The Mission Group Regulatory News (TMG)

THE MISSION GROUP plc

("MISSION", "the Group")

FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2021

Sustained improvement in revenues and profitability resulting in FY21 results ahead of expectations and 2022 has started well

Reinstatement of the Group's progressive dividend policy

29 March 2022

The MISSION Group plc (AIM: TMG), creator of Work That Counts TM, comprising a network of 17 Agencies delivering real, sustainable growth for its Clients, is pleased to announce its final results for the year ended 31 December 2021.

FINANCIAL HIGHLIGHTS

*Headline results are calculated before acquisition adjustments, start-up costs and exceptional restructuring costs (as set out in Note 3).

BUSINESS HIGHLIGHTS

OUTLOOK

· Trading in 2022 has started well and in line with Board's expectations.

· Group remains at the forefront of opportunities across our markets and since the year end have confirmed the acquisition of Livity, the youth focused creative consultancy.

· Confident that MISSION is well positioned for future growth and will continue to make further progress against its strategy in the year ahead and beyond.

Julian Hanson-Smith, MISSION's Non-Executive Chair, commented: "MISSION's performance in 2021 has demonstrated the resilience, adaptability and strength of the Group. We have delivered a sustained improvement in revenues and profitability, as well as reinstating the Group's progressive dividend policy. The Board is optimistic for 2022, notwithstanding the current macroeconomic uncertainty and the implications of increasing general costs and in particular wage inflation. Trading year to date is in line with our expectations, and we continue to explore opportunities to add additional capabilities in dynamic areas of our markets."

ENQUIRIES

To access a video interview with MISSION's CEO, James Clifton, discussing the Group's FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2021, please follow the link here.

NOTES TO EDITORS

MISSION is a collective of Creative and MarTech Agencies led by entrepreneurs who encourage an independent spirit. Employing 1,000 people across 29 locations and 3 continents, the Group successfully combines its diverse expertise to produce Work That Counts TM for our Clients, whatever their ambitions. Creating real standout, sharing real innovation and delivering real growth for some of the world's biggest brands. 

www.themission.co.uk

CHAIR'S STATEMENT

MISSION's performance in 2021 has demonstrated the resilience, adaptability and strength of the Group. Despite the year's challenges, MISSION has achieved impressive growth, delivering a sustained improvement in revenues and profitability, as well as reinstating the Group's progressive dividend policy.

This would not have been possible without the continued hard-work and determination of MISSION's entire team, embodying the entrepreneurial spirit that defines the Group.

A strong testament to MISSION's people and the quality of their work has been the excellent Client retention demonstrated during these last two years - to have 47% of the Group's revenues generated by Clients of five years or more underpins our ability to deliver results to both Clients and to our Stakeholders.

The Group has made progress against its strategic priorities during the year, with investments in dynamic areas of our markets that have expanded MISSION's creative and customer experience capabilities. We have also begun to strengthen and grow our data and analytics offering which represents a significant growth opportunity.

During the year MISSION underwent a brand refresh, refining our purpose and proposition to better demonstrate how we work with our Clients. MISSION exists to deliver Work That Counts, aiming to become a long-term creative partner that consistently delivers real, sustainable growth for our Clients.

Board changes

There were significant changes to the structure of the Board in 2021.

In April, Giles Lee assumed the role of Group Chief Financial Officer, following Peter Fitzwilliam's retirement.

After ten years as Executive Chairman, David Morgan retired in October but remains a significant and supportive shareholder. I took on the role of Non-Executive Chair, having acted as a Non-Executive Director of MISSION since 2015.

Further retirements from the Board in the year included Robert Day and Barry Cook. On behalf of the Group, I would like to thank David for his outstanding leadership of the Group, and also Peter, Robert and Barry for their significant contributions to the business.

In December we announced a new Non-Executive Director, Dr Eliza Filby. Eliza is a 'Generational Intelligence' expert who brings unique specialist expertise on generational differences and trends, which is highly relevant and valuable to much of the work MISSION does for its Clients.

Dr Filby replaces Non-Executive Director Andrew Nash as Chair of the Company's Remuneration Committee, with Andrew taking on the role of Senior Independent Director and Chair of MISSION's Audit and Risk Committee.

Dividend

The Board has taken confidence from MISSION's sustained strong trading recovery and is keen to return to the pre-pandemic progressive dividend policy that balances continued investment in the Group's capabilities with the needs of Shareholders. Following the reinstatement of an H1 dividend (0.80 pence per share), the Board is proposing a final dividend of 1.60 pence per share. This brings the total dividend for the year to 2.40 pence per share.

