Half Yearly Report

25th Sep 2009 07:00



The Mission Marketing Group plc

25 September 2009

Interim results for the six months to 30 June 2009

A focus on new business and cost containment positions the Group well for an economic recovery

The Mission Marketing Group plc ("TMMG, themission®"), the UK marketing communications group, today announces its interim results for the six months ended 30 June 2009.

Trading

Balance sheet

Income Statement

Cash

Iain Ferguson, Chief Executive Officer, commented:

"During the first half the advertising industry saw the toughest trading conditions experienced for many years. It is testament to our agencies and the skills and commitment of their people that incomes held up well despite most clients having to restrict their activities and we have continued to deliver above average margins. A strong new business performance and cost management initiatives have both contributed to results that are in line with the Board's expectations.

"Looking forward our focus will be to continue to pay down debt, manage our costs and nurture our talent. The difficult market conditions are likely to persist however we do not believe that the rate of deterioration seen in the first half will continue in the second. The benefits of our reduced cost base have started to come thorough as expected which, combined with the positive new business momentum and the successful strengthening of the balance sheet see themission® well placed for a cyclical recovery."

Iain Ferguson, Chief Executive The Mission Marketing Group plc	020 7395 7575
Tim Alderson, Chief Financial Officer  The Mission Marketing Group plc	020 7395 7572
Charles Palmer/Nicola Biles  Financial Dynamics	020 7831 3113
Mark Percy/Sarah Jacobs Seymour Pierce Limited	020 7107 8000

www.themission.co.uk 

themission® is a national marketing communications and advertising group with 12 offices across the UK. The Group specialises in providing national and international clients with award winning marketing, advertising and business communications. Group members include April-Six, Bray Leino, Big Communications, Fuse Digital, rla Group, Story UK and thinkBDW. themission® employs 600 staff nationally and is listed on AIM (TMMG).

  Chief Executive's Statement

Overview and strategy

The period saw the toughest trading conditions experienced by the industry for many years. It is testament to our agencies and the skills and commitment of their people that incomes held up well despite most clients having to severely restrict their activities. The Mission Marketing Group plc ("TMMG, themission®") has focused on cost containment, strengthening the balance sheet and new business in order to position the Group for the economic recovery.

The major client relationships in all of our agencies have, in the main, been maintained through the economic downturn. This is testament to the effort and commitment of our client service and creative teams in each of the agencies in themission®. They have continually stretched - to make smaller budgets work harder and to deliver effective, award-winning work to help clients outperform their competition.

As previously indicated activity levels are materially lower than during this period a year ago, resulting in operating income of £18.6m and a profit before tax of £1.7m. However we are positioned well to benefit when confidence improves and spending levels begin to increase. We are starting to see some signs of improvement in some sectors and industries. In others, the return to investment spending levels will be more gradual.

The strategy of themission® has been to assemble an efficient, effective Group of proven businesses based in lower cost locations across the UK, providing marketing and communications services to national and international clients. Through acquisitions the Group now comprises a stable of strong agency brands - April-Six, thinkBDW, Big Communications, Bray Leino, Fuse Digital, RLA and Story - each recognised for its strength in particular industry sectors, or in specific communications techniques or media platforms.

Our agencies are increasingly effective in working together collaboratively, combining skills and abilities from different sectors and media. Having created a national platform, the focus is increasing on intra-group collaboration and tight cost and cash management. The benefits are now coming through enabling us to provide more services to our clients and to address broader mandates. We have also seen a shift in the business mix which has resulted in a higher gross margin.

The cost management initiatives have been painful in the short term; however this has allowed us to structure the Group for today's commercial reality while allowing us, in parallel, to make selective, strategic investments in our core skills. The development in our Learning business at Bray Leino, now re-branded Bray Leino BroadSkill is a good example of the potential that exists to increase scale and scope. 

We were successful in renegotiating various liabilities and took a number of actions to reduce costs. This was of course a difficult and painful process and had an impact on short term profitability but positions the business well for the cyclical economic recovery. The focus going forward is to continue to pay down debt, manage our costs and nurture our talent.

We remain alert to opportunities created by the economic slowdown and continue to monitor the marketplace to identify potential candidates. We are also pursuing internal avenues to share costs, premises and branding where that offers potential for expanding services such as thinkMedia.

Finally, and perhaps most crucially, we have continued to invest in talent. The agencies have made key hires and the Group has initiated its long term, share-based incentive plan ("LTIP"). This incentive plan is part of the Group's succession planning and is offered to key operational managers as their agencies come out of the earn-out period. After the period, initial awards were made to the new leadership teams of the first two agencies to complete their earn-outs to help ensure continued alignment of purpose with our investors. It is intended that further awards will be made to put in place to provide additional incentives for future performance. 

Balance sheet 

£1.0m of cash was raised from a placing to investors, which has strengthened our balance sheet and will be used, as planned, to reduce the acquisition liabilities in the second half. This also generates a further reduction in operating costs and interest. In addition £1.5m of equity was issued in part satisfaction of the Bray Leino additional consideration. Together with retained earnings this strengthened our total equity base by £4.0m to £52.5m.

During the period, the balance sheet acquisition liabilities have reduced further by £4.4m from £10.4m to £6.0m as a result of scheduled payments and through a revised estimate of the remaining liabilities over time. Cash has risen to £6.0m and the net debt position has reduced by £3.3m to £14.5m. These together have improved the net debt to equity ratio from 37% to 28% and the total debt to equity ratio has improved from 58% to 39%.

As a result of the successful completion of the earn-out period by our two largest agencies, acquired at IPO, there was a peak liability repayment in 2009. In order to smooth this peak out, and in the light of the recessionary impact on profit, the Vendors and Banks agreed to reschedule the repayment profile over a longer period to more closely match cash flows. This positive step resulted in exceptional costs of £0.4m in the period.

