Mc Mining Regulatory News (MCM)

Motivcom plc

("Motivcom" or "the Group")

Interim Results for the six months ended 30 June 2012

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 2012.

Current visibility indicates that the full year outcome will be in line with the Board's expectations

Financial Highlights

* Operating profit of £1,027,000 (2011: £1,324,000) plus amortisation of intangibles of £310,000 (2011: £155,000) and acquisition costs of £nil (2011: £75,000)

† Profit before tax of £897,000 (2011: £1,284,000) plus amortisation of intangibles of £310,000 (2011: £155,000), acquisition costs of £nil (2011: £75,000) and unwinding of discount relating to contingent consideration liability of £110,000 (2011: £nil)

‡ See reconciliation in note 5

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

"The Group's diversified offering is providing some resilience in tough economic conditions. Current revenue visibility indicates that the full year will deliver modest growth, in line with the Board's expectations.

The Group has worked hard to continue developing new products in certain areas of the business, as well as securing new client wins during the period. The Board is confident that the Group's approach is maintaining its leading position in the market, and this confidence is demonstrated by the dividend increase of 30%."

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Chairman's Statement

I am pleased to report the results for Motivcom for the six months to June 2012. Whilst these show a decline on the first half of 2011, this reflects timing differences of major contracts and the Group remains on course to deliver modest growth for the year, in line with the Board's expectations.

As in previous years the business balance between the two halves of the year is driven by the timing of key events and promotions which inevitably vary year on year. In 2012 there was certain activity associated with the Olympics and Paralympics where the revenues have fallen into the second half of the year.

The Group maintains a strong balance sheet with net cash of £5.15 million. Whilst the Group continues to look for earnings enhancing acquisitions we will not risk overpaying in an uncertain economic environment. In the absence of suitable acquisition opportunities the Group will seek alternative uses for its cash which are in the best interests of its shareholders.

Financial update

The results for the six month period show the Group's gross profit has decreased by 2% to £13,885,000 (2011: £14,148,000) producing a headline operating profit of £1,337,000 (2011: £1,554,000), a decrease of 14%. Headline profit before tax decreased by 13% to £1,317,000 (2011: £1,514,000) and headline basic earnings per share decreased by 13% to 3.28 pence (2011: 3.79 pence).

In view of the cash generative nature of the Group's business and the Board's confidence in the prospects of the Group, the Company proposes an interim dividend for the period to June 2012 of 1.5 pence, an increase of 30% (2011: 1.15 pence). This will be paid on 2 November 2012 to shareholders on the register at close of business on 5 October 2012. As I have detailed previously, the Board intends to continue its progressive dividend policy.

Divisional Reports

Motivation

The motivation division has delivered increased revenue and kept a tight control on costs; as a result operating profits have more than doubled.

Motivation programme activity was steady in the first half of the year with high levels of new business enquiries, particularly for employee engagement initiatives. This resulted in very pleasing new client wins from the Post Office, Royal Mail and Lloyds Banking Group which will contribute in the second half of the year and more significantly into 2013.

Our voucher / gift card business has continued to benefit from last year's technology investment and the resulting shift from paper vouchers to retailer gift cards. The improved functionality and lower distributions costs have helped grow volumes by 20% over the first half of 2011.

Our pre paid MasterCard product, Spree, has again grown with transaction values in the first half of the year of £82 million (2011: £69 million). Spree delivers retail saving at most key high street brands and is an example of a product that is thriving under current market conditions. The development of a generic solution called MySpree has enabled us to offer a low cost employee solution to the SME market. Following its launch in May 2012 three new corporate client programmes have launched. Further investment has been made in Spree Mobile which allows cardholders to check balances and load cards on the move so that they can fully benefit from the retail savings available. In due course this will also allow us to present specific mobile based retail offers based on the proximity of the cardholder to our retail partners.

Events & Communications

As expected, we have witnessed individual clients reducing their activity by curtailing the frequency or number of delegates. I am, however, pleased to report that our Event companies continue to develop new and ever more creative conferences, product launches and incentive rewards for over 100 top global brands. In addition we have taken a disciplined approach to our cost base in this area.

Our Venue Find business has seen a positive start to 2012 in terms of the volume of bookings with new client wins adding to future prospects. As a result of fewer delegate numbers and margin pressures, we are more or less on par with 2011. A further benefit of the new business wins has been to produce a more balanced, diverse and resilient client base with good potential for future growth. Goldserve, our global sales lead generation service, has delivered fewer enquiries than anticipated but has developed a new advertising revenue stream which we expect to deliver benefit in 2013.

