Preliminary Results

26th March 2014

CHIME COMMUNICATIONS PLC

ANNOUNCEMENT OF AUDITED PRELIMINARY RESULTS FOR

THE YEAR ENDED 31ST DECEMBER 2013

A year of transformation and growth

Strengthened position as an international communications and sports marketing group

Chime Communications plc, the international communications and sports marketing group, today announces its full year results for the period ended 31st December 2013.

OPERATIONAL HIGHLIGHTS

· Good performance compared to record 2012 with 8% increase in operating income

· Growing market share

· Further developed our Sport and Entertainment group

· Strong operating income and operating profit growth in Advertising and Marketing Services, Public Relations, Healthcare Communications and Insight and Engagement

· Extended international operations through the acquisitions of People Marketing in China and JMI in the USA

· Further progress in Brazilian businesses in advance of the 2014 FIFA World Cup

· Expected operating income on contracts won for the 2014 FIFA World Cup and the 2014 Commonwealth Games now exceeds the operating income achieved for the 2012 Olympics

· Improved the senior management of both Public Relations and Sport and Entertainment divisions

· Strengthened Board with appointment of three new Non-Executive Directors

HEADLINE FINANCIAL HIGHLIGHTS1

· Net bank debt as at 31st December 2013 of £39.8 million (2012: £4.2 million net cash)

· Final dividend maintained and total dividend for the year increased by 1% to 7.34p (2012: 7.24p)

· £95 million facility agreed with RBS and HSBC until September 2016.

Christopher Satterthwaite, Chief Executive of Chime Communications, said:

"2013 was a good year in which we maintained profits despite the tough comparative of an outstanding 'Olympic' year in 2012. The acquisitions of JMI in the USA and People Marketing in China have significantly increased the scale of our sports marketing business in line with our strategy of becoming an international communications and sports marketing group and positioned CSM Sport and Entertainment for growth in 2014 and beyond. Momentum is building towards the 2014 FIFA World Cup and the 2014 Commonwealth Games and the value of the contracts won so far for these two events is expected to exceed the operating income achieved from the 2012 Olympics. 

We have continued to focus on developing all areas of the business and are pleased with the progress of our Advertising and Marketing Services, Healthcare Communications, Public Relations and Insight and Engagement divisions which all grew market share and reported double digit growth in operating income and operating profit".

REPORTED HIGHLIGHTS1

Note: 1. All numbers and comments shown in this section are headline unless otherwise stated. The appendix to this announcement shows a reconciliation of these headline numbers to the reported numbers. The headline numbers adjust for the following:

· Deemed remuneration charge add back in respect of the change in accounting policy for earn-out payments including LLP capital based payments.

· Add back of charges to the income statement in respect of amortisation of intangible assets, impairment of goodwill (see note 8) and costs relating to acquisition and restructuring.

· Discontinued business that does not meet the definition of discontinued operations under the accounting standard. This related to the geopolitical business within Bell Pottinger and our disposal of MMK.

2. Like for Like comparisons are calculated by taking current year actual results (which include acquisitions from the relevant date of completion) compared with prior year actual results, adjusted to include the results of acquisitions for the commensurate period in the prior year.

OVERVIEW

2013 performance in Group operating income and profits was in line with our expectations. Profit levels in Sport and Entertainment were lower than 2012 due mainly to the absence of an Olympics or World Cup. Operating profits grew by 79% in Advertising and Marketing Services, 11% in Public Relations, 71% in Healthcare Communications and 29% in Insight and Engagement. Operating profit margin improved in Advertising and Marketing Services, Healthcare Communications and Insight and Engagement.

Sport and Entertainment has continued to extend the sports and geographies in which it operates. The $75 million acquisition of JMI significantly enhanced CSM Sport and Entertainment's capacity and reach. We have incurred restructuring costs of £3.1 million relating mainly to the strengthening of our management team and empty property costs.

STRATEGY

We have continued to deliver against our stated strategy. In 2012 we realigned the Group as an international communications and sports marketing business. We improved our digital offering and opened new offices in Europe, the Far East and Australia. This year we have started to see the returns from these investments.

2013 has been a further year of change for Chime as we have invested in the company, positioning it for growth in 2014 and beyond, both organically and through acquisitions. 

The timing of the Olympics and World Cups falling on "even-numbered" years has created a stepped profile of profitability for Chime, and despite being an "odd-numbered" year, without one of these events, the momentum has been good with some key client wins across all areas of the business.

The acquisition of JMI and its market leading presence in motorsport, will help reduce Sport and Entertainment's revenue volatility through its multi-year contracts, longstanding relationships and strong revenue visibility and it is an important step in the development of our international full service and multisport strategy.

