22 Sep 2015 07:00
22 September 2015
PORTA COMMUNICATIONS PLC
(The "Group" or "Porta")
Interim results for the six months ended 30 June 2015
Porta Communications Plc, the international marketing and communications business, is pleased to announce its interim results for the six months ended 30 June 2015.
Financial Highlights
Rounded to the nearest thousand
| June 2015 £ | June 2014 (restated*) £ | Full year 2014 £
|
Revenue | 17,352,000 | 9,930,000 | 23,274,000 |
Gross Profit | 13,906,000 | 8,224,000 | 19,405,000 |
EBITDA1 | 828,000 | 500,0001 | 196,0001 |
Headline EBITDA2 | 1,334,000 | 1,335,000 | 2,189,000 |
Headline EBITDA margin3 | 9.6% | 16.2% | 11.3% |
¹ EBITDA excludes non-trading gain on acquisition of £475,394.
2 Headline EBITDA excludes start-up losses, acquisitions and restructuring costs, exceptional legal and professional costs, share based payments, gain on acquisition and non-recurring, double property costs.
3 Headline EBITDA margin is headline EBITDA as a percentage of Gross Profit.
* Results exclude operations that were discontinued in 2014. See note 9 in the Group consolidated financial statements for the year ended 31 December 2014.
Highlights
· Revenue up 75% to £17,352,000
· Gross profit up 69% to £13,906,000
· Organic growth 17% higher than the comparable period
· EBITDA after all costs up by 66% over the comparable period to £828,000
· Positive operating cash flow of £0.7 million generated compared with negative operating cash flow of £2.3 million and £3.4 million consumed in the six-month period to 30 June 2014 and the whole 2014 respectively
· Gross profit per employee of £54,000 on a half-year basis - 10% higher than comparable period (£49,000)
Commenting on the results, David Wright, Chief Executive of Porta, said:
"This has been another period of healthy trading performance, with positive contributions throughout our integrated agency network. Our global offering is experiencing strong growth and the acquisitions that we made last year are also performing well.
We have rationalised our business by closing non-performing offices and departments. This has contributed to annualised cost savings in excess of £1 million. The full benefits of this rationalisation process are likely to be recognised in 2016.
"We are recruiting high quality, experienced executives in key areas, and management is confident that this will lead to further new business wins in the second half, leading to another strong performance in reported EBITDA."
Enquiries
Porta Communications Plcwww.portacomms.com David Wright, Chief ExecutiveGene Golembiewski, Finance Director | +44 (0) 20 7680 6500 |
Sanlam Securities UK Limited Simon Clements/ Virginia Bull
| +44 (0) 20 7628 2200 |
Redleaf Communications - Media EnquiriesCharlie Geller / Emma Kane | +44 (0) 20 7382 4747 |
Notes to Editors:
Porta has two divisions:
· Communications - financial, corporate and consumer public relations, public affairs and research
· Marketing & Advertising - multi-capability marketing, brand and creative communications
The Group currently has offices in Aberdeen, Abu Dhabi, Beijing, Brisbane, Bristol, Brussels, Canberra, Cardiff, Edinburgh, Frankfurt, Hong Kong, London, Manchester, Melbourne, Singapore and Sydney.
The brands and companies it owns are: Newgate Communications, PPS Group, Redleaf Communications, 13 Communications, Publicasity, 2112 Communications and Summit Marketing Services.
Porta Communications has today relaunched its corporate website - www.portacomms.com.
Chief Executive Report
Porta Communications Plc ("Porta") continues to trade strongly, and outperform its peer group in terms of organic growth. In the first six months of 2015 gross profit (fees) was 67% higher than the corresponding period. After stripping out first time contributions from acquisitions, organic growth increased by 17%. EBITDA after exceptional items was also 66% higher than the comparable period, and more than four times higher than the whole of 2014. As anticipated, exceptional items are also much lower in the absence of any start-up costs, and we expect this trend to continue in the future. The Group also reported positive net cash flow from operations for the first time of £0.72 million. This was an improvement of £3 million from the comparable period and an improvement of £4 million from the whole 2014.
PR Division
Newgate Australia is consistently winning new mandates in all areas of its business, Newgate Asia won a number of new, large projects in the region, and Redleaf Communications secured a number of new clients and is trading at record levels.
Management completed a review of the businesses and took the decision to close smaller non-performing offices in Brussels and Germany, and certain, less successful departments. This decision has already resulted in an annualised cost saving in excess of £1 million.
Porta has also successfully integrated its non-consumer PR businesses under the Newgate brand, with the exception of Redleaf Communications. The result of this is that we can now offer to clients a fully integrated global communications consultancy, operating under a common set of values. We are already seeing the benefits of this, and our specialist teams are now regularly winning new business together by offering a wider consolidated service. This led to a 155% increase in profits arising from shared clients.
We have recruited, and continue to recruit high quality people, and now have a much stronger team in place who, the Board expect, will take the business to a new level.
Advertising Division
The Advertising Division has increased the levels of business it undertakes with its larger clients, and the Board expects the division will make a more meaningful contribution to the Group going forward.
Outlook
Porta is well placed to progress the next phase of its development and cement its place as one of the major players in its sector. We are strengthening the management team, and improving the quality and experience levels of new executives. This is key to winning larger and more profitable client mandates. Following the management review and the closure of certain businesses we have reduced our costs, and are focused now on building our established brands and expanding both our geographical reach and range of services.
Our integrated product mix should ensure a better than average sector performance in the short term, and the recent new business wins across the group, coupled with the successful reorganisation programme is expected to result in another strong EBITDA performance in the second half of the year.