Whilst the Board chose not to pay any dividends in 2020 due to the pandemic, the total dividend for 2021 represents a 4% increase on the total dividend declared in 2019.

Outlook

The Board is optimistic for 2022, notwithstanding the current macroeconomic uncertainty due to the ongoing geopolitical situation in Ukraine and the implications of increasing general, and in particular, wage inflation. During the pandemic our leadership teams have re-organized their businesses to build in greater resilience and flexibility. This positions them well to respond to opportunities and to remain relevant as employers of choice and as critical business partners for their Clients.

Trading year to date is in line with our expectations, and we continue to explore opportunities to add additional capabilities in dynamic areas of our markets.

Julian Hanson-Smith

Non-Executive Chair

CHIEF EXECUTIVE'S STATEMENT

Well, that was not the year that we or anyone expected!

Starting with a prolonged third lockdown in the UK in the first half of the year and the rise of the Omicron variant in the latter, we all continued to face unexpected and unprecedented challenges.

That's why I am so delighted to report that MISSION has delivered strong, profitable growth in 2021, even beating the City's, and indeed our own, expectations. A result of which I and the wider Leadership Team are incredibly proud.

This result was made possible by the strategic progress that the Group has made in recent years underpinning our ability to deliver against this evolving trading environment, achieving revenue (operating income) growth of 18% at £72.5m (2020: £61.5m) with headline operating profits of £8.0m (2020: £1.9m) and headline profit margin improving to 11.1% (2020: 3.1%).

Strong Trading Recovery

The Group delivered strong year on year growth across all business segments. The vast majority of our Agencies within the Advertising & Digital segment delivered year on year growth over the course of 2021. We were delighted to see a continued strong performance from our Agencies that operate in sectors which have proven more resilient to the pandemic such as April Six, our specialist technology and mobility Agency which delivered an 14.7% increase in revenue. However, it was also particularly rewarding to see strong performances from our Agencies exposed to sectors which were hardest hit by the pandemic.

ThinkBDW, our specialist property and marketing Agency, delivered a 34.1% increase in revenue following their investment in new skills and tools during 2020. Mongoose Promotions also saw a significant increase in revenues up 40.0% over the course of the year, with the Agency launching a successful rebranding in early 2022 to become SPARK Marketing Services Limited (SPARK). The move aimed at showcasing their expanding service offering and further differentiating them from Mongoose Sports & Entertainment, which also grew its revenues by 20.3% within our Public Relations segment.

Our Events segment recovered well to deliver revenue growth of 69.1% as Clients started to resume event activity with key projects during the period including the UK Pavilion at the Dubai Expo.

Over the course of the year, the Group also benefitted from a full year of the now fully embedded behavioural science practice, Innovation Bubble, acquired in 2020, which now shares many new Clients with other MISSION Agencies.

As Julian has said, Client retention across MISSION remained strong, with 47% of Group revenues generated from Clients who have been with us for five years or longer. This was balanced by a number of exciting new business opportunities with new Client wins throughout the year including the following that have not been previously reported: Reckitt Benckiser, BMW/Mini, Fuji Xerox, Met Office, Moda, Leightons, California Psychics, Island Poke, LRQA and Vegetarian Express.

Finally, the collaborative culture at MISSION continues to underpin strong working relationships across the Group's Agencies, with all of our Agencies increasingly benefiting from the centralised support that the MISSION Advantage offers them. New, agile working practices which have evolved throughout the different phases of the pandemic, continue to support this.

Work That Counts TM 

2021 saw the Group introduce a new descriptor with the goal of better reflecting MISSION's vision to be the preferred creative partner for real business growth. This descriptor; 'Work That Counts', demonstrates that everything we do is designed to make the difference our Clients are looking for and why they consider us to be a long-term creative partner that consistently delivers that real business growth.

Investment in our capabilities

2021 saw us outline and sharpen our focus on three strategic areas of opportunity, through which we intend to expand our capabilities to support our clients.

Firstly, we are focused on further strengthening MISSION's data and analytics capability, driving further enhancements to our established offering and developing the centralised support we can offer all our Agencies to support client and new business growth. One of the first initiatives successfully launched in the second half of the year has been the 'MISSION BRAND BONDING INDEX' (MBBI), a free to use online platform using comprehensive data and a bespoke algorithm to benchmark global brands. The MBBI has been adapted to align with sector prospecting targets across all Group Agencies and is proving to be an important tool to showcase our growing expertise in this field.

