Final Results

The Mission Marketing Group plc

Audited results for the year ended 31 December 2012

25 March 2013

The Mission Marketing Group plc ("TMMG" or "the missiontm"), the national marketing communications and advertising group, is pleased to announce its audited results for the year ended 31 December 2012.

Trading

·; Net annualised new business wins of £5.6m

·; Great new business wins including Aviva, Brittany Ferries, M&S Bank, Norwegian Seafood and VMware

·; Strong Client retention and growth from incumbent Clients, including Axa, BP, Dermal and Legal & General

Income statement

·; Operating income ("revenue") up 15% to £47.5m (2011: £41.5m)

·; Headline operating profit up 2% to £6.0m (2011: £5.8m)

·; Headline operating margins reduced to 13% (2011: 14%) due to impact of new ventures and acquisitions, but still above industry average

·; Sharp reduction in interest costs to £1.1m (2011: £1.6m)

·; Headline profit before tax up 15% to £4.9m (2011: £4.2m)

·; Headline Diluted EPS up 8% to 4.5 pence (2011: 4.2 pence)

Balance sheet and cash flow

·; Net bank debt reduced by £3.0m to £12.3m

·; Debt leverage ratio reduced from x2.3 in 2011 to x1.7 in 2012

David Morgan, Chairman, commented: "It's now three years since we restructured the missiontmand I am pleased to report that 2012 saw a continuation of our progress in what has been yet another challenging year for our sector. We focused on concinnity and our Agencies have never worked better together, providing a cohesion that we and our Clients have benefitted from. We remain excited by the potential of our business and look forward to further progress in 2013 and beyond."

the missiontm is a national marketing communications and advertising group with 17 offices across the UK. The Group specialises in providing national and international Clients with award winning marketing, advertising and business communications. Group members include Addiction, April-Six, Balloon Dog, Big Communications, Bray Leino, RLA, Robson Brown, Story, ThinkBDW and Yucca. the missiontm employs over 800 staff nationally and is listed on AIM (TMMG).

www.themission.co.uk

Chairman's Statement

Dear shareholder

It's now three years since we restructured the missiontm and I am pleased to report that 2012 saw a continuation of our progress in what has been yet another challenging year for our sector.

Our objective going into 2012 was to maintain our progress whilst strengthening the expertise of our Agencies and the Group. We focused on concinnity and our Agencies have never worked better together, providing a cohesion that we and our Clients have benefitted from.

Overall the Agencies have performed very well. They have improved their status with their Clients and created great new business wins from the likes of Aviva, Brittany Ferries and M&S Bank. What is even more admirable is that they have retained and built their existing Client bases at a time when competitive activity has never been fiercer. Our progress has come both from our consumer and b2b Agencies as well as our specialist IT, Property and Automotive businesses. They should be justly proud of their achievements in 2012.

We have also sought to strengthen our Group by bringing in new expertise that complements the whole. Both newcomers are already providing new and dynamic options to the rest of the Group thereby enhancing our Client offer.

The Addiction team joined us in September, principally to spearhead our capabilities in Branded Content and to fulfil our desire to create Mission Studios that will provide our Agencies with pre and post film production services from its West One base. Their work for the likes of B&Q and Remington is highly regarded and opens up new channels of opportunity for us.

We acquired balloon dog in Norwich and London in October to strengthen our CRM and data offering and provide us with yet another outstanding and profitable Agency that works with Clients such as Barclays, Pret a Manger and Aviva. The scope to build on the balloon dog business certainly exists within the Group.

But best of all, both of these new additions have brought us some great new colleagues, all of whom chose to be with the missiontm because they believe in what we are doing.

So where do we go from here? Our Agencies are in good shape and we expect them to work even closer together going forward. Their Client bases are the envy of the industry and they all have exciting strategies for the future.

2012 was a tough old year but we did what we said we would do. So I guess we did well and it's fair to say we are seeing some positive signs. Green shoots maybe but who knows what this mad economic world has in store for us? That is why we will continue to build cautiously and maintain a reduced risk position. We remain acquisitive but in a measured manner, call us quakebuttocks if you will, but our focus will remain on debt management, expertise enhancement and concinnity.

