PTCM.L Regulatory News (PTCM)

30 April 2018

Porta Communications Plc

("Porta" or "the Company" or "the Group")

Final Results for the year ended 31 December 2017andNotice of AGM

Porta Communications Plc (AIM: PTCM), the international communications and marketing group, today announces its final audited results for the year ended 31 December 2017.

The Board is pleased to report on a further year of significant progress at Porta, during which the Company has continued to see good organic growth and build on its strategy of creating an integrated international communications business. As in 2016, with no companies acquired during the year, shareholders can see the sustained organic growth performance of the Group leading to the delivery of record levels of turnover and Adjusted EBITDA.

Financial Highlights

· Revenues 8% higher at £40.3m (FY 2016: £37.1m)

· Gross profit increased by 15% to £34.2m (FY 2016: £29.7m)

· Adjusted EBITDA1 increased by 20% to £2.8m (FY 2016: £2.3m)

· Reported EBITDA increased by 178% to £2.2m (FY 2016: £0.8m)

· Loss Before Tax on continuing operations of £3.0m (FY 2016: £5.1m)

· Loss Per Share of 1.4p (FY 2016: loss of 2.1p)

· Net debt of £8.4m (FY 2016: £7.6m)

1. Adjusted EBITDA excludes acquisition and reorganisation costs, exceptional legal and consultancy costs, share based payments, security impairment, revaluation of contingent consideration and provision of vendor loan guarantee.

Full Year Highlights

· Strong organic growth delivering record levels of turnover and Adjusted EBITDA

· Balance sheet strengthened by £3m strategic equity investment from SEC S.p.A.

· Refinancing of debt facilities with Hawk and Retro Grand, reducing interest rates from 12.8% and 12% respectively to 8%

· Strong financial performances from Newgate Australia, Newgate Singapore, Newgate Hong Kong, Publicasity and Redleaf Communications

· Completion of cost reduction plans in UK businesses will generate annualised cost savings of approximately £1.9m

Outlook

· Further consolidation of the cost base and operating structures of UK businesses in H1 2018

· Emma Kane and Brian Tyson appointed as Joint CEOs on 26 April 2018

· Leadership team continues to develop its strategy to deliver long term profitable growth

· Group is well positioned to achieve growth targets

John Foley, Chairman, commented:

"The Group is now led by experienced and proven leaders who are actively involved with their senior colleagues in the development of an operational strategy to deliver long-term, profitable growth. The Board is confident that the Group is now better positioned to achieve its growth targets as a result of the actions taken in 2017 to address the balance sheet and identify an appropriate senior management structure at Board level to take the Group forward."

Posting of Annual Report and Notice of Annual General Meeting

The Company's Annual General Meeting will be held at the offices of Porta Communications Plc, Sky Light City Tower, 50 Basinghall Street, London, EC2V 5DE, at 2pm on 31 May 2018. The Annual Report containing the Notice of the Annual General Meeting will be posted to shareholders by 3 May 2018 and will be available on the Company's website from today.

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The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Enquiries

Porta Communications Plc

Brian Tyson, Joint CEO

Emma Kane, Joint CEO

Rhydian Bankes, CFO

www.portacomms.com

+44 (0) 20 7680 6500

Grant Thornton UK LLP (Nominated Adviser)

Philip Secrett

Samantha Harrison

+44 (0) 20 7383 5100

N+1 Singer (Broker)

James Maxwell

Lauren Kettle

+44 (0) 20 7496 3000

Newgate Communications (Media Enquiries)

Bob Huxford

Adam Lloyd

James Ash

+44 (0) 20 7680 6500

Notes to Editors:

Porta is a fully integrated communications and marketing group with specialisms including financial, corporate and consumer public relations, public affairs and research and multi-capability marketing, brand and creative communications.

The group has offices in Abu Dhabi, Beijing, Brisbane, Bristol, Canberra, Cardiff, Edinburgh, Hong Kong, London, Manchester, Melbourne, Perth, Shanghai, Singapore and Sydney.

The brands and companies it owns are Newgate Communications, Redleaf Communications, Publicasity and 2112 Communications.

Porta Communications' corporate website is www.portacomms.com

Chairman's Statement

For the year ended 31 December 2017

Introduction

Porta has made good progress in its underlying trading performance in 2017 delivering record levels of turnover and Adjusted EBITDA. In addition, the Group's balance sheet was strengthened by the £3m strategic equity investment from SEC S.p.A. ("SEC") and the signing of a £3.3m Revolving Credit Facility with Clydesdale Bank ("RCF"). Furthermore, the Group Board has been strengthened by a number of key appointments so that Porta can move forward to deliver profitable growth during the next stages of its development.

