Interim Results

RNS Number : 2353T

The Mission Marketing Group PLC

24 September 2010

 

The Mission Marketing Group plc  

24 September 2010

 

Interim results for the six months to 30 June 2010

The Mission Marketing Group plc ("TMMG", "themission®"), the national marketing communications and advertising group, today announces its interim results for the six months ended 30 June 2010.

Trading

·; Good new business wins in the period, including Danepak, Travelers Insurance, Café Direct, moneysupermarket.com, nPower, Vogels, Mankind, Fosters Wines, Sensodyne, Targus, Vmware, Lawson, Acxiom, RM, Redrow and Scania Trucks as well as Smoking and Alcohol and Greener Scotland campaigns for the Scottish Government

·; Net annualised new business of £1.4m operating income won in the year so far

·; Strong relationships maintained with incumbent clients although, in some cases, client budgets were reduced and margins squeezed due to economic pressures

 

Balance sheet

·; As announced in May 2010, acquisition liabilities eliminated in the period through equity conversion and a placing of new shares

·; New agreement reached with the Group's bankers, resulting in facilities committed to 2013 and first repayment not due until June 2011

·; Net bank debt reduced by £4.2m in the period to £15.9m

·; Total gearing (bank plus vendor debt) reduced from almost 50% at 31 December 2009 to 30%

 

Income Statement

·; Results in line with the Board's expectations

·; Operating income (Revenue): £17.4m (2009: £18.6m)

·; Headline operating profit: £1.9m (2009: £3.0m)

·; Loss before tax: £0.2m (2009: profit of £1.7m)

·; Headline Diluted EPS: 1.27 pence (2009: 4.79 pence) as a result of equity issue for acquisition liabilities and placing

 

Cash

·; Cash inflow from operating activities of £4.2m (2009: £2.8m)

·; Substantial improvement in cash conversion due to strong working capital management

 

David Morgan, Chairman, commented:

 

"The first six months of this year has seen a lot of change within themission®. We have restructured and refinanced the business in a way that has helped us to return to core values and to focus more on organic growth. Although operating profits in the first half were lower than last year's, they were in line with management's expectations and the Board can see improvements which indicate a more pronounced second half profit. The Group has had a steady start to the year and the Board looks forward to the second half with increased confidence."

 

 

Enquiries:

 

David Morgan, Chairman Peter Fitzwilliam, Finance Director
The Mission Marketing Group plc	020 7758 3525
Charles Palmer/Nicola Biles
Financial Dynamics	020 7831 3113
Jeremy Porter/Mark Percy (Corporate Finance) David Banks (Corporate Broking) Seymour Pierce Limited	020 7107 8000

 

 

www.themission.co.uk 

 

themission® is a national marketing communications and advertising group with 11 offices across the UK. The Group specialises in providing national and international clients with award winning marketing, advertising and business communications.

 

Group members include thinkApril-Six, Bray Leino, Big Communications, Fuse Digital, thinkBDW, Story UK and thinkRLA. themission® employs 600 staff nationally and is listed on AIM (TMMG).

Chairman's Statement

 

The first six months of this year has seen a lot of change within themission®. We have restructured and refinanced the business in a way that has helped us to return to core values and to focus more on organic growth by providing increased support to our agencies and helping them flourish by increasing their talent and skill base.

 

As part of our restructure, management of the agencies converted existing vendor debt to equity and have, as individuals, invested further in the Group. With a Board that now includes a representative from each agency, we are already seeing greater commitment to the Group and an increase in motivation that has led to greater sharing of ideas, business projects and expertise.

 

Whilst the market remains challenging, we are seeing increased interest and opportunities especially within the private sector. It is no secret that the public sector is undergoing change but I am confident that our actions and renewed support in this area will help alleviate any downside.

 

Our businesses are winning new clients, developing existing clients and bringing new and innovative ideas that will help us grow over the years to come. I have every confidence in the group of people who are running our business.