We remain excited by the potential of our business and look forward to further progress in 2013 and beyond.

David Morgan

Chairman

Financial Review

Summary

A year ago, we said we thought 2012 would see us out-perform our competitors. We believe we have achieved this. Against a continuing difficult backdrop for the sector, we are pleased to report results for the year ended 31 December 2012 which show further progress in terms of revenue, profit and debt reduction.

Trading, Statement of Income and Dividend

Turnover (Billings) was 1% higher than the previous year, at £117.0m (2011: £116.0m), and like-for-like turnover, excluding the acquisition of balloon dog with effect from 30 September 2012, was unchanged, reflecting the significant media spend in 2011 relating to the Census (our largest ever project).

Operating income ("revenue") increased 15% to £47.5m (2011: £41.5m), of which the like-for-like increase was 12%, mainly the result of net new business wins, notably VMware, Norwegian Seafood, Axa, Legal & General, Aviva and M&S Bank, together with the first contributions from Yucca, Bray Leino Healthcare and RLA's expansion in Northern Ireland. As mentioned in the Chairman's Statement, it was a good year for new business wins and Client retention. Net new business revenue gained in the year totalled £5.6m, up from £4.1m last year.

In common with the industry, gross profit margins achieved by our different business activities vary widely, and the overall Group margin can be strongly influenced by the level of media placement activity undertaken by our Clients. The higher overall gross margin in 2012 (41% vs 36% in 2011) reflects the lower proportion of media in the business mix (39% of turnover in 2012 vs 44% in 2011) as explained above and illustrated by the segmental analysis in Note 2.

The Directors measure the Group's performance by reference to headline profits, calculated before the deduction of amortisation of intangibles and professional fees associated with acquisitions and as set out in Note 3. Headline operating profit increased by 2% to £6.0m (2011: £5.8m) including the acquisition of balloon dog, and was unchanged on a like-for-like basis. As expected, the expansion of the Group over the last 18 months, through new ventures, additional talent and in-fill acquisitions, sometimes of financially distressed businesses, has reduced margins (headline operating profit as a percentage of gross profit) in the short term (to 13% from 14% in the prior year) but the Group is stronger as a result of these developments and confident that they will benefit the Group in the years ahead. The most recent addition to the Group - balloon dog - is the first acquisition involving anything other than a modest outlay since the refinancing in April 2010. We are really pleased with the way in which the new Agency has fitted into the culture of the Group and it is performing as anticipated.

Further significant progress was made in 2012 to reduce the Group's interest burden, both through a further reduction in net debt and also the renegotiation of interest rates. As a result, net interest costs reduced by a very pleasing 32% to £1.1m (2011: £1.6m).

After financing costs, headline profit before tax increased by 15% to £4.9m (2011: £4.2m).

Reported profit before tax increased by 14% (to £4.7m) after the deduction of amortisation charges and professional fees totaling £0.2m relating to acquisitions made in 2012. In 2011, £0.1m of exceptional costs were incurred relating to the completion of restructuring commenced in 2010.

The headline diluted EPS increased by 8% to 4.54 pence (2011: 4.20 pence).

The Board does not propose the payment of a dividend at this stage. However, as previously mentioned, the strong reduction in our debt leverage since 2010 provides the Board with greater flexibility when considering the most effective use for the cash generated by the business.

We continue to work on fully integrating our recent acquisitions which we expect to result in profits being more second half biased than in recent years. We will keep a close eye on trading in the first half and, if we continue to make progress, it remains our intention to declare a dividend at the time of our interim results.

Balance Sheet and Cash Flow

The Group's balance sheet has been further strengthened during the year by the equity placing of £1.2m used to fund the acquisitions of balloon dog and Addiction. In addition, beneficial changes to our banking arrangements came into effect in June 2012, with an extension of the facilities and the renegotiation of terms. Loan facilities which were due to expire in mid-2013 were extended to the end of 2015, our annual repayment obligation was reduced from £4m to £2.3m, and interest rates charged on the loans were reduced. These changes reflect the Group's complete rehabilitation in the banking community since the restructuring in April 2010.

