TNG.L Regulatory News (TNG)

Tangent Communications PLC

("Tangent" or the "Company")

Results for the year ended 29 February 2012

Tangent is an AIM listed company, a leading integrator of technology and marketing strategy, with industry leading digital print facilities.

Business Highlights:

·; Underlying Operating Profit increased by 13.3% to £1.53m (2011: £1.35m).

·; Gross Profit increased by 7.8% to £11.83m (2011: £10.97m).

·; Profit Before tax increased by 38.1% to £1.45m (2011: £1.05m).

·; Underlying earnings per share increased to 0.60p (2011: 0.55p).

·; E-commerce contract signed with TATA targeting online retail in India.

·; Launch of printed.com as a leading destination for buying printed products.

"Tangent's performance for the year ended February 2012 saw profit before tax increase by 38.1% to £1.45m. Digital revenues reported operating margins of 9.3% (up from 7% in 2011), as we retained our quality customer base and won international web development contracts with Carlsberg and TATA. Print performance remained static, as reducing contribution from estate agents was buoyed by the growing revenues of printed.com.

We go into 2012-13 with clear objectives of growing our Digital revenues and printed.com. Both areas represent significant opportunities in the UK and internationally to expand Tangent over the next few years".

1 Underlying operating profit is defined as operating profit after share based payment charges before non-recurring costs

2 Underlying EPS is calculated after share based payments before non-recurring costs net of tax

For further information, please contact:

Tangent Communications plcTimothy Green 020 7462 6100

Canaccord Genuity LimitedBruce Garrow 020 7523 8350

About the Company:Tangent employs 240 people across four locations in London, Newcastle, Cheltenham and Melbourne and is traded on AIM (AIM: TNG). For more information please visit www.tangentplc.com

Chairman's Statementfor the year ended 29 February 2012

Tangent's underlying operating profits increased by 13.3% from £1.35m to £1.53m whilst turnover at £21.72m was 3.0% lower. On the plus side our Digital marketing operations grew strongly, customising our proprietary core technology and marketing skills for a range of leading brands.

However our Print business was impacted by its major customer segment of estate agents. This was a worse decline than we had expected and there was also the absence of last year's £1m of General Election business. However overall Print sales were £10.83m versus £11.27m and profits were £0.82m versus £0.81m. This was achieved with the growing success of our e-commerce print service to SMEs. Thus our digital print facility remained substantially loaded, albeit with a more varied workload, the efficient handling of which the production team are to be congratulated.

The proposed dividend of 0.2p per share is maintained at last year's level.

Piers CaldecoteNon-executive chairman

Chief Executive's Statementfor the year ended 29 February 2012

Revenues

Sales of £21.72m for the year delivered £11.83m of gross margin above the £10.97m in 2010-11. Three key factors drove this 5.5% improvement in margin; the reduction in straight through income (postage from the general election revenues in 1H 2010), a higher proportion of income from digital services rather than manufacturing and an improving price point for our print.

The focus in 2011-12 was for an improved sales mix and certainly at this level our objectives were reached with £0.86m of additional gross profit which was 7.8% up on 2010-11.

Digital

The re-branding of Tangent One and Snowball into Tangent Snowball was completed early in the year bringing together what was once as many as 6 separate agencies (Tangent Direct, Snowball, Tangent One, Lateral, Tangent Labs and C360). This has had a binding effect for the business and ranks Tangent Snowball as a Top 20 digital marketing agency in the UK (Marketing Magazine). Tangent Snowball creates marketing strategies and delivers them. The integrated agency offers a blend of CRM and digital communications that cuts across media channels and strategies. With the benefit of in-house data, web development and creative skills, our client services assemble teams to drive digital strategies with particular effectiveness in the B2B, leisure and luxury sectors. We will now target breaking into the top 10 lists as the agency grows its existing clients and expands with new account wins. Sales of £10.90m delivered operating profits of £1.02m, just under the targeted 10% net margin set for the business. The UK digital market is well established and much of our work is now international with implementations across the globe. A note on international revenues is included below.

International Revenues

Australia performed strongly as the contract with Pearson to design, build and market www.borders.com.au was maintained through the year. This contract is up for renewal in 2012-13 which may impact future revenues. The win with TATA to deliver www.landmarkonthenet.com has opened an opportunity for Tangent to position itself as experts in the fast growing Indian e-commerce market. Managing this contract remotely has proven successful although the opportunity of having a Tangent office locally to Mumbai has been explored and is targeted for Q3 / Q4. Contracts with Bang & Olufsen, Carlsberg, Dunhill and SAP are all international with delivery across Europe, the United States and the growing Asian markets.

Print

Print revenues declined in the 1H where comparisons to the previous year included the exceptional £1m contract from The Labour Party general election campaign. In the 2H print revenues grew on a like for like basis as new revenues from printed.com began to offset any decline in estate agency revenues. Customer numbers have grown dramatically as the concentration of large print contracts has been overrun by a mass of small business customers. Our marketing optimisation team continues to deliver but with few year-on-year trends established, forecasting remains a challenge. We expect Print revenues to grow in 2012-13 and will begin to communicate and report on printed.com metrics as the year continues.

Estate agency revenues were lower in 2011-12 and are forecast to reduce further in the coming year although the quality of sales is targeted to improve. Utilisation of our investment in the latest digital presses has ensured we have a high proportion of satisfied and repeat customers which should provide an excellent platform for us to build on.

International

Digital print revenues are yet to be established outside the UK although we expect to support an international roll-out during 2012-13. For European fulfilment we will utilise existing capacity from our Newcastle facility in the short term and aim to take advantage of competitive pricing from the £/euro exchange. Furthermore we will establish local fulfilment partners for Asian (India) and US markets before the end of the year.

Expenditure

The capital expenditure programme that commenced in 2010-11 to upgrade the Ravensworth digital print facility has continued with a further £0.98m spent during the year. There is further expenditure planned in 2012-13 although this year is expected to complete the investment programme. We should be able to deliver a further 30% of digital print revenues before further investment would be considered.

IT spend continues to increase as the cost of hosting and maintenance, and the sheer number of digital and office headcount grow in the business. No significant expenditure is planned although a move to Cloud-based frameworks is likely in the near future.

Innovation

During the year we will invest in our software platforms TaoShop and TaoMAP.

TaoShop provides open source e-commerce for retailers - the platform originally designed in 2005 using a bespoke PHP platform. Whilst stable and successful, this closed framework has been a limiting factor in adoption. Market trends have moved to favour the adoption of open source platforms as they provide the added flexibility and perceived optionality of the customer not to be tied into support and services from the agency. This can be seen most clearly in the success of open source platforms such as Magento commerce. Moving to our open source framework "Oscar" ensures we can provide expertise without ownership. Although in its infancy, awareness is starting to build and the framework has already been adopted by external development teams. As we ramp up the PR of our launch client TATA we will target the Indian e-commerce marketplace in Q3/Q4.

TaoMAP provides sales and marketing automation software for enterprises. Grown from our Toolkit software developed since 2001 the solution has evolved from a tool to order business cards online to multi-faceted automation software. TaoMAP provides multi-channel communications (mobile, email, print, data management, CMS, website creation, merchandising, e-commerce, payment facilities). The growth of features over the past ten years has provided the opportunity to refine the solution into a more modular framework. This approach will speed up future implementations and provide a slicker user experience to increase the effectiveness of the software for existing clients.

With customers Carlsberg, Citroen, GalaCoral, Greene King, The Labour Party and Wolseley, just some of our lead clients, this will ensure the underpinning of on-going license fees and the references for a significant new business push in the latter part of the year.

Outlook

For 2012-13 Tangent will focus on revenue growth; increasing customer numbers to our printed.com service and new contractual income to our Digital business. We will increase advertising expenditure to promote printed.com both in the UK and internationally as we build our brand and the utilisation of our print facility. We will continue to invest in our Digital offering by driving the reputation of our marketing effectiveness and web development to attract new clients and projects. We look to the 2H of the year to best demonstrate growth prospects from increased customer numbers and new business.

Timothy GreenChief executive

Financial reviewfor the year ended 29 February 2012

Tangent is pleased to report an increase in gross profit and operating profit for the year to 29 February 2012.

