12th Sep 2007 07:02
Chime Communications PLC12 September 2007 CHIME COMMUNICATIONS PLC INTERIM RESULTS FOR THE SIX MONTHS ENDED 30TH JUNE 2007 Chime Communications PLC, the leading marketing services group, today announcesits interim results for the six months ended 30th June 2007 and the acquisitionof The Corporate Citizenship Company, a leading corporate responsibilityconsultancy. • Operating income up 15.9% to £43.9 million (£37.8 million) - Organic growth of 9.8% • Operating profit up 21.8% to £7.3 million (£6.0 million) - Organic growth of 13.6% • Margin improvement to 16.7% (15.9%) • Profit before tax up 20.8% to £6.4 million (£5.3 million) • Earnings per share up 17.2% to 1.70p (1.45p) • Net debt of £5.2 million compared to net cash at 31st December 2006 of £2.9 million • Acquisition and integration of Fast Track completed • Interim dividend increased by 22.2% to 0.22p per share (0.18p) (Bracketed figures are for 2006 first half year). Lord Bell, Chairman of Chime Communications, said: "A very good performance for the half year with all our divisions growing. Wehave continued to outperform the market since 2004. A strong new businessperformance across the Group for the half year and a full new business pipelinemakes us confident about the outcome for the year". For further information please contact: Lord Bell, Chairman 020 7861 8515Chime Communications Christopher Satterthwaite, Chief Executive 020 7861 8515Chime Communications Charles Cook/Chris Hamilton 020 7861 3232Bell Pottinger Corporate & Financial SUMMARY OF RESULTS Six months to 30th June Actual Organic (1) 2007 2006 % 2007 2006 % change £m £m change £m £mOperating income 43.9 37.8 +16% 41.6 37.8 +10%Operating profit 7.3 6.0 +22% 7.1 6.3 +14%Operating profit margin 16.7% 15.9% (1) Excluding acquisitions in 2006 and 2007 The strong performance in 2006 has continued in the first half of 2007 withexcellent performance across all three of our divisions. We have outperformedthe market since 2004. Operating income in the first half of 2007 increased by 15.9% to £43.9 millionand operating profit increased by 21.8% to £7.3 million, resulting in anoperating profit margin increase to 16.7%. Operating income (excluding acquisitions) rose by 9.8% and operating profit grewby 13.6%. The Board is proposing an interim dividend of 0.22p per share compared to 0.18pin 2006, an increase of 22.2%. Net debt at 30th June 2007 was £5.2 million compared to net cash of £2.9 millionat 31st December 2006 due to the payment of the cash element (£10 million) ofthe initial consideration for the acquisition of Fast Track. REVIEW OF OPERATIONS In the first half of 2007 all three divisions showed growth well ahead of themarketplace in both operating income and operating profit. Public Relations remains our largest division being 55% of operating income(2006 - 59%), Advertising and Marketing Services was 36% (2006 - 34%) andResearch 9% (2006 - 7%). Public Relations - Bell Pottinger Group Six months to 30th June 2007 2006 % change £m £mOperating income 24.2 22.3 +8.3Operating profit 4.4 3.9 +13.3Operating margin 18.2% 17.4% The public relations market continues to grow ahead of other marcoms sectorsfuelled by the need for companies to protect and build their reputation bothonline (including social networking) and offline where the value of goodrelationships with stakeholders is at an increasing premium. Our PublicRelations Division has continued to show strong growth ahead of this marketplacegrowth. Operating income for the first half of 2007 increased by 8% to £24.2 million andoperating profit increased by 13% to £4.4 million, resulting in an operatingprofit margin of 18.2%. The Bell Pottinger Group has once again retained its no. 1 position at the topof the PR Week league table published in April 2007. New business wins in the first half of 2007 have included : ABN Amro Hoare Govett Pilsner Urquell GlobalAdobe Principle CapitalAOL UK Renewable Energy GroupCisco Science MuseumDuchy of Lancaster The John Templeton FoundationDunlop Aerospace TrafiguraHamleys TwinjetInfinis World Nuclear AssociationMTV 6upOpen Learning Exchange Advertising and Marketing Services - VCCP Group, Fast Track, Teamspirit and TTA Six months to 30th June 2007 2006 % change £m £m Operating income 16.0 13.0 +23.2Operating profit 2.4 1.8 +32.8Operating profit margin 15.1% 14.0% These are the first results to include the acquisition of Fast Track (2 months)which has integrated well with the rest of the Group. There are already severalopportunities for the cross marketing of business. Operating income for the first half of 2007 increased by 23% to £16.0 millionand