The Mission Group Regulatory News (TMG)

14 Sep 2006 07:01

The Mission Marketing Group PLC14 September 2006 14 September 2006 The Mission Marketing Group plc Interim Results 2006 for the six months to 30 June 2006 Growth in digital and breadth of service offering drives organic operating profit growth of 30% - well ahead of sector The Mission Marketing Group plc ("TMMG, themission(R)"), a leading UK marketingcommunications group, today announces its maiden interims following admission toAIM on 13 April 2006. As the statutory accounts cover only the two and a half month trading period to30 June 2006, proforma accounts have been prepared for the full six monthstogether with a comparable period to 30 June 2005. This gives a representativepicture of the underlying trading performance of the Group and enablescomparison with the proforma accounts in the AIM Admission Document. Thiscomparison represents purely organic growth as it includes only the currenttrading units for each of the periods. The highlights below show the results for the period and then for the proformahalf year with the comparable proforma half for the previous year. Highlights • Turnover £13.0m, proforma £29.8m (2005: £24.2m) up 23% • Operating profit £1.0m, proforma £2.9m (2005: £2.2m) up some 30% • PBT £0.99m, proforma £2.5m (2005: £2.1m) up 22% • Diluted EPS 2.92 pence, proforma 8.01 pence (2005: 6.57 pence) up 22% • This growth in the half builds upon the proforma full year to 31 December 2005 which had o Turnover of £47.1m o Operating profit of £3.6m o PBT of £3.1m o Diluted EPS 9.68 pence • Cash net of loan notes due within one year of £3.0m • A broad service offer, growth in digital and cost efficient structure underpins good organic growth • Digital marketing grew by 34% and made up £947,000 or 9% of gross profit in the half • Successful flotation provides capital for growth - both organically and through selective acquisitions • Acquisition of Bray Leino adds significant scale • Integration of businesses on track and benefits are beginning to be generated • Acquisition strategy being actively implemented • Current trading is in line with the Board's expectations, with good organic growth supported by encouraging new business performance - including digital and new media. Commenting on the results Iain Ferguson, CEO said: " themission(R) has reported a good financial performance during the first halfof the year. The successful IPO and acquisition of Bray Leino have provided uswith a strong platform from which to implement our strategy of building anational advertising and marketing agency network. We are already seeing thebenefits of the acquisition and our increased scale coming through as ourclients start to use more of our specialist services, particularly digital. The second half has started well with trading in line with our expectations.Growth in digital together with increased share of spend from existing clients,thanks to the Group's broader service offering, underpins our good organicgrowth prospects. This, coupled with a strong acquisitions pipeline, makes usconfident of delivering a good financial performance in 2006 and positive aboutthe future prospects for the Group." ENDS Enquiries: Iain Ferguson, Chief Executive 07860 361432Tim Alderson, Chief Financial Officer 07931 546672themission(R) 020 7959 3011 Charles Palmer/Nicola Biles 020 7831 3113Financial Dynamics Chief Executive's Statement Overview and strategy themission(R) has reported good results of the first half of 2006. Like-for-likesales growth for the proforma first half of 23% compares very favourably againsta sector growth in 2005 of 2.6% (source: Advertising Association). Thisdemonstrates the advantages derived from the broad mix of services offered bythe Group, its limited exposure to traditional mass media advertising and thegrowth in digital revenues as well as the Group's ability to capitalise onchanging market conditions. The strategy that we set out at the time of our IPO in April is to build anetwork of businesses that specialise in providing award winning advertising andother specialist marketing services through a combination of organic growth andselective acquisitions. Consistent with this, it is the Board's intention toacquire further business capabilities, initially in the UK, which operateoutside the high-cost central London area. We have clearly identified that client requirements