Financial overview

Revenue of £40.3m was 8% higher than the previous year (2016: £37.1m). Gross profit increased by 15% to £34.2m (2016: £29.7m). Adjusted EBITDA increased by 20% to £2.8m (2016: £2.3m). Reported EBITDA increased by 178% to £2.2m (2016: £0.8m). This growth was especially satisfying since it was all organic growth as no acquisition effects are relevant to the year ended 31 December 2017.

The loss before taxation of £3.0m (2016: loss of £5.1m) was partly the result of high finance expense charges (£1.5m); the £3m equity raise and the signing of the RCF have enabled the Group to refinance its existing debt balance with Hawk Investment Holdings Limited and Retro Grand Limited ("Hawk and Retro Grand") at a reduced interest rate of 8%, down from 12.8% and 12% respectively. Balances owed to Hawk and Retro Grand at 31 December 2017 were £3.5m and £5.2m respectively (31 December 2016: £3.4m and £5.8m respectively).

The Board has undertaken a full review of carrying values of subsidiaries and associates at 31 December 2017 and considered that impairment charges of £1.4m were required. The majority of this charge is attributable to the closing down of the loss making 13 Communications Limited and a decision to reduce to nil the Group's investment in Capital Access Group Limited. Restructuring costs of £0.6m were incurred as a result of the necessary restructuring of Porta's UK businesses so that its cost base is more appropriate for the current size of its activities; we have exited the unprofitable activities in Newgate Communications Limited's geopolitical and brand practices.

The loss per share on continuing operations was 1.4 pence (2016: loss of 2.1 pence) and no dividends were paid or declared in respect of the years ended 31 December 2017 or 31 December 2016.

Operational review

The financial performances of Newgate Australia, Newgate Singapore, Newgate Hong Kong, Redleaf Communications, Publicasity and 2112 were all either excellent or much improved during the year.

Newgate Australia, in only its fourth year as an operating business, is now a leading integrated communications business in Australia. It developed two new business lines in 2017 including a dedicated digital practice and an employee communications offering. Newgate Singapore had a record year and was top of the Mergermarket's ranking of M&A communications advisers across the Asia-Pacific (ex Japan) region. Newgate Hong Kong's expanding management team has moved to larger offices and a new Shanghai office was opened in March 2018. Redleaf Communications now acts for 132 clients on a retained and project basis. The 2016 restructuring of the cost base at 2112 resulted in a much improved EBITDA performance in 2017.

The Group's other UK businesses are not yet producing satisfactory levels of financial performance and decisions have been taken and implemented to reduce the cost base of the businesses based at the Group's UK head office in 50 Basinghall Street by approximately £1.9m on an ongoing annual basis at current activity levels. The rebranding of PPS Group as Newgate Engage to offer property and planning expertise within the UK took place during the year and is already producing improved financial performance. In addition, the Group's CFO has led a programme to overhaul and improve the Group's financial and reporting systems so that reporting of key performance indicators and financial information is consistently made across the entire Group.

The cash performance of the Group during 2017 was satisfactory and is explained in detail in the CFO's Review. Creditor levels which were previously stretched prior to the £3m equity investment received in August 2017 are now at normal levels and the increase in the Group's working capital is consistent with the reported increase in activity levels.

Strategy

Porta was established to become a market-leading international marketing and communications group. The Group made a significant number of acquisitions and was bold enough to enter into a number of "start-ups" to achieve this goal.

Porta already contains a number of businesses which are market leading and produce excellent financial results. The recent Board changes (described below) show that the Board's immediate focus is to ensure that further progress is made in all areas to create a Group which can deliver performance which both supports the original vision and justifies the considerable financial investment which has been incurred.

The strategic investment made by SEC offers both Porta and SEC the chance to create an appropriate and successful collaboration. Detailed work on the form of that collaboration is ongoing.

Board changes

The Board's executive management team consists of Emma Kane, Brian Tyson, Rhydian Bankes and Gene Golembiewski. Brian was appointed to the Board on 1 November 2017 and is the Managing Partner of Newgate Australia, the largest and most profitable business in Porta. Emma became a Board member on 26 April 2018. She founded and then led Redleaf Communications to become a respected and market leading marketing and communications business in the UK and will now have responsibility to combine Porta's two largest UK-based communications businesses, Newgate and Redleaf, and to lead the enlarged agency as its Chief Executive.