operating profit increased by 33% to £2.4 million, resulting in an operatingprofit margin of 15.1%. Excluding Fast Track operating income grew by 10.9% andoperating profit by 11.2%. New business wins in the first half of 2007 have included : AEG The 02 Glasgow 2014 Commonwealth GamesBritish Basketball Hyundai (below the line)BUSA Legal and GeneralCarbon Trust Levi StraussComparethemarket.com Mark WarnerDiageo's Reserve Brands Met LifeDiet Coke Plus PruHealthGE Money Tanqueray (Diageo) Research - The Research Group Six months to 30th June 2007 2006 % change £m £mOperating income 3.7 2.5 +45.7Operating profit 0.8 0.6 +37.2Operating profit margin 20.6% 21.9% These results include Facts International which was acquired in February 2007and which has enjoyed its best six months' performance ever. Operating income for the first half of 2007 increased by 46% to £3.7 million andoperating profit increased by 37% to £0.8 million. Operating profit marginreduced slightly to 21% owing to continued investment in the business includinga new managing director for Opinion Leader. Excluding Facts International, operating income grew by 18% and operating profitgrew by 24%. The Research Group has continued to show very strong organic growth particularlyin the area of deliberative research where it has a market leading position. New business wins in the first half of 2007 have included : 2012 Olympics (ODA and LOCOG) HobsonsAegon John Lewis PartnershipAnglian Water National TrustAssociation of British Insurers PepsicoBusiness in the Community Pernod RicardBarrett Developments PrudentialBSkyB Scottish WidowsG.E. Money St James's PlaceHiscox BUSINESS ACTIVITY The Group acted for 982 clients in the first half of 2007 compared to 905 in thesame period in 2006. 56% of operating income came from clients using more thanone of our companies (2006: 49%). This was through 146 shared clients the sameas in 2006. 162 clients paid us over £50,000 in the first half of 2007 compared to 134 inthe same period in 2006. Our 30 largest clients represented 45% of totaloperating income (2006 - 43%). During the first six months of 2007 two of our clients have represented 16.3% ofour operating income, 8.2% and 8.1% respectively. Both contracts are high marginlong term and have normal renewal periods. One was renewed in the last sixmonths and both clients have retained us since 2003. Confidentiality clausesprevent us giving more detailed information. No other client represents morethan 5% of our operating income Average fee income per client was £45,000 compared to £42,000 in the first halfof 2006. Average income per employee in the first half year was £52,000 (2006 -£52,000). 11.8% of our operating income came from digital activity in the first half of2007 (2006: 9%) and 33% came from international work (international clients andwork done overseas) (2006: 32%). High profile activities where we advised clients included : • Advising McLaren F1 on its dispute with Ferrari. • Advising Thaksin Shinawatra on the acquisition of Manchester City and the Thai military junta's attack on his reputation. • Imperial Tobacco's contested £11 billion offer for Altadis of Spain. • BAE Systems' £2 billion acquisition of Armor Group in the US. • Dobbies Garden Centres in their takeover approach from Tesco. • Bloomsbury Publishing's latest successful Harry Potter book. • BSkyB's The Bigger Picture, their responsible business campaign and initiative. • Representing Mark Warner Holidays during the Madeleine McCann crisis. • Working with Boris Becker as the face of Polo Ralph Lauren for its sponsorship at the Wimbledon tennis tournament. • The Prince of Wales' May Day Business Summit on Climate Change with Business in the Community, bringing together over 1,000 chief executives and senior directors across England. • The combination of Highmark Blue Cross Blue Shield with Independence Blue Cross to form the largest health insurance company in the US. • The highly successful launch of The 02, London's newest and most spectacular entertainment venue. • The launch of The Carbon Trust's first brand advertising campaign. • The launch of Four Seasons Ocean Residences, a £500 million, 719 foot luxury vessel with 112 private residences. BANKING ARRANGEMENTS The Group generated £3.6 million of cash from trading activities in the firsthalf of 2007 (2006 - £4.3 million). Net debt at 30th June 2007 was £5.2 millioncompared to net cash at 31st December 2006 of £2.9 million. The outflow of fundswas caused principally by the acquisitions of Fast Track and Facts Internationalwhich had combined cash acquisition costs of £12 million. The Group continues to