of the media sector areundergoing a period of rapid change. We are therefore focussed on acquiringcompanies that have developed expertise beyond the traditional TV-centricadvertising model and which have already integrated on and off line services.These can be leveraged to effectively reach and engage both consumers andbusinesses. Results The interim reporting period begins at incorporation (7 March 2006), butincludes only the two and a half months of trading (13 April to 30 June 2006)for the newly formed Group following its admission to the AIM market. The Groupconsists of the existing businesses: The Mission Marketing Holdings Limited ("TMMH"), Big Communication Limited ("Big") and Fuse Digital Limited ("Fuse"), andthe newly acquired Bray Leino Holdings Limited ("Bray Leino") from 13 April2006. Turnover for the two and a half month period was £13.0m, operating profit was£1.0m and diluted EPS was 2.92 pence. There are no comparables for this period.Due to our business and client mix the profit performance of the Group tends tobe higher in the first half of the year. To provide meaningful information and to build on the proforma informationprovided in the Admission Document, we have provided proforma financials for thefull six months to 30 June 2006 and comparatives for the first six months andfull year of 2005, as if the Group had existed in its current form throughoutthose periods. On this basis, as shown at the end of this interim report, turnover grew by 23%to £29.8m (2005: £24.2m). This increase in volume led to gross profitsincreasing by 13% to £10.9m (2005: £9.6m). Operating profit rose by some 30% to£2.9m (2005: £2.2m). Net interest payable during the first half increased to £344,000 (2005:£140,000). As a result of the different debt and cash balances in the periods,these are not strictly comparable. As a result the pre-tax profit, earnings andEPS all grew by a slightly lower 22% (identical tax and number of sharesassumptions for the periods). The profit before taxation was £2.5m (2005:£2.1m). At Admission, £13.6m was raised net of equity raising costs. Part of this wasused to reduce the pre-existing Group bank debt which was replaced by a single£10m revolving credit facility, of which £2m remains undrawn. The remainder wasused to fund the acquisition of Bray Leino and provide working capital.Combined with our strong trading cash flow, this has resulted in a cash balanceat the end of the period of £11.4m or £3.0m net of the loan notes payable withina year. After careful consideration the Board has decided not to adopt the InternationalFinancial Reporting Standards ("IFRS") at this stage, but to make 2006 thetransition year in advance of full IFRS adoption in 2007. Dividends The Board intends, subject to availability of distributable reserves, thatdividends will be paid for the full year 2006 and thereafter every interim andfull year as part of a progressive dividend policy. However the main focus ofthe Group in the short term will be on delivering growth in earnings throughwell planned organic growth and selective acquisitions. Review of Operations The enlarged Group now has operations in five specialist areas: Advertising,Digital/On-line marketing, PR, Events and Learning. These services are availableto all of our clients through our network of six offices. Advertising is the largest practice area and provides its clients with a fullagency service offering including brand consultancy, product development, andtraditional and new media advertising campaigns. During the World Cup, three ofour agencies' clients were featured with successful multi-platform campaigns forSchloer, King of Shaves and WKD. We have specific expertise in OTCpharmaceuticals, consumer goods, financial and business services and business tobusiness. All of these offer potential for further growth. Digital and on line media have delivered an excellent performance, reflectingthe Group's commitment to focus resources in this area. We plan to leveragegrowing demand for consulting and executional expertise as clients manoeuvre tocreate new competitive advantage in the internet space. Our agencies havedeveloped advanced expertise in food and drink, business to business and otherkey sectors and are working with blue chip clients such as Carlsberg, Lucozadeand Miele. The Public Relations business has grown rapidly and now operates out of fouroffices around the UK. The PR