Audited results for the year to 31 December 2014

The Mission Marketing Group plc

Audited results for the year ended 31 December 2014

26 March 2015

The Mission Marketing Group plc ("TMMG" or "the missiontm"), the marketing communications and advertising group, is pleased to announce its audited results for the year ended 31 December 2014.

Financial headlines

· Operating income ("revenue") up 7% to £55.0m (2013: £51.6m)

· Headline trading profit up 10% to £7.7m (2013: £7.0m)

· Headline profit before tax up 10% to £5.5m (2013: £5.0m)

· Headline diluted EPS up by 15% to 5.13 pence (2013: 4.45 pence)

· Full year dividend up by 10% to 1.1p (2013: 1.0p)

· Total cash investment in growth: £4.2m (£2.1m on acquisitions; £2.1m on capex)

· Net proceeds from equity placing: £2.3m

· Full settlement of bank warrants in cash: £0.7m

· Net bank debt reduced by £1.3m to £9.4m

David Morgan, Chairman, commented: "In 2014 we made good strides with our declared strategy of extending the strength and scope of the Group. Our Agencies flourished and we either acquired or created new business ventures that will make us even better placed to serve our Clients in the years ahead. As we exited 2014, the Group was in good shape and we expect further growth in the coming year in both revenue and profit."

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

www.themission.co.uk

Chairman's Statement

2014 was a good innings, now let's play a blinder.

It's always gratifying to do what you say you're going to do, so 2014 will go down for us as such a year. We made good strides with our declared strategy of extending the strength and scope of the Group. Our Agencies flourished and we either acquired or created new business ventures that will make us even better placed to serve our Clients in the years ahead.

Having opened up shop in Singapore towards the back end of 2013, we acquired 70% of the digital marketing Agency Splash Interactive towards the end of 2014. Headquartered in Singapore but with offices in the five major Far East markets, Splash brings us a real presence in that region. And one that our Clients are already supporting.

We also acquired the London-based Proof Communication, which we merged into our successful technology Agency April Six and rounded off the year by acquiring Speed Communications, which we combined with our Bray Leino PR division, now jointly trading under the Speed brand. Exciting times in PR.

Added to this we created a Sports Marketing Consultancy within the missiontm itself to advise our Clients in this area. We have also strengthened our technology offerings with some pretty smart ideas and resourced our Agencies with some great new talent especially in the US and within our Healthcare Agency, Solaris.

And more recently, our integrated Agencies Big and balloon dog were combined under the bigdog brand to create a single, efficient and powerful business with a great Client portfolio and huge potential.

Phew.

Our core businesses had a good year, especially in the second half, winning a hat full of awards and great new Clients. Client retention was again strong which serves us well going into 2015 and beyond.

Internationally, our new San Francisco april six business is flourishing, supporting existing Clients as well as attracting new ones. And in the UK, both April Six and ThinkBDW were relocated to fine new premises to accommodate growth and further efficiency increases.

We have continued to pay down debt and I was also gratified by the response from our existing, and some new, institutional investors during the year. This enabled us to further invest in the businesses, fund our acquisitions and settle warrants of over 3% of our equity held by our bank, RBS. Who, I'm pleased to say, continue to support us - so much so that we have recently concluded a four year extension to our facilities with them.

It seems to me therefore that the missiontm had a pretty good innings in 2014. And I'm hopeful that our shareholders and supporters will be bowled over in 2015. Which should be no surprise given the team that we are able to field.

They're all doing a grand job. No lallygaggers here.

David Morgan

Chairman

Financial Review

Summary

The improved economic conditions seen during 2014 had a largely positive effect on the group. Almost all of our Agencies reported growth in revenues (operating income), but it was not always possible to maintain profit margins in the face of continued relentless downward pressure on pricing. And curiously, the boom in the property market during the year resulted in a marked reduction in the level of marketing spend by developers and estate agents as demand outstripped supply. The portfolio nature of the group's structure again proved to be a real strength, diversifying the risk associated with a concentration on any one Agency or market. Overall, it has been a good achievement to deliver 10% growth in headline profits and to hit market expectations, especially in the knowledge that some of our competitors are really struggling.

We have strengthened the group's balance sheet progressively over recent years and 2014 was no different. The downward trend in our gearing and debt leverage ratios was further enhanced by a £2.3m equity placing in October. We also took the opportunity provided by our greater financial strength to settle all outstanding bank warrants, thereby removing 3% equity dilution.

We exit 2014 in a strong position and expect 2015 to be another busy year, consolidating the acquisitions made in 2014, streamlining some of our existing operations, and planning further acquisitions.

Key Performance Indicators

The Group manages its internal operational performance and capital management by monitoring various key performance indicators ("KPIs''). The Group's current KPIs, which are quantified and commented on below, are:

· operating income ("revenue"), which the Group aims to increase year-on-year both via organic growth and from acquisitions;

· operating profit margins, where the Group aims to achieve levels at least in line with industry averages;

· headline profits before tax, which the Group aims to increase year-on-year;

· the ratio of net bank debt to EBITDA (Headline operating profit before depreciation and amortisation charges), which the Group is aiming to maintain below x2.0; and

· the ratio of total debt (including both bank debt and deferred acquisition consideration) to EBITDA, which the Group is aiming to maintain below x2.5.

Trading, Statement of Income and Dividend

Turnover was 1% higher than the previous year, at £125.5m (2013: £124.1m), where the growth achieved by most Agencies was largely offset by the reduction in Media spend by property Clients. Turnover is a measure of how much Clients are billed. But since billings include pass-through costs (eg TV companies' charges for buying air-time), the Board does not consider turnover to be a key performance measure. Instead, the Board views operating income (turnover less third party costs) as a more meaningful measure of Agency activity levels.

Operating income ("revenue") increased 7% to £55.0m (2013: £51.6m), once again achieving the first of our KPIs and continuing the consistent growth of recent years. 5% of the growth resulted from the full year contribution from Solaris and the acquisitions of Proof Communication Limited ("Proof"), Splash Interactive Pte Ltd ("Splash") and Speed Communications Agency Ltd ("Speed") with effect from 1 August, 30 September and 31 October 2014 respectively. Like-for-like revenue increased 2% year-on-year, where growth in most Agencies was somewhat offset by lower spending by property Clients.

The Directors measure the Group's profit performance by reference to headline profits, calculated before exceptional items and acquisition adjustments (as set out in Note 3). Headline trading profits (ie segmental operating profit, before central costs, as set out in Note 2) increased strongly, to £7.7m (2013: £7.0m), reflecting a 5% contribution from Solaris, Proof, Splash and Speed and a 5% increase in like-for-like profits; this latter is a very pleasing result in view of increased property costs, incentive payments and the effects of the property market. After higher central costs, headline operating profit increased by 6% to £6.1m (2013: £5.7m)

We expected 2014 to repeat the general pattern of Clients' spending cycles, which tend to result in a second half bias in our financial results, but the bias was stronger than we originally predicted. As a consequence, the pattern of profit margins (headline operating profit as a percentage of revenue) also repeated those of last year, with margins of 8% in H1 (2013: 8%), improving to 14% in H2 (2013: 14%). Overall, the group achieved a margin of 11% for the full year (2013: 11%), which is comfortably ahead of the levels achieved by the Group's peer group of UK quoted marketing companies (excluding WPP, which is so large it distorts all comparisons), thereby achieving the second of our KPIs.

Reported net interest costs fell only slightly from the prior year, but this reflects the accelerated write-off of the balance of £0.1m of unamortised arrangement fees from the refinancing of the group's bank facilities in 2012. On an underlying basis, reductions in interest costs were achieved, both through a further reduction in net debt and also from the lower interest margins triggered by reductions in our leverage ratio (see below for definition). As a result, headline interest costs reduced by over 20% to £0.5m (2013: £0.7m).

After financing costs, headline profit before tax increased by 10% to £5.5m (2013: £5.0m), achieving the third of our KPIs and continuing the growth in headline profit over recent years.

Reported profit before tax increased by over 70% to £5.4m (2013: £3.2m) after acquisition adjustments and accelerated amortisation of bank debt arrangement fees totaling £0.1m (2013: exceptional costs of £2.1m and acquisition adjustments (net gain) of £0.3m).

The headline diluted EPS increased by 15% to 5.13 pence (2013: 4.45 pence).

Following payment of an interim dividend of 0.25 pence per share, the Board recommends a final dividend of 0.85 pence per share, bringing the total for the year to 1.10 pence per share, representing an increase of 10%. The final dividend will be payable on 20 July 2015 to shareholders on the register at 10 July 2015. The Board will continue to keep under regular review the best use of the Group's cash resources but it is the Board's intention to increase both interim and final dividends in future years.

Balance Sheet and Cash Flow

The Group's balance sheet has been further strengthened during the year by the Autumn equity placing of £2.3m. During the year a total of £2.1m in cash was invested in acquisitions (net of cash acquired), £2.1m was invested in capital expenditure, notably higher than in previous years due to the relocation of two of our Agencies, and £0.7m was used to settle bank warrants over 3.156% of the fully diluted share capital. Working capital increased by £1.1m but, despite this, net bank debt reduced by £1.3m to £9.4m (2013: £10.7m). Our gearing ratio (net debt bank to equity) reduced from 16% last year to 13% at 31 December 2014 and the Group's "leverage ratio" (ratio of net bank debt to headline EBITDA) fell from x1.5 at 31 December 2013 to x1.25 at 31 December 2014, again comfortably achieving our fourth KPI.

Now that the Group has started expanding through acquisition, the Board's management of the Group's liquidity and balance sheet extends beyond considering just bank indebtedness and now also includes an assessment of the Group's financial commitments relating to acquisitions. As a result, the Board has introduced a fifth KPI - the ratio of total debt to EBITDA - which it is targeting to maintain below x2.5 in order to avoid over-stretching the Group's balance sheet. Total debt includes the Group's bank indebtedness and also the amount of contingent acquisition consideration estimated to be payable. Since acquisition consideration is dependent on future levels of profitability in the acquired business, which are inevitably uncertain, the Board calculates this ratio by reference to the amount of consideration which would be payable if the acquired business were to maintain its current level of profitability. At 31 December 2014, the ratio of total debt to EBITDA on this basis was x1.7, comfortably within our final KPI.

Since the end of the financial year, we have secured beneficial changes to our banking arrangements. Loan facilities which were due to expire at the end of 2015 (therefore resulting in the full £11m of outstanding loans at 31 December 2014 being classified within current liabilities) have been replaced by new and increased facilities expiring in February 2019. Committed facilities have been increased from £11m to £15m, with a further overdraft facility of £3m. Interest rate margins are subject to a ratchet depending on leverage ratios but, at every ratio level, are lower than under previous arrangements. In addition, the repayment obligation on the term loan element of the new facilities is lighter in the first two years than the second, resulting in greater headroom to support the group's acquisition ambitions in the near future. More detail of the new facilities is set out in Note 12.

Taxation

The Group's effective tax rate was 21.7% (2013: 25.5%), only marginally higher than the statutory rate of 21.5% (2013: 23.25%). The Group's effective tax rate is normally above the statutory rate due to non-deductible staff and client-related expenditure, and the excess of depreciation over capital allowances. In 2014, these factors were offset by higher tax deductions on share options exercised during the year, and the non-taxable nature of movements in the fair value of contingent consideration.

Outlook

As we exited 2014, the Group was in good shape and we expect further growth in the coming year in both revenue and profit. In order to underpin this growth, the Board has restructured certain activities with the consequence of some £0.6m of one-off costs incurred in the first quarter of 2015 which reduce our overall cost base. The Board expects this leaner structure to further strengthen the Group's resilience and looks to the future with confidence.