operate comfortably within its banking covenants and debtfacility of £25 million. This is a three year facility maturing in February2010. TAXATION The effective tax charge for the first half of 2007 was 29.5%. Due to theChancellor's announcement in the 2007 budget of a future reduction in thecorporation tax rate from 30% to 28%, the deferred tax asset in our balancesheet has had to be reflected at the new reduced rate. The reduction in value ofthe asset has given rise to an additional one-off tax charge in the incomestatement which is likely to increase the effective tax rate from the previouslyannounced 28.5% to 29.5% for 2007. DIVIDENDS The Board is proposing to pay an interim dividend of 0.22p per share (2006 -0.18p), an increase of 22%. This will be payable on 8th November 2007 toshareholders on the register at 12th October 2007. The ex-dividend date is 10thOctober 2007. CORPORATE AND SOCIAL RESPONSIBILITY The Group has continued to make progress on its environmental practices. Webecame carbon neutral on 1st January 2007 and have committed to reduce ourcarbon emissions by 30% by the end of 2007. We have just published our second corporate responsibility report the majorfocus of which was our response to growing concerns about climate change. Thiswill be distributed to shareholders with our interim announcement. CORPORATE DEVELOPMENT We made two acquisitions in the first half of 2007, Facts International and FastTrack and we are today announcing the acquisition of The Corporate CitizenshipCompany. Facts International - 75% of this fieldwork research business was acquired inFebruary 2007. The remaining 25% is held by the new Chairman of FactsInternational. Fast Track - The acquisition of the UK's leading sports marketing agency wascompleted at the end of April 2007. The initial consideration was £15 millionpayable £10 million in cash and £5 million in Chime shares. Deferredconsideration is payable on the average profits for the three years ended 31stDecember 2009 and the three years ended 31st December 2012. The maximum totalconsideration (initial and deferred) is £43 million. The transaction (initialand deferred) is based on a multiple of 7 times the average pretax profits. Thefour main shareholders of Fast Track have warranted pretax profits for the yearto 31st December 2007 of £2.5 million. The Corporate Citizenship Company - We have today announced the acquisition ofthe Corporate Citizenship Company from David Logan and Mike Tuffrey, thefounders of the business, who will continue to run the business. Chime's currentCorporate Responsibility business, Smart, will initially work alongside TheCorporate Citizenship Company, with Amanda Jordan (Smart), David Logan and MikeTuffrey leading the combined businesses in the future. Our aim is to bring thetwo businesses together from January 2008 to become the first port of call forclients who want a full range of services across the corporate responsibilitypractice both in the UK and globally. Net assets of The Corporate CitizenshipCompany at 31st March 2007 were £735,000. Clients of the Corporate Citizenship Company include Unilever, Ford, DeutscheBank, Cadbury Schweppes, Diageo and B.P. BOARD AND COMMITTEE COMPOSITION Rodger Hughes (formerly Managing Partner of PricewaterhouseCoopers UK) wasappointed to the Board as a Non-Executive Director on 1st July 2007. He willassume the role of Senior Independent Director on 1st October 2007 when thecurrent Senior Independent Director Julian Seymour steps down. Julian willcontinue as a Non-Executive Director until the end of the year. Following this appointment the composition of the Board committees has beenchanged. Julian Seymour, Rodger Hughes and Catherine Biner Bradley sit on allthree committees and Paul Richardson sits on the Audit Committee. OUTLOOK The first half of 2007 saw us make further encouraging progress, continuing toachieve the targets we set in our three year plan. We have had a strong new business performance across the Group and we have afull new business pipeline. In addition we expect the Group to grow strongly inthe following areas: • Digital in which we have continued to make good progress in the first half of 2007. • International - our Middle East, US and German operations have progressed well in the first half of 2007 and we see very good prospects for further growth. • High growth sectors in which we see the opportunity for further expansion. • High growth disciplines which will grow ahead of general market growth, eg. sports marketing and research. We are confident about the outcome for the year and remain very optimistic aboutour future prospects. Consolidated