Interim results

Motivcom plc

("Motivcom" or "the Group")

Interim Results for the six months ended 30 June 2014

Motivcom plc (AIM:MCM), a leading business services group offering incentives & loyalty expertise and meetings & event management services to major blue-chip corporate clients, is pleased to announce its unaudited interim results for the six months ended 30 June 2014.

Financial Highlights

Unaudited Interim Results for the period ended 30 June 2014

* Operating profit from continuing operations of £718,000 (2013: £1,104,000) plus amortisation of intangibles of £110,000 (2013: £142,000)

† Profit before tax from continuing activities of £686,000 (2013: £1,058,000) plus amortisation of intangibles of £110,000 (2013: £142,000) and unwinding of discount relating to contingent consideration liability of £23,000 (2013: £44,000)

‡ See reconciliation in Note 5

Commenting on the results, Colin Lloyd, Chairman of Motivcom plc, said: "As reported on 27 June 2014 trading in the first half of this year was below the Board's expectations. Whilst the level of the Group's order intake remains satisfactory, the delivery of much of this work is heavily weighted into the second half of the year. The variation in phasing between the first and second half has been a regularly reported characteristic of the Group's business and this industry. The Board views this matter mainly as a timing issue.

I am also pleased to report that, following a strategic review of the Group's activities, an offer for the business was received on 12 September from Sodexo Motivation Solutions UK Ltd, part of Sodexo SA. This offer values the business at £1.48 per share and the board believes it is in the best interests of the Group's shareholders to accept. The Board is therefore recommending the offer to shareholders."

- Ends -

For further information:

CHAIRMAN'S STATEMENT

I am pleased to report the results for Motivcom for the six months to 30 June 2014. As reported on 27 June 2014 trading in the first half of this year was below the Board's expectations. Whilst the level of the Group's order intake remains satisfactory, the delivery of much of this work is heavily weighted into the second half of the year. The variation in phasing between the first and second half has been a regularly reported characteristic of the Group's business and this industry. The Board views this matter mainly as a timing issue.

I am also pleased to report that, following a strategic review of the Group's activities, an offer for the business was received on 12 September from Sodexo Motivation Solutions UK Ltd, part of Sodexo SA. This offer values the business at £1.48 per share and the board believes it is in the best interests of the Group's shareholders to accept. The Board is therefore recommending the offer to shareholders.

Financial update

The results of the entities to be acquired by Sodexo SA have been classified as continuing operations. The results of Summersault Communications Limited and Zibrant Limited which were and will be respectively acquired by their Management are classified as discontinued operations. Additionally, discontinued operations include a loss of £180,000 arising from the sale of Summersault Communications Limited and an estimated loss of £10,418,000 arising in the main from goodwill impairment on the sale of Zibrant Limited.

The Group's gross profit from continuing operations was 1% lower at £7,905,000 (2013: £7,971,000) whilst overheads were 5% higher at £7,077,000 (2013: £6,725,000). This flowed through into a headline operating profit of £828,000 (2013: £1,246,000). Trading volumes in p&mm sales promotion were below expectations in the first half.

The Group's gross profit from discontinued operations was 20% lower at £4,623,000 (2013: £5,774,000). Overheads were 8% lower at £4,811,000 (2013: £5,213,000). This flowed through into a headline operating loss of £188,000 (2013: profit £561,000). Trading volumes in Zibrant events were below expectations in the first half being heavily weighted into the second half.

In light of the offer referenced above the Board does not intend to declare an interim dividend for the half year ended 30 June 2014.

Divisional Reports

Motivation

The Motivation division has continued to deliver excellent growth during the period with headline operating profits increasing by 46% to £1,280,000 (2013: £876,000). New business intake from both new and existing clients underpins this positive result and reflects a more positive economic environment.

Motivation programme activity has benefited from both new and existing client wins in 2014 which are at various stages of implementation. The continued recognition by UK business that Reward and Recognition initiatives positively impact overall performance has resulted in an excellent pipeline of new business.

Our voucher / gift card volumes are 7% up on the first half of 2013 and continue to benefit from the shift from paper vouchers to plastic retailer gift cards. Improved functionality and lower distribution costs deliver greater appeal to customers and drive efficiencies into the operation.

Spree, our pre paid MasterCard product, has continued to grow with transaction values in the first half reaching £92 million (H1 2013: £88 million). Investment in cardholder marketing, mobile solutions and product for the SME market continues to drive growth in the cardholder base and improved profitability from existing cardholders.

A steady stream of new business wins means that the division is performing well and the Board anticipates that it will continue to make good progress in the second half of 2014 and on into 2015.

Promotions

The Promotions division has performed below expectations in the first half of 2014 with an overall headline operating loss of £589,000 (2013: profit £201,000). Discontinued operations contribute a headline operating loss of £91,000 (2013: £108,000).

Employee Benefits

Growth continues to be strong within the p&mm employee benefits division. Significant new business wins, combined with excellent retention and new product integration for our existing clients have resulted in a record half year. Client service levels, product innovation and breadth of offer also continue to shine and this has been recognised by several industry awards in recent months.

Allsave have also performed very well and have established several new Intermediary 'preferred partner' relationships, resulting in a number of new client wins. In addition a new Employee Benefits platform offering a range of sixteen services has been developed and will be launched in the second half of 2014. The strong reputation and relationship with existing clients, will provide the opportunity to up-sell new products and services to their extensive existing client base as well as attracting new clients.

Sales Promotion

Performance in the first half of 2014 was below expectation. We have seen promotions activity and opportunities loaded into the second half. Whilst revenue expectations have been revised down we have held back certain planned investment in this area that will deliver cost savings that will help to compensate.

Events

The events division has performed below expectations in the first half of 2014 with an overall headline operating profit of £67,000 (2013: £805,000). Discontinued operations contribute a headline operating loss of £97,000 (2013: headline operating profit of £669,000).

2014 has been a year of investment and significant change in the events environment within Motivcom. In January we launched the new creative Zibrant LIVE! brand which has secured excellent levels of new business which will be delivered in the second half of 2014. In the first half of 2014 we also undertook major investment in infrastructure updating our venues, event management, accommodation booking, finance and HR systems, together with replacement of certain computer hardware. The business is now in better shape and we expect to see a significantly improved performance in the second half of 2014.

In summary

As this is expected to be the final Chairman's report for the Group can I thank our shareholders, our advisors, my board of directors and the management and the staff of Motivcom for their support over the ten years since our admission to Aim, and wish them every success for the future.

Colin Lloyd

Chairman

26 September 2014

CONSOLIDATED INTERIM INCOME STATEMENT (UNAUDITED)

FOR THE PERIOD ENDED 30 JUNE 2014

CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

FOR THE PERIOD ENDED 30 JUNE 2014

CONSOLIDATED INTERIM BALANCE SHEET (UNAUDITED)

AT 30 JUNE 2014

CONSOLIDATED INTERIM CASH FLOW STATEMENT (UNAUDITED)

FOR THE PERIOD ENDED 30 JUNE 2014

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

FOR THE PERIOD ENDED 30 JUNE 2014

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 30 JUNE 2014

1 General information

Motivcom plc ("the Company") and its subsidiaries (together "Motivcom plc" or "the Group") are involved in (1) the development and administration of third party motivation and incentive programmes (2) the provision of incentive travel, live events and venue finding and (3) the provision of trade and consumer sales promotions, employee benefits products and communication programmes.

The Company is a public limited liability company incorporated and domiciled in England. The address of its registered office is Avalon House, Breckland, Linford Wood, Milton Keynes MK14 6LD. The Company has its primary and only listing on Aim, London Stock Exchange's international market for smaller growing companies.

These unaudited condensed consolidated interim financial statements (the interim financial statements) have been approved for issue by the Board of Directors on 26 September 2014.

2 Basis of preparation

These interim financial statements of Motivcom plc are for the six months ended 30 June 2014. They have been prepared in accordance with IAS 34, Interim Financial Reporting. They do not constitute statutory accounts as defined in Section 435 of the Companies Act 2006. They should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2013 which are available on the Group's website (www.motivcom.com) and 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.

These interim financial statements have been prepared in accordance with the accounting policies adopted in the last financial statements for the year ended 31 December 2013.

The accounting policies have been applied consistently throughout the Group in preparing these interim financial statements.

The financial statements are prepared on a going concern basis. In considering going concern, the directors have reviewed the Group's future cash requirements and earnings projections. The directors believe these forecasts have been prepared on a prudent basis and have also considered the impact of a range of potential changes to trading performance. The directors have concluded that the Group should be able to operate within its current facilities and comply with its banking covenants for the foreseeable future and therefore believe it is appropriate to prepare the financial statements of the Group on a going concern basis. This is supported by the Group's liquidity position at 30 June 2014.

The Group's financial risk management policies are described in its financial statements for the year ended 31 December 2013.

3 Segment Information

At 30 June 2014 the Group is organised into three main operating segments - (1) development and administration of third party motivation and incentive programmes ("Motivation") - (2) the provision of incentive travel, live events and venue finding ("Events") - (3) trade and consumer sales promotions, employee benefit products and communications ("Promotions"). Unallocated costs represent corporate and share-based payment expenses.

The segment results for the six months ended 30 June 2014 are as follows:

The segment results for the six months ended 30 June 2013 are as follows:

The segment results for the year ended 31 December 2013 are as follows:

IFRS 8 requires that an entity reports a measure of assets and liabilities for each reportable segment only if such an amount is regularly provided to the Chief Operating Decision Maker. As no such amounts are regularly provided to the Chief Operating Decision Maker, segment assets and liabilities are not disclosed.

The Group's business is divided into two main streams - Incentives and Loyalty ("Incentives") and Meetings and Event Management ("Meetings"). Incentives comprises the segment results of Motivation and Promotions but also includes the motivation business of AYMTM Limited included in Events. Meetings comprises the segment results of Events less the motivation business of AYMTM Limited. The Group recognises that this additional information enables its shareholders to better appreciate the nature of its business.

