won and operated more business than in previous years. More pleasing was the mix of business and the new clients we are beginning to work with. Our Travel Promotions business and affinity offering suffered during 2011, but has lately seen an encouraging upturn in business decisions with significant business already won for 2012 and a healthy looking pipeline. Our Entice product is generating increased levels of interest which will result in several large programme launches in the coming months, leading to an optimistic outlook for 2012.

Employee Benefits

The employee benefits arena has continued to evolve in the past twelve months. There is still a strong appetite from HR departments to be able to offer engaging and 'true-value' product. However, there is increasing competitive pressure on margins, especially in the large corporate environment. We have, therefore, had to look closely at our business model in this area and adapt our strategy to maximise the current opportunity. Those changes have been made to both our marketing identity and product offering for 2012. Despite tighter budget control, we are now seeing a growing number of clients looking to employee benefits as a cost effective solution to their engagement and retention challenges. We expect a positive impact to take effect from the second quarter of 2012, with the second half of 2012 showing a significant step change. We continue to see a strong level of renewal activity, with over 90% client retention.

I am delighted to report our Allsave acquisition has integrated well and the resulting performance is positive having exceeded budgeted revenue, gross profit and net profit for the 8 months they have been part of the Group. Their largest client has renewed its contract for 2012.

Communications

The new strategy and direction highlighted in my last report is being diligently followed and we are starting to see results. This is borne out by Summersault wining the Tesco account for employee communication, the UK's largest employer. A move into consumer publishing is also proving to be fruitful and this is being helped by a having a credible in house digital resource. Encouraged by some early wins and a substantial pipeline, we are optimistic about the short to medium future.

Outlook

Despite continuing challenging economic conditions in the UK, gross profit has increased, the Group development strategy has progressed and net cash levels have been maintained. As detailed in our pre-close statement, order inflow for 2012 continues to be in line with expectations and as a result your Board takes a cautiously optimistic outlook for the year ahead.

I am fully aware of the commitment that my board colleagues, management and staff across the group have made in 2011. On behalf of Motivcom shareholders and myself I would like to thank them for their professionalism and dedication.

Colin Lloyd

Chairman

27 March 2012

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2011

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2011

CONSOLIDATED BALANCE SHEET

AT 31 DECEMBER 2011

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 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 2011 or 31 December 2010 but is derived from those accounts.

Statutory Accounts for 2010 have been delivered to the Registrar of Companies and those for 2011 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 2010 which is available on the Group's website (www.motivcom.com). The Group has prospectively adopted IAS 24 Related Party Disclosures (Revised 2009) as of 1 January 2011. This clarifies the definition of a related Party and may increase the amount of disclosures in the statutory accounts for the year ending 31 December 2011.

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 2011 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 2011 are as follows:

The segment results for the year ended 31 December 2010 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 2011 or 2010.

3 Interest expense

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 27.9% (2010: 29.0%).

5 Earnings per share

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 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 2011.

Headline basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company plus (i) the amortisation of intangible assets, (ii) acquisition expenses and (iii) adjustments to contingent consideration 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 2011 of 2.85 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 £830,700.

7 Cash generated from operations

8 Acquisitions

Allsave Limited and My Family Care Vouchers Limited

On 28 April 2011 the Company acquired the entire issued share capitals of Allsave Limited and My Family Care Vouchers Limited, which are companies related to each other and are together referred to as Allsave, for an initial cash consideration of £1,300,000. In addition, further cash consideration of £346,000 was paid on 7 July 2011 representing the value of excess net tangible assets above £135,000 at completion ("Net asset adjuster consideration"). Additional contingent cash consideration of up to £925,000 is payable subject to Allsave achieving specified levels of gross profit in the years ending 31 March 2012, 2013 and 2014. It has been assumed that Allsave will achieve the specified levels of gross profit in all three years and full provision has been made for this contingent consideration by applying the income approach. The net present value of the contingent consideration is £678,000 due to the effects of discounting. Associated legal and professional costs of £85,000 were paid and these are shown separately in the income statement in the period. Allsave specialises in providing tax efficient childcare vouchers to UK companies. Childcare is a "hero" product within the Group strategy and this acquisition provides the Group with an increased share in this market.

The acquisition had the following effect on the Group's assets and liabilities.

The goodwill arising on the acquisition of Allsave is attributable to anticipated future operating synergies from the combination, opportunities to acquire new customers and the anticipated profitability arising from cross-selling opportunities within the Group. Under IFRS no value can be attributed to such intangibles and this has contributed to the amount recognised as goodwill.

Allsave contributed £813,000 to Group revenues and gross profits and £410,000 to Group operating profits in the period.

Goldserve

On 19 September 2011 Zibrant, a major subsidiary of the Company, acquired the business and assets of Goldserve ("Goldserve"), an unincorporated partnership of Emmet Hart and Richard Harrison.

Zibrant paid an initial cash consideration of £1,500,000 for the business and assets of Goldserve, which has been funded from the Group's net cash balances. Additional contingent cash consideration of up to £3,750,000 in aggregate is payable subject to Goldserve generating specified levels of confirmed business leads in each of the years ending 31 December 2012, 2013 and 2014. It has been assumed that Goldserve will generate the specified levels of confirmed business only in the year ending 31 December 2014 and provision has been made for this contingent consideration by applying a combination of the market and the cost approaches. The net present value of the contingent consideration is £567,000 due to the effects of discounting. Associated legal and professional costs of £52,000 were paid and these are shown separately in the income statement in the period. Goldserve operates more than 2,000 global lead and enquiry websites, generating in excess of 10,000 new event enquiries per year which will provide Zibrant with a specialist online marketing solution creating an important new business acquisition channel.

The fair values noted below are provisional due to the proximity of the acquisition to the period end. The acquisition had the following effect on the Group's assets and liabilities.

The goodwill arising on the acquisition of Goldserve is attributable to anticipated future operating synergies from the combination, opportunities to acquire new customers and the anticipated profitability arising from cross-selling opportunities within the Group. Under IFRS no value can be attributed to such intangibles and this has contributed to the amount recognised as goodwill.

Goldserve contributed £2,000 to Group revenues and gross profits and a £61,000 loss within Group operating profits in the period.

Summary

If the two acquisitions had been completed at the beginning of the year, management estimate that Group revenue for the period would have been £106,331,000 and Group operating profit would have been £3,556,000.

Prior year acquisitions

In 2010, £110,000 was expended on the acquisition of the trade and certain assets of Peppermint Productions Limited, including £75,000 for contingent consideration. Of the £110,000, £105,000 was in respect of goodwill.