Interim Results

Tangent Communications PLC ("Tangent" or the "Company)

Interim for the six month period ended 31 August 2014

Key Highlights

Commenting on the period, Tangent's Chief Executive, Timothy Green, said:

"Tangent's Online print business continues to strengthen in a competitive market. Our range of products has been expanded, and many more customers have been reached.

Online sales are up 11% on 2013, with printed.com seeing particularly strong first half sales. Online profits are in line with the prior year after the strong growth delivered by printed.com and Ravensworth, but were offset by the under-performance of goodprint.

On the digital marketing side of the business, important long-term changes were made. Tangent Snowball was down-sized and it is now a leaner and more agile business. The drop in revenues during the first half however had a material impact on profits.

Chief Executive's Review

Sales in the first half were £13.26m (2013: £13.25m) with operating profit down at £0.96m (2013: £1.51m).Gross profit was £7.79m (2013: £8.21m) and operating expenses up to £6.83m (2013: £6.63m).

Online Segment - printed.com, Ravensworth, goodprint

Across our Online businesses, sales are driven by a range of printed products that are manufactured in-house. First half sales were up 11% at £8.84m (2013: £7.95m) with operating profit flat at £1.03m (2013: £1.08m) as we invested in infrastructure and people to drive online growth.

printed.com

It was a strong first half for printed.com, with sales up 30% to £3.62m (2013: £2.78m). The key to printed.com success is constant innovation, with a relentless push to get the right products onto our website at the right price. This strategy continues to attract new customers - up 15% year on year - and we continue to see repeat purchases from our existing customer base - up 56% year on year. For small businesses and sole traders, the printed.com offer is particularly compelling, with a dedicated part of the website tailored to particular groups, from wedding stationers to photographers. The volume of customers these products attract can be significant, and we will continue to create and evolve the range of products offered.

Ravensworth

Sales were up 17% in the first half at £4.06m (2013: £3.48m). Innovations in the first half of this year included backlit window cards, home information packs, and our first digital offering. This fully transactional website with a photo editing service has attracted 1,500 orders to date and 100% of customers have returned to buy again. A combination of the above led to the 17% sales growth in the period.

goodprint

Sales in the first half were down 31% at £1.16m (2013: £1.69m). Competition in the market for selling business cards continues to intensify and attracting one-off customers at any cost is not part of our plan. Re-building the customer base will take time. The new management team will lead a re-design of the website and launch new products which will incur higher costs.

Agency Segment (Tangent Snowball, T/OD)

Sales are driven by our London-based businesses Tangent Snowball and T/OD. First half sales were down 17% at £4.42m (2013: £5.30m) with underlying operating profit at £0.16m (2013: £0.67m).

Tangent Snowball

Sales were down 22% at £3.22m (2013: £4.14m). Tangent Snowball revenues were affected by budget cuts from two key clients and the previously announced divestment of operations in Australia. Headcount has been reduced and Tangent Snowball is now a leaner and more agile business. The second half of this financial year is set to show an improvement compared to the first half.

T/OD

T/OD's sales grew by 3% to £1.20m (2013: £1.16m). Gross margin continued to be above 70% as T/OD intensified its focus on selling innovative print displays to high end retailers.

Non-recurring expense

The non-recurring expense of £0.23m (2013: Nil) relates to the downsizing of Tangent Snowball.

Discontinued operations

During the first half, we completed the divestment of our Australian business, Tangent Snowball PTY Ltd. A loss for the period from discontinued operations of £0.12m is included this year (2013: £0.05m).

Net Cash

Net cash at 31 August 2014 was £1.71m (2013: £1.84m). We paid £0.66m for the final dividend (2013: £0.56m).

Outlook

We remain committed to being a leading player in the online print sector. The opportunities are growing and we are determined to seize on them: expanding our range; innovating new products; tailoring our offering to the millions of businesses that need quality printed material at a competitive price. We continue to invest in our people and our technology - refining the Tangent offer to drive future sales growth.

The Company expects the second half of this financial year to show an improvement in the Tangent Snowball division compared to the first half, however current softness in the goodprint division and investment to improve the performance results in further prudence for the full year.

Timothy GreenChief Executive

For further information, please contact:

Tangent Communications PLCTimothy Green - Chief Executive: 020 7462 6101Kevin Cameron - Finance Director: 020 7462 6101

Canaccord Genuity Limited - Nominated adviser and broker

Consolidated statements of comprehensive income

for the half-year ended 31 August 2014

Consolidated statement of changes in equity

for the half year ended 31 August 2014

Consolidated balance sheet

at 31 August 2014

Consolidated statements of cash flows

for the half-year ended 31 August 2014

Notes to the financial information

for the half-year ended 31 August 2014

1. Basis of preparation

This consolidated half-yearly financial information, which is condensed and unaudited for the half-year ended 31 August 2014, has been prepared in accordance with the accounting policies which the group expects to adopt in its next annual report and is consistent with those adopted in the consolidated financial statements for the year ended 28 February 2014. These accounting policies are based on the EU-adopted International Financial Reporting Standards ("IFRS") and International Financial Reporting Interpretations Committee ("IFRIC") interpretations that the group expects to be applicable at that time. This consolidated half-yearly information for the half-year ended 31 August 2014 has been prepared in accordance with IAS 34: Interim Financial Reporting, as adopted by the EU and under the historical cost convention.

