Last checked at 23 Sep 2008 07:00
The Mission Marketing Group plc
Interim results
for the six months to 30 June 2008
Development across the enlarged Group delivers strong margin and EPS growth
23 September 2008
The Mission Marketing Group plc ("TMMG, themission®"), the UK marketing communications group, today announces its interim results for the six months ended 30 June 2008.
Highlights
·; On a pro-forma basis:
o Turnover: £57.6m +3%, above market rates* (2007: £56.1m)
o Operating Income (Revenue): £22.5m +5% (2007: £21.5m)
Organic growth enhanced by leveraging additional services across the enlarged Group's existing clients*Source: Carat Adspend forecast anticipates 2.5% growth in 2008 in the UK
The proforma figures allow direct year-on-year comparison with the comparable interim period for 2007.
Iain Ferguson, CEO of themission® said:
"During the first half of 2008 themission® has benefited from the acquisitions made in 2007, its strength in digital and a good new business performance. Overall, our strategy has delivered despite the difficulties facing our clients in the current period of economic weakness.
Against this backdrop we have taken a number of initiatives to reduce costs. Looking forward we believe that the benefits of the enlarged Group, coupled with the quality of our work means that we continue to be well positioned in the markets in which we operate."
For further information please contact:
| Iain Ferguson, Chief Executive | 020 7395 7575 |
| Tim Alderson, Chief Financial Officer | |
| The Mission Marketing Group plc | |
| Charles Palmer/Nicola Biles | 020 7831 3113 |
| Financial Dynamics | |
| Mark Percy/ Sarah Jacobs | 020 7107 8000 |
| Seymour Pierce | |
| Website: | www.themission.co.uk |
themission® is a national marketing communications and advertising group with 13 offices across the UK. The Group specialises in providing national and international clients with award winning marketing, advertising and business communications. Group members include April-Six, Bray Leino, Big Communications, Fuse Digital, thinkBDW, Story UK and RLA. themission® employs over 600 staff nationally and is listed on AIM (TMMG).
Chief Executive's Statement
Overview and strategy
The Mission Marketing Group plc ("themission®", "TMMG") has delivered a good set of results in the first half of 2008. The results are based on a combination of the successful integration of acquired businesses and continued organic growth. Our ongoing execution of Group strategy, despite difficulties faced by our clients in all sectors, has delivered substantial profit growth.
Our clients are facing some of the most difficult trading conditions in recent years. We have worked hard, with encouraging success, to continue to deliver growth and to maintain our progress in developing the Group in this very challenging environment. This has only been made possible by the talent, energy and dedication of the management and their teams in every agency in themission®. The integration of acquired businesses has created new opportunities for collaboration. And our core strategy; the development of more services for more clients across more locations, and the concentration of our operations outside high-cost central London is delivering trading and margin upsides as planned. As a result, we are pleased to be reporting headline profit growth of some 50%.
The Group's continued progress demonstrates the benefits of building a network of fully integrated businesses specialising in the provision of award winning advertising and marketing services for our national and international clients. We have consistently grown considerably faster than the marketing services sector, demonstrating the strength of our business model at a time when clients are increasingly focused on the return they achieve on their marketing and advertising investment.
The strategy of themission® continues to be to acquire and leverage proven businesses, based in lower cost locations across the UK, that provide marketing and communications services to national and international clients. The Group now comprises a stable of strong agency brands - each recognised for its strength in particular industry sectors or in specific communications techniques or media platforms. April-Six, BDW, Big Communications, Bray Leino, Fuse Digital, RLA Group and Story combine to bring to the Group a powerful combination of scale, innovation and expertise.
We announced our intention this year to slow our very rapid rate of acquisition and to focus on the integration of previously acquired businesses whilst seeking opportunities to add infill teams or skill-sets to our existing agencies. This has proved fruitful and we have added scale and scope in our core communications businesses as well as in our Learning business at Bray Leino. We remain alert to opportunities created by the economic slowdown and are active in the marketplace to identify suitable candidates.
We are committed to, and have made continued progress towards, our goal of truly 'bi-lingual' on-line and off-line capabilities - delivering on multiple platforms through all of our operations. Finally, and perhaps most crucially, we have continued to invest in talent. The agencies have made some exceptional hires and the Group has embarked on a series of initiatives to put in place the optimal incentive and compensation schemes for managers at all levels as we move through the earnout phase of themission® 's earliest acquisitions.
Reflecting our confidence in our strategy and in the future prospects of themission®, whilst also conserving cash, the Board is declaring a maintained interim dividend at 0.36 pence per share.
Results
Turnover for the six month period was £57.6m, up 45% (2007: £39.7m) representing the contribution from April-Six and thinkBDW, acquired in the first half of 2007 and the inclusion of Story and RLA as well as organic growth. The operating income grew by 50% to £22.5m (2007: £15.0m) showing a slightly higher gross margin reflecting a higher value-added business mix with the new acquisitions. Operating profit was £6.0m (2007: £4.0m) at a constant operating profit margin of 26% which is considerably higher than the sector average. Net interest payable increased to £1.0m as a result of the loans taken out to fund the acquisitions made in 2007. As previously announced, the notional IFRS interest charge for additional consideration reduced partly as a result of scheduled payments, and partly through a revised estimate of the remaining liabilities over time. The profit before taxation was £4.9m up 62% (2007: £3.0m) and, due to a slightly lower tax rate, the profit after tax was £3.4m up 78% (2007: £1.9m). The diluted EPS was 10.15 pence up 31% (2007: 7.73 pence) as a result of the shares issued for the acquisitions in the first half of 2007 being in issue for the full period and the inclusion of the shares issued for the acquisitions in the second half of 2007.
Like-for-like turnover grew by 3% to £57.6m (2007: £56.1m), above market rates, and generated gross profits up 5% to £22.5m (2007: 21.5m). Operating profit fell by some 10% to £6.0m (2007: £6.6m) as a result of the planned change of business mix into more labour intensive non-media activities and slowing income as the deteriorating economic situation makes itself felt.
The balance sheet liabilities have reduced by £8.0m to £19.3m as a result of scheduled payments and through a revised estimate of the remaining liabilities over time. The net debt position remains constant at £16.5m. These together have improved the net debt to equity ratio from 37% to 34% and the total debt to equity ratio has improved from 98% to 75%. The debt gearing has also improved with EBITDA/ Bank Debt improved at 1.9x, down from 2.3x and interest cover up to 6.9x, up from 4.9x.
The interim statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") and these statements do not constitute a set of statutory financial statements.