Peter Fitzwilliam

Finance Director

Consolidated Income Statement

For the year ended 31 December 2014

The earnings per share figures derive from continuing and total operations.

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2014

Consolidated Balance Sheet

As at 31 December 2014

Consolidated Cash Flow Statement

for the year ended 31 December 2014

Consolidated Statement of Changes in Equity

for the year ended 31 December 2014

Notes to the Consolidated Financial Statements

1. Basis of preparation and significant accounting policies

The results for the year to 31 December 2014 have been extracted from the audited consolidated financial statements, which are expected to be published by 27 March 2015.

The financial information set out above does not constitute the Company's statutory accounts for the years to 31 December 2014 or 2013 but is derived from those accounts. Statutory accounts for the year ended 31 December 2013 were delivered to the Registrar of Companies following the Annual General Meeting on 16 June 2014 and the statutory accounts for 2014 are expected to be published on the Group's website (www.themission.co.uk) shortly, posted to shareholders at least 21 days ahead of the Annual General Meeting ("AGM") on 15 June 2015 and, after approval at the AGM, delivered to the Registrar of Companies.

The auditors, Francis Clark LLP, have reported on the accounts for the years ended 31 December 2014 and 31 December 2013; their reports in both years were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006 in respect of those accounts.

The annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) adopted by the European Union and on the historical cost basis.

Turnover and revenue recognition

The Group's operating subsidiaries carry out a range of different activities. The following policies apply consistently across subsidiaries and business segments.

Turnover represents fees, commissions, rechargeable expenses and sales of materials performed subject to specific contracts. Income is recognised on the following basis:

· Retainer fees are apportioned over the time period to which they relate.

· Project income is recognised by apportioning the fees billed or billable to the time period for which those fees were earned by relationship to the percentage of completeness of the project to which they relate.

· Media commission is recognised when the advertising has been satisfactorily aired or placed.

· Unbilled costs relating to contracts for services are included at rechargeable value in accrued income.

Where recorded turnover exceeds amounts invoiced to Clients, the excess is classified as accrued income (within Trade and other receivables). Where amounts invoiced to Clients exceed recorded turnover, the excess is classified as deferred income (within Accruals).

Goodwill and other intangible assets

Goodwill

Goodwill arising from the purchase of subsidiary undertakings and trade acquisitions represents the excess of the total cost of acquisition over the Group's interest in the fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary acquired. The total cost of acquisition represents both the unconditional payments made in cash and shares on acquisition and an estimate of future contingent consideration payments to vendors in respect of earn-outs.

Goodwill is not amortised, but is reviewed annually for impairment. Goodwill impairment is assessed by comparing the carrying value of goodwill for each cash-generating unit to the future cash flows, discounted to their net present value using an appropriate discount rate, derived from the relevant underlying assets. Where the net present value of future cash flows is below the carrying value of goodwill, an impairment adjustment is recognised in profit or loss and is not subsequently reversed.

Other intangible assets

Other intangible assets purchased separately, or separately identified as part of an acquisition, are amortised over periods of between 4 and 20 years, except certain brand names which are considered to have an indefinite useful life. The value of such brand names is not amortised, but rather an annual impairment test is applied and any shortfall in the present value of future cash flows derived from the brand name versus the carrying value is recognised in profit and loss.

Contingent consideration payments

The Directors manage the financial risk associated with making business acquisitions by structuring the terms of the acquisition, wherever possible, to include an element of the total consideration payable for the business which is contingent on its future profitability (ie earn-out). Contingent consideration is initially recognised at its estimated fair value based on a reasonable estimate of the amounts expected to be paid. Changes in the fair value of the contingent consideration that arise from additional information obtained during the first twelve months from the acquisition date, about facts and circumstances that existed at the acquisition date, are adjusted retrospectively, with corresponding adjustments against goodwill. The fair value of contingent consideration is reviewed annually and subsequent changes in the fair value are recognised in profit or loss, but excluded from headline profits. 

