Half-year Report

22 August 2016

Wireless Group plc

("WLG" or "the Company" or "the Group")

Wireless Group plc today announces interim results for the six months ended 30 June 2016.

Financial highlights*

· Disposal of TV business to ITV for a purchase price of £100m completed in February 2016

· Profit on disposal of £79.2m and associated return of capital of £55.0m

· Group revenue from continuing operations of £38.2m (2015 restated: £37.0m)

· Group operating profit of £4.7m (2015 restated: £6.1m)

· Group operating profit includes £1.8m start-up losses for D2

· Pre-tax profits from continuing operations of £4.5m (2015 restated: £5.0m)

· Reported profit for the period of £82.1m (2015 restated: loss of £0.5m)

· Diluted adjusted earnings per share of 4.4p (2015 restated: 3.6p)

· Net debt reduced to £1.6m (2015: £46.9m)

· Recommended cash offer of 315p per share from News Corporation ("News Corp"), totalling £220m

· No interim dividend declared in light of News Corp offer

* References to operating profit includes income from associates and joint ventures but excludes discontinued operations.

Operational highlights

· Strong performance by talkSPORT assisted by the European Football Championships

· Three packages won for Premier League live audio rights for next three seasons

· Advertising slowdown in Q2 in both the UK and Ireland impacted local radio performance

· Successful launch of three new digital channels on the D2 multiplex, with strong audiences recorded in first RAJAR results

Richard Huntingford, Chairman, Wireless Group plc, said:

"Wireless Group - and especially talkSPORT - has performed well in the first six months of the year. After a competitive bidding process, we were also delighted to be awarded three packages for Premier League live audio rights which will further underpin the outlook for talkSPORT going forward.

The recent RAJAR and JNLR figures demonstrate the strength of the Group's ongoing brands in its key markets as well as the ability to launch successfully new digital brands that are attractive to listeners which stands the Group in good stead going forward.

In our local stations and in Ireland, advertising trends were softer as we moved towards the referendum in Q2. Whilst it is still unclear what impact the uncertainty created by Brexit might have on advertising revenues in the all-important Q4, including in Ireland, the Group currently anticipates a full year outturn broadly in line with expectations.

In the meantime, good progress is being made in respect of the regulatory clearances required in connection with the News Corp offer."

For further information contact:

Chairman's Statement

Overview

Following the sale of its television business to ITV, WLG became a focused radio group operating in the UK and Ireland with highly attractive assets including talkSPORT and a growing digital division. It is a profitable business - with a strong balance sheet - that owns and operates valuable brands that attract loyal audiences.

On 30 June 2016, the Group announced a recommended cash offer of 315p per share from News Corp, subject to regulatory clearance. Good progress is being made in respect of the regulatory clearances and as at 17 August 2016, the first closing date of the offer, acceptances totalling 92 per cent. had been received from the Group's shareholders.

Financial results *

Group operating profit from continuing operations was £4.7m (2015 restated: £6.1m). After net interest costs of £0.6m (2015 restated: £1.0m) and foreign exchange gains of £0.4m (2015 restated: loss of £0.1m), Group profit before tax from continuing operations was £4.5m (2015 restated: £5.0m). Group profit after tax from continuing operations was £3.7m (2015 restated: £3.6m). Group profit after tax from continuing and discontinued operations was £82.1m (2015 restated: loss of £0.5m).

Group net debt was substantially lower at £1.6m (2015: £46.9m) predominantly as a result of the disposal of the TV assets.

* As appropriate, references to operating profit includes income from associates and joint ventures but excludes discontinued operations.

Dividend

Following the offer from News Corp, the Group has agreed not to declare an interim dividend. Wireless shareholders named on the register on 20 May 2016 received on 15 July 2016 the previously announced Special Dividend of 6.15 pence as well as the 2015 Final Dividend of 7.60 pence - 13.75 pence in total.

Operating review

talkSPORT is the UK's premier sports radio station and the strength of its offering was again demonstrated in the recent Q2 RAJAR results published on 4 August. The channel's weekly reach increased to 3.3m listeners - the station's second highest ever result - with four of its key weekday shows breaking listener records. talkSPORT's reach and audience demographic both remain attractive propositions for advertisers and while some additional benefit was always expected from the Euro 2016 tournament, talkSPORT nevertheless turned in an exceptionally good first half performance.

talkSPORT was also pleased to be awarded three live UK audio packages for the Premier League for three seasons from 2016/17 to 2018/19 inclusive, meaning it will have more Premier League coverage than ever before and become the only national commercial radio station carrying live Premier League games.

talkSPORT's international broadcasting business, now in its fifth season, continued to achieve double digit sales and profit growth in H1. These rights are in place for three further seasons and there are now partnership agreements in 68 territories.

