The Mission Group Regulatory News (TMG)

17 Apr 2008 07:01

The Mission Marketing Group PLC17 April 2008 The Mission Marketing Group plc PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2007 Rapid group development combined with strong organic growth delivers market beating performance 17 April 2008 The Mission Marketing Group plc ("TMMG, themission(R)"), the UK marketingcommunications group, today announces its preliminary results for the year ended31 December 2007. The highlights below show the results for the period with comparable results forthe previous year. Proforma numbers assume all the existing Group companies havebeen owned since 1 January 2006. • Operating income up 120% to £33.0m (2006: £15.1m) • Operating profit up 195% to £7.4m (2006: £2.5m) • Operating margin increased from 16.8% to 22.5% • Proforma turnover up 10% to £103.7m (2006: £94.6m) • Proforma operating income up 14% to £42.3m (2006: £37.1m) • Proforma operating profit up 15% to £11.0m (2006: £9.6m) • Proforma profit before tax up 19% to £9.0m (2006: £7.5m) • Diluted EPS up 173% to 13.44 pence (2006: 4.92 pence) • Diluted EPS excluding IFRS interest up 162% to 17.82 pence (2006: 6.79 pence) • Final dividend of 0.74 pence per share proposed, full year up 10% to 1.1 pence (2006:1.0 pence) • Net cash of £8.9m (2006: £5.2m) with strong operating cash flow and cash conversion • Digital revenue trebled (proforma 61%) and made up 14% of full year operating income • New on-line and off-line clients include West Indies Rum and Spirit Producers Association, AEGON, Domino's Pizza, Sharwoods, Grant Thornton, Sugar Puffs and St Austell Tribute Ale • Acquisition strategy actively implemented: four major acquisitions made during the year. Integration benefits coming through as planned • The current year has started well and the Board remains confident of the prospects for the year. Iain Ferguson, CEO of themission(R) said: "Record operating profit growth of 195% has made 2007 another good year for theGroup. themission(R)'s dramatic growth in the last two years has seen it becomeone of the largest networks in the UK and continue to deliver market beatingperformance. The Group's strong proforma growth demonstrates that all of ouragencies are performing well. In addition, network development is enhancing ourservice offer and has attracted significant new clients. The rapid assimilationof our high-quality acquisitions continues to create opportunities to delivernew and improved services to clients and to leverage the collective strength ofthemission(R)'s expanding portfolio of capabilities. "The current year has started well with all of the acquisitions alreadysuccessfully integrated. The benefits are beginning to come through as plannedand significant growth compared with 2007 will be delivered through the fullyear effect of the acquisitions and continued organic growth. While we continueto monitor the volatile economic environment, trading is good and we areconfident that the enlarged Group is well positioned to continue to outperformthe markets in which we operate and that 2008 will be another successful yearfor themission." For further information please contact: Iain Ferguson, Chief Executive 020 7395 7575Tim Alderson, Chief Financial OfficerThe Mission Marketing Group plc Charles Palmer/Nicola Biles 020 7831 3113Financial Dynamics Mark Percy/ Sarah Jacobs 020 7107 8000Seymour Pierce Website: www.themission.co.uk themission(R) is a national marketing communications and advertising group with13 offices across the UK. The Group specialises in providing national andinternational clients with award winning marketing, advertising and businesscommunications. Group members include April-Six, Bray Leino, Big Communications,Fuse Digital, thinkBDW, Story UK and RLA. themission(R) employs over 600 staffnationally and is listed on AIM (TMMG). Chairman's Statement themission(R) has had another good year. The Group has maintained its strongproforma growth as well as acquiring complementary companies that willcontribute to future growth. We have welcomed some 250 new staff across ournetwork of 13 offices. In addition to rapidly growing our existing businesses we have successfullycompleted four major acquisitions reinforcing our already strong position as oneof the UK's leading group of agencies outside central London. These newresources from thinkBDW, April-Six, Story and RLA increase the capabilities ofthe Group to respond to rapidly changing client needs and give us presence indynamic growth sectors. The strength of our business model is reflected in our ability to attract topquality clients and staff as well as to create value for shareholders.Thecontinued success of the Group is a tribute to the effort and enthusiasm of ourmanagement teams and our people across the country and the commitment of eachagency in themission(R) to be a trusted, reliable, effective partner to thecompanies we serve - locally and nationally and around the world. themission(R)'s strategy to build a profitable, dynamic national communicationsGroup is progressing well and as planned. In these times of rapid change, we are well placed for the year ahead and lookforward to continued success in the coming years. 2008 has started well and weremain confident of the prospects for the full year. Rt Hon Francis Maude MPChairman Chief Executive's Review Overview and strategy themission(R) has maintained its strong momentum and delivered growthsubstantially in excess of the UK market. Through a combination of proformagrowth and selective acquisitions Group turnover has grown dramatically - froman annualised £5.1m at IPO in April 2006 through to an annualised £103.7m by theend of 2007. This has allowed us to report a strong set of results with proformaprofit before tax growth of 19% at £9.0m on turnover of £103.7m up 10%. A series of strategic acquisitions have allowed us to rapidly develop the Groupin terms of scale, scope and reach. Today, in just the second year since itsadmission to the AIM market, themission(R) consists of seven leading agencies,in thirteen locations, employing over 600 talented staff servicing scores ofnational and international blue chip clients. The strategy of bringing together established leading agencies, in lower-costlocations, with expertise in dynamic sectors, to deliver incremental services toexisting and new clients continues to bear fruit. The integration model we havein place has also allowed for a rapid assimilation of the reporting and otherstandards required by a public company. The integration of newly acquiredagencies is going well. Our acquisitions in March 2007 of thinkBDW and April-Six - specialists inproperty marketing and the business-to-business IT sector respectively, werefollowed in September and December by the addition of two new agencies. Story,based in Edinburgh is a leader in direct and data based communications withclients in financial services, luxury brands and privatised utilities. Storyimmediately leveraged its membership of the Group, launching a sales and clientservice capability located in themission(R) offices in London. RLA, based byBournemouth International Airport and with offices in Belfast and a co-locationoffice in Edinburgh with Story, is a leader in executing national communicationson a localised basis, delivering creative services and media buying for clientsin the automotive and retail sectors. RLA gives the Group both new capabilitiesand a presence in Ireland. The media world is shifting to become an increasingly digital and on-lineenvironment and we are, in every agency, developing our already significantcapabilities in pursuit of a rapidly growing on-line advertising, communicationsand e-commerce market. Our strategic intent is to ensure that we are completely'bi-lingual' in all on-line and off-line operations; in all planning, in allcreative thinking and in the means to execute all programmes for our clients.Our aim is to be their trusted guide through the rapidly emerging and highlycompetitive, multimedia world in which they now do business. We continue to enjoy success in attracting top-quality talent through ourcombination of strong agency brands and the collective appeal of themission(R)as one of the UK's most dynamic new groups. Key