 

Results and dividend

 

Trading for the first half of 2010 was in line with management's expectations. Turnover for the six month period was marginally higher than last year at £43.4m (2009: £42.7m). Operating income however fell 6% to £17.4m (2009: £18.6m), the lower gross margin reflecting a higher proportion of media in the business mix and a general squeeze on margins, experienced by the industry as a whole. Reflecting the reduction in operating income, headline operating profit was lower, at £1.9m (2009: £3.0m).

 

Net interest payable increased to £1.1m (2009: £0.8m), primarily as a result of interest on outstanding vendor debt following the renegotiation of repayment profiles in May 2009.

 

After exceptional costs of £0.8m (2009: £0.4m) relating to the bank refinancing, and redundancy and restructuring costs, the loss before taxation was £0.2m (2009: profit of £1.7m) and the loss after tax was £0.1m (2009: profit of £1.2m). The headline diluted EPS was 1.27 pence (2009: 4.79 pence).

 

In line with our continuing focus on cash retention the Board does not propose the payment of an interim dividend.

 

Balance sheet

 

During the period we have restructured our balance sheet such that the Group now has a much more comfortable level of financial leverage. This has been accomplished by converting the majority of the outstanding vendor debt into equity, and a private placing of £1.3m cash which was used to redeem outstanding acquisition debt and associated interest.

 

As a result of the above, the balance sheet acquisition liabilities have reduced by £3.9m during the period to £0.1m. The increased focus on cash and working capital management has further strengthened our position, increasing the cash balance by £4.2m from £0.3m to £4.5m in the period. These together have reduced the total net debt position (bank plus vendor debt) by £8.1m to £15.9m, and improved the total net debt to equity ratio from 49% to 30%.

 

The refinancing agreement results in committed facilities until 2013 and also included a deferral of bank debt repayments until 2011 which will provide further breathing room during this period of economic recovery.

 

Current trading and outlook

 

Although operating profits in the first half of the year were lower than last year's, the Board can see improvements in the second half of the year. Some of the Group's specialist agencies, notably in the IT and property sectors, are showing strong market growth and good new business wins, whilst the integrated agencies have received commitments for the remainder of the year which indicate a more pronounced second half profit.

 

The Group has had a steady start to the year and the Board looks forward to the second half with increased confidence.

 

 

David Morgan

Chairman

Consolidated Statement of Comprehensive Income

for the 6 months ended 30 June 2010

 

		6 months to	6 months to	Year ended
		30 June 2010	30 June 2009	31 December 2009
		Unaudited	Unaudited	Audited
	Note	£'000	£'000	£'000
TURNOVER	2	43,423	42,682	85,976
Cost of sales		(26,003)	(24,129)	(49,837)
OPERATING INCOME	2	17,420	18,553	36,139
Operating expenses before exceptional items		(15,616)	(15,803)	(30,573)
OPERATING PROFIT BEFORE EXCEPTIONAL ITEMS	2	1,804	2,750	5,566
Goodwill impairment		-	-	(3,995)
Other exceptional items	4	(833)	(373)	(705)
OPERATING PROFIT		971	2,377	866
Investment income	5	-	-	11
Finance costs	5	(1,119)	(773)	(1,799)
IFRS interest charges	5	(5)	68	57
(LOSS) / PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION		(153)	1,672	(865)
Taxation	6	42	(449)	(1,097)
(LOSS) / PROFIT FOR THE PERIOD		(111)	1,223	(1,962)
Other comprehensive income		-	-	-
TOTAL COMPREHENSIVE (LOSS) / INCOME FOR THE PERIOD		(111)	1,223	(1,962)
Basic earnings per share (pence)	7	(0.27)	3.72	(5.54)
Diluted earnings per share (pence)	7	(0.27)	3.72	(5.54)
Headline basic earnings per share (pence)	7	1.34	4.79	7.96
Headline diluted earnings per share (pence)	7	1.27	4.79	7.84

 

Consolidated Balance Sheet

as at 30 June 2010

 