The Group successfully launched three new national digital radio services in March - Virgin Radio, a music service which brings the iconic Virgin Radio brand back to the UK under a 12 year brand licence agreement with Virgin Group; talkRADIO, a talk-led service focussed on current affairs and entertainment; and talkSPORT 2, a complementary service to talkSPORT covering live action across a broader range of sports.

Early results have been encouraging. Virgin Radio's strong presenter line-up - led by Edith Bowman's breakfast show - saw the station post a weekly reach of 409,000 in Q2. talkSPORT 2 has also proven a popular choice, drawing an initial 285,000 listeners, attracted by a wider range of sporting coverage backed by a range of partnerships with leading sports rights holders. talkRADIO - fronted by a number of strong personalities - has attracted 224,000 weekly listeners with an encouragingly high listening profile of 6.5 hours per week.

Sales in our local radio operations in GB were down on H1 on a like-for-like basis mainly as a result of reduced demand in the lead up to the Brexit referendum. Costs were tightly controlled in this division, largely mitigating the profit decline.

Results for Radio GB overall include start-up losses attributable to the new digital station totalling £1.8m in the first six months and planned cost savings of £0.5m.

The Irish radio advertising market continues to lag the recovery in the Irish economy, particularly amongst larger advertising agencies, although currency tailwinds mitigated the impact of this on Radio Ireland reported revenue. The key factors affecting this included the continued move towards more measurable digital campaigns, the uncertainty around the Brexit referendum and a slower than expected return to marketing investment from some key market sectors. The recent JNLR audience figures for Q2 have confirmed the market-leading positions that the Group's stations enjoy in key urban areas, which alongside the relaunch of our agency sales operation as Urban Media, with improved digital/social capabilities, provides confidence for the future. Costs increased in part due to currency movements, external television advertising and investment in digital activities.

Profits in the Digital Services division were unchanged but substantial progress was made in the period in improving the future profitability of Simply Zesty.

Outlook

talkSPORT is a highly attractive medium for advertisers seeking male audiences. While a major football tournament typically would drive a 10% increase in sales over the course of a calendar year, talkSPORT is experiencing good underlying sales growth and is increasingly leveraging its brand strength through a growing number of major sponsorships and partnerships.

The launch and establishment of our three recently-launched national radio stations on D2 was a key priority for 2016 and initial results are encouraging. Following the recent RAJAR results, operating losses at the three stations are still anticipated to be broadly in line with forecasts, moving to a small loss in 2017 and growing profitably beyond this. Encouragingly, 70% of our forecast 2016 revenue for the D2 stations has already been achieved.

The recent RAJAR and JNLR figures demonstrate the strength of the Group's ongoing brands in its key markets as well as the ability to launch successfully new digital brands that are attractive to listeners which stands the Group in good stead going forward.

In our local stations and in Ireland, advertising trends were softer as we moved towards the referendum in Q2. Whilst it is still unclear what impact the uncertainty created by Brexit might have on advertising revenues in the all-important Q4, including in Ireland, the Group currently anticipates a full year outturn broadly in line with expectations.

Richard Huntingford

Chairman

22 August 2016

Group Income Statement

for the six months ended 30 June 2016

Group Statement of Comprehensive Income

for the six months ended 30 June 2016

Group Balance Sheet

for the six months ended 30 June 2016

Group Cash Flow

for the six months ended 30 June 2016

Group Statement of Changes in Equity

for the six months ended 30 June 2016

Notes to the accounts

1. Basis of preparation

The condensed interim financial statements have been prepared in accordance with IAS34 "Interim Financial Reporting" and the Disclosure and Transparency Rules of the Financial Conduct Authority.

In addition, the interim condensed financial statements have been prepared on a basis consistent with the accounting policies set out in the Group's Annual Report and Accounts for the year ended 31 December 2015. A number of New European Union endorsed amendments to existing standards are effective for periods beginning on or after 1 January 2016. However, none of these have a material, if any, impact on the annual or condensed interim financial statements of the Group in 2016.

In October 2015 the Group entered into a conditional agreement to sell its Television business to ITV Broadcasting Limited. The sale of this business was completed on 29 February 2016. Consequently the Group Income Statement reflects the classification of this business as discontinued operations for both 2016 and 2015, with the 30 June 2015 figures having been restated to reflect this.