Results

Turnover for the six month period was £42.7m (2008: £57.6m). Operating income fell to a lesser degree and in-line with the market to £18.6m (2008: £22.5m) showing a slightly higher gross margin reflecting a higher value-added business mix. Headline operating profit was £3.0m (2008: £6.0m) at a lower operating profit margin of 16% which, although down on previous periods, is above the industry average. Net interest payable decreased to £0.8m as a result of the decrease in market interest rates. The notional IFRS interest charge for additional consideration is reduced; partly as a result of scheduled payments, and partly through a revised estimate of the remaining liabilities over time. The profit before taxation was £1.7m (2008: £4.9m) and, due to a slightly lower tax rate, the profit after tax was £1.2m (2008: £3.4m). The headline diluted EPS was 4.79 pence (2008: 10.51 pence).

Dividends

Given the uncertain outlook still forecast for the UK economy, and in line with our current focus on cash retention, the Board has recommended, as announced in the Preliminary results for 2008, that no interim dividend will be paid this year (2008: 0.36 pence per share).

Corporate Governance

The Board recognise the importance of sound corporate governance and will, insofar as practicable given the Company's size and the constitution of the Board, comply with the main provisions of the Combined Code: Principles of Corporate Governance and Code of Best Practice.

In order to better comply with the Code and ABI guidelines the non-executive Directors waived all their options entitlements.

Review of Operations

The Group now consists of six agencies. Turnover has reduced somewhat reflecting lower activity levels and cost pressures as clients retrenched across the board in the face of the recession. From its pre-IPO level of £5.0m in 2006, annualised turnover is now some £90m.

The focus during the first half has been on business development - extending the range of services to existing clients as well as new business. No further acquisitions have been made and efforts have been refocused on cash, costs, clients and collaboration across the Group. Head office costs have been significantly reduced, directors and senior managers have waived or deferred both salary and bonus payments, total headcount has been reduced by 10%, offices are being consolidated, KPIs tightened and capital expenditure and freelance costs frozen. As the economy bottoms out and begins its cyclical recovery, these initiatives, while in some cases suppressing profitability in the short term, will position us well for the future.

 

The Group's initiative to provide additional services to potential and new clients and to optimise resources across agencies is proceeding well. onemission™ now has team leaders in each location, collaborative efforts on pitches are frequent and specific expertise is being accessed for the benefit of clients' business. The aim is not to dilute the agency personalities and their points of difference, but to create a new norm where best advice can be delivered irrespective of source. As well as producing tangible customer benefits, the success of onemission™ is a barometer of our transition to an effective agency Group, as people from different agency cultures, skills and locations acquire the confidence and habit of working together. As a measure of our success, onemission™ initiatives have now contributed over £3.6m of operating income to the Group since inception including Symantec, WIRSPA and the Transform Medical Group all of which have worked with more than one group agency. 

Key to this growing confidence is the Operations Board. This comprises the leader of each agency and is the team tasked with operating the collective business - evolving its strategy, agreeing its priorities, and working together to manage the whole as well as the constituent parts. This team meets quarterly and, by conference call, holds monthly update and action sessions.

Our new business and onemission™ efforts have led to a significant number of new business wins including The Royal Mint, Countrywide Lettings, London and Quadrant, Blue Coat, the Office for National Statistics Census, Bloor Homes, Crest Nicholson, Taylor Wimpey, Landmark Trust, WKD Core, Woburn, Transform Medical, Calor, Canon, Avanade, Lan2Lan, RNLI, Virgin Media, BP Alternative Energy, Manchester Airports Group, The Scottish Government and M&S Money. 

Additionally we continue to work with market leading brands and companies such as Wrigley, Dermal, BP, Scottish and Southern Energy, LVMH, HBOS, Volkswagen, Microsoft, WKD and First Direct.

The Group's operations are organised and reported under five segments.

Branding and Advertising 

Branding and Advertising is our largest segment and includes TV and other mass-media advertising as well as design and production activities across a wide range of direct marketing, print and other media platforms.

Mass-media campaigns have been the primary victim of industry wide client spend reductions and deferrals, with many opting to recycle existing work and others delaying product launches and other developments - the key business drivers in this area. The severe downturn in the IT sector and the well-documented slowdown in the volume of residential property transactions had an increasing impact, and operating income was £10.6m in the period, down from £14.2m last year. Some industry sectors such as property and financial services are now showing some early signs of recovery.

Big Communications has continued to help drive the impressive growth of Domino's Pizza, developing ongoing TV campaigns as well as a series of highly impactful idents to leverage Domino's sponsorship of 'Britain's Got Talent'. Big has also produced a campaign to support the launch of WKD's new WKD Core brand, created packaging and advertising for the re-launch of Real Crisps, and developed new advertising for the iconic Crisp 'n Dry cooking oils.

Meanwhile, in addition to continuing campaigns for clients such as Fairview and Bellway, thinkBDW has conducted market research on behalf of a number of its clients to help identify their audiences and refine advertising messages as the property market begins its recovery. This was the first time research on this scale had been conducted in the housebuilding industry. The agency also successfully targeted Housing Associations as part of its new business drive, and significantly grew its business in this increasingly important sector.

Following Story's recent appointment to the Scottish Government roster, they are currently developing a campaign for the Scottish Ambulance Service. Story also continues to develop product and campaign positionings for First Direct, and global campaigns for LVMH brand Ardbeg, whilst for the Transform Cosmetic Surgery Group, they recently produced Transform's most successful ever direct response campaign.