After two years of reductions in working capital, a decrease in the proportion of Clients making up-front payments contributed to a net increase in working capital during the year. Despite this, net bank debt reduced by a further £3m, to £12.3m (2011: £15.3m). This compares with £13.9m of committed term facilities, together with an overdraft facility of £2.5m, representing a comfortable level of headroom. Our gearing ratio (net debt to equity) reduced from 26% last year to 20% at 31 December 2012 and the Group's "leverage ratio" (ratio of net bank debt to pre-exceptional EBITDA), which in H1 reduced below x2.0 for the first time since the Company's IPO in 2006, fell further despite the traditionally weaker H2, to x1.7 at 31 December 2012.

During the year, the Group continued to find opportunities to strengthen its services and extend its reach. Including the settlement of various acquired obligations, cash totalling £1.3m was invested in four deals during the year, including Quorum Advertising Limited and Haven Marketing Limited as well as Addiction Worldwide and balloon dog. These deals were funded almost entirely by an equity placing which was over-subscribed and raised £1.1m net of expenses.

At 31 December 2012, the Board undertook its annual assessment of the value of goodwill and concluded that no impairment in the carrying value was required. Capital expenditure, at £1.2m, was slightly lower than 2011 (£1.5m) and similar to depreciation charges (£1.0m).

Achieving a leverage ratio of x2.0 has been a key target for the Board since the restructuring in April 2010. Until this was achieved in H1 2012, the Board was focused on paying down debt and concentrating on organic growth, with only small in-fill acquisitions being contemplated. With our leverage ratio now well below x2.0, and expected to fall further over the next six months, the Board's options have increased. In addition to the possibility of paying dividends later this year, we will continue to review opportunities to make both strategic and opportunistic acquisitions to accelerate growth, but in a careful and selective way.

Peter Fitzwilliam

Finance Director

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2012

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

Consolidated Balance Sheet

As at 31 December 2012

Consolidated Cash Flow Statement

for the year ended 31 December 2012

Consolidated Statement of Changes in Equity

Year ended 31 December 2012

Notes to the Consolidated Financial Statements

1. Basis of preparation and significant accounting policies

The results for the year to 31 December 2012 have been extracted from the audited consolidated financial statements.

The financial information set out above does not constitute the Company's statutory accounts for the years to 31 December 2012 or 2011 but is derived from those accounts. Statutory accounts for the year ended 31 December 2011 were delivered to the Registrar of Companies following the Annual General Meeting on 18 June 2012 and the statutory accounts for 2012 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 17 June 2013 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 2012 and 31 December 2011; 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.

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.

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:

·; Potential impairment of goodwill;

·; Revenue recognition policies in respect of contracts which straddle the year end; and

·; Valuation of intangible assets on acquisitions.

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. Estimating these future cash flows is the Group's key source of estimation uncertainty.

Revenue is recognised based on an estimate of the stage of completion of contracts which straddle the year end, typically derived from the amount of time so far committed to those contracts in relation to the total estimated time to complete them.

When considering the valuation of intangible assets on acquisitions, a range of methods is undertaking both for identifying intangibles and placing valuations on them. Brand names, customer relationships, intellectual property rights and goodwill 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.

2. Segmental Information

Business Segmentation

For management purposes the Group had seven operating subsidiaries during the period: April-Six Limited, Big Communications Limited, Bray Leino Limited (incorporating Addiction and Yucca), Fox Murphy Limited (trading as balloon dog), RLA Group Limited, Story UK Limited and ThinkBDW Limited (incorporating Robson Brown), each of which carries out a range of activities. These activities have been divided into four business and operating segments as defined by IFRS 8 which form the basis of the Group's primary reporting segments, namely: Branding, Advertising and Digital; Media; Events and Learning; and Public Relations.