The second strategic area of focus is enhancing our creative and customer experience (CX) capability. We have identified an opportunity to leverage the power of our existing CX capabilities, with meaningful creative talent, which allows us to have continued breadth and depth of expertise and services to fit today's customer challenges. We further strengthened our position in this space with the acquisition of Soul, the psychology-led customer engagement Agency whose approach fits perfectly with our Clients' need to understand their customers on a deeper level. Since the financial year end we have also launched krow.x - the creative CX agency.

The third strategic opportunity for the Group is around delivering effective ecommerce solutions. As well as focusing on creating an enhanced data and analytics capability for ecommerce with an external partner, we are continuing to build our capability within MISSION Made to support all Agencies in delivering effective ecommerce websites for Clients.

Making Positive Change

Following the successful launch of our inaugural Environmental, Social and Governance (ESG) manifesto 'Making Positive Change' in 2020, I am delighted to have seen the Group make further progress against our commitments over the course of the year.

One of our key areas of focus throughout 2021 was continuing to support our people in their working environment, despite the continued disruptions to working practices which the pandemic continued to pose.

All of our offices were reopened over the course of the year with every care taken to ensure our workspaces remained safe. Resilience and Wellbeing Workshops were delivered from March to June and made available to everyone across the Group in preparation for their return to office-based work.

Over the course of the year, we have also taken further strides forward as part of our commitment to being a Mindful Employer with over 40 Mental Health First Aiders now trained across the Group.

A key part of our manifesto is focused on introducing and developing talent in the industry. This is especially critical following the 'The Great Resignation' to which our Industry was not immune. That is why we are committing to investing at record levels in recruiting and retaining the best talent in 2022. The Group recognises this will have some short-term impact on its cost base, but it will ultimately underpin its ability to deliver in future years.

Outlook

Trading in 2022 has started well and in line with our expectations, though we note that, whilst we have no operations in the region, the war in Ukraine is heart-breaking and creating a level of economic uncertainty that is difficult to predict.

We remain at the forefront of opportunities across our markets and since the year end have been delighted to confirm the acquisition of Livity, the youth focused creative consultancy.

This latest acquisition is testament to our continued strategy to focus on exploring opportunities that further enhance our compelling infrastructure and builds on our strong track record of acquiring and integrating earning accretive businesses, which enhance our services, geographic reach and sector expertise. With minimal earn-out obligations due, the MISSION's highly cash generative nature means we are well placed to continue to capitalise on further new opportunities that we believe 2022 will undoubtedly bring.

We are confident that MISSION is well positioned for future growth and will continue to make further progress against its strategy in the year ahead and beyond.

James Clifton

Group Chief Executive

CHIEF FINANCIAL OFFICER'S REVIEW

Trading performance

Overview

As has been described in the Chairman's and Chief Executive's statements, the business has recovered very strongly from the depths of the pandemic, and this comes through powerfully in the financial performance that is detailed in the coming paragraphs.

2021 saw revenue growth of 18% and this, alongside an improvement in headline operating margins to 11% (2020: 3%), delivered an £8.8m increase in reported profit before tax (from a loss of £2.1m to a profit of £6.8m) and a £6.3m increase in adjusted, headline profit before tax from £1.2m in 2020 to £7.5m in 2021 (as set out in Note 3).

Billings and revenue

Turnover (billings) was 26% higher than the previous year, at £153.3m (2020: £121.9m), but since billings include pass-through costs (e.g. TV companies' charges for buying airtime), the Board does not consider turnover to be a key performance measure for its Agencies. Instead, the Board views operating income (turnover less third-party costs) as a more meaningful measure of activity levels. Taken as a whole, the Group's operating income (referred to as "revenue") for the year increased by 18% to £72.5m (2020: £61.5m), with growth delivered across all reported business segments.

Of this £11.0m growth in revenue, £10.2m was organic, reflecting the strong recovery of those MISSION Agencies most effected by the pandemic across the business segments, namely those exposed to property (ThinkBDW), events (Bray Leino Events) and cinema-related sales promotions sectors (Mongoose). April Six, our specialist technology and mobility Agency that grew strongly during the pandemic continued to out-perform with Amazon Web Services (AWS) now an important Group Client.

The remaining £0.8m of growth came primarily from the benefit of a full year of Innovation Bubble trading (acquired July 2020) and supplemented at the end of the year by the impact of new MISSION agency Soul (acquired October 2021).