Executive Summary | |||||
Six months ended | Six months ended | Year ended | |||
30 June 2015 | 30 June 2014 | 31 December 2014 | |||
£ | Restated1, £ | £ | |||
Operating (loss)/profit | (548,975) | 20,6642 | (1,252,534)2 | ||
Add back depreciation and amortisation | 1,377,027 | 479,624 | 1,448,5041 | ||
EBITDA from continuing operations | 828,052 | 500,288 | 195,970 | ||
Start-up losses | - | 237,426 | 613,326 | ||
Acquisition costs | 29,948 | 107,200 | 271,947 | ||
Non-recurring property costs | 66,909 | 323,536 | 323,536 | ||
Restructuring costs | 116,956 | 20,500 | 189,500 | ||
Legal and professional consultancy costs | 98,994 | 47,100 | 276,418 | ||
Share based payments | 192,748 | 98,620 | 185,580 | ||
Bad debt expense | - | - | 133,167 | ||
Headline EBITDA | 1,333,607 | 1,334,670 | 2,189,444 | ||
EPS reported on operating profit for continuing operations | (0.2p) | 0.0p | (0.6p) | ||
EPS based on headline EBITDA | 0.5p | 0.7p | 1.0p |
1 June 2014 and December 2014 results exclude the operations of Twenty20 Media Group which was discontinued in 2014. See note 9 in the December 2014 financial statements.
2 Operating (loss)/profit for comparative periods exclude £475,394 non-operating gain on acquisition and has been removed from headline EBITDA adjustments.
Interim results by division were as follows:
Six months ended 30 June 2015 | Communications | Marketing & Advertising | TOTAL Operations | Head office | TOTAL |
£ | £ | £ | £ | £ | |
External revenue | 14,319,240 | 3,032,508 | 17,351,748 | - | 17,351,748 |
Gross profit (fee income) | 12,129,177 | 1,776,373 | 13,905,550 | - | 13,905,550 |
Operating results | 769,219 | (102,631) | 666,588 | (1,215,563) | (548,975) |
Depreciation & Amortisation | 1,180,107 | 105,518 | 1,285,625 | 91,402 | 1,377,027 |
Reported EBITDA | 1,949,326 | 2,887 | 1,952,213 | (1,124,161) | 828,052 |
Headline adjustments | 288,307 | 13,773 | 302,080 | 203,475 | 505,555 |
Headline EBITDA | 2,237,633 | 16,660 | 2,254,293 | (920,686) | 1,333,607 |
Headline EBITDA margin | 9.6% |
Six months ended 30 June 2014 Restated1 | Communications | Marketing & Advertising 1 | TOTAL Operations | Head office | TOTAL |
£ | £ | £ | £ | £ | |
External revenue | 7,684,539 | 2,242,575 | 9,927,114 | 3,225 | 9,930,339 |
Gross profit (fee income) | 7,037,929 | 1,183,243 | 8,221,172 | 2,823 | 8,223,995 |
Operating results2 | 1,753,328 | 195,6932 | 1,949,021 | (1,928,357) | 20,664 |
Depreciation & Amortisation | 313,234 | 72,055 | 385,289 | 94,335 | 479,624 |
Reported EBITDA2 | 2,066,562 | 267,748 | 2,334,310 | (1,834,022) | 500,288 |
Headline adjustments | 9,085 | 18,000 | 27,085 | 807,297 | 834,382 |
Headline EBITDA | 2,075,647 | 285,748 | 2,361,395 | (1,026,725) | 1,334,670 |
Headline EBITDA margin | 16.2% |
David Wright
Chief Executive Officer
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2015 (Unaudited)
Six months ended30 June 2015 | Six months ended30 June 2014 | Year ended 31 December 2014 | |||
£ | Restated, £ | £ | |||
Continuing operations | |||||
Revenue | 5 | 17,351,748 | 9,930,339 | 23,273,668 | |
Cost of sales | (3,446,198) | (1,706,344) | (3,868,339) | ||
Gross profit | 13,905,550 | 8,223,995 | 19,405,329 | ||
Operating and administrative expenses | (14,454,525) | (7,727,937) | (20,182,469) | ||
Operating (loss)/profit | 4 | (548,975) | 496,058 | (777,140) | |
Finance expense | (593,629) | (326,454) | (689,288) | ||
Finance income | 11,737 | - | 1,261 | ||
Share of profit/(loss) in associate | - | - | (7,287) | ||
Profit/(loss) before taxation on continuing operations | (1,130,867) | 169,604 | (1,472,454) | ||
Tax credit/(charge) | 7 | (284,657) | (239,134) | 302,530 | |
Loss for the period on continuing operations | (1,415,524) | (69,530) | (1,169,924) | ||
Discontinued operations | |||||
Loss for the period from discontinued operations | - | (53,940) | (2,480,674) | ||
Loss for the period | (1,415,524) | (123,470) | (3,650,598) | ||
(Loss) / profit for the period attributable to: | |||||
Owners of the Company | (1,802,801) | (319,614) | (3,737,939) | ||
Non-controlling interests | 387,277 | 196,144 | 87,341 | ||
(1,415,524) | (123,470) | (3,650,598) | |||
Other comprehensive income | |||||
Exchange differences arising on items that may be subsequently reclassified to profit and loss | (121,953) | 28,078 | (45,581) | ||
Exchange differences arising on sale of subsidiary | - | - | - | ||
Total other comprehensive income, net of tax | (121,953) | 28,078 | (45,581) | ||
Total comprehensive income for the period | (1,537,477) | (95,392) | (3,696,179) | ||
Total comprehensive income for the period attributable to: | |||||
Owners of the Company | (1,897,563) | (305,294) | (3,767,767) | ||
Non-controlling interests | 360,086 | 209,902 | 71,588 | ||
(1,537,477) | (95,392) | (3,696,179) | |||
Earnings/(loss)per share basic and diluted | 13 | ||||
On continuing operations | (0.5p) | (0.0p) | (0.6p) | ||
On discontinued operations | - | (0.0p) | (1.1p) | ||
On continuing and discontinued operations | (0.5p) | (0.0p) | (1.7p) | ||
On operating (loss)/profit from continuing operations | (0.2p) | 0.2p | (0.4p) | ||
On headline EBITDA | 0.5p | 0.7p | 1.0p |
The accompanying notes are an integral part of this condensed consolidated interim financial report.