The segment results for the six months ended 30 June 2014 are as follows:

The segment results for the six months ended 30 June 2013 are as follows:

The segment results for the year ended 31 December 2013 are as follows:

4 Income tax expenses

5 Earnings per share and dividends

Basic

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period.

Basic earnings per share (in pence)

Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all contracted dilutive potential ordinary shares. The Company has only one category of dilutive potential ordinary shares, share options.

The calculation is performed for the share options to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding share options and taking account of the yet unexpensed share based payment charge relating to those options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options. Tranches two to four of the options granted to C T Lloyd have been excluded from this calculation as all the conditions attaching to the proposed options had not been met at 30 June 2014.

Diluted earnings per share (in pence)

Headline basic

Headline basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company plus the amortisation of intangible assets by the weighted average number of ordinary shares in issue during the period.

Headline basic earnings per share (in pence)

Dividends

During the first six months of 2014 Motivcom plc paid a final dividend in respect of 2013 of £979,636 to its equity shareholders (2013: £903,000). This represents a payment of 3.60 pence per share (2013: 3.00 pence).

6 Share-based payments

The Group has six contracted share option schemes, as disclosed in the Group's most recent financial statements. The Group has not entered into a new Sharesave scheme in the period. The following options have been valued in accordance with the provisions of IFRS 2.

The fair value of services received in return for share options granted to employees is measured by reference to the fair value of share options granted. The estimate of fair value of the services received is measured based on a binomial lattice model for the EMI, CSOP and Sharesave Schemes and a Monte Carlo model for the C T Lloyd Option Scheme. The vesting period is used as an input to those models.

The following additional assumptions were used for the EMI Option Schemes and the CT Lloyd Option Scheme:

- Expected volatility of 24% based on the average volatility of the Company since flotation in August 2004

- A dividend yield of 1.20%

- Risk free interest rate of 5.31%

The following additional assumptions were used for CSOP:

- Expected volatility of 62% based on the average volatility of the Company since flotation in August 2004

- A dividend yield of 4.79%

- Risk free interest rate of 2.49%

The following additional assumptions were used for Sharesave Scheme 7:

- Expected volatility of 62% based on the average volatility of the Company since flotation in August 2004

- A dividend yield of 2.32%

- Risk free interest rate of 1.06%

The following additional assumptions were used for Sharesave Scheme 8:

- Expected volatility of 38% based on the average volatility of the Company since flotation in August 2004

- A dividend yield of 4.37%

- Risk free interest rate of 0.34%

The following additional assumptions were used for Sharesave Scheme 9:

- Expected volatility of 35% based on the average volatility of the Company since flotation in August 2004

- A dividend yield of 4.00%

- Risk free interest rate of 0.71%

7 Intangible assets

An impairment of intangibles of £10,054,000 has been recognised in connection with the proposed disposal of Zibrant (see note 8) after measurement at market value less disposal costs.

8 Acquisitions and disposals

The Group did not make any acquisitions during the period, nor in the six months ended 30 June 2013.

On 11 May 2014 the Group completed the sale of its subsidiary Summersault Communications Limited to its management. No consideration was payable. On 12 September 2014 the Group announced that it had entered into an agreement for the sale of its subsidiary Zibrant Limited to its management for consideration of £2,924,000. The Group's directors consider that both of these businesses meet the criteria under IFRS 5 for being classified as discontinued operations, and the assets and liabilities of Zibrant Limited have been classified as a disposal group held for sale. The results from the discontinued operations of Summersault Communications Limited and Zibrant Limited included in the income statement are set out below:

The net loss on the disposal of Summersault Communications Limited is set out below:

The total result for the year after taxation on the discontinued operations of Summersault Communications Limited and Zibrant Limited is set out below:

The assets and liabilities classified under the disposal group for Zibrant Limited are set out below:

9 Share Capital

There were no changes to share capital in the period. On 15 April 2013 the Company purchased 3,010,181 of its own shares at a price per share of 110 pence for a total cost of £3,311,000 by means of a Tender Offer to all shareholders. Additionally, costs of £53,000 were incurred. The shares were immediately cancelled on 15 April 2013 and £15,051 transferred from share capital to capital redemption reserve.

10 Fair value hierarchy

IFRS 7 Improving Disclosures about Financial Instruments requires the Group to present certain information about financial instruments measured at fair value in the balance sheet. At 30 June 2013 and 30 June 2014 the only financial instruments measured at fair value through profit and loss were contingent consideration. The fair value is estimated using a valuation technique. Significant inputs into the model are based on management's assumptions of the cash outflow and appropriate discount rates. The fair value measurements in respect of deferred consideration are classified as level 3 in the fair value hierarchy as inputs for the asset or liability are not based on observable market data (unobservable inputs).

The losses (after deduction of tax) recognised in profit and loss account are disclosed in the table for headline basic earnings per share in Note 5.