Final Results

Motivcom plc

("Motivcom", "the Company" or "the Group")

Final Results for the year ended 31 December 2012

Motivcom plc (AIM:MCM), a leading business services group offering incentives & loyalty expertise and meetings & event management services to major blue-chip corporate clients, is pleased to announce its final results for the year ended 31 December 2012.

HIGHLIGHTS

·; Headline operating profit* increased by 3% to £4,147,000 (2011: £4,017,000)

·; Headline profit before tax† increased by 4% to £4,121,000 (2011: £3,952,000)

·; Headline basic earnings per share‡ increased by 8% to 10.79 pence (2011: 9.97 pence)

·; Operating profit decreased by 21% to £2,713,000 (2011: £3,426,000)

·; Profit before tax decreased by 24% to £2,502,000 (2011: £3,280,000)

·; Basic earnings per share decreased by 20% to 6.52 pence (2011: 8.14 pence)

·; Proposed final dividend of 3.0 pence per share to be paid on 19 June 2013, making a total dividend of 4.5 pence per share (2011: 4.0 pence per share), an increase of 12.5%

·; Net cash balances at 31 December 2012 of £11,933,000 (2011: £5,639,000)

·; Equity increased by 4% to £22,787,000 (2011: £21,946,000)

·; Diverse service offering provides a sound platform for future growth and development

·; Proposed tender offer to buy back 10% of the Group's equity

* Operating profit of £2,713,000 (2011: £3,426,000) plus amortisation and impairment of intangible assets of £2,075,000 (2011: £479,000) and acquisition expenses of £59,000 (2011: £137,000) less contingent consideration adjustment credit of £700,000 (2011: £25,000).

† Profit before tax of £2,502,000 (2011: £3,280,000) plus amortisation and impairment of intangible assets of £2,075,000 (2011: £479,000), acquisition expenses of £59,000 (2011: £137,000) and unwinding of discount relating to contingent consideration liability of £185,000 (2011: £81,000), less contingent consideration adjustment credit of £700,000 (2011: £25,000).

‡ See reconciliation in Note 5

Commenting on the results, Colin Lloyd, Chairman of Motivcom plc, said:

"The Group's diversified offering has provided resilience in the tough economic conditions in 2012. The full year delivered modest growth, in line with the Board's expectations at the interim results.

The Group has continued to develop new products in certain key areas of the business, as well as securing new client wins during the period. The Board is confident that the Group's approach is maintaining its leading position in the market, and this confidence is demonstrated by the dividend increase of 12.5 % for the full year.

In view of positive net cash and ongoing cash generation the Board is recommending a tender offer to buy back 10% of the Group equity at a maximum estimated cost of £3.3 million."

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CHAIRMAN'S STATEMENT

I am pleased to report that the results for the year to 31 December 2012 show a modest increase on the outcome for 2011, in line with the Board's expectations which were outlined in the Group's interim results.

The Group is cash generative and maintains a strong balance sheet with average net cash of circa £6 million. Whilst the Group continues to look for earnings enhancing acquisitions, the Board will not risk overpaying in an uncertain economic environment. In the absence of suitable acquisition opportunities the Board has recommended that in the best interests of its shareholders the Group will tender to buy 10% of shares in the Company at a maximum offer price of 110 pence per share, a maximum estimated cost of £3.3 million. Shareholders will be sent a circular with further details.

Financial update

Headline operating profit increased by 3% to £4,147,000 (2011: £4,017,000) on a gross profit that decreased by 1% to £29,317,000 (2011: £29,504,000). Headline profit before tax increased by 4% to £4,121,000 (2011: £3,952,000). Headline basic earnings per share increased by 8% to 10.79 pence (2011: 9.97 pence).

The 2012 net cash balances of £11,933,000 (2011: £5,639,000) contained an exceptional £3.5 million of cash relating to client pass through costs that were paid out in early January 2013.

Dividends

In view of the cash generative nature of the Group's business, the Company proposes a final dividend for 2012 of 3.0 pence per share. This makes a total dividend per share of 4.5 pence for 2012 (2011: total dividend of 4.0 pence), an increase of 12.5%. This final dividend will be paid on 19 June 2013 to shareholders on the register at close of business on 2 April 2013.

The Board intends to grow the dividend in real terms whilst aiming for earnings cover of two times over the medium term.

Strategy

As stated in my report last year the Board has set a clear and achievable five year strategy for the Group covering people and client development, new products and services as well as appropriate acquisitions as they arise. This strategy is being met through the various developments set out in this report. The Board believes that the strategy will continue to build on the core strengths of the Group and places Motivcom in an excellent position to take advantage of any upturn in the economy.

Divisional Reports

Motivation

The Motivation division increased gross profit by 8% to £5.9 million and divisional headline operating profits increased by 28% to £1.5 million. Building on the sales and marketing investment reported last year this reflects the upside of growing scale in the operation. These initiatives continue into 2013 for which the division maintains a positive outlook.

