Final Results

11 May 2017

Porta Communications Plc

("Porta" or "the Company")

Final Results for the year ended 31 December 2016andNotice of AGM

Porta Communications Plc (AIM: PTCM), the international communications and marketing group, is pleased to announce its final audited results for the year ended 31 December 2016.

The Board is pleased to report on a year of significant change at Porta, during which the Company has seen good organic growth and continued its strategy of creating an integrated international communications business. With no companies acquired during 2016, shareholders can clearly see the underlying trading performance of the Group in a year in which Porta has achieved healthy levels of growth in turnover and gross profit.

The reduction in adjusted EBITDA reflects the significant senior hires made throughout the year and these strategic appointments are now having a positive impact on the business. This is coupled with some important changes to the Board of Directors, marking the beginning of a new chapter in the development of the Group.

Financial Highlights

· Revenues 9% ahead of 2015 at £37.1m (FY 2015: £34.1m)

· Gross profit increased by 10% to £29.7m (FY 2015: £26.9m)

· Headline adjusted EBITDA1 £2.3m (FY 2015: £2.6m)

· Headline adjusted Profit Before Tax2 £0.7m (FY 2015: £0.8m)

· Loss Before Tax3 £5.1m (FY 2015: £2.9m)

· Loss Per Share 2.2p (FY 2015: 1.6p)

· Net debt £7.6m (FY 2015: £6.2m)

1. Headline adjusted EBITDA excludes acquisition and restructuring costs, exceptional legal and professional costs, share based payments, gain on acquisition, security impairment, revaluation of contingent consideration, provision of vendor loan guarantee and non-recurring property costs.

2. Headline adjusted Profit Before Tax excludes exceptional costs in arriving at Headline adjusted EBITDA as outlined above, amortisation on acquired intangibles and impairment charges against goodwill, brands and customer lists as a result of impairment reviews.

3. Includes £2.3m of impairment charges (FY 2015: Nil) and £2.1m of amortisation on the acquired intangibles (FY 2015: £2.2m).

Full Year Highlights

· Revenue growth all organic with no acquisitions in the period

· Substantial investment in Newgate UK with new senior hires cultivating a growing pipeline

· Strong trading performances from Newgate Australia, Newgate Singapore, Publicasity and Redleaf Communications

· Improving performance from Newgate UK

Outlook

· New Board in place to lead the Company to the next stage of development and profitability

· Current trading performance substantially ahead of 2016

· Discussions under way with potential debt financiers and strategic investors

John Foley, Chairman, commented:

"2017 has started well with trading performance substantially ahead of both last year and our internal expectations."

Steffan Williams, CEO, commented:

"Whilst the business grew organically in 2016 there is still a lot of work to be done. We have hired some excellent people and we now need to give them the very best chance to flourish. We also need to make sure that we act in as joined up a manner as possible across the Group businesses and across geographies.

"2017 has started well and from this month we have a new management team in place with a new and collaborative culture that is committed to taking Porta to the next level."

Posting of Annual Report and Notice of Annual General Meeting

The Company's Annual General Meeting will be held at 2pm on 8 June 2017. The Annual Report containing the Notice of the Annual General Meeting will be posted to shareholders by 15 May 2017 and will be available on our website thereafter.

-- ends --

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Enquiries

Porta Communications Plc

Steffan Williams, CEO

Rhydian Bankes, CFO

www.portacomms.com

+44 (0) 20 7680 6500

Grant Thornton UK LLP (Nominated Adviser)

Philip Secrett

Samantha Harrison

Daniel Bush

+44 (0) 207 383 5100

Nplus1 Singer (Broker)

James Maxwell

Lauren Kettle

+44 (0) 20 7496 3000

Newgate Communications (Media Enquiries)

Bob Huxford

Adam Lloyd

James Ash

+44 (0) 20 7680 6500

Notes to Editors:

Porta is a fully integrated communications and marketing group with specialisms including financial, corporate and consumer public relations, public affairs and research and multi-capability marketing, brand and creative communications.