KEY PERFORMANCE INDICATORS

Average Fee per Client

Average fee per client for 2013 was £99,000, compared to £91,000 in 2012. 249 clients paid us over £100,000 in 2013 compared to 211 in 2012. Our largest client represented 12.5% of total operating income (2012: 12.5%). Our top 30 clients represented 44% of total income compared to 49% in 2012, demonstrating the breadth and further diversification of our business. 

Income from Shared Clients

The Group acted for 1,720 clients in 2013 compared to 1,725 in 2012. 286 of these clients used more than one of our businesses (2012: 248) which represented 68% of total operating income (2012: 68%). We expect that the acquisitions made in 2013 and the new territories entered will provide greater opportunities for cross selling.

Operating Profit Margin

Operating profit margin for 2013 was 15.2% compared to 16.4% in 2012 which was higher as a result of the Sport and Entertainment division margin being higher because it was an Olympic year. 

Income from Overseas Offices

Income from overseas offices increased by 65% in 2013 and as a percentage of total income it increased from 12% in 2012 to 19% in 2013. We expect this percentage to continue to increase in 2014 and beyond as we expand further overseas.

Earnings per Share

Earnings per share in 2013 decreased to 19.47p (2012: 21.27p).

WORKING CAPITAL

Cash generation is very important and we continue to focus on working capital management. Our objective is to have a net working capital position that is better than neutral (negative). This has been achieved in each of the last five years with 2013 being £1.8 million (2012: £8.5 million) of net working capital.

As expected working capital movement for the year was negative (£7.8 million) as we invested ahead of the 2014 World Cup.

HEADLINE DIVISIONAL PERFORMANCE

Sport and Entertainment

2013 performance was, as expected, lower than 2012. However a great deal was achieved in the year to position us for growth in 2014 and beyond and to build our growing international reputation.

Our businesses in Brazil have continued to develop and we now have 19 contracts for the FIFA World Cup with operating income from those contracts, together with operating income from the 2014 Commonwealth Games, now expected to exceed the operating income from the 2012 Olympics.

We remain No. 1 in the UK Sports Marketing League Table (Marketing) and we now operate strongly in seven of the top 10 sports by value in the world. 

We acquired three businesses in 2013, Complete Leisure (UK), People Marketing (China) and JMI (US). These acquisitions do not have income linked to the Olympics and World Cups and will help reduce the lower profit level in odd calendar years. All three acquisitions are performing well and JMI provide Sport and Entertainment with a leading position in motorsports, a sport in which we previously had limited presence as well as a foothold in the United States, the largest sports market in the world.

Zak Brown, Chief Executive of JMI, has joined the Executive Board of our Sport and Entertainment division and is already making a valuable contribution. 

New business wins include: Waitrose, Tottenham Hotspur FC, Old Mutual, Invictus Games, UEFA Euro 2016 and World Cup 2020 qualifying games, Martini, Sure, Eurasia Cup, Coca Cola, Foxy Bingo, Pru Health, Hardy's and Banco do Brasil.

Advertising & Marketing Services

VCCP won both the Campaign Magazine's Agency of the Year and Campaign of the Year (for O2) and was the agency with the best new business record for the third year in a row. Teamspirit also won Financial Services Agency of the Year (Financial Services Forum).

Our work during 2013 further enhanced our reputation both creatively and in the faster growing areas of digital, mobile and content.

In the last two years we have focused on margin improvement and this effort has been rewarded with an increase from 8% to 12%. We will continue to focus on improving margins through 2014.

We have enhanced the range of services offered to clients through the acquisition of WARL (shopper marketing) and our start-ups in 2012, both geographies (Australia and Spain) and services (Media and Content), are all now profitable. Teamspirit achieved double digit growth in both operating income and operating profit.

New business wins include: ASDA, Royal London, AEG Europe, Avis and Budget, Channel 4, Mundipharma, Courvoisier, The AA, Aviva and Henderson Global Investors.

Public Relations

Good Relations has been relaunched with its Triple G rating as its USP and is now ranked the third largest TMT agency, sixth largest digital agency and 15th largest public relations agency in the UK (PR Week). There has been further investment in senior management which has resulted in a slight margin decline in 2013.

There are opportunities for margin improvement and for growth in 2014 as companies increasingly embrace the importance of social purpose in business. 

New business wins include: B&Q, Cisco, Qualcomm, Waitrose, De Beers, Jaguar Land Rover, infirst Healthcare and Pilsner Urquell.

