Half Yearly Report

The Mission Marketing Group plc 

30 September 2011

Interim results for the six months to 30 June 2011

The Mission Marketing Group plc ("TMMG" or "the missiontm"), the national marketing communications and advertising group, sets out its interim results for the six months ended 30 June 2011.

Trading

·; Good new business wins in the period, including Pitney Bowes, Cisco, Barratt Homes, Norwegian Seafood, Highland Spring, Kier Homes, Ferodo, Peugeot, JCB and Tuborg

·; Strong growth from existing Clients, including BP, Bellway, Scania, Domino's Pizza

·; Net annualised new business of £3.6m operating income won so far

Income Statement

·; Results in line with the Board's expectations

·; Operating income (Revenue) up 14% to £19.8m (2010: £17.4m)

·; Operating margins improved to 13% (2010:10%)

·; Headline operating profit up 42% to £2.7m (2010: £1.9m)

·; Net finance costs reduced by 20% to £0.9m (2010: £1.1m)

·; Headline profit before tax up 132% to £1.8m (2010: £0.8m)

·; Reported profit before tax: £1.7m (2010: loss of £0.2m)

·; Headline Diluted EPS: 1.70 pence (2010: 1.27 pence)

·; Full year again expected to have a second-half bias

Balance sheet and cash flow

·; Cash inflow from operating activities of £5.4m (2010: £4.2m)

·; Bank debt repayments of £2.5m, including £1.5m of voluntary prepayment

·; Net bank debt reduced by £4.7m in the six months to £13.8m

·; Gearing reduced from 34% at 31 December 2010 to 25%

·; Debt leverage ratio reduced from x3.3 at 31 December 2010 to x2.2 at 30 June 2011

Commenting on the interim results, David Morgan, Chairman, said: "Last year, we set clear goals for the future. Our 2010 results illustrated good initial progress against each of these goals. The results for the first six months of 2011, with strong increases in revenue and profits, and a reduction in net debt, demonstrate our continued progress."

"Our Agencies continue to perform well in a difficult market, and we are actively seeking new ventures, additional talent and strategic acquisitions to accelerate our growth in the coming years. Whilst there is much still to do, I view the outlook with cautious optimism."

Enquiries:

the missiontm is a national marketing communications and advertising group with 14 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, Big Communications, Bray Leino, Fuse Digital, RLA, Robson Brown, Story and ThinkBDW.

www.themission.co.uk

The Mission Marketing Group plc

Interim results for the six months to 30 June 2011

Chairman's Statement

The Group has had a good start to the year, with strong increases in turnover, operating income and profits over the same period last year.

Last year, we set clear goals for the future:

·; to focus on our core business;

·; to provide even greater value to our Clients;

·; to improve our profitability through growth and cost reductions;

·; to pay down debt; and

·; to encourage an atmosphere that drives success.

Our 2010 results illustrated good initial progress against each of these goals. The results for the first six months of 2011 demonstrate our continued progress:

·; Increased revenue, from winning new Clients and developing existing Clients;

·; Increased operating profits, from revenue growth and a reduction in central costs;

·; Reduced net debt, gearing ratio and debt leverage, from a focus on cash management.

Whilst the markets we operate in get no easier, our Agencies have performed remarkably well and we are seeing significant benefits from our onemissiontm collaboration whereby the Agencies share best practice and broader skill sets, thereby delivering unrivalled service and quality to our Clients. In doing so, the Agencies are building on their achievements of 2010 and showing further growth so far in 2011.

In addition to growth from our core business we have embarked on a programme of integrating new Agencies into our Group. Our first example is Robson Brown, which we re-established following its collapse at the end of 2010, and which has contributed £0.6m of operating income in the period. We will continue to look for similar opportunities in 2011 and beyond.

Due to Clients' spending patterns, we again expect the result for the twelve months to 31 December 2011 to have a bias towards the second half. All in all, it has been a steady start to the year.

Results and dividend

Trading for the first half of 2011 was in line with management's expectations. Turnover for the six month period was significantly higher than the previous year, at £59.9m (2010: £43.4m), reflecting both the media launch of the 2011 Census (our largest ever project) and strong growth in media placement activity handled by ThinkBDW, our property-specialist Agency.

Operating income ("revenue") increased 14% to £19.8m (2010: £17.4m), mainly the result of strong growth in ThinkBDW and RLA (our automotive-specialist Agency), and also the first contribution from Robson Brown. Agency operating expenses increased by only 12% to support the higher levels of activity, whilst central costs reduced by almost 30%, resulting in an improvement in operating margins to 13% (2010: 10%). Pre-exceptional operating profit increased by nearly 50% to £2.7m (2010: £1.8m) and headline operating profit increased to £2.7m from £1.9m.

The conversion of outstanding vendor debt to equity in June 2010 resulted in a reduction in both the level of debt on which interest was being paid and also the average interest rate. The consequential reduction in net interest payable has been partly offset by the cost of 2010's bank debt renegotiation, where bank arrangement fees are being amortised over the term of the group's credit facilities, resulting in net interest payable of £0.9m, down from £1.1m in 2010.

After exceptional restructuring costs of £0.1m (2010: £0.8m relating to the bank refinancing, and redundancy and restructuring costs), profit before taxation was £1.7m (2010: loss of £0.2m) and the profit after tax was £1.2m (2010: loss of £0.1m). The headline diluted EPS was 1.70 pence (2010: 1.27 pence).

In line with our continuing focus on debt reduction, the Board does not propose the payment of an interim dividend.

Balance sheet and cash flow

The major restructuring of the balance sheet was completed last year, with a private placing raising £1.3m, all remaining acquisition liabilities eliminated through conversion to equity or settlement in cash, and new committed bank facilities agreed until 2013.

