Half Yearly Report

RNS Number : 5808R

Chime Communications PLC

25 August 2010

 

 

25th August 2010

 

 

 

CHIME COMMUNICATIONS PLC

 

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30TH JUNE 2010

 

 

 

Chime Communications PLC, the leading marketing services group, today announces its interim results for the six months ended 30th June 2010.

 

Financial Highlights

 

·; Operating income up 22% to £71.1 million (H1 2009: £58.4 million)

 

- Organic1 growth of 5%

 

·; Operating profit2 up 35% to £12.8 million (H1 2009: £9.5 million)

 

- Organic1 and 2 growth of 11%

 

·; First half operating profit margin2 of 18.1% (H1 2009: 16.3% and Full Year 2009: 16.4%)

 

·; Profit before tax2 and 3 up 39% to £12.3 million (H1 2009: £8.9 million)

 

·; Basic earnings per share from continuing operations2 and 3 up 8% to 12.02p (H1 2009: 11.12p)

 

·; Net cash at 30th June 2010 of £5.5 million (30th June 2009: £18.1 million - 31st December 2009: £4.8 million)

 

·; Interim dividend increased by 15% to 1.84p per share (H1 2009: 1.60p)

 

·; Best first half year new business performance in the Company's history

 

·; 91% of full year operating income now contracted

 

·; IFRS profit before tax of £10.3 million (H1 2009: £8.5 million)

 

 

 

Corporate Highlights

 

·; Successfully integrated Essentially Group

 

·; Acquisition of Tree completed on 9th March 2010

 

·; Completed restructuring of Research Group

 

·; Opening of Pelham Bell Pottinger Asia

 

Commenting on the results, Lord Bell, Chairman of Chime Communications, said:

 

"Our profit before tax is up again - nearly 40%. Chime is the success story of the marcoms industry over the last few years. Our half year compound annual growth in profits before tax since 2005 has been 30%. In the same period we have nearly doubled our full year earnings per share and more than doubled our dividend per share. All this while the economies of the UK and developed world have suffered the credit crunch, the recession, the Euro crisis and many other problems; and the marcoms sector declined with the vast majority of our competitors reporting a fall in profits. We are delighted with the group's performance and are confident the success story will continue for the full year and beyond."

 

Notes:	1.	Organic growth is calculated excluding all acquisitions in 2009 and 2010.
	2.	Before taking account of amortisation of acquired intangible assets (£0.7 million, 2009: £0.1 million) and costs relating to acquisitions and restructuring (£1.3 million, 2009: £nil).
	3.	Before taking account of loss on disposal of assets held for sale (£nil, 2009: £0.2 million) and write off of investments (£nil, 2009: £0.1 million).

 

 

For further information please contact:

 

Lord Bell, Chairman 020 7861 8515

Chime Communications

 

Christopher Satterthwaite, Chief Executive 020 7861 8515

Chime Communications

 

James Henderson/Emma Kent/Victoria Geoghegan 020 7861 3232

Pelham Bell Pottinger

 

 

 

STRATEGY

Chime committed itself to becoming the 'modern communications' group in 2005, recognising that the marketing communications marketplace was being revolutionised through the far reaching effects of the internet. As a small cap group we believed we could react to these changing circumstances quicker than 'traditional communications' groups.

 

Since that time our profits before tax have more than trebled (2005 £7.3m / 2010 highest analyst forecast £24.2m). In the most dynamic marketplace in the world, our commitment to becoming the modern communications group has worked. In 2005, we suggested two ways it would direct our business:

 

·; "to be up to date and competitive in our use of communications technology": we have integrated digital capability into all of our Groups and work on leading edge digital campaigns for the likes of O2, HSBC and comparethemarket.com.

 

·; "to be in touch with the mood and spirit of the times": we have achieved leading positions in geo-political consulting, public affairs and corporate responsibility guided by this thinking.

 

In 2010, we are strengthening our commitment to being the 'modern communications' group in five ways:

 

Acquisitive: in being diversified and investing in the fastest growing sectors of communications; eg. we continue to make acquisitions in sports marketing with a view to developing a leading worldwide sports marketing group.

 

Organic: in constantly developing our capabilities in line with the spirit of the times to fuel organic growth; eg. we are investing through the P&L in healthcare advertising, search and international public affairs.

 

International: in the international development of our business introducing our diversified approach into the fastest growing economies of the world; eg. following Pelham Bell Pottinger Asia, we will open offices in Hong Kong and Rio de Janeiro in the next 12 months.

 

Digital: in the application of information technology; eg. developing new business like O2 Digital, News International and Nintendo.

 

Cross Referral: in the way we work together on behalf of our clients as a tightly knit co-operative group with a common goal, as we do for clients like Mubadala, The Government of Sri Lanka, Emirates, Muller and Standard Life.

 

In summary, we believe we can continue to grow our business well above average rates of growth, through our conviction of being 'the modern communications group.'

 

 

REVIEW OF OPERATIONS

 

Summary of First Half Results

 

	2010 £m	2009 £m	% Change
Operating Income	71.1	58.4	+22%
Operating Profit2	12.8	9.5	+35%
Profit before Tax2 and 3	12.3	8.9	+39%
Operating Profit Margin2	18.1%	16.3%

 

 

Notes:	2.	Before taking account of amortisation of acquired intangible assets (£0.7 million, 2009: £0.1 million) and costs relating to acquisitions and restructuring (£1.3 million, 2009: £nil).
	3.	Before taking account of loss on disposal of assets held for sale (£nil,2009: £0.2 million) and write off of investments (£nil, 2009: £0.1 million).

 

Overall the Group continues to perform ahead of expectations.