Condensed Consolidated Statement of Financial Position
As at 30 June 2015 (Unaudited)
Notes | 30 June 2015 | 30 June 2014 | 31 December 2014 | ||||
£ | £ | £ | |||||
Non-current assets | |||||||
Intangible assets | 12 | 17,911,355 | 14,517,905 | 18,582,868 | |||
Fixed assets | 8 | 1,250,398 | 1,308,776 | 1,440,714 | |||
Investment in associates | 119,435 | 126,721 | 119,435 | ||||
Other investments | 9,500 | 1,000 | 1,000 | ||||
Non-current financial assets | 923,775 | 923,775 | 923,775 | ||||
Deferred tax asset | 1,425,154 | 1,100,964 | 1,449,871 | ||||
Total non-current assets | 21,639,617 | 17,979,141 | 22,517,663 | ||||
Current assets | |||||||
Current assets in relation to discontinued operations | - | - | 3,433,528 | ||||
Work in progress | 724,998 | 1,502,489 | 1,115,206 | ||||
Trade and other receivables | 8,540,783 | 7,994,763 | 7,760,659 | ||||
Current tax assets | 120,192 | - | - | ||||
Cash and cash equivalents | 1,923,873 | 1,877,039 | 1,791,426 | ||||
Total current assets | 11,309,846 | 11,374,291 | 14,100,819 | ||||
Current liabilities | |||||||
Current liabilities in relation to discontinued operations | - | - | (3,433,528) | ||||
Bank overdrafts | - | (37,327) | - | ||||
Trade and other payables | (7,719,375) | (8,080,799) | (6,527,716) | ||||
Current tax liabilities | (754,446) | - | (665,338) | ||||
Loans and borrowings | 11 | (7,426,165) | (468,226) | (4,574,993) | |||
Total current liabilities | (15,899,986) | (8,586,352) | (15,201,575) | ||||
Net current (liabilities)/assets | (4,590,140) | 2,787,939 | (1,100,756) | ||||
Non-current liabilities | |||||||
Trade and other payables | - | (82,968) | - | ||||
Fair value of contingent consideration | (956,417) | (1,285,326) | (981,379) | ||||
Deferred tax liabilities | (2,093,338) | (1,141,401) | (2,318,616) | ||||
Loans and borrowings | 11 | (260,188) | (3,335,866) | (2,823,163) | |||
Total non-current liabilities | (3,309,943) | (5,845,561) | (6,123,158) | ||||
Net assets | 13,739,534 | 14,921,519 | 15,293,749 | ||||
Equity | |||||||
Share capital | 9 | 28,380,791 | 23,518,520 | 27,405,391 | |||
Share premium | 4,788,547 | 4,781,880 | 4,788,547 | ||||
Retained losses | (20,490,215) | (14,303,068) | (18,018,687) | ||||
Translation reserve | (172,958) | (34,047) | (78,195) | ||||
Other reserves | (785,326) | (1,298,387) | (978,075) | ||||
Total equity shareholders' funds | 11,720,839 | 12,664,898 | 13,118,981 | ||||
Equity non-controlling interests | 2,018,695 | 2,256,621 | 2,174,768 | ||||
Total equity | 13,739,534 | 14,921,519 | 15,293,749 | ||||
The accompanying notes are an integral part of this condensed consolidated interim financial report.
Condensed Consolidated Statement of Cash Flows
For the six months ended 30 June 2015 (Unaudited)
Six months ended30 June 2015 | Six months ended30 June 2014 | Year ended 31 December 2014 | ||||
£ | £ | £ | ||||
Cash flow from operating activities | ||||||
(Loss)/profit before taxation on continuing activities | (1,130,867) | 169,604 | (1,472,454) | |||
Adjusted for: | ||||||
Loss from discontinued operations before tax | - | (98,700) | (2,529,706) | |||
Depreciation and amortisation | 1,377,027 | � | 564,947 | 1,619,846 | ||
Equity settled share based payments | 192,749 | 98,620 | 185,580 | |||
Gain on acquisition | - | (475,394) | (475,394) | |||
Finance income | (11,737) | - | (1,261) | |||
Finance costs | 593,629 | 355,311 | 712,897 | |||
Share of losses of associate | - | - | 7,287 | |||
Loss on disposal of property, plant and equipment | - | - | 10,252 | |||
Tax paid | (441,475) | (43,735) | (219,353) | |||
Decrease/(increase) in work in progress | 357,246 | (224,292) | (699,368) | |||
Increase in trade and other receivables | (828,856) | (2,063,353) | (1,139,675) | |||
Increase/(decrease) in trade and other payables | 589,509 | (315,967) | (767,154) | |||
Changes in working capital relating to discontinued operations | - | (248,812) | (235,414) | |||
Impairment of assets in discontinued operations | - | - | 1,629,862 | |||
Unrealised foreign exchange loss/(gain) | 23,525 | 12,420 | (23,430) | |||
Net cash inflow/(outflow) from operating activities | 720,750 | (2,269,351) | (3,397,485) | |||
Cash flows from investing activities | ||||||
Acquisition of intangible assets | (24,346) | (16,405) | (16,672) | |||
Acquisition of property, plant and equipment | (71,696) | (475,158) | (627,165) | |||
Dividends paid to non-controlling interests | (262,698) | (100,000) | (340,833) | |||
Acquisition of subsidiary, net of cash acquired | 49,102 | (1,792,474) | (3,117,205) | |||
Interest received | 11,737 | - | 1,261 | |||
Interest paid | (9,856) | (2,662) | (49,912) | |||
Net investing cash flow from discontinued operations | - | (40,549) | (60,381) | |||
Net cash outflow from investing activities | (307,757) | (2,427,248) | (4,210,907) | |||
Cash flows from financing activities | ||||||
Proceeds from the issue of ordinary shares (net of issue costs) | - | 6,595,350 | 6,595,350 | |||
Proceeds from loans and borrowings | - | - | 3,000,000 | |||
Repayment of loans and borrowings | (179,278) | (2,519,716) | (2,577,292) | |||
Repayment of leases | (77,101) | - | (96,944) | |||
Net financing cash flow from discontinued operations | - | (50,000) | (62,500) | |||
Net cash (absorbed)/generated from financing activities | (256,379) | 4,025,634 | 6,858,614 | |||
Net increase/(decrease) in cash and cash equivalents | 156,614 | (670,965) | (749,778) | |||
Cash and cash equivalents at 1 January | 1,791,426 | 2,544,802 | 2,544,802 | |||
Effect of exchange rate changes | (24,167) | 3,202 | (3,598) | |||
Cash and cash equivalents at period end | 1,923,873 | 1,877,039 | 1,791,426 | |||
The accompanying notes are an integral part of this condensed consolidated interim financial report.