practice covers consumer and business to businesssegments and has recently won a number of new assignments spanning both the UKand Continental Europe. Events specialises in the design, creation, transportation and construction ofsemi-permanent structures for exhibitions and trade shows as well as designingand creating point of sale and retail solutions. The business has grown withincreasing demand from customers particularly in the dynamic fashion andhealthcare sectors and new growth is now being driven through client assignmentsin the IT sector. The Learning unit provides high quality skills and personal developmentsolutions to businesses and major public sector organisations through itsnetwork of some160 independent training consultants. The unit is Governmentaccredited, IS0 compliant and has specialist expertise in programme design anddelivery. We have already begun to see benefits of delivering new specialist services,which we have acquired or created, to our existing client base. This willprovide a further future source of income as extended capabilities are madeavailable across the enlarged Group. New Business During the first half we have maintained our established track record ofattracting blue chip clients in growth sectors including IT, pharmaceuticals,services, packaged goods and the public sector. Key new business wins during thefirst half of this year include assignments for Seagate, Princes Foods, UnipartLeisure and Debt Free Direct. Our Board We have the benefit at TMMG of a Board and executive team that have considerabledepth of experience and successful track records in the advertising andmarketing services business. Collectively, they bring to the Group provenexpertise in executing strategy by leveraging opportunities for cross-selling,creating efficiencies throughout agency networks, managing mergers andacquisitions, agency and network development, financial controls and governance,and value creation. Our non-executive chairman, The Rt Hon Francis Maude and nonexecutive director, Brian Child, provide further insight and guidance on our keybusiness areas. The Board is structured to provide the capacity to drive and manage our growthand acquisition ambitions without further expansion in the short term. This isconsistent with our stated aim of creating a successful, dynamic buy-and-buildmarketing communications group which is not predicated on traditional TV andmass media advertising. Corporate Governance The Board recognise the importance of sound corporate governance and will,insofar as practicable given the Company's size and constitution of the Board,comply with the main provisions of the Combined Code: Principles of CorporateGovernance and Code of Best Practice. Current trading and outlook The Group has had a very encouraging start to the year. Existing clients arebeginning to use our new extended service offer and there is growing demand forcost-efficient, effective advertising and marketing services that go beyondtraditional mass media advertising. The structure of the enlarged Group meansthat themission(R) is well positioned to capitalise on these trends, andcontinue to outperform the sector. The second half has started well with trading in line with the Board'sexpectations. Growth in digital together with increased share of spend fromexisting clients, thanks to the Group's broader service offering, underpin itsgood organic growth prospects. This, coupled with a strong acquisitionspipeline, makes the Board confident of delivering a good financial performancein 2006. Iain Ferguson Chief Executive The Mission Marketing Group plc Consolidated Profit and Loss Account for the period ended 30 June 2006 Period ended 30 June 2006 Unaudited Note £'000 TURNOVER 12,985 Cost of sales (8,308) GROSS PROFIT 4,677 Administrative expenses 2 (3,636) OPERATING PROFIT 1,041 Net interest payable 3 (115) PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 926 Taxation 4 (297) PROFIT FOR THE PERIOD 5 629 Basic earnings per share (pence) 6 3.12Diluted earnings per share (pence) 6 2.92Fully diluted earnings per share (pence) 6 2.66 There were no recognised gains or losses for the period other than the profitshown above. No separate statement of Total Recognised Gains and Losses has been presented asthese have been dealt with in the profit and loss account. This statement covers the period from incorporation, 7 March 2006, and thetrading period