TNG.L Regulatory News (TNG)

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

Results for the half-year ended 31 August 2012

Highlights

·; Revenues of £12m, up £1m (2011: £11m)

·; Underlying Operating Profit of £0.98m, up £0.03m (2011: £0.95)

·; Basic Earnings per Share of 0.41p, up 0.03p (2011: £0.38)

·; Post period end: Tangent today announces the acquisition of Goodprint UK Limited and a £10 million placing to new and existing shareholders

Chief executive's review

Period Performance

Tangent increased performance in all key measures of revenue, profit before tax and earnings per share. In addition to steady performance across the business lines, printed.com has grown significantly. The past six months has seen a rapid increase in these revenues all derived online.

Gross margins (net of direct cost of sales and direct wages) grew to 57%, up from 52%. This trend is expected to continue as Tangent continues to provide higher quality products and services which derive higher margins. Additional expenditure will be seen in advertising as we move to online channels to generate revenues.

Online

printed.com has a high concentration on performance based advertising to drive customer acquisition. Advertising is expected to remain proportional to revenue growth and totalled £600,000 for the period. Lower proportions of wages or overheads to revenues are characteristic of the online business where operational gearing opportunities are gained by the website's ability to generate and process increasing revenues. Over 50% of transactions are now made via credit card payment or paypal ensuring cash is received well ahead of traditional revenues.

In the short term, the investment in online infrastructure and the build-up of customer numbers for printed.com will generate lower margins as we test and learn to better optimise our product range to meet customer demands. Progress will be measured by KPI's: Revenues, COCA (cost of customer acquisition) and Conversion Rates. These metrics will be published at the full year and then reported on thereafter.

Ravensworth and T/OD sales remained in line with previous periods, yet margins have improved as we have increased our pricing without significant impact on customer numbers or revenues.

Digital

Tangent Snowball continues to attract high calibre engagements with additional contracts picked up with Carlsberg, Richemont Group and TATA in the period. Our contract with Pearson in Australia has seen some reduction and we will monitor the progress of the office closely in the next six months. The investment into our two software products Connect (Enterprise Marketing Solution) and Oscar (e-commerce) has progressed well. We expect released versions to be adopted by clients in the second half of the year. New business canvassing is progressing well and we expect to announce further contracts that have been secured for launch in the second half of the year.

Outlook

The characteristics of the Online business are attractive. Following the successful build-up of our printed.com business, our strategy will drive new and convert existing revenues to this model. The acquisition of Goodprint, which is referred to above, will sit alongside the existing printed.com business to create a multi brand web division. Combined with the continued progress in other parts of the Group, the board remains confident in the Company's future prospects.

Full terms of the acquisition and placing are detailed in the announcement released separately today and in the circular which is available at the Company's website (http://tangentplc.com/reports)

For further information, please contact:

Tangent Communications plc

Timothy Green, CEO 020 7462 6100

Canaccord Genuity Limited

Bruce Garrow, Cameron Duncan, Emma Gabriel 020 7523 8350

Portland Communications 020 7842 0123

Louise Rutter

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

Notes to the financial information

for the half-year ended 31 August 2012

1. Basis of preparation

This consolidated half-yearly financial information, which is condensed and unaudited for the half-year ended 31 August 2012, 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 29 February 2012. These accounting 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 2012 has been prepared in accordance with IAS 34: Interim Financial Reporting, as adopted by the EU and under the historical cost convention.

Intangible assets accounting policy

At the beginning of the period the following accounting policy in respect of intangible assets became relevant as the group commenced development of its own software platform:

Internally generated assets arising from the group's software developments are recognised only if all the following conditions are met:

·; an asset is created that can be identified;

·; it is probable that the asset created will generate future economic benefit; and

·; the development cost of the asset can be measured reliably

Once development has been completed internally generated intangible assets are amortised on a straight-line basis over their useful lives. No amortisation charge has been included in the period to 31 August 2012 as development has not yet been completed.

The information relating to the half-years ended 31 August 2012 and 31 August 2011 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 29 February 2012 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 29 February 2012 has been filed with the Registrar of Companies.

The group's financial risk management objectives and policies are consistent with those disclosed in the 2012 annual report and accounts.

The half-yearly report was approved by the board of directors on 23 October 2012. 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, Digital and Online (formerly Print), unallocated corporate expenses are shown below under Central.

Digital - Comprises Tangent Snowball

Online - 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, and general professional advice together with the share-based payment charge as set out in note 3. Executive directors' costs are allocated to the Digital 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 £65,000 (half-year ended 31 August 2011: £15,000 and year ended 29 February 2012: £110,000).

3. Share options and share-based payment charge (continued)

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

For the share options outstanding at 31 August 2012 exercise prices ranged between 1p and 13.25p per share and the weighted average remaining contractual life was 3.74 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. At 31 August 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. Other intangible assets

During the period the group spent £185,000 on internally generated intangible assets, developing proprietary marketing and e-commerce platforms. Investment will continue through the second half of the year and we expect to release and have client adoption by the end of the current financial year. We have invested in the development of our e-commerce shop for printed.com during the period and will continue to do so for in the remainder of this year and in the periods to come.

6. Property, plant and equipment

During the period the group spent £341,000 on additions to plant, equipment and computers to upgrade production facilities with a further £54,000 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 29 February 2012 was approved by shareholders at the annual general meeting on 26 June 2012 and paid on 18 July 2012.

8. Provisions

Provisions are for the cash consideration payable for the acquisition of the entire share capital of The DDG Network Limited together with the business and assets of Double D Management LLP. During the period an additional £126,000 was provided in respect of the final payment of deferred consideration for this acquisition.

9. Share Capital

Allotted and fully paid

10. Cash flow from operations

11. Analysis of net funds

12. 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.

Independent review report by the auditors

for the half-year ended 31 August 2012

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 2012 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 2012 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 

23 October 2012

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.