The Board has asked Emma and Brian to become its Joint Chief Executive Officers for the next stage in the development of the Group. They will lead the Board's executive management team together with Rhydian and Gene who both played key roles during 2017 to strengthen the Group's balance sheet and improve the Group's control environment and reporting structures.

Steffan Williams, who was previously the Group's Chief Executive Officer, has left the Group with immediate effect and will cease to be a director of Porta on or before 5 May 2018.

People

On behalf of the Board I would like to thank all our employees for their commitment, enthusiasm and hard work.

Corporate Governance

The board is of the opinion that the measures of governance in place within the Group are appropriate for its size.

Outlook

The first half of 2018 will be a period of further consolidation of the cost base and operating structures of the UK businesses and this will adversely affect revenue and profits during that period. The Board is confident that the Group is now better positioned as a result of actions taken in 2017 which began to address the Group's weakened balance sheet and has identified an appropriate senior management structure at Board level to take the Group forward. The Group is now led by experienced and proven leaders who are actively involved with their senior colleagues in the development of an operational strategy to deliver long term, profitable growth.

John Foley

Chairman

27 April 2018

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2017

The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statement of Financial Position

As at 31 December 2017

The financial statements were approved by the Board of Directors and authorised for issue on 27 April 2018.

Gene Golembiewski

Rhydian Bankes

Directors

Porta Communications Plc (company registration number: 05353387)

The accompanying notes are an integral part of these consolidated financial statements.

Company Statement of Financial Position

As at 31 December 2017

As permitted under Section 408 of the Companies Act 2006, the Statement of Comprehensive Income for the Company

is not presented as part of these financial statements. The Company's loss for the year, after tax, was £4,490,656 (2016:

£5,994,890).

The financial statements were approved by the Board of Directors and authorised for issue on 27 April 2018.

Gene Golembiewski

Rhydian Bankes

Directors

Porta Communications Plc (company registration number: 05353387)

The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statement of Cash Flows

For the year ended 31 December 2017

The accompanying notes are an integral part of these consolidated financial statements.

Company Statement of Cash Flows

For the year ended 31 December 2017

1 Dividends received from subsidiary companies have been reclassified from financing activities to investing activities in the 2016 comparative period.

The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statement of Changes in Equity

For the year ended 31 December 2017

The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statement of Changes in Equity (continued)

For the year ended 31 December 2017

Company Statement of Changes in Equity

For the year ended 31 December 2017

The accompanying notes are an integral part of these consolidated financial statements

Notes to the Financial Statements

For the year ended 31 December 2017

1. Accounting policies

The financial information set out in this report does not constitute the Company's statutory accounts for the years ended 31 December 2017 or 2016 but is derived from the 2017 accounts. Statutory accounts for 2016 have been delivered to the Register of Companies and those for 2017 will be delivered in due course. The auditor has reported on those accounts; its report was (i) unqualified, (ii) did not include a reference to any matters which the auditor drew attention by way of emphasis without qualifying the report and (iii) did not contain a statement under section 498(2) or section 498(3) of the Companies Act 2006.

The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented unless otherwise stated. The adoption of the additional policies has no impact on the results, assets or liabilities of the Group for the prior year.

The financial statements are presented in Pounds Sterling which is the Company's functional currency.

Consistent with previous years, Adjusted EBITDA is included as a key metric for understanding the Group's performance. Adjusted EBITDA is the results of the Group before start-up losses, acquisition costs, restructuring costs, non-recurring property costs, legal and other consultancy costs, share based payment expense and impairments.

The adjusting items are broken down in the tables below.

(a) Basis of preparation of the financial statements

The Consolidated and Company financial statements of Porta Communications Plc have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU), IFRIC Interpretations and the parts of the Companies Act 2006 applicable to Companies reporting under IFRS.

The Consolidated and Company financial statements have been prepared under the historical cost convention, except for financial instruments and contingent consideration that have been measured at fair value.

The financial statements have been prepared on a going concern basis in accordance with IFRS and IFRIC

interpretations issued and effective or issued and early adopted as at the time of preparing these statements.

The preparation of financial statements in accordance with IFRS requires the use of certain critical accounting estimates.

It also requires management to exercise its judgment in the process of applying the Group's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated and parent Company financial statements are disclosed under accounting policy (x).

New and amended standards adopted by the Group

The Group has applied the following standard and amendment for the first time for their annual reporting period commencing 1 January 2017:

l Recognition of Deferred Tax Assets for Unrealised Losses - Amendments to IAS 12

l Disclosure initiative - Amendments to IAS 7

The adoption of these amendments did not have any impact on the amounts recognised in prior periods.

Management do not believe that the amendments to IAS12 will affect the current or future periods. The amendments to

IAS 7 require disclosure of changes in liabilities arising from financing activities, see note 8.

Standards, interpretations and amendments to published standards that are not yet effective and have not been adopted early by the Group

A number of the new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2018, and have not been applied in preparing these consolidated financial statements. Those which are/ may be relevant to the Group and expected to have significant effect on the consolidated financial statements of the Group are set out below. The Group is yet to assess the full impact of these changes.

l IFRS 9 Financial Instruments addresses the classification, measurement and recognition of financial assets and financial liabilities. It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. The standard is effective for accounting periods beginning on or after 1 January 2018. Early adoption is permitted subject to EU endorsement.

l IFRS 15 Revenue from contracts with customers deals with revenue recognition and establishes principles for reporting useful information to users of financial statements. The standard replaces IAS 18 Revenue and IAS 11 Construction contracts and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2018 and earlier application is permitted subject to EU endorsement.

The impact that IFRS 15 will have on the financial statements is yet to be quantified. The Group are in the process of completing this assessment and at this stage are unable to conclude on the impact on the accounts. The Group has different contractual arrangements with each of its clients which requires a detailed review in order to assess the changes the Group will need to make to its revenue recognition policies once the standard is implemented.

l IFRS 16 Leases requires that operating leases be capitalised and an asset and a financial liability recognised in respect of those leases. The standard is effective for annual periods beginning on or after 1 January 2019 and earlier application is permitted subject to EU endorsement if IFRS 15 is also applied.

The impact that IFRS 16 will have on the financial statements is also as yet to be quantified. As a result of the Group's diverse geographic portfolio of business, the Group has a significant number of leases which will need to be assessed individually against the requirements of the standard.

l IFRS 2 Share-based payments ("SBP") provides clarification concerning the treatment of vesting and non-vesting conditions. It also clarifies the treatment when tax laws oblige an entity to withhold an amount for an employee's tax obligation associated with a SBP and to transfer that amount to the tax authority on the employee's behalf. Finally, the amendment provides further guidance on accounting for modifications of options. The standard is effective for accounting periods beginning on or after 1 January 2018.

l IFRIC 22 Foreign Currency Transactions and Advance Consideration clarifies how to determine the date of transaction for the exchange rate to be used on initial recognition of a related asset, expense or income where an entity pays or receives consideration in advance for foreign currency-denominated contracts. The interpretation is effective for accounting periods beginning on or after 1 January 2018.

(b) Basis of consolidation

The Consolidated Statement of Comprehensive Income and Statement of Financial Position include the financial statements of the Company and its subsidiary undertakings made up to 31 December 2017 and present comparative information for the year ended 31 December 2016.

Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

Profit or loss and each component of other comprehensive income ('OCI') are attributed to the equity holders of the parent of the Group and to non-controlling interests. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

A change in ownership interest of a subsidiary without a loss of control is accounted for as an equity transaction. If the Group loses control over a subsidiary, it:

l derecognises the assets (including goodwill) and liabilities of the subsidiary

l derecognises the carrying amount of any non-controlling interests

l derecognises the cumulative translation differences recorded in equity

l recognises the fair value of the consideration received

l recognises the fair value of any investment retained

l recognises any surplus or deficit in the Statement of Comprehensive Income

l reclassifies the parent's share of components previously recognised in OCI to profit or loss or retained earnings, as

appropriate, as would be required if the Group had directly disposed of the related assets or liabilities.

When the Group ceases to have control any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may require that the amounts previously recognised in other comprehensive income be reclassified to profit or loss.

(c) Going concern

The Group's forecast and projections, taking account of reasonable, possible changes in trading performance, show that the Group should be able to operate within the level of its current finance facilities. However, the Directors have sought and received assurance from the Group's major lenders that they will continue to provide financial support beyond the expiry of the existing loan facilities sufficient to enable the Board to conclude that the Group and the Company are going concerns.

The Group refinanced their loans and borrowings on 3 August 2017. See note 23 for more detail.

Therefore, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Therefore, the Company and the Group continue to adopt the going concern basis in preparing the consolidated financial statements.

(d) Business combinations

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at fair value at the date of acquisition and the amount of any non-controlling interest in the acquired entity. Non-controlling interests ('NCI') may be initially measured either at fair value or at the NCI's proportionate share of the recognised amounts of the acquiree's identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Acquisition costs incurred are expensed and included in administrative expenses except for legal costs in relation to the issue of equity instruments, in connection with an acquisition, which are capitalised and net off against share premium.