 

Our productivity improved with income per head in the first half of 2010 increasing to £59,000 from £58,000 in the first half of 2009. We further developed our business in the first half of 2010, with clients using more than one company increasing to 198 from 169 in the first half of 2009 and the total revenue from clients using more than one company increasing by 7%. Our 30 top clients represented 48% of income (H1 2009: 57%).

 

If the recent acquisition of Essentially is excluded, the fee income per client in the first half of 2010 would be the same as the first half of 2009.

 

Our operating income from international work rose by 20% from £27 million to £32 million which represented 46% of total income in both 2009 and 2010.

 

The Group acted for 1,353 clients in the first half of 2010 compared to 908 in the first half of 2009 and the number of clients paying us over £50,000 increased from 164 to 212.

 

Our two largest clients represented 20.9% of total operating income (H1 2009: 20.4%). Both clients have been retained since 2003, are high margin and have normal renewal terms. They are both covered by more than one contract covering the various different services provided to the client so that the ending of one contract would be unlikely to lead to all the contracts for the same client coming to an end.

 

21% of income came from the Government and Public Sector market. In the first half of 2009 the UK Government represented 2%, this year it will be under 1%.

 

 

HIGHLIGHTS OF THE SIX MONTHS

 

New Business

 

In terms of new business, we won 658 pitches in the first half of 2010, a record number since we began recording new business activity in 2001. This represented £19.4 million of new operating income compared to £15.3 million in the first half of 2009. 91% of our 2010 operating income target is now confirmed.

 

Notable Wins

 

·; Airbus Global	·; Nintendo
·; Alternative Hotel Group	·; O2 Digital
·; Freesat	·; Omega Pharma
·; Gatwick Express	·; Port of Dover
·; Golden Agri	·; powerPerfector
·; The Government of Sri Lanka	·; Roche
·; Kurt Geiger	·; St. Tropez
·; Land Securities	·; Unilever
·; London Clubs	·; United Arab Emirates University
·; Mizuno	·; Zoopla
·; News International

 

Campaigns, promotions and sponsorship

 

We continued to work on high profile campaigns across our diversified skill base:

 

·; Richemont's acquisition of Net-a-Porter

 

·; Qatar Holding's acquisition of Harrods

 

·; Launch of Project New Bank by Lord Levene

 

·; Korean National Oil Company's bid for Dana Petroleum

 

·; The second advertisement in the trilogy for comparethemarket.com

 

·; Emirates' sponsorship of the 2010 FIFA World Cup and 2010 Ryder Cup

 

·; Coca-Cola Enterprises' sale of its North American bottling operations

 

·; The announcement of Bath Rugby Club's new owner

 

·; The new dancing dodo advertising campaign for 5 Alive

 

·; O2 and Gorillaz campaign to allow O2 customers priority tickets to their 'Plastic Beach' tour

 

·; The launch of the new Cabanga (come on England) campaign for Texaco

 

·; David Beckham's goodwill visit to the British military HQ at Camp Bastion

 

·; The launch of the summer radio and online brand campaign in the UK and US for cheapflights.com

 

·; The Lawn Tennis Association's campaign during Wimbledon to encourage more people to take up the game with help from Maria Sharapova, Judy Murray and Tim Henman

 

 

DIVISIONAL PERFORMANCE

 

Trading conditions in the first half of 2010 were better than the first half of 2009.

 

We have continued to focus on both organic income growth and cost control whilst integrating the three acquisitions we made at the end of last year and early this year.

 

Based on operating income, Public Relations continues to be our largest group at 49% (2009 full year: 55%), Advertising and Marketing Services contributed 25% (2009 full year: 26%), Sports Marketing contributed 21% following the acquisition of Essentially in November 2009 (2009 full year: 14%) and Research contributed 5% (2009 full year: 5%).

 

 

Public Relations - Bell Pottinger Group including Good Relations, Harvard, Insight and Corporate Citizenship

 

	2010 £m	2009 £m	% Change
Operating Income	34.6	32.8	+5%
Operating Profit2	7.9	6.7	+17%
Operating Profit Margin	22.8%	20.6%

 

Notes:

2.

Before taking account of amortisation of acquired intangible assets (£0.1 million, 2009: £nil) and costs relating to acquisitions and restructuring (£0.2 million, 2009: £nil).

 

The Public Relations Group, Bell Pottinger, the UK's largest public relations agency, continued to perform extremely well in the first half of 2010. Cost control remained good with the 5% increase in revenue resulting in a 17% increase in operating profit. Margin improved to 22.8%.

 

There were strong performances in public affairs, financial public relations, technology public relations, corporate and social responsibility, consumer and international operations.

 

Advertising and Marketing Services - VCCP Group and Teamspirit

 

	2010 £m	2009 £m	% Change
Operating Income	18.1	15.5	+17%
Operating Profit	1.7	2.0	-14%
Operating Profit Margin	9.5%	12.9%

 

The operating income in our Advertising and Marketing Services Group which is one of the fastest growing in the UK, increased by 17% in the first half of 2010 but operating profit decreased by 14%. Revenue grew but costs were higher. There were two main reasons for this. Firstly, we increased our resources to cope with an increased number of new business pitches and secondly, we geared up our digital capability. We have recently won the O2 Digital account and we are in Campaign magazine's top ten new business agencies.

 

The main VCCP agency, VCCP Search and the new VCCP businesses in Germany and the Czech Republic have continued to grow at a fast rate.

 

The increased income will come through in the second half year, therefore we expect to show strong operating profit growth for the full year 2010.

 

 

Sports Marketing Services - Fast Track and Essentially

 

	2010 £m	2009 £m	% Change
Operating Income	14.9	7.1	+111%
Operating Profit2	3.2	1.5	+118%
Operating Profit Margin	21.7%	21.0%

 

Note:

2.