The Group has offices in Abu Dhabi, Beijing, Brisbane, Bristol, Canberra, Cardiff, Edinburgh, Hong Kong, London, Manchester, Melbourne, Singapore and Sydney.

The brands and companies it owns are: Newgate Communications, PPS Group, Redleaf Communications, Publicasity, 2112 Communications and Summit Marketing Services.

Porta Communications' corporate website is - www.portacomms.com

CHAIRMAN'S STATEMENT

INTRODUCTION

Porta achieved healthy levels of turnover, gross profit and adjusted EBITDA in the year ended 31 December 2016. No companies were acquired in the period and so shareholders can now clearly see both the underlying trading performance of the Group and the accounting adjustments that reduce a profitable adjusted EBITDA of £2.3 million to a loss before taxation on continuing operations of £5.1 million.

FINANCIAL OVERVIEW OF RESULTS

Turnover of £37.1m was 9% higher than for the previous year (2015: £34.1m). Gross profit increased by 10% to £29.7m (2015: £26.9m). Adjusted headline EBITDA reduced by 10% to £2.3m (2015: £2.6m) mainly because of the substantial investment made in strengthening the team at Newgate UK and because of a slowdown in activity at PPS after the BREXIT referendum decision. The loss before taxation on continuing operations was £5.1m (2015: £2.9m loss) and the loss per share on continuing and discontinued operations was 2.2p (2015: 1.6p loss).

The Chief Executive's Business Review concentrates on the highlights achieved by individual businesses during 2016 but I would like to note the very good trading performances of Newgate Australia, Newgate Singapore, Publicasity and Redleaf Communications as well as the improving momentum to our Newgate UK operations.

Porta is a Group that was founded in December 2010 and was then rapidly built by both the acquisition of a number of businesses and by the start up of a number of its current businesses. The 2016 results include a £2.6m amortisation and depreciation charge and £2.1m of that amount relates to the non-cash charges associated with the write down of customer relationships and brands resulting from the creation of intangible assets when acquisitions were made.

The Board has conducted a thorough impairment charge review of all cash generating units within the Group and a further £2.3m charge has been made in the 2016 accounts to reduce the carrying value of intangible assets where necessary; the performance of Summit Marketing Services and PPS required adjustment as a result of current and anticipated trading performance levels. Restructuring and Acquisition costs of £1.4m included a provision of £0.3m in relation to a vendor loan guarantee, £0.3m of contingent payments to two employees of PPS for conditions existing at the date of the acquisition of PPS, £0.2m of contingent consideration revaluation relating to Redleaf Communications and £0.2m of share based payment expense as well as other one off, non-trading items associated with previous acquisitions and company restructurings.

Despite generating £1.2m of net cash from operating activities (2015: £1.3m), year-end net debt was £7.6m (2015: £6.2m). It is clear to the current Board that an equity injection of up to £3m should be sought to support ongoing growth, and discussions with strategic investors are underway to enable this to happen.

To this end, in order to maintain the Group's flexibility to raise further funds for such an equity issue, as well as being able to issue shares in relation to legal obligations that already exist including contracted follow-on acquisitions, the Board proposes to seek authority at the forthcoming AGM to issue up to 163.1 million new shares (being approximately 50% of Porta's existing issued share capital) with 130.4 million of the authority to issue new shares (approximately 40% of Porta's existing issued share capital) being on a non-pre-emptive basis.

The Board has also reached an advanced stage of discussions with a senior debt provider to establish a new working capital facility. The Group's current main funders are Retro Grand Limited ("Retro Grand") and Hawk Investment Holdings Limited ("Hawk"). Loans advanced by Retro Grand and Hawk carry high interest rates which reflect the fact that these loans were originally anticipated to be equivalent to mezzanine debt. Retro Grand and Hawk have indicated that there will be a substantial reduction in the interest rate charged when appropriate equity investment has been raised.

BOARD CHANGES

Bob Morton retired as Non-Executive Chairman during the year and David Wright became Executive Chairman with Steffan Williams becoming Chief Executive; since the year end David has also left the Board and I was appointed as Non-Executive Chairman. Brian Blasdale also retired as a Non-Executive Director during 2016.