When the business combination is achieved in stages, any previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognised in profit or loss. It is then considered in determination of goodwill.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Any subsequent changes to the fair value of the contingent consideration are adjusted against the cost of the acquisition if they occur within the measurement period of 12 months following the date of acquisition. Any subsequent changes to the fair value of the contingent consideration after the measurement period are recognised in the Consolidated Statement of Comprehensive Income. Contingent consideration that is classified as equity is not remeasured and subsequent settlement is accounted for within equity.

When the Group enters into options and forward contracts over shares relating to NCIs at the same time as the business

combination, the NCI is recognised to the extent the risk and rewards of ownership of those shares remain with them. Irrespective of whether the NCI is recognised, a financial liability (redemption liability) is recorded to reflect the forward or put option. All subsequent changes to the liability are recognised in profit or loss. Where the risks and rewards of ownership remain with the NCIs, the recognised financial liability is a reduction in the controlling interest equity. The NCI is then recognised and is allocated its share of profits and losses accordingly. Dividends paid to the NCIs that do not reduce the contracted purchase price are deducted from the NCI carrying value. When forward or put options state that dividend payments reduce the contracted future purchase price, then the dividend amount is deducted from the redemption liability.

Transactions with NCIs that do not result in a loss of control are accounted for as equity transactions - that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains and losses on disposal to NCIs are also recorded in equity.

(e) Foreign currency translation

Amounts included in the financial statements of each of the Group's entities are measured using the currency of the

primary economic environment in which the entity operates (the functional currency).

The Consolidated financial statements are presented in Pounds Sterling, the Company's functional and presentation currency. Transactions in foreign currencies are translated into the functional currency using the exchange rate prevailing at the date of the transaction. Foreign exchange gains and losses resulting from settlement of such transactions, and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies, are recognised in the Statement of Comprehensive Income except when deferred in equity as qualifying cash flow and net investment hedges.

The results and financial position of all Group companies that have a functional currency other than sterling are

translated as follows:

l income and expenses are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rate prevailing on the transaction date, in which case income and expenses are translated at the date of the transaction);

l assets and liabilities are translated at the closing exchange rate at Statement of Financial Position date; and

l all resulting exchange differences are recognised as other comprehensive income which is a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and from borrowings, are taken to equity. When a foreign operation is sold such exchange differences are recognised in the Statement of Comprehensive Income as part of the gain or loss on sale. Goodwill and fair value adjustments on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing exchange rate. Exchange differences arising are recognised in other comprehensive income.

(f) Revenue and revenue recognition

Revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the revenue can be reliably measured. Revenue represents the fees and commissions, net of discounts, derived from services provided to and invoiced to clients.

Revenue is recognised in the period in which the service is performed, in accordance with contractual arrangements. Income billed in advance of the performance of service is deferred and income in respect of work carried out but not billed at period end is accrued. In these cases, revenue is recognised by reference to the stage of completion which is measured by reference to labour hours incurred to the period end as a percentage of the total estimated labour hours for the contract.

Where the contract outcome cannot be measured reliably, revenue is recognised to the extent of the expenses recognised that are recoverable.

(g) Property, plant and equipment

Property, plant and equipment are stated at cost, net of depreciation and provision for any impairment. Depreciation is calculated to write down the cost of all tangible fixed assets to estimated residual value over their expected useful lives as follows:

Office improvements 5 years, straight line (for leases see note (u))

Fittings and equipment 5 years, straight line

Computer equipment 3 years, straight line

Motor vehicles 5 years, straight line

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each Statement of Financial Position date. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amount and are included in the Consolidated Statement of Comprehensive Income.

(h) Intangible assets

Intangible assets comprise goodwill, certain corporate brand names and customer relationships acquired in business combinations, website development costs, software and other licences.

Goodwill represents the excess of fair value attributed to investments in businesses or subsidiary undertakings over the fair value of the underlying net assets, including intangible assets, at the date of their acquisition. Goodwill on acquisition of an entity is included in intangible assets. Gains and losses on disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill has an indefinite useful life and therefore not amortised. Impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the net present value of future cash flows derived from the underlying assets using a projection period of up to five years for each cash-generating unit. After the projection period a steady growth rate representing an appropriate long-term growth rate for the industry is applied. Any impairment is recognised immediately as an expense and is not subsequently reversed.