senior hires in finance, inplanning, in account service, in creative and in new business are now in placeacross the Group and are an important addition to our human asset base and partof our long-term succession plan. The current year is expected by commentators to be turbulent following thecredit crisis and the various knock-on effects in some industry sectors. Generalvisibility in the economy has decreased somewhat but we are encouraged by themost recent Bellwether report which anticipates, albeit at slower rates,continued growth in some elements of marketing activity - notably digital andon-line. For themission(R) the year has started well, the momentum from lastyear has not reduced and we remain focussed on highlighting and delivering thebenefits of our lower cost base, multiple service offering and on-line expertiseto help clients move forward. We have a firm platform from which to pursue our strategy of combining furtherproforma growth with selective earnings enhancing acquisitions. Results The Group consists of The Mission Marketing Group Plc, Big CommunicationLimited ("Big"), Fuse Digital Limited ("Fuse"), Bray Leino Limited ("Bray Leino"), The Driver is Limited ("TDI"), Bastin Day Westley Limited ("thinkBDW"), April-Six Limited ("April-Six"), PCM Limited ("PCM"), Story Limited ("Story") and RLA Group Limited ("RLA"). The results contain TDI from 6 February, thinkBDW from 9 March, April-Six from21 March, PCM from 6 August, Story from 14 September and no results are includedfor RLA which effectively completed at the year end. Turnover for the period was £79.5m (2006: £37.5m) up 112%, operating income was£33.0m (2006: £15.1m) up 120%, operating profit was £7.4m (2006: £2.5m) up 195%and diluted EPS was 13.44 pence (2006: 4.92 pence) up 173%. Headline PBT(excluding non-cash IFRS interest charges) was £6.4m (2006: £2.2m) up 190%. To provide meaningful information and to build on the proforma informationprovided in the 2006 Annual Report, we have provided proforma financials for thefull twelve months to 31 December 2007 and comparatives for the full year of2006, as if the Group had existed in its current form throughout those periods. In 2007 themission(R) delivered proforma turnover growth of 10% from £94.6m to£103.7m and resulting in operating profit growth of 15% from £9.6m to £11.0m ina market which is estimated to have grown by 6.4%. Net interest payable was£936,000 and the proforma profit before taxation and IFRS charges was up 16% to£10.1m. As a result the post-tax profit, earnings and EPS all grew by 20%(identical tax and number of shares assumptions for the periods). Dividend The Group has delivered as planned and, reflecting our confidence in the yearahead and our balanced dividend policy, the Board is recommending a finaldividend payment of 0.74p per share be paid to all shareholders on the registerat the close of business on 23 May 2008, subject to shareholder approval. Thisrepresents a 1.1 pence dividend for the year, up 10% from last year. Theex-dividend date is 21May 2008 and the payment date is 20 June 2008. Review of Operations themission(R) has again significantly outperformed forecasts for growth in theUK marketing services sector - expected at 6.4% (Carat ad-spend forecast) -compared with our own proforma growth in operating income of 14%. The Group successfully completed four major acquisitions during the period -thinkBDW and April-Six in March, Story UK in September and RLA in December, justprior to the year end. All acquisitions have been successfully assimilatedalongside the Group's other agencies and the benefits of being part of anenlarged group are coming through as planned. These acquisitions enable us to continue rapidly to extend our service offeringand geographic reach as well as strengthening our position in our chosen, highgrowth sectors. Since becoming part of themission(R) Story have gained newbusiness as a direct result of adding a London presence offering specialistmedia planning and buying. thinkBDW have opened new service centres in ourexisting locations in Bristol and the Midlands and have up-weighted theiron-line capacity. Additionally, a team of creative and account service stafffrom Rhythmm in Bristol have joined Bray Leino in Bristol, further enhancingBray Leino's integrated communications capabilities. Our committed approach to integration, our focus on creating and developing newbusiness lines across multiple locations and our wide geographic footprint allcombine to increase the potential benefits from these and from futureacquisitions. Business segments: The Group's business mix is based on, and reported under, five strategiccapabilities - Branding and Advertising, Digital and On-line, Learning andEvents, Media, and Public Relations. These areas operate on a standalone orcombined basis according to specific client needs and the continued ability ofour teams to quickly adjust the 'mixing desk' in pursuit of maximisedperformance and return has been a major strength in our service offering overthe last twelve months. Our 'bi-lingual' approach across all media platforms ineach strategic area ensures that work is executed in the most effective andappropriate way. Branding and Advertising is our largest area of activity representing some 62%of operating income. Within this segment, themission(R) agencies deliverbusiness and marketing consultancy, design and packaging, and creative andproduction services. This is all in addition to TV, radio, poster, and nationaland regional press campaigns - usually spanning both traditional off-line mediaand on-line techniques. Performance here has been extremely encouraging withwins from West Indies Rum and Spirits Producer's Association, Sugar Puffs,Teleflorist, Nortel Networks, Amdocs and, at the turn of the year, Domino'sPizza. These are in addition to on-going work for sector-leading clients such asVolkswagen, Goodyear Dunlop, Kingfisher PLC, WKD, Symantec, Wrigleys, Dermal,Bellway and Spicer Haart. One of the continuing strengths of all agencies in thethemission(R) is the fundamental media neutrality of our approach which puts thebusiness performance of our clients at the top of our list of deliverables.This attitude has helped drive operating income growth of 131% (proforma up10%). Digital and On-line continues to deliver dramatic growth, trebling operatingincome (proforma up 61%) and now makes up 14% of the Group's total, the secondlargest segment. This is our fastest growing area and a number of developmentinitiatives have been completed in the period. We identified, and added to ourbusiness, a full team of on-line experts in the south west and made furthersuccessful headway, through our involvement at Bray Leino with i-blink, into thedesign and provision of digital in store content for innovative retailers suchas Superdrug. The year also saw continued rapid development in our ComputerGenerated Images (CGI) capabilities and this, along with rapid expansion oftouch screen technology at thinkBDW, is creating new, highly effective mediaplatforms for our clients in the property sector. We continue to win major newassignments including a world first, an on-line viral campaign for LVMH maltArdbeg, voiced entirely in Gaelic, the creation of an on-line store for CharnosLingerie and on-line presence for ecological cleaning brand Ecover. Learning and Events are specialist capabilities where the Group's Bray Leinoagency has built significant capabilities to service clients in the Luxury Goodsand Oil and Gas sectors -both major movers in the international events business- and the Public Sector, a major investor in learning and people development.Events had a strong performance up 36% from the previous year, working withmajor global offshore industry clients such as the Wood Group. In Learning,despite a slowdown in QinetiQ spending and the non take-up of a large contractedproject by a Government agency, the year ended strongly. Building on our commitment to create a world class Learning and TrainingBusiness, Bray Leino has joined forces with BroadSkill, one of the UK's leadingproviders of business process and IT training. David Harman, previously atLeadership Development Ltd, has been appointed CEO of the enlarged unit,reporting to the Bray Leino