		As at	As at	As at
		30 June 2010	30 June 2009	31 December 2009
		Unaudited	Unaudited	Audited
	Note	£'000	£'000	£'000
FIXED ASSETS
Intangible assets	8	68,254	72,163	68,214
Property, plant and equipment		1,971	1,971	2,031
		70,225	74,134	70,245
CURRENT ASSETS
Work in progress		494	1,743	525
Trade and other receivables		15,548	13,936	16,958
Cash and short term deposits		4,499	6,094	281
		20,541	21,773	17,764
CURRENT LIABILITIES
Trade and other payables		(8,268)	(9,472)	(8,930)
Accruals		(8,037)	(6,403)	(4,384)
Corporation tax payable		(261)	(920)	(810)
Bank loans	10	(1,012)	(1,886)	(2,443)
Acquisition loan notes and shares	9	(3)	(662)	(314)
Acquisition contingent payments	9	(69)	(2,323)	(2,621)
		(17,650)	(21,666)	(19,502)
NET CURRENT ASSETS / (LIABILITIES)		2,891	107	(1,738)
TOTAL ASSETS LESS CURRENT LIABILITIES		73,116	74,241	68,507
NON CURRENT LIABILITIES
Bank loans	10	(19,339)	(18,719)	(17,914)
Obligations under finance leases		(122)	-	(153)
Acquisition loan notes and shares	9	-	(199)	-
Acquisition contingent payments	9	-	(2,800)	(1,000)
Deferred tax liabilities		(24)	(72)	(21)
NET ASSETS		53,631	52,451	49,419
CAPITAL AND RESERVES
Called up share capital		7,246	3,959	3,959
Share premium account		39,542	38,578	38,578
Own shares		(1,259)	(1,398)	(1,398)
Staff remuneration reserve		112	960	60
Retained earnings		7,990	10,352	8,220
TOTAL EQUITY		53,631	52,451	49,419

 

Consolidated Cash Flow Statement

for the 6 months ended 30 June 2010

 

		6 months to	6 months to	Year ended
		30 June 2010	30 June 2009	31 December 2009
		Unaudited	Unaudited	Audited
	Note	£'000	£'000	£'000
OPERATING CASH FLOW	11	5,837	4,763	3,315
Net finance costs		(1,125)	(937)	(1,757)
Tax paid		(504)	(986)	(1,778)
Net cash inflow / (outflow) from operating activities		4,208	2,840	(220)
INVESTING ACTIVITIES
Proceeds on disposal of property, plant and equipment		4	16	48
Purchase of property, plant and equipment		(309)	(262)	(720)
Acquisition of subsidiaries		(40)	(78)	(118)
Acquisition of intellectual property rights		-	-	(20)
Net cash outflow from investing activities		(345)	(324)	(810)
FINANCING ACTIVITIES
Repayments of amounts borrowed		(876)	(298)	(2,347)
Movement in HP creditor and finance leases		(26)	(10)	215
Receipts from long term loans		-	2,004	-
Repayment of long term loans		-	(1,614)	(53)
Proceeds on issue of ordinary share capital		1,279	1,000	1,000
Financing and share issue costs		(22)	(30)	(30)
Net cash inflow / (outflow) from financing activities		355	1,052	(1,215)
Increase/(Decrease) in cash and cash equivalents		4,218	3,568	(2,245)
Cash and cash equivalents at beginning of period		281	2,526	2,526
CASH AND CASH EQUIVALENTS AT END OF PERIOD		4,499	6,094	281

Consolidated Statement of Changes in Equity

for the 6 months ended 30 June 2010

 

 

	Share capital £'000	Share premium £'000	Own shares £'000	Retained earnings £'000	Staff remuneration reserve £'000	Total £'000
Changes in equity
At 1 January 2009	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
Credit for share option scheme	-	-	-	-	153	153
Waiver of share options	-	-	-	1,053	(1,053)	-
Loss for the period	-	-	-	(3,185)	-	(3,185)
At 31 December 2009	3,959	38,578	(1,398)	8,220	60	49,419
New shares issued	3,287	964	-	-	-	4,251
Credit for share option scheme	-	-	-	-	52	52
Shares awarded to employees from own shares	-	-	139	(119)	-	20
Loss for the period	-	-	-	(111)	-	(111)
At 30 June 2010	7,246	39,542	(1,259)	7,990	112	53,631

Notes to the unaudited Interim Report

for the 6 months ended 30 June 2010

 

 

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. These statements do not constitute a set of statutory financial statements within the meaning of the Companies Act 2006.