Dividends
Reflecting our confidence in our strategy and in the future prospects of themission®, whilst also conserving cash, the Board is pleased to declare an interim dividend of 0.36 pence per share (2007: 0.36 pence per share). This will be paid on 17 October 2008 to those shareholders on the register at 3 October 2008.
Corporate Governance
The Board recognise the importance of sound corporate governance and will, insofar as practicable given the Company's size and the constitution of the Board, comply with the main provisions of the Combined Code: Principles of Corporate Governance and Code of Best Practice.
Review of Operations
The Group is benefiting from the four major acquisitions completed in 2007 and the first half of 2008 includes a full six months trading for all of these agencies. Annualised turnover has grown to over £100m, from £5m pre-IPO in 2006.
themission® acquired two further agencies since the first half of 2007, each adding new sector know-how and technical expertise to the Group's offering.
Story is based in Edinburgh and is a leader in providing direct response and data-based marketing and communications campaigns to companies in both business and consumer markets. Story is a consistently recognised award winner for creativity and effectiveness and specialises in dynamic sectors including luxury goods, utilities and financial services. Story's clients include First Direct, Scottish and Southern Energy and LVMH.
RLA Group is based in Bournemouth with a subsidiary office in Belfast. RLA is a recognised leader in delivering diverse campaigns at dealer and store level thus enabling effective marketing for clients with complex routes to market. RLA specialises in the automotive, retail and leisure sectors and works with world class companies such as Volkswagen Commercial Vehicles, Mace and Kingfisher's Trade Depot.
The integration process is an important part of our business model and these acquisitions have been rapidly and successfully integrated into the Group. The process begins pre-acquisition so that before completion and without incurring external cost, systems, reporting and other standards are already aligned. Our process ensures that prospective Group companies are introduced to existing Group members to help ensure a smooth transition from owner/manager to Group member. Immediately after completion, face to face 'all staff' meetings provide a forum for ensuring clear understanding, at all levels, of themission® strategy, the role of the new company in delivering against that strategy, and the areas of focus which will leverage membership of the Group. Finally, new CEOs are appointed to the Operations Board which is the team tasked with the collective delivery of maximum performance in line with the Group's business plan.
Capitalising on what has already been achieved to date, this year we have created onemission™ to bring new services and capabilities to market across the Group. This has delivered incremental business with some £1.0m on an annualised basis and at the same time has helped us begin to optimise resources by sourcing internally items such as print, overflow creative and technical capacity. onemission™ has helped articulate internally the benefits to clients and to the Group of leveraging the broad spectrum of expertise available through our 600 people.
Within the enlarged Group, our ability to offer more services to more clients in more locations has led to significant new business wins including Hastings, Fexco, Remington, Orange, Brunel Healthcare, Clarks Originals, Royal Mint, Domino's Pizza, Ricoh and Millgate Homes and our agencies have collaborated together to win new assignments from existing clients such as Symantec, WKD and Volkswagen. Additionally we continue to work with market leading brands such as BP, Wrigleys Dermal, Scottish and Southern Energy, HBOS, Volkswagen, Goodyear Dunlop, Microsoft and Kingfisher.
Our operations are organised and reported under five segments.
Branding and Advertising
Branding and Advertising is our largest segment and has had an encouraging first half. This business line includes TV and other mass-media advertising as well as our design and production activities across a wide range of direct marketing, print and other media platforms.
Despite some recent downturn in volumes in the IT sector and the well-documented slowdown in the level of residential property transactions, other sectors we service have held up relatively well. Proforma operating income was £14.2m up 58% due to recent acquisitions but down 1% on a proforma basis, and we have continued to create and execute campaigns for key clients. One of the continuing strengths of all agencies in themission® is the fundamental media neutrality of our approach which puts the business performance of our clients at the top of our list of deliverables.
Our agencies have also won a number of new clients including an assignment at Big Communications to create the first Lil-lets TV advertising campaign in over five years. The new Domino's Pizza 'Steak Special' TV commercial, also produced by Big, has been a key factor in the pizza becoming one of the most successful new product launches to date by the leading pizza delivery company. Bray Leino was appointed to produce new consumer advertising for April-Six client Symantec and has launched new campaigns for the West Indies Rum and Spirits Producers' Association and Sugar Puffs. RLA Group created new campaigns for Volkswagen Commercial Vehicles, Teleflorist and Kingfisher while at Story we saw the re-launch onto direct response TV for Hastings. April-Six added Nortel Networks and Ricoh and thinkBDW won additional share of spend from Bellway and Spicerhaart.
Also in this core business area we added a new unit specialising in the financial services sector. Previously trading as Rhythmm, this business has now combined with Bray Leino in Bristol.
Digital and On-line
Digital and on-line communications are continuing their dramatic growth trend and our digital business has continued to perform strongly - both for standalone, on-line only clients and also as a component of multi-platform campaigns. This has helped drive operating income to £3.2m an actual growth of 59% and increased the segment to 14% of the Group total proforma growth, was 17%. We have again increased our management strength in this area with new hires at all agencies to help fuel this major driver of growth across all our businesses in the Healthcare, Financial, Consumer and Corporate sectors.
At RLA we have launched an innovative local online search marketing campaign which was identified by Google as a first for the automotive industry and saw Volkswagen Van Centre website visitors grow by more than 50%. For Lucozade's new drink Lucozade Alert, the team at Fuse created 'switch on' - the digital marketing and online launch campaign for the brand. We have also delivered new on-line activities for clients such as LVMH, Scottish and Southern Energy, HBOS and Remington - the latter recently won by Fuse Digital in a global pitch.
Our agencies will continue to look for new ways to innovate and to help our clients derive maximum advantage from digital initiatives. They are innovative and entrepreneurial by nature and our light organisational structure enables fast decision making and commercial opportunism. The power of user-generated content is a growing phenomenon now being recognised and harnessed by all our operations. We have developed innovative new media techniques to respond to the challenge of reaching targeted groups including Bray Leino's participation in in-store digital content through i-Blink and new technological developments in on-line media and touch screen interactive display panels at thinkBDW.
The Group will continue to explore selective acquisitions and other opportunities to drive future growth in this segment.
Events and Learning
Events and Learning are two specialist practices in which Group agency Bray Leino has built significant capabilities. Events and Learning had a strong performance with operating income up 13% to £2.2m on both an actual and proforma basis.
In Events, we target clients in the Luxury Goods and Oil & Gas sectors - both of these are consistently heavy investors in the international events business and the former requires consultancy input, design and execution of the physical presentation of brands at retail. Events have added to their core luxury, fashion and industrial sectors, making further inroads into retail development and consumer electronics with additional assignments for Timberland, Superdry, Henri Lloyd, MCM, West Indies Spirits and Rum Association/Vinopolis and Intel.