Event Management and Live Production have also seen similar trends with client budgetary pressures reducing the numbers of delegates and average spend per head. However, we have seen new business wins from international accounts which will replace revenue and sustain the business in 2013.

Overall, the market remains challenging, but our creative approach to client service and business development is maintaining our leading position.

Promotions

Employee Benefits & Communications

This year has seen some positive new business wins within the Publishing division, specifically in the customer and digital areas, despite the challenging backdrop. We have invested in developing innovative solutions in the digital arena, which we expect to underpin the business over the next few years.

2012 has seen Employee Benefits evolve in line with expectations. A 'soft' start to the year has been followed by consistent growth across all sectors. Fresh and vibrant product, combined with best in class customer service and value has seen good results with regard to both retention and new business. The second half is proving to be equally as successful. Whilst the market place will remain competitive we strongly believe we are in an excellent position to challenge the marketplace and continue to win new business whilst retaining our existing relationships. In some product areas, such as Childcare, we are seeing excellent results but pricing pressure persists.

Sales Promotion

Entice, our loyalty and affinity brand, has retained all of its large clients and has been developing its business model to meet clients needs in these changing and challenging times. The pipeline remains buoyant as clients still wish to focus on retention and loyalty.

Filmology, our cinema promotions brand, had an excellent start to the year with a good flow of profitable business. The current view of 2013 is positive as there are a healthy number of quality enquiries.

The success of the Olympics dwarfed available marketing monies to spend on the European Football Championship, normally an excellent income generator for Fotorama. The Olympics were very tightly controlled in the promotional space but we have taken other opportunities and can report good levels of business and profitability with established clients. As expected, the remainder of 2012 will be relatively a quieter period but we continue to work on a number of promising opportunities.

Travel promotions continue to be a key part of our offering and are reporting good levels of business and profitability with established clients and we have won significant business in this area from a major UK bank. Whilst we continue to work on new client acquisitions corporates are currently taking longer to commit to new vendors.

In the context of new product development, the Fuel Gift Card was launched in May. A first of its kind in the market, it allows organisations to use the power of free fuel as a promotional reward to drive consumer behaviour. Early signs are positive and several major brands have already adopted the proposition for promotional campaigns. This is a good example of how the business has used the adverse conditions of rising and volatile fuel prices to deliver new and innovative promotional product to drive new client acquisition.

Outlook

The difficult economic conditions in the UK are continuing. Nevertheless, the Group is expected to perform in line with the Board's expectations for 2012.

I am fully aware of the commitment that my Board colleagues, management and staff across the Group are making. On behalf of Motivcom shareholders and myself I would like to thank them for their professionalism and dedication.

Colin Lloyd

Chairman

26 September 2012

CONSOLIDATED INTERIM INCOME STATEMENT (UNAUDITED)

FOR THE PERIOD ENDED 30 JUNE 2012

CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

FOR THE PERIOD ENDED 30 JUNE 2012

All activities are classed as continuing

CONSOLIDATED INTERIM BALANCE SHEET (UNAUDITED)

AT 30 JUNE 2012

CONSOLIDATED INTERIM CASH FLOW STATEMENT (UNAUDITED)

FOR THE PERIOD ENDED 30 JUNE 2012

Cash generated from operations

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

FOR THE PERIOD ENDED 30 JUNE 2012

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 30 JUNE 2012

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 25 September 2012

2 Basis of preparation

These interim financial statements of Motivcom plc are for the six months ended 30 June 2012. 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 2011 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 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 2012.

The Group's financial risk management policies are described in its financial statements for the year ended 31 December 2011.

3 Segment Information

At 30 June 2012 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 2012 are as follows:

The segment results for the six months ended 30 June 2011 are as follows:

The segment results for the year ended 31 December 2011 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 2012.

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 2012 Motivcom plc paid a final dividend in respect of 2011 of £835,000 to its equity shareholders (2011: £638,000). This represents a payment of 2.85 pence per share (2011: 2.20 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 1 June 2012. 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 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%

The following additional assumptions were used for Sharesave Scheme 8:

- Expected volatility of 38% based on the average volatility of the Company since flotation in August 2004

- A dividend yield of 4.37%

- Risk free interest rate of 0.34%

7 Intangible assets

8 Acquisitions

The Group did not make any acquisitions during the period.

In the six months ended 30 June 2011, the Group expended £1,646,000 on the acquisition of 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. In addition, a further £678,000 was provided for contingent consideration, resulting in a total fair value for the consideration of £2,324,000. In the six months ended 30 June 2012, the Group paid £308,000 of contingent consideration, being the full amount potentially payable on achievement of the specified gross profit level.