board, which will be strengthened by the addition ofHenry Jodrell from BroadSkill. The enlarged business will be known as Bray LeinoBroadSkill and will work with a range of blue chip companies and organisationshelping them to develop their people and business processes, includingleadership and executive coaching, change management and IT skills. Media has again delivered strong growth. Significantly adding to our alreadybroad media client base at Story, RLA and Bray Leino our agencies have securedwins with Explore Living and top ten insurance firm Hastings in a multi millionpound deal. We have also worked alongside HBOS, creating an industry firstallowing the automatic central provision of artwork to the regional press. Wehave deep expertise in all media platforms. As the largest buyer of media onGMTV we are rapidly building a strong reputation for smart, responsive,cost-effective media planning and buying. Developing existing and new clientrelationships and enhancing our growing reputation in the automotive andproperty sectors has driven growth. Media mix represents 8% of operating incomeand has grown by 164% (proforma up 18%). Public Relations had another strong year - benefiting in particular from itsestablished and fast-growing national reputation for leadership on ethical,environmental and re-cycling issues. The business spans both private and publicsector clients and posted a creditable 55% growth (proforma up 24%) against thecomparable period in 2006. In a busy year, we have opened a new PR office inLeicester, expanded our presence in London and initiated a new PR offerspecifically for the property and real estate sector. Meantime, key clientscontinued to invest behind success on brands such as Ecover, G R Lanes, HSA andBibby Financial Services, while new business wins included the EthicalSuperstore and a first assignment for Innocent. New Business The Group enjoyed a record year for new business with wins including Bradfordand Bingley, Sugar Puffs, Sharwoods and Teleflorist. In addition we continue todevelop our capacity and practices to deliver incremental services to clients.This collaborative intent is one of the key criteria employed in selectingacquisition targets and our specialist teams in various agencies now worktogether on a daily basis. This has allowed delivery of new services to clientsin new places and has helped win major new cross agency business assignmentssuch as the West Indies Rum and Spirits Producer's Association - a Europeanassignment led by Bray Leino. Awards and Recognition 2007 was another outstanding year for the Group with agencies receiving over 65awards. Big Communications and Bray Leino recorded their biggest ever haul ofawards at this year's Cream Awards which recognise excellence in the creativeindustry in the English and Welsh regions. Bray Leino collected 10 awards -three gold, three silver and four bronze; Big Communications were awarded 11awards - six silver and five bronze. The awards covered a range of advertisingmediums, ranging from TV to outdoor to press. The Cream Awards followed on from themission(R) agency successes at the regionalFresh and Rose Awards which saw Big Communications, Fuse Digital, and Bray Leinoawarded 28 awards for work for clients including WKD, Foods from Spain, Sustransand Grant Thornton. In October, Bray Leino received the title of 'Best Green Press Advertisementunder £100K' for the Sustrans 'Tax Disc' campaign, at The Green Awards. Launchedin 2006, The Green Awards recognise outstanding creative work that communicatesthe importance of CSR, sustainable development and ethical best practice in anysector and across any marketing discipline for brands promoting everything fromfair trade and renewable energy to resource efficiency and waste awareness,demonstrating our strong presence in the ethical and green issues arena. BrayLeino also won the PR Week award for 'Cheddarvision' a cheesy tale that featuredon National TV news and even had its own web fan club. Newly acquired April-Six was named as the largest specialist B2B agency in theUK in Marketing Magazine's annual league tables recognising April-Six'sdevelopment since its foundation only seven years ago. The league tables alsohighlighted that April-Six is both the largest and the fastest growing agencyspecialising in the technology sector, identified in the survey as the largestsector in the B2B market, reinforcing our belief that IT represents a dynamicgrowth sector. Story was awarded a total of 16 international awards in 2007 including twoMarketing Society Excellence Awards for Brand Development and CommunicationExcellence. Other awards included several for work on Ardbeg 1965 - Dadi On-lineAward for Best Commercial Project and Best Viral Campaign and two gold, onesilver and one bronze at the DMA Awards. Dave Mullen, co founder and creativedirector, was ranked sixth in Campaign's Top 10 DM Creative Directors. In 2008 Big Communications, Bray Leino and Story gained positions in the top 25of The Drum magazine's first fully integrated table of the Top 100 marketingservices companies outside of London highlighting our commitment to drivinggrowth through new client development and our ability to derive benefits frombeing an enlarged network of agencies with a wide geographic footprint. Corporate Governance The Board recognise the importance of sound corporate governance and will,insofar as practicable given the Company's size; comply with the main provisionsof the Combined Code: Principles of Corporate Governance and Code of BestPractice. Current Trading and Outlook The current year has started well. Last year's acquisitions have now beensuccessfully integrated and the operational benefits are beginning to comethrough as planned with more clients being offered more services in morelocations. New business has been good during the first quarter with wins such asHastings and Domino's. While we continue to monitor the macro-economicenvironment, we are confident that the enlarged group is well positioned tocontinue to outperform the markets in which we operate and that 2008 will beanother successful year for themission. Iain FergusonChief Executive Chief Financial Officer's Review Key Performance Indicators The Group manages its internal operational performance by monitoring various keyperformance indicators (''KPIs''). The KPIs are tailored to the level at whichthey are used and their purpose. At the Group level the KPIs are EPS growth,gearing, liquidity, amount of EBIT acquired and especially proforma growth. International Financial Reporting Standards (''IFRS'') In line with all companies listed on European Stock Exchanges, The Group resultshave been prepared under International Financial Reporting Standards (''IFRS'')for the 2007 financial year. The comparative results for 2006 have been restatedto comply with IFRS. The 3 principal changes that have resulted from the restatement under IFRS are: 1. The costs of discounting deferred consideration provisions, included in the IFRS interest charges. This amounted to £826,000 in 2007 (2006: £284,000).2. The cost of bank arrangement fees, included in the IFRS interest charge. This amounted to £320,000 in 2007 (2006: £120,000).3. Decrease in outstanding acquisition consideration liabilities as a result of the adjustment to the deferred consideration component of the cost of acquisition to present value of £2,506,000 (2006: £799,000). Banking Arrangements At the start of the year the Group had a £23.0m revolving credit facility (RCF)with the Royal Bank of Scotland and a £2.0m overdraft facility of which only£8.0m of the RCF had been used. As progressive drawdown on the RCF for thethinkBDW, April-Six and Story acquisitions caused this RBS revolving creditfacility to approach its limit, a further £25.0m facility was arranged with HSBCand the two were combined under a club arrangement. This was used for theacquisition of RLA which increased the total drawdown to £25.7m (2006: £8.0m),and the amount of Bank debt drawn down at 31 December 2007 was £25.4m. Thisleaves committed headroom of £0.3m and an uncommitted facility of £21.0m for newacquisitions. The overdraft facility of £2.0m continues, but has not been used.This is deemed adequate for the Group's growth for the near