In Learning, we target clients in large corporates and in the Public Sector - both major investors in learning and in people and skills enhancement. A number of development initiatives have been completed in the period and we are adding to our business by acquiring BroadSkill, one of the UK's leading providers of business process and IT training. The enlarged Learning business is now known as Bray Leino BroadSkill and works with a range of blue chip companies and organisations on leadership and executive coaching, change management and IT skills. We continue to win major new assignments in Learning including the UK Border Agency, Natural England, Skills Active, Airbus and have been re-appointed to United Utilities.
Media
Our Media business is a combination of on-line and off-line planning and buying at Bray Leino, RLA Group, BDW and Story. We are a top10 buyer of television at GMTV and a major player in regional press - specifically specialist sections and titles in automotive and residential property. Story in London has succeeded in winning the Hastings direct response advertising business where we plan and buy media and also are responsible for hard-hitting creative. Media has had a successful year with operating income of £2.0m up 44% on an actual basis and up 10% on a proforma basis.
We aim to provide smart, cost-effective media plans and buys across multiple platforms. Value adding developments to consolidate planning and buying for HBOS, and to manage centrally the diverse needs of extended distribution systems at Volkswagen have helped differentiate our media offer. We also offer specialist expertise at Bray Leino in OTC pharmaceuticals - primarily in winter remedy products including the recently launched and successful Iglu brand. On-line we placed new work for Seagate, Teleflorist, Ardbeg, Ecover, Scottish and Southern Energy and findmypast.com
Public Relations
Public Relations had another good start to the year - growing operating income by 30% to £1m on both an actual and proforma basis and benefiting in particular at Bray Leino from its established and fast-growing national reputation for leadership on ethical, environmental and recycling issues. This is an area in which the agency has deep expertise, already applied on behalf of major brands such as Ecover and Ethical Superstore.
New wins include Federation of Organic Milk Group, Envirowise, Royal Mint, Bury Technology and a reappointment to work for WRAP (Waste & Resource Action Programme).
The Bray Leino PR team has relocated its London presence, specialising in fashion and ethical PR, alongside thinkBDW in the Group's Soho offices where BDW has also launched thinkPR - a specialist property sector PR service offer which in its first weeks of existence attracted new business from Middlegate and Consero Homes.
Awards
The Group continues to combine practice skills sets and multi-office partnerships to meet clients' needs. All our agencies have been recognised and honoured in prestigious industry awards recently including The Pharmaceutical Marketing Society Awards; Patient Information Campaign Category, in which we were the overall winner for the Tell Her Campaign, for Sanofi Pasteur MSD.
Big Communications, Bray Leino and Story have gained positions in the top 25 of The Drum magazine's first fully integrated table of the Top 100 marketing services companies outside of London.
Fuse Digital has been awarded a GRAMIA award for its work on the launch of new energy drink Lucozade Alert and Big Communications has been awarded a GRAMIA award for its campaign for Mr. Porky pork scratchings. Mr. Porky is the UK's biggest seller of savoury pork snacks.
Campaign also named the much-awarded Ardbeg Beastie campaign as one of the Top 10 best direct marketing campaigns in the UK. Further afield in New York, this time for Ardbeg 1965, Story was awarded a Silver at the John Caples International Awards, while in Chicago, Ardbeg 1965 won a Bronze in the retail/direct sales category at the International Echo Awards. In Scotland, Story won the category for Direct Marketing Excellence at The Marketing Society Excellence Awards for their Ardbeg Beastie piece and its work for Scottish and Southern Energy was awarded a finalist place in the Online Excellence category.
Our people have also been recognised for their achievements. Dave Mullen of Story was voted Number 6 in the UK's Top 10 Best Creative Directors by Campaign Magazine, Iain Ferguson was a London Finalist in E&Y Entrepreneur of the year, and Tim Alderson was named finalist in QCA Finance Director of the year. Sue Mullen of Story was included in Scotland's most powerful list and themission® also reached the final stages in Growth Investor AIM Company of the year.
Current trading and outlook
Given the economic turmoil which has faced all of its clients, the Group has delivered a good start to the current year following a very successful 2007. New people and skills have been added through tactical in-fills to existing operations. Integration of these and of the two new acquisitions made in the second half of 2007 has gone well with active collaboration between Group companies to offer clients new services.
All areas of economic activity worldwide are continuing to deteriorate. We cannot reasonably expect to remain immune to delays and freezes in clients' planned activities and we now believe that operating income in the second half will be broadly similar to the first half. We already benefit from lower cost locations and have taken a number of further initiatives to switch fixed into variable compensation and to reduce overhead wherever possible. With the impact of some restructuring costs coming through during the second half, the split in profitability this year is likely to be similar to that achieved in 2007 at 60% in the first half and 40% in the second half.
There is wide consensus that the negative market conditions the world is experiencing are likely to persist in the foreseeable future. Given these challenges, we believe that the experience of our management teams coupled with our agencies' focus on delivering effective, multi-discipline, business building campaigns means that we are well positioned to exploit opportunities as they arise.
Iain Ferguson
Chief Executive
Consolidated Income Statement
for the 6 months ended 30 June 2008
| 6 months to | 6 months to | Year ended | ||
| 30 June 2008 | 30 June 2007 | 31 December 2007 | ||
| Unaudited | Unaudited | Audited | ||
| Note | £'000 | £'000 | £'000 | |
| TURNOVER | 2 | 57,571 | 39,687 | 79,540 |
| Cost of sales | (35,088) | (24,654) | (46,493) | |
| OPERATING INCOME | 2 | 22,483 | 15,033 | 33,047 |
| Operating expenses | 4 | (16,526) | (11,053) | (25,614) |
| OPERATING PROFIT | 2 | 5,957 | 3,980 | 7,433 |
| Share of results of equity accounted associate | (10) | - | (14) | |
| Profit from sale of equity accounted associate | 12 | - | - | |
| Investment income | 5 | 87 | 183 | 400 |
| Finance costs | 5 | (1,006) | (606) | (1,390) |
| IFRS interest charges | 5 | (120) | (529) | (1,146) |
| PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION | 4,920 | 3,028 | 5,283 | |
| Taxation | 6 | (1,562) | (1,146) | (1,766) |
| PROFIT FOR THE PERIOD | 3,358 | 1,882 | 3,517 | |
| For continuing and total operations: | ||||
| Basic earnings per share (pence) | 8 | 10.15 | 7.77 | 13.44 |
| Diluted earnings per share (pence) | 8 | 10.15 | 7.73 | 13.44 |
Consolidated Balance Sheet
as at 30 June 2008
| As at | As at | As at | ||
| 30 June 2008 | 30 June 2007 | 31 December 2007 | ||
| Unaudited | Unaudited | Audited | ||
| Note | £'000 | £'000 | £'000 | |
| FIXED ASSETS | ||||
| Intangible assets | 9 | 82,778 | 61,571 | 87,182 |
| Investments in associates | 10 | - | 24 | 10 |
| Property, plant and equipment | 2,388 | 1,954 | 2,534 | |
| 85,166 | 63,549 | 89,726 | ||
| CURRENT ASSETS | ||||
| Work in progress | 1,865 | 891 | 822 | |
| Trade and other receivables | 11 | 19,842 | 14,783 | 16,624 |
| Cash and short term deposits | 5,080 | 7,954 | 9,561 | |
| 26,787 | 23,628 | 27,007 | ||
| CURRENT LIABILITIES | ||||
| Trade and other payables | (18,287) | (13,365) | (14,060) | |
| Accruals | (2,627) | (1,936) | (2,943) | |
| Corporation tax payable | (2,119) | (1,693) | (1,640) | |
| Bank loans | (960) | (3,995) | (3,062) | |
| Acquisition loan notes and shares | 12.1 | (1,881) | (1,686) | (3,894) |
| Acquisition contingent payments | 12.1 | (6,492) | (122) | (122) |
| (32,366) | (22,797) | (25,721) | ||
| NET CURRENT (LIABILITIES)/ASSETS | (5,579) | 831 | 1,286 | |
| TOTAL ASSETS LESS CURRENT LIABILITIES | 79,587 | 64,380 | 91,012 | |
| NON CURRENT LIABILITIES | ||||
| Bank loans | (20,040) | (14,732) | (22,383) | |
| Obligations under finance leases | (17) | - | (17) | |
| Acquisition loan notes and shares | 12.1 | (189) | (1,007) | (1,637) |
| Acquisition contingent payments | 12.1 | (11,309) | (15,087) | (22,229) |
| Deferred tax liabilities | (61) | (81) | (81) | |
| NET ASSETS | 47,971 | 33,473 | 44,665 | |
| CAPITAL AND RESERVES | ||||
| Called up share capital | 3,308 | 2,604 | 3,308 | |
| Share premium account | 36,643 | 27,867 | 36,643 | |
| Staff remuneration reserve | 638 | 274 | 445 | |
| Retained earnings | 7,382 | 2,728 | 4,269 | |
| TOTAL EQUITY | 47,971 | 33,473 | 44,665 |
Consolidated Cash Flow Statement
for the 6 months ended 30 June 2008
| 6 months to | 6 months to | Year ended | ||
| 30 June 2008 | 30 June 2007 | 31 December 2007 | ||
| Unaudited | Unaudited | Audited | ||
| Note | £'000 | £'000 | £'000 | |
| OPERATING CASH FLOW | 13 | 5,530 | 4,232 | 8,160 |
| Net finance costs | (919) | (648) | (1,310) | |
| Tax paid | (1,073) | (516) | (1,718) | |
| Net cash inflow from operating activities | 3,538 | 3,068 | 5,132 | |
| INVESTING ACTIVITIES | ||||
| Proceeds on disposal of property, plant and equipment | 59 | - | 22 | |
| Purchase of property, plant and equipment | (297) | (100) | (753) | |
| Acquisition of subsidiaries | (1,069) | (13,148) | (26,997) | |
| Net Cash acquired with subsidiaries | 340 | 3,743 | 6,605 | |
| Acquisition of associate companies | - | (24) | (24) | |
| Net cash (outflow) from investing activities | (967) | (9,529) | (21,147) | |
| FINANCING ACTIVITIES | ||||
| Dividend paid | (245) | (215) | (309) | |
| Repayments of amounts borrowed | (2,345) | (7,151) | (7,492) | |
| Movement in HP creditor and finance leases | (17) | (28) | - | |
| Receipts from long term loans | - | 10,727 | 19,001 | |
| Repayment of long term loans | (4,445) | - | (1,556) | |
| Proceeds on issue of ordinary share capital | - | - | 5,000 | |
| Financing and share issue costs | - | - | (150) | |
| Net cash inflow from financing activities | (7,052) | 3,333 | 14,494 | |
| (Decrease) in cash and cash equivalents | (4,481) | (3,128) | (1,521) | |
| Cash and cash equivalents at beginning of period | 9,561 | 11,082 | 11,082 | |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | 5,080 | 7,954 | 9,561 |
Consolidated Statement of Changes in Equity
for the 6 months ended 30 June 2008
| Share capital £'000 | Share premium £'000 | Retained earnings £'000 | Staff remuneration reserve £'000 | Total £'000 | |
| Changes in equity | |||||
| At 1 January 2007 | 2,156 | 22,517 | 1,061 | 128 | 25,862 |
| New shares issued | 448 | 5,350 | - | - | 5,798 |
| Credit for share option scheme | - | - | - | 146 | 146 |
| Profit for the period | - | - | 1,882 | - | 1,882 |
| Dividends | - | - | (215) | - | (215) |
| At 30 June 2007 | 2,604 | 27,867 | 2,728 | 274 | 33,473 |
| New shares issued | 704 | 8,776 | - | - | 9,480 |
| Credit for share option scheme | - | - | - | 171 | 171 |
| Profit for the period | - | - | 1,635 | - | 1,635 |
| Dividends | - | - | (94) | - | (94) |
| At 31 December 2007 | 3,308 | 36,643 | 4,269 | 445 | 44,665 |
| Credit for share option scheme | - | - | - | 193 | 193 |
| Profit for the period | - | - | 3,358 | - | 3,358 |
| Dividends | - | - | (245) | - | (245) |
| At 30 June 2008 | 3,308 | 36,643 | 7,382 | 638 | 47,971 |
Notes to the unaudited Interim Report
for the 6 months ended 30 June 2008
1. Accounting Policies
Basis of Preparation
The Financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) adopted for use in the European Union and those parts of the Companies Act 1985 which are applicable to companies reporting under IFRS.
The financial statements have been prepared on the historical cost basis.
Basis of Consolidation
The Group's financial statements consolidate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating polices of an investee entity so as to obtain benefits from its activities.