I would like to thank everyone who has now left the Board for the contribution that they made; in particular, there would be no Porta if it had not been for the drive and commitment shown by Bob and David and I thank them for all their hard work over the years.

Also since year end, Gene Golembiewski has changed roles from CFO to a role involving wider commercial responsibilities, and remains as both an Executive Director and as Company Secretary. Rhydian Bankes, previously Porta's Head of Group Finance, has joined the Board as CFO.

It is for a new Board to take Porta to the next stage in its development, to substantially increase profitability and thus realise the potential that was anticipated by Bob and David.

STRATEGY

Porta was established with the aim of creating an integrated international communications and marketing Group with clear synergies across all businesses and offices. The Group wants to recruit the best available talent in its sectors and to target ever stronger client opportunities.

This will be achieved by our Board and senior management team recognising that the following things need to be achieved together:

- that whilst underlying trading is healthy it can substantially improve because we have recruited some excellent hires and made the necessary investment in staff to produce further growth;

- that the investment in our people is an ongoing process that requires an appropriate equity incentive for senior management teams;

- that the Group Board is focused on the practical measures necessary to strengthen the balance sheet and the Group's working capital facilities;

- that a renewed focus on cost and cash control is needed together with an improvement in the Group's support structures to support further profitable growth; and

- that we are all committed to ensuring that the Group is something that should have a value worth more than just the sum of its parts, which can work together with our clients on a multi stakeholder and/or international basis and which is above all else a Group which is both an exciting place to work and which provides a great service to its clients.

Steffan Williams will lead our management teams in the development of the specific plans necessary to achieve these aims.

PEOPLE

On behalf of the Board, I would like to thank all our employees for their hard work and commitment.

CORPORATE GOVERNANCE

The Board is of the opinion that the measures of governance in place within the Group are appropriate for its size.

OUTLOOK

2017 has started well with trading performance substantially ahead of both last year and our internal expectations.

John R Foley

Chairman

CHIEF EXECUTIVE OFFICER'S STATEMENT

This was largely a year of consolidation for Porta in which the Company took the first meaningful steps towards realising the synergies and commercial opportunities that our multi stakeholder, cross-border business provides. All growth was organic.

2112

2016 was a year of focused reorganisation for 2112. The agency reduced people numbers and costs without significantly damaging fee income.

Key clients include BNY Mellon, Towergate Insurance and Hermes Investment Management. Significant wins during the year included Earthport, Hermes Investment Management and Legal & General Investment Management.

NEWGATE ABU DHABI

Newgate Abu Dhabi had to withstand very difficult trading and economic conditions due to a continuing recession in the region in which budgets were severely cut or put on hold as a result of a low oil price. Despite these conditions, and as one of the newest offices in the Newgate network, the Abu Dhabi team demonstrated resilience by delivering a modest profit in only its second full year.

Newgate Abu Dhabi continued its work on high profile mandates in the region and is delivering on its strategy to maintain an equitable balance between public and private sector work.

NEWGATE AUSTRALIA

The key to success for our Australian business continues to be the integrated offering of financial and corporate communications, public affairs and research and the newly introduced Newgate Engage. Newgate Engage was successfully launched in February 2016 to take advantage of the huge demand for skilled community and stakeholder engagement to support the massive infrastructure investment programme underway in New South Wales and Victoria.

Other project highlights for the year include advising on the successful transaction for Ausgrid, Australia's largest electricity network business whilst the largest client win for the year in Australia was the mandate to work with the Australian Banking Association (ABA) assisting the industry body in navigating through a number of high profile media and political issues including calls for a Royal Commission into the banking sector.

The current year should see the benefit from the investment in key executives along with the new Engage business.

NEWGATE HONG KONG AND CHINA

Newgate Hong Kong and China enjoyed a strong first half of the year, bolstered by projects for Elliott and Franklin Templeton as well as work for distress debt funds involved in the Kaisa Group bond default, the largest ever real estate default in China. The third quarter, however, was disappointing with delays on some financial communications mandates. This was not unexpected given the widespread and well-published retrenchments seen in Hong Kong across the investment banking sector during the course of the year.