Before taking account of amortisation of acquired intangible assets (£0.6 million, 2009: £0.1 million) and costs relating to acquisitions and restructuring (£0.3 million, 2009: £nil).

The Sports Marketing Group is now one of the top five sports marketing businesses in the world. It has global capability and is a significant driver for growth.

 

Essentially Group was acquired in November 2009, so this acquisition is included in the figures for the first half of 2010.

 

Fast Track increased revenue in the first half of 2010 and remains well positioned for growth.

 

Essentially performed ahead of our expectations and we are optimistic about its prospects for the future.

 

 

Research - Facts International, Opinion Leader and Tree

 

	2010 £m	2009 £m	% Change
Operating Income	3.5	3.0	+16%
Operating Profit2	0.4	-	-
Operating Profit Margin	10.9%	-

 

Note:

2.

Before taking account of amortisation of acquired intangible assets (£nil,2009: £nil) and costs relating to acquisitions and restructuring (£0.7 million, 2009: £nil).

 

 

Our Research Group improved its performance following the acquisition of Tree and the restructuring of the senior management team.

 

Facts International, our quantitative business, and Tree, our data analytics business, have performed particularly well. The performance of Opinion Leader Research has not yet shown the benefits of the restructuring.

 

We expect the trading performance in the second half of 2010 to be better than the first half.

 

 

CASH FLOW, BANKING ARRANGEMENTS AND DEFERRED CONSIDERATIONS

 

Net cash at 30th June 2010 was £5.5 million compared to £18.1 million at 30th June 2009 and £4.8 million at 31st December 2009.

 

The Group generated cash from trading activities in the first half of 2010 of £11.1 million (H1 2009: £15.1 million) representing a cash conversion of 121%.

 

The Group has a borrowing facility of £32 million until July 2013 which it continues to operate well within.

 

No deferred considerations are payable in the remainder of 2010. The likely amount payable in 2011 is £1.2 million and £0.7 million in 2012.

 

TAXATION

 

The effective tax rate for the first half of 2010 was 31.6% in line with the full year 2008 and 2009. This is expected to continue for the full year 2010.

 

 

DIVIDENDS

The Board has declared an interim dividend of 1.84p per share (H1 2009: 1.60p), an increase of 15%.

 

The interim dividend will be payable on 15th October 2010 to shareholders on the register at 24th September 2010. The ex dividend date is 22nd September 2010.

 

 

OUTLOOK

 

The next six months will see a growth in M&A and corporate activity. The growth of global regulation will serve our international public affairs network and the need for many countries to promote both their reputations and their attraction as a place for foreign direct investment is growing apace. There are exciting new developments in green technology and the now almost compulsory commitment to corporate and social responsibility and we are well positioned to attract clients in all these areas.

 

Sports and sporting events now make up the majority of both entertainment and news across the world. Internet and mobile technology is growing rapidly. All need to be communicated and marketed. These markets are very competitive and enable us to sell our added value skills.

 

The economy is recovering and confidence is returning. In a world of fragmented and diverse opinions all companies need their advocates. We believe the UK will be slow, but across the world there are many markets where the go light is very green.

 

We will continue to control costs, focus on cash management and concentrate on growing our portfolio of clients across all disciplines and all the markets, both in the UK and internationally. In the first two months of the second half year we are ahead of budget. We are confident of the full year and beyond.

 

 

 

Condensed Consolidated Income Statement

Six months ended 30 June 2010

 

		6 months to 30 June 2010	6 months to 30 June 2009	12 months to 31 December 2009
		(unaudited)	(unaudited)	(audited)
		£'000	£'000	£'000
	Notes
CONTINUING OPERATIONS
Revenue (billings)		135,837	137,485	300,908
Cost of sales		(64,776)	(79,112)	(177,811)
OPERATING INCOME		71,061	58,373	123,097
Operating expenses		(60,242)	(48,946)	(103,535)
ADJUSTED OPERATING PROFIT	3	12,847	9,515	20,148
Amortisation of intangibles		(756)	(88)	(336)
Cost of acquisitions and restructuring		(1,272)	-	(250)
OPERATING PROFIT		10,819	9,427	19,562
Profit on disposal of subsidiary		-	-	1,385
Loss on disposal of subsidiary		-	-	(122)
Share of results of associates		67	(6)	(412)
Disposal of available for sale investment		-	(188)	(188)
Impairment in carrying value of investment		-	(95)	(350)
Investment income		45	47	111
Finance costs		(246)	(215)	(521)
Finance cost of deferred consideration		(389)	(449)	(912)
PROFIT BEFORE TAX		10,296	8,521	18,553
Tax		(3,254)	(2,693)	(5,856)
PROFIT FOR THE PERIOD		7,042	5,828	12,697
Attributable to:
Equity holders of the parent		6,522	5,768	12,479
Non-controlling interests		520	60	218
		7,042	5,828	12,697
EARNINGS PER SHARE	4
From continuing operations
Basic (pence)		9.52	10.44	22.06
Diluted (pence)		9.16	10.32	21.13
ADJUSTED EARNINGS PER SHARE	3
Basic (pence)		12.02	11.12	22.46
Diluted (pence)		11.56	10.99	21.51

 

 

Condensed Consolidated Statement of Comprehensive Income

Six months ended 30 June 2010

 

 

	6 months to 30 June 2010	6 months to 30 June 2009	12 months to 31 December 2009
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Profit for the period	7,042	5,828	12,697
Recycling of losses/revaluation of available for sale investment	-	136	136
Exchange differences on translation of foreign operations	(445)	(1,200)	(722)
Net cost recognised directly in equity	(445)	(1,064)	(586)
Total comprehensive income for the period	6,597	4,764	12,111
Attributable to:
Equity holders of the parent	6,069	4,704	11,893
Non-controlling interests	528	60	218
	6,597	4,764	12,111