from 13 April to 30 June 2006. The Mission Marketing Group plc Consolidated Balance Sheet for the period ended 30 June 2006 As at 30 June 2006 Unaudited Note £'000FIXED ASSETSIntangible assets 7.1 38,057Tangible assets 1,357 39,414CURRENT ASSETSWork in progress 184Debtors 11,685Cash at bank and in hand 11,379 23,248 CREDITORS: Amounts falling due within one year (21,847) NET CURRENT ASSETS 1,401 TOTAL ASSETS LESS CURRENT LIABILITIES 40,815 CREDITORS: Amounts falling due after more than one yearDeferred tax (45)Bank loan (8,000)Deferred consideration (9,321)NET ASSETS 23,449 CAPITAL AND RESERVESCalled up share capital 8 2,000Share premium account 9 20,820Profit and loss account 9 629SHAREHOLDER'S FUNDS 23,449 The Mission Marketing Group plc Consolidated Cash Flow Statement for the period ended 30 June 2006 Period ended 30 June 2006 Unaudited Note £'000 £'000 Net cash inflow from operating activities 10.1 167 Net cash outflow from returns onInvestments and Servicing of Finance 3 (115) Corporation tax paid (121) Capital expenditure (105) Acquisitions and disposalsPayments to acquire subsidiary undertakings (2,436)Cash acquired 3,464Net cash inflow from acquisitions and disposals 1,028 FinancingReceipts from issuing shares 13,620Receipts from long term loans 8,000Repayments of amounts borrowed (11,095)Net cash inflow from financing 10,525 INCREASE IN CASH AND CASH EQUIVALENTS 11,379 The Mission Marketing Group plc Notes to the unaudited Interim Report for the period ended 30 June 2006 1. BASIS OF PREPARATION The consolidated interim financial statements for the period to 30 June 2006have been prepared on the basis of the accounting policies set out in theAdmission Document, dated 10 April 2006, on pages 33 and 34. This financialinformation has not been audited but has been reviewed by the Company'sauditors. It does not constitute statutory accounts within the meaning ofsection 240 of the Companies Act 1985. The interim statements were approved by the directors on 13 September 2006. 2. ADMINISTRATIVE EXPENSES The administrative expenses of £3,636,000 include a non-cash charge of £37,800for the options granted to employees in line with Financial Reporting Standard20: "Share-based payments". 3. INTEREST Period ended 30 June 2006 Unaudited £'000 Interest receivable 82 Interest payable:on bank loans and overdrafts (132)on loan notes (65) (197) Net interest payable (115) 4. TAXATION The taxation charge for the period ended 30 June 2006 has been based on anestimated effective tax rate on profit on ordinary activities of 32%. 5. DIVIDEND The Board has declared that there will be no dividend for the period. 6. EARNINGS PER SHARE The earnings per share has been calculated by dividing the profit on ordinaryactivities after taxation by the weighted average number of ordinary shares inissue during the period of determined in accordance with the provisions ofFRS22: "Earnings per Share". Period ended 30 June 2006, unaudited Earnings £'000 Weighted average Pence per number of shares shareIssued Shares 20,000,000Shares to be issued subject only to time 165,289Basic earnings per share 629 20,165,289 3.12 Dilutive effect of securities:Shares to be issued subject to performance achieved 1,375,620within the periodDiluted earnings per share 629 21,540,909 2.92Dilutive effect of options: 38,254Dilutive effect of expected contingent additional 2,066,116consideration shares:Fully diluted earnings per share 629 23,645,279 2.66 Basic earnings per share includes shares to be issued subject only to time as ifthey had been issued at the beginning of the period. Diluted earnings per share includes the Bray Leino deferred initialconsideration shares to be issued as if they had been issued at the beginning ofthe period subject to performance achieved within the period. The additionalconsideration shares included in Creditors: Amounts falling due after more thanone year and the options have not been included in the diluted earnings pershare because the conditions for their issue had not been met in the period. Fully diluted earnings per share includes the contingent Bray Leino additionalconsideration shares, at a level that the Board estimate will be payable in2009, as if they had been issued at the beginning of the period at a price of121p per share. The 2,000,000 options in issue, with an exercise price of 120p,have been included to the extent average market price during the period (122.34pper share) was above the exercise price in accordance with FRS22. 