 

The financial statements have been prepared on the historical cost basis and in accordance with the accounting policies adopted in the last audited statutory financial statements for the year ended 31 December 2009.

 

Going concern

 

The Board has substantially strengthened the Group's balance sheet in the period. Bank debt has been rescheduled, with committed facilities available to 2013, acquisition liabilities have been virtually eliminated through equity conversion and a placing of new shares, and the focus on cash management across the agencies has resulted in stronger operating cash flows.

 

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;

·; Contingent deferred payments in respect of acquisitions;

·; 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 and are discussed, to the extent necessary, in more detail in their respective notes.

 

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 five segments which form the basis of the Group's primary segmentation, namely: Branding and Advertising, Digital and On-line, Events and Learning, Media and Public Relations.

 

	6 months to	6 months to	Year ended
	30 June 2010	30 June 2009	31 December 2009
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
		Turnover
Business segment
Branding and Advertising	16,837	16,155	32,925
Digital and On-line	3,926	4,652	9,758
Events and Learning	4,854	5,636	10,747
Media	16,388	14,946	29,407
Public Relations	1,418	1,293	3,139
	43,423	42,682	85,976

 

		Operating income
Business segment
Branding and Advertising	10,398	10,614	20,740
Digital and On-line	2,621	3,312	6,241
Events and Learning	1,900	2,169	3,995
Media	1,468	1,470	2,994
Public Relations	1,033	988	2,169
	17,420	18,553	36,139

 

		Operating profit before exceptional items
Business segment
Branding and Advertising	1,785	1,864	3,639
Digital and On-line	440	827	1,383
Events and Learning	20	161	262
Media	375	544	1,286
Public Relations	6	66	284
	2,626	3,462	6,854
Central costs	(822)	(712)	(1,288)
	1,804	2,750	5,566

 

 

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

 

	6 months to 30 June 2010	6 months to 30 June 2009	Year to 31 December 2009
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Headline profit before finance costs, income from investments and taxation	1,878	2,962	6,030
Net finance costs	(1,119)	(773)	(1,788)
Headline profit before taxation	759	2,189	4,242
Adjustments
Redundancy and restructuring costs	(74)	(212)	(464)
Goodwill impairment	-	-	(3,995)
Other exceptional items	(833)	(373)	(705)
IFRS interest charges	(5)	68	57
Reported (loss) / profit before taxation	(153)	1,672	(865)
Headline profit before tax	759	2,189	4,242
Headline taxation	(213)	(613)	(1,424)
Headline profit after taxation	546	1,576	2,818
Adjustments
Redundancy and restructuring costs	(74)	(212)	(464)
Goodwill impairment	-	-	(3,995)
Other exceptional items	(833)	(373)	(705)
IFRS interest charges	(5)	68	57
Taxation impact	255	164	327
Reported profit after taxation	(111)	1,223	(1,962)

 

 

4. Other exceptional items

 

Other exceptional items consist of 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.

 

5. Investment income and Finance costs

 

	6 months to	6 months to	Year ended
	30 June 2010	30 June 2009	31 December 2009
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Investment income:
Interest receivable	-	-	11
Finance costs:
On bank loans and overdrafts	(730)	(614)	(1,307)
On loan notes	(299)	(73)	(210)
Amortisation of bank debt renegotiation fee	(90)	(86)	(282)
	(1,119)	(773)	(1,799)
IFRS interest charges:
Finance cost of deferred consideration	(5)	68	57
Total net finance cost	(1,124)	(705)	(1,731)

 

 

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 credit agreement.

 

6. Taxation

 

The taxation charge for the period ended 30 June 2010 has been based on an estimated effective tax rate on profit on ordinary activities prior to IFRS interest charges of 28%

(30 June 2009: 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".