 

 

 

Condensed Consolidated Balance Sheet as at 30 June 2010

 

		As at 30 June 2010	As at 30 June 2009	As At 31 December 2009
		(unaudited)	(unaudited)	(audited)
		£'000	£'000	£'000
	Note
Non-current assets
Goodwill	7	149,712	112,527	144,614
Other intangible assets		5,013	823	5,240
Property, plant and equipment		4,065	4,081	4,036
Investments in associates		356	881	645
Other investments		-	255	-
Due from deferred consideration		504	504	504
Deferred tax asset		1,618	836	1,448
		161,268	119,907	156,487
Current assets
Work in progress		2,695	2,507	2,429
Trade and other receivables		48,877	42,944	48,139
Cash and cash equivalents		5,957	18,207	5,296
		57,529	63,658	55,864
Total assets		218,797	183,565	212,351
Current liabilities
Trade and other payables		(73,099)	(72,473)	(71,051)
Current tax liabilities		(3,681)	(2,420)	(4,176)
Obligations under finance leases		(18)	(35)	(14)
Bank loans		(395)	-	(52)
Short-term provisions		(2,287)	(10,043)	(11,378)
		(79,480)	(84,971)	(86,671)
Net current liabilities		(21,951)	(21,313)	(30,807)
Non-current liabilities
Bank loans		-	-	(348)
Long-term provisions		(10,696)	(7,320)	(8,489)
Obligations under finance leases		(31)	(11)	-
		(10,727)	(7,331)	(8,837)
Total liabilities		(90,207)	(92,302)	(95,508)
Net assets		128,590	91,263	116,843
Equity
Share capital		18,347	14,264	16,834
Share premium account		63,215	37,121	52,691
Own shares		(6,948)	(5,395)	(5,406)
Equity reserve		32,385	32,385	32,385
Translation reserve		845	812	1,290
Accumulated profits		22,129	13,187	20,504
Equity attributable to equity holders of the Parent		129,973	92,374	118,298
Written put options over non-controlling interests		(2,000)	(2,000)	(2,000)
Non-controlling interests		617	889	545
Total equity		128,590	91,263	116,843

 

 

 

 

Condensed Consolidated Cash Flow Statement

Six months ended 30 June 2010

 

		6 months to 30 June 2010 (unaudited)	6 months to 30 June 2009 (unaudited)	12 months to 31 December 2009 (audited)
	Notes	£'000	£'000	£'000
Net cash from operating activities	8	11,109	15,070	10,425
Investing activities
Interest received		45	59	63
Dividends received from investments		357	47	47
Proceeds on disposal of property, plant and equipment		47	12	46
Purchases of property, plant and equipment		(1,069)	(512)	(1,279)
Purchases of other intangible assets		-	(151)	(220)
Proceeds from disposal of available for sale investment		-	63	63
Loans granted to associates		-	20	(30)
Acquisition of subsidiaries (net of cash acquired)		(7,785)	(346)	(6,849)
Disposal of subsidiary		-	(14)	(31)
Deferred consideration received		-	47	47
Purchase of non-controlling interests		(694)	-	-
Investment by non-controlling shareholder		110	-	-
Net cash used in investing activities		(8,989)	(775)	(8,143)
Financing activities
Dividend paid		(2,504)	(1,766)	(2,666)
Dividends paid to minorities		(286)	(87)	(244)
(Repayment of)/increase in borrowings		(5)	-	400
Repayment of loan notes		-	(339)	(358)
Repayment of obligations under finance leases		(5)	(18)	(51)
Proceeds on issue of ordinary share capital		4,401	-	284
Purchase of own shares		(3,048)	(682)	(934)
Net cash used in financing activities		(1,447)	(2,892)	(3,569)
Net increase/(decrease) in cash and cash equivalents		673	11,403	(1,287)
Cash and cash equivalents at beginning of period		5,296	6,804	6,804
Effect of foreign exchange rate changes		(12)	-	(221)
Cash and cash equivalents at end of period		5,957	18,207	5,296
Cash and cash equivalents comprise cash at bank, loan note deposits less overdrafts. Taking into account the following borrowings net cash was:
Cash and cash equivalents		5,957	18,207	5,296
Bank loans		(395)	-	(400)
Finance leases		(49)	(46)	(14)
Loan notes outstanding		(58)	(77)	(58)
Overall net cash		5,455	18,084	4,824

Condensed Consolidated Statement of Changes in Equity

 

	Share capital	Share premium	Own shares	Capital reduction reserve	Translation reserves	Accumulated profit/loss	Total	Written put options over non-controlling interests	Non-controlling interests	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2009	14,264	37,121	(4,952)	32,385	2,012	8,731	89,561	(2,000)	930	88,491
Total comprehensive income for the six month period to 30 June 2009	-	-	-	-	(1,200)	5,904	4,704	-	60	4,764
Transactions with owners:
Share based payments	-	-	-	-	-	558	558	-	-	558
Purchase of own shares	-	-	(443)	-	-	(240)	(683)	-	-	(683)
Dividends paid to non-controlling interests	-	-	-	-	-	-	-	-	(101)	(101)
Equity dividends	-	-	-	-	-	(1,766)	(1,766)	-	-	(1,766)
Balance at 30 June 2009	14,264	37,121	(5,395)	32,385	812	13,187	92,374	(2,000)	889	91,263
Total comprehensive income for the six month period to 31 December 2009	-	-	-	-	478	6,711	7,189	-	158	7,347
Transactions with owners:
Shares issued on acquisition of subsidiaries	2,525	15,404	-	-	-	-	17,929	-	(277)	17,652
Share issue costs	-	(73)	-	-	-	-	(73)	-	-	(73)
Disposal of subsidiaries	-	-	-	-	-	-	-	-	(82)	(82)
Issued to staff under options	45	239	-	-	-	-	284	-	-	284
Share based payments	-	-	-	-	-	1,746	1,746	-	-	1,746
Disposed on exercise of options	-	-	494	-	-	(240)	254	-	-	254
Purchase of own shares	-	-	(505)	-	-	-	(505)	-	-	(505)
Dividends paid to non-controlling interests	-	-	-	-	-	-	-	-	(143)	(143)
Equity dividends	-	-	-	-	-	(900)	(900)	-	-	(900)
Balance at 31 December 2009	16,834	52,691	(5,406)	32,385	1,290	20,504	118,298	(2,000)	545	116,843