term. There is across guarantee structure in place with the Group's bankers by means of a fixedand floating charge over all of the assets of the Group companies in favour ofthe Royal Bank of Scotland and HSBC Bank plc. Liquidity In addition to the long term debt facility above, the Group maintains asignificant cash balance for working capital, acquisitions and other growthopportunities. At 31 December 2007 this amounted to £9,561,000, however some ofthis is held in escrow against short term loan notes, so the underlying net cashbalance was £8,901,000 (2006: £5,131,000). The operating cash flow of the Group together with the Group cash and debtfacilities are deemed adequate to meet all current and future obligations andalso to meet the ongoing growth strategy. Treasury Policy The Group's policy is not to use any financial instruments for speculating butto use hedging of interest rates and currencies appropriate to the level of debtand trade respectively. Approximately half of the Group's debt is hedged forthree years under a cap or cap and collar arrangement which limits the maximuminterest rate that can be paid. The Group does not have a material amount of its turnover in foreign currenciesand natural hedges are used where possible, matching revenues and costs in thesame currency. Where this is not possible appropriate currency hedging is used. The Group operates a virtual cash pooling arrangement where the total balancecan be deposited to maximise the interest rate receivable. Part of this balanceis offset against the revolving credit facility to reduce overall interest costsfurther. Balance Sheet, Net Debt and Gearing The Group has a policy of issuing equity to the ongoing management ofacquisitions (but not exiting vendors) of up to 50% in order to align theinterests of all Group executives. There is also a policy to maintain growthwithin prudent limits. During the year, shares were issued as part of thethinkBDW, April-Six, Story and RLA acquisitions. In addition, shares were issuedthrough a private placing raising £5m. Provisions were also raised relating tothe acquisitions of April-Six, thinkBDW, Story and RLA amounting to £6,667,000payable in early 2010 and £8,468,000 payable in 2011, in cash and up to 50%shares at the Group's option. The Bray Leino initial consideration loan noteswere fully paid off in May 2007 and the total outstanding acquisitionliabilities are detailed in note 8. Equity attributable to shareholders of the Group was £44.7m at 31 December 2007(2006: £25.9m) and the number of shares increased to 33.1m (2006: 21.6m). Net debt, being the Bank debt less the underlying net cash balance amounted to£16.5m (2006: £2.9m) Gearing, as measured by net debt over equity, amounted to 37% at 31 December2007 (2006: 11%). The Mission Marketing Group maintains a policy of restricting net debt andgearing to conservative and manageable levels in order to preserve its financialstability. Taxation The effective tax rate, after adding back the notional IFRS interest chargeswhich are not taxable, for 2007 was 31% (2006: 33.8%) The tax charge of£1,766,000 benefited from reductions from the prior period. Cash Flows The Group received cash by increasing its debt from £8.0m to £25.4m and byplacing £5.0m of new equity. In addition operational cash flow was strong. TheGroup acquired four major companies during the period and fulfilled its debtrepayment schedule, and paid off some £6.0m of loan notes. The net cash afterthose movements increased to £8.9m. Based on current projections the Group canpay off all its debt obligations and the cash element of the deferredconsideration payments as well as part of the payments currently assumed to bepayable in shares. Tim AldersonChief Financial OfficerConsolidated Income StatementFor the year ended 31 December 2007 Year ended 31 Period ended 31 December December 2007 2006 Restated* Note £'000 £'000 TURNOVER 2 79,540 37,468 Cost of sales (46,493) (22,417) OPERATING INCOME 2 33,047 15,051 Operating expenses (25,614) (12,528) OPERATING PROFIT 2 7,433 2,523 Share of results of equity accounted associate (14) -Investment income (bank interest) 400 281Finance costs 4 (1,390) (590)IFRS interest charges 4 (1,146) (404) PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 3 5,283 1,810Taxation (1,766) (749) PROFIT FOR THE PERIOD 3,517 1,061 Basic earnings per share (pence) 6 13.44 5.16Diluted earnings per share (pence) 6 13.44 4.92 *Restated under IFRS (see note 11) Consolidated Balance SheetAs at 31 December 2007 As at 31 As at 31 December December 2006 2007 Restated* Note £'000 £'000FIXED ASSETSIntangible assets 7 87,182 37,292Investments in associates 10 -Property, plant and equipment 2,534 1,443 89,726 38,735CURRENT ASSETSWork in progress 822 237Trade and other receivables 16,624 9,642Cash and short term deposits 9,561 11,082 27,007 20,961CURRENT LIABILITIESTrade and other payables (12,075) (6,928)Accruals (2,943) (1,347)Corporation tax payable (1,640) (590)Social security and other taxes (1,985) (1,223)Bank loans (3,062) (700)Acquisition loan notes and shares 8.1 (3,894) (7,151)Acquisition contingent payments 8.1 (122) - (25,721) (17,939)NET CURRENT ASSETS 1,286 3,022 TOTAL ASSETS LESS CURRENT LIABILITIES 91,012 41,757NON CURRENT LIABILITIESBank loans (22,383) (7,300)Obligations under finance leases (17) (28)Acquisition loan notes and shares 8.1 (1,637) (1,923)Acquisition contingent payments 8.1 (22,229) (6,599)Deferred tax liabilities (81) (45)NET ASSETS 44,665 25,862 CAPITAL AND RESERVESCalled up share capital 9 3,308 2,156Share premium account 36,643 22,517Staff remuneration reserve 445 128Retained earnings 4,269 1,061TOTAL EQUITY 44,665 25,862 *Restated under IFRS (see note 11) Consolidated Cash Flow Statementfor the year ended 31 December 2007 Year to 31 Period to 31 December 2007 December 2006 Note £'000 £'000OPERATING CASH FLOW 10 8,160 2,207Net finance costs (1,310) (309)Tax paid (1,718) (782)Net cash inflow from operating activities 5,132 1,116INVESTING ACTIVITIESProceeds on disposal of property, plant and equipment 22 -Purchase of property, plant and equipment (753) (368)Acquisition of subsidiaries (26,997) (2,436)Net Cash acquired with subsidiaries 6,605 3,464Acquisition of associate companies (24) -Net cash (outflow)/inflow from investing activities (21,147) 660FINANCING ACTIVITIESDividends paid (309) -Repayments of amounts borrowed (7,492) (12,331)Movement in HP creditor and finance leases - 28Receipts from long term loans 19,001 8,000Repayment of long term loans (1,556) -Proceeds on issue of ordinary share capital 5,000 14,800Financing and share issue costs (150) (1,191)Net cash inflow from financing activities 14,494 9,306(Decrease)/increase in cash and cash equivalents (1,521) 11,082Cash and cash equivalents at beginning of year 11,082 -Cash and cash equivalents at end of year 9,561 11,082 Consolidated Statement of Changes in EquityYear ended 31 December 2007 Staff Share Share Retained remuneration capital premium earnings reserve Total £'000 £'000 £'000 £'000 £'000 Changes in equity At 7 March 2006 - - - - -(incorporation)New shares issued 2,156 22,517 - - 24,673Credit for share option - - - 128 128schemeProfit for the period - - 1,061 - 1,061Dividends - - - - -At 31 December 2006 2,156 22,517 1,061 128 25,862 New shares issued 1,152 14,126 - - 15,278Credit for share option - - - 317 317schemeProfit for the period - - 3,517 - 3,517Dividends - - (309) - (309)At 31 December 2007 3,308 36,643 4,269 445 44,665 Notes to the Consolidated Financial Statements 1. Accounting policies Basis of preparation The annual financial statements have been prepared in accordance withInternational Financial Reporting Standards (IFRS) for the first time. Thedisclosures required by IFRS 1 concerning the transition from UK GAAP to IFRSare given in notes 11, 12 and 13. The Financial statements have also beenprepared in accordance with IFRS adopted for use in the European Union andtherefore comply with Article 4 of the EU IAS Regulation. The financial statements have been prepared on the historical cost basis. Basis of consolidation The Group's financial statements consolidate the financial statements of theCompany and entities controlled by the Company (its subsidiaries) made up to 31December each