However, a marked improvement was seen in the final quarter both in new retained business as well as project work.

New clients won during the year included companies from across the industrial spectrum as well as a mixture of both global and Chinese financial institutions - most notably projects with global insurance group, AIG, and Chinese private equity firm, Hony Capital, as well as retainers with asset management firm, AMP Capital, and global private equity firm, Permira.

NEWGATE SINGAPORE

Newgate Singapore made good progress during 2016, adding to its retained client list, the diversity of client assignments, revenue from client work, profitability and staff numbers.

The team advised on over a dozen M&A situations in Singapore during the year, involving companies drawn from the commodities, hospitality real estate, land transport, logistics real estate, precision manufacturing, real estate asset management and shipping sectors.

NEWGATE UK

Newgate UK produced a 23 per cent growth in Gross Profit and £1.6m turnaround in reported EBITDA on the year. The quality of the new team was reflected in the number of major transactions handled by Newgate, including the $6.3bn acquisition by retained client, Sompo, the largest non-life insurance company in Japan. The transactions we worked on from London during the course of 2016 were part of more than $20bn of deals worked on by Newgate globally during the year.

Client mandates during the year included supporting Glencore as it implemented its debt reduction strategy. Away from the financial markets, work for a gas exploration company helped it secure planning permission.

The potential of the integrated offering, including local engagement, was exhibited in Newgate UK supporting the Link UK project, backed by Intersection, an Alphabet company, which is working with BT to replace ageing telephone boxes throughout the UK with ultramodern digital communications kiosks.

PPS suffered badly from the impact of the EU referendum/Brexit with a number of projects, in particular planning consent, being put on hold over the period. Since the year end PPS has been rebranded as Newgate Engage and has been integrated into the Newgate UK offering.

PUBLICASITY

Publicasity delivered another strong 2016 financial performance. Fee income remained consistent, but with a 26 per cent increase in EBITDA versus the previous year. The top ten clients represented 77 per cent of total income, with no one individual client representing more than 13 per cent.

Notable wins included major fashion and home retailer, TK Maxx, the premium bed retailer, Feather & Black, the German stationery giant, Staedtler, and Parisian confectioner, Pierre Herme.

REDLEAF

Redleaf had another exceptional year with total sales up 12 per cent and EBITDA up 15 per cent on 2015.

During 2016, Redleaf's achievements in delivering meaningful and measurable campaigns for its clients were recognised with several industry awards including Quoted Company Alliance PR Firm of the Year 2016 and Best Adviser Financial PR in the UK Stock Market Awards.

New retainer clients included Western Union, State Street and Allsop. Meanwhile the financial team worked on such transactions as Nagatanien's purchase of Chaucer Foods and Daisy Group's purchase of Alternative Networks.

SUMMIT

Summit had a good year. Its roster of key clients includes AXA and the Institution of Civil Engineers (ICE).

Steffan Williams

Chief Executive Officer

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2016

Consolidated Statement of Financial Position

As at 31 December 2016

As at 31 December 2016

For the year ended 31 December 2016

For the year ended 31 December 2016

Consolidated Statement of Changes in Equity

For the year ended 31 December 2016

The accompanying notes are an integral part of these consolidated financial statements.

For the year ended 31 December 2016

For the year ended 31 December 2016

1. Accounting policies

The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented unless otherwise stated. The adoption of the additional policies has no impact on the results, assets or liabilities of the Group for the prior year.

The financial statements are presented in Pounds Sterling which is the Company's functional currency.

Consistent with previous years, Adjusted EBITDA is included as a key metric for understanding the Group's performance. Adjusted EBITDA is the results of the Group before start-up losses, acquisition costs, restructuring costs, non-recurring property costs, legal and other consultancy costs, share based payment expense and impairments.

The adjusting items are broken down in the tables below.

