TNG.L Regulatory News (TNG)

Tangent Communications PLC ("Tangent" or the "Company")

Interim for the six month period ended 31 August 2013

First half performance exceeds expectations

Key Highlights

Commenting on the year, Tangent's Chief Executive, Timothy Green, said:

"I am delighted to announce that Tangent's first half performance exceeded expectations with a 50% increase in underlying operating profit to £1.47m. We spent much of last year investing in our business; the benefits of this will be most noticeable in the second half. The second half of the year to February 2014 has begun well and like for like sales and profits are now ahead of the prior year."

Chief Executive's Review

Consolidated

Sales grew to £13.51m in the period, after strong growth from printed.com. Combined revenues from our retail websites (printed.com, goodprint, smileprint) rose by £2.79m in the period to £4.47m and by £0.83m (an increase of 23%) on a like for like basis after the acquired goodprint and smileprint revenues were added.

Tangent Snowball gross profit margin improved to 88% (2012 78%) as we managed out some low margin client work. This had a minimal impact on operating profit and with improving operating margin, the business is well positioned for the second half of the current financial year. Ravensworth delivered greater than expected profits in the first half.

The revenue splits across our business lines are set out as follows:

printed.com, goodprint, smileprint

Sales have grown to £4.47m (2012: £1.68m), growth was 23% on a like for like basis, adjusting for the acquired goodprint and smileprint revenues.

printed.com grew by attracting a significant number of new customers and returning customers spending with greater regularity, across a wider range of products. The trend in repeat orders is encouraging, ahead of expectations and comes as a result of the great user experience, the take up of our unique reward program and the high quality products enjoyed by our customers.

This translated into improved performance with printed.com sales growing rapidly and generating profits ahead of expectations. Investments made in printed.com have enabled it to become a platform for our future growth.

The goodprint site continued to attract an increasing volume of visits in line with its prior year performance, however the conversion rate of these visits fell. As a result, we plan to expand the customer experience with more new and innovative products. We have tailored a new reward plan for goodprint customers by capitalising on the success of our experience with reward programmes.

We continue to learn about the 17 different European markets we now sell into through smileprint, against a backdrop of increased competition which has pushed up the costs of acquiring customers.

Our facility in Newcastle performed efficiently in response to the increased volumes from the addition of the goodprint and smileprint sales and customer services. It is set up to satisfy the rising volumes expected in the second half of the year and deliver greater economies of scale.

We are excited about the outlook for our retail websites given the strong performance in the first half and the continued momentum into the second half.

We monitor the progress of our retail websites by reference to the following KPIs which we report on a quarterly basis:

Over 50,000 unique customers were served in the first six months of the financial year a similar number to the same period in the prior year. These customers are now more loyal, more frequent and purchase more products, resulting in a 23% increase in revenues to £4.47m in the first half of this financial year.

Tangent Snowball

Tangent Snowball is on track. We directed all our efforts on our high quality client base and the impact was positive. Reduced revenues have had a minimal impact on operating profits after gross margin in the first half reached 88% (2012: 76%). The second half of this financial year is now set to show a significant improvement compared to the prior year. New client wins include a Papa Johns franchise programme across a number of international markets. The Labour Party has also signed a new 5 year extension improving our existing contract to provide the system and service for their membership through to 2019.

Our reputation is being enhanced by the quality of our client base and the exposure our work is receiving. Success in the B2B loyalty programmes we create in particular with Carlsberg, Pepsico and Wolseley demonstrates the value we can offer to global brands and, under the experience of new management we expect the proposition to reach out further.

Tangent Snowball is set to exceed its prior year profits on lower sales, having managed out some low margin client work.

Ravensworth

Sales of £3.48m (2012: £3.50m) saw a rise in the last four months of the first half as Ravensworth started to reap the benefits of its number 1 position in print and design to the estate agency market. Ravensworth is set to prosper from the current property market as we estimate, for those agents outsourcing publication, every other listing of a new property on the market results in an order by a Ravensworth customer for brochure details. The operational gearing benefits from the increased volumes will flow directly to profits enabling outperformance on the prior year. For the full year, Ravensworth is expected to outperform the prior year in terms of sales and profits. The acceleration of the Government's Help to Buy scheme will be a catalyst for first time buyers entering the property market and is expected to fuel further growth for Ravensworth.

T/OD

T/OD increased its sales on the prior year by 9% to £1.16m (2012: £1.06m) after success in marketing its new packaging products to high-end retailers. Collaboration with printed.com has facilitated offering online access to T/OD's cutting edge methods of printing signage and display products. This initiative opens up a new market for T/OD whilst giving printed.com a differentiator in its online market place.

Share Repurchase Programme

We continue to be cash generative and have a strong balance sheet. As part of our long term strategy to create value for shareholders, we are targeting to return up to £0.5m through a share buyback which will go hand in hand with our longstanding dividend policy that will also continue.