Corporate brand names and customer relationships acquired as part of acquisitions of businesses are capitalised separately from goodwill as intangible assets if their value can be measured reliably on initial recognition and it is probable that the expected future economic benefits that are attributable to the asset will flow to the Group.

Expenditure on website development, software and licences is initially stated at cost. 

Amortisation is provided at rates calculated to write off the cost less estimated residual value of each asset, other than goodwill, on a straight-line basis over the estimated life of the asset. Estimated life and estimated residual value are

calculated on an asset by asset basis having regard to the nature of the asset, and the cash flows generated, or to be

generated, by the asset historically and projected.

Amortisation is calculated to write down the cost of these assets to their estimated residual value over their expected

useful lives as follows:

Brands 10 years, straight line

Customer relationships 5 years, straight line

Websites, software and licences 3 years, straight line

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each Statement of Financial Position date. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amount and are included in the Consolidated Statement of Comprehensive Income.

(i) Impairment of assets

Non-current assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying value exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. Value in use is based on the present value of the future cash flows relating to the asset, and is determined over periods which are deemed to appropriately reflect the minimum expected period that the cash generating unit will operate for. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cashflows (cash generating units). Any impairment loss is immediately recognised as an expense in the Statement of Comprehensive Income.

(j) Non-current assets held for sale and discontinued operations

The Group classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. The criteria for held for sale classification is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Discontinued operations may include abandoned or closed operations which will not meet the held for sale criteria as they are not recovered principally through sale and therefore balance sheet presentation requirements will not be applicable to them. Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the Statement of Comprehensive Income.

Property, plant and equipment and intangible assets are not depreciated or amortised once classified as held for sale.

(k) Investments

Fixed asset investments in subsidiaries are shown in the Company Statement of Financial Position at cost less any

provision for impairment.

Investments in associate entities over which the Group has significant influence are accounted for using the equity method. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control and/or joint control over those policies.

Under the equity method, the investment in an associate is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Group's share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to the associate is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment. 

The Statement of Comprehensive Income reflects the Group's share of the results of operations of the associate. Any change in the OCI of those investments is presented as part of the Group's OCI. The aggregate of the Group's share of profit or loss of an associate is shown on the face of the Statement of Comprehensive Income outside operating profit and represents profit or loss after tax and non-controlling interest in the subsidiaries of the associates.

At each reporting date, the Group determines whether it is necessary to recognise an impairment loss of its investment in its associates through examination of any objective evidence. The Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value, then recognises the loss as 'share of profit of an associate' in the Statement of Comprehensive Income.

Upon loss of significant influence over the associate, the Group measures and recognises any retained investments at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss.

(l) Available for sale ('AFS') investments

AFS financial investments include equity instruments and debt securities. Equity instruments classified as AFS are those that are neither classified as held for trading nor designated at fair value through profit or loss.

After initial measurement, AFS financial instruments are subsequently measured at fair value with unrealised gains or losses recognised in OCI and credited in the AFS reserve until the investment is derecognised, at which time the cumulative gain and loss is recognised in finance cost, or the investment is determined to be impaired, when the cumulative loss is reclassified from the AFS reserve to the Statement of Comprehensive Income in finance costs.

The Group evaluates whether the ability and intention to sell its AFS financial assets in the near term is still appropriate. When, in rare circumstances, the partnership is unable to trade these financial assets due to inactive markets, the partnership may elect to reclassify these financial assets if members have the ability and intention to hold the assets for foreseeable future or until maturity.

For the financial assets reclassified from the AFS category, the fair value carrying amount at the date of reclassification becomes its new amortised cost and any previous gain or loss on the asset that has been recognised in equity is amortised to profit or loss over the remaining life of the investment using the effective interest rate ('EIR'). Any difference between the new amortised cost and the maturity amount is also amortised over the remaining life of the asset using EIR. If the asset is subsequently determined to be impaired, then the amount recorded in equity is reclassified to the Statement of Comprehensive Income.

(m) Work in progress

Work in progress is valued at cost, which includes outlays incurred on behalf of clients and an appropriate proportion of directly attributable costs and overheads on incomplete assignments. Provision is made for irrecoverable costs where it is probable that such costs will not be recovered from future billing.

(n) Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows. Any change in the provision is recognised in the Statement of Comprehensive Income.

(o) Cash and cash equivalents

In the consolidated statement of cash flow, cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts. In the Consolidated Statement of Financial Position, bank overdrafts and loans repayable within one year are shown within loans and borrowings in current liabilities.