(a) Basis of preparation of the financial statements

The Consolidated and Company financial statements of Porta Communications Plc have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU), IFRIC Interpretations and the parts of the Companies Act 2006 applicable to Companies reporting under IFRS.

The Consolidated and Company financial statements have been prepared under the historical cost convention, except for financial instruments and contingent consideration that have been measured at fair value.

The financial statements have been prepared on a going concern basis in accordance with IFRS and IFRIC interpretations issued and effective or issued and early adopted as at the time of preparing these statements.

The preparation of financial statements in accordance with IFRS requires the use of certain critical accounting estimates.

It also requires management to exercise its judgment in the process of applying the Group's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated and parent company financial statements are disclosed under accounting policy (x).

Standards, interpretations and amendments to published standards that are not yet effective and have not been adopted early by the Group

A number of the new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2017, and have not been applied in preparing these consolidated financial statements. Those which are/may be relevant to the Group and expected to have significant effect on the consolidated financial statements of the Group are set out below. The Group is yet to assess the full impact of these changes.

● IFRS 9 Financial Instruments addresses the classification, measurement and recognition of financial assets and financial liabilities. It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. The standard is effective for accounting periods beginning on or after 1 January 2018. Early adoption is permitted subject to EU endorsement. 

● IFRS 15 Revenue from contracts with customers deals with revenue recognition and establishes principles for reporting useful information to users of financial statements. The standard replaces IAS 18 Revenue and IAS 11 Construction contracts and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2018 and earlier application is permitted subject to EU endorsement. 

● IFRS 16 Leases requires that operating leases be capitalised and an asset and a financial liability recognised in respect of those leases. The standard is effective for annual periods beginning on or after 1 January 2019 and earlier application is permitted subject to EU endorsement if IFRS 15 is also applied.

● IAS12 Income Taxes - amendments regarding the recognition of deferred tax assets for unrealised losses. The standard is effective for annual periods beginning on or after 1 January 2017.

● IFRS 2 Share-based payments ("SBP") provides clarification concerning the treatment of vesting and non-vesting conditions. It also clarifies the treatment when tax laws oblige an entity to withhold an amount for an employee's tax obligation associated with a SBP and to transfer that amount to the tax authority on the employee's behalf. Finally the amendment provides further guidance on accounting for modifications of options. The standard is effective for accounting periods beginning on or after 1 January 2018.

With the exception of IFRS 15 and IFRS 16, the Directors do not expect that the adoption of the Standards and amendments listed above will have a material impact on the financial statements of the Group in the future periods.

The impact that IFRS 15 will have on the financial statements is yet to be quantified. The Group has different contractual arrangements with each of its clients which will require detailed review in order to assess the changes the Group will need to make to its revenue recognition policies once the standard is implemented.

The impact that IFRS 16 will have on the financial statements is also as yet to be quantified. As a result of the Group's diverse geographic portfolio of business, the Group has a significant number of leases which will need to be assessed individually against the requirements of the standard.

(b) Basis of consolidation

The Consolidated Statement of Comprehensive Income and Statement of Financial Position include the financial statements of the Company and its subsidiary undertakings made up to 31 December 2016 and present comparative information for the year ended 31 December 2015.

Subsidiaries are all entities over which the Group has control. The Group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

Profit or loss and each component of other comprehensive income ('OCI') are attributed to the equity holders of the parent of the Group and to non-controlling interests. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

A change in ownership interest of a subsidiary without a loss of control is accounted for as an equity transaction. If the Group loses control over a subsidiary, it:

● derecognises the assets (including goodwill) and liabilities of the subsidiary

● derecognises the carrying amount of any non-controlling interests

● derecognises the cumulative translation differences recorded in equity

● recognises the fair value of the consideration received

● recognises the fair value of any investment retained

● recognises any surplus or deficit in the Statement of Comprehensive Income

● reclassifies the parent's share of components previously recognised in OCI to profit or loss or retained earnings, as appropriate, as would be required if the Group had directly disposed of the related assets or liabilities.

When the Group ceases to have control any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may require that the amounts previously recognised in other comprehensive income be reclassified to profit or loss.

(c) Going concern

The current economic conditions continue to create uncertainty particularly for (a) the level of demand for the Group's services; and (b) the availability of bank finance for the foreseeable future. The Group's forecast and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current finance facilities. However, the Directors have sought and received assurance from the Group's major lenders that they will continue to provide financial support beyond the expiry of the existing loan facilities sufficient to enable the Board to conclude that the Group and the Company are going concerns.

The Group refinanced their loans and borrowings in 2016. See note 23 for more detail.

Therefore, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Therefore, the Company and the Group continue to adopt the going concern basis in preparing the consolidated financial statements.

(d) Business combinations

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at fair value at the date of acquisition and the amount of any non- controlling interest in the acquired entity. Non-controlling interests ('NCI') may be initially measured either at fair value or at the NCI's proportionate share of the recognised amounts of the acquiree's identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Acquisition costs incurred are expensed and included in administrative expenses except for legal costs in relation to the issue of equity instruments, in connection with an acquisition, which are capitalised and net off against share premium.

When the business combination is achieved in stages, any previously held equity interest is re-measured at its acquisition date fair value and any resulting gain or loss is recognised in profit or loss. It is then considered in determination of goodwill.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Any subsequent changes to the fair value of the contingent consideration are adjusted against the cost of the acquisition if they occur within the measurement period of 12 months following the date of acquisition. Any subsequent changes to the fair value of the contingent consideration after the measurement period are recognised in the Consolidated Statement of Comprehensive Income. Contingent consideration that is classified as equity is not re-measured and subsequent settlement is accounted for within equity.

When the Group enters into options and forward contracts over shares relating to NCIs at the same time as the business combination, the NCI is recognised to the extent the risk and rewards of ownership of those shares remain with them.

Irrespective of whether the NCI is recognised, a financial liability (redemption liability) is recorded to reflect the forward or put option. All subsequent changes to the liability are recognised in profit or loss. Where the risks and rewards of ownership remain with the NCIs, the recognised financial liability is a reduction in the controlling interest equity. The NCI is then recognised and is allocated its share of profits and losses accordingly. Where significant risks and rewards of ownership reside with the NCIs, the difference between the financial liability and the NCI balance is debited to controlling interest equity if the liability is greater than the carrying value of the NCI, otherwise the difference is attributed to NCI. Dividends paid to the NCIs that do not reduce the contracted purchase price are deducted from the NCI carrying value. Profits and losses are allocated to NCI to the extent it is necessary to cover the dividend payment so that NCI does not become negative. In those situations, when forward or put options state that dividend payments reduce the contracted future purchase price, then the dividend amount is deducted from the redemption liability.

Transactions with NCIs that do not result in a loss of control are accounted for as equity transactions - that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains and losses on disposal to NCIs are also recorded in equity.

(e) Foreign currency translation

Amounts included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency).

The Consolidated financial statements are presented in Pounds Sterling, the Company's functional and presentation currency. Transactions in foreign currencies are translated into the functional currency using the exchange rate prevailing at the date of the transaction. Foreign exchange gains and losses resulting from settlement of such transactions, and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies, are recognised in the Statement of Comprehensive Income except when deferred in equity as qualifying cash flow and net investment hedges.

The results and financial position of all Group companies that have a functional currency other than sterling are translated as follows:

● income and expenses are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rate prevailing on the transaction date, in which case income and expenses are translated at the date of the transaction);

● assets and liabilities are translated at the closing exchange rate at Statement of Financial Position date; and

● all resulting exchange differences are recognised as other comprehensive income which is a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and from borrowings, are taken to equity. When a foreign operation is sold such exchange differences are recognised in the Statement of Comprehensive Income as part of the gain or loss on sale. Goodwill and fair value adjustments on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing exchange rate. Exchange differences arising are recognised in other comprehensive income.

(f) Revenue and revenue recognition

Revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the revenue can be reliably measured. Revenue represents the fees and commissions, net of discounts, derived from services provided to and invoiced to clients.