Income StatementSix months ended 30 June 2007 6 months to 6 months to 12 months to 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Note CONTINUING OPERATIONSTurnover 94,810 82,510 164,143Cost of sales (50,949) (44,662) (86,222) ----------- ----------- ----------- OPERATING INCOME 43,861 37,848 77,921 Operating expenses (36,551) (31,845) (65,686) ----------- ----------- ----------- OPERATING PROFIT 7,310 6,003 12,235 Share of results of associates (104) (241) (280)Investment income 60 62 93Finance costs (324) (256) (402)Finance cost of deferredconsideration (522) (253) (612) ----------- ----------- ----------- PROFIT BEFORE TAX 6,420 5,315 11,034 Tax (1,894) (1,660) (3,147) ----------- ----------- ----------- PROFIT FOR THE PERIOD FROMCONTINUING OPERATIONS 4,526 3,655 7,887 DISCONTINUED OPERATIONS(Loss)/profit for the periodfrom discontinued operations (27) 42 20 ----------- ----------- ----------- PROFIT FOR THE PERIOD 4,499 3,697 7,907 =========== =========== =========== Attributable to:Equity holders of the parent 4,328 3,584 7,647Minority interest 171 113 260 ----------- ----------- ----------- 4,499 3,697 7,907 =========== =========== =========== EARNINGS PER SHARE 2From continuing operationsBasic 1.72p 1.43p 3.08pDiluted 1.64p 1.42p 3.02pFrom continuing anddiscontinuedoperationsBasic 1.70p 1.45p 3.08pDiluted 1.63p 1.44p 3.03p Consolidated Statement of Recognised Income and ExpenseSix months ended 30 June 2007 6 months to 6 months to 12 months to 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Gain on revaluation of available forsaleinvestments 35 - -Exchange differences on translationof foreignsubsidiaries (16) (36) (106) ---------- ---------- ----------Net expense recognised directly inequity 19 (36) (106)Profit for the period 4,499 3,697 7,907 Total recognised income and expensefor ---------- ---------- ----------the period 4,518 3,661 7,801 ---------- ---------- ---------- Attributable to:Equity holders of the parent 4,347 3,548 7,541Minority interest 171 113 260 Total recognised income and expense ---------- ---------- ----------relating to the period 4,518 3,661 7,801 ---------- ---------- ---------- Consolidated Balance Sheet as at 30 June 2007 As at As at As at 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Non-current assetsGoodwill 103,061 72,956 74,730Other intangible assets 55 75 10Property, plant and equipment 3,917 2,681 2,972Investments in associates 638 680 582Due from deferred consideration 950 950 950Available for sale investments 285 - -Deferred tax asset 1,650 1,340 1,747 ---------- ---------- ---------- 110,556 78,682 80,991 ---------- ---------- ---------- Current assetsWork in progress 2,245 1,141 686Trade and other receivables 42,134 31,826 30,813Cash and cash equivalents 5,717 2,642 6,652 ---------- ---------- ---------- 50,096 35,609 38,151 ---------- ---------- ----------Total assets 160,652 114,291 119,142 ---------- ---------- ---------- Current liabilitiesTrade and other payables (53,904) (41,455) (37,996)Current tax liabilities (2,958) (2,772) (2,475)Obligations under finance leases (69) (127) (109)Short-term provisions (13,755) (2,106) (2,133) ---------- ---------- ---------- (70,686) (46,460) (42,713) ---------- ---------- ---------- ---------- ---------- ----------Net current liabilities (20,590) (10,851) (4,562) ---------- ---------- ---------- Non-current liabilitiesBank loans (9,839) (911) (2,928)Long-term provisions (10,553) (11,406) (13,167)Obligations under finance leases (20) (83) (49) ---------- ---------- ---------- (20,412) (12,400) (16,144) ---------- ---------- ----------Total liabilities (91,098) (58,860) (58,857) ---------- ---------- ---------- ---------- ---------- ----------Net assets 69,554 55,431 60,285 ---------- ---------- ---------- EquityShare capital 13,286 12,654 12,684Share premium account 31,929 26,475 26,594Own shares (3,984) (7,397) (5,968)Equity reserve 34,203 32,957 33,764Revaluation of fair value ofavailable for saleinvestment 35 - -Translation reserve (261) (103) (245)Accumulated losses (6,133) (9,460) (6,971) ---------- ---------- ----------Equity attributable to equity holdersof theparent 69,075 55,126 59,858Equity minority interest 479 305 427 ---------- ---------- ----------Total equity 69,554 55,431 60,285 ---------- ---------- ---------- Consolidated Cash Flow StatementSix months ended 30 June 2007 6 months to 6 months to 12 months to 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Note Net cash inflow fromoperatingactivities 4 3,622 4,279 7,694 Investing activitiesInterest received 60 62 93Proceeds on disposal ofproperty, plantand equipment 7 29 69Purchases