The information relating to the half-years ended 31 August 2014 and 31 August 2013 is unaudited and does not constitute statutory financial statements as defined in section 434 of the Companies Act 2006. It has, however, been reviewed by the auditors and their report is set out at the end of this document. The comparative figures for the year ended 28 February 2014 have been extracted from the consolidated financial statements, 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 annual report and accounts for the year ended 28 February 2014 has been filed with the Registrar of Companies.

The group's financial risk management objectives and policies are consistent with those disclosed in the 2014 annual report and accounts.

The half-yearly report was approved by the board of directors on 17 November 2013. The half-yearly report is available on Tangent's website, www.tangentplc.com, and is being sent to shareholders. Further copies are available at Tangent's registered office, 84-86 Great Portland Street, London W1W 7NR.

Going concern

The directors are satisfied that the group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

2. Non-recurring Expenses

Reduced budgets at two key clients and the divestment of our Australian business impacted revenues at Tangent Snowball. As a result staff levels were reduced, the total cost of which amounted to £226,000 and has been included in non-recurring expenses.

3. Operating segments

Management has determined the operating segments based on reports reviewed by the Board of Directors that are used to make strategic decisions. The board reviews revenues and operating profits by segment but assets at a consolidated level. On this basis the group has two reportable segments, Agency and Online. Unallocated corporate expenses are shown below under PLC.

Agency - Comprises Tangent Snowball and T/OD (Tangent on Demand).

Online - Comprises Ravensworth, printed.com and goodprint.PLC - PLC costs relate to the cost of non-executive directors, maintenance of Tangent's stock market listing, and general professional advice together with the share-based payment charge as set out in note 4. Executive directors' costs are allocated to the Agency and Online segments.

3. Operating segments (continued)

4. Share options and share-based payment charge

The total share-based payment charge for the period was £10,000 (half-year ended 31 August 2013: £69,000 and year ended 28 February 2014: £183,000).

The movements in share options and the corresponding weighted average exercise prices ("WAEP") are summarised below:

For the share options outstanding at 31 August 2014 exercise prices ranged between nil and 13.25p per share and the weighted average remaining contractual life was 5.37 years.

5. Earnings per share

The calculation of the basic and diluted earnings per share is based on the following:

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.

A calculation is performed for the share options to determine the number of shares that could have been acquired at fair value based on the monetary value of the subscription rights attached to the outstanding share options. The number of shares from this calculation is compared with the number of shares that would have been issued assuming the exercise of the options and the difference is deemed to be the number of dilutive shares attributable to share options.

6. Other intangible assets

During the period the group spent £271,000 (2013: £320,000) on software to support the growth in on line revenues by expanding the number of products available on the company's websites. During the period amortisation charges of £141,000 were recognised in respect of these assets.

7. Property, plant and equipment

During the period the group spent £202,000 on additions to plant, equipment and computers to upgrade production facilities with a further £111,000 on improvements to leasehold property.

8. Dividends

Amounts recognised as distributions to equity holders in the period:

8. Dividends (continued)

The Tangent employee share ownership trust holds 928,340 shares and has waived its right to receive dividends. The dividend for the year ended 28 February 2014 was approved by shareholders at the annual general meeting on 24 June 2014 and paid on 4 August 2014.

9. Share capital

Allotted and fully paid

10. Own Shares

The own shares reserve represents the cost of shares in Tangent Communications PLC purchased in the market and held by the Company. The number of shares held at 31 August 2014 was 3,945,000 (31 August 2013 and 28 February 2014 nil).

11. Disposal of subsidiary

On 12 March 2014 Tangent completed the disposal of 81% of the issued share capital in Tangent Snowball PTY Limited. It is the group's intention to retain the remaining 19% the cost of which has been reclassified under investments and amounts to less than £1,000. The results of Tangent Snowball PTY Limited have not been included in the consolidated statement of comprehensive income for the period to 31 August 2014 and the net assets of the subsidiary as at 1 March 2014, the date from which control changed were as follows:-

11. Disposal of subsidiary (continued)

The loss from discontinued operations was composed as follows:-

12. Cash flow from operations

13. Analysis of net funds

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the half-year ended 31 August 2014 which comprises the consolidated statement of comprehensive income, consolidated statement of changes in equity, consolidated balance sheet, consolidated statement of cash flows and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules for Companies.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34: Interim Financial Reporting, as adopted by the European Union.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410: Review of Interim Financial Information Performed by the Independent Auditor of the Entity, issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the half-year ended 31 August 2014 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules for Companies.

UHY Hacker Young

Chartered Accountants

Quadrant House

4 Thomas More Square

London E1W 1YW 

17 November 2014

Notes

1. The maintenance and integrity of the Tangent Communications PLC website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the half-yearly report or the auditors' review report since they were initially presented on the website.

2. Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions.