Mc Mining Regulatory News (MCM)

Motivcom plc

("Motivcom" or "the Group")

Interim Results for the six months ended 30 June 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 unaudited interim results for the six months ended 30 June 2011.

Financial Highlights

* Operating profit of £1,324,000 (2010: £2,385,000) plus amortisation of intangibles of £155,000 (2010: £150,000) and acquisition costs of £75,000 (2010: £nil)

† Profit before tax of £1,284,000 (2010: £2,346,000) plus amortisation of intangibles of £155,000 (2010: £150,000) and acquisition costs of £75,000 (2010: £nil)

‡ See reconciliation in note 5

Commenting on the results, Colin Lloyd, Chairman of Motivcom plc, said: "Given the timing of significant client projects, it can be difficult to draw meaningful comparisons between the same period last year. The ongoing challenging economic climate continues to impact certain areas of the business, but with a revised Group strategy and having made two strategically important acquisitions during the period, the Board remains cautiously optimistic about the medium term prospects for the Group."

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CHAIRMAN'S STATEMENT

As expected the Group's results for the six months to 30 June 2011 were below the prior year. As I have set out in previous statements to shareholders the comparison between each year's interim results can vary depending on when significant client projects occur. In H1 2010 there were two large sales promotions and this pattern did not repeat in H1 2011.

Following on from our 2010 result, business intake in Q1 continued in the same positive fashion. In Q2 we saw a slow down in business intake which over the last few months has not recovered to the levels which we had anticipated.

The Group is pleased to announce two strategic acquisitions, both of which are expected to positively contribute to earnings in the first 12 months of ownership.

Financial update

The results for the six month period show the Group's gross profit has increased by 9% to £14,148,000 (2010: 12,931,000) producing a headline operating profit of £1,554,000 (2010: £2,535,000), a decrease of 39%. Headline profit before tax decreased by 39% to £1,514,000 (2010: £2,496,000) and headline basic earnings per share decreased by 38% to 3.79 pence (2010: 6.11 pence).

Gross profit increased by £1,217,000 from £12,931,000 to £14,148,000 whilst revenue grew by £5,263,000 from £47,334,000 to £52,597,000. Headline operating profit decreased by £981,000 from £2,535,000 to £1,554,000. In 2010, the Promotions division ran various large and successful promotions in the period, including several for the World Cup. Net finance costs remained stable at £40,000 (2010: £39,000).

The difference between headline profit before tax and profit before tax is the amortisation of intangibles, mainly relating to the 2007 acquisition of Zibrant, and legal and professional fees in relation to the Allsave acquisition.

Net assets increased to £20,913,000 from £19,275,000 at 31 December 2010, continuing to provide the Group with scope to make appropriate investments to further its development. The Group had net cash at 30 June 2011 of £7,207,000.

The Board has approved an interim dividend of 1.15 pence per ordinary share (2010: 1.00 pence per share). This will be paid on 4 November 2011 to all shareholders on the register at close of business on 7 October 2011.

Progress on initiatives and acquisitions

We continue to implement the various strategic initiatives set out in my previous report. This has required some investment in 2011 and returns are expected in 2012 and beyond.

On 28 April 2011 the Group acquired Allsave, comprising Allsave Limited and My Family Care Vouchers Limited, a leading supplier of childcare vouchers, for a total maximum consideration of £2,250,000. This acquisition has positively impacted the results of the first half of the year. The integration and cross selling of the existing Group products in this sector provides an excellent platform for future growth consistent with the Group strategy that I have previously detailed to shareholders.

On 19 September 2011 Zibrant Limited, one of the Group's major subsidiaries, acquired the business and assets of Goldserve. 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 Goldserve acquisition will enhance earnings in 2012.

Divisional Reports

Motivation

The Motivation division set challenging growth objectives for 2011. Divisional gross profit is budgeted for the full year to grow by 13% and operating profits by 38%. The division currently expects to meet its budget. Q1 started well following on from high activity levels at the end of 2010 and, although new business acquisition has slowed into Q2, activity and uptake on business wins from H2 2010 and Q1 have sustained the business well.

Motivation programme activity has delivered a solid result for H1; although corporate budgets have remained under pressure our client base continues to recognise the positive impact of employee engagement on productivity, customer satisfaction and employee attrition. The development of new and innovative communication techniques using social media style interfaces has also helped to maintain a good flow of business wins.

With over 300 clients regularly purchasing retail vouchers through our voucher operations, this area relies on operational excellence and regular business wins. H1 has seen a modest 3% growth in overall volumes over H1 2010. A project to convert from paper vouchers to retailer gift cards has required technology investment which has largely been completed and the roll out of the new functionality across client programmes has made good progress. This allows clients to benefit from lower distribution costs and faster speed of delivery.

Spree, our prepaid MasterCard product, has continued to expand rapidly following the launch of two significant new programmes in November 2010. Further development in H1 will continue to fuel this growth into H2. Load values in H1 were £70 million (2010 H1; £34 million). In turn these volumes provide economies of scale which allow us to deliver significant price and service differentiation in the areas in which we operate.

Events

2010 saw rapid growth in the Events division with gross profit increasing by 38% on 2009. H1 has seen the division holding on to these gains but failing to achieve any significant growth as the trading environment has tightened again. In the current trading conditions we have seen many clients increasingly facing challenging budget issues and reducing both spend per delegate and delegate numbers. A key client that had anticipated an increasing requirement when budgets were set has had an internal policy change which has impacted gross profits. There has also been a slowing down of venue find revenues. Considerable effort has been made to reduce costs but H1 suffers the inevitable lag. The Group continues to realign its cost base.

However, we have seen some pockets of growth and achieved new client successes. We have focussed our efforts in 2011 and consolidated our position, retained our client wins from 2010, invested in new technology and strengthened our teams to ensure that we are in the strongest position to take advantage of any upturn in the economy. Given the almost zero levels of growth currently being reported in the UK we do not foresee any significant growth in second half of 2011.

Promotions

Sales Promotion

After a very encouraging start to the year, economic negativity has taken hold of the marketing community. As a result brands are becoming increasingly cautious and retailer involvement has become more of a focus, resulting in an extended decision making process. This has impacted the level of business in H1. By comparison H1 2010 benefitted from a number of significant promotions.

The Fotorama and Filmology businesses have performed well and will both outperform expectations. After writing some quality business early in the year and still with a good sales pipeline, Entice, the Group's loyalty and affinity platform, has been impacted by the extended decision making process and slow programme implementation. It remains, however, a very promising story for the medium term into 2012. The development of our online travel portal to support the fulfilment of travel promotions has been completed. This has driven cost out of this process and has been very well received by both clients and prospects.

Employee Benefits & Communications

UK employers have never had a greater desire to retain their best staff; equally HR departments are under pressure to make significant cost savings. This conflict has caused confusion in the market with the result of pressure on program renewals and an extended decision making process. To date our renewal and new business activity has held up well in an increasingly competitive environment.

The acquisition of Allsave has strengthened our position in the childcare voucher space. I am pleased to report integration has been seamless. Allsave has over 1000 clients who deal with them on a single product basis. A cross selling campaign is underway to introduce our broader range of HR products with good early visibility of success. This will strengthen the relationship with clients going forward and provide a more compelling new business proposition.

Our Publishing division has responded well to the structural challenges posed by the industry and highlighted in my last report. The result is a credible, robust and achievable strategy. The new strategy will positively impact H2 onwards as the new initiatives kick in together with some significant client wins.

Outlook

Your Board continues to prudently manage, develop and invest in all aspects of its operations mindful of the general economic conditions that pervade UK business, and takes a cautiously optimistic view of the Group's medium term prospects. Although the year started well, business intake over the last few months has been less than anticipated and the likely outcome is that the Group's full year result will fall short of original expectations.

Colin Lloyd

Chairman

27 September 2011

CONSOLIDATED INTERIM INCOME STATEMENT (UNAUDITED)

FOR THE PERIOD ENDED 30 JUNE 2011

CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

FOR THE PERIOD ENDED 30 JUNE 2011

All activities are classed as continuing

CONSOLIDATED INTERIM BALANCE SHEET (UNAUDITED)

AT 30 JUNE 2011

CONSOLIDATED INTERIM CASH FLOW STATEMENT (UNAUDITED)

FOR THE PERIOD ENDED 30 JUNE 2011

Cash generated from operations

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

FOR THE PERIOD ENDED 30 JUNE 2011

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 30 JUNE 2011

1 General information

Motivcom plc ("the Company") and its subsidiaries (together "Motivcom plc" or "the Group") are involved in (1) the development and administration of third party motivation and incentive programmes (2) the provision of incentive travel, live events and venue finding and (3) the provision of trade and consumer sales promotions, employee benefits products and communication programmes.

The Company is a public limited liability company incorporated and domiciled in England. The address of its registered office is Avalon House, Breckland, Linford Wood, Milton Keynes MK14 6LD. The Company has its primary and only listing on the Alternative Investment Market of London Stock Exchange.

These unaudited condensed consolidated interim financial statements (the interim financial statements) have been approved for issue by the Board of Directors on 26 September 2011.