Highlights

·; Profit before tax increased by 38.1% to £1.45m (2011: £1.05m)

·; Underlying operating profit increased by 13.3% to £1.53m (2011: £1.35m)

·; Underlying operating margin increased to 7.0% (2011: 6.0%)

·; Diluted basic earnings per share increased by 34.9% to 0.58p (2011: 0.43p)

·; Gross margin increased by £0.86m (7.8%) to £11.83m (2011: £10.97m)

·; Underlying operating profit from Digital segment increased by 27.5% to £1.02m (2011: £0.80m)

·; Cash generated from operations £1.80m (2011: £1.83m) represented 118% of underlying operating profit (2011: 136%)

·; Proposed final dividend 0.2p per share (2011: 0.2p per share)

Trading PerformanceRevenue for the year to 29 February 2012 was £21.72m.This was in line with the year to 28 February 2011 (£21.39m) after excluding £1.0m from General Election Campaign work undertaken during the prior year.

The mix of revenues in Tangent has continued to improve as higher margin digital sales increased, customer service and support fees grew and print revenues moved from contract to direct sales channels.

This lead to a reduction in bought-in costs of £1.68m to £6.13m (2011: £7.81m) reflecting the growing level of service and support based income and direct channel print revenues together with reduced pass-through postage costs.

Gross profit increased by £0.86m to £11.83m (2011: £10.97m) with gross margin improving from 49.0% to 54.5%.

Average staff numbers grew 10% over 2011-12 with employment costs rising by £0.94m to £9.73m (2011: £8.79m). As customer numbers increased and product lines developed, additional resource was added in our print production facility. During the year Tangent also established a dedicated new business team and invested further in development, customer and support services as revenues continued to change. This combined with the additional share-based payment charge, as noted below, accounted for the increase in employment costs over the year.

The increase in operating expenses of £0.6m to £10.20m (2011: £9.60m) was mainly due to the increase in employment costs as noted above. In addition Tangent has continued to invest in the expansion of its e-commerce printed.com revenues, driven through increased spend on advertising and marketing which rose by £0.30m during the year to £0.51m (2011: £0.21m). This increase was largely offset by a reduction in charges for impairment on trade receivables of £0.16m and a reduction in professional fees of £0.13m.

The 2012 charge for share-based payments was £0.11m (2011: £0.02m). Included in this year's share-based payment charge is an additional £0.07m to reflect the potential cash bonus payable on phantom options which have currently vested, further detail on which are included below.

The additional gross margin generated was more than enough to cover the increase in operating expenses, with underlying operating profits increasing by 13.3% to £1.53m (2011: £1.35m).

Profit before tax increased by 38.1% to £1.45m (2011: £1.05m).The major difference to underlying operating profits being a significantly reduced charge for non-recurring expenses £0.06m (2011: £0.30m).

The tax charge of £0.41m (2011: £0.28m) equates to 28.5% of profit before tax, £0.04m higher than the standard rate of corporation tax of 26%. This additional charge arises as Tangent has investment in capital assets from which no allowances for tax purposes arise, namely land and buildings, together with expenses that are not deductible for tax purposes.Underlying fully diluted earnings per share for the year (calculated after share-based payments but before non-recurring costs net of tax) was 0.60p per share, an increase of 9.1% (2011: 0.55p per share).

SegmentsAs noted in the 2011 annual report, from 1 March 2011 Tangent amended its operating segments. In prior years our direct marketing business had a significant overlap with our print business. However as our digital revenues have grown, the interaction between the segments has become significantly reduced.The realignment of the segments has allowed Tangent to consolidate its printing activities under "Print" and our agency, digital and marketing activities under "Digital", thus providing a clearer view of Tangent's activities both internally and externally. All comparative numbers included in these financial statements have been amended to reflect this. The amendment does not have any impact on previously reported operating profits, net assets or earnings per share of Tangent.

Digital

Revenue for 2011-12, at £10.90m, was marginally lower than the prior year (2011: £11.13m).

Over the last 12 months the focus for this segment has been on improving the mix of sales, significantly increasing the proportion of digital fees, which accounted for 70% of segment revenue in 2012 (2011: 64%). As a result gross income (sales less all bought-in costs) improved to 73% (2011: 69%) adding an additional £0.40m at this level.

Digitalcontinued to invest both in software platforms and human resources across the year, increasing operating expenses by £0.46m, offset by a significant reduction in impairment charges on trade receivables of £0.16m (2011 having included a one-off charge in respect of Red Group Retail in Australia) and in professional fees of £0.10m.