(p) Trade payables

Trade payables are obligations to pay for goods and services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

(q) Borrowings and compound instruments

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any differences between the proceeds (net of transaction costs) and the redemption value is recognised in the Statement of Comprehensive Income over the period of the borrowings using the effective interest method.

Fees paid on the establishment of loan facilities are recognised as transaction costs. In cases where these costs are settled at the time of the borrowing maturity and was added to the principal subject to an additional interest charge, this fee is capitalised as prepayment for liquidity services and amortised over the period of the facility to which it relates.

Borrowings issued to the Group that can be converted into share capital at the option of the issuer, and where the number of shares to be issued does not vary with changes in their fair value are classified by the Group as compound financial instruments. The liability component of a compound financial instrument is recognised initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognised initially as the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to a liability and an equity component in proportion to the initial carrying amounts.

Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective interest method. The equity component of a compound financial instrument is not remeasured subsequent to initial recognition except on conversion or expiry. Borrowings that can be converted into share capital at the option of the issuer but where the number of shares to be issued can vary fail the fixed test under IAS 32. As such this form of debt isn't accounted for as a compound instrument and as such no equity element arises.

(r) Taxation including deferred taxation

The tax expense for the period comprises current and deferred tax. Tax is recognised in the Statement of Comprehensive Income except where it relates to items recognised directly in Equity.

Current income tax

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted at the reporting date in the countries where the Group operates and generates taxable income.

Deferred tax

Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, if the deferred tax arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for.

Deferred tax assets are recognised to the extent that the Group believes it is probable that future taxable profit will be available against which temporary timing differences and carry forward of unused tax credits/losses can be utilised. The Group's assessment of the recoverability of deferred tax assets is based on forecasts of the future profitability of the Group and are reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

(s) Share capital and share premium

Ordinary shares are classified as equity. Share premium represents the amounts received in excess of the nominal value of the Ordinary shares less costs of the shares issued and is classified as equity.

(t) Share based payments

The Group makes equity-settled payments to its employees. Equity-settled share based awards are measured at fair value at the date of grant using an options pricing methodology and expensed over the vesting period of the award. At each Statement of Financial Position date, the Group reviews its estimate of the number of options that are expected to vest.

Shares issued to vendors in respect of the acquisition of interests in subsidiary undertakings are accounted for in accordance with accounting policy (d) above.

Equity-settled share based payments may also be made in settlement of professional costs in relation to costs incurred in the issue of new shares and in acquisition of subsidiary companies. In these cases, the payments are measured at fair value of services provided which will normally equate to the invoiced fees where those services are provided at arms' length in the normal course of trade. In the case of payments made for the issue of new shares, the fair value is charged against the share premium account or other reserves; charges in respect of other professional fees are expensed within the Consolidated Statement of Comprehensive Income for the year.

(u) Leasing commitments

Group as a lessee

Leases where the lessor retains a significant portion of the risks and rewards of ownership are classified as operating leases. Rentals payable under operating leases (net of any incentives received) are charged as operating costs to the Consolidated Statement of Comprehensive Income on a straight-line basis over the lease term. Rental incomes under operating leases which are sublet are recognised over the lease term on a straight-line basis over the lease term.

Leases where significant risks and benefits incidental to ownership of the leased item have been transferred to the Group are classified as finance leases. Finance leases are capitalised at the commencement of the lease at the fair value of the leased assets or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the Consolidated Statement of Comprehensive Income.

Each leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of estimated useful life of the asset and the lease term.

(v) Finance costs

Finance costs, including interest, finance charges in respect of finance leases, bank charges and the unwinding of the discount on deferred consideration, are recognised in the Statement of Comprehensive Income in the year in which they are incurred using the effective interest rate method.

(w) Pensions and similar obligations

The Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis in respect of defined contribution plans. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due.

Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is

available.

Payments to a defined contribution pension plan were charged as an expense to the Statement of Comprehensive Income, as incurred, when the related employee service is rendered. The Group has no further legal or constructive payment obligations once the contributions have been made. 

(x) Critical accounting estimates and judgments

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

l Business Combinations

The Group has recognised customer relationships and brands relating to acquisitions it has made. The determination of estimated fair values of acquired intangible assets, as well as the expected useful life ascribed, requires the use of significant judgment. The Group has used the discounted cash flows and relief-from-royalty models in order to determine the fair value of acquired intangible assets. See note 15 for further details.