of property, plantand equipment (566) (846) (1,703) Acquisition of investment inanassociate - (51) -Disposal of investment inassociate - - 2,862Loans granted to associates (160) (1) 13Acquisition of subsidiaries (9,133) (334) (359)Net proceeds from disposal ofsubsidiaries - 2,888 (74) ----------- ----------- -----------Net cash (outflow)/inflowfrom returns on investment and servicing offinance (9,792) 1,747 901 ----------- ----------- ----------- Financing activitiesDividend paid (1,043) (793) (1,243)Dividends paid to minorities (113) (92) (92)Drawdowns of/(repayments) ofborrowing 6,912 (7,574) (5,557)Repayment of loan notes (282) (530) (878)Repayments of obligationsunderfinance leases (68) (81) (156)Proceeds on issue of ordinaryshare capital 292 - -Buy back of warrants - (800) (800)Sale/(purchase) of own shares (463) (511) (214)Net cash from/(used in)financing ----------- ----------- -----------activities 5,235 (10,381) (8,940) ----------- ----------- ----------- Net decrease in cash and cashequivalents (935) (4,355) (345) Cash and cash equivalents atbeginning of period 6,652 6,997 6,997 Cash and cash equivalents atend ----------- ----------- -----------of period 5,717 2,642 6,652 =========== =========== =========== Cash and cash equivalents comprise cash at bank, loan note deposits lessoverdrafts and taking into accountthe following borrowings net (debt)/cash was: Bank loans (9,839) (911) (2,928)Finance leases (89) (210) (158)Loan notes outstanding (1,009) (724) (642) ----------- ----------- -----------Overall net (debt)/cash (5,220) 797 2,924 Notes: 1. Business Segments For management purposes, the group is organised into three operating divisions -Public Relations, Advertising and Marketing Services and Research. Thesedivisions are the basis on which the group reports its primary segmentinformation. Principal activities are as follows: Public Relations The Public Relations division comprises some of the leading names in theindustry, including Bell Pottinger, Good Relations, Harvard, Insight, Resonate,De Facto and The SMART Company. It is the ranked number 1 PR Group in the UK inthe PR Week public relations consultancy league table for 2006. It serves morethan 600 major UK and international brands, as well as governments, governmentdepartments, pharmaceutical and healthcare companies, charities, not-for-profitorganisations, professional service firms, consumer brands and famous people Advertising and Marketing Services ('AMS') The AMS division is the fastest growing marketing services group in the UK. Itpossesses specialist skills in advertising and marketing services - directmarketing, digital communication, sponsorship exploitation, point of sale, salespromotion and specialist media planning and buying. It also specialises in theniche markets of property and financial services. Research The Research division is made up of Opinion Leader Research, Ledbury Researchand Facts International. Opinion Leader Research is one of the UK's leadingresearch consultancies and Ledbury Research provides research and advice tobrands who market and sell to high net worth consumers. The group's operations are located in the United Kingdom, Germany, the MiddleEast and USA. The group's Advertising and Marketing Services and Researchdivisions are located solely in the United Kingdom. Public relations is carriedout in the United Kingdom, Germany, The Middle East and USA Operating Income Operating Profit 6 months to 6 months to 12 months to 6 months to 6 months to 12 months to 30 June 30 June 31 December 30 June 30 June 31 December 2007 2006 2006 2007 2006 2006 (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited) £'000 £'000 £'000 £'000 £'000 £'000Class ofbusiness PublicRelations:Continuingoperations 24,208 22,363 46,952 4,408 3,890 8,233 AdvertisingandMarketingServices:Continuingoperations 14,364 12,956 26,264 2,022 1,819 3,519Acquisitions 1,604 - - 394 - - --------- --------- --------- --------- --------- --------- 15,968 12,956 26,264 2,416 1,819 3,519 Research:Continuingoperations 2,984 2,529 4,705 687 554 1,021Acquisitions 701 - - 73 - - --------- --------- --------- --------- --------- --------- 3,685 2,529 4,705 760 554 1,021 --------- --------- --------- --------- --------- --------- 43,861 37,848 77,921 7,584 6,263 12,773 ChimeCentral Costs - - - (274) (260) (538) --------- --------- --------- --------- --------- --------- 43,861 37,848 77,921 7,310 6,003 12,235 --------- --------- --------- --------- --------- --------- Operating Margin 6 months to 6 months to 12 months to 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) % % %Class of business Public Relations:Continuing