On acquisition, the assets and liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Goodwill represents the excess of acquisition cost over the fair value of the Group's share of the identifiable net assets of the acquired subsidiary at the date of acquisition. Any deficiency of the cost of acquisition below the fair value of the identifiable net assets acquired (i.e. discount on acquisition) is credited to the income statement in the period of acquisition.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring accounting policies used into line with those used by the Group.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Revenue and revenue recognition
Turnover is in respect of the provision for services including fees, commissions, rechargeable expenses and sales of materials performed subject to specific 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 income is 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 the partial performance of the contractual obligations in accordance with IAS18 Revenue.
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 of earn-out arrangements are required to be treated as remuneration within the income statement. These amounts are required to be charged to the income statement.
The Group has applied the requirements of IFRS 2 Share-based Payments. IFRS 2 has been applied to all grants of equity instruments.
Equity-settled share-based payments, such as share options, are measured at fair value at the date of grant. The fair value determined at the grant date of the equity-settled share payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of the number of shares that will eventually vest.
Fair value is measured by use of a Black Scholes model on the grounds that there are no market related vesting conditions. The expected life used in the model has been adjusted, based on the management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. Market price on any given day is obtained from external publicly available sources.
Pension costs
Retirement benefits to employees are provided by defined contribution schemes that are funded by the Group and employees. Payments are made to pension trusts that are financially separate from the Group. There are no defined benefit plans.
Foreign Currencies
Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of the transaction. Exchange differences are reflected in the income statement accordingly.
Goodwill
Goodwill arising from the purchase of subsidiary undertakings, represents the excess of the cost of acquisition over the Group's interest in the fair value of the identifiable asset, liabilities and contingent liabilities of the subsidiary acquired, and is capitalised in accordance with the requirements of IFRS 3. Future anticipated payments to vendors in respect of earn-outs are based on the Directors' best estimates of these obligations. Earn-outs are dependent on the future performance of the relevant business and are reviewed annually. The deferred consideration is discounted to its fair value in accordance with IFRS 3 and IAS 39. The difference between the fair value of these liabilities and the actual amounts payable are charged to the income statement as notional finance costs over the life of the associated liability.
Goodwill is not amortised, but is reviewed annually for impairment. Goodwill impairment is assessed by comparing the carrying value of goodwill to the net present value of future cash flows derived from the underlying assets considering forecast cash flows over an initial projection period of up to three years for each cash-generating unit. After this period, growth rates equivalent to nominal GDP are generally assumed. In accordance with IFRS 3 the carrying value of goodwill will continue to be reviewed for impairment on the basis stipulated and adjusted should this be required. Impairment is recognised in the income statement and is not subsequently reversed. The individual circumstances of each future acquisition will be assessed to determine the appropriate treatment of any related goodwill.
Property, plant and equipment
Tangible fixed assets are stated at cost less accumulated depreciation. Depreciation is provided on all property, plant and equipment at rates calculated to write off the cost, less estimated residual value based on prices prevailing at the date of acquisition, of each asset evenly over its expected useful economic life, as follows:
Short leasehold property Period of the lease
Motor vehicles 25% per annum
Fixtures, fittings and equipment 10-33% per annum
Computer 25-33% per annum
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.
The gain or loss arising on the disposal of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the income statement.
Work in progress
Work in progress is stated at the lower of cost and net realisable value and includes the costs of direct materials and purchases, and the costs of direct labour. Net realisable value is based on estimated invoice value less further costs expected to be incurred to completion.
Deferred Consideration
The terms of an acquisition may provide that the value of the purchase consideration, which may be payable in cash, shares or other security at a future date, depends on uncertain future events, such as the future performance of the acquired company. Where it is not possible to estimate the amounts payable with any degree of certainty, the amounts recognised in the financial statements represent a reasonable estimate at the balance sheet date of the amounts expected to be paid. The deferred consideration is discounted to a fair value. The difference between the fair value of the liabilities and the actual amounts 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 the associated liability. The rate used is the risk free rate applicable at the time of acquisition of the relevant entity. The Directors consider these rates to be reasonable in light of similar rates available on debt instruments.
Where it becomes appropriate to increase or decrease a previous estimate of deferred consideration, an adjustment is made to the current year IFRS interest charge, such that the cumulative interest charged to the date of change reflects the amount of interest charge that would have been expensed had the revised estimate of the deferred consideration been made at the date that the liability was first recognized. By so doing, the total interest expensed over the life of the liability is calculated as a function of the latest expectation and is not influenced by any previous estimates whether higher or lower, and fully reflects the intention of IFRS 3.
Financial Instruments
Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument. Issue costs are offset against the proceeds of such instruments.
Financial Liability and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The Group has only one class of share in existence.
Finance costs
Finance costs, which include interest, bank charges and the unwinding of the discount on deferred consideration, are recognised in the income statement in the period in which they are incurred.
Accounting estimates and judgements
The Group makes estimates and judgements concerning the future and the resulting estimates may, by definition, vary from the actual results. The Directors considered the critical accounting estimates and judgements used in the financial statements and concluded that the main areas of judgement are:
Revenue recognition policies in respect of contracts which straddle the period end;
Contingent deferred payments in respect of acquisitions; and
Recognition and quantification of share based payments
Valuation of intangible assets.
These estimates are based on historical experience and various other assumptions that management and the Board of Directors believe are reasonable under the circumstances and are discussed, to the extent necessary, in more detail in their respective notes.
2. Business segmentation
For management purposes the Group had seven operating subsidiaries during the period, Bray Leino Limited, Big Communications Limited, Fuse Digital Limited, Bastin Day Westley Limited, April-Six Limited, Story UK Limited and RLA Group Limited. These have been divided into five segments which form the basis of the Group's primary segmentation namely; Branding and Advertising, Media, Events and Learning, Public Relations and Digital.
| 6 months to | 6 months to | Year ended | |
| 30 June 2008 | 30 June 2007 | 31 December 2007 | |
| Unaudited | Unaudited | Audited | |
| £'000 | £'000 | £'000 | |
| Turnover | |||
| Business segment | |||
| Branding and Advertising | 20,766 | 14,909 | 31,898 |
| Digital and On-line | 4,384 | 2,764 | 6,526 |
| Events and Learning | 6,394 | 4,227 | 9,733 |
| Media | 24,758 | 16,851 | 29,306 |
| Public Relations | 1,269 | 936 | 2,077 |
| 57,571 | 39,687 | 79,540 |
| Operating income | |||||
| Business segment | |||||
| Branding and Advertising | 14,223 | 9,017 | 20,376 | ||
| Digital and On-line | 3,165 | 1,986 | 4,583 | ||
| Events and Learning | 2,168 | 1,924 | 3,699 | ||
| Media | 1,975 | 1,372 | 2,773 | ||
| Public Relations | 952 | 734 | 1,616 | ||
| 22,483 | 15,033 | 33,047 | |||
| Operating profit | |||||
| Business segment | |||||
| Branding and Advertising | 4,525 | 2,919 | 6,167 | ||
| Digital and On-line | 1,050 | 619 | 1,214 | ||
| Events and Learning | 334 | 413 | 578 | ||
| Media | 852 | 717 | 1,219 | ||
| Public Relations | 82 | 64 | 82 | ||
| 6,843 | 4,732 | 9,260 | |||
| Central costs | (886) | (752) | (1,827) | ||
| 5,957 | 3,980 | 7,433 | |||
Geographical segmentation
The Group's operations are all based in the UK and substantially all the Group's business is executed in the UK.