OutlookIn light of Tangent's current performance and against an improving economic backdrop, we are confident about the full year to February 2014.

Timothy GreenChief Executive

For further information, please contact:

Tangent Communications PLCTimothy Green - Chief Executive: 020 7462 6101Seema Paterson - Corporate Development: 020 7462 6101

Canaccord Genuity Limited - Nominated adviser and broker

Bruce Garrow / Emma Gabriel 020 7523 8350

MHP CommunicationsAndrew Leach / Christian Pickel 020 3128 8208

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

1. Basis of preparation

This consolidated half-yearly financial information, which is condensed and unaudited for the half-year ended 31 August 2013, has been prepared in accordance with the accounting policies which the group expects to adopt in its next annual report and is consistent with those adopted in the consolidated financial statements for the year ended 28 February 2013. These accounting 5 policies are based on the EU-adopted International Financial Reporting Standards ("IFRS") and International Financial Reporting Interpretations Committee ("IFRIC") interpretations that the group expects to be applicable at that time. This consolidated half-yearly information for the half-year ended 31 August 2013 has been prepared in accordance with IAS 34: Interim Financial Reporting, as adopted by the EU and under the historical cost convention.

The information relating to the half-years ended 31 August 2013 and 31 August 2012 is unaudited and does not constitute statutory financial statements as defined in section 434 of the Companies Act 2006. It has, however, been reviewed by the auditors and their report is set out at the end of this document. The comparative figures for the year ended 28 February 2013 have been extracted from the consolidated financial statements, 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 annual report and accounts for the year ended 28 February 2013 has been filed with the Registrar of Companies.

The group's financial risk management objectives and policies are consistent with those disclosed in the 2013 annual report and accounts.

The half-yearly report was approved by the board of directors on 8 November 2013. The half-yearly report is available on Tangent's website, www.tangentplc.com, and is being sent to shareholders. Further copies are available at Tangent's registered office, 84-86 Great Portland Street, London W1W 7NR.

Going concern

The directors are satisfied that the group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

2. Operating segments

Management has determined the operating segments based on reports reviewed by the Board of Directors that are used to make strategic decisions. The board reviews revenues and operating profits by segment but assets at a consolidated level. On this basis the group has two reportable segments, Services and Online, unallocated corporate expenses are shown below under Plc.

Services - Comprises Tangent Snowball and T/OD (Tangent on Demand).

Online - Comprises Ravensworth, printed.com, smileprint and goodprint.

Plc - Plc costs relate to the cost of non-executive directors, maintenance of Tangent's stock market listing, and general professional advice together with the share-based payment charge as set out in note 3. Executive directors' costs are allocated to the Services and Online segments.

2. Operating segments (continued)

3. Share options and share-based payment charge

The total share-based payment charge for the period was £69,000 (half-year ended 31 August 2012: £65,000 and year ended 28 February 2013: £110,000).

The movements in share options and the corresponding weighted average exercise prices ("WAEP") are summarised below:

For the share options outstanding at 31 August 2013 exercise prices ranged between nil and 13.25p per share and the weighted average remaining contractual life was 5.82 years.

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.

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. Other intangible assets

During the period the group spent £320,000 (2012: £185,000) on developing proprietary marketing and e-commerce platforms. We have invested in the development of the e-commerce shop for our online segment during the period and will continue to do so for the remainder of this year and in the periods to come. The addition of software assets represents the acquisition and development of software platforms for the Group. At 31 August 2013 some development work was still in progress. On completion these assets are amortised over their expected useful life, estimated to be 5 years. During the period amortisation charge of £89,000 was recognised in respect of these assets.

6. Property, plant and equipment

During the period the group spent £295,000 on additions to plant, equipment and computers to upgrade production facilities with a further £49,000 on improvements to leasehold property.

7. Dividends

Amounts recognised as distributions to equity holders in the period:

The Tangent employee share ownership trust holds 1,428,340 shares and has waived its right to receive dividends. The dividend for the year ended 28 February 2013 was approved by shareholders at the annual general meeting on 9 July 2013 and paid on 2 August 2013.

8. Share capital

Allotted and fully paid

9. Cash flow from operations

10. Analysis of net funds

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the half-year ended 31 August 2013 which comprises the consolidated statement of comprehensive income, consolidated statement of changes in equity, consolidated balance sheet, consolidated statement of cash flows and 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.

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 AIM Rules for Companies.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs 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 financial 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 half-year ended 31 August 2013 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules for Companies.

UHY Hacker Young LLP

Chartered Accountants

Quadrant House

4 Thomas More Square

London E1W 1YW 

8 November 2013

Notes

1. The maintenance and integrity of the Tangent Communications plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the half-yearly report or the auditors' review report since they were initially presented on the website.

2. Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions