The Mission Group Regulatory News (TMG)

The Mission Marketing Group plc

Interim results for the six months to 30 June 2015

The Mission Marketing Group plc ("TMMG" or "the missiontm"), the marketing communications and advertising group, sets out its interim results for the six months ended 30 June 2015.

Trading

· Continued growth, both organic and from acquisitions

· Some great new Client wins in the period, including Ask, Autoline, BMW, Brewin Dolphin, British Airways, Diageo, Muller Wiseman, RAC, Sage, SAS and Siemens

· Full year again expected to have a strong second-half bias - trading remains in line

· Continue to seek suitable acquisitions

Income Statement

· Operating income (Revenue) up 12% to £29.5m (2014: £26.3m)

· Headline operating profit up 15% to £2.4m (2014: £2.1m)

· Headline profit before tax up 20% to £2.2m (2014: £1.8m)

· Headline Diluted EPS up 12% to 1.88 pence (2014: 1.68 pence)

Balance sheet and cash flow

· Net bank debt reduced by £1.5m in the six months to £7.9m

· Bank debt leverage ratio maintained below x1.25

· Total debt leverage ratio below x1.5

Dividend

· Significant increase in interim dividend to 0.3p (2014: 0.25p)

· Payable on 4 December 2015 to shareholders on the register at 6 November 2015

An interview with David Morgan, Chairman, can be viewed from 9.30am today at:

http://www.themission.co.uk/investor-centre/reports

the missiontm is a network of entrepreneurial marketing communications Agencies employing over 850 people in the UK, Asia and San Francisco. The Group comprises a complementary mix of integrated generalists, specialists in specific marketing/ communications activities and specialists in particular market sectors, all providing award-winning solutions to national and international Clients.

www.themission.co.uk

Chairman's Statement

Profits up, debt down and expectations high.

I'm delighted to report that, in the ever changing and challenging sector that we live in, our Agencies have continued to push forward in the first half of this year with growth from new initiatives as well as improvements within our core offerings.

We have seen growth in both our reach and our expertise particularly within digital and data development areas whilst at the same time created new initiatives such as Ethology which sees a harnessing of data with insights and direction in a rather clever way that delivers great responses from consumers. Digital has always been at the heart of what our Agencies do but the pace at which they are exploring and creating new and meaningful techniques is quite astonishing.

But that's not all. Nearly all of our Agencies continue to punch above their weight with new business wins across the board from Ask, Autoline, BMW, Brewin Dolphin, British Airways, Diageo, Muller Wiseman, RAC, Sage, SAS, Siemens and many, many more. We continue to upgrade our talent, expertise and facilities, one example being the recent opening of our new facility for our hugely talented Agency, Story in Edinburgh.

In December last year we launched Speed PR which has gone very well and this year we have bedded in Splash in Asia, acquired late last year, as well as other smaller but perfectly formed Agencies that we absorbed into Story, Bray Leino and April Six. The April Six opening in San Francisco continues to thrive as does our recent merger to create the bigdog Agency with offices now in Leicester, Birmingham, Norwich and London.

Alongside this activity we recently launched Mongoose Sports Marketing by hiring a very talented team from within the Sports Marketing world. Early days, but suffice to say that we are very excited by this initiative. Mongoose is our latest example of how we are striving to build the Group in a way that is seamless and provides our Clients with a breadth of capabilities so that their budgets go further and are utilised wider. Some recent wins at Mongoose are already suggesting that their refreshing approach to Sports Marketing has clear resonance with Corporates, Brands and Events.

Following the announcement that Stephen Boyd will be stepping down from the Board at the end of the year, we are delighted to announce the appointment of Julian Hanson-Smith as a Non-Executive Director with effect from 1 October 2015. Julian was instrumental in setting up the hugely successful financial PR firm Financial Dynamics before pursuing a career in Private Equity so he is highly experienced in our sector.

It may be a cliché but I am a firm believer that to fail to plan is to plan to fail. That is why we have been focusing on our long term strategy and I am confident that we know where we are going and as such we have plotted our future course. We are beginning to see the fruits of this quite meticulous planning and I do feel that our course is now well set to take us into 2016 and beyond.

And no, whilst it's going well for us just now we won't become ultracrepidarian nor are we ready for saturnalia but we do see the Group continue to expand and deliver against our own expectations. We will continue to acquire with consanguinity and expect to make a couple of rather exciting announcements later this year.

Our mission remains simple: to be seen to be the most respected and regarded Agency Group that delivers success and value to its Clients wherever they require us to. At the same time we will continue to manage our business in a risk-averse way as we have done since we restructured five years ago. Our debt continues to reduce and our profitability continues to increase and that's just how we like it.