April-Six has been involved in the rebranding of a number of organisations including LAN2LAN, a successful networking reseller, and Transcribe, who have a number of print shops in central London. April-Six has also added clients Avanade, Canon and Blue Coat to its portfolio.

Bray Leino was appointed by the West Indian Rum and Spirits Producers Association (WIRSPA) last year. Since then, an integrated international campaign has been created encompassing advertising, online, experiential and PR. Consumers can meet 'Real' West Indian rums in the press, on the internet and face to face at Vinothèque in London. In financial services, Bray Leino has worked with Sun Life Direct across its core products, creating several new campaigns in press, DM, inserts and door drops. For Wrigley's, 5 - a groundbreaking sugar-free stick gum - is their biggest NPD news this year, and for Honey Monster, Bray Leino has created new pack architecture to unite the company's expanding range.

One of the highlights of the period was the win of the Census communications programme for the Office for National Statistics, adding to the agency's existing public sector work which includes such varied clients as WRAP and The Royal Mint.

Bray Leino now has an expanded London presence, shared with thinkBDW, to enable efficient coverage of London-based clients and new business consultancies.

Digital and Online

Digital and online communications are continuing their growth trend ahead of traditional media, and our digital business has continued to perform positively - increasing its share of operating income, generating £3.3m in the period, up on last year.

Fuse Digital consistently innovates in the online space with award-winning work in sectors ranging from food and drink to retail. For Lucozade, Fuse developed 'Do More' an exciting online campaign based around five once-in-a-lifetime challenges for Lucozade consumers - trackable through a variety of social marketing platforms like Blogger and Twitter, as well as YouTube and Facebook. For retail destination the Bullring, Fuse created a full digital strategy including an online loyalty site and events support for Summer in the City and Centre of Style.

Story develops highly effective online strategies to drive sales of Ardbeg globally, including the multi-award winning Corryvreckan campaign. In addition to ongoing campaigns for First Direct and DFS, Story has been appointed by the Glenmorangie Company to design, build and launch its global intranet site for the Ardbeg brand.

Bray Leino has created a stunning digital experience for the 2009 Wrigley's Airwaves Pro campaign exploiting its growing motorsports grass-roots appeal. The online campaign embraces a website, banner ads, an interactive game, monthly competitions and an extensive eCRM campaign. For Dentyl pH the agency developed an interactive gadget ad, which plays on the mouthwash brand's 'smooooth' positioning by inviting people to submit their best chat-up lines for the chance to win a video camera.

 

Events and Learning

Events and Learning are two specialist practices in which Group agency Bray Leino has built significant capabilities. Events, and more specifically Learning, delivered a good performance with operating income at £2.2m, in line with last year. 

  Events specialises in the luxury goods and oil and gas sectors, both historically consistently heavy investors in the international events business. However, both are sectors which have been de-stabilised by the economic environment, with resultant cancellations and reductions in activity levels. Events have had some success in adding to their core luxury, fashion and industrial sectors, making gains in new verticals with new clients such as Senior Automotive, Penrose London, Oasis Dental Care and Courtland Brooks, alongside additional assignments for Superdry, Ringspun and Airbus.

  In another new departure in events, thinkBDW devised and implemented a road show for Fairview Homes, utilising a liveried double decker bus, which travelled to a different town each weekend to promote a local development. This activity will continue throughout the year and has proved to be a cost-effective way of driving high visitor traffic to the new sites.

  In Learning, we deliver motivational skills development for our clients both in large corporates and the public sector. Our core business specialises in management development and change management programmes, and in the first six months of 2009 this business is growing in a very competitive market. This growth is the result of client recommendation and sound bid activity, which recognises that our consultants are leaders in developing the skills needed for success.

  Since the addition to our business last year of BroadSkill and the creation of Bray Leino BroadSkill, the business has benefited from cross-selling its services across our client base, demonstrated by recent wins with Airbus, BP, Kraft, The Wood Group and Symantec. Growth in our public sector business is being achieved following the award of the Buying Solutions framework earlier in the year. Recent wins include The Scottish Parliament, DSTL, VOSA and DWP.

  In 2008 we committed to build a full in-house Digital Learning capability, and in the last six months we have seen more clients seeking to use eLearning to reflect the changing requirements for their employees. We create cost efficient solutions for our clients, and the team is now delivering Digital Learning for Atos Origin, BP and Symantec and a number of public sector clients. The Solutions team within Bray Leino BroadSkill has won five new Primary Care Trusts using the BroadCare solution. In these challenging times, evidence suggests that investing in the skills of your employees appears to be critical for future success, and our Learning business is well positioned to support our current and future clients across the Mission Group.

Media

Our Media business is a combination of online and offline planning and buying at Bray Leino, RLA, thinkMedia and Story. We are a top10 buyer of television at GMTV and a major player in regional press - specifically specialist sections and titles in automotive and residential property. Media has had a tough market to contend with, both through reductions in absolute volumes and the impact of a soft media market on commission values. Media operating income, at £1.5m in the period, is down from its 2008 level of £2.0m.

We continue to provide cost-effective, hard-working media plans and buys across multiple platforms, and offer innovative commercial packages and sponsorship opportunities. Online we placed new work for Transform Cosmetic Surgery Group, DFS and First Direct.

For GoldenEye, Bray Leino delivered both a creative and media trade campaign for GoldenEye eye drops, which was voted runner up for the Best Current Trade Press Advertising campaign by OTC Marketing News.