Condensed Consolidated Statement of Changes in Equity
Statement of changes in equity for the six months ended 30 June 2015: | |||||||||
| Share capital | Sharepremium | Retained losses | Translationreserve | Other Reserves | Written Put/Call Options over NCI | Total equity shareholders' funds | Non-controlling interests (NCI) | Total equity |
£ | £ | £ | £ | £ | £ | £ | £ | £ | |
Balance at 1 January 2015 | 27,405,391 | 4,788,547 | (18,018,687) | (78,195) | 813,671 | (1,791,746) | 13,118,981 | 2,174,768 | 15,293,749 |
Total comprehensive income | |||||||||
Loss for the period | - | - | (1,802,801) | - | - | - | (1,802,801) | 387,277 | (1,415,524) |
Other comprehensive income | - | - | - | (94,763) | - | - | (94,763) | (27,190) | (121,953) |
Total comprehensive income | - | - | (1,802,801) | (94,763) | - | - | (1,897,564) | 360,087 | (1,537,477) |
Transactions with owners of the Company, recognised directly in equity | |||||||||
Contributions by owners: | |||||||||
Issue of ordinary shares in relation to business combinations | 975,400 | - | - | - | - | - | 975,400 | - | 975,400 |
Dividend paid to non-controlling interest | - | - | - | - | - | - | - | (262,698) | (262,698) |
Share based payments | 192,749 | 192,749 | - | 192,749 | |||||
Changes in ownership interests of subsidiaries: | |||||||||
Acquisition of subsidiary with non-controlling interest | - | - | - | - | - | - | - | 53,211 | 53,211 |
Acquisition of non-controlling interest without a change in control | - | - | (668,727) | - | - | - | (668,726) | (306,673) | (975,400) |
Total transactions recognised directly in equity | 975,400 | - | (668,727) | - | 192,749 | - | 499,422 | (516,160) | (16,738) |
Balance at 30 June 2015 | 28,380,791 | 4,788,547 | (20,490,215) | (172,958) | 1,006,420 | (1,791,746) | 11,720,839 | 2,018,695 | 13,739,534 |
The accompanying notes are an integral part of this condensed consolidated interim financial report.
Statement of changes in equity for the year ended 31 December 2014: | |||||||||
Share capital | Sharepremium | Retained losses | Translationreserve | Other Reserves | Written Put/ Call Options over NCI | Total equity shareholders' funds | Non-controlling interests | Total equity | |
£ | £ | £ | £ | £ | £ | £ | £ | £ | |
Balance at 1 January 2014 | 16,860,101 | 3,117,545 | (13,883,454) | (48,367) | (851,950) | - | 5,193,875 | 1,129,894 | 6,323,769 |
Total comprehensive income | |||||||||
Loss for the period | - | - | (319,614) | - | - | - | (319,614) | 196,144 | (123,470) |
Other comprehensive income | - | - | - | 14,320 | - | - | 14,320 | 13,758 | 28,078 |
Total comprehensive income | - | - | (319,614) | 14,320 | - | - | (305,294) | 209,902 | (95,392) |
Contributions by owners: | |||||||||
Issue of ordinary shares | 5,384,615 | 1,615,385 | - | - | - | - | 7,000,000 | - | 7,000,000 |
Issue of ordinary shares in relation to business combinations | 1,273,804 | 453,600 | - | - | - | - | 1,727,404 | - | 1,727,404 |
Issue costs | - | (404,650) | - | - | - | - | (404,650) | - | (404,650) |
Dividend paid to non-controlling interest | - | - | - | - | - | - | - | (100,000) | (100,000) |
Share based payments | - | - | - | - | 98,620 | - | 98,620 | - | 98,620 |
Written put/call options over non-controlling interest | - | - | - | - | - | (1,791,746) | (1,791,746) | - | (1,791,746) |
Equity component of the deferred consideration | - | - | - | - | 1,246,689 | - | 1,246,689 | - | 1,246,689 |
Changes in ownership interest of subsidiaries: | |||||||||
Acquisition of subsidiary with non-controlling interest | - | - | - | - | - | - | - | 1,772,825 | 1,772,825 |
Acquisition of non-controlling interest without a change in control | - | - | (100,000) | - | - | - | (100,000) | (756,000) | (856,000) |
Total transactions recognised directly in equity | 6,658,419 | 1,664,335 | (100,000) | - | 1,345,309 | (1,791,746) | 7,776,317 | 916,825 | 8,693,142 |
Balance at 30 June 2014 | 23,518,520 | 4,781,880 | (14,303,068) | (34,047) | 493,359 | (1,791,746) | 12,664,898 | 2,256,621 | 14,921,519 |
Total comprehensive income | |||||||||
Loss for the period | - | - | (3,418,325) | - | - | - | (3,418,325) | (108,803) | (3,527,128) |
Other comprehensive income | - | - | - | (44,148) | - | - | (44,148) | (29,511) | (73,659) |
Total comprehensive income | - | - | (3,418,325) | (44,148) | - | - | (3,462,473) | (138,314) | (3,600,787) |
Contributions by owners: | |||||||||
Issue of ordinary shares in relation to business combinations
| 3,886,871 | 6,667 | - | - | - | - | 3,893,538 | - | 3,893,538 |
Dividends paid to non-controlling interest | - | - | - | - | - | - | - | (240,833) | (240,833) |
Share based payments | - | - | - | - | 86,960 | - | 86,960 | - | 86,960 |
Equity component of convertible loan issued | - | - | - | - | 233,352 | - | 233,352 | - | 233,352 |
Changes in ownership interest of subsidiaries: | |||||||||
Disposal of subsidiary with non-controlling interest | - | - | (297,294) | - | - | - | (297,294) | 297,294 | - |
Total transactions directly recognised in equity | 3,886,871 | 6,667 | (297,294) | - | 320,312 | - | 3,916,556 | 56,461 | 3,973,017 |
Balance at 31 December 2014 | 27,405,391 | 4,788,547 | (18,018,687) | (78,195) | 813,671 | (1,791,746) | 13,118,981 | 2,174,768 | 15,293,749 |
The accompanying notes are an integral part of this condensed consolidated interim financial report.