Accordingly, changes to our balance sheet have been less significant in the first six months of 2011, but our continued focus on cash and working capital management has enabled not only the first scheduled debt repayment to be made but also a voluntary prepayment of £1.5m. Cash flow from operating activities in the six months was £5.4m (2010; £4.2m), leading to a reduction in net debt to £13.8m (2010: £15.9m) and a further reduction in our gearing ratio (net debt to equity) from 34% at 31 December 2010 to 25% at the end of the period. As predicted, our "leverage ratio" (ratio of net bank debt to pre-exceptional EBITDA) also reduced, from x3.3 at 31 December 2010 to x2.2 at 30 June 2011.

Operating cash flows are traditionally stronger in the first half of the year than the second and an increase in net debt is therefore predicted at 31 December 2011. However, we anticipate little change to our leverage ratio.

Board responsibilities

Following Brian Child's departure from the Board, Stephen Boyd assumes his role as Chairman of the Remuneration Committee and becomes Senior Independent Non-Executive Director. Chris Morris, a Non-Executive Director since December 2009, has been appointed Deputy Chairman, and will become a member of the Audit, Remuneration and Nomination Committees.

Current trading and outlook

Our Agencies continue to perform well in a difficult market, and we are actively seeking new ventures, additional talent and strategic acquisitions to accelerate our growth in the coming years. Whilst there is much still to do, I view the outlook with cautious optimism.

David Morgan

Chairman

Condensed Consolidated Statement of Comprehensive Income

for the 6 months ended 30 June 2011

Condensed Consolidated Balance Sheet

as at 30 June 2011

Condensed Consolidated Cash Flow Statement

for the 6 months ended 30 June 2011

Condensed Consolidated Statement of Changes in Equity

for the 6 months ended 30 June 2011

Notes to the unaudited Interim Report

for the 6 months ended 30 June 2011

1. Accounting Policies

Basis of preparation

The condensed consolidated interim financial statements for the six months ended 30 June 2011 have been prepared in accordance with the IAS 34 "Interim Financial Reporting" and the Group's accounting policies.

The Group's accounting policies are in accordance with International Financial Reporting Standards as adopted by the European Union and are set out in the Group's Annual Report and Accounts 2010 on pages 21-24. These are consistent with the accounting policies which the Group expects to adopt in its 2011 Annual Report. The Group has not early adopted any Standard, Interpretation or Amendment that has been issued but is not yet effective.

The information relating to the six months ended 30 June 2011 and 30 June 2010 is unaudited and does not constitute statutory financial statements as defined in Section 434 of the Companies Act 2006. The comparative figures for the year ended 31 December 2010 have been extracted from the Group's Annual Report and Accounts 2010, on which the auditors gave an unqualified opinion and did not include a statement under section 498 (2) or (3) of the Companies Act 2006. The Group Annual Report and Accounts for the year ended 31 December 2010 have been filed with the Registrar of Companies.

Going concern

The Group has committed bank facilities available to 2013 and no remaining acquisition liabilities. The available banking facilities provide comfortable levels of headroom against the Group's projected cash flows and the Directors accordingly consider that it is appropriate to continue to adopt the going concern basis in preparing these interim financial statements.

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;

·; Recognition and quantification of share based payments; and

·; 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.

2. Segmental Information

Business segmentation

For management purposes the Group had seven operating subsidiaries during the period: Bray Leino Limited, Big Communications Limited, Fuse Digital Limited, thinkBDW Limited, April-Six Limited, Story UK Limited and RLA Group Limited. These have been divided into four segments which form the basis of the Group's primary segmentation, namely: Branding, Advertising and Digital; Events and Learning; Media; and Public Relations.

Geographical segmentation

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

3. Reconciliation of Headline Profit to Reported Profit

4. Exceptional items

Exceptional items represent revenue or costs that, either by their size or nature, require separate disclosure in order to give a fuller understanding of the Group's financial performance.

Exceptional items in 2011 consist of restructuring costs. Exceptional items in 2010 comprise professional fees relating to the re-structuring and re-scheduling of bank facilities and outstanding acquisition obligations, including the equity conversion and placing of new shares, and amounts payable as a result of the restructuring of the Board and the exit of vendor management following refinancing.

5. Investment income and Finance costs

Debt arrangement fees arising on the renegotiation of credit facilities in 2010 are being amortised over the life of the credit agreement.

6. Taxation

The taxation charge for the period ended 30 June 2011 has been based on an estimated effective tax rate on profit on ordinary activities prior to IFRS interest charges of 28%

(30 June 2010: 28%).

7. 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".

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.

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. Dilutive options are not incorporated into the reported diluted earnings per share calculation if the effect would be to lower the loss per share.

8. Goodwill

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. The goodwill impairment provision of £3,995,000 made in 2009 has remained unchanged in subsequent periods. Goodwill is comprised of the following substantial components:

* The Driver Is Ltd, PCM Ltd, Rhythmm Communications Group Ltd and BroadSkill Ltd operations have been merged into the business of Bray Leino Ltd. All goodwill relating to these entities has therefore been reallocated to Bray Leino Ltd.

Other Intangible Assets

Other intangible assets consist of intellectual property rights which are amortised over 20 years. The amortisation charge forthe period ended 30 June 2011 was £2,000 (2010: £2,000).

9. Bank Loans and Net Debt

10. Notes to the consolidated cash flow statement

Reconciliation of operating income to operating cash flow

11. Post balance sheet events

There were no material post balance sheet events.

12. Availability of the Interim Report

Copies of the Interim Report are available by writing to the Company Secretary at the Company's Head Office at 8/9 Carlisle Street, London, W1D 3BP and on the Group's website, www.themission.co.uk