3. Reconciliation of Headline Profit to Reported Profit
| 6 months to 30 June 2008 | 6 months to 30 June 2007 | Year to 31 December 2007 | |
| Unaudited | Unaudited | Audited | |
| £'000 | £'000 | £'000 | |
| Headline profit before finance costs, income from investments and taxation | 5,959 | 3,980 | 7,419 |
| Net finance costs | (919) | (423) | (990) |
| Headline profit before taxation | 5,040 | 3,557 | 6,429 |
| IFRS adjustments | |||
| IFRS interest charges | (120) | (529) | (1,146) |
| Reported profit before taxation | 4,920 | 3,028 | 5,283 |
| Headline profit before tax | 5,040 | 3,557 | 6,429 |
| Headline taxation | (1,562) | (1,146) | (1,766) |
| Headline profit after taxation | 3,478 | 2,411 | 4,663 |
| IFRS adjustments | |||
| IFRS interest charges | (120) | (529) | (1,146) |
| Taxation impact | - | - | - |
| Reported profit after taxation | 3,358 | 1,882 | 3,517 |
4. Operating expenses
The operating expenses of £16,525,729 (2007: £11,052,500) include a non-cash charge of £193,000 (2007: £145,850) for the options granted to employees in line with IFRS2: "Share-based payments".
5. Investment income and Finance costs
| 6 months to | 6 months to | Year ended | |
| 30 June 2008 | 30 June 2007 | 31 December 2007 | |
| Unaudited | Unaudited | Audited | |
| £'000 | £'000 | £'000 | |
| Investment income: | |||
| Interest receivable | 87 | 183 | 400 |
| Finance costs: | |||
| On bank loans and overdrafts | (1,006) | (496) | (1,280) |
| On loan notes | - | (110) | (110) |
| (1,006) | (606) | (1,390) | |
| IFRS interest charges: | |||
| Finance cost of deferred consideration | (120) | (304) | (826) |
| Bank arrangement fees | - | (225) | (320) |
| (120) | (529) | (1,146) | |
| Total net finance cost | (1,039) | (952) | (2,136) |
6. Taxation
The taxation charge for the period ended 30 June 2008 has been based on an estimated effective tax rate on profit on ordinary activities prior to IFRS interest charges, Headline profit before taxation, of 31% (30 June 2007: 32%).
7. Dividends
| 6 months to | 6 months to | Year ended | |
| 30 June 2008 | 30 June 2007 | 31 December 2007 | |
| Unaudited | Unaudited | Audited | |
| £'000 | £'000 | £'000 | |
| Amounts recognised as distributions to equity holders in the period (approved): | |||
| Full year dividend for the period ended 31 December 2006 of 1.0 pence per share | - | 215 | 215 |
| Interim dividend of 0.36 pence per share for the year ended 31 December 2007 | - | - | 94 |
| Final dividend of 0.74 pence per share for the year ended 31 December 2007 | 245 | - | - |
| 245 | 215 | 309 |
The proposed interim dividend of 0.36 pence per share was approved by the Board on 22 September 2008 and has not been included as a liability as at 30 June 2008. The dividend will be paid on 17 October 2008 to those shareholders on the register at 3 October 2008.
8. 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 IAS33: "Earnings per Share".
| 6 months to | 6 months to | Year ended | |
| 30 June 2008 | 30 June 2007 | 31 December 2007 | |
| Unaudited | Unaudited | Audited | |
| £'000 | £'000 | £'000 | |
| Earnings | |||
| Earnings for the purpose of reported earnings per share being net profit attributable to equity holders of the parent | 3,358 | 1,882 | 3,517 |
| Add back IFRS interest charges | 120 | 529 | 1,146 |
| Earnings for the purposes of headline earnings per share (see note 3) | 3,478 | 2,411 | 4,663 |
| Number of shares | |||
| Weighted average number of ordinary shares for the purpose of basic earnings per share | 33,076,828 | 24,223,833 | 26,163,476 |
| Dilutive effect of securities: | |||
| Share options | - | 120,000 | - |
| Weighted average number of ordinary shares for the purpose of diluted earnings per share | 33,076,828 | 24,343,833 | 26,163,476 |
| Reported basis: | |||
| Basic earnings per share (pence) | 10.15 | 7.77 | 13.44 |
| Diluted earnings per share (pence) | 10.15 | 7.73 | 13.44 |
| Headline basis: | |||
| Basic earnings per share (pence) | 10.51 | 9.95 | 17.82 |
| Diluted earnings per share (pence) | 10.51 | 9.90 | 17.82 |
Basic earnings per share includes shares to be issued subject only to time as if they had been issued at the beginning of the period.
The additional consideration shares included in non current liabilities have not been included in the diluted earnings per share because the conditions for their issue had not been met in the period. Options issued are included in diluted earnings per share to the extent that the market price is above the exercise price in accordance with IAS33.
9. Goodwill
| £'000 | |
| At 1 January 2007 | 37,292 |
| Recognised on acquisition of subsidiaries | 24,082 |
| Adjustment to consideration and net assets | 197 |
| At 30 June 2007 | 61,571 |
| Recognised on acquisition of subsidiaries | 23,994 |
| Adjustment to consideration and net assets | 1,617 |
| At 31 December 2007 | 87,182 |
| Recognised on acquisition of subsidiaries (see note 10) | 2,048 |
| Adjustment to consideration and net assets | (6,452) |
| At 30 June 2008 | 82,778 |
The adjustments to consideration relate to changes in the estimated deferred consideration in the earn-out period under the terms of the relevant sale and purchase agreement.
In accordance with the Group's accounting policies, an annual impairment test is applied to the carrying value of goodwill. Goodwill is not amortised.