Trading results

Turnover ("billings") for the six months ended 30 June 2015 increased by 6% to £66.6m (2014: £62.8m). Billings include pass-through costs (eg TV companies' charges for buying air-time) and thus the Board does not consider turnover to be a key performance measure. Instead, the Board views operating income (turnover less third party costs) as a more meaningful measure of Agency activity levels.

We are pleased to report a strong increase (of 12%) in operating income ("revenue") to £29.5m (2014: £26.3m), aided by the acquisitions made in the second half of 2014.

The Directors measure the Group's profit performance by reference to headline profits, calculated before exceptional items and acquisition adjustments (as set out in Note 3). Accordingly, we are really pleased to report a 15% increase in headline operating profits, to £2.4m (2014: £2.1m).

Profit margins in the first half (headline operating profit as a percentage of revenue) remained at 8% as improved margins in the Group's PR, Media and Events and Learning activities, partly driven by the restructuring undertaken at the start of the year, offset the higher initial running costs of our overseas businesses and the start-up costs of our new Sports Marketing business. Generally speaking, our Clients' spending cycles tend to result in a second half bias in our financial results, including higher profit margins, and we expect this pattern to be repeated in 2015.

Adjustments to reported profits in 2015 comprise the previously reported restructuring costs of £0.6m, treated as exceptional items (2014: £nil), offset by acquisition-related items of £0.2m (the net of adjustments in estimated contingent acquisition consideration and the amortisation of intangibles) (2014: £0.4m). After these adjustments, reported operating profits were £2.0m (2014: £2.5m).

After financing costs of £0.2m (2014: £0.3m), headline profit before tax increased by 20%, to £2.2m (2014: £1.8m), and reported profit before tax was £1.7m (2014: £2.2m).

The Group estimates an effective tax rate of 22% (2014: 24%), resulting in profits after tax of £1.4m for the six months (2014: £1.7m), and an increase of 12% in fully diluted headline EPS to 1.88 pence (2014: 1.68 pence).

Balance sheet, cash flow and dividend

Operating cash flows are traditionally stronger in the first half of the year than the second but the start of 2015 didn't see quite the same sizeable working capital inflow as in prior years. Even so, inflows from operating activities were £2.3m (2014: £5.2m), leading to a £1.5m reduction in net debt to £7.9m at 30 June (30 June 2014: £7.3m). Our "leverage ratio" (ratio of net bank debt to adjusted EBITDA) stayed well below x1.25 and our new performance measure, "total leverage" (ratio of total debt, including both bank debt and deferred contingent acquisition consideration), fell to below x1.5.

Further to the announcement of 16 April, the Employee Benefit Trust continues to make periodic share purchases when appropriate and currently holds 1,119,663 ordinary shares.

At 30 June 2015, the Group had £14.6m of committed facilities, of which £4m was undrawn, and an additional overdraft facility of £3m. As in prior years, due to the phasing of working capital requirements, an increase in net debt is predicted in the second half of the year.

Having held the interim dividend unchanged for two years, at 0.25p, the Directors have declared an increased interim dividend of 0.3p in 2015, payable on 4 December 2015 to shareholders on the register at 6 November 2015. Accordingly the ex-dividend date is 5 November 2015.

Current trading and outlook

We had a very solid start to the year and continue to drive organic growth across our Agencies whilst adding to our offering with suitable acquisitions. We expect more of the same in the second half and the Board remains confident of meeting expectations for the year.

David Morgan

Chairman

Condensed Consolidated Income Statement

for the 6 months ended 30 June 2015

Condensed Consolidated Statement of Comprehensive Income

for the 6 months ended 30 June 2015

Condensed Consolidated Balance Sheet

as at 30 June 2015

Condensed Consolidated Cash Flow Statement

for the 6 months ended 30 June 2015

Condensed Consolidated Statement of Changes in Equity

for the 6 months ended 30 June 2015

Notes to the unaudited Interim Report

for the 6 months ended 30 June 2015

1. Accounting Policies

Basis of preparation

The condensed consolidated interim financial statements for the six months ended 30 June 2015 have been prepared in accordance with the IAS 34 "Interim Financial Reporting" and the Group's accounting policies.

The Group's accounting policies are in accordance with International Financial Reporting Standards as adopted by the European Union and are set out in the Group's Annual Report and Accounts 2014 on pages 40-42. These are consistent with the accounting policies which the Group expects to adopt in its 2015 Annual Report. The Group has not early-adopted any Standard, Interpretation or Amendment that has been issued but is not yet effective.