Changing sales mix and improved margin were the drivers for the increase in underlying operating profit which increased by 27.5% to £1.02m (2011: £0.80m) with operating margin improving to 9.3% (2011: 7.1%).

Print

Revenue for Print, at £10.83m, was marginally lower than 2011 (£11.27m), which included £1.0m in revenues from the General Election. Excluding this, sales on a like-for-like basis were 5% ahead of 2011.

Over the course of the last year the focus of this segment has been to move away from commercial contract print and increase customer numbers in the SME market, where margins are higher, via our e-commerce sales channel printed.com. Customers ordering via that channel have increased threefold over the last twelve months. Revenue growth has been somewhat offset by the move away from contract sales and static estate agency revenues.

In order to service the increasing number of customers, orders and product lines developed by our growing advertising and marketing activity, staff numbers and thereby employment costs in this segment increased by £0.45m to £4.14m (2011: £3.69m).

As Tangent targets smaller business clients with our e-commerce offering, the methodology to attract those customers has moved to an advertising model rather than traditional sales activity. As a result advertising spend increased by £0.30m to £0.40m, 4% of segment revenues.

The improved gross margin earned from the developing sales mix was more than sufficient to cover the additional operating costs. Underlying operating profit for 2012 was £0.82m, in line 2011 (£0.81m) with operating margin improving to 7.6% (2011: 7.2%).

The half year reported figures to 31 August 2011 included a charge of £0.1m in respect of royalties, as noted below under Non-recurring income and expenses this has been revised to zero at 29 February 2012.

Central

Central costs, excluding share-based payment charges of £0.11m (2011: £0.02m) were £0.04m lower than 2011 as a result of reduced expenditure on professional fees.

Non-recurring income and expenses

Non-recurring income and expenses for the year amounted to £0.06m (2011: £0.30m).

In order to provide a clear view on operating performance Tangent shows separately on the face of the statement of comprehensive income those items that are both significant and non-recurring in nature. To that end Tangent has excluded the following items from underlying operating profit:

Impairment Loss

In April 2008 Tangent established a joint venture, Zui Limited, to provide services to the Enterprise Resource Planning market. Whilst successful at first, the last two years have seen little activity and as such an impairment provision has been made inrespect of the trade receivable due from Zui, amounting to £0.14m.

Legal Fees

During the year Tangent engaged professional advisers to defend an action brought by VLM Holdings Limited, as detailed under 'Royalties' below. Fees incurred of £0.10m do not form part of the normal operating expenses of Tangent and have therefore been included in Non-recurring Income and Expenses and excluded from underlying operating profit. Further costs are expected to be incurred during 2012-13 of up to £0.2m.

Redundancy and Termination Costs

During the year to 28 February 2011 the Board completed the merger of Snowball and Tangent One resulting in redundancy and termination costs. Some of these costs have been incurred in the year to 29 February 2012. As these costs do not form part of the normal operating expenses of Tangent they have been separately identified in the consolidated statement of comprehensive income and excluded from underlying operating profit.

Royalties

In March 2009 Tangent entered an agreement to acquire rights to certain intellectual property from VLM Holdings Limited. Under the terms of that agreement all rights would transfer to Tangent following payment of royalties over a three year period from March 2009 to March 2012. In November 2009 Tangent served notice terminating the agreement following an irremediable breach. VLM Holdings Limited subsequently disputed the termination. Tangent made provision for royalty fees payable under the agreement.

During 2011-12 VLM Holdings instigated proceedings for recovery of unpaid royalties and damages. Tangent's lawyers have advised that they do not consider the claim has merit and recommended that it be contested. As such the Board considers that it is possible but not probable that any award will be made in respect of the action brought by VLM Holdings Limited. The estimate of royalties as at 28 February 2011 has therefore been revised to £nil resulting in a credit of £0.22m, included in non-recurring income and expenses and excluded from underlying operating profit. Included at note 29 is further detail in respect of the contingent liability.