Goodwill is comprised of the following substantial components:
| 30 June 2008 | 30 June 2007 | 31 December 2007 | |
| Unaudited | Unaudited | Audited | |
| £'000 | £'000 | £'000 | |
| Big Communications Ltd/Fuse Digital Ltd | 8,182 | 9,126 | 8,122 |
| Bray Leino Ltd | 28,363 | 28,363 | 30,984 |
| April-Six Ltd | 9,408 | 14,307 | 12,182 |
| Bastin Day Westley Ltd | 9,072 | 9,394 | 9,028 |
| The Driver Is Ltd | 396 | 381 | 396 |
| Story UK Ltd | 10,075 | - | 10,075 |
| PCM Ltd | 526 | - | 526 |
| RLA Group Ltd | 14,708 | - | 15,869 |
| Rhythmm Communications Group Ltd | 367 | - | - |
| BroadSkill Ltd | 1,681 | - | - |
| 82,778 | 61,571 | 87,182 |
10. Investments in associates
| 30 June 2008 | 30 June 2007 | 31 December 2007 | |
| £'000 | £'000 | £'000 | |
| Investment in shares in iblink Limited | - | 24 | 10 |
Investments in associates consists of a 20% (2007: 40%) holding in the share capital of iblink Limited, which has been incorporated into these financial statements using the equity method of accounting. During the period 20% of iblink Limited was sold for a profit of £12,000.
11. Trade and other receivables
An allowance has been made for estimated irrecoverable amounts of £120,100 (30 June 2007: £165,235 and 31 December 2007: £153,735).
12. Acquisitions
12.1 Acquisition loan notes and acquisition contingent payments
The terms of an acquisition may provide that the value of the purchase consideration, which may be payable in cash or shares or other securities 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 payments that may be due are as follows:
| Initial Consideration Loan Notes | Additional Consideration Loan Notes | Initial Consideration Shares to be issued | Additional Consideration Shares to be issued | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | |
| Less than one year | 1,697 | 6,175 | 184 | 317 | 8,373 |
| Between one and two years | 189 | 1,718 | - | 1,717 | 3,624 |
| Between two and three years | - | 3,937 | - | 3,937 | 7,874 |
| 1,886 | 11,830 | 184 | 5,971 | 19,871 |
12.2 Acquisition of Rythmm Communications Group Limited ("Rythmm")
On 5 February 2008, the Group acquired the whole issued shared capital of Rythmm Communications Group Limited. The fair value of the consideration given for the acquisition was £501,968. An initial payment of £449,918 was satisfied by cash on completion. Costs relating to the acquisition amounted to £1,750.
Contingent consideration of £300,000 is dependent on the profitability of Rythmm for the two years to 31 December 2009. The Group has provided for contingent consideration of £50,300 to date. All acquisition payments are to be settled within twelve months of acquisition date.
The fair value of the net assets acquired was £135,308, resulting in goodwill of £366,660 which has been capitalised as an intangible asset.
| Book Value | Fair Value adjustments | Fair value | |
| £'000 | £'000 | £'000 | |
| Net assets acquired | |||
| Inventory | 18 | - | 18 |
| Trade and other receivables | 319 | - | 319 |
| Cash and cash equivalents | 336 | - | 336 |
| Trade and other payables | (587) | - | (587) |
| Deferred taxation liability | 49 | - | 49 |
| 135 | |||
| Goodwill | 367 | ||
| Total consideration | 502 | ||
| Satisfied by: | |||
| Cash | 450 | ||
| Deferred contingent consideration | 50 | ||
| Acquisition costs | 2 | ||
| 502 | |||
The goodwill arising on the acquisition is attributable to the anticipated profitability of Rythmm and the anticipated future operating synergies from the combination with the Group.
Management carried out a review to assess whether any intangible assets relating to brand names, customer relationships and contractual arrangements were acquired as part of the transaction. Management concluded that no value could be ascribed to these intangible assets on the basis that other intangibles and goodwill cannot be separately valued reliably, due to the nature of the intangible assets in question.
12.3 Acquisition of BroadSkill Limited ("BroadSkill")
On 7 March 2008, the Group acquired the whole issued shared capital of BroadSkill Limited. The fair value of the consideration given for the acquisition was £1,284,019. An initial payment of £350,000 was satisfied by cash on completion. Costs relating to the acquisition amounted to £54,000.
Contingent consideration of £1,200,000 is dependent on the profitability of BroadSkill for the three years to 31 December 2010. The Group has provided for contingent consideration of £950,000 to date. This has been discounted to a net present value of £880,019, with the resulting discounting charge of £69,981 to be taken thorough the income statement over the earnout period.
The fair value of the net liabilities acquired was £397,400, resulting in goodwill of £1,681,419 which has been capitalised as an intangible asset.
| Book Value | Fair Value adjustments | Fair value | |
| £'000 | £'000 | £'000 | |
| Net assets acquired | |||
| Inventory | 4 | 4 | |
| Trade and other receivables | 469 | - | 469 |
| Cash and cash equivalents | 5 | - | 5 |
| Trade and other payables | (855) | - | (855) |
| Deferred taxation liability | (20) | - | (20) |
| (397) | |||
| Goodwill | 1,681 | ||
| Total consideration | 1,284 | ||
| Satisfied by: | |||
| Cash | 350 | ||
| Deferred contingent consideration | 880 | ||
| Acquisition costs | 54 | ||
| 1,284 | |||
The goodwill arising on the acquisition is attributable to the anticipated profitability of BroadSkill and the anticipated future operating synergies from the combination with the Group.
Management carried out a review to assess whether any intangible assets relating to brand names, customer relationships and contractual arrangements were acquired as part of the transaction. Management concluded that no value could be ascribed to these intangible assets on the basis that other intangibles and goodwill cannot be separately valued reliably, due to the nature of the intangible assets in question.
13. Notes to the consolidated cash flow statement
Reconciliation of operating income to operating cash flow
| 6 months to | 6 months to | Year ended | |
| 30 June 2008 | 30 June 2007 | 31 December 2007 | |
| Unaudited | Unaudited | Audited | |
| £'000 | £'000 | £'000 | |
| Operating profit | 5,957 | 3,980 | 7,433 |
| Depreciation charges | 402 | 199 | 516 |
| Gain on disposal of property, plant and equipment | (18) | - | (3) |
| Non cash charge for share options | 193 | 146 | 317 |
| (Increase)/decrease in receivables | (2,418) | (915) | 416 |
| Increase in work in progress | (1,021) | (644) | (25) |
| Increase/(Decrease) in payables | 2,435 | 1,466 | (494) |
| Operating cash flow | 5,530 | 4,232 | 8,160 |
14. Leave pay accrual
No liability or expense has been recognised relating to untaken leave for any of the periods presented. The Group has a policy of not allowing days to be carried forward from one year to the next, unless in exceptional circumstances. In addition, no payment is made in lieu of untaken leave which is not carried forward. As a result, there is no material liability relating to untaken leave at year end. An accounting policy of not recognising a liability for untaken leave in the interim figures has therefore been adopted, as any effect on the income statement at the first half year reverses itself in the second half of the year. Were the Group to recognise a liability for the full cost of untaken leave at 30 June 2008, the effect on the income statement would be an expense of £263,094 (30 June 2007: £257,560).