Healthcare Communications

Open Health is now estimated to be a top 10 European healthcare communications and market access group. The acquisitions made in the last three years are now delivering good growth and a high margin. The strong like for like growth demonstrates the strength of the core proposition and we expect further progress in 2014.

New business wins include: Shionogi Novartis, Abbvie, GSK and Pfizer.

Insight and Engagement

CIE is now the eighth largest insight group in the UK (Marketing Magazine) having continued to grow and out perform the market since 2010. Much of its growth is coming from its digital research business, Watermelon.

New business wins include: npower, Home Office, National Fraud Authority, Talk Talk, Sky, Nestlé and Direct Line Group.

BOARD CHANGES

Enhancing our corporate governance and aligning it with our growth strategy was also a key focus for 2013 and we are very pleased to have appointed three new Non-Executive Directors during 2013: Clare Gilmartin, Martin Glenn and Vin Murria. 

As Vice President of eBay UK and Greater Europe, Clare led the European division during an exceptional period of growth for the brand, including the successful move to mobile platforms.

Martin is the Chief Executive Officer of United Biscuits. Martin has previously held senior positions at Birds Eye Iglo Group and PepsiCo. He has experience of international expansion and of working with strong brands, on international expansion and the delivery of strategic goals.

Vin is the Chief Executive Officer of Advanced Software Group plc, an AIM-listed healthcare and business management software solutions company she founded in 2008. Named AIM plc Entrepreneur of the Year 2012 and Woman of The Year in the 2012 Cisco Everywoman Technology Awards, Vin is a successful entrepreneur with a strong background in technology based international business. Vin is also a Non-Executive Director of Greenko plc, an AIM-listed Indian energy company.

Catherine Biner Bradley and Richard Alston both stepped down during 2013 and we are very grateful for their contributions over many years.

We are also announcing today the resignation of Paul Richardson as a Non-Executive Director following WPP's shareholding falling below 20%. Paul has been a Director since 1997 and we are very grateful for his contribution over nearly 17 years.

CORPORATE ACTIVITY

In 2013 we acquired four businesses which complement our strategy of international expansion and digital enhancement and are earnings enhancing:

· Complete Leisure Group in the UK (sport and entertainment)

· People Marketing in Shanghai and Hong Kong (sport and entertainment)

· WARL in the UK (advertising and marketing services)

· JMI in Indianapolis and London (sport and entertainment)

WPP POSITION

At the time of our acquisition of JMI in November 2013, WPP stated that it was their intention to explore a sale of their stake in Chime. We have not been notified of any share disposals by them. 

CASH FLOW AND BANKING ARRANGEMENTS

Net bank debt at 31st December 2013 was £39.8 million compared to net cash of £4.2 million at 31st December 2012. 

An increased facility has been agreed with RBS and HSBC for £95 million. This runs until September 2016, with an interest rate of between 1.75% and 2.75%, depending on use of the facility compared to EBITDA. The estimated earn-outs (which include consideration treated as deemed remuneration) payable in 2014 total £8.6 million of which £5.2 million is payable in cash or loan notes.

As expected there was a working capital outflow in 2013 as investment was made in the contracts we have won for the 2014 World Cup. We continue to focus on both cash and working capital management and a working capital target has now been included as one of our key performance indicators.

TAXATION

The effective tax rate for 2013 was 26% compared to 28% for 2012.

The rate is expected to continue to reduce in future years particularly as the UK rate of corporation tax continues to fall and we utilise some overseas losses.

DIVIDENDS

The Board proposes a final dividend of 5.14p per share (2012: 5.14p per share). This will be payable on 13th June 2014 to shareholders on the register at 23rd May 2014. The ex-dividend date is 21st May 2014. 

Total dividend for the year will be 7.34p compared to 7.24p in 2012. An increase of 1%. This represents a dividend cover of 2.4 times, compared to 3.0 times in 2012 and 4.0 times in 2011.

CORPORATE RESPONSIBILITYWe continue to reduce our impact on the environment. In 2013 we reduced our carbon footprint per full time employee by 4.6% and we have set a target for a further 5% in 2014. We have well developed community and young people initiatives.

We continue to be listed on the FTSE4Good Index and are proud to be a Carbon Trust Standard Bearer.

OUTLOOK

Our strategy is continuing to be delivered and 2014 has started well with the Group gaining momentum and trading is in line with expectations. Good progress has been made on our work for the World Cup in Brazil and plans for the Commonwealth Games in September are also progressing well.

Our communications businesses all have good growth prospects for 2014.

Market conditions in many countries are improving but if sterling remains strong it may cause some adjustment to our 2014 reported results.

We will continue to focus on improving margins and grow both organically and through further earnings enhancing acquisitions in 2014.