year. Control is achieved where the company has the power togovern the financial and operating polices of an investee entity so as to obtainbenefits from its activities. On acquisition, the assets and liabilities and contingent liabilities of asubsidiary are measured at their fair values at the date of acquisition.Goodwill represents the excess of acquisition cost over the fair value of theGroup's share of the identifiable net assets of the acquired subsidiary at thedate of acquisition. Any deficiency of the cost of acquisition below the fairvalue of the identifiable net assets acquired (i.e. discount on acquisition) iscredited to the income statement in the period of acquisition. The results of subsidiaries acquired or disposed of during the year are includedin the consolidated income statement from the effective date of acquisition orup to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements ofsubsidiaries to bring accounting policies used into line with those used by theGroup. All intra-group transactions, balances, income and expenses are eliminated onconsolidation. Revenue and revenue recognition Turnover is in respect of the provision for services including fees,commissions, rechargeable expenses and sales of materials performed subject tospecific contract. Where recorded turnover exceeds amounts invoiced to clients,the excess is classified as accrued income. Income is taken on fee income in the period to which it relates. Project incomeis recognised in the period in which the project is worked on. For projects,which fall over the accounting year end, income is recognised to reflect thepartial performance of the contractual obligations in accordance with IAS 18Revenue. Income is recognised on the following basis: • Retainer fees are apportioned over the time period to which they relate. • Project income is recognised by apportioning the fees billed or billable to the time period for which those fees were earned by relationship to the percentage of completeness of the project to which they relate. • Media commission is recognised, when the advertising has been satisfactorily aired or placed. • Unbilled costs relating to contracts for services are included at rechargeable value in accrued income. • Unbilled costs relating to contracts for products are carried forward at the lower of cost and net realisable value with no profit recognition. • Financial liabilities are released to income when the liability is extinguished. Share-based payment transactions In accordance with IFRS 3 certain payments made to employees in respect ofearn-out arrangements are required to be treated as remuneration within theincome statement. These amounts are required to be charged to the incomestatement. The Group has applied the requirements of IFRS 2 Share-based Payments. IFRS 2has been applied to all grants of equity instruments. Equity-settled share-based payments, such as share options, are measured at fairvalue at the date of grant. The fair value determined at the grant date of theequity-settled share payments is expensed on a straight-line basis over thevesting period, based on the Group's estimate of the number of shares that willeventually vest. Fair value is measured by use of a Black Scholes model on the grounds that thereare no market related vesting conditions. The expected life used in the modelhas been adjusted, based on the management's best estimate, for the effects ofnon-transferability, exercise restrictions and behavioural considerations.Market price on any given day is obtained from external publicly availablesources. Goodwill Goodwill arising from the purchase of subsidiary undertakings, represents theexcess of the cost of acquisition over the Group's interest in the fair value ofthe identifiable asset, liabilities and contingent liabilities of the subsidiaryacquired, and is capitalised in accordance with the requirements of IFRS 3.Future anticipated payments to vendors in respect of earn-outs are based on theDirectors' best estimates of these obligations. Earn-outs are dependent on thefuture performance of the relevant business and are reviewed annually. Thedeferred consideration is discounted to its fair value in accordance with IFRS 3and IAS 39. The difference between the fair value of these liabilities and theactual amounts payable are charged to the income statement as notional financecosts over the life of the associated liability. Goodwill is not amortised, but is reviewed annually for impairment. Goodwillimpairment is assessed by comparing the carrying value of goodwill to the netpresent value of future cash flows derived from the underlying assetsconsidering forecast cash flows over an initial projection period of up to threeyears for each cash-generating unit. After this period, growth rates equivalentto nominal GDP are generally assumed. In accordance with IFRS 3 the carryingvalue of goodwill will continue to be reviewed for impairment on the basisstipulated and adjusted should this be required. Impairment is recognised in theincome statement and is not subsequently reversed. The individual circumstancesof each future acquisition will be assessed to determine the appropriatetreatment of any related goodwill. Work in progress Work in progress is stated at the lower of cost and net realisable value andincludes the costs of direct materials and purchases, and the costs of directlabour. Net realisable value is based on estimated invoice value less furthercosts expected to be incurred to completion. Deferred consideration The terms of an acquisition may provide that the value of the purchasesconsideration, which may be payable in cash, shares or other security at afuture date, depends on uncertain future events, such as the future performanceof the acquired company. Where it is not possible to estimate the amountspayable with any degree of certainty, the amounts recognised in the financialstatements represent a reasonable estimate at the balance sheet date of theamounts expected to be paid. The deferred consideration is discounted to a fairvalue. The difference between the fair value of the liabilities and the actualamounts payable are charged to the income statement as notional finance costs(calculated at annual rates of between 4.5% and 5.5% over the life of theassociated liability. The rate used is the risk free rate applicable at the timeof acquisition of the relevant entity. The Directors consider these rates to bereasonable in light of similar rates available on debt instruments. Financial instruments Financial assets and financial liabilities are recognised on the Group's balancesheet when the Group becomes a party to the contractual provisions of theinstrument. Issue costs are offset against the proceeds of such instruments. Financial liabilities and equity Financial liabilities and equity instruments are classified according to thesubstance of the contractual arrangements entered into. An equity instrument isany contract that evidences a residual interest in the assets of the Group afterdeducting all of its liabilities. The Group has only one class of share inexistence. Finance costs Finance costs, which include interest, bank charges and the unwinding of thediscount on deferred consideration, are recognised in the income statement inthe year in which they are incurred. Accounting estimates and judgements The Group makes estimates and judgements concerning the future and the resultingestimates may, by definition, vary from the actual results. The Directorsconsidered the critical accounting estimates and judgements used in thefinancial statements and concluded that the main areas of judgement are: • Revenue recognition policies in respect of contracts which straddle the year end;• Contingent deferred payments in respect of acquisitions;• Recognition and quantification of share based payments; and• Valuation of intangible assets. These estimates are based on historical experience and various other assumptionsthat management and the Directors believe are reasonable under the circumstancesand are discussed, to the extent necessary, in more detail in their respectivenotes. 