Whilst the majority of our businesses were largely unaffected by the disruption of COVID-19 travel restrictions around the world, this did impact on Pathfindr somewhat with turnover down to £0.7m (2020: £1.5m). Pathfindr had adapted innovatively to the pandemic with good sales of its Safe Distancing Assistant during 2020. Unsurprisingly however, further demand for this product fell away in 2021. Whilst Pathfindr suffered somewhat from the inability to travel and deliver face to face demonstrations of new Asset Tracking products to potential Clients, it has invested confidently in developing these markets with improved products during 2021 and has already been rewarded by trials with large-scale Clients in early 2022. Pathfindr will continue to invest in product development in 2022 to capitalise on the potential demand in the marketplace with the resulting opportunities expected to be realised in 2023 and beyond.

One of the differentiating features of MISSION is the longevity and loyalty of its Client base. We believe this is due to the dynamic and Agency-first culture which ensures Clients feel they are receiving a boutique level of Client service but supported by the resources of a multi-national group.

Profit and margins

Reported operating profit recovered resoundingly this year, from a 2020 loss of £1.3m to a 2021 profit of £7.3m, an increase of £8.6m.

The revenue growth of 18% on 2020 was delivered at an impressive incremental profit margin of 55%. The headline operating expenditure base increased in the year by only 8% (from £59.6m in 2020 to £64.5m in 2021). Our commitment to our Shared Services initiative ensured that support and infrastructure costs were tightly managed whilst our Agency-first model empowered Agency CEOs to increase resources in careful response to improving revenue demand.

In 2020 the Group benefited from £3.0m of furlough receipts. We were pleased to note that in 2021 this dropped to only £0.3m as most employees returned to work to service the increased revenues. This enabled recruitment, onboarding and training costs to be reduced, improving business efficiency through the recovery, and demonstrates the success of the Coronavirus Job Retention Scheme across our business.

The Directors measure and report the Group's performance primarily by reference to headline results, in order to avoid the distortions created by one-off events and non-cash accounting adjustments relating to acquisitions. Headline results are calculated before acquisition adjustments, exceptional items and losses from start-up activities (as set out in Note 3).

Headline operating profit improved immensely on the previous year to £8.0m (2020 £1.9m), an increase of £6.1m. Furthermore, our profit margin for the year (headline operating profit as a percentage of revenue) also increased significantly to 11.1% (2020 3.1%).

Headline Profit before tax

The reported profit before tax was £6.8m (2020: loss of £2.1m), an increase of £8.8m.

Adjustments to reported profits, detailed further in Note 3, totalled £0.7m (2020: £3.2m). The total value of adjustments reduced significantly in 2021. This was primarily due to adjustments relating to acquisition-related items of £0.2m profit compared to £1.9m costs in 2020. Furthermore, and specifically within this, the movement in fair value of contingent consideration for 2021 totalled £0.8m profit compared to £1.3m cost in 2020. This year-on-year correction followed a somewhat over-cautious forecast review on 2020 that crystallised and resulted in a lower consideration payment in 2021.

In addition to this, there were no COVID-19 related adjustments to profit in 2021 (2020: £1.0m).

As has already been described by my colleagues, the Board engaged in a significant restructuring and resizing in 2021. The resultant one-off costs associated with this restructure totalled £0.5m.

The final adjustment relates to losses from start-up activities of £0.4m (2020: £0.3m) as we expanded our Mongoose business into Singapore. After these adjustments, the reported profit before tax was £6.8m (2020: loss of £2.1m).

Taxation

The headline tax rate reduced to more normal levels during 2021, being 22.0% (2020: 42.6%). In 2020 COVID-19 had a significant effect on the Group's headline tax rate with non-deductible tax losses and the temporary bias towards US-based profits pushing the headline tax rate higher.

On a reported basis, in 2020 the impact of COVID-19 described above, coupled with a large non-deductible loss on the remeasurement of contingent consideration, resulted in a tax charge of £0.2m on a reported loss before tax of £2.1m. As with the headline tax rate, the reported tax rate also returned to more normal levels in 2021 at 21.2%, largely back in line with the tax rate in 2019 of 22.5%. The tax rate is expected to be consistently higher than the statutory rate (of 19.0%, unchanged from 2020) since the amortisation of acquisition-related intangibles is not deductible for tax purposes and tax rates on our US operations are substantially higher that the UK corporation tax rate.

Earnings Per Share

After tax, the reported profit for the year was £5.3m (2020: loss of £2.2m) and EPS was 6.0 pence (2020: loss of 2.3 pence). On a diluted basis, EPS was 5.9 pence (2020: loss of 2.3 pence).

After adjustments, Headline EPS was 6.6 pence (2020: 1.0 pence) and, on a diluted basis, was 6.5 pence (2020: 1.0 pence).