Appendix - Reconciliation of Income Statement to headline results for the year ended 31 December 2013

The reconciliation below sets out the headline results of the group and the related adjustments to the reported Income Statement that the directors consider necessary in order to provide an indication of the underlying trading performance.

Headline figures are presented with the exit of the MMK - Good Relations Group GmbH and Conduit Marketing Limited businesses classed as discontinued operations.

Appendix - Reconciliation of Business Segments to adjusted results for the year ended 31 December 2013

Headline figures are presented with the exit of the MMK - Good Relations Group GmbH and Conduit Marketing Limited businesses classed as discontinued operations.

Consolidated Income Statement

Year ended 31 December 2013

Consolidated Statement of Comprehensive Income

Year ended 31 December 2013

Consolidated Balance Sheet as at 31 December 2013

Consolidated Balance Sheet as at 31 December 2013 (continued)

Consolidated Statement of Changes in Equity

Consolidated Cash Flow Statement

Year ended 31 December 2013

Notes:

1. Basis of preparation

The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2013 or 2012. Statutory accounts for 2012 have been delivered to the Registrar of Companies and those for 2013 will be delivered following the company's annual general meeting. The auditor's reports on both the 2013 and 2012 accounts were unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under s498(2) or (3) of Companies Act 2006. Whilst the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards (IFRSs) this announcement does not in itself contain sufficient information to comply with IFRSs. The Company expects to publish full financial statements that comply with IFRSs in April 2014.

The information in this preliminary announcement was approved by the Board on 26 March 2014.

The consolidated income statement, consolidated balance sheet, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated cash flow statement have been prepared on a basis consistent with the financial statements for the year ended 31 December 2013.

Going Concern Basis

The Group meets its day to day working capital requirements through a £95 million rolling overdraft facility and a committed facility which matures in September 2016.

In preparing forecasts the directors have taken into account the following key factors:

· The rate of growth of the UK and global economy on the Group's business during the economic recovery;

· Key client account renewals;

· Planned acquisitions and disposals;

· Anticipated payments under deemed remuneration and deferred and contingent consideration;

· The level of committed and variable costs; and

· Current new business targets compared to levels achieved in previous years.

The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current facility and banking covenants.

The directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

Forward looking statements

The preliminary announcement contains certain forward looking statements in respect of Chime Communications plc and the operation of its subsidiaries. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that may or may not occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements and forecasts. Nothing in this announcement should be construed as a profit forecast.

2. Business Segments

For management purposes, the Group is currently organised into five operating segments: Sport & Entertainment, Advertising and Marketing Services, Public Relations, Healthcare and, Insight and Engagement.

Principal activities are as follows:

Sports & Entertainment

The Sports & Entertainment division is the fastest growing Sport & Entertainment group in the world, and includes ICON, the Essentially Group, iLUKA, Fast Track and most recently JMI. In the UK market, Fast Track and Essentially are number one and number two respectively in the sponsorship leagues tables (Marketing Magazine, November 2012).

Advertising and Marketing Services ('AMS')

The AMS division includes the VCCP Group and Teamspirit. It possesses specialist skills in advertising and marketing services, direct marketing, digital communication, search relations, point of sale, sales promotion, data consultancy and technical design, multimedia content, youth marketing and experiential, marketing consulting, retail and shopper marketing and specialist media planning and buying. It also specialises in the niche market of financial services.

Public Relations

The Good Relations Group is a fully integrated brand communications and CSR consultancy servicing more than 400 clients in the UK and internationally. Companies include: Corporate Citizenship, a best-in-class global CSR consultancy, inEvidence, a market-leading and global business-to-business customer advocacy agency, Good Relations Brand Communications, one of the UK's leading consumer brand and B2B public relations agencies, Harvard, a renowned technology public relations business and TTA Property, an award-winning property public relations business.

Insight & Engagement

The Insight and Engagement division brings together some of the country's leading insight specialists with the most extensive and innovative research solutions to help their clients to reach faster conclusions, make better decisions and develop more informed solutions. The Insight and Engagement division is made up of Opinion Leader Research, Facts International and Watermelon Research.

Healthcare

Open Health, a healthcare communications and market access group was formed in 2011, and comprises organically developed and acquired businesses. The group brands are Open LEC, Open Plan, Reynolds McKenzie, Succinct, The Earth Works, Harvey Walsh and pH Associates. 

3. Earnings per share

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

Diluted earnings per share is calculated on the profit for the year attributable to parent company shareholders divided by the weighted average number of ordinary shares outstanding during the year adjusted for the potentially dilutive impact of employee share incentive schemes and shares to be issued as part of deferred or contingent consideration on acquisitions of subsidiaries.