2 Basis of preparation

These interim financial statements of Motivcom plc are for the six months ended 30 June 2011. They have been prepared in accordance with IAS 34, Interim Financial Reporting. They do not constitute statutory accounts as defined in Section 435 of the Companies Act 2006. They should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2010 which are available on the Group's website (www.motivcom.com) and have been filed with The Registrar of Companies. The auditors report on those financial statements was unqualified and did not contain a statement made under Section 498(3) of the Companies Act 2006.

These interim financial statements have been prepared in accordance with the accounting policies adopted in the last financial statements for the year ended 31 December 2010 except for the prospective adoption of 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 accounting policies have been applied consistently throughout the Group in preparing these interim financial statements.

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 30 June 2011.

The Group's financial risk management policies are described in its financial statements for the year ended 31 December 2010.

3 Segment Information

At 30 June 2011 the Group is organised into three main operating segments - (1) development and administration of third party motivation and incentive programmes ("Motivation") - (2) the provision of incentive travel, live events and venue finding ("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 six months ended 30 June 2011 are as follows:

The segment results for the six months ended 30 June 2010 are as follows:

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

IFRS 8 requires that an entity reports a measure of assets and liabilities for each reportable segment only if such an amount is regularly provided to the Chief Operating Decision Maker. As no such amounts are regularly provided to the Chief Operating Decision Maker, segment assets and liabilities are not disclosed.

4 Income tax expenses

5 Earnings per share and dividends

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 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 30 June 2011.

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.

Dividends

During the first six months of 2011 Motivcom plc paid a final dividend in respect of 2010 of £638,000 to its equity shareholders (2010: 2009 second interim dividend of £496,000). This represents a payment of 2.20 pence per share (2010: 1.70 pence).

6 Share-based payments

The Group has eight contracted share option schemes, comprising those disclosed in the Group's most recent financial statements and a Sharesave Scheme introduced on 2 June 2011. The following options have been valued in accordance with the provisions of IFRS 2.

The fair value of services received in return for share options granted to employees is measured by reference to the fair value of share options granted. The estimate of fair value of the services received is measured based on a binomial lattice model for the EMI, CSOP and Sharesave Schemes and a Monte Carlo model for the C T Lloyd Option Scheme. The vesting period is used as an input to those models.

The following additional assumptions were used for the EMI Option Schemes and the CT Lloyd Option Scheme:

- Expected volatility of 24% based on the average volatility of the Company since flotation in August 2004

- A dividend yield of 1.20%

- Risk free interest rate of 5.31%

The following additional assumptions were used for Sharesave Scheme 4:

- Expected volatility of 34% based on the average volatility of the Company since flotation in August 2004

- A dividend yield of 2.35%

- Risk free interest rate of 4.92%

The following additional assumptions were used for CSOP and Sharesave Scheme 5:

- Expected volatility of 62% based on the average volatility of the Company since flotation in August 2004

- A dividend yield of 4.79%

- Risk free interest rate of 2.49%

The following additional assumptions were used for Sharesave Scheme 6:

- Expected volatility of 63% based on the average volatility of the Company since flotation in August 2004

- A dividend yield of 3.07%

- Risk free interest rate of 1.64%

The following additional assumptions were used for Sharesave Scheme 7:

- Expected volatility of 62% based on the average volatility of the Company since flotation in August 2004

- A dividend yield of 2.32%

- Risk free interest rate of 1.06%

7 Intangible assets

8 Acquisitions

Allsave

On 28 April 2011 the Company acquired the entire issued share capitals of Allsave Limited and My Family Care Vouchers Limited, 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 deferred 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 deferred consideration by applying the income approach. Associated legal and professional costs of £75,000 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.

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 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 £192,000 to Group revenues and gross profits and £94,000 to Group operating profits in the period. If the acquisition had been completed at the beginning of the year, Management estimate that Group revenue for the period would have been £53,009,000 and Group operating profit would have been £1,558,000.

9 Post balance sheet events

On 19 September 2011 Zibrant Limited ("Zibrant"), a major subsidiary of the Group, completed the acquisition of the business and assets of Goldserve ("Goldserve"), an unincorporated partnership of Emmet Hart and Richard Harrison. 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. An initial cash consideration of £1,500,000 was paid for the business and assets of Goldserve, which has been funded from the Group's net cash balances. Additional contingent deferred consideration of up to £3,750,000 in aggregate is payable in cash subject to Goldserve generating specified levels of confirmed business leads in each of the years ended 31 December 2012, 2013 and 2014. There is no published financial information for Goldserve. Assets acquired include domain names, websites and software to manage enquiries.

Due to the very short timeframe since acquisition, the Group has not had the opportunity to evaluate the fair value of the assets or the contingent deferred consideration.