 

 

	6 months to	6 months to	Year  ended
	30 June 2010	30 June 2009	31 December 2009
	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	(111)	1,223	(1,962)
Earnings for the purposes of headline earnings per share (see note 3)	546	1,576	2,818
Number of shares
Weighted average number of ordinary shares for the purpose of basic earnings per share and reported diluted earnings per share	40,866,663	32,882,015	35,409,542
Dilutive effect of securities:
Share options	2,226,790	-	547,946
Weighted average number of ordinary shares for the purpose of headline diluted earnings per share	43,093,453	32,882,015	35,957,488
Reported basis:
Basic earnings per share (pence)	(0.27)	3.72	(5.54)
Diluted earnings per share (pence)	(0.27)	3.72	(5.54)
Headline basis:
Basic earnings per share (pence)	1.34	4.79	7.96
Diluted earnings per share (pence)	1.27	4.79	7.84

 

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.

 

8. Goodwill

 

	£'000
At 1 January 2009	74,495
Recognised on acquisition of subsidiaries	(26)
Adjustment to consideration and net assets	(2,362)
At 30 June 2009	72,107
Recognised on acquisition of subsidiaries	26
Adjustment to consideration and net assets	2
Goodwill impairment	(3,995)
At 31 December 2009	68,140
Adjustment to consideration and net assets	42
At 30 June 2010	68,182

 

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 2010	30 June 2009	31 December 2009
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Big Communications Ltd/Fuse Digital Ltd	8,125	8,125	8,125
Bray Leino Ltd	28,413	28,383	28,413
April-Six Ltd	9,411	9,411	9,411
thinkBDW Ltd	6,283	6,283	6,283
The Driver Is Ltd	349	366	349
Story UK Ltd	6,969	6,969	6,969
PCM Ltd	707	700	705
RLA Group Ltd	6,575	10,570	6,575
Rhythmm Communications Group Ltd	520	470	480
BroadSkill Ltd	830	830	830
	68,182	72,107	68,140

 

Other Intangible Assets

 

	30 June 2010	30 June 2009	31 December 2009
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Intellectual property rights	72	56	74

 

Other intangible assets consist of intellectual property rights which are amortised over 20 years. The amortisation charge for the period ended 30 June 2010 was £2,000 (2009: £1,500).

 

9. 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
2009
Less than one year	662	2,158	165	2,985
Between one and two years	199	2,800	-	2,999
At 30 June 2009	861	4,958	165	5,984
2010
Less than one year	3	69	-	72
More than one year	-	-	-	-
At 30 June 2010	3	69	-	72

 

 

10. Bank Loans

 

	30 June 2010	30 June 2009
	£'000	£'000
Bank loan outstanding	20,326	20,769
Accumulated interest	223	-
Adjustment to amortised cost	(198)	(164)
Carrying value of loan outstanding	20,351	20,605
The borrowings are repayable as follows:
Less than one year	1,012	1,886
In one to two years	4,000	2,500
In more than two years but less than three years	12,314	16,383
In more than three years but less than four years	3,000	-
	20,326	20,769
Accumulated interest	223	-
Adjustment to amortised cost	(198)	(164)
	20,351	20,605
Less: Amount due for settlement within 12 months (shown under current liabilities)	(1,012)	(1,886)
Amount due for settlement after 12 months	19,339	18,719

 

The revolving credit facility is subject to repayment on a quarterly basis, starting 30 June 2011, with maturity as shown above.

 

11. 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 2010	30 June 2009	31 December 2009
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Operating profit	971	2,377	866
Depreciation charges	371	365	730
Gain on disposal of property, plant and equipment	(4)	(13)	(10)
Non cash charge for share options and shares awarded	72	160	313
Non cash goodwill impairment		-	3,995
Decrease in receivables	1,410	3,914	891
Decrease / (Increase) in work in progress	31	(1,158)	60
Increase / (Decrease) in payables	2,986	(882)	(3,530)
Operating cash flow	5,837	4,763	3,315

 

12. Post balance sheet events

 

There were no material post balance sheet events.

 

 

13. Availability of the Interim Report

 

Copies of the Interim Report will be available from the Company's registered office at 14-18 Noel Street, London, W1F 8GN and on the Group's website, www.themission.co.uk

This information is provided by RNS

The company news service from the London Stock Exchange