2. Segmental Information Business segmentation For management purposes the Group had seven operating subsidiaries during theperiod, Bray Leino Limited, Big Communications Limited, Fuse Digital Limited,Bastin Day Westley Limited, April-Six Limited, Story UK Limited and RLA GroupLimited. These have been divided into five segments which form the basis of theGroup's primary segmentation namely; Branding and Advertising, Media, Digital,Events and Learning, and Public Relations. Events Branding & Public & Advertising Media Digital Learning Relations GroupYear to 31 December 2007 £'000 £'000 £'000 £'000 £'000 £'000Turnover 31,898 29,306 6,526 9,733 2,077 79,540Operating income 20,376 2,773 4,583 3,699 1,616 33,047Segmental operating profit 6,167 1,219 1,214 578 82 9,260Unallocated corporate expenses (1,827)Operating profit 7,433Share of results of equity (14)accounted associateInvestment income 400Finance costs (1,390)IFRS interest charges (1,146)Profit on ordinary activities 5,283before taxationTaxation (1,766)Profit for year 3,517 Other InformationCapital expenditure 523 19 98 131 47 818Unallocated capital expenditure 21Total capital expenditure 839 Depreciation and amortisation 265 18 62 121 29 495Unallocated depreciation 21Total depreciation 516 Balance SheetAssetsSegment assets 23,345 4,058 3,213 1,334 189 32,139Unallocated corporate assets 84,594Consolidated total assets 116,733LiabilitiesSegment Liabilities 7,105 2,419 1,117 444 63 11,148Unallocated corporate liabilities 60,920Consolidated total liabilities 72,068 Consolidated net assets 16,240 1,639 2,096 890 126 44,665 Unallocated corporate expenses include corporate administration expensesnecessary for a quoted company. It is considered impractical to split the debtinterest and notional IFRS charges into segments. The split of assets and liabilities has been estimated, but is not consideredmeaningful as the businesses are integrated. Unallocated corporate assets andliabilities include unallocated IFRS assets and liabilities, corporate assetsand liabilities, group cash reserves, drawn debt liabilities and payments due tovendors. Events Branding & Public & Advertising Media Digital Learning Relations GroupPeriod to 31 December 2006 £'000 £'000 £'000 £'000 £'000 £'000Turnover 11,548 15,026 2,550 7,042 1,302 37,468Operating income 8,807 1,052 1,480 2,670 1,042 15,051Segmental operating profit 1,365 1,102 509 456 94 3,526Unallocated corporate expenses (1.003)Operating profit 2,523Investment income 281Finance costs (590)IFRS interest charges (404)Profit on ordinary activities 1,810before taxationTaxation (749)Profit for period 1,061 Other InformationCapital expenditure 143 4 11 114 13 285Unallocated capital expenditure 83Total capital expenditure 368 Depreciation and amortisation 114 6 13 84 19 236Unallocated depreciation 12Total depreciation 248 Balance SheetAssetsSegment assets 10,314 3,071 2,353 2,059 319 18,116Unallocated corporate assets 41,580Consolidated total assets 59,696LiabilitiesSegment Liabilities 5,868 1,741 1,303 1,167 181 10,260Unallocated corporate liabilities 23,574 Consolidated total liabilities 33,834 Consolidated net assets 4,446 1,330 1,050 892 138 25,862 3. Profit on ordinary activities before tax Profit on ordinary activities before taxation is stated after charging:- Year to 31 Period to 31 December 2007 December 2006 £'000 £'000Depreciation of owned tangible fixed assets 503 245Depreciation of tangible fixed assets held under finance leases 13 3(Profit) / Loss on disposal of property, plant and equipment (3) 14Operating lease rentals - Land and buildings 570 360Operating lease rentals - Plant and equipment 280 188Operating lease rentals - Other assets 216 9Staff costs 18,631 9,599Auditors' remuneration 132 96Profit on foreign exchange 4 - Included in staff costs is an FRS20 non-cash option charge of £317,000 (2006:£128,000) 4. Finance costs and IFRS interest charges Year to 31 Period to 31 December 2007 December 2006 £'000 £'000Interest on bank loans and overdrafts (1,280) (398)Interest on loan notes (110) (192) (1,390) (590)IFRS interest charges:Finance cost of deferred consideration (826) (284)Bank arrangement fees (320) (120) (1,146) (404) 5. Dividends Year to 31 Period to 31 December 2007 December 2006 £'000 £'000Amounts recognised as distributions to equity holders in the yearPrior year final (full period) dividend of 1.00 pence per share (2006: 0.0 215 -pence)Interim dividend of 0.36 pence per share (2006: 0.0 pence ) 94 - 309 - A final dividend of 0.74 pence is to be paid on 20 June 2008 to thoseshareholders on the register at 23 May 2008. In accordance with IFRS the finaldividend of £0.74p will be recognised in the 2008 accounts, should it beapproved by shareholders at the AGM. 6. Earnings per Share The calculation of the basic and diluted earnings per share is based on thefollowing data, determined in accordance with the provisions of IAS33: "Earningsper Share". Year to Period to 31 December 31 December 2007 2006 £'000 £'000EarningsEarnings for the purpose of reported earnings per share beingnet profit attributable to equity holders of the parent 3,517 1,061Add back IFRS interest charges 1,146 404Earnings for the purpose of headline earnings per share 4,663 1,465Number of sharesWeighted average number of ordinary shares for the purpose ofbasic earnings per share 26,163,476 20,567,372 Reported basis:Basic earnings per share (pence) 13.44 5.16Diluted earnings per share (pence) 13.44 4.92 Headline basis:Basic earnings per share (pence) 17.82 7.12Diluted earnings per share (pence) 17.82 6.79 Basic earnings per share includes shares to be issued subject only to time as ifthey had been issued at the beginning of the period. There were no shares to be issued subject to performance achieved within theperiod in 2007. Those in 2006 relate to Bray Leino. The additional consideration shares included in non current liabilities have notbeen included in the diluted earnings per share because the conditions for theirissue had not been met in the period. Options issued are included in dilutedearnings per share to the extent that the market price is above the exerciseprice in accordance with IAS33. 7. Intangible assets - Goodwill £'000At 7 March 2006 -Recognised on acquisition of subsidiaries ( as restated under IFRS) 37,034Adjustment to consideration and net assets 258At 31 December 2006 37,292Recognised on acquisition of subsidiaries (see note 8) 48,076Adjustment to consideration and net assets 1,814At 31 December 2007 87,182 As explained in the Accounting Policies note and in line with IFRS, goodwill hasnot been amortised. The adjustments to consideration relate to changes in the estimated deferredconsideration in the earn-out period under the terms of the relevant sale andpurchase agreement. In addition, the adjustments to consideration includereclassifications of acquisition costs previously included in prepayments. In accordance with the Group's accounting policies, an annual impairment test isapplied to the carrying value of goodwill and other intangible assets. Thereview performed assesses whether the carrying value of goodwill is supported bythe net present value of future cash flows derived from the underlying assetsconsidering forecast cash flows over an initial projection period of three yearsfor each cash-generating unit. After this period, growth rates equivalent tonominal GDP are assumed for all units. The discount rate used is the Group'sestimated pre-tax weighted average cost of capital, which is 14.3%. Similarlythe cash flow projections used in the calculations are pre-tax. Goodwill is comprised of the following substantial components: Year to 31 Period to 31 December 2007 December 2006 £'000 £'000The Mission Marketing Holdings Ltd - 1,106Big Communications Ltd/Fuse Digital Ltd 8,122 7,965Bray Leino Ltd 30,984 28,221April-Six Ltd 12,182 -Bastin Day Westley Ltd 9,028 -The Driver Is Ltd 396 -Story UK Limited 10,075 -PCM Ltd 526 -RLA Group Limited 15,869 - 87,182 37,292 The Mission Marketing Holdings Limited has been made non-trading and thegoodwill previously held in it as owner of Big Communications Limited and FuseDigital Limited has been reallocated to those companies. 