Notes to the Condensed Consolidated Interim Financial Report
For the six months to 30 June 2015 (Unaudited)
1. Corporate information
The interim condensed consolidated financial statements of Porta Communications PLC and its subsidiaries (collectively, the Group) for the six-month period ended 30 June 2015 were authorised for issue in accordance with a resolution of the Directors on 22 September 2015.
Porta Communications PLC ('the Company') is a public company domiciled in the United Kingdom whose shares are publicly traded on the Alternative Investment Market of the London Stock Exchange. The Group is primarily involved in providing communication, advertising and marketing services.
2. Basis of preparation
(a) Statement of compliance
The condensed consolidated interim financial report for the six month period ended on 30 June 2015 has been prepared in accordance with IAS 34 Interim Financial Reporting. Selected explanatory notes are included to explain events and transactions that are significant to understand the changes in financial position and performance of the Group since the last annual consolidated financial statements as at and for the year ended 31 December 2014. This condensed consolidated interim financial report does not include all of the information required for full annual financial statements prepared in accordance with International Financial Reporting Standards as adopted by the European Union.
The financial information presented herein does not constitute full statutory accounts under section 434 of the Companies Act 2006. This condensed consolidated financial report is unaudited. The financial information in respect of the previous year ended 31 December 2014 has been extracted from the consolidated statutory accounts of the Company for that period and have been delivered to the Registrar of Companies. The Group's Independent Auditor's report on those accounts was unqualified, did not include references to any matters to which the auditor drew attention by way of emphasis without qualifying their report and did not contain a statement under section 498 (2) or 498 (3) of the Companies Act 2006.
(b) Judgements and estimates
Preparing the condensed consolidated interim financial report requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.
In preparing this condensed consolidated interim financial report, significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2014.
(c) Headline measures
The Group believes that reporting non-GAAP or headline adjusted measures provide a useful comparison of business performance and reflects the way the business is managed. Accordingly headline measures of operating profit (EBITDA) and earnings per share exclude, where applicable, restructuring costs, start-up losses, amortisation of intangible assets, impairment charges, acquisition accounting adjustments, share option charges, and other exceptional items. Non-headline gains or losses are items that, in the opinion of the Directors, are required to be disclosed separately, by virtue of their size or incidence, to enable a full understanding of the Group's underlying financial performance.
A reconciliation between statutory and headline operating profit is presented in Note 4. In addition to this, earnings per share is presented in Note 13. Headline measures in this report are not defined terms under IFRS and may not be compared with similarly titled measures reported by other companies.
3. Accounting policies
The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2014, as described in those annual financial statements. The adoption of new standards and interpretations effective as of 1 January 2015 had an impact on the comparative figures.
4. Reconciliation of operating profit to EBITDA and to headline adjusted EBITDA
Six months ended 30 June 2015 | Six months ended 30 June 2014 | Year ended 31 December 2014 | |
Continuing operations: | £ | Restated1, £ | £ |
Reported operating profit / (loss) | (548,975) | 496,058 | (777,140) |
Less non-operating gain on acquisition | - | (475,394) | (475,394) |
Operating profit / (loss) 2 | (548,975) | 20,664 | (1,252,534) |
Add back depreciation and amortisation | 1,377,027 | 479,624 | 1,448,5041 |
EBITDA from continuing operations | 828,052 | 500,288 | 195,970 |
Add back: | |||
Start-up losses* | - | 237,426 | 613,326 |
Acquisition costs | 29,948 | 107,200 | 271,947 |
Restructuring costs | 116,956 | 20,500 | 189,500 |
Non-recurring property costs | 66,909 | 323,536 | 323,536 |
Legal and professional consultancy costs | 98,994 | 47,100 | 276,418 |
Share-based payments | 192,748 | 98,620 | 185,580 |
Bad debt expense | - | - | 133,167 |
Adjusted headline EBIDTA | 1,333,607 | 1,334,670 | 2,189,444 |
EPS reported on operating profit/(loss) from continuing2 operations | (0.2p) | 0.0p | (0.6p) |
EPS based on adjusted headline EBITDA | 0.5p | 0.7p | 1.0p |
*For the purpose of the above analysis, start-up losses are defined as operating results in the period of entities which are businesses that commenced trading as part of the Group. Such businesses so defined will cease being separately defined as a start-up at the earlier of two years from the commencement of the activity or when the businesses show evidence of becoming consistently profitable.
1 June 2014 and December 2014 results exclude the operations of TTMG which was discontinued in 2014. See note 9 in the 2014 consolidated financial statements.