Contingent consideration relating to acquisitions is recognised at fair value. This is determined based on management estimates of the most likely outcome, discounted to present value using an appropriate discount rate based on market inputs and management judgment. See note 20 for further details.

l Revenue recognition

Where contracts are not complete at the period end, revenue is recognised by reference to the stage of completion. Contracts are reviewed on an individual basis with the involvement of the specific staff servicing each contract. The number of hours worked on a contract are ascertained by reviewing staff timesheets and the total hours estimated are taken from the original internal budget. See accounting policy (f) for further details.

l Impairment of goodwill and intangible assets

The carrying value of goodwill and brands are subject to an impairment review both annually and when there are indications that the carrying value may not be recoverable, in accordance with policies (h) and (i) stated above. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations which require the use of estimates. See note 15 for further details.

l Recoverability of investments and debts due from subsidiaries and related parties

Whether the carrying value of the Company's investment in subsidiaries, balances due from those subsidiaries and balances due from related parties is recoverable or impaired requires judgments and estimates relating to the prospects of those subsidiaries. The Directors assess the recoverability of these balances at each year end.

Particularly in the case of start-up businesses, such judgments and estimates are subject to the uncertainty inherent in

projections of expected future growth in revenue. See notes 17 and 26 for further details.

l Control in another entity with less than half of the voting rights

The Group owns a 45% equity interest in Newgate Communications Singapore Pte. Ltd together with the right to acquire at any time a further 6% interest which right is deemed to be highly exercisable. After taking into account the Group's power over its investee, its exposure and rights to variable returns from its involvement with the investee, and its ability to use the power over the investee to affect the amount of investor's return, the Directors have concluded that the Group has a controlling interest in Newgate Communications Singapore Pte. Ltd and therefore the results of the acquired business since acquisition has been included in the Group's consolidated financial statements. See note 17 for further details.

l Capital Access Group provision and contingent liability

Under the acquisition agreement for Capital Access, Porta has a guarantee of £1,000,000 against lender debt. See note 20 for further details.

l Deferred tax assets with respect to unused tax losses

Deferred tax assets are recognised for unused tax losses to the extent that it is probable that future taxable profit will be available against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits, together with future tax planning strategies.

The Group have assessed the likelihood of carried forward losses to be utilised and as a result have recognised deferred tax assets for £2,200,000 (2016: £6,400,000) of tax losses carried forward. The Group also has £10,900,000 (2016: £6,200,000) of unrecognised tax losses carried forward. These unrecognised tax losses relate to subsidiaries which have a history of losses, do not expire, and may not be used to offset taxable income elsewhere in the Group. Management are not aware of any available tax planning opportunities that could quantify the recognition of these losses as deferred tax assets. On this basis, the Group has determined that it cannot recognise deferred tax assets on these tax losses carried forward.

If the Group was able to recognise all unrecognised deferred tax assets, profit and equity would have increased by

£2,098,250. See note 6 for further details.

(y) Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker (the Group's Chief Executive Officer), who is responsible for allocating resources and assessing performance of the operating segments.

2. Segmental reporting

Business segments

The Group has three reportable segments, as described below, which are the Group's strategic divisions. The strategic divisions offer different products and services and are managed separately because they require different resources and strategies. For each of the strategic divisions, the Group's Chief Executive Officer reviews internal management reports on a monthly basis. The following summary describes the operations in each of the Group's reportable segments:

l Corporate Communications includes public relations, public affairs and other corporate communication services

l Marketing & Advertising includes media buying, creative advertising, marketing and corporate branding services

l Head office, which is not an operating segment, includes services provided by the Group's corporate function, including group treasury and finance and management services.

The accounting policies of the reportable segments are the same as the Group's accounting policies, which are described in note 1.

Inter-segment pricing is determined on an arm's length basis. Segment result represents operating profit, which is the measure reported to the Chief Executive Officer. All assets and liabilities are allocated to reportable segments with the exception of tax and other centrally managed balances. Goodwill is allocated to segments as described in note 15.

Geographical segments

Results

The analysis of results and assets by geographic region, based on the location of the operating company is as follows:

1. The EMEA region consists of Europe, Middle East and Africa.

The split of the client based revenue as a percentage of Group revenue:

No individual client sales were greater than 10% of Group revenue (2016: None).

1. The EMEA region consists of Europe, Middle East and Africa.

3. Expenses - analysis by nature

The operating loss on continuing activities is stated after charging:

The amount shown for fees payable to the Company's auditors for the audit of the Group's consolidated financial statements includes £22,000 (2016: £19,000) in respect of the Company's own audit.

4. Employment benefit expense

Employment costs and staff numbers

Employment costs relating to continuing activities during the year were as follows:

Group