8. Acquisitions 8.1 Acquisition loan notes and acquisition contingent payments The terms of an acquisition may provide that the value of the purchaseconsideration, which may be payable in cash or shares or other securities at afuture date, depends on uncertain future events such as the future performanceof the acquired company. The directors estimate that the liability for paymentsthat may be due are as follows: Initial Additional Shares to Total Consideration Consideration be issued Loan Notes Loan Notes £'000 £'000 £'000 £'000Less than one year 3,444 61 511 4,016Between one and two years 1,092 5,032 4,305 10,429Between two and three years 184 2,979 2,980 6,143Between three and four years - 3,647 3,647 7,294 4,720 11,719 11,443 27,882 1yr TotalAcquisition loan notes and shares 3,894 1,637 5,531Acquisition contingent payments 122 22,229 22,351 4,016 23,866 27,882 8.2 Acquisition of Bastin Day Westley Limited ("thinkBDW") On 9 March 2007, The Group acquired the whole issued shared capital of BastinDay Westley Limited. The fair value of the consideration given for theacquisition was £11,236,212. An initial payment of £5,293,892 was satisfied bycash on completion. Costs relating to the acquisition amounted to £449,031. Maximum contingent consideration of £7,900,000 is dependent on the profitabilityof Bastin Day Westley Limited for the 3 years to 14 March 2010. The Group hasprovided for contingent consideration of £3,240,692 to date. This has beendiscounted to a net present value of £2,791,448, with the resulting discountingcharge of £449,244 to be taken thorough the income statement over the earnoutperiod. Up to 50 percent of this contingent consideration is payable in the formof shares at the option of The Mission Marketing Group Plc. The fair value of the net assets acquired was £2,208,686 resulting in goodwillof £9,027,526 which has been capitalised as an intangible asset. Book Value Fair Value Fair value adjustments £'000 £'000 £'000Net assets acquiredFixed assets 251 - 251Inventory 10 10Trade and other receivables 3,021 - 3,021Cash and cash equivalents 2,563 - 2,563Trade and other payables (3,618) - (3,618)Deferred taxation liability (19) - (19) 2,208Goodwill 9,028Total consideration 11,236 Satisfied by:Cash 5,294Shares issued 1,980Loan notes issued 572Deferred initial consideration 150Deferred contingent consideration 2,791Acquisition costs 449 11,236 The goodwill arising on the acquisition is attributable to the anticipatedprofitability of the Company and the anticipated future operating synergies fromthe combination. 8.3 Acquisition of April-Six Limited On 21 March 2007, The Group acquired the whole issued shared capital ofApril-Six Limited. The fair value of the consideration given for the acquisitionwas £13,834,998. An initial payment of £6,793,864 was satisfied by cash oncompletion. Costs relating to the acquisition amounted to £449,031. Maximum contingent consideration of £7,774,000 is dependent on the profitabilityof April-Six Limited for the 3 years to 16 March 2010. The Group has providedfor contingent consideration of £3,220,092 to date. This has been discounted toa net present value of £2,773,704, with the resulting discounting charge of£446,388 to be taken thorough the income statement over the earnout period. Upto 50 percent of this contingent consideration is payable in the form of sharesat the option of The Mission Marketing Group Plc. The fair value of the net assets acquired was £1,652,851, resulting in goodwillof £12,182,147 which has been capitalised as an intangible asset. Book Value Fair Value Fair value adjustments £'000 £'000 £'000Net assets acquiredFixed assets 163 (20) 143Trade and other receivables 1,147 - 1,147Cash and cash equivalents 1,274 - 1,274Trade and other payables (894) - (894)Deferred taxation liability (17) - (17) 1,653Goodwill 12,182Total consideration 13,835 Satisfied by:Cash 6,794Shares issued 3,818Loan notes issued -Deferred contingent consideration 2,774Acquisition costs 449 13,835 The goodwill arising on the acquisition is attributable to the anticipatedprofitability of the Company and the anticipated future operating synergies fromthe combination. 8.4 Acquisition of Story UK Limited ("Story") On 14 September 2007, The Group acquired the whole issued shared capital ofStory. The fair value of the consideration given for the acquisition was£11,725,620. An initial payment of £5,201,600 was satisfied by cash oncompletion. Costs relating to the acquisition amounted to £391,250. Maximum contingent consideration of £6,362,602 is dependent on the profitabilityof Story for the 3.3 years to 31 December 2010. The Group has provided forcontingent consideration of £3,746,684 to date. This has been discounted to anet present value of £3,148,020, with the resulting discounting charge of£598,664 to be taken thorough the income statement over the earnout period. The fair value of the net assets acquired was £1,650,949, resulting in goodwillof £10,074,671 which has been capitalised as an intangible asset. Book Value Fair Value Fair value adjustments £'000 £'000 £'000Net assets acquiredFixed assets 26 - 26Cash and cash equivalents 2,017 - 2,017Trade and other receivables 1,028 - 1,028Trade and other payables (1,420) - (1,420) 1,651Goodwill 10,075Total consideration 11,726 Satisfied by:Cash 5,202Shares issued 2,775Loan notes issued 210Deferred contingent consideration 3,148Acquisition costs 391 11,726 The goodwill arising on the acquisition is attributable to the anticipatedprofitability of the Company and the anticipated future operating synergies fromthe combination. 8.5 Acquisition of RLA Group Limited ("RLA") On 21 December 2007, The Group acquired the whole issued shared capital of RLA.The fair value of the consideration given for the acquisition was £16,725,039.An initial payment of £7,722,135 was satisfied by cash on completion. Costsrelating to the acquisition amounted to £658,982. Maximum contingent consideration of £9,972,134 is dependent on the profitabilityof RLA for the 3 years to 31 December 2010. The Group has provided forcontingent consideration of £4,721,005 to date. This has been discounted to anet present value of £4,091,725, with the resulting discounting charge of£629,280 to be taken thorough the income statement over the earnout period. The fair value of the net assets acquired was £855,659, resulting in goodwill of£15,869,380 which has been capitalised as an intangible asset. Book Value Fair Value Fair value adjustments £'000 £'000 £'000Net assets acquiredFixed assets 368 - 368Cash and cash equivalents 757 - 757Inventory 530 - 530Trade and other receivables 2,199 - 2,199Trade and other payables (2,998) - (2,998) 856Goodwill 15,869Total consideration 16,725 Satisfied by:Cash 7,722Shares issued 1,855Loan notes issued 450Deferred initial consideration 1,947Deferred additional consideration 4,092Acquisition costs 659 16,725 The goodwill arising on the acquisition is attributable to the anticipatedprofitability of the Company and the anticipated future operating synergies fromthe combination. Management carried out a review to assess whether any intangible assets relatingto brand names, customer relationships and contractual arrangements wereacquired as part of the transactions. Management concluded that no value couldbe ascribed to these intangible assets on the basis that other intangibles andgoodwill cannot be separately valued, due to the nature of the intangible assetsin question. 9. Share capital Year to 31 Period to 31 December 2007 December 2006 £ £Authorised:85,000,000 ordinary shares of 10 p each (2006: 85,000,000 ordinary 8,500,000 8,500,000shares of 10p each) Allotted and called up:33,076,828 ordinary shares of 10 p each (2006: 21,561,646 ordinary 3,307,683 2,156,165shares of 10p each) On 22 March 2007 2,946,751 shares with a total nominal value of £294,675 wereissued to the vendors of April-Six Limited as part of the consideration for theacquisition at a value of 129.58p each, for a total consideration of £3,818,400.In addition, 1,528,014 shares with a total nominal value of £152,801 were issuedon 22 March 2007 in connection with the acquisition of Bastin Day WestleyLimited at a value of 129.58p each for a total consideration of £1,980,000. On 20 September 2007 2,060,485 shares were issued as part of the considerationfor the acquisition of Story UK Limited. These shares, with a total nominalvalue of £206,049, were issued at a value of 134.68p each for a totalconsideration of £2,774,959. 