2 Operating results in comparative periods exclude £475,394 non-operating gain on the acquisition.
5. Segmental reporting
Business segments
The following tables present revenue and reportable results for the Group's operational segments:
Six months ended 30 June 2015
| Communications | Marketing and Advertising | Head office | Other / Consol. | Total |
£ | £ | £ | £ | £ | |
External revenue | 14,319,240 | 3,032,508 | - | - | 17,351,748 |
Inter-segment revenue | 13,204 | 63,555 | 892,979 | (969,738) | - |
Reportable segment revenue | 14,332,444 | 3,096,063 | 892,979 | (969,738) | 17,351,748 |
Reportable segment gross profit | 12,129,177 | 1,776,373 | - | - | 13,905,550 |
Reportable segment results | 769,219 | (102,631) | (1,215,563) | - | (548,975) |
Reported segment EBITDA | 1,949,326 | 2,887 | (1,124,161) | - | 828,052 |
Headline segment EBITDA | 2,237,633 | 16,660 | (920,686) | - | 1,333,607 |
Six months ended 30 June 2014 (restated) | Communications | Marketing and Advertising1 | Head office | Other / Consol. | Total |
£ | £ | £ | £ | £ | |
Revenue | 7,684,539 | 2,242,575 | 3,225 | - | 9,930,339 |
Inter-segmental revenue | 53,237 | 67,852 | 434,672 | (555,761) | - |
Reportable segment revenue | 7,737,776 | 2,310,427 | 437,897 | (555,761) | 9,930,339 |
Reportable segment gross profit | 7,037,929 | 1,183,243 | 2,823 | - | 8,223,995 |
Reportable segment results | 1,753,328 | 195,693 | (1,928,357) | - | 20,664 |
Reported segment EBITDA | 2,066,562 | 267,748 | (1,834,022) | - | 500,288 |
Headline segment EBITDA | 2,075,647 | 285,748 | (1,026,725) | - | 1,334,670 |
Year ended 31 December 2014 | Communications | Marketing and Advertising1 | Head office | Other / Consol. | Total |
£ | £ | £ | £ | £ | |
Revenue | 18,625,818 | 4,647,850 | - | - | 23,273,668 |
Inter-segmental revenue | 152,832 | 114,705 | 1,116,886 | (1,384,423) | - |
Reportable segment revenue | 18,778,650 | 4,762,555 | 1,116,886 | (1,384,423) | 23,273,668 |
Reportable segment gross profit | 16,714,182 | 2,539,795 | 151,352 | - | 19,405,329 |
Reportable segment results | 885,053 | (214,019) | (1,923,568) | - | (1,252,534) |
Reported segment EBITDA | 1,954,687 | (38,629) | (1,720,089) | - | 195,969 |
Headline segment EBITDA | 2,629,812 | 258,909 | (699,278) | - | 2,189,443 |
1 Operating results and EBITDA adjustments in comparative periods exclude £475,394 non-operating gain on the acquisition.
The following table below presents assets and liabilities information for the Group's operating segments as at 30 June 2015, 30 June 2014 (restated) and 31 December 2014 respectively:
Six months ended 30 June 2015 | Communications | Marketing and Advertising | Head office | Other / Consol. | Total |
£ | £ | £ | £ | £ | |
Reportable segment assets | 26,263,580 | 1,807,634 | 11,689,271 | (6,811,022) | 32,949,463 |
Reportable segment liabilities | (9,399,832) | (5,478,004) | (11,143,115) | 6,811,022 | (19,209,929) |
Six months ended 30 June 2014 (restated) | Communications | Marketing and Advertising | Head office | Other / Consol. | Total |
£ | £ | £ | £ | £ | |
Reportable segment assets | 12,185,363 | 5,137,482 | 19,557,993 | (7,527,406) | 29,353,432 |
Reportable segment liabilities | (6,222,378) | (11,205,905) | (4,531,036) | 7,527,406 | (14,431,913) |
Year ended 31 December 2014
| Communications | Marketing and Advertising | Head office | Other / Consol. | Total |
£ | £ | £ | £ | £ | |
Reportable segment assets | 25,303,801 | 3,659,710 | 12,454,647 | (8,233,204) | 33,184,954 |
Reportable segment liabilities | (9,065,447) | (7,184,801) | (9,874,161) | 8,233,204 | (17,891,205) |
Geographical segments
The analysis of results and assets by geographic region, based on the location of the operating company, is as follows:
Six months ended 30 June 2015 | UK | EMEA | Asia- Pacific | Total |
£ | £ | £ | £ | |
Revenue | 12,634,601 | 195,296 | 4,521,851 | 17,351,748 |
Gross profit | 9,476,100 | 155,790 | 4,273,660 | 13,905,550 |
(Loss)/profit on continuing operations before tax | (2,054,055) | (12,763) | 935,951 | (1,130,867) |
Loss on discontinued operations before tax | - | - | - | - |
Six months ended 30 June 2014 (restated) | UK | EMEA | Asia- Pacific | Total |
£ | £ | £ | £ | |
Revenue | 6,123,567 | 151,402 | 3,655,370 | 9,930,339 |
Gross profit | 4,759,229 | 150,437 | 3,314,329 | 8,223,995 |
(Loss)/profit on continuing operations before tax | (483,122) | (75,835) | 728,561 | 169,604 |
Loss on discontinued operations before tax | (98,701) | - | - | (98,701) |
Year ended 31 December 2014 | UK | EMEA | Asia- Pacific | Total |
£ | £ | £ | £ | |
Revenue | 15,160,367 | 509,122 | 7,604,179 | 23,273,668 |
Gross profit | 11,867,995 | 467,872 | 7,069,462 | 19,405,329 |
(Loss)/profit on continuing operations before tax | (2,547,818) | (176,536) | 1,251,900 | (1,472,454) |
Loss on discontinued operations before tax | (2,529,706) | - | - | (2,529,706) |
6. Acquisition of subsidiaries and associates
Acquisition of Newgate Communications (HK) Limited
Newgate Communications (HK) Limited ('Newgate Hong Kong') is a PR consultancy firm specialising in brand building and capital markets services which has been operating under the 'Newgate' brand from the commencement of its trading activity in late in 2012.
On 1 November 2012, the Group provided Newgate Hong Kong with a revolving loan facility up to £495,753 for general working capital purposes. On 1 January 2015, the Directors of both Porta and Newgate Hong Kong agreed to convert the full outstanding balance of the loan facility, including 1.5% annual interest accrued to the date, into 51% of the issued share capital of Newgate Hong Kong.
The fair value of net assets acquired has been agreed to be equal to their book value. The following table summarises the recognised amounts of assets and liabilities assumed at the acquisition date.