Dividend

The Board adopts a progressive dividend policy, aiming to grow dividends each year in line with earnings but always balancing the desire to reward shareholders via dividends with the need to fund the Group's growth ambitions and maintain a strong balance sheet and healthy distributable reserves (2021: £38.7m, 2020: £37.0m).

A dividend of 0.80 pence per share was paid in December 2021. The Board has proposed a resolution for a final dividend of 1.60 pence per share in its AGM Notice, bringing the total for the year to 2.40 pence per share. No dividends were declared in 2020. The total dividend for the year of 2.40 pence per share represents a 4% increase on the total dividend declared in 2019.

Balance sheet

In common with other marketing communications groups the main features of our balance sheet are the goodwill and other intangible assets resulting from acquisitions made over the years and the debt taken on in connection with those acquisitions.

The level of intangible assets relating to acquisitions and internal investments increased by £2.8m in the year following the acquisition of Soul in October. The level of 'total debt' (combined net bank debt and acquisition obligations) increased by £4.0m.

The Board undertakes an annual assessment of the value of all goodwill, explained further in Note 10, and at 31 December 2021 again concluded that no impairment in the carrying value was required.

The Group's acquisition obligations at the end of 2021 were £3.3m (2020: £8.5m), to be satisfied by a mix of shares and cash. All of this is dependent on post-acquisition earn-out profits. £0.7m is expected to fall due for payment in cash within 12 months and a further £0.4m in cash in the subsequent 12 months. The Directors believe that the strength of the Group's balance sheet can comfortably accommodate these obligations alongside the Group's commitments to capital expenditure (expected to run at similar levels to recent years) and dividend payments.

Consolidated Net Current Assets closed at £10.3m (2020 net liabilities of £8.9m).

This was in part the result of the major reduction in Acquisition Obligations noted above and in part because a new three year, £20m Revolving Credit Facility was agreed in April 2021 with our longstanding bankers, NatWest. This arrangement also has an "accordion option" to increase the facility by up to £5m and by one year.

At the end of the year the Group's net bank debt stood at £10.3m (2020: £1.2m). On an adjusted basis (pre IFRS16) the leverage ratio of net bank debt to headline EBITDA was x1.2 at 31 December 2021 (2020: x0.6). The Group's adjusted ratio of total debt, including remaining acquisition obligations, to EBITDA at 31 December 2021 was significantly reduced to x1.5 (2020: x4.3).

Cash flow

The underlying cash performance is strong following the settlement of a number of prior-period obligations.

The closing net bank debt position for 2021 was £10.3m. This represents an increase in net debt of £9.1m on the 2020 year-end net bank debt of £1.2m, which in itself is an historic low for the Group.

Headline profit after tax of £5.8m (2020: £0.7m) converted into £1.7m (2020: £8.9m) of 'free cash flow' (defined as net cash inflow from operating activities less tangible and intangible capital expenditure).

Bank loans increased by £11.5m and this, coupled with the free cash flow provided funding for new acquisitions amounting to £0.7m (2020: £0.2m), the settlement of contingent obligations relating to the profits generated by previous acquisitions totalling £6.7m (2020: 2.0m), dividends of £2.1m (2020: Nil) and a working capital outflow of £4.8m.

With regards to the working capital outflow, as expected, the Group's cash flow during 2021 was impacted by some unwinding of the temporary working capital movements that followed the much-reduced trading experienced in 2020 over and above those deferred payments noted above. The working capital outflow is defined as the aggregate movement in receivables, stock and payables and was reported as £4.8m (2020: £6.4m inflow).

However, if the COVID-related deferrals noted above are adjusted for then the underlying working capital outflow is revealed as £1.7m (2020: £3.3m inflow), with this outflow occurring as trading activity accelerated through the second half year. By both measures it is clear to see that the working capital movements have very much followed the trading recovery.

Going concern

There is now widespread belief around the globe that the peak economic uncertainty of COVID-19 has passed. However, further scenario modelling has been undertaken of the Group's net debt position into the reasonably foreseeable future. This modelling included cautious assumptions about trading performance, investment plans and acquisition consideration obligations. The principal uncertainty in the projections is when and to what extent the Group's revenues will return to pre-pandemic levels. The central scenario anticipates that revenues will remain below 2019 levels until Q3 2022. Against this scenario, the Group was demonstrated to have adequate headroom against its £20m banking facilities which has an "accordion option" to increase the facility by up to £5m. These facilities were also demonstrated to be sufficient to cater for a downside scenario whereby the Group's trading in H1 2022 repeated that seen in H1 2020, the worst in the Group's history.