3,571,429 shares with a total nominal value of £357,143 were issued through aprivate placing on 22 November 2007, these shares being issued at a value of140p each, for a total consideration of £5,000,000. £150,098 of share issuecosts were incurred in connection with this private placing and were written offto share premium. On 21 December 2007 1,408,503 shares with a total nominal value of £140,850 wereissued to the vendors of RLA Group Limited as part of the consideration for theacquisition at a value of 131.73p each, for a total consideration of £1,855,350. 10. Reconciliation of operating profit to operating cash flow Year ended Period ended 31 December 2007 31 December 2006 £'000 £'000Operating profit 7,433 2,523Depreciation charges 516 248Gain on disposal of property, plant and equipment (3) -Non cash charge for share options 317 128Decrease in receivables 416 1,320Increase in work in progress (25) (98)Decrease in payables (494) (1,914)Operating cash flow 8,160 2,207 11. Explanation of transition to IFRSs This is the first year that the company has presented its financial statementsunder IFRS. The following disclosures are required in the year of transition.The last financial statements under UK GAAP were for the period ended 31December 2006 and the date of transition to IFRS was therefore 7 March 2006(incorporation). 12. Reconciliation of Equity at 31 December 2006 (date of last UK GAAP financialstatements) UK GAAP As previously Effect of IFRSs reported transition to IFRSs Note £'000 £'000 £'000FIXED ASSETSIntangible assets a, d 38,315 (1,023) 37,292Property, plant and equipment 1,443 - 1,443 39,758 (1,023) 38,735CURRENT ASSETSWork in progress 237 - 237Trade and other receivables 9,642 - 9,642Cash and short term deposits 11,082 - 11,082 20,961 - 20,961CURRENT LIABILITIESTrade and other payables d (7,971) (180) (8,151)Accruals (1,347) - (1,347)Corporation tax payable (590) - (590)Bank loans (700) - (700)Acquisition loan notes (7,151) - (7,151) (17,759) (180) (17,939)NET CURRENT ASSETS 3,202 (180) 3,022 TOTAL ASSETS LESS CURRENT LIABILITIES 42,960 (1,203) 41,757 NON CURRENT LIABILITIESBank loans (7,300) - (7,300)Acquisition loan notes b (2,047) 124 (1,923)Acquisition contingent payments c (7,274) 675 (6,599)Obligations under finance leases (28) - (28)Deferred tax liabilities (45) - (45) (16,694) 799 (15,895) NET ASSETS 26,266 (404) 25,862 CAPITAL AND RESERVESCalled up share capital 2,156 - 2,156Share premium account 22,517 - 22,517Staff remuneration reserve 128 - 128Retained earnings 1,465 (404) 1,061TOTAL EQUITY 26,266 (404) 25,862 Note 31 December 2006 Total equity previously reported under UK GAAP 26,266a Decrease in Goodwill as a result of adjustment to deferred consideration component of cost of acquisition to present value at acquisition date (1,203)b Adjustment to outstanding deferred consideration acquisition loan notes to present value 124c Adjustment to outstanding deferred consideration acquisition contingent payments to present value 675d Adjustment to reverse media accrual writebacks previously recognised under UK GAAP - Increase in Goodwill 180 - Increase in Trade and other payables (180) Total adjustment to equity (404) Total equity IFRSs 25,862 13. Reconciliation of Profit or Loss for the 8.5 months to 31 December 2006 UK GAAP Effect of IFRSs As previously transition to reported IFRSs Note £'000 £'000 £'000 Turnover 37,468 - 37,468Cost of sales (22,417) - (22,417)Operating Income 15,051 - 15,051Operating expenses (12,528) - (12,528)Operating profit 2,523 - 2,523 Investment income 281 - 281Finance cost (590) - (590)IFRS interest charges a, b - (404) (404)Profit before tax 2,214 (404) (1,810)Tax expense (749) - (749)Profit for the period 1,465 (404) 1,061 Note Operating Profit on Profit for the profit Ordinary period Activities before taxation £'000 £'000 £'000 Profit as previously reported under UK GAAP 2,523 2,214 1,465a Interest charge on deferred consideration on acquisitions - (284) (284)b Bank arrangement fees - (120) (120) Total adjustment to profit - (404) (404) Profit per IFRS 2,523 1,810 1,061 14. Post Balance Sheet Events Subsequent to year end Bray Leino acquired the entities Broadskill Ltd andRhythmm Ltd. These businesses will be managed by Bray Leino. 15. Preliminary announcement information The financial information set out in this preliminary announcement does notconstitute the Group's statutory accounts within the meaning of section 240 ofthe Companies Act 1985. Proforma Consolidated Income Statementfor the twelve months ended 31 December 2007 The financial statements for the year ended 31 December 2007 includes a fulltwelve month trading period, whereas the comparative period to 31 December 2006covers only an eight and a half month trading period. In addition, the Groupacquired April-Six Limited and Bastin Day Westley Limited in March 2007, StoryUK Limited in September 2007 and RLA Group Limited in December 2007. The Groupis also presenting its year end financial statements under IFRS for the firsttime. As a result of the aforementioned factors, comparison of the results does notreflect the underlying like for like growth of the Group. A comparable proformafinancial statement has therefore been prepared. Proforma figures for both thecurrent year ended 31 December and the comparative period include all currenttrading units for the full twelve months ended 31 December. This gives arepresentative picture of the underlying trading performance of the Group, thecomparisons representing purely proforma growth. Year to % Year to 31 December 2007 growth 31 December 2006 Unaudited Unaudited £'000 £'000 TURNOVER 103,744 +10% 94,553 Cost of sales (61,399) +7% (57,406) OPERATING INCOME 42,345 +14% 37,147 Operating expenses (31,297) +14% (27,521) OPERATING PROFIT 11,048 +15% 9,626 Share of results of equity accounted (14) (14)associateInvestment income 401 401Finance costs (1,337) (1,337)IFRS interest charge (1,146) (1,146) PROFIT ON ORDINARY ACTIVITIES BEFORE 8,952 +19% 7,530TAXATION Taxation (3,130) (2,689) PROFIT FOR THE YEAR 5,822 +20% 4,841 Basic earnings per share (pence) 17.60 +20% 14.63Diluted earnings per share (pence) 17.60 +20% 14.63 The current level of net interest costs and IFRS interest charges has beenapplied to all periods presented to reflect the costs associated with thecurrent size of the Group and the current levels of debt. In addition, thecurrent share of results of the equity accounted associate was applied to the2006 year as the associate was only formed during 2006 and did not trade for thefull year. A tax rate of 31% has been applied to profit before IFRS interestcharges for both periods presented. In calculating the earnings per share, theproforma number of shares was calculated and has been used for both periods,(Basic: 33,076,828, Diluted: 33,076,828). Segmentation Note For management purposes the Group had seven operating subsidiaries during theperiod, Bray Leino Limited, Big Communications Limited, Fuse Digital Limited,Bastin Day Westley Limited, April-Six Limited, Story UK Limited and RLA GroupLimited. These have been divided into five segments which form the basis of theGroup's primary segmentation namely: Branding and Advertising, Media, Events andLearning, Public Relations and Digital. The Group's operations are all based inthe UK and substantially all the Group's business is executed in the UK. Year to Year to 31 December 2007 % growth 31 December 2006 Unaudited Unaudited £'000 £'000 TurnoverBusiness segmentBranding and Advertising 46,387 +15% 40,206Media 38,090 +2% 37,285Events and Learning 9,733 -5% 10,216Public Relations 2,077 +25% 1,663Digital and On-line 7,457 +44% 5,183 103,744 +10% 94,553 Operating incomeBusiness segmentBranding and Advertising 28,274 +10% 25,721Media 3,365 +18% 2,863Events and Learning 3,699 -5% 3,911Public Relations 1,616 +24% 1,300Digital and On-line 5,391 +61% 3,352 42,345 +14% 37,147 Operating profitBusiness segmentBranding and Advertising 9,294 +12% 8,272Media 1,377 +16% 1,186Events and Learning 578 -25% 773Public Relations 82 +12% 73Digital and On-line 1,544 +34% 1,150 12,875 +12% 11,454Central costs (1,827) (1,827) 11,048 +15% 9,627 This information is provided by RNS The company news service from the London Stock Exchange