Also at Bray Leino, pain relief gel Ibuleve has been signed as sponsor of Countdown on Channel 4, in what will be the brand's first major TV broadcast sponsorship covering all Channel 4 transmissions as well as Video On Demand. Freederm, the spot and skincare brand, has teamed up with three of the leading players in youth orientated media, to run a promotion called 'findmyfreederm' offering young people the chance to win one of five aspirational 'money can't buy' prizes. The competition will be promoted across the Viacom TV music channels (MTV), Choice FM and the Bigtop40 chart show, NME, Nuts and Look magazines as well as their online properties.

thinkMedia was successful in winning the media planning and buying for two major property advertisers; Bloor Homes, a national housebuilder, initially working with the South Midlands division as part of a consolidated marketing approach, and Countrywide, the UK's largest estate agency group. Countrywide appointed thinkMedia to work with its 200-strong Lettings branch network.

Public Relations

Public Relations had a good start to the year - maintaining operating income in a depressed market in line with last year at £1.0m.

  Building on its national reputation for high-impact, behaviour-changing consumer campaigns on behalf of national brands and industry bodies, the PR business has expanded its consumer client base across a range of sectors including media, food and drink, travel and tourism. Wins in the first half include Virgin Media, Bassetts Soft & Chewy vitamins, FOMG (the Federation of Organic Milk Groups), Spanish Olives, Rimini Tourism and Woburn Safari Park.

Public sector, and in particular influencer and stakeholder relations as well as ethical and environmental, remain strong growth areas with expansion of its client base including South West Olympics and Forum for the Future.

  Alongside business growth and development, the Public Relations business has also secured recognition for its quality standards through attainment of the CMS (Consultancy Management Standard) accreditation by the PRCA.

As with other segments, the Public Relations business works increasingly with clients from other disciplines and agencies as part of our onemission™ initiative.

Awards

Our agencies have again been honoured in prestigious industry awards, and we are proud that the Group continues to gain external and expert recognition for its campaigns and effectiveness on behalf of national and international clients. 

Big has continued to be well represented in the various awards shows with a nomination for its Lil-lets TV work at the Roses and two wins at the Chip Shop Awards, the industry's irreverent but highly-regarded creative showcase event. The agency is also looking forward to a successful winter awards season with a number of recently-announced nominations in the Fresh awards.

 

Fuse Digital has won accolades at both the BCSC and ICSC Awards for their digital marketing work with Bullring. The Lucozade Energy: Do More online campaign has also been nominated under three separate categories at the Fresh Digital Awards due to be held in September.

thinkBDW won an 'Innovations In Marketing' award for its integrated launch campaign for Barratt Homes' prestigious 'New South Quarter' development.

Story has already had a strong year for awards winning a gold for Ardbeg Blasda at the Marketing Society Scotland Excellence Awards, a bronze at the International Caples Awards for Ardbeg Corryvreckan, and several finalist places at the Cannes Lions and Drum Marketing Awards. At time of going to press, Story also had two entries through to the second stage of judging at the Campaign Big Awards and two nominations pending in the Dadi digital awards.

Current Trading and Outlook

The worsening economic turmoil during the period challenged all of the Group's clients and some sectors, such as IT and Automotive, have seen their ability to sustain investment in marketing very severely curtailed. Despite this, the Group's gross income has held up broadly in line with the market and income to date is tracking in line with a balanced first half/second half split. While various cost-cutting measures mean that annual costs will reduce by some £5.0m peak to trough, these actions have impacted negatively on short term profitability and margins which, although still ahead of industry norms, has reduced from its previous level.

There is growing consensus that the turbulent market conditions the world is experiencing are likely to persist into the foreseeable future, however; there is also a sense that the worst of the decline is behind us. We believe clients will begin gradually to increase their investments in market share and brand equity and this, allied to the measures we have taken internally, means that we are well positioned to exploit opportunities as they arise. 

Looking forward, there are causes for cautious optimism in the broader economy and in the Property and Financial Services sectors specifically. Current trading reflects some signs of improved client outlook and having sustained our high-quality client and talent base, despite the rough ride of the past 12 months, and successfully re-scheduled the payment of certain liabilities, the Group is well placed to benefit from the cyclical recovery.

This has been an exceptionally difficult and painful time for the management teams and staff who have seen colleagues leave the business as part of the necessary reduction in costs. I would like to take this opportunity to thank all the people around the Group for their exceptional efforts and achievements during a very testing period.

Finally, on behalf of all of us at themission® we thank our Chairman Francis Maude for his guidance, commitment and support since our admission to AIM. Francis, as announced in June, must step down from commercial involvements at the end of this year to allow him to pursue his political career. With the Nomination Committee he is now engaged in appointing a successor and we all wish him every success in the future.

Iain Ferguson

Chief Executive

  

Consolidated Income Statement 

for the 6 months ended 30 June 2009

		6 months to	6 months to	Year ended
		30 June2009	30 June 2008	31 December 2008
		Unaudited	Unaudited	Audited
	Note	£'000	£'000	£'000
TURNOVER	2	42,682	57,571	104,157
Cost of sales		(24,129)	(35,088)	(61,475)
OPERATING INCOME	2	18,553	22,483	42,682
Operating expenses before exceptional items	4	(15,803)	(16,526)	(33,646)
OPERATING PROFIT BEFORE EXCEPTIONAL ITEMS	2	2,750	5,957	9,036
Exceptional items	5	(373)	-	-
OPERATING PROFIT	2	2,377	5,957	9,036
Share of results of equity accounted associate		-	(10)	(10)
Profit from sale of equity accounted associate		-	12	12
Investment income	6	-	87	119
Finance costs	6	(773)	(1,006)	(1,900)
IFRS interest charges	6	68	(120)	(12)
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION		1,672	4,920	7,245
Taxation	7	(449)	(1,562)	(2,027)
PROFIT FOR THE PERIOD		1,223	3,358	5,218
For continuing and total operations:
Reported basic and diluted earnings per share (pence)	9	3.72	10.15	16.14
Headline basic and diluted earnings per share (pence)	9	4.79	10.51	16.39

Statement of comprehensive income

All items of comprehensive income are shown in the income statement. There were no items of other comprehensive income in any of the reporting periods presented.