Condensed Consolidated Statement of Changes in Equity (continued)

 

	Share capital	Share premium	Own shares	Capital reduction reserve	Translation reserves	Accumulated profit/loss	Total	Written put options over non-controlling interests	Non-controlling interests	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2010	16,834	52,691	(5,406)	32,385	1,290	20,504	118,298	(2,000)	545	116,843
Total comprehensive income for the six month period to 30 June 2010	-	-	-	-	(445)	6,514	6,069	-	528	6,597
Transactions with owners:
Shares issued on acquisition of subsidiaries	944	6,707	-	-	-	-	7,651	-	-	7,651
Share placing	563	3,937	-	-	-	-	4,500	-	-	4,500
Share issue costs	-	(137)	-	-	-	-	(137)	-	-	(137)
Issued to staff under options	6	17	-	-	-	-	23	-	-	23
Share based payments	-	-	-	-	-	635	635	-	-	635
Disposed on exercise of options	-	-	1,596	-	-	(1,506)	90	-	-	90
Purchase of own shares	-	-	(3,138)	-	-	-	(3,138)	-	-	(3,138)
Purchase of non-controlling interest	-	-	-	-	-	(1,514)	(1,514)	-	(280)	(1,794)
Investment by non controlling shareholder	-	-	-	-	-	-	-	-	110	110
Dividends paid to non-controlling interests	-	-	-	-	-	-	-	-	(286)	(286)
Equity dividends	-	-	-	-	-	(2,504)	(2,504)	-	-	(2,504)
Balance at 30 June 2010	18,347	63,215	(6,948)	32,385	845	22,129	129,973	(2,000)	617	128,590

Notes:

 

1. Business Segments

 

For management purposes, the Group is currently organised into four operating segments - Public Relations, Advertising and Marketing Services, Sports Marketing and Research.

Principal activities are as follows:

Public Relations

The Public Relations division comprises some of the leading names in the industry, including Bell Pottinger, Good Relations, Harvard, Insight, Resonate, TTA Public Relations and Corporate Citizenship. It is the number 1 ranked PR Group in the UK in the PR Week public relations consultancy league table for 2009. It serves major UK and international brands, as well as governments, government departments, pharmaceutical and healthcare companies, charities, not-for-profit organisations, professional service firms, consumer brands and famous people.

Advertising and Marketing Services ('AMS')

The AMS division includes the VCCP Group and Teamspirit. It possesses specialist skills in advertising and marketing services - direct marketing, digital communication, search relations, point of sale, sales promotion and specialist media planning and buying. It also specialises in the niche market of financial services.

Sports Marketing

The Sports Marketing division is the UK's number one sports marketing group (Marketing Magazine, December 2009) and includes Fast Track and Essentially Group.

Research

The Research division is made up of Opinion Leader Research and Facts International. Opinion Leader Research is one of the UK's leading research consultancies. Tree (see note 6) has been included in the Research division from 2010.

Segment information about these businesses is presented below.

 

 

1. Business segments (continued)

 

	Revenue (billings)				Operating Income
	6 months to 30 June 2010	6 months to 30 June 2009	12 months to 31 December 2009		6 months to 30 June 2010	6 months to 30 June 2009	12 months to 31 December 2009
		(restated)	(restated)			(restated)	(restated)
	(unaudited)	(unaudited)	(audited)		(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000		£'000	£'000	£'000
Public Relations	72,696	87,186	197,741		34,587	32,807	68,250
Advertising and Marketing Services	34,524	30,763	63,718		18,091	15,499	31,895
Sports Marketing	23,866	14,956	30,726		14,905	7,072	17,176
Research	4,751	4,580	8,723		3,478	2,995	5,776
	135,837	137,485	300,908		71,061	58,373	123,097
	Adjusted Operating Profit				Adjusted Operating Profit Margin
	6 months to 30 June 2010	6 months to 30 June 2009	12 months to 31 December 2009		6 months to 30 June 2010	6 months to 30 June 2009	12 months to 31 December 2009
		(restated)	(restated)			(restated)	(restated)
	(unaudited)	(unaudited)	(audited)		(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000		%	%	%
Public Relations	7,883	6,767	13,989		22.8%	20.6%	20.5%
Advertising and Marketing Services	1,715	1,994	3,937		9.5%	12.9%	12.3%
Sports Marketing	3,239	1,483	3,543		21.7%	21.0%	20.6%
Research	379	(23)	(212)		10.9%	(0.8%)	(3.7%)
	13,216	10,221	21,257		18.6%	17.5%	17.3%
Unallocated corporate expenses	(369)	(706)	(1,109)
Adjusted operating profit	12,847	9,515	20,148		18.1%	16.3%	16.4%
Share of results of associates	67	(6)	23
Investment income	45	47	111
Finance costs	(246)	(215)	(521)
Finance cost of deferred consideration	(389)	(449)	(912)
Adjusted profit before tax	12,324	8,892	18,849