Accordingly, the Board has concluded that it is appropriate to adopt the going concern basis in preparing the financial statements. 

Key performance indicators

KPIs are designed to monitor the Group's revenue and profit growth, within a safe capital structure. Whilst COVID-19 has interrupted the Group's consistent track record of growth, the Board has reviewed and reconfirmed the Group's KPI targets as being appropriate for a post-pandemic environment.

The targets, along with the outcome for 2021 are as follows:

· Achieve organic revenue growth of at least 5% per year [delivered + 17%];

· Increase headline operating profit margins to 14% [delivered 11%];

· Grow headline profit before tax by 10% year-on-year; and [delivered 539%]

· Maintain the ratio of net bank debt to EBITDA* at or below x1.5 [delivered x1.2] and the ratio of total debt (including both bank debt and deferred acquisition consideration) to EBITDA at or below x2.0 [delivered x1.5].

*EBITDA is headline operating profit before depreciation and amortisation charges.

At the individual Agency level, the Group's financial KPIs comprise revenue and controllable profitability measures, predominantly based on the achievement of the annual budget. More detailed KPIs are applied within individual Agencies. In addition to financial KPIs, the Board periodically monitors the length of Client relationships, the forward visibility of revenue and the retention of key staff.

Outlook

We entered the year expecting 2022 to be another year of growth, albeit at the time of writing the financial markets are still absorbing the shock of the invasion of Ukraine.

The year has started well and prospects for organic growth are good. We also expect to make additional margin improvements in spite of the macro-economic cost pressures impacting our sector and we anticipate reporting upon the substantial progress of Pathfindr. Furthermore, the significant reduction reported in future acquisition consideration obligations will enable this growth to be highly cash generative.

Giles Lee

Group Chief Financial Officer

Consolidated Income Statement

For the year ended 31 December 2021

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2021

Consolidated Balance Sheet

As at 31 December 2021

Consolidated Cash Flow Statement

For the year ended 31 December 2021

Consolidated Statement of Changes in Equity

For the year ended 31 December 2021

Notes to the Consolidated Financial Statements

1. Principal Accounting Policies

Basis of preparation

The results for the year to 31 December 2021 have been extracted from the audited consolidated financial statements, which are expected to be published by 31 March 2022.

The financial information set out above does not constitute the Company's statutory accounts for the years to 31 December 2021 or 2020 but is derived from those accounts. Statutory accounts for the year ended 31 December 2020 were delivered to the Registrar of Companies following the Annual General Meeting on 14 June 2021 and the statutory accounts for 2021 are expected to be published on the Group's website (www.themission.co.uk) shortly, posted to shareholders at least 21 days ahead of the Annual General Meeting ("AGM") on 21 June 2022 and, after approval at the AGM, delivered to the Registrar of Companies. 

The auditors, PKF Francis Clark, have reported on the accounts for the years ended 31 December 2021 and 31 December 2020; their reports in both years were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006 in respect of those accounts.

2. Segmental Information

IFRS 15: Revenue from Contracts with Customers requires the disaggregation of revenue into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The Board has considered how the Group's revenue might be disaggregated in order to meet the requirements of IFRS 15 and has concluded that the activity and geographical segmentation disclosures set out below represent the most appropriate categories of disaggregation. The Board considers that neither differences between types of Clients, sales channels and markets nor differences between contract duration and the timing of transfer of goods or services are sufficiently significant to require further disaggregation.

For management purposes the Group monitored the performance of its separate operating units, each of which carries out a range of activities, as a single business segment. However, since different activities have different revenue characteristics, the Group's turnover and operating income has been disaggregated below to provide additional benefit to readers of these financial statements.

Following the implementation of a Shared Services function from the start of 2018 and the resulting transfer of certain Agency-specific contracts onto centrally-managed arrangements, a significant portion of the total operating costs are now centrally managed and segment information is therefore now only presented down to the operating income level.

Assets and liabilities are not split between activities.

Geographical segmentation

The following table provides an analysis of the Group's operating income by region of activity:

3. Reconciliation of Headline Profit to Reported Profit

The Board believes that headline profits, which eliminate certain amounts from the reported figures, provide a better understanding of the underlying trading of the Group. The adjustments to reported profits generally fall into three categories: acquisition-related items, exceptional restructuring costs and start-up costs.

Board restructuring costs in 2021 comprised leaving packages payable to former directors Robert Day, Peter Fitzwilliam and David Morgan following their resignations. COVID restructuring costs in 2020 related to redundancy and property closure costs in response to the COVID-19 pandemic.