3. Reconciliation of Headline Profit to Reported Profit

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.

5. Finance Costs and IFRS Interest Charges

6. Profit on Ordinary Activities before Tax

Profit on ordinary activities before taxation is stated after charging/(crediting):-

7. Taxation

Factors Affecting the Tax Charge for the Current Year:

The tax assessed for the year is higher (2011: lower) than the standard rate of corporation tax in the UK. The differences are:

8. 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.

A reconciliation of the profit after tax on a reported basis and the headline basis is given in note 3.

9. Intangible Assets

In accordance with the Group's accounting policies, an annual impairment test is applied to the carrying value of goodwill. 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 a material deficit of value in use compared to the carrying value of goodwill.

Other Intangible Assets

Additions of £938,000 in the year include client relationships and trade names acquired relating to balloon dog and Addiction Worldwide of which £163,000 relates to trade names deemed to have an indefinite useful life (2011: £190,000 consists of client lists and other information acquired relating to FireIMC and Yucca).

10. Bank Overdrafts, Loans and Net Debt

The adjustment to amortised cost relates to the amortisation of bank debt renegotiation fees over the life of the loan facility.

At 31 December 2012, the Group had a term loan facility of £6.9m due for repayment by December 2015 on a quarterly basis, and a revolving credit facility of up to £7.0m, expiring on 27 December 2015. Interest on both the term loan facility and the revolving credit facility is based on 3 month LIBOR plus 3.5%, payable in cash on loan rollover dates. The gross amount of the revolving credit facility drawn at 31 December 2012 was £6.5m. In addition to its committed facilities, the Group had available an overdraft facility of up to £2.5m with interest payable by reference to National Westminster Bank plc Base Rate plus 3.5%.

11. Acquisitions

11.1 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 payments that may be due is as follows:

11.2 Acquisition of Friars 573 Limited ("balloon dog")

On 11 October 2012, the Group acquired the whole issued share capital of Friars 573 Limited, the holding company of Fox Murphy Limited, a company trading as balloon dog ("balloon dog"). The fair value of the consideration given for the acquisition was £2,823,000. Initial consideration was satisfied by a cash payment of £451,000 and the issue of £87,000 of shares. Costs relating to the acquisition amounted to £51,000 and were expensed.

Maximum contingent consideration of £2,496,000 is dependent on balloon dog achieving various profit targets over the period December 2012 to December 2015. The Group has provided for contingent consideration of £2,285,000 to date. This contingent consideration is to be settled by a combination of cash and shares.

The fair value of the net identifiable assets acquired was £578,000 resulting in goodwill and other intangible assets of £2,245,000. 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.

The majority of the cash and cash equivalents acquired were utilised following acquisition to settle preference shares, corporation tax and other obligations.

balloon dog contributed turnover of £1,394,000, operating income of £1,216,000 and headline operating profit of £137,000 to the results of the Group since acquisition.

11.3 Acquisition of Addiction Worldwide ("Addiction")

On 21 September 2012, the Group acquired the trade and assets of Addiction Worldwide from Francis Clark LLP, Administrators. The fair value of the consideration given for the acquisition was £85,000, all settled in cash on completion. There is no deferred or contingent consideration payable. Costs relating to the acquisition amounted to £23,420 and were expensed.

The fair value of the net identifiable liabilities acquired was £489,000 resulting in goodwill and other intangible assets of £574,000. 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 acquired trade and assets and the anticipated future operating synergies from the combination.

The majority of the net liabilities acquired were settled following acquisition by drawing on the Group's cash resources.

Addiction has been integrated into the Group's activities and consequently it is not possible to determine accurately its contribution to revenue and profit since acquisition. However, the Directors estimate that Addiction's contribution to profit was breakeven.

11.4 Pro-forma results including acquisitions

The Directors estimate that the turnover, operating income and headline operating profit of the Group would have been approximately £128.0m, £54.9m and £6.3m had the Group consolidated the results of balloon dog and Addiction from the beginning of the year.