 

 

1. Business segments (continued)

 

	Operating Profit				Operating Profit Margin
	6 months to 30 June 2010	6 months to 30 June 2009	12 months to 31 December 2009		6 months to 30 June 2010	6 months to 30 June 2009	12 months to 31 December 2009
		(restated)	(restated)			(restated)	(restated)
	(unaudited)	(unaudited)	(audited)		(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000		%	%	%
Public Relations	7,611	6,767	13,989		22.0%	20.6%	20.5%
Advertising and Marketing Services	1,715	1,994	3,937		9.5%	12.9%	12.3%
Sports Marketing	2,394	1,395	2,957		16.1%	19.7%	17.2%
Research	(392)	(23)	(212)		(11.3%)	(0.8%)	(3.7%)
	11,328	10,133	20,671		15.9%	17.4%	16.8%
Unallocated corporate expenses	(509)	(706)	(1,109)
Operating profit	10,819	9,427	19,562		15.2%	16.1%	15.9%
Profit on part disposal of subsidiary	-	-	1,385
Loss on disposal of subsidiary	-	-	(122)
Share of results of associates	67	(6)	(412)
Disposal of available for sale investments	-	(188)	(188)
Impairment in carrying value of investment	-	(95)	(350)
Investment income	45	47	111
Finance costs	(246)	(215)	(521)
Finance cost of deferred consideration	(389)	(449)	(912)
Profit before tax	10,296	8,521	18,553

 

Comparatives for the half year ended 30 June 2009 have been restated as the Fast Track Group was previously reported within Advertising and Marketing Services. From 2009 it is included within Sports Marketing. The effect of this change for the half year comparative was to increase revenue in Sports Marketing by £14,956,000, operating income by £7,072,000 and operating profit by £1,395,000, with a corresponding decrease in Advertising and Marketing Services.

In addition, the comparatives for the half year ended 30 June 2009 and the year ended 31 December 2009 have been restated as Branded Moments of Truth is now reported as part of Public Relations (previously part of Advertising and Marketing Services). The impact for the year ended 31 December 2009 is to increase operating income in Public Relations by £1,393,000 and operating profit by £66,000, with a corresponding decrease in Advertising and Marketing Services. For the half year ended 30 June 2009, the impact is to increase operating income in Public Relations by £774,000 and operating profit by £57,000, with a corresponding decrease in Advertising and Marketing Services.

 

1. Business segments (continued)

 

Geographical segments:

 

The Group's operations are located in the United Kingdom, Germany, the Middle East, the USA, South Africa, India, Australia and New Zealand. The Group's Advertising and Marketing Services division is located in the United Kingdom, Europe and the Middle East. Public relations is carried out in the United Kingdom, Germany, the Middle East and the USA. The Sports Marketing division is located in the United Kingdom, Spain, South Africa, Australia, New Zealand and the Middle East. The Research division is located solely in the United Kingdom.

 

2. Basis of preparation

 

The interim report for the six months ended 30 June 2010 is unaudited but has been reviewed by the auditors, Deloitte LLP, and their report to Chime Communications plc is set out on page 28.

 

The interim report for the six months ended 30 June 2010 has been prepared in accordance with IAS 34 'Interim financial reporting' as adopted by the European Union. The consolidated interim report should be read in conjunction with the annual financial statements for the year ended 31 December 2009, which has been prepared in accordance with IFRS as adopted by the European Union. The financial information contained in the consolidated interim report does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006. The figures for the year ended 31 December 2009 have been extracted from the statutory financial statements which have been filed with the Registrar of Companies. The auditors' report on those financial statements was unqualified and did not contain a statement made under Section 498 (3) of the Companies Act 2006.

The annual financial statements of Chime Communications Plc are prepared in accordance with IFRS as adopted by the European Union. Except as described below, the accounting policies adopted in the preparation of the half year condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2009.

·; Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

 

The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year beginning on 1 January 2010, and impact the consolidated half year financial information as described:

 

·; IFRS 3 (revised), "Business combinations", and consequential amendments to IAS 27, "Consolidated and separate financial statements", IAS 28, "Investments in associates", and IAS 31, "Interests in joint ventures", are effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. IFRS 3 (revised) continues to apply the acquisition method to business combinations, but with some significant changes. For example acquisition-related expenses and any revisions to contingent cash consideration in the period following the acquisition will be recorded in the income statement. As this amendment is applied prospectively it has not been applied in respect of acquisitions made in previous periods.

 

·; As the Group has adopted IFRS 3 (revised), it is also required to adopt IAS 27 (revised), "Consolidated and separate financial statements". IAS 27 (revised) requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control. Such transactions will no longer result in either goodwill or in a gain or a loss being recognised.

 

Going Concern Basis

 

The Directors have prepared cash flow forecasts which indicate that the Group has adequate resources to continue in operational existence for the foreseeable future. In preparing these forecasts the directors have taken into account the following key factors:

 

i. The possible impact of the continued economic downturn on the Group's business;

ii. Key client account renewals;

iii. The level of committed and variable costs; and

iv. Current new business targets compared to levels achieved in previous years.

 

The Group currently has a borrowing facility of £32 million which continues until July 2013. This facility is subject to banking covenants.

 

The Directors have concluded, based on the cash flow forecasts, that it is appropriate to prepare the accounts on a going concern basis.

 

Risks and uncertainties

 

There have been no significant changes to the risks and uncertainties affecting the Group since the publication of the Annual Report and Accounts for the year ended 31 December 2009 in March 2010. These risks, which relate principally to personnel, acquisitions and the competitive and economic environments in which the Group operates are described on pages 35-37 of the Annual Report.