The Balance Sheet at 31 December 2015 has been restated to reflect the liability, amounting to £512,000, in respect of the unfunded pension arrangement that was retained as part of the continuing operations for the Group. In the Report and Accounts for the year ended 31 December 2015, this liability was erroneously netted against the defined benefit pension scheme asset included within the "Assets of disposal group".

These interim statements have been prepared on a going concern basis as the directors, having considered available relevant information, have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.

The interim results are unaudited but have been formally reviewed by the auditors and their report to the Company is set out at the end of this Interim Report. The information shown for the year ended 31 December 2015 does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006 and has been extracted from the Group's 2015 Annual Report, which has been filed with the Registrar of Companies. The report of the auditors on the accounts contained within the Group's 2015 Annual Report was unqualified and did not contain a statement under either Section 498(2) or Section 498(3) of the Companies Act 2006 regarding inadequate accounting records or a failure to obtain necessary information and explanations. 

2. Seasonality and cyclicality

There is no significant seasonality or cyclicality affecting the interim results of the continuing operations.

3. Segmental information

The Group operates in three principal areas of activity - radio in GB, radio in Ireland and digital services. These business segments all form part of the Group's continuing operations and these form the basis on which the Group is managed and reports are provided to the Executive Chairman and the Board.

Following the agreement in 2015 to sell the main Television segment businesses, UTV and UTV Ireland as outlined in note 1, and the classification of these businesses as discontinued operations, Tibus and Simply Zesty which were previously included within the Television segment are now included as a separate segment, renamed Digital Services.

Revenue

Six months ended 30 June 2016

Six months ended 30 June 2015

Results

Six months ended 30 June 2016

Results

Six months ended 30 June 2015

4. Taxation

In the budget in March 2016, it was proposed that corporation tax rates in the UK would be reduced to 17% in 2020. As these have not yet been substantively enacted, deferred tax has been calculated at 18% within this Interim Report. If the proposed corporation tax rate changes were to be fully approved, the relevant deferred tax assets and liabilities would be restated accordingly resulting in a net exceptional credit of approximately £1,772,000.

5. Discontinued operations

In October 2015 the Group entered into a conditional agreement to sell its Television business to ITV. The sale of this business was completed on 29 February 2016.

The results of the discontinued operations for 2016 and 2015 are presented below. The figures for the six months ended 30 June 2015 have been restated to re-class the results of the Television businesses as discontinued last year.

6. Exceptional item

On 29 February 2016, Wireless Group plc completed the sale of the entire issued share capital of UTV Limited and its wholly owned subsidiary UTV Ireland Limited, to ITV Broadcasting Limited. This resulted in a profit on disposal before tax of £79,202,000.

Profit on disposal of subsidiary

The consideration received on completion of the sale of UTV Television was based on an estimated Balance Sheet at 29 February 2016. In line with the Share Purchase Agreement, an adjustment to the consideration received on Completion would be paid to or received from ITV Broadcasting Limited based on the subsequently agreed Balance Sheet at 29 February 2016. This adjustment was agreed on 9 August 2016 and a refund of £930,000 was paid to ITV Broadcasting Limited on 12 August 2016. This adjustment is included within the consideration noted above and included within trade and other payables at 30 June 2016.

7. Dividends

The special dividend in 2016 and final dividend for 2015 were paid on 15 July 2016 (2014: 15 July 2015).

8. Earnings per share

Basic earnings per share are calculated based on the profit for the financial period attributable to equity holders of the parent and on the weighted average number of shares in issue during the period.

Adjusted earnings per share are calculated based on the profit for the financial period attributable to equity holders of the parent adjusted for the exceptional items and the impact of net finance costs under IAS 19 "Employee Benefits (Revised)". This calculation uses the weighted average number of shares in issue during the year.

Diluted earnings per share are calculated based on profit for the financial period attributable to equity holders of the parent. Diluted adjusted earnings per share are calculated based on profit for the financial period attributable to equity holders of the parent before the exceptional items and the impact of net finance costs under IAS 19 "Employee Benefits (Revised)". In each case the weighted average number of shares is adjusted to reflect the dilutive potential of the awards expected to be vested on the Long Term Incentive Schemes.

The following reflects the income and share data used in the basic, adjusted, diluted and diluted adjusted earnings per share calculations:

Net profit attributable to equity holders

Weighted average number of shares

Earnings per share