Motivation programme activity developed well in 2012; our clients continue to recognise the positive impact of employee engagement on productivity, customer satisfaction and employee attrition. Whilst decision making remained slow, Motivcom's expertise and strong reputation in the area of employee recognition and incentives has helped to maintain a good flow of business wins which will contribute to 2013.

Voucher and gift card volumes were up 11% on 2011 to £67 million and exceeded the Group's previous all time high in 2008. The operation continued to benefit from the migration from paper vouchers to plastic gift cards with 43% of the volume on plastic at the end of 2012 (17% in December 2011). Our wide and growing base of customers in this area will be of great benefit as sentiment improves.

Spree, our prepaid MasterCard® product, has continued to expand. In 2012, load values were up 10% to £170 million (2011: £155 million) despite significant pressure on retailers during the year. This growth continues to be driven both by the expansion of existing card programmes and the introduction of new ones. Our growing experience in managing and marketing to our existing cardholder base will continue to deliver bottom line growth into 2013 and beyond.

Promotions

In the Promotions division, gross profit increased by 12% to £8.5 million and divisional headline operating profits increased by 46% to £1.0 million.

Employee Benefits

Employee Benefits saw steady growth throughout 2012. 'The Essentials Range' of benefits for the small to medium sized business gave a new stream of revenue, offering a 'plug and play' platform to help these clients offer these benefits to their employees without major investment. We also continued to grow within the public sector, winning a number of key clients who require several products to be managed by one organisation. This, combined with a fresh and vibrant approach to the market, saw new business increase by almost 100%, whilst keeping our retention levels above the Board's expectations.

2013 has seen a strong start, and with more developments and initiatives in the pipeline it promises to be another good year for the Employee Benefits division. Our focus will continue to be on client service, best in class offers for employees, and innovation of both the product and the technology that supports it.

Allsave our flagship provider of child care vouchers had a successful year; this was built on great people, focus and strong process. Client retention remains a key strength as a result existing schemes grew year on year. 2012 saw the commencement of an aggressive sales strategy. The Group has secured a number of significant client wins during the period, including, Coca Cola, QBE, Securitas and many others. Our relationships with key intermediaries continued to strengthen which will result in greater activity in 2013.

Sales Promotion

Whilst 2012 was a challenging year in terms of new business intake in Fotorama, Filmology and Protravel, we nevertheless retained all key clients and grew our business with them. Major promotions with clients including PruHealth and Toshiba helped us to close the year with good prospects for 2013.

New product development and innovation has also been a feature of the period, with the first major step being the development of the fuel gift card which won many clients in the final quarter of 2012. Furthermore, our acquisition of Treatme.net now allows the Group to be vertically integrated with the ever more popular 'feel good' rewards and incentives such as experiences and days out.

The Board's outlook for sales promotion in 2013 is cautiously positive. We do not expect confidence in this market to drop and are hopeful budgets will not be ring fenced. Overall, business has started well and we aim to build on the actions taken in 2012.

Meetings & Event Management

The Events division gross profit decreased by 9% to £14.9 million and divisional headline operating profits decreased by 23% to £1.8 million. 2012 again proved a challenging year for marketing events with continuing pressure on margins and budgets. Nevertheless, I am pleased to report that the talented and highly committed teams across the Group helped to achieve many successes during the year and to deliver a significant profit contribution. New business has been secured from competitors in hard fought tender processes with significant potential gains in the consumer sectors. In addition the Board has taken a disciplined approach to our cost base in this area.

Our meeting and event venue finding business has been steady in 2012 and continues the recent trend of reflecting conditions in the wider economy. In contrast to the spend on live event production which is related to marketing and communication initiatives, our meeting space booking service ebbs and flows with corporate activity on a daily basis. We have seen very little detrimental impact on volumes from the internet and virtual meetings and our basic premise still holds that "when our clients are busy doing business, we are busy booking their business". I am also pleased to report that we have made an encouraging start in 2013.

Goldserve, acquired in September 2011, performed acceptably for the first six months after acquisition. However, changes made by Google in its search engine methodology adversely impacted lead generation thereafter. The Board, therefore, took the decision to impair the goodwill and intangibles acquired which resulted in an overall charge to operating profit of £934,000 after writing back contingent consideration no longer considered payable.

The live events arena has seen a more challenging year with short term budget savings affecting clients' ability to commit to major activity. Maintaining the Group's UK event management market leading position has been a priority and continues to be for 2013.

Outlook

The Board is pleased that business intake in January and February 2013 slightly exceeded expectation with 48% of annual budgeted gross profit confirmed at 28 February 2013. Whilst it is early in the year, we expect the Group to perform in line with the Board's expectations which have been set with cautious optimism, assuming no material change to the economic environment.