Accounting estimates and judgements

The Group makes estimates and judgements concerning the future and the resulting estimates may, by definition, vary from the actual results. The Directors considered the critical accounting estimates and judgements used in the financial statements and concluded that the main areas of judgement are, in order of significance:

Potential impairment of goodwill:

The potential impairment of goodwill is based on estimates of future cash flows derived from the financial projections of each cash-generating unit over an initial three year period and assumptions about growth thereafter, discussed in more detail in Note 11.

Contingent payments in respect of acquisitions:

Contingent consideration, by definition, depends on uncertain future events. At the time of purchasing a business, the Directors use the financial projections obtained during due diligence as the basis for estimating contingent consideration. Subsequent estimates benefit from the greater insight gained in the post-acquisition period and the business' track record of financial performance.

Revenue recognition policies in respect of contracts which straddle the year end:

Estimates of revenue to be recognised on contracts which straddle the year end are typically based on the amount of time so far committed to those contracts in relation to the total estimated time to complete them.

Valuation of intangible assets on acquisitions:

When considering the valuation of intangible assets on acquisitions, a range of methods is undertaken both for identifying intangibles and placing valuations on them. Brand names, customer relationships and intellectual property rights are the most frequently identified intangible assets. The valuation of each element is assessed by reference to commonly used techniques, such as "relief from royalty" and "excess earnings" and to industry leaders and competitors. Estimating the length of customer retention is the principal uncertainty and draws on historic experience.

Going concern

The Group's available banking facilities provide comfortable levels of headroom against the Group's projected cash flows and the Directors accordingly consider that it is appropriate to continue to adopt the going concern basis in preparing these financial statements.

2. Segmental Information

Business Segmentation

For management purposes the Group had twelve operating units during the year, each of which carries out a range of activities. These activities have been divided into four business and operating segments which form the basis of the Group's primary reporting segments.

3. Reconciliation of Headline Profit to Reported Profit

The Board believes that headline profits, which eliminate certain amounts from the reported figures, provide a better understanding of the underlying trading of the Group. The adjustments to reported profits fall into two categories: exceptional items and acquisition-related items.

In 2013, exceptional items included movements in the fair value of contingent consideration which are now disclosed as acquisition adjustments in the Consolidated Income Statement. The comparatives have been restated accordingly.

4. Exceptional items

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

On 5 February 2015, the Group signed new bank facilities replacing those in place at 31 December 2014 and, as a result, the remaining unamortised bank debt arrangement fees of £126,000 were fully written off during the year and have been classified as an exceptional item. In 2013 the main exceptional items were amounts payable for loss of office and other costs incurred relating to the restructuring of Bray Leino's London operations. This restructuring also resulted in the impairment of Addiction goodwill and other intangibles acquired.

5. Acquisition adjustments

The movement in fair value of contingent consideration relates to a net downward revision in the estimate payable to vendors of businesses acquired in prior years. Acquisition transaction costs relate to the acquisitions made during the year as detailed in Note 13.

6. Net Finance Costs

7. Profit on Ordinary Activities before Taxation

Profit on ordinary activities before taxation is stated after charging:-

8. Taxation

Factors Affecting the Tax Charge for the Current Year:

The tax assessed for the year is marginally higher than the standard rate of corporation tax in the UK. The differences are:

9. Dividends

A final dividend of 0.85 pence is to be paid on 20 July 2015 to those shareholders on the register at 10 July 2015. In accordance with IFRS the final dividend of 0.85p will be recognised in the 2015 accounts, should it be approved by shareholders at the AGM.

10 Earnings Per Share

The calculation of the basic and diluted earnings per share is based on the following data, determined in accordance with the provisions of IAS 33: Earnings per Share.

Basic earnings per share includes shares to be issued subject only to time as if they had been issued at the beginning of the period.

11. Intangible Assets

Additions in the year relate to the acquisitionsset out in more detail in Note 13.