Start-up costs derive from organically started businesses and comprise the trading losses of such entities until the earlier of two years from commencement or when they show evidence of becoming sustainably profitable. Start-up costs in 2021 relate to the launch of Mongoose Sports' new venture in Birmingham and the venture Alive, launched in Asia in 2021. Start-up costs in 2020 related to Story's new venture in Leeds, April Six's new venture in Germany and the launch of Alive in Asia.

4. Acquisition Adjustments

The movement in fair value of contingent consideration relates to a net downward (2020: upward) revision in the estimate payable to vendors of businesses acquired in prior years. Acquisition transaction costs relate to professional fees in connection with acquisitions made or contemplated.

5. Net Finance Costs

6. Profit or Loss Before Taxation

Profit or loss on ordinary activities before taxation is stated after charging / (crediting):

7. Taxation

Factors Affecting the Tax Charge for the Current Year:

The tax assessed for the year is higher (2020: higher) than the standard rate of corporation tax in the UK. The differences are:

8. Dividends

The 2019 final dividend of 1.53 pence per share was proposed in the 2019 annual report and accounts but subsequently deferred due to the priority to preserve cash during the pandemic. Following the much-improved net debt position at 31 December 2020, this dividend was paid in March 2021 and, in accordance with IFRS, recognised in the 2021 accounts.

A final dividend of 1.60 pence per share is to be paid in July 2022 should it be approved by shareholders at the AGM. In accordance with IFRS this final dividend will be recognised in the 2022 accounts.

9. Earnings Per Share

The calculation of the basic and diluted earnings per share is based on the following data, determined in accordance with the provisions of IAS 33: Earnings Per Share.

A reconciliation of the profit after tax on a reported basis and the headline basis is given in Note 3.

10. Intangible Assets

In accordance with the Group's accounting policies, an annual impairment test is applied to the carrying value of goodwill. The review performed assesses whether the carrying value of goodwill is supported by the net present value of projected cash flows derived from the underlying assets for each cash-generating unit ("CGU"), discounted using an appropriate discount rate. It is the Directors' judgement that each distinct Agency represents a CGU. The initial projection period of four years includes the annual budget for each CGU, based on insight into Clients' planned marketing expenditure and targets for net new business growth derived from historical experience, and extrapolations of the budget in subsequent years based on known factors and estimated trends. The key assumptions used by each CGU concern revenue growth and staffing levels and different assumptions are made by different CGUs based on their individual circumstances. Beyond this initial projection period, a generic long term growth rate of 2.0% is assumed for all units based on information published by market analysts. For one CGU the underlying value in use calculations requires performance in year one that is in excess of that achieved for the last 4 years, in part as a result of the market disruption caused by the COVID-19 pandemic. Management is confident that performance will continue to recover through 2022 to the point that no impairment would be required on future review.

The resulting pre-tax cash flow forecasts were discounted using a rate of 8.75%, the average of the Weighted Average Cost of Capital ("WACC") over the 10 years from 2012, when the current methodology of calculating WACC was first adopted (2020: 8.20%, the average WACC over the 9 years from 2012).

The reason for using this average rather than the WACC at 31 December 2021 (the "2021 WACC") was to avoid any distortion that may have been caused by the exceptional circumstances of COVID-19. Over the pre-COVID 8 years from 2012 to 2019, the Group's WACC was consistently within a range of 7.4% to 8.5% and the Directors felt it inappropriate to discount cash flows that stretch into the indefinite future by using a potentially COVID-affected 2021 WACC.

The conclusion from using the above methodology was that no impairment in goodwill was required. No change to this conclusion is reached as a result of the following independent changes in assumptions: nil growth in 2022 and a one year delay in the achievement of 2022 budgets caused by COVID-19; any reduction in short term growth rates beyond 2022; nil long term growth rates; a 1% increase in discount rate. The only change in assumptions that would result in a material impairment in the carrying value of the Group's goodwill is an increase in discount rate of 3.5%, which management do not believe is a reasonably possible change in key assumption.

11. Investments, Associates and Joint Ventures

12. Trade and Other Receivables

An allowance has been made for estimated irrecoverable amounts from the provision of services of £225,000 (2020: £97,000). The estimated irrecoverable amount is arrived at by considering the historic loss rate and adjusting for current expectations, Client base and economic conditions, including the potential impact of COVID-19 which has resulted in an increase in the estimated loss rate in 2021.