7. ACQUISITIONS 7.1 Acquisition goodwill On 13 April 2006 the Company was admitted to AIM and concurrently completed theacquisition of the previous businesses of The Mission Marketing Group Limitedand of Bray Leino Holdings Limited. Goodwill arising on the acquisition of thesecompanies has been capitalised and will be the subject of an annual impairmentreview. The calculation of the goodwill arising on these acquisitions is subject tocertain elements of consideration which are contingent in nature and dependantupon the financial performance of the companies in the years to 31 December 2008(Bray Leino) and 31 March 2009 (Big/Fuse). Book Value of assets and liabilities TMMGL Big/Fuse Bray Leino Totalat the date of acquisition £'000 £'000 £'000 £'000 Consideration paid 2,995 7,257 17,737 27,989Acquisitions costs - 370 1,155 1,525Additional consideration to be paid - 2,274 5,000 7,274Total cost of investment 2,995 9,901 23,892 36,788 Fixed assets 9,908 101 1,214 11,223Current assets 425 2,889 12,513 15,827Current liabilities (217) (1,379) (10,469) (12,065)Liabilities over 1 year (8,227) - (8,027) (16,254)Total net assets at date of acquisition 1,889 1,611 (4,769) (1,269) Goodwill arising on acquisition 1,106 8,290 28,661 38,057 7.2 Acquisition outstanding obligations The directors best estimate of future earn out obligations is as follows: Loan Notes Shares to be Total issued £'000 £'000 £'000 Less than one year 8,386 1,865 10,251Between one and two years 1,364 - 1,364Between two and three years 5,457 2,500 7,957Total liabilities 15,207 4,365 19,572 The loan notes less than one year are payable to Bray Leino vendors and arebacked by cash in an escrow account of £7,186,181 which is included in the cashbalance. The amounts greater than one year above are included in Creditors: Amountsfalling due after more than one year. In addition to the above the Company has a 6 year revolving credit facility ofup to £10m of which £8m has been drawn down and is included in Creditors:Amounts falling due after more than one year as there are no repayments duewithin one year. The deferred consideration of £1,865,000 is payable to the Bray Leino vendors inshares which are due to be issued on 16 October 2006. The Bray Leinoacquisition includes a maximum deferred consideration of £8m, of which up to 50%is payable in shares at the Company's option. A contingent consideration of £5mhas been assumed with 50% payable in shares in the table above. 8. SHARE CAPITAL As at 30 June 2006 Unaudited £'000Authorised:85,000,000 ordinary shares of 10pence each 8,500,000 Allotted and called up:20,000,000 ordinary shares of 10pence each,fully paid 2,000,000 The Company was incorporated on 7 March 2006 and on 6 April 2006 1,359,165shares were issued to the shareholders of The Mission Marketing Group Limited,the balance of shares were issued immediately following the Placing andAdmission to AIM on 13 April 2006. 9. STATEMENT OF MOVEMENTS ON RESERVES Share Premium Profit and loss account £'000 £'000On incorporation 7 March 2006 - - Premium on Shares issued in April 2006 22,000Costs of issue (1,180)Profit for the period ended 30 June 2006 629Balance at 30 June 2006 20,820 629 In the period 6 to 13 April 2006 20,000,000 shares were issued at a premium of110 pence resulting in an increase in share premium of £20,820,000 after£1,180,000 of placing costs. 10. NOTES ON THE CONSOLIDATED CASH FLOW STATEMENT 10.1 Reconciliation of operating profit to net cash inflow from operatingactivities Period ended 30 June 2006 Unaudited £'000Operating profit 1,041Depreciation charges 71Non cash charge for share options 38Increase in debtors (550)Increase in work in progress (45)Decrease in creditors (388)Net cash inflow from operating activities 167 10.2 Analysis of net funds At 7 March 2006 Cash As at 30 Movement June 2006 £'000 £'000 £'000Cash at bank and in hand net of overdrafts - 11,379 11,379Loan notes due within 1 year - (8,386) (8,386)Loan notes due after more than 1 year - (6,821) (6,821)Bank loans - (8,000) (8,000)Shares to be issued - (4,365) (4,365)Total net debt - (16,193) (16,193) 10.3 Reconciliation of net cash flow to movements in net funds Period ended 30 June 2006 Unaudited £'000Decrease in cash in the year representing change in net (16,193)debt Net (debt)/cash at 12 April 2006 - Net debt at 30th June 2006 (16,193) 11. POST BALANCE SHEET EVENTS There have been no significant post balance sheet events. 