operations 18.2% 17.4% 17.5% Advertising and Marketing Services:Continuing operations 14.1% 14.0% 13.4%Acquisitions 24.6% --------- --------- --------- 15.1% 14.0% 13.4%Research:Continuing operations 23.0% 21.9% 21.7%Acquisitions 10.4% --------- --------- --------- 20.6% 21.9% 21.7% --------- --------- --------- 17.3% 16.5% 16.4%Chime Central CostsOther operating income --------- --------- --------- 16.7% 15.9% 15.7% --------- --------- --------- 2. Earnings per share From continuing and discontinued operations The calculation of the basic and diluted earnings per share is based on thefollowing data: 12 months Six months 31 December ended 30 June 2007 2006 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000Earnings Earnings for the purpose of basicearnings per share being net profitattributable to the equity holdersof the parent 4,328 3,584 7,647 --------- --------- --------- Number of shares Weighted average number of ordinaryshares for the purposes of basicearnings per share 253,943,574 247,504,382 247,920,453 Effect of dilutive potentialordinary shares:Share options and deferred shares 10,923,902 1,227,355 4,390,908 --------- --------- ---------Weighted average number of ordinaryshares for the purposes of dilutedearnings per share 264,867,476 248,731,737 252,311,361 --------- --------- --------- From continuing operations 12 months Six months ended 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000Earnings Net profit attributable to equityholders of the parent 4,328 3,584 7,647 Adjustments to exclude loss/(profit)for the period from discontinuedoperations 27 (42) (20) --------- --------- ---------Earnings from continuing operationsfor the purposes of basic earningspershare excluding discontinued operations 4,355 3,542 7,627 --------- --------- --------- The denominators used are the same as those detailed above for both the basicand diluted earnings per share from continuing and discontinued operations. From discontinued operations 12 months Six months ended 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) Basic (0.01)p 0.02p - Diluted (0.01)p 0.02p 0.01p The denominators used are the same as those detailed above for both the basicand diluted earnings per share from continuing and discontinued operations. 3. Dividends 12 months Six months 31 December ended 30 June 2007 2006 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Amounts recognised as distributionsto equity holders in the period(approved): Interim dividend for the year ended31 December 2006 of 0.18p (2005: 0.16p) per share - - 450Final dividend for the year ended 31December 2006 of 0.40p (2005:0.32p)per share 1,043 793 793 --------- --------- --------- 1,043 793 1,243Amounts not recognised asdistributions to equity holders inthePeriod (declared): Proposed interim dividend for theyear ended 31 December 2007 of 0.22p (2006: 0.18p) per share 580 446 -Proposed final dividend for the yearended 31 December 2006 of 0.40p pershare - - 1,001 --------- --------- --------- 446 1,001 --------- --------- --------- The proposed interim dividend was approved by the Board on 10 September 2007 andhas not been included as a liability as at 30 June 2007. The dividend will bepaid on 8 November 2007 to those shareholders on the register at 12 October2007. The expected ex-dividend date is 10 October 2007. Under an agreement dated 3 April 1996, The Chime Communications Employee Trustwhich holds 2,143,455 ordinary shares representing 0.80% of the company'scalled-up share capital, has agreed to waive all dividends. 4. Notes to the consolidated cash flow statement 6 months to 6 months to 12 months to 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Profit from operations 7,310 6,003 12,235Adjustments for:(Loss)/profit from discontinuedoperation (39) 60 29Share based payment expense 518 140 371Translation differences (11) (14) (76)Depreciation of property, plantand equipment 617 488 1,026Amortisation of other intangibleassets 9 65 130(Loss)/gain on disposal of property,plant andequipment 14 (6) (1)Decrease in provisions (43) (280) (328) ---------- ---------- ---------- Operating cash flows beforemovements inworking capital 8,375 6,456 13,386 Increase in work in progress (1,522) (575) (121)Increase in receivables (7,635) (7,609) (6,499)Increase in payables 6,074 6,939 3,692 ---------- ---------- ---------- Cash generated by operations 5,292 5,211 10,458 Income taxes paid (1,368) (700) (2,306)Interest paid (302) (232) (458) ---------- ---------- ---------- Net cash from operating activities 3,622 4,279 7,694 ========== ========== ========== 5. Accounting Policies The consolidated income statement, balance