Interim Results

The Mission Marketing Group plc

Interim results for the six months to 30 June 2014

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 2014.

Trading

· Continued growth

· April-Six's new San Francisco office, opened in Q3 last year, off to a flying start

· Bray Leino's new Singapore office, opened this year, gaining traction

· Some great new Client wins in the period, including Sainsbury's, Samsung and Fiat

· Full year again expected to have a strong second-half bias - trading remains in line

· Continue to seek suitable acquisitions

Income statement

· Operating income (Revenue) up 4% to £26.3m (2013: £25.4m)

· Headline operating profit up 3% to £2.1m (2013: £2.0m)

· Net finance costs reduced by nearly a quarter to £0.3m (2013: £0.4m)

· Headline profit before tax up 9% to £1.8m (2013: £1.7m)

· Headline Diluted EPS up 11% to 1.68 pence (2013: 1.51 pence)

Balance sheet and cash flow

· Cash inflow from operating activities of £5.2m (2013: £5.0m)

· Net bank debt reduced by £3.4m in the six months to £7.3m

· Gearing reduced from 17% at 31 December 2013 to 11%

· Debt leverage ratio reduced to below x1.25

Dividend

· Interim dividend declared of 0.25p (2013: 0.25p)

· Payable on 5 December 2014 to shareholders on the register at 7 November 2014

An interview with David Morgan, Chairman, can be viewed from 07:00 today at:

http://youtu.be/k8Y1eVpXp-A

Enquiries:

the missiontm is a network of entrepreneurial marketing communications Agencies employing over 800 people in the UK, San Francisco and Singapore. Built from a broad mix of specialist and full service offerings, the Group provides national and international Clients with award-winning marketing, advertising and business communications. Group members include Addiction, April-Six, balloon dog, Big Communications, Bray Leino, Proof Communication, RLA, Robson Brown, Solaris, Story, ThinkBDW and Yucca.

www.themission.co.uk

Chairman's Statement

Full Steam Ahead.

The first half of 2014 has been an important period for the Group as our now stabilised ship has been taking on more fuel in order to help us fuel the next phase of our development and build our business into 2015 and beyond.

With results for the first half going largely to plan we have moved into a programme of development whereby we have invested in people, new facilities and systems that have beefed up our Agencies, introducing new and often innovative ways of working within a market backdrop that is encouraging a little more entrepreneurism.

Our twelve operating businesses remain in good shape with our specialist sector businesses leading the charge. Encouraging new business gains from the likes of Fiat, FireEye, Strada, VELUX, St Michel, Peer 1, Sainsbury's, Rolls Royce and Samsung have provided our core businesses with a strengthened platform to move into the second half of 2014 and especially into 2015.

Equally encouraging, the pipeline of acquisition opportunities is fuller than it has been for many years. We recently announced the purchase of Proof Communication, the specialist science, technology and engineering PR Agency, which has integrated seamlessly into our April-Six Agency and has already delivered beyond our initial expectations.

To some degree, the acquisition of Proof and the solidity of our Group signals a new phase in our business where we plan to step up the introduction of tautoousian Agencies that can work alongside our existing in a way that improves the overall. So stand by for more announcements this year.

But it's not all about the new or different. It's still about delivering outstanding work for our Clients in a way that makes them famous and more successful. As we entered into 2014 our Board decreed that our development over the coming two years would not simply be about being bigger and better it would be about doing things that will enhance our Clients. Going where they go, supporting them where they need support. We will achieve this not with flapdoodle promises but by being cautious yet controlled in how we grow.

Trading results

Turnover ("billings") for the six months ended 30 June 2014 reduced by 7% to £62.8m (2013: £67.6m), reflecting reduced levels of media buying activity, which the Group expects to have a greater bias towards the second half of the year than usual due to the timing of specific campaigns. Billings include pass-through costs (eg TV companies' charges for buying air-time) and thus the Board does not consider turnover to be a key performance measure. Instead, the Board views operating income (turnover less third party costs) as a more meaningful measure of Agency activity levels.

We are pleased to report an increase of 4% in operating income ("revenue") to £26.3m (2013: £25.4m), of which 2% came from the contribution from Solaris, acquired in Q3 2013. Underlying growth of 4% in the Group's Branding, Advertising and Digital activities and strong growth in PR activities was partly offset by reductions in Media (see above) and Events and Learning.

The Directors measure the Group's profit performance by reference to headline profits, calculated before exceptional items and acquisition adjustments (as set out in Note 3). Headline operating profits increased 3% to £2.1m (2013: £2.0m).

Profit margins in the first half (headline operating profit as a percentage of revenue) remained at 8% as improved margins in the Group's PR and Branding, Advertising and Digital activities were offset by the lower proportion of Media revenues. Generally speaking, our Clients' spending cycles tend to result in a second half bias in our financial results, including higher profit margins. We expect 2014 to be no different.

Adjustments to reported profits in 2013 comprised exceptional items totalling £2.2m (mainly relating to the costs of restructuring Bray Leino's London operations and the non-cash write-off of intangibles arising on the 2012 acquisition of Addiction) and acquisition-related items of £0.3m (mainly a reduction in estimated contingent acquisition consideration). A further reduction in estimated contingent acquisition consideration at the interim stage resulted in acquisition adjustments of £0.4m in 2014. After these adjustments, reported operating profits were £2.5m (2013: £0.4m).

The continued reduction in net debt, coupled with lower interest rates as the Group's risk profile reduces, have again reduced finance costs, by nearly a quarter, to £0.3m (2013: £0.4m). After financing costs, headline profit before tax increased 9% to £1.8m (2013: £1.7m) and reported profit before tax was £2.2m (2013: £0.1m).

The Group estimates an effective tax rate of 24% (2013: 26%), resulting in profits after tax of £1.7m for the six months (2013: £0.1m), and an increase of 11% in fully diluted headline EPS to 1.68 pence (2013: 1.51 pence).

Balance sheet, cash flow and dividend

Operating cash flows are traditionally stronger in the first half of the year than the second and start of 2014 again saw strong cash flows, resulting in cash inflows from operating activities of £5.2m (2013: £5.0m) and a reduction in net debt to £7.3m at 30 June (2013: £8.8m). As a result, our gearing ratio (net debt to equity) reduced from 17% at 31 December 2013 to 11% at the end of the period and our "leverage ratio" (ratio of net bank debt to adjusted EBITDA) reduced below x1.25, triggering lower interest rate margins which will benefit the second half of the year.

At 30 June 2014, the Group had £11.6m of committed facilities, of which £2m was undrawn, and an additional overdraft facility of £2m. As in prior years, due to the phasing of working capital requirements, an increase in net debt is predicted in the second half of the year.

The Group's second interim dividend since it returned to the dividend list last year after an absence of 4 years, of 0.25p (2013: 0.25p), has been declared, payable on 5 December 2014 to shareholders on the register at 7 November 2014. Accordingly the ex-dividend date is 6 November 2014.

Current trading and outlook

Our financial performance remains solid. As in previous years, our second half weighting creates challenges ahead but, as we stand, we are confident that our business remains on track to deliver against our year-end expectations.

We look forward with optimism as we continue on our exciting journey.

David Morgan

Chairman

Condensed Consolidated Statement of Comprehensive Income

for the 6 months ended 30 June 2014

Condensed Consolidated Balance Sheet

as at 30 June 2014

Condensed Consolidated Cash Flow Statement

for the 6 months ended 30 June 2014

Condensed Consolidated Statement of Changes in Equity

for the 6 months ended 30 June 2014

Notes to the unaudited Interim Report

for the 6 months ended 30 June 2014

1. Accounting Policies

Basis of preparation

The condensed consolidated interim financial statements for the six months ended 30 June 2014 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 2013 on pages 32-35. These are consistent with the accounting policies which the Group expects to adopt in its 2014 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 2014 and 30 June 2013 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 2013 have been extracted from the Group's Annual Report and Accounts 2013, 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 2013 have been filed with the Registrar of Companies.

Going concern

The Directors have considered the financial projections of the Group, including cash flow forecasts, the availability of committed bank facilities and the headroom against covenant tests for the coming 12 months. They are satisfied that the Group has adequate resources for the foreseeable future and 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:

· Potential impairment of goodwill and other intangible assets;

· Contingent deferred payments in respect of acquisitions;

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

· Valuation of intangible assets on acquisitions.

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 eleven operating units trading through eight subsidiaries during the period: April-Six Ltd, Big Communications Ltd, Bray Leino Ltd (incorporating Addiction and Yucca), Fox Murphy Ltd (trading as balloon dog), RLA Group Ltd, Solaris Healthcare Network Ltd, Story UK Ltd and ThinkBDW Ltd (incorporating Robson Brown), each of which carries out a range of activities. These activities have been divided into four business and operating segments as defined by IFRS 8 which form the basis of the Group's primary reporting segments, namely: Branding, Advertising and Digital; Media; Events and Learning; and Public Relations.

Geographical segmentation

Although the Group is actively developing its overseas presence, the vast majority of the Group's operations are still based in the UK and substantially all the Group's business is executed in the UK.

3. Reconciliation of Reported Profit to Headline Profit

In order to provide a clearer understanding of underlying profitability, headline profits exclude exceptional items and acquisition-related costs and adjustments.

4. Contribution of newly acquired entities to the results of the Group

Solaris Healthcare Network Limited ("Solaris") was acquired on 30 September 2013 and contributed turnover of £0.7m, operating income of £0.6m and a marginal headline operating profit to the results of the Group in the six month period ended 30 June 2014.

5. Exceptional items

Exceptional items consist of 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.

In 2013, exceptional items included gains on remeasurement of contingent consideration relating to a net downward revision in the estimates payable to vendors of businesses acquired in prior years. These are now disclosed as acquisition adjustments in the Condensed Consolidated Statement of Comprehensive Income. The comparatives have been restated accordingly.

In 2013, the restructuring of Bray Leino's activities resulted in redundancy and other costs which were treated as exceptional items. In addition, there was an associated impairment of goodwill and other intangibles relating to the Addiction acquisition, which were also treated as an exceptional item.

The loss on legal dispute with supplier in 2013 related to prizes on a promotion which were deemed by the courts to be fraudulently won by the customers, resulting on the costs of these prizes and legal costs being passed to the Group.

6. Investment income and Finance costs

Debt arrangement fees arising on the renegotiation, in 2010, and modification, in 2012, of credit facilities are being amortised over the life of the credit agreement.

7. Taxation

The taxation charge for the period ended 30 June 2014 has been based on an estimated effective tax rate on profit on ordinary activities of 24% (30 June 2013: 26%).

8. 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.

A reconciliation of the profit after tax on a reported basis and the headline basis is given in note 3.

9. Intangible assets

Goodwill

Goodwill arose from the acquisition of the following subsidiary companies and is comprised of the following substantial components:

In accordance with the Group's accounting policies, an annual impairment test is applied to the carrying value of goodwill, unless there is an indication that one of the cash generating units has become impaired during the year, in which case an impairment test is applied to the relevant asset. The next impairment test will be undertaken at 31 December 2014.

Other Intangible Assets

Other intangible assets consist of intellectual property rights, client relationships and trade names.

10. Bank Loans and Net Debt

11. Acquisition obligations

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 is as follows:

12. Post balance sheet events

There were no material post balance sheet events.