Accrued income relates to unbilled work in progress and has substantially the same risk characteristics as the trade receivables for the same types of contracts.

Trade receivables include £7.4m that is past due but not impaired, of which £1.1m is greater than 3 months past due.

Accrued income has increased by £3,628,000 as a result of an increase in the volume of work taking place just prior to the 2021 year end, particularly on the events and sponsorship sides of the business, where the work has been performed prior to year end, but the customer will only be invoiced and pay in 2022.

13. Trade and Other Payables

Trade creditors, deferred income and other creditors and accruals have all increased as a result of the increased level of trading in 2021.

14. Bank Overdrafts, Loans and Net Bank Debt

Bank debt arrangement fees, where they can be amortised over the life of the loan facility, are included in finance costs. The unamortised portion is reported as a reduction in bank loans outstanding.

At 31 December 2021, the Group's committed bank facilities comprised a new revolving credit facility of £20m, expiring on 5 April 2024, with an option to increase the facility by £5m and by one year. Interest on the new facility is based on SONIA (sterling overnight index average) plus a margin of between 1.50% and 2.25% depending on the Group's debt leverage ratio, payable in cash on loan rollover dates.

In addition to its committed facilities, the Group has available an overdraft facility of up to £3.0m with interest payable by reference to National Westminster Bank plc Base Rate plus 2.25%.

At 31 December 2021, there was a cross guarantee structure in place with the Group's bankers by means of a fixed and floating charge over all of the assets of the Group companies in favour of National Westminster Bank plc.

All borrowings are in sterling.

15. Lease Liabilities

Obligations under leases are due as follows:

16. Acquisitions

16.1 Acquisition Obligations

The terms of an acquisition provide that the value of the purchase consideration, which may be payable in cash or shares at a future date, depends on uncertain future events such as the future performance of the acquired company. The Directors estimate that the liability for contingent consideration payments is as follows:

A reconciliation of acquisition obligations during the period is as follows:

16.2 Acquisition of Soul (London) Ltd

On 14 October 2021, the Group acquired the entire issued share capital of Soul (London) Ltd ("Soul"), a full-service customer engagement Agency based in London that works with psychologists to help businesses better understand human nature and human behaviour. The fair value of the consideration given for the acquisition was £2,968,000, comprising initial cash consideration and deferred contingent cash consideration. Costs relating to the acquisition amounted to £72,000 and were expensed.

Maximum contingent consideration of £6,600,000 is dependent on Soul achieving a profit target over the period 1 January 2021 to 31 December 2024. The Group has provided for contingent consideration of £2,305,000 to date.

The fair value of the net identifiable assets acquired was £264,000 resulting in goodwill and previously unrecognised other intangible assets of £2,704,000. Goodwill arises on consolidation and is not tax-deductible. Management carried out a review to assess whether any other intangible assets were acquired as part of the transaction. Management concluded that both a brand name and customer relationships were acquired and attributed a value to each of these by applying commonly accepted valuation methodologies. The goodwill arising on the acquisition is attributable to the anticipated profitability of Soul.

Soul contributed turnover of £370,000, operating income of £370,000 and headline operating profit of £100,000 to the results of the Group in 2021.

16.3 Pro-forma results including acquisitions

The Directors estimate that the turnover, operating income and headline operating profit of the Group would have been approximately £154.4m, £73.6m and £8.3m had the Group consolidated the results of the acquisitions made during the year, from the beginning of the year.

17. Share Capital

Share-based incentives

The Group has the following share-based incentives in issue:

The TMMG Long Term Incentive Plan ("LTIP") was created to incentivise senior employees across the Group. Nil-cost options are awarded at the discretion of, and vest based on criteria established by, the Remuneration Committee. During the year, 486,616 options were exercised at an average share price of 83.6p and at the end of the year 321,859 of the outstanding options are exercisable.

Shares held in an Employee Benefit Trust (see Note 18) will be used to satisfy share options exercised under the Long Term Incentive Plan.

A new Growth Share Scheme was implemented in June 2021. Participants in the scheme subscribed for Ordinary B shares in The Mission Marketing Holdings Limited (the "growth shares") at a nominal value. These growth shares can be exchanged for an equivalent number of Ordinary Shares in MISSION if MISSION's share price equals or exceeds 150p for at least 15 consecutive days during the period ending on the date the Company's financial results for the year ended 31st December 2023 are announced; if not, they will have no value.

18. Own Shares

Shares are held in an Employee Benefit Trust to meet certain requirements of the Long Term Incentive Plan.

19. Post Balance Sheet Events

There have been no material post balance sheet events.