  Consolidated Balance Sheet 

as at 30 June 2009

		As at	As at	As at
		30 June 2009	30 June 2008	31 December 2008
		Unaudited	Unaudited	Audited
	Note	£'000	£'000	£'000
FIXED ASSETS
Intangible assets	10	72,163	82,778	74,553
Investments in associates	11	-	-	-
Property, plant and equipment		1,971	2,388	2,075
		74,134	85,166	76,628
CURRENT ASSETS
Work in progress		1,743	1,865	585
Trade and other receivables	12	13,936	19,842	17,823
Cash and short term deposits		6,094	5,080	2,526
		21,773	26,787	20,934
CURRENT LIABILITIES
Trade and other payables		(14,131)	(18,287)	(13,610)
Accruals		(1,744)	(2,627)	(3,172)
Corporation tax payable		(920)	(2,119)	(1,442)
Bank loans		(1,886)	(960)	(2,683)
Acquisition loan notes and shares	13	(662)	(1,881)	(958)
Acquisition contingent payments	13	(2,323)	(6,492)	(6,368)
		(21,666)	(32,366)	(28,233)
NET CURRENT ASSETS / (LIABILITIES)		107	(5,579)	(7,299)
TOTAL ASSETS LESS CURRENT LIABILITIES		74,241	79,587	69,329
NON CURRENT LIABILITIES
Bank loans		(18,719)	(20,040)	(17,696)
Obligations under finance leases		-	(17)	-
Acquisition loan notes and shares	13	(199)	(189)	(194)
Acquisition contingent payments	13	(2,800)	(11,309)	(2,887)
Deferred tax liabilities		(72)	(61)	(70)
NET ASSETS		52,451	47,971	48,482
CAPITAL AND RESERVES
Called up share capital		3,959	3,308	3,308
Share premium account		38,578	36,643	36,643
Own shares		(1,398)	-	(1,398)
Staff remuneration reserve		960	638	800
Retained earnings		10,352	7,382	9,129
TOTAL EQUITY		52,451	47,971	48,482

  

Consolidated Cash Flow Statement

for the 6 months ended 30 June 2009

		6 months to	6 months to	Year ended
		30 June 2009	30 June 2008	31 December 2008
		Unaudited	Unaudited	Audited
	Note	£'000	£'000	£'000
OPERATING CASH FLOW	14	4,763	5,530	7,785
Net finance costs		(937)	(919)	(1,781)
Tax paid		(986)	(1,073))	(2,236)
Net cash inflow from operating activities		2,840	3,538	3,768
INVESTING ACTIVITIES
Proceeds on disposal of property, plant and equipment		16	59	152
Purchase of property, plant and equipment		(262)	(297)	(462)
Acquisition of subsidiaries		(78)	(1,069)	(1,165)
Acquisition of intellectual property rights		-	-	(61)
Net Cash acquired with subsidiaries		-	340	341
Net cash (outflow) from investing activities		(324)	(967)	(1,195)
FINANCING ACTIVITIES
Dividend paid		-	(245)	(358)
Repayments of amounts borrowed		(298)	(2,345)	(2,754)
Movement in HP creditor and finance leases		(10)	(17)	(32)
Receipts from long term loans		2,004	-	-
Repayment of long term loans		(1,614)	(4,445)	(5,066)
Proceeds on issue of ordinary share capital		1,000	-	-
Financing and share issue costs		(30)
Purchase of own shares held in EBT		-	-	(1,398)
Net cash inflow from financing activities		1,052	(7,052)	(9,608)
Increase/(Decrease) in cash and cash equivalents		3,568	(4,481)	(7,035)
Cash and cash equivalents at beginning of period		2,526	9,561	9,561
CASH AND CASH EQUIVALENTS AT END OF PERIOD		6,094	5,080	2,526

  Consolidated Statement of Changes in Equity

for the 6 months ended 30 June 2009

	Share  capital £'000	Share premium £'000	Own shares £'000	Retained earnings £'000	Staff remuneration reserve £'000	Total £'000
Changes in equity
At 1 January 2008	3,308	36,643	-	4,269	445	44,665
Credit for share option scheme	-	-	-	-	193	193
Profit for the period	-	-	-	3,358	-	3,358
Dividends	-	-	-	(245)	-	(245)
At 30 June 2008	3,308	36,643	-	7,382	638	47,971
Own shares purchase by EBT	-	-	(1,398)	-	-	(1,398)
Credit for share option scheme	-	-		-	162	162
Profit for the period	-	-		1,860	-	1,860
Dividends	-	-		(113)	-	(113)
At 31 December 2008	3,308	36,643	(1,398)	9,129	800	48,482
New shares issued	651	1,935	-	-	-	2,586
Credit for share option scheme	-	-	-	-	160	160
Profit for the period	-	-	-	1,223	-	1,223
At 30 June 2009	3,959	38,578	(1,398)	10,352	960	52,451

Notes to the unaudited Interim Report for the 6 months ended 30 June 2009

1.	Accounting Policies

Basis of preparation

The Financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) adopted by the European Union and those parts of the Companies Act 1985 which are applicable to companies reporting under IFRS.  These statements do not constitute a set of statutory financial statements.

The financial statements have been prepared on the historical cost basis. 

Going concern

On 22 May 2009 a series of documents were signed that amended the repayment profile of the outstanding acquisition obligations and of the existing bank revolving credit facility more closely matching the projected cash flows and the maturity of the obligations. As a result the Directors are satisfied that the Group has sufficient cash available for operating purposes going forward and will continue in operational existence for the foreseeable future, being at least one year.