 

 

3. Adjusted Results

 

	6 months to 30 June 2010		6 months to 30 June 2009		12 months to 31 December 2009
	(unaudited)		(unaudited)		(audited)
	Operating profit	Profit before tax	Operating profit	Profit before tax	Operating profit	Profit before tax
	£'000	£'000	£'000	£'000	£'000	£'000
Reconciliation of reported profit to adjusted amounts
Reported	10,819	10,296	9,427	8,521	19,562	18,553
Adjusting items:
Cost of acquisitions and restructuring*	1,272	1,272	-	-	250	250
Amortisation and impairment of intangibles	756	756	88	88	336	336
Disposal of available for sale investments	-	-	-	188	-	188
Impairment in carrying value of investment	-	-	-	95	-	350
Write off loans to associates	-	-	-	-	-	435
Profit on part disposal of subsidiary	-	-	-	-	-	(1,385)
Loss on disposal of subsidiary	-	-	-	-	-	122
Adjusted amounts (before tax)	12,847	12,324	9,515	8,892	20,148	18,849
Tax		(3,254)		(2,693)		(5,856)
Tax impact of adjusting items		(317)		-		(70)
Adjusted profit for the period (after tax)		8,753		6,199		12,923
Non controlling interests		(520)		(60)		(218)
Adjusted profit for the period (after tax attributable to equity holders of the parent)		8,233		6,139		12,705
Earnings per share
Weighted average number of ordinary shares for the purpose of basic earnings per share		68,503,330		55,238,494		56,573,800
Adjusted basic earnings per share (pence)		12.02		11.12		22.46
Weighted average number of shares for the purpose of diluted earnings per share		71,198,506		55,884,842		59,065,404
Adjusted diluted earnings per share (pence)		11.56		10.99		21.51

 

 

*Cost of acquisitions and restructuring includes costs incurred by the Group in reorganising and integrating acquired businesses, non-recurring business restructuring and costs associated with Board level changes. Costs have been incurred in the PR division (£140,000), Research (£716,000) and Sports Marketing (£276,000). £140,000 relating to acquisitions was recorded centrally.

 

 

4. Earnings per share

 

From continuing operations

 

The calculation of the basic and diluted earnings per share is based on the following data:

 

	6 months to 30 June 2010	6 months to 30 June 2009	12 months to 31 December 2009
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Earnings
Earnings for the purpose of basic earnings per share being net profit attributable to the equity holders of the parent	6,522	5,768	12,479
Number of shares
Weighted average number of ordinary shares for the purposes of basic earnings per share	68,503,330	55,238,494	56,573,800
Effect of dilutive potential ordinary shares:
Deferred shares	-	-	24,585
Share options and deferred shares	2,695,176	646,348	2,467,019
Weighted average number of ordinary shares for the purposes of diluted earnings per share	71,198,506	55,884,842	59,065,404
Earnings per share (from continuing operations)
Basic (pence)	9.52	10.44	22.06
Diluted (pence)	9.16	10.32	21.13

 

 

 

5. Dividends

 

	6 months to 30 June 2010	6 months to 30 June 2009	12 months to 31 December 2009
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Amounts recognised as distributions to equity holders in the period (approved):
Interim dividend for the year ended 31 December 2009 of 1.60p per share	-	-	900
Final dividend for the year ended 31 December 2009 of 3.50p (2008: 3.18p) per share	2,504	1,766	1,766
	2,504	1,766	2,666
Amounts not recognised as distributions to equity holders in the period (declared):
Proposed interim dividend for the year ended 31 December 2010 of 1.84p (2009: 1.60p) per share	1,330	899	-
Proposed final dividend for the year ended 31 December 2009 of 3.50p per share	-	-	2,325
	1,330	899	2,325

 

The proposed interim dividend was approved by the Board on 19 August 2010 and has not been included as a liability as at 30 June 2010. The dividend will be paid on 15 October 2010 to those shareholders on the register at 24 September 2010. The ex-dividend date is 22 September 2010.

 

Under an agreement dated 3 April 1996, The Chime Communications Employee Trust which holds 1,119,364 ordinary shares representing 1.53% of the company's called-up share capital has agreed to waive all dividends.

 

 

6. Business combinations

 

Tree (London) Limited

 

On 9 March 2010, the Group completed the acquisition of 100% of the share capital of Tree (London) Limited, a research and data analytics company. The consideration given for the acquisition was £2,000,000, subject to a working capital adjustment resulting in additional consideration of £8,000.

 

The goodwill calculation for the acquisition is as follows.

 

	Book value £'000	Fair value adjustments £'000	Provisional Fair value £'000
Tangible assets	19	-	19
Intangible assets	2,000	(1,594)	406
Cash	4	-	4
Trade & other receivables	359	-	359
Trade & other payables	(376)	27	(349)
Deferred tax	-	(114)	(114)
	2,006	(1,681)	325
Goodwill			1,683
Total consideration			2,008
Cash outflow arising on acquisition (net of cash acquired)			2,004

 

The adjustment to intangible assets arises from the write-off of goodwill held by Tree (London) Limited (£2,000,000) offset by the recognition of an intangible asset relating to a customer contract (£406,000). This resulted in the recognition of a deferred tax asset (£114,000).

 

The adjustment to trade and other payables (£27,000) relates to a payment made in respect of tax losses not recognised by the company surrendered to former group companies.

 

Costs amounting to £123,000 have been recognised as an expense during the period and are included in costs of acquisitions.

 

Due to proximity of the acquisition to the reporting date the fair value adjustments for the acquisition have been determined provisionally at the balance sheet date. Goodwill represents the assembled workforce and specialists skills held by Tree (London) Limited.