sheet, statement of recognised incomeand expense and cash flow statement have been prepared on a basis consistentwith the financial statements for the year ended 31 December 2006. The results for the 6 months ended 30 June 2007 are unaudited and do notconstitute statutory accounts within the meaning of section 240 of the Companiesact 1985. The results for the year ended 31 December 2006 have been extractedfrom the published Financial Statements which have been delivered to theRegistrar of Companies. The auditors' report on those accounts was unqualifiedand did not contain any statement under section 237 of the Companies Act 1985. The prior period comparatives have been restated to reflect the discontinuedoperations of Rare Corporate Design. The effect of this change is as follows:Reduction in operating income 6 months to 30 June 2006 £469,000, 12 months to 31December 2006 £895,000; Reduction in operating profit 6 months to 30 June 2006£60,000, 12 months to 31 December 2006 £29,000. 6. Acquisition of Fast Track On 30th April 2007, the Group acquired 100% of the issued share capital of FastTrack Sales Limited. The fair value of the consideration given for theacquisition was £40 million, a further £3 million payable on a separate futureacquisition of the minority shareholding in Fast Track Sailing Limited takes thetotal consideration payable to £43 million. An initial payment of £15 millionwas satisfied by £10 million in cash from within the Groups banking facility and£5 million provided by the issue to the shareholders of Fast Track SailingLimited of 10,000,000 new ordinary shares of 5p each at a premium of 45p. Costsrelating to the acquisition amounted to £985,000, of which £704,000 had beenpaid during the period. The new ordinary shares are subject to a restriction onsale following completion. Contingent consideration of £25 million is dependent on the profitability ofFast Track Sales Limited for the six years to 31 December 2012. The Group hasprovided for contingent consideration of £12,755,000 to date, this has beendiscounted to a net present value of £9,677,000, with the resulting discountingcharge of £3,078,000 to be taken through the income statement over the period. The following table sets out the Groups preliminary assessment of the fairvalues of the liabilities acquired and the goodwill. The fair value of the netliabilities acquired was £(2,039,000), resulting in goodwill of £27,701,000which has been capitalised as an intangible fixed asset. Book Fair value Fair value adjustments value £'000 £'000 £'000 Net assets acquired:Tangible assets 1,048 - 1,048Asset available for sale 250 250Trade and other receivables 2,807 - 2,807Cash and cash equivalents 2,528 - 2,528Trade and other payables (8,705) - (8,705) -------- --------- -------- (2,072) - (2,072) -------- --------- -------- Minority interest 33 -------- (2,039) Goodwill 27,701 -------- Total consideration 25,662 ======== Satisfied by:Cash 10,000Shares allotted 5,000Directly attributable costs 985Deferred consideration 9,677 -------- 25,662 ======== Net cash outflow arising on acquisition:Cash consideration 10,704Cash and cash equivalents acquired (2,528) -------- 8,176 ======== The Group additionally spent £957,000 on consideration and deferredconsideration associated with other acquisitions of the group. INDEPENDENT REVIEW REPORT TO CHIME COMMUNICATIONS PLC Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2007 which comprise the income statement, thebalance sheet, the statement of recognized income and expenses, the cash flowstatement and related notes 1 to 6. We have read the other information containedin the interim report and considered whether it contains any apparentmisstatements or material inconsistencies with the financial information. This report is made solely to the company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures are consistent withthose applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2007. Deloitte & Touche LLPChartered Accountants 11 September 2007 Notes: A review does not provide assurance on the maintenance and integrity ofthe website, including controls used to achieve this, and in particular onwhether any changes may have occurred to the financial information since firstpublished. These matters are the responsibility of the directors but no controlprocedures can provide absolute assurance in this area. Legislation in theUnited Kingdom governing the preparation and dissemination of financialinformation differs from legislation in other jurisdictions. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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