The Directors therefore consider that it is appropriate to continue to adopt the going concern basis in preparing these interim financial statements.

Basis of consolidation

The Group's financial statements consolidate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 30 June 2009. Control is achieved where the Company has the power to govern the financial and operating polices of an investee entity so as to obtain benefits from its activities.

On acquisition, the assets and liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Goodwill represents the excess of acquisition cost over the fair value of the Group's share of the identifiable net assets of the acquired subsidiary at the date of acquisition. Any deficiency of the cost of acquisition below the fair value of the identifiable net assets acquired (i.e. discount on acquisition) is credited to the income statement in the period of acquisition.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring accounting policies used into line with those used by the Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Revenue and revenue recognition

Turnover is in respect of the provision for services including fees, commissions, rechargeable expenses and sales of materials performed subject to specific contract. Where recorded turnover exceeds amounts invoiced to clients, the excess is classified as accrued income.

Income is taken on fee income in the period to which it relates. Project income is recognised in the period in which the project is worked on. For projects, which fall over the accounting year end, income is recognised to reflect the partial performance of the contractual obligations in accordance with IAS18 Revenue. 

Income is recognised on the following basis:

Retainer fees are apportioned over the time period to which they relate.

Project income is recognised by apportioning the fees billed or billable to the time period for which those fees were earned by relationship to the percentage of completeness of the project to which they relate.

Media commission is recognised, when the advertising has been satisfactorily aired or placed.

Unbilled costs relating to contracts for services are included at rechargeable value in accrued income.

Unbilled costs relating to contracts for products are carried forward at the lower of cost and net realisable value with no profit recognition.

Financial liabilities are released to income when the liability is extinguished.

Share-based payment transactions

The Group has applied the requirements of IFRS 2 Share-based Payments. IFRS 2 has been applied to all grants of equity instruments. 

Equity-settled share-based payments, such as share options, are measured at fair value at the date of grant. The fair value determined at the grant date of the equity-settled share payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of the number of shares that will eventually vest.

Fair value is measured by use of a Black Scholes model on the grounds that there are no market related vesting conditions. The expected life used in the model has been adjusted, based on the management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. Market price on any given day is obtained from external publicly available sources.

Pension costs

Retirement benefits to employees are provided by defined contribution schemes that are funded by the Group and employees. Payments are made to pension trusts that are financially separate from the Group. There are no defined benefit plans.

Foreign currencies

Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of the transaction. Exchange differences are reflected in the income statement accordingly.

Goodwill

Goodwill arising from the purchase of subsidiary undertakings, represents the excess of the cost of acquisition over the Group's interest in the fair value of the identifiable asset, liabilities and contingent liabilities of the subsidiary acquired, and is capitalised in accordance with the requirements of IFRS 3. Future anticipated payments to vendors in respect of earn-outs are based on the Directors' best estimates of these obligations. Earn-outs are dependent on the future performance of the relevant business and are reviewed annually. The deferred consideration is discounted to its fair value in accordance with IFRS 3 and IAS 39. The difference between the fair value of these liabilities and the actual amounts payable are charged to the income statement as notional finance costs over the life of the associated liability.

Goodwill is not amortised, but is reviewed annually for impairment. Goodwill impairment is assessed by comparing the carrying value of goodwill to the net present value of future cash flows derived from the underlying assets considering forecast cash flows over an initial projection period of up to three years for each cash-generating unit. After this period, growth rates equivalent to nominal GDP are generally assumed. In accordance with IFRS 3 the carrying value of goodwill will continue to be reviewed for impairment on the basis stipulated and adjusted should this be required. Impairment is recognised in the income statement and is not subsequently reversed. The individual circumstances of each future acquisition will be assessed to determine the appropriate treatment of any related goodwill.

Property, plant and equipment

Tangible fixed assets are stated at cost less accumulated depreciation. Depreciation is provided on all property, plant and equipment at rates calculated to write off the cost, less estimated residual value based on prices prevailing at the date of acquisition, of each asset evenly over its expected useful economic life, as follows:

Short leasehold property	Period of the lease
Motor vehicles	25% per annum
Fixtures, fittings and equipment	10-33% per annum
Computer	25-33% per annum

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.

The gain or loss arising on the disposal of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the income statement.

Work in progress

Work in progress is stated at the lower of cost and net realisable value and includes the costs of direct materials and purchases, and the costs of direct labour. Net realisable value is based on estimated invoice value less further costs expected to be incurred to completion.

Deferred consideration

The terms of an acquisition may provide that the value of the purchase consideration, which may be payable in cash, shares or other security at a future date, depends on uncertain future events, such as the future performance of the acquired company. Where it is not possible to estimate the amounts payable with any degree of certainty, the amounts recognised in the financial statements represent a reasonable estimate at the balance sheet date of the amounts expected to be paid. The deferred consideration is discounted to a fair value. The difference between the fair value of the liabilities and the actual amounts payable are charged to the income statement as notional finance costs (calculated at annual rates of between 4.5% and 5.5% over the life of the associated liability. The rate used is the risk free rate applicable at the time of acquisition of the relevant entity. The Directors consider these rates to be reasonable in light of similar rates available on debt instruments.

Where it becomes appropriate to increase or decrease a previous estimate of deferred consideration, an adjustment is made to the current year IFRS interest charge, such that the cumulative interest charged to the date of change reflects the amount of interest charge that would have been expensed had the revised estimate of the deferred consideration been made at the date that the liability was first recognized. By so doing, the total interest expensed over the life of the liability is calculated as a function of the latest expectation and is not influenced by any previous estimates whether higher or lower, and fully reflects the intention of IFRS 3.