At 1 January 2015 | |
£ | |
Fixed assets | 12,976 |
Work in progress | 2,884 |
Trade and other receivable | 77,178 |
Cash and cash equivalents | 49,102 |
Trade and other payable | (33,546) |
Net assets acquired | 108,594 |
Less: attributable to non-controlling interests | (53,211) |
Net value attributable to parent | 55,383 |
Goodwill
Goodwill arising from the transaction has been recognised as follows:
£ | ||
The value of converted loan as total consideration | 506,642 | |
Less fair value of net identifiable assets | (55,383) | |
Goodwill | 451,259 |
The goodwill is attributable mainly to the skills and knowledge of the staff acquired and the synergies expected to be achieved by extending the Newgate brand globally.
Acquisition of additional interest in Newgate Communications LLP and 2112 Direct LLP
On 28 May 2015, the Group completed the reorganisation of the Newgate Communications LLP ('Newgate'), and 2112 Direct LLP ('2112') and, as a part of this reorganisation, acquired the outstanding 49% interest in Newgate and the outstanding 30% in 2112, thereby increasing its ownership interest in both businesses to 100%, for a total consideration of 9,754,000 Ordinary shares of 10p each.
The net carrying value of the non-controlling interest acquired was immaterial for the group reporting purposes.
7. Income tax expense
The Group calculates the period income tax expense using the tax rate that would be applicable to the expected total annual earnings. The major components of income tax expense in the interim condensed Statement of Comprehensive Income are:
Six months ended 30 June 2015 | Six months ended 30 June 2014 | |
Income taxes | £ | Restated, £ |
Current income tax charge/(credit) | 480,110 | 246,792 |
Deferred income tax charge/(credit) | (195,453) | (7,658) |
Income tax charge/(credit) recognised in statement of profit or loss | 284,657 | 239,134 |
8. Property, plant and equipment
Acquisitions and disposals
During the six months ended 30 June 2015, the Group acquired assets with a cost of £56,387 (six months to 30 June 2014: £882,296).
No assets were disposed of during the six months ended 30 June 2015 (30 June 2014: £nil).
9. Capital and Reserves
Issues of ordinary shares
On 28 May 2015, the Group announced the acquisition of the non-controlling interest in two businesses, Newgate and 2112, through the issue of 9,754,000 ordinary shares of 10p each at par value. Further details are given in note 6.
The movement in Ordinary shares for the year reconciles as follows:
Number | £ nominal value | |||
At 1 January 2015 | 267,573,895 | 26,757,390 | ||
New issues during the year | 9,754,000 | 975,400 | ||
At 30 June 2015 | 277,327,895 | 27,732,790 |
Deferred Shares
There has been no change in the number of, or rights relating to, the Deferred shares during the six months to 30 June 201.
Allotted, called up and fully paid
30 June 2015 | Number | £ nominal value | ||
Ordinary shares of 10p each | 277,327,895 | 27,732,790 | ||
Deferred shares of 0.9p each | 72,000,000 | 648,000 | ||
28,380,790 |
31 December 2014 | Number | £ | ||
Ordinary shares of 10p each | 267,573,895 | 26,757,390 | ||
Deferred shares of 0.9p each | 72,000,000 | 648,000 | ||
27,405,390 |
30 June 2014 | Number | £ | ||
Ordinary shares of 10p each | 228,705,193 | 22,870,520 | ||
Deferred shares of 0.9p each | 72,000,000 | 648,000 | ||
23,518,520 |
10. Share-based payments
On 13 May 2015 the Company granted options over a total of 8,070,000 ordinary shares of 10p each in Porta to employees across several business operations, of which 150,000 were cancelled immediately after the grant date. The exercise price of the options is 10p per share and, subject to the achievement of certain performance conditions, vesting over various periods of up to three years.
No options have been settled by way of cash in either the current or preceding periods.
The following inputs were used in the measurement of the fair values at grant date of the share-based payment plans.
Share option plan | |
13 May 2015 | |
Fair value at grant date | 4.24p |
Share price at grant date | 7.63p |
Exercise price | 10.00p |
Expected volatility | 67% |
Option life (expected weighted average life) | 6 years |
Expected dividends | 0% |
Risk-free interest rate | 2.10% |
30 June 2015 | Weighted average | |
Number of Options | exercise price, pence | |
Balance at 1 January 2015 | 11,141,096 | 14.90p |
Issued during the period | 8,070,000 | 10.00p |
Cancelled during the period | (150,000) | 10.00p |
Forfeited during the period | (100,000) | 10.00p |
Balance at 30 June 2015 | 18,961,096 | 12.87p |
For the six months ended 30 June 2015, the Group has recognised £192,748 of share based payment expense in the interim Statement of Comprehensive Income (30 June 2014: £98,620).
11. Loans and Borrowings
30 June 2015 | 30 June 2014 | 31 December 2014 | ||||
£ | £ | £ | ||||
Current liabilities | ||||||
Loans - related party | 2,665,743 | 400,000 | - | |||
Loans notes | 1,572,807 | - | 1,557,532 | |||
Convertible loans | 3,088,690 | - | 2,936,680 | |||
7,327,240 | 400,000 | 4,494,212 | ||||
Obligation under finance lease | 98,925 | 68,226 | 80,781 | |||
7,426,165 | 468,226 | 4,574,993 | ||||
Non-current liabilities | ||||||
Loans - related party | - | 2,371,356 | 2,518,550 | |||
Secured bank loan | - | 650,000 | - | |||
- | 3,021,356 | 2,518,550 | ||||
Obligation under finance lease | 260,188 | 314,510 | 304,613 | |||
260,188 | 3,335,866 | 2,823,163 | ||||
The related party loans are secured over all current and future assets of all companies within the Group. The secured bank loan at 30 June 2014 was secured over all fixed assets, trade debtors and other assets of WFCA Limited and its two subsidiaries.