The information relating to the six months ended 30 June 2015 and 30 June 2014 is unaudited and does not constitute statutory financial statements as defined in Section 434 of the Companies Act 2006. The comparative figures for the year ended 31 December 2014 have been extracted from the Group's Annual Report and Accounts 2014, on which the auditors gave an unqualified opinion and did not include a statement under section 498 (2) or (3) of the Companies Act 2006. The Group Annual Report and Accounts for the year ended 31 December 2014 have been filed with the Registrar of Companies.

Going concern

The Directors have considered the financial projections of the Group, including cash flow forecasts, the availability of committed bank facilities and the headroom against covenant tests for the coming 12 months. They are satisfied that the Group has adequate resources for the foreseeable future and that it is appropriate to continue to adopt the going concern basis in preparing these interim financial statements.

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:

· Potential impairment of goodwill and other intangible assets;

· Contingent deferred payments in respect of acquisitions;

· Revenue recognition policies in respect of contracts which straddle the period end; and

· Valuation of intangible assets on acquisitions.

These estimates are based on historical experience and various other assumptions that management and the Board of Directors believe are reasonable under the circumstances.

2. Segmental Information

Business segmentation

For management purposes the Group had twelve operating units during the period, each of which carries out a range of activities. These activities have been divided into four business and operating segments as defined by IFRS 8 which form the basis of the Group's primary reporting segments, namely: Branding, Advertising and Digital; Media; Public Relations; and Events and Learning.

Geographical segmentation

With the acquisition of Splash Interactive Pte. Ltd, trading in five territories in Asia, and the growth in April Six's San Francisco operations, the Group's activities outside the UK are broadening, but substantially all the Group's business remains based and executed in the UK, with less than 10% attributed to territories outside of the UK.

3. Reconciliation of Reported Profit to Headline Profit

In order to provide a clearer understanding of underlying profitability, headline profits exclude exceptional items and acquisition-related costs and adjustments.

4. Exceptional Items

Exceptional items consist of revenue or costs that, either by their size or nature, require separate disclosure in order to give a fuller understanding of the Group's financial performance.

Exceptional costs in 2015 comprise amounts payable for loss of office and other costs incurred relating to the restructuring of certain operations in order to streamline activities and underpin the Board's growth expectations. In 2014 the exceptional item related to the accelerated write off of arrangement fees attached to banking facilities which were replaced by the signing of new banking facilities.

5. Acquisition Adjustments

The movement in fair value of contingent consideration relates to a net downward revision in the estimate payable to vendors of businesses acquired in prior years. Acquisition transaction costs relate to the acquisitions made during the year.

6. Net Finance Costs

7. Taxation

The taxation charge for the period ended 30 June 2015 has been based on an estimated effective tax rate on profit on ordinary activities of 22% (30 June 2014: 24%).

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".

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.

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

9. Intangible Assets

Goodwill

Goodwill arose from the acquisition of the following subsidiary companies and is comprised of the following substantial components:

*In 2015, Fox Murphy Ltd was renamed Big Dog Agency Ltd and the business of Big Communications Ltd was transferred across into this entity. The goodwill of both Fox Murphy Ltd and Big Communications Ltd has therefore been combined in Big Dog Agency Ltd.

In accordance with the Group's accounting policies, an annual impairment test is applied to the carrying value of goodwill, unless there is an indication that one of the cash generating units has become impaired during the year, in which case an impairment test is applied to the relevant asset. The next impairment test will be undertaken at 31 December 2015.

Other Intangible Assets

Other intangible assets consist of intellectual property rights, Client relationships and trade names.

10. Bank Loans and Net Debt

11. Acquisition Obligations

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 is as follows:

12. Contribution of Newly Acquired/Commenced Ventures to the Results of the Group

Proof Communications Ltd, Splash Interactive Pte. Ltd, Speed Communications Agency Ltd and Brandon Hill Communications Ltd were all acquired in the second half of 2014. In addition, The Weather Print and Digital Communications Ltd was acquired on 13 February 2015 and also in the first half of 2015 the Group commenced pre-launch activities in connection with its new Sports Marketing venture. These entities contributed turnover of £4.0m, operating income of £3.3m and headline operating profit of £0.3m to the results of the Group for the six month period ended 30 June 2015, although it is almost impossible to establish exactly how much of this contribution arose from the entities in their own standalone right and how much arose from new business activity and referrals generated from other Group Agencies as part of our efforts to optimise collaboration and concinnity.

13. Post Balance Sheet Events

There were no material post balance sheet events.