Share-based payment charges

The 2012 charge for share-based payments was £0.11m (2011: £0.02m). The current capital structure of Tangent does not allow for equity to be issued in satisfaction of options granted, which subsequently vest and become exercisable, to Timothy Green and Nicholas Green. As such, since June 2007, phantom options have been issued which may result in a cash bonus being paid, subject to relevant performance criteria being met. In all cases the Board retains the right to satisfy the options in shares rather than through a cash bonus. Included in this year's share-based payment charge is an additional £0.07m to reflect the potential cash bonus payable on phantom options which have currently vested.As in prior years this charge has been shown separately on the face of the consolidated statement of comprehensive income and included within underlying operating profits.

Cash Flows

Tangent's cash and cash equivalents at 29 February 2012 amounted to £1.82m (2011: £1.93m).Cash generated from operations was £1.80m representing 118% (2011: 136%) of underlying operating profit and 122% (2011: 174%) of operating profit. As in prior years, charges for amortisation and depreciation were the major reason for operating cash flow exceeding operating profit. Operating cash flow reduced following a negative movement in working capital of £0.37m. This was a result of lower outsource costs during the year and therefore trade payables at the year end and the major reason for the lower cash conversion percentage this year.

The major items included within the consolidated cash flow statement are as follows:

·; Capital expenditure of £0.98m was spent on the acquisition of digital printing and finishing equipment and IT infrastructure.

·; Tax payments of £0.49m (2011: £0.1m), this represents settlement of Tangent's 2011 tax liabilities together with instalment payments in respect of the year to 29 February 2012.

·; Payment of £0.36m in deferred consideration for the acquisition of "Snowball".

·; Dividends of £0.35m were paid during the year.

·; New finance lease amounting to £0.37m was raised during the year for the acquisition of digital printing equipment and £0.12m of finance leases were repaid.

Balance Sheet

Tangent's net assets increased by £0.89m to £20.98m (2011: £20.09m). The major item on the balance sheet is goodwill.

The carrying value of goodwill is tested at least annually or when there is an indication that an impairment charge may be likely, no such impairment was present at the year end. At 29 February 2012 the carrying value of goodwill on Tangent's balance sheet was £16.87m (2011: £16.26m), an increase of £0.61m following settlement of deferred consideration on the previous acquisition of "Snowball".

Dividends

The Board believes that paying a dividend is an important part of providing returns to shareholders. To that end the Board will recommend payment of a dividend of 0.2 pence (2011: 0.2 pence) at the Annual General Meeting payable on 18 July 2012 to shareholders registered on 6 July 2012.

Treasury, Funding and Exchange RiskTangent finances its operations through funds raised from shareholders, retained earnings and finance lease borrowings. In addition the group has a variable rate £1m overdraft facility which has rarely been used. Regular reports on cash balances and borrowings are provided to the Board.The majority of Tangent's trade is conducted in Sterling although a material amount is denominated in Euros and Australian Dollars. The directors monitor exposure and where possible match Euro and Australian Dollar denominated revenues and expenditure to mitigate foreign exchange risk.

Key Performance Indicators

In order to monitor Tangent's performance the Board regularly reviews a number of KPI's which measure the underlying operating performance of the group, the key ones being gross profit, underlying operating profit, underlying operating margin, profit before tax, basic earnings per share and operating cash flow conversion.

In addition Tangent monitors the following non-financial KPI's:

Waste management and recycling

Tangent recognises that its activities have an impact on the environment.To mitigate this Tangent is registered with the Forestry Stewardship Council to ensure that all paper stock used in the business conforms to FSC's chain of custody requirements.In addition Tangent is committed to reducing the levels of waste created in our print facility and increasing the percentage of waste that can be recycled. To that end, at the start of the 2011-12 financial year a formal waste management programme was implemented and a recycling target of 98% set.Whilst not quite at the original target, Tangent is pleased to confirm that over the course of the 2011-12 financial year 97.5% of the waste produced by our print facility was processed for recycling.Over the coming year Tangent will continue to measure the levels of waste produced and that being recycled with an aim to improving upon that achieved during 2011-12.

Staff retention

Tangent recognises that people are our major asset and staff retention is an important issue for business continuity.To monitor and manage this, monthly staff turnover was reviewed and during the course of 2011-12 was1.9%.

This is a key non-financial KPI for Tangent and will be kept under review.

Tangent will continue to offer competitive salary and benefits packages together with identifying staff training and development needs to improve long term staff retention.

Kevin CameronFinance Director

Consolidated statement of comprehensive income

for the year ended 29 February 2012

The results shown above relate entirely to continuing operations and are attributable to equity shareholders of the company.