Financial instruments

Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument. Issue costs are offset against the proceeds of such instruments. 

Financial liabilities and equity

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The Group has only one class of share in existence.

Finance costs

Finance costs, which include interest, bank charges and the unwinding of the discount on deferred consideration, are recognised in the income statement in the period in which they are incurred. In addition, fees payable to the bank relating to the renegotiation of the bank debt are being amortised over a three year period, being the life of the revolving credit facility.

Accounting estimates and judgements

The Group makes estimates and judgements concerning the future and the resulting estimates may, by definition, vary from the actual results. The Directors considered the critical accounting estimates and judgements used in the financial statements and concluded that the main areas of judgement are:

Revenue recognition policies in respect of contracts which straddle the period end;

Contingent deferred payments in respect of acquisitions; and

Recognition and quantification of share based payments

Valuation of intangible assets.

These estimates are based on historical experience and various other assumptions that management and the Board of Directors believe are reasonable under the circumstances and are discussed, to the extent necessary, in more detail in their respective notes.

2.	Operating segmentation

Business segmentation

For management purposes the Group had seven operating subsidiaries during the period, Bray Leino Limited, Big Communications Limited, Fuse Digital Limited, Bastin Day Westley Limited, April-Six Limited, Story UK Limited and RLA Group Limited. These have been divided into five segments which form the basis of the Group's primary segmentation namely; Branding and Advertising, Digital, Events and Learning, Media and Public Relations. Please note that this report does not include a proforma segmentation note as proforma results are identical to actual results for all periods presented.

	6 months to	6 months to	Year ended
	30 June 2009	30 June 2008	31 December 2008
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
		Turnover
Business segment
Branding and Advertising	16,155	20,766	39,751
Digital and On-line	4,652	4,384	9,155
Events and Learning	5,636	6,394	13,323
Media	14,946	24,758	39,404
Public Relations	1,293	1,269	2,524
	42,682	57,571	104,157

		Operating income
Business segment
Branding and Advertising	10,614	14,223	26,481
Digital and On-line	3,312	3,165	6,152
Events and Learning	2,169	2,168	4,613
Media	1,470	1,975	3,504
Public Relations	988	952	1,932
	18,553	22,483	42,682

		Operating profit before exceptional items
Business segment
Branding and Advertising	1,864	4,525	6,962
Digital and On-line	827	1,050	1,724
Events and Learning	161	334	627
Media	544	852	1,483
Public Relations	66	82	167
	3,462	6,843	10,963
Central costs	(712)	(886)	(1,927)
	2,750	5,957	9,036

Geographical segmentation

The Group's operations are all based in the UK and substantially all the Group's business is executed in the UK.

In accordance with IFRS8 the Group's operations have been presented on business segment lines as this is the basis on which operating information is presented to the Board.

3.	Reconciliation of Headline Profit to Reported Profit

	6 months to 30 June 2009	6 months to 30 June 2008	Year to  31 December 2008
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Headline profit before finance costs, income from investments and taxation	2,962	5,959	9,133
Net finance costs	(773)	(919)	(1,781)
Headline profit before taxation	2,189	5,040	7,352
Adjustments
Exceptional items	(373)	-	-
Redundancy and restructuring costs	(212)	-	(95)
IFRS interest charges	68	(120)	(12)
Reported profit before taxation	1,672	4,920	7,245
Headline profit before tax	2,189	5,040	7,352
Headline taxation	(613)	(1,562)	(2,056)
Headline profit after taxation	1,576	3,478	5,296
Adjustments
Exceptional items	(373)	-	-
Redundancy and restructuring costs	(212)	-	(95)
IFRS interest charges	68	(120)	(12)
Taxation impact	164	-	29
Reported profit after taxation	1,223	3,358	5,218

4.	Operating expenses before exceptional items

The operating expenses of £15,802,794 (2008: £16,525,729) include a non-cash charge of £160,000 (2008: £193,000) for the options granted to employees in line with IFRS2: "Share-based payments".

5.	Exceptional Items

Exceptional costs consist of fees to lawyers and other relevant advisors relating to:

 

- the re-negotiation of the repayment profile of the outstanding acquisition obligations with the relevant vendors; and

- the re-negotiation of the terms of the existing bank revolving credit facility.

6.	Investment income and Finance costs

	6 months to	6 months  to	Year  ended
	30 June  2009	30 June  2008	31 December 2008
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Investment income:
Interest receivable	-	87	119
Finance costs:
On bank loans and overdrafts	(614)	(1,006)	(1,900)
On loan notes	(73)	-	-
Amortisation of bank debt renegotiation fee	(86)	-	-
	(773)	(1,006)	(1,900)
IFRS interest charges:
Finance cost of deferred consideration	68	(120)	(12)
Bank arrangement fees	-	-	-
	68	(120)	(12)
Total net finance cost	(705)	(1,039)	(1,793)

The amortisation of bank renegotiation fee consists of fees payable to the bank relating to the bank debt re-negotiation which are being amortised over the life of the revolving credit facility.

7.

Taxation

The taxation charge for the period ended 30 June 2009 has been based on an estimated effective tax rate on profit on ordinary activities prior to IFRS interest charges of 28% (30 June 2008: 31%). 

8.

Dividends

	6 months to	6 months  to	Year  ended
	30 June 2009	30 June 2008	31 December 2008
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Amounts recognised as distributions to equity holders in the period (approved):
Full year dividend for the period ended 31 December 2007 of 0.74 pence per share	-	245	245
Interim dividend of 0.36 pence per share for the year ended 31 December 2008	-	-	119
Total dividend paid to EBT scheme	-	-	(6)
	-	245	358

9.	Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data, determined in accordance with the provisions of IAS33: "Earnings per Share".