In accordance with the Group's accounting policies, an annual impairment test is applied to the carrying value of goodwill. The review performed assesses whether the carrying value of goodwill is supported by the net present value of projected cash flows derived from the underlying assets for each cash-generating unit ("CGU"). For all CGUs, the Directors assessed the sensitivity of the impairment test results to changes in key assumptions and concluded that a reasonably possible change to the key assumptions would not cause the carrying value of goodwill to exceed the net present value of its projected cash flows.

Other Intangible Assets

Additions in the year include client relationships and trade names acquired relating to the Proof, Speed and Splash acquisitions.

12. Bank Overdrafts, Loans and Net Debt

Bank debt arrangement fees, where they can be amortised over the life of the loan facility, are included in finance costs. The unamortised portion is reported as a reduction in bank loans outstanding.

At 31 December 2014, the Group had a term loan facility of £4.0m due for repayment by December 2015 on a quarterly basis, and a revolving credit facility of up to £7.0m (fully drawn), expiring on 27 December 2015. As a result, the full £11.0m of outstanding loans at 31 December 2014 is classified within current liabilities in the Group balance sheet. On 5 February 2015, the Group signed new bank facilities replacing those in place at 31 December 2014. The new facilities are a £8m term loan and a revolving credit facility of up to £7m, both repayable by 5 February 2019. Had these new facilities been in place at 31 December 2014, £1.5m of the outstanding loans would have been classified within current liabilities and £9.5m within non current liabilities.

Interest on the old term loan and revolving credit facilities was based on 3 month LIBOR plus 2.75%, payable in cash on loan rollover dates. Interest rate margins on the new facilities are lower, at 2.25%.

In addition to its committed facilities, the Group had available an overdraft facility of up to £3.0m with interest payable by reference to National Westminster Bank plc Base Rate plus 3.5%. In February, this overdraft facility was replaced by a new facility with a 2.5% interest rate margin.

13. Acquisitions

13.1 Acquisition Obligations

The terms of an acquisition may provide that the value of the purchase consideration, which may be payable in cash or shares or other securities at a future date, depends on uncertain future events such as the future performance of the acquired company. The Directors estimate that the liability for contingent consideration payments that may be due is as follows:

13.2 Acquisition of Proof Communication Ltd

On 1 August 2014, the Group acquired the whole issued share capital of Proof Communication Ltd ("Proof"), a specialist science, engineering and technology PR business, to extend and complement the services already being provided by April Six in the technology sector. The fair value of the consideration given for the acquisition was £1,493,000, comprising initial cash and share consideration and deferred contingent cash consideration. 115,347 ordinary shares were issued as part of the initial consideration. Costs relating to the acquisition amounted to £36,000 and were expensed.

Maximum contingent consideration of £1,017,000 is dependent on Proof achieving a profit target over the period 1 January 2014 to 31 December 2015. The Group has provided for contingent consideration of £511,000 to date.

The fair value of the net identifiable assets acquired was £583,000 resulting in goodwill and other intangible assets of £910,000. Goodwill arises on consolidation and is not tax-deductible. Management carried out a review to assess whether any other intangible assets were acquired as part of the transaction. Management concluded that customer relationships were acquired and attributed a value this by applying commonly accepted valuation methodologies. The goodwill arising on the acquisition is attributable to the anticipated profitability of the Company.

Proof contributed turnover of £514,000, operating income of £457,000 and headline operating profit of £121,000 to the results of the Group since acquisition.

13.3 Acquisition of Splash Interactive Pte. Ltd

On 30 September 2014, the Group acquired 70% of the issued share capital of Splash Interactive Pte. Ltd ("Splash"), a specialist digital agency operating through five territories in Asia, to enhance the Group's digital competence and to support the Group's existing Asia-based Clients. The fair value of the consideration given for the acquisition was £2,643,000, comprising initial cash consideration and deferred contingent cash consideration. Costs relating to the acquisition amounted to £172,000 and were expensed. In addition, the Group has an option to purchase, and the vendors also have an option to sell, the remaining 30% of the issued share capital from 1 January 2018. This option has been recognised at its estimated future cost of £1,094,000, bringing the total consideration to £3,737,000.

Maximum contingent consideration of £6,939,000 is dependent on Splash achieving various profit targets over the period October 2014 to December 2017. The Group has provided for contingent consideration of £2,200,000 to date.

The fair value of the net identifiable assets acquired was £932,000, of which the Group's 70% share amounted to £652,000, resulting in goodwill and other intangible assets of £3,085,000. The non-controlling interest is measured at the non-controlling interests' proportionate share of Splash's identifiable net assets. Goodwill arises on consolidation and is not tax-deductible. Management carried out a review to assess whether any other intangible assets were acquired as part of the transaction. Management concluded that both a brand name and customer relationships were acquired and attributed a value to each of these by applying commonly accepted valuation methodologies. The goodwill arising on the acquisition is attributable to the anticipated profitability of the Company.

Splash contributed turnover of £925,000, operating income of £760,000 and headline operating profit of £197,000 to the results of the Group since acquisition.

13.4 Acquisition of Speed Communications Agency Ltd (formerly Raymond Loewy International Limited trading as Speed)

On 31 October 2014, the Group acquired the whole issued share capital of Speed Communications Agency Ltd (formerly Raymond Loewy International Limited trading as Speed) ("Speed") in order to bring greater scale to the Group's existing PR capabilities, thereby opening up new opportunities to win Clients. The fair value of the consideration given for the acquisition was £815,000, comprising initial cash and share consideration and deferred contingent cash and share consideration. 600,000 ordinary shares were issued as part of the initial consideration. Costs relating to the acquisition amounted to £30,000 and were expensed.

Maximum contingent consideration of £140,000 is dependent on Speed achieving various profit targets over the period November 2014 to December 2015. The Group has provided for contingent consideration of £140,000.

The fair value of the net identifiable liabilities acquired was £60,000 resulting in goodwill and other intangible assets of £875,000. Goodwill arises on consolidation and is not tax-deductible. Management carried out a review to assess whether any other intangible assets were acquired as part of the transaction. Management concluded that both a brand name and customer relationships were acquired and attributed a value to each of these by applying commonly accepted valuation methodologies. The goodwill arising on the acquisition is attributable to the anticipated profitability of the Company.

Speed contributed turnover of £327,000, operating income of £284,000 and a headline operating loss of £40,000 to the results of the Group since acquisition.

13.5 Other acquisitions

A total of £480,000 was invested in other acquisitions during the year, comprising initial cash consideration of £225,000 and deferred contingent consideration of £255,000.

13.6 Pro-forma results including acquisitions

The Directors estimate that the turnover, operating income and headline operating profit of the Group would have been approximately £131.0m, £59.5m and £6.3m had the Group consolidated the results of Proof, Splash and Speed from the beginning of the year.

14. Operating Lease Commitments

As at 31 December the Group had annual commitments under non-cancellable operating leases as follows:

15. Share Capital

Options

The Group has the following options in issue:

The TMMG Long Term Incentive Plan ("LTIP") was created to incentivise senior employees across the Group. Nil cost options are awarded at the discretion of the Remuneration Committee of the board, and vest three years later only if the profit performance of the Group in the intervening period is sufficient to meet predetermined criteria (always subject to Remuneration Committee discretion). During the year, 777,257 of these options were exercised at a weighted average share price of 47.0p and at the end of the year 42,900 of the outstanding options are exercisable.

Shares held in an Employee Benefit Trust will be used to satisfy share options exercised under The Mission Marketing Group Long Term Incentive Plan.

Warrants over 3.156% of the Group's fully diluted share capital, with an exercise price of 10p per share, were issued to the Group's loan providers following the refinancing completed in 2010, exercisable at any time until April 2017. In October 2014, agreements were reached with the Group's warrant holders under which the holders accepted a cash amount in full and final settlement of their rights to subscribe for shares under the warrant deed. The total settlement cost to the Group was £675,000.