Consolidated statement of changes in equityfor the year ended 29 February 2012

Consolidated balance sheetat 29 February 2012

Consolidated statement of cash flowsfor the year ended 29 February 2012

1. Basis of preparation

Tangent Communications plc is quoted on AIM, a market of the London Stock Exchange, has the TIDM code TNG and it is incorporated in England.

The Group's consolidated financial statements for the year ended 29 February 2012, from which this financial information has been extracted, and for the comparative year ended 28 February 2011 are prepared on a going concern basis and in accordance with IFRS as adopted by the EU ("IFRS"), and in accordance with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in section 434 of the Companies Act 2006 but it is derived from those accounts. The financial information for the year ended 28 February 2011 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under s498(2) or s498(3) of the Companies Act 2006. The consolidated statement of financial position at 29 February 2012, the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated statement of cash flows and the related notes for the year then ended have been extracted from the Group's 2012 statutory financial statements upon which the auditor's opinion is unqualified and does not include any statement under s498(2) or s498(3) of the Companies Act 2006.

The announcement has been agreed with the company's auditor for release.

2. Non-recurring Income and Expenses

In order to provide a clear view on operating performance Tangent shows separately on the face of the statement of comprehensive income those items that are both significant and non-recurring in nature.

Impairment Loss

In April 2008 Tangent established a joint venture, Zui Limited, to provide services to the Enterprise Resource Planning market. Whilst successful at first the last two years has seen little activity and as such an impairment provision has been made in respect the trade receivable due from Zui, amounting to £0.14m.

Legal Fees

During the year Tangent engaged professional advisers to defend an action brought by VLM Holdings Limited, as detailed under 'Royalties' below. Fees incurred of £0.10m do not form part of the normal operating expenses of Tangent and have therefore been included in Non-recurring Income and Expenses and excluded from underlying operating profit. Further costs are expected to be incurred during 2012-13 of up to £0.2m.

Redundancy and Termination Costs

During the year to 28 February 2011 the Board completed the merger of Snowball and Tangent One this resulted in redundancy and termination costs some of which have been settled in the year to 29 February 2012. As these costs do not form part of the normal operating expenses of Tangent they have been separately identified in the consolidated statement of income and excluded from underlying operating profit.

Royalties

In March 2009 Tangent entered an agreement to acquire rights to certain intellectual property from VLM Holdings Limited. Under the terms of that agreement all rights would transfer to Tangent following payment of royalties over a three year period from March 2009 to March 2012. In November 2009 Tangent served notice terminating the agreement following an irremediable breach. VLM Holdings Limited subsequently disputed the termination. Tangent made provision for royalty fees payable under the agreement.

During the financial year VLM Holdings instigated proceedings for recovery of unpaid royalties and damages. Tangent's lawyers have advised that they do not consider the claim has merit and recommended that it be contested. As such the Board considers that it is possible but not probable that any award will be made in respect of the action brought by VLM Holdings Limited. The estimate of royalties as at 28 February 2011 has therefore been revised to £nil resulting in a credit of £0.22m, included in non-recurring income and expenses and excluded from underlying operating profit. Included at note 9 is further detail in respect of this contingent liability.

Non-recurring expenses are set out below:

3. Segment Information

Management has determined the operating segments based on the reports reviewed by the Board of Directors that are used to make strategic decisions, which reviews revenues and operating profits by segment but assets at a consolidated level.

On 1 March 2011 Tangent revised its business segments, on this basis the group had two reportable segments, Digital and Print. Unallocated corporate expenses are shown below under Central.

Digital - ComprisesTangent Snowball

Print -Comprises Ravensworth, printed.com and T/OD (Tangent on Demand).

Central - Central costs relate to the cost of non-executive directors, maintenance of Tangent's stock market listing, general professional advice together with the share-based payment charge. Executive directors' costs are allocated to the Digital and Print business segments.

The comparative period below has been amended to reflect the change in business segments as noted above, this change does not have any impact on previously reported operating profits, net assets or earnings per share of Tangent.

The segment results for the year ended 29th February 2012 were as follows:

Major customers         

During the year Tangent had no customer that represented more than 10% of revenues.