I am fully aware of the commitment that my board colleagues, management and staff across the Group have made in 2012. On behalf of Motivcom shareholders and myself I would like to thank them for their professionalism and dedication.

Colin Lloyd

Chairman

19 March 2013

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2012

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2012

CONSOLIDATED BALANCE SHEET

AT 31 DECEMBER 2012

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2012

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2012

NOTES TO THE FINANCIAL INFORMATION

1 Basis of information in this announcement

The financial information in this announcement does not constitute the Company's statutory accounts for the years ended 31 December 2012 or 31 December 2011 but is derived from those accounts.

Statutory Accounts for 2011 have been delivered to the Registrar of Companies and those for 2012 will be delivered following the Company's annual general meeting. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain any statement under section 498 (2) or (3) of the Companies Act 2006.

This announcement has been prepared on the basis of the Group's accounting policies. These are set out in its Annual Report and Accounts for the year ended 31 December 2011 which is available on the Group's website (www.motivcom.com)..

The financial statements are prepared on a going concern basis. In considering going concern, the directors have reviewed the Group's future cash requirements and earnings projections. The directors believe these forecasts have been prepared on a prudent basis and have also considered the impact of a range of potential changes to trading performance. The directors have concluded that the Group should be able to operate within its current facilities and comply with its banking covenants for the foreseeable future and therefore believe it is appropriate to prepare the financial statements of the Group on a going concern basis. This is supported by the Group's liquidity position at the year end.

2 Segment information

At 31 December 2012 the Group is organised into three main business segments - (1) development and administration of third party motivation and incentive programmes ("Motivation") - (2) the provision of incentive travel, live events and venue find ("Events") - (3) trade and consumer sales promotions, employee benefit products and communications ("Promotions"). Unallocated costs represent corporate and share-based payment expenses.

The segment results for the year ended 31 December 2012 are as follows:

The segment results for the year ended 31 December 2011 are as follows:

The Group's business is divided into two main streams - Incentives and Loyalty ("Incentives") and Meetings and Event Management ("Meetings"). Incentives comprises the segment results of Motivation and Promotions but also includes the motivation business of AYMTM Limited included in Events. Meetings comprises the segment results of Events less the motivation business of AYMTM Limited. The Group recognises that this additional information enables its shareholders better appreciate the nature of its business.

The analysis for the year ended 31 December 2012 is as follows:

The analysis for the year ended 31 December 2011 is as follows:

The home country of the Company and its subsidiaries is England. The Group's sales are mainly in countries within the UK and the eurozone and, allocated on the basis of the country in which the customer is located, are as follows:

No client represented greater than 10% of Group revenue in either 2012 or 2011.

3 Interest expense

4 Income tax expense

The tax on the Group's profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated companies as follows:

The weighted average applicable tax rate was 22.9% (2011: 27.9%).

5 Earnings per share

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period.

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all contracted dilutive potential ordinary shares. The Company has only one category of dilutive potential ordinary shares, share options.

The calculation is performed for the share options to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding share options and taking account of the yet unexpensed share based payment charge relating to those options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options. Tranches two to four of the options granted to C T Lloyd have been excluded from this calculation as all the conditions attaching to the proposed options had not been met at 31 December 2012.

Headline basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company plus (i) the amortisation of intangible assets, (ii) acquisition expenses and (iii) adjustments to contingent consideration by the weighted average number of ordinary shares in issue during the period.

6 Dividends

The proposed final dividend for the year ended 31 December 2012 of 3.0 pence per share is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. The total amount proposed is £873,030.

7 Cash generated from operations

8 Acquisitions

Treatme.Net Limited

On 1 November 2012 the Company acquired the entire issued share capital of Treatme.Net Limited ("Treatme"), for a cash consideration of £300,000. Associated legal and professional costs of £59,000 were paid and these are shown separately in the income statement in the period. Treatme are a leading provider of activity and experience days and enable Promotions to be vertically integrated when supplying campaigns to its clients.

The acquisition had the following effect on the Group's assets and liabilities.

The goodwill arising on the acquisition of Treatme is attributable to anticipated future operating synergies from the combination, opportunities to acquire new customers and the anticipated profitability arising from cross-selling opportunities within the Group. Under IFRS no value can be attributed to such intangibles and this has contributed to the amount recognised as goodwill.

Treatme contributed £244,000 to Group revenues, £114,000 to Group gross profits and a £5,000 operating loss in the period.

Summary

If the acquisition had been completed at the beginning of the year, management estimate that Group revenue for the period would have been £107,434,000 and Group operating profit would have been £2,509,000.

Prior year acquisitions

In 2011, £4,391,000 was expended on the acquisition of the entire issued share capitals of Allsave Limited and My Family Care Vouchers Limited and the business and assets of Goldserve, including £1,245,000 for contingent consideration. Of the £4,391,000, £1,252,000 was in respect of goodwill.