15. Post balance sheet events
The Mission Marketing Group Employee Benefit Trust bought 1,695,094 ordinary in the period to 31 July 2008 and these shares will not count for the purpose of calculating earnings per share.
16. Availability of the Interim Report
Copies of the Interim Report will be available from the Company's registered office at Garden House, 57-59 Long Acre, London, WC 2E 9JL and on the Group's website, www.themission.co.uk
INDEPENDENT REVIEW REPORT TO THE MISSION MARKETING GROUP PLC
Introduction
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2008 which comprises the Consolidated Income Statement, Consolidated Balance Sheet, Consolidated Cash flow Statement, Consolidated Statement of Changes in Equity and the related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. Our work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Rules of the Alternative Investment Market.
As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRS as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting' as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30th June 2008 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Rules of the Alternative Investment Market.
Kingston Smith LLP
141 Wardour Street
London
W1F 0UT
Proforma Consolidated Income Statement
for the six months ended 30 June 2008
During the six months ended 30 June 2008, the Group acquired Rythmm Communication Ltd and BroadSkill Ltd. In addition, various entities where acquired at various stages during the 2007 year. As a result, comparison of the interim results does not reflect the underlying organic growth of the Group. A comparable proforma financial statement has therefore been prepared. Proforma figures for both the current period ended 30 June and the comparative period include all current trading units for the full six months ended 30 June. Similarly, the proforma figures for the year ended 31 December 2007 include all current trading units for the full twelve months ended 31 December 2007. This gives a representative picture of the underlying trading performance of the Group, the comparisons representing purely organic growth.
| 6 months to | % | 6 months to | Year to | |
| 30 June 2008 | growth | 30 June 2007 | 31 Dec 2007 | |
| Unaudited | Unaudited | Unaudited | ||
| £'000 | £'000 | £'000 | ||
| TURNOVER | 57,571 | +3% | 56,056 | 103,744 |
| Cost of sales | (35,088) | +1% | (34,576) | (61,399) |
|
|
|
| ||
| OPERATING INCOME | 22,483 | +5% | 21,480 | 42,345 |
| Operating expenses | (16,526) | +11% | (14,833) | (31,297) |
|
|
|
| ||
| OPERATING PROFIT | 5,957 | -10% | 6,647 | 11,048 |
| Share of results of equity accounted associate | (10) | (10) | (14) | |
| Profit from sale of equity accounted associate | 12 | 12 | - | |
| Investment income | 87 | 87 | 401 | |
| Finance costs | (1,006) | (1,006) | (1,337) | |
| IFRS interest charge | (120) | (120) | (1,146) | |
|
|
|
| ||
| PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION | 4,920 | -12% | 5,610 | 8,952 |
| Taxation | (1,562) | (1,776) | (3,130) | |
|
|
|
| ||
| PROFIT FOR THE PERIOD | 3,358 | -12% | 3,834 | 5,822 |
| Basic earnings per share (pence) | 10.15 | -12% | 11.59 | 17.60 |
| Diluted earnings per share (pence) | 10.15 | -12% | 11.59 | 17.60 |
The current level of interest costs, IFRS interest charges and head office overhead costs have been applied to the 6 months ended 30 June 2007 to reflect the costs associated with the current size of the Group and the current levels of debt. In addition, the current share of results of the equity accounted associate and profit from sale of equity accounted associate have been applied to the 6 months ended 30 June 2007. A tax rate of 31% has been applied to profit before IFRS interest charges for all periods presented. In calculating the earnings per share, the proforma number of shares was calculated and has been used for all three periods, (Basic: 33,076,828, Diluted: 33,076,828).
Segmentation Note
For management purposes the Group had seven operating subsidiaries during the period, Bray Leino Limited, Big Communications Limited, Fuse Digital Limited, Bastin Day Westley Limited, April-Six Limited, Story UK Limited and RLA Group Limited. These have been divided into five segments which form the basis of the Group's primary segmentation namely; Branding and Advertising, Media, Events and Learning, Public Relations and Digital. The Group's operations are all based in the UK and substantially all the Group's business is executed in the UK.
| 6 months to | 6 months to | Year to | ||
| 30 June 2008 | % growth | 30 June 2007 | 31 December 2007 | |
| Unaudited | Unaudited | Unaudited | ||
| £'000 | £'000 | £'000 | ||
| Turnover | ||||
| Business segment | ||||
| Branding and Advertising | 20,766 | -14% | 24,183 | 46,137 |
| Digital and On-line | 4,384 | +20% | 3,661 | 7,707 |
| Events and Learning | 6,394 | +51% | 4,227 | 9,733 |
| Media | 24,758 | +7% | 23,049 | 38,090 |
| Public Relations | 1,269 | +36% | 936 | 2,077 |
| 57,571 | +3% | 56,056 | 103,744 |
| | | | Operating income | |
| | | | | |
| Business segment | | | | |
| Branding and Advertising | 14,223 | -1% | 14,324 | 28,150 |
| Digital and On-line | 3,165 | +17% | 2,707 | 5,515 |
| Events and Learning | 2,168 | +13% | 1,924 | 3,699 |
| Media | 1,975 | +10% | 1,791 | 3,365 |
| Public Relations | 952 | +30% | 734 | 1,616 |
| | 22,483 | +5% | 21,480 | 42,345 |
| Operating profit | ||||
| Business segment | ||||
| Branding and Advertising | 4,525 | -14% | 5,265 | 9,252 |
| Digital and On-line | 1,050 | +14% | 922 | 1,586 |
| Events and Learning | 334 | -19% | 413 | 578 |
| Media | 852 | -2% | 869 | 1,377 |
| Public Relations | 82 | +28% | 64 | 82 |
| 6,843 | -9% | 7,533 | 12,875 | |
| Central costs | (886) | (886) | (1,827) | |
| 5,957 | -10% | 6,647 | 11,048 |