Digitalcustomers representing more than 10% of that segment's revenues were as follows:

Customer one 16%

Customer two 14%

Customer three 13%

Print had no customers representing more than 10% of that segment's revenue.

The segment results for the year ended 28th February 2011 were as follows:     

Major customers

During the year Tangent had one customer that represented 12% of total revenues for the year.

Digitalcustomers representing more than 10% of that segment's revenues for the year were as follows:

Customer one 14%

Customer two 12%

Print had one customers representing 20% of that segment's revenue for the year

Geographical information

Non-current assets for this purpose consist of property, plant and equipment, intangible assets and deferred tax assets.  

4. Earnings per share

The calculation of the basic and diluted earnings per share is based on the following:

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. At 29 February 2012 Tangent had two categories of dilutive potential ordinary shares: share options and shares contingently issuable as consideration for an acquisition.

A calculation is performed for the share options to determine the number of shares that could have been acquired at fair value based on the monetary value of the subscription rights attached to the outstanding share options. The number of shares from this calculation is compared with the number of shares that would have been issued assuming the exercise of the options and the difference is deemed to be the number of dilutive shares attributable to share options.

5. Dividends

The recommended final dividend is subject to approval by shareholders at the 2012 annual general meeting and has not been included as a liability in these financial statements.

The Tangent employee share ownership trust, which holds a total of 1,428,340 ordinary shares, has agreed to waive all dividends so the directors estimate that the dividend will be payable on approximately 175m ordinary shares.

6. Intangible assets

The addition of £631,000 to intangible assets represents the payment of contingent consideration for the acquisition of the entire share capital of The DDG Network Limited together with the business and assets of Double D Management LLP, collectively known as "Snowball".

Impairment of goodwill

Goodwill acquired in a business combination is allocated for impairment testing to the cash-generating units (CGUs) that are expected to benefit from that business combination.

Tangent has two CGU's:

DigitalThis business segment includes Tangent Snowball.

PrintThis business segment includes Ravensworth, printed.com and T/OD.

These represent the lowest level within Tangent at which goodwill is reviewed for impairment.

The carrying value of goodwill allocated to each CGU is as follows:

Tangent tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired.

The recoverable amounts of the CGU's are determined from value-in-use calculations. The key assumptions for the value-in-use calculations are those regarding the discount rates, growth rates and expected changes to forecast profitability. These assumptions have been revised in the year to take account of the current economic environment. Management estimates discount rates using pre-tax rates that reflect the current market assessments of the time value of money and the risks specific to each CGU.

Future cash flows are derived from the most recent financial budget approved by management for the next five years, beyond that period cash flows are extrapolated using a growth rate of 3% (2011: 3%).

The rate used to discount forecast future cash flows for both business segments is 10% (2011: 13%).

In 2012 no impairment charge has been made against goodwill for either CGU (2011: £nil). Headroom in the Digital CGU is £17.0 million and £3.9 million in the Print CGU

Tangent has conducted a sensitivity analysis on the impairment test of each CGU's carrying value with the following results:

·; The discount rate would need to increase to 27.81% to remove the headroom in the Digital CGU and to 12.55% to remove the headroom in the Print CGU.

·; Reducing the long term growth rate to 0% does not create an impairment charge in either CGU.

·; Cash flows over the next five years would need to reduce by 72.8% to remove the headroom in the Digital CGU and by 27.06% to remove the headroom in the Print CGU.

7. Share capital

The company has one class of ordinary share which carries no right to fixed income, each share carries the right to one vote at general meetings of the company.At 29 February 2012 and at the date of this report the number of issued ordinary shares is 176,445,113.

8. Cash generated from operations

9. Contingent Liabilities

In March 2009 Tangent entered an agreement to acquire rights to certain intellectual property from VLM Holdings Limited used to generate digital printing. Under the terms of that agreement all rights would transfer to Tangent following payment of royalties over a three year period from March 2009 to March 2012.

In November 2009 Tangent served notice terminating the agreement following an irremediable breach. VLM Holdings Limited have since disputed the termination and during the financial year instigated proceedings for recovery of royalties (up to £800,000) and recovery of costs (up to £150,000). Tangent's lawyers have advised that they do not consider that the claim has merit and recommended it be contested as such no provision has been made in these financial statements as the directors do not consider that there is any probable liability.