Revenue is recognised in the period in which the service is performed, in accordance with contractual arrangements. Income billed in advance of the performance of service is deferred and income in respect of work carried out but not billed at period end is accrued. In these cases, revenue is recognised by reference to the stage of completion which is measured by reference to labour hours incurred to the period end as a percentage of the total estimated labour hours for the contract.

Where the contract outcome cannot be measured reliably, revenue is recognised to the extent of the expenses recognised that are recoverable.

(g) Property, plant and equipment

Property, plant and equipment are stated at cost, net of depreciation and provision for any impairment. Depreciation is calculated to write down the cost of all tangible fixed assets to estimated residual value over their expected useful lives as follows:

Office improvements 5 years, straight line (or length of lease, if shorter)

Fittings and equipment 5 years, straight line

Computer equipment 3 years, straight line

Motor vehicles 5 years, straight line

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each Statement of Financial Position date. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amount and are included in the Statement of Comprehensive Income.

(h) Intangible assets

Intangible assets comprise goodwill, certain corporate brand names and customer relationships acquired in business combinations, website development costs, software and other licences.

Goodwill represents the excess of fair value attributed to investments in businesses or subsidiary undertakings over the fair value of the underlying net assets, including intangible assets, at the date of their acquisition. Goodwill on acquisition of an entity is included in intangible assets. Gains and losses on disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill has an indefinite useful life and therefore not amortised. Impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the net present value of future cash flows derived from the underlying assets using a projection period of up to five years for each cash-generating unit. After the projection period a steady growth rate representing an appropriate long-term growth rate for the industry is applied. Any impairment is recognised immediately as an expense and is not subsequently reversed.

Corporate brand names and customer relationships acquired as part of acquisitions of businesses are capitalised separately from goodwill as intangible assets if their value can be measured reliably on initial recognition and it is probable that the expected future economic benefits that are attributable to the asset will flow to the Group.

Expenditure on website development, software and licences is initially stated at cost.

Amortisation is provided at rates calculated to write off the cost less estimated residual value of each asset, other than goodwill, on a straight-line basis over the estimated life of the asset. Estimated life and estimated residual value are calculated on an asset by asset basis having regard to the nature of the asset, and the cash flows generated, or to be generated, by the asset historically and projected.

Amortisation is calculated to write down the cost of these assets to their estimated residual value over their expected useful lives as follows:

Brands 10 years, straight line

Customer relationships 5 years, straight line Websites, software and licences 3 years, straight line

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each Statement of Financial Position date. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amount and are included in the Statement of Comprehensive Income.

(i) Impairment of assets

Non-current assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying value exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. Value in use is based on the present value of the future cash flows relating to the asset, and is determined over periods which are deemed to appropriately reflect the minimum expected period that the cash generating unit will operate for. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cashflows (cash generating units). Any impairment loss is immediately recognised as an expense in the Statement of Comprehensive Income.

(j) Non-current assets held for sale and discontinued operations

The Group classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. The criteria for held for sale classification is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Discontinued operations may include abandoned or closed operations which will not meet the held for sale criteria as they are not recovered principally through sale and therefore balance sheet presentation requirements will not be applicable to them.

Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the Statement of Comprehensive Income.

Property, plant and equipment and intangible assets are not depreciated or amortised once classified as held for sale.

(k) Investments

Fixed asset investments in subsidiaries are shown in the Company Statement of Financial Position at cost less any provision for impairment.

Investments in associate entities over which the Group has significant influence are accounted for using the equity method. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control and/or joint control over those policies.

Under the equity method, the investment in an associate is initially recognised at cost. The carrying amount of the investment is adjusted to recognize changes in the Group's share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to the associate is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment.

The Statement of Comprehensive Income reflects the Group's share of the results of operations of the associate. Any change in the OCI of those investments is presented as part of the Group's OCI. The aggregate of the Group's share of profit or loss of an associate is shown on the face of the Statement of Comprehensive Income outside operating profit and represents profit or loss after tax and non-controlling interest in the subsidiaries of the associates.