	6 months to	6 months to	Year  ended
	30 June 2009	30 June 2008	31 December 2008
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Earnings
Earnings for the purpose of reported earnings per share being net profit attributable to equity holders of the parent	1,223	3,358	5,218
Earnings for the purposes of headline earnings per share (see note 3)	1,576	3,478	5,296
Number of shares
Weighted average number of ordinary shares for the purpose of basic earnings per share	32,882,015	33,076,828	32,319,841
Dilutive effect of securities:
Share options	-	-	-
Weighted average number of ordinary shares for the purpose of diluted earnings per share	32,882,015	33,076,828	32,319,841
Reported basis:
Basic earnings per share (pence)	3.72	10.15	16.14
Diluted earnings per share (pence)	3.72	10.15	16.14
Headline basis:
Basic earnings per share (pence)	4.79	10.51	16.39
Diluted earnings per share (pence)	4.79	10.51	16.39

Basic earnings per share includes shares to be issued subject only to time as if they had been issued at the beginning of the period.

The additional consideration shares included in non current liabilities have not been included in the diluted earnings per share because the conditions for their issue had not been met in the period. Options issued are included in diluted earnings per share to the extent that the market price is above the exercise price in accordance with IAS33.

10.

Goodwill

	£'000
At 1 January 2008	87,182
Recognised on acquisition of subsidiaries	2,048
Adjustment to consideration and net assets	(6,452)
At 30 June 2008	82,778
Recognised on acquisition of subsidiaries	-
Adjustment to consideration and net assets	(8,283)
At 31 December 2008	74,495
Recognised on acquisition of subsidiaries	(26)
Adjustment to consideration and net assets	(2,362)
At 30 June 2009	72,107

The adjustments to consideration relate to changes in the estimated deferred consideration in the earn-out period under the terms of the relevant sale and purchase agreement.

In accordance with the Group's accounting policies, an annual impairment test is applied to the carrying value of goodwill. Goodwill is not amortised.

Goodwill is comprised of the following substantial components:

	30 June 2009	30 June 2008	31 December 2008
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Big Communications Ltd/Fuse Digital Ltd	8,125	8,182	8,125
Bray Leino Ltd	28,383	28,363	28,363
April-Six Ltd	9,411	9,408	9,411
Bastin Day Westley Ltd	6,283	9,072	6,283
The Driver Is Ltd	366	396	365
Story UK Ltd	6,969	10,075	8,598
PCM Ltd	700	526	657
RLA Group Ltd	10,570	14,708	10,570
Rhythmm Communications Group Ltd	470	367	439
BroadSkill Ltd	830	1,681	1,684
	72,107	82,778	74,495

Other Intangible Assets

	30 June 2009	30 June 2008	31 December 2008
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Intellectual property rights	56	-	58

Other intangible assets consist of intellectual property rights which are amortised over 20 years. The amortisation charge for the period ended 30 June 2009 was £1,500 (2008: nil).

11.	Investments in associates

	30 June 2009	30 June 2008	31 December 2008
	£'000	£'000	£'000
Investment in shares in iblink Limited	-	-	-

Investments in associates consists of a 0% (2008: 20%) holding in the share capital of iblink Limited, which has been incorporated into these financial statements using the equity method of accounting. During the period ended 30 June 2009 the remaining shareholding in iblink Limited was sold for nil profit (2008: 20% sold for £12,000 profit).

12.	Trade and other receivables

An allowance has been made for estimated irrecoverable amounts of £64,108 (30 June 2008: £120,100 and 31 December 2008: £163,070).

13.	Acquisition loan notes and acquisition contingent payments

The terms of an acquisition may provide that the value of the purchase consideration, which may be payable in cash or shares or other securities at a future date, depends on uncertain future events such as the future performance of the acquired company. The directors estimate that the liability for payments that may be due are as follows:

	Initial Consideration Loan Notes	Additional Consideration Loan Notes	Additional Consideration Shares to be issued	Total
	£'000	£'000	£'000	£'000
Less than one year	662	2,158	165	2,985
Between one and two years	199	2,800	-	2,999
	861	4,958	165	5,984

  

14.	Notes to the consolidated cash flow statement

Reconciliation of operating income to operating cash flow

	6 months to	6 months to	Year ended
	30 June 2009	30 June 2008	31 December 2008
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Operating profit	2,377	5,957	9,036
Depreciation charges	365	402	776
Gain on disposal of property, plant and equipment	(13)	(18)	(4)
Non cash charge for share options	160	193	355
Decrease/(Increase) in receivables	3,914	(2,418)	(398)
(Increase)/Decrease in work in progress	(1,158)	(1,021)	109
(Decrease)/Increase in payables	(882)	2,435	(2,089)
Operating cash flow	4,763	5,530	7,785

15.	Leave pay accrual

No liability or expense has been recognised relating to untaken leave for any of the periods presented. The Group has a policy of not allowing days to be carried forward from one year to the next, unless in exceptional circumstances. In addition, no payment is made in lieu of untaken leave which is not carried forward. As a result, there is no material liability relating to untaken leave at year end. An accounting policy of not recognising a liability for untaken leave in the interim figures has therefore been adopted, as any effect on the income statement at the first half year reverses itself in the second half of the year. Were the Group to recognise a liability for the full cost of untaken leave at 30 June 2009, the effect on the income statement would be an expense of £196,609 (30 June 2008: £263,094).

16.	Post balance sheet events

There were no material post balance sheet events. 

17.	Availability of the Interim Report

Copies of the Interim Report will be available from the Company's registered office at Garden House, 57-59 Long Acre, London, WC 2E 9JL and on the Group's website, www.themission.co.uk

ENDIR VZLFLKKBZBBE

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Related Shares:

The Mission Group