30 June 2015 | 30 June 2014 | 31 December 2014 | ||||||
Nominal Interest Rate | Year of maturity | Face Value | Carrying Amount | Face Value | Carrying Amount | Face Value | Carrying Amount | |
Discounted bond - related party | 12% | 2016 | 2,862,000 | 2,665,743 | 2,862,000 | 2,371,356 | 2,862,000 | 2,518,550 |
Loan notes | 6% | 2015 | 1,552,000 | 1,572,807 | - | - | 1,552,000 | 1,557,532 |
Convertible loans | 12% | 2015 | 3,067,450 | 3,088,690 | - | - | 3,007,450 | 2,936,680 |
Loan | 12% | 2014 | - | - | - | - | - | - |
Loan - related party | 12% | 2015 | - | - | 300,000 | 300,000 | - | - |
Loan - related party | 12% | 2015 | - | - | 100,000 | 100,000 | - | - |
Secured bank loan | Base + 2.75% | 2015 | - | - | 650,000 | 650,000 | - | - |
7,481,450 | 7,327,240 | 3,912,000 | 3,421,356 | 7,421,450 | 7,012,762 | |||
Terms and debt repayment schedule
12. Intangible assets and goodwill
Goodwill | Customer relationships | Brands | Websites, software and licences | Total | |
Cost | £ | £ | £ | £ | £ |
At 1 January 2014 | 7,110,054 | 1,590,000 | 747,000 | 141,022 | 9,588,076 |
Additions in period - acquired with subsidiary | 2,344,791 | 2,690,000 | 1,085,000 | 1,223 | 6,121,014 |
Other additions | - | - | - | 16,405 | 16,405 |
Exchange differences | (1,998) | - | - | (15) | (2,013) |
At 30 June 2014 | 9,452,847 | 4,280,000 | 1,832,000 | 158,635 | 15,723,482 |
Acquisition in period - acquired with subsidiary | 773,806 | 5,640,000 | 1,700,000 | - | 8,113,806 |
Other additions in the period | - | - | 33,417 | 33,417 | |
Discontinued operations | (2,724,601) | (540,000) | (345,000) | (8,017) | (3,617,618) |
Translation differences | 14,898 | - | - | 52 | 14,950 |
At 31 December 2014 | 7,516,950 | 9,380,000 | 3,187,000 | 184,087 | 20,268,037 |
Acquisition in period - acquired with subsidiary | 451,259 | - | - | - | 451,259 |
Other additions in the period | - | - | - | 24,346 | 24,346 |
Disposals in the period | - | - | - | (133) | (133) |
Exchange differences | (18,969) | - | - | (73) | (19,042) |
At 30 June 2015 | 7,949,240 | 9,380,000 | 3,187,000 | 208,227 | 20,724,467 |
Amortisation | £ | £ | £ | £ | £ |
At 1 January 2014 | - | 602,158 | 140,300 | 58,152 | 800,610 |
Charge for the period | - | 311,415 | 67,808 | 25,753 | 404,976 |
Exchange differences | - | - | - | (9) | (9) |
At 30 June 2014 | - | 913,573 | 208,108 | 83,896 | 1,205,577 |
Charge for the period | - | 676,581 | 128,856 | 25,236 | 830,673 |
Discontinued operations | - | (256,833) | (86,250) | (8,017) | (351,100) |
Exchange differences | - | - | - | 19 | 19 |
At 31 December 2014 | - | 1,333,321 | 250,714 | 101,134 | 1,685,169 |
Charge for the period | - | 944,248 | 159,350 | 24,529 | 1,128,127 |
Disposals in the period | - | - | - | (133) | (133) |
Exchange differences | - | - | - | (51) | (51) |
At 30 June 2015 | - | 2,277,569 | 410,064 | 125,479 | 2,813,112 |
Net book value | £ | £ | £ | £ | £ |
At 1 January 2014 | 7,110,054 | 987,842 | 606,700 | 82,870 | 8,787,466 |
At 30 June 2014 | 9,452,847 | 3,366,427 | 1,623,892 | 74,739 | 14,517,905 |
At 31 December 2014 | 7,516,950 | 8,046,679 | 2,936,286 | 82,953 | 18,582,868 |
At 30 June 2015 | 7,949,240 | 7,102,431 | 2,776,936 | 82,748 | 17,911,355 |
As described in note 6, during the six-month period ended 30 June 2015 the Group acquired Newgate Hong Kong. The fair values of identifiable assets and liabilities have been determined provisionally and may be subject to adjustment during the following 12-month period.
No cash generating units ('CGUs') were tested for impairment because there were no impairment indicators at 30 June 2015 for CGUs to which goodwill has been allocated.
13. Earnings/(loss) per share
The loss per share has been calculated using the weighted average number of shares in issue during the relevant financial year. The weighted number of equity shares in issue and the loss after tax attributable to ordinary shareholders, used in these calculations, are as follows:
Six months ended 30 June 2015 | Six months ended 30 June 2014 | Year ended 31 December 2014 | ||||
Number | Number | Number | ||||
Weighted average number of shares (ordinary and dilutive) | 268,482,487 | 201,221,609 | 219,820,830 | |||
£ | Restated, £ | £ | ||||
Loss on continuing activities after tax | (1,415,524) | (69,530) | (1,169,924) | |||
Loss on discontinued activities after tax | - | (53,940) | (2,480,674) | |||
Loss on continuing and discontinued activities after tax | (1,415,524) | (123,470) | (3,650,598) | |||
No share options outstanding at 30 June 2015, 30 June 2014 or 31 December 2014 were dilutive and all such potential ordinary shares are therefore excluded from the weighted average number of ordinary shares for the purposes of calculating diluted earnings per share. Details of share options outstanding are given in note 10.
14. Group Composition
During the six-month period to 30 June 2015, the following entities were added to the group structure reported as at 31 December 2014:
Name | Interest (ordinary share capital) | Country of Incorporation |
Newgate Communications (HK) Limited | 51% owned | China |
Newgate Communications FZ LLC | 76% owned | UAE |
15. Related party transactions
Key management personnel
The nature and amounts of related party transactions are consistent with those reported in the Group's consolidated statutory accounts for the year ended 31 December 2014.
The loans made in note 11 above were also related party transactions.
16. Subsequent events
There have been no material subsequent events to report from 30 June 2015 to the date that these accounts were approved on 22 September 2015.
17. Publication
A copy of this report is available from the Company's website at www.portacomms.com and available in hard copy on application to the Company's offices.