 

Tree (London) Limited contributed revenue of £948,000 and operating profit of £131,000 to the results of the Group since acquisition. If the acquisition had been made at the beginning of the period, Management estimate that Group revenue for the period would have been £136,258,000 and Group operating profit would have been £10,877,000.

 

The acquisition of Tree (London) Limited, together with that of Pelham Public Relations Limited (agreed on 21 December 2009) was financed by the placing of £4,500,000 by way of a vendor placing of £1,800,000 and a cash placing of £2,700,000 million fully underwritten by Numis Securities Limited, as announced on 15 January 2010. This gave rise to additional share capital of £563,000 and share premium of £3,937,000. The costs relating to the placing amounted to £137,000 and have been recorded in equity.

 

 

6. Business combinations (continued)

 

Essentially Group Limited

 

In October 2009, the Group acquired 100% of the share capital of Essentially Group Limited and determined provisional fair values at the date of acquisition. These fair values have been adjusted, with a corresponding impact on goodwill as detailed below. The fair values remain provisional at 30 June 2010.

 

	Provisional fair value stated at 31 December 2009 £'000	Fair value adjustments £'000	Provisional fair value stated at 30 June 2010 £'000
Intangible assets	4,450	-	4,450
Tangible assets	172	-	172
Trade & other receivables	9,236	(306)	8,930
Cash & cash equivalents	(5,685)	-	(5,685)
Trade & other payables	(17,506)	(229)	(17,735)
	(9,333)	(535)	(9,868)
Goodwill	28,575	535	29,110
Total Consideration	19,242	-	19,242

 

The fair value adjustments arise as a result of adjustments to revenue and cost accruals, sundry creditors, bad debt provisions and similar items relating to the pre-acquisition period following the outturn of actual events.

 

 

7. Goodwill

 

	6 months to 30 June 2010	6 months to 30 June 2009	12 months to 31 December 2009
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Carrying amount at 1 January	144,614	113,086	113,086
Exchange differences	(388)	(530)	(346)
Recognised on acquisition of subsidiaries (note 6)	1,683	-	31,855
Fair value adjustments in respect of prior year acquisitions (note 6)	535	-	-
Derecognised on disposal of subsidiaries	-	-	(305)
Other changes in respect of prior year acquisitions	3,368	(29)	324
Impairment	(100)	-	-
At 30 June (31 December)	149,712	112,527	144,614

 

Other changes in respect of prior year acquisitions includes revisions to the estimate of deferred consideration payable relating to acquisitions completed in previous years.

8. Notes to the consolidated cash flow statement

 

	6 months to 30 June 2010	6 month to 30 June 2009	12 months to 31 December 2009
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Operating profit	10,819	9,427	19,562
Adjustments for:
Share-based payment expense	635	558	1,448
Translation differences	(172)	(482)	269
Depreciation of property, plant and equipment	997	969	1,946
Amortisation of other intangible assets	11	45	104
Amortisation of acquired intangibles	756	88	336
Loss on disposal of property, plant and equipment	(2)	4	29
Impairment of other intangible assets	-	-	317
(Decrease)/increase in provisions	(83)	258	398
Operating cash flows before movements in working capital	12,961	10,867	24,409
Increase in work in progress	(244)	(480)	(387)
(Increase)/decrease in receivables	(584)	4,658	8,522
Increase/(decrease) in payables	3,066	3,299	(15,978)
Cash generated by operations	15,199	18,344	16,566
Income taxes paid	(3,859)	(3,023)	(5,612)
Interest paid	(231)	(251)	(529)
Net cash from operating activities	11,109	15,070	10,425

 

 

9. Related party transactions

 

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. During the period Group companies entered into the following significant transactions with related parties who are not members of the Group.

	6 months to 30 June 2010 (unaudited) £'000
	Sale of services	Purchase of services	Amounts owed by related parties	Amounts owed to related parties
Sportech	340	-	83	-
Rare Corporate Design Limited	75	274	50	59
	6 months to 30 June 2009 (unaudited) £'000
	Sale of services	Purchase of services	Amounts owed by related parties	Amounts owed to related parties
Sportech	257	-	148	-
Rare Corporate Design Limited	109	142	59	26
	12 months to 31 December 2009 (audited) £'000
	Sale of services	Purchase of services	Amounts owed by related parties	Amounts owed to related parties
Sportech	837	-	45	-
Rare Corporate Design Limited	166	442	68	21

 

The Group provided public relations services, media buying, digital advertising and marketing consultancy services to Sportech Group plc. Piers Pottinger is a Director of Sportech Group plc.

Rare Corporate Design Limited is an associated company of the Group.

Sales of goods to related parties were made on an arm's length basis. The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No provisions have been made for doubtful debts in respect of the amounts owed by related parties.

Forward looking statements

 

The interim management report contains certain forward looking statements in respect of Chime Communications plc and the operation of its subsidiaries. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that may or may not occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements and forecasts. Nothing in this announcement should be construed as a profit forecast.

 

Responsibility statement

 

We confirm that to the best of our knowledge;

 

(a) the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';

 

(b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

 

(c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein).

 

 

 

By order of the board

 

 

 

 

 

Mark Smith

Finance Director

 

25 August 2010

 

 

INDEPENDENT REVIEW REPORT TO CHIME COMMUNICATIONS PLC

 

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2010 which comprises the Condensed Consolidated Income Statement, the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Balance Sheet, the Condensed Consolidated Statement of Changes in Equity, the Condensed Consolidated Cash Flow Statement and related notes 1 to 9. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

 

Directors' responsibilities

The interim report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

 

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim report based on our review.

 

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim report for the six months ended 30 June 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

 

 

Deloitte LLP

Chartered Accountants and Statutory Auditors

London, United Kingdom

25 August 2010