12. PUBLICATION OF THE INTERIM REPORT Copies of the Interim Report are being mailed to shareholders and will beavailable from the Company's registered office at Devonshire House, 60 GoswellRoad, London, EC2M 4QP. They will also be posted on the Group's website, www.themission.co.uk INDEPENDENT REVIEW REPORT TO THE MISSION MARKETING GROUP PLC Introduction We have been instructed by the Company to review the financial information forthe period ended 30 June 2006 which comprises the Consolidated Profit and LossAccount, Consolidated Balance Sheet, Consolidated Cash flow Statement and therelated notes. We have read the other information contained in the interimreport and considered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the Company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the Company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe Company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The directors areresponsible for preparing the interim report in accordance with the ListingRules of the AIM market which require that the accounting policies andpresentation applied to the interim figures should be consistent with thoseapplied in preparing the preceding annual accounts except where any changes, andthe reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board. A review consists principally of makingenquiries of Group management and applying analytical procedures to thefinancial information and underlying financial data and based thereon, assessingwhether the accounting policies and presentation have been consistently appliedunless otherwise disclosed. A review excludes audit procedures such as tests ofcontrols and verification of assets, liabilities and transactions. It issubstantially less in scope than an audit performed in accordance with AuditingStandards and therefore provides a lower level of assurance than an audit.Accordingly we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the period ended 30June 2006. 141 Wardour Street Kingston Smith LLPLondon Accountants & Registered AuditorsW1F 0UT 13 September 2006 The Mission Marketing Group plc Proforma Consolidated Profit and Loss Account for the six months ended 30 June 2006 The Mission Marketing Group plc was incorporated on 7 March 2006 and did nottrade until Admission to the AIM market when it acquired the pre-existingbusiness of The Mission Marketing Group Limited and also that of Bray LeinoHoldings Limited. The unaudited Profit and loss for the 6 months to 30 June 2006 is taken from theindividual entities as if they had been part of the Group from 1 January 2006.Exceptional costs relating to the redemption of the Bray Leino debt facility of£279,311 as part of the acquisition and costs of shares issued to non-vendoremployees have been excluded. The proforma profit for the 12 months ended 31 December 2005 is taken from PartV of the Admission Document issued in April 2006. It excludes businesses whichwere discontinued before the year end and which consequently have not beenacquired by TMMG. The unaudited profit and loss for the 6 months to 30 June 2005has been estimated from the management accounts for the year ended 31 December2005 and the proforma accounts for that period. All the proforma numbers exclude amortisation in line with the Company's policyand assume a tax rate of 32% on the adjusted profits. In calculating theearnings per share for the prior periods the same number of shares and dilutedshares given in note 6 above have been used throughout all three periods,(Basic: 20,165,289, Diluted: 21,540,909 ordinary shares). Six months ended Six months Year ended ended 30 June 2006 30 June 2005 30 December 2005 Unaudited Unaudited Unaudited £'000 £'000 £'000 TURNOVER 29,830 24,222 47,087 Cost of sales (18,884) (14,597) (28,216) GROSS PROFIT 10,946 9,625 18,871 Administrative expenses (8,064) (7,404) (15,279) OPERATING PROFIT 2,882 2,221 3,592 Net interest payable (344) (140) (525) PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 2,538 2,081 3,068 Taxation (812) (666) (982) PROFIT FOR THE PERIOD 1,726 1,415 2,086 Basic earnings per share (pence) 8.56 7.02 10.34Diluted earnings per share (pence) 8.01 6.57 9.68Fully diluted earnings per share (pence) 7.30 5.99 8.82 This information is provided by RNS The company news service from the London Stock Exchange