Some share options that had a higher purchase price than the average market price of the shares for the year ended 31 December 2012 were outstanding. These options have been excluded from the calculation of diluted earnings per share as they would have been antidilutive.

The denominators used are the same as those detailed above for both basic and diluted earnings per share from continuing and discontinued operations.

4. Dividends

The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. The dividend will be paid on 13 June 2014 to those shareholders on the register at 23 May 2014. The ex-dividend date is 21 May 2014.

Under an arrangement dated 3 April 1996, The Chime Communications Employee Trust which holds 910,704 ordinary shares representing 0.9% of the Company's called-up share capital, has agreed to waive dividends over 427,124 shares (0.4% of the company's called up share capital), the difference being those shares held under the deferred share scheme.

5. Notes to the cash flow statement

6. Discontinued Operations

On 18 June 2012, the Group entered into a sale agreement to dispose of the Bell Pottinger businesses to BPP Communications Limited, ('BPP Communications'). The businesses sold to BPP Communications included the entities Bell Pottinger Public Relations Limited, Pelham Bell Pottinger Limited (60%), Bell Pottinger Public Affairs Limited, Pelham Bell Pottinger Asia Pte Limited, Bell Pottinger Middle East FZ-LLC and Bell Pottinger Bahrain S.P.C and the trade and assets of Bell Pottinger Sans Frontières, Bell Pottinger USA Inc and Bell Pottinger Central. These companies carried out part of the Group's public relations operations.

Lord Bell and Piers Pottinger were Chairman and Deputy-chairman of Chime Communications plc, and are shareholders of BPP Communications, and as such the disposal is noted as a related party transaction.

The disposal was completed on 30 June 2012, on which date the control of the Bell Pottinger Businesses passed to the acquirer.

The total consideration was £19.6m, settled in £13.9m cash, shares representing a 25% holding in BPP Communications Limited valued at £4.1m, an amount of £1.0m which has been deferred for a period up to 30 June 2013 and £0.6m of deferred consideration liability transferred. The £1.0 million was received in June 2013. BPP Communications Limited has been recognised as an associate at the balance sheet date. 

The results of the discontinued operations which have been included in the consolidated income statement were as follows:

In the period to 31 December 2012 the Bell Pottinger businesses contributed £0.5m (2011: £5.2m) to the Group's net operating cash flows, paid £0.1m (2011: £0.2m) in respect of investing activities and paid £0.9m (2011: £0.7m) in respect of financing activities.

A profit of £3.0m arose on the disposal of the Bell Pottinger Business, being the proceeds of disposal less the carrying amount of the subsidiaries net assets and attributable goodwill.

7. Business combinations

In 2013, the Group made a number of acquisitions in order to grow the business.

The Sport and Entertainment division made 3 main acquisitions as follows:

· Complete Leisure Group which owns the rights to all Lord Coe's income streams over the next fifteen years. Primarily, these income streams constitute commissions, royalties and consulting income. Lord Coe is one of the most high profile figures in world sport and the proposed acquisition of CLG will assist CSM Sport & Entertainment ("CSM") in its ambition to become one of the top three sports and entertainment businesses in the world ; and

· People Marketing is a sports marketing and communications agency based in Shanghai. It will significantly enhance the geographical spread of CSM's activities and provide access to the Chinese and South East Asia markets.

· Just Marketing Inc. ("JMI") a global marketing firm focused on motorsports, operating primarily in Formula 1, NASCAR (the National Association for Stock Car Auto Racing) and IndyCar. JMI has offices in Indianapolis, London and Hong Kong. The acquisition will help CSM's fulfil its aspiration of becoming a leading sports marketer. In particular it provides

· a leading position in motorsports, a sport in which it currently has limited presence;

· gives a foothold into the United States, one of the world's largest sports marketing markets;

· reduces CSM's revenue volatility through JMI's multi-year contracts, longstanding relationships and strong revenue visibility.

The VCCP Partnership made 1 main acquisition as follows:

· WARL Group Limited which brings specialist retail and shopper skills to the VCCP Partnership.

Complete Leisure Group

On 30 January 2013 the group exercised its option to acquire Lord Coe's 93% interest in The Complete Leisure Group Limited ('CLG'), a company incorporated in the United Kingdom, for initial consideration of £1,965,000 in cash. This was in addition to the payment in November 2012 of £300,000 for acquiring the option bringing total consideration to £2,265,000. A further 6% was acquired from minority shareholders for £110,000 bringing the total share acquired to 99%.

Additional amounts are payable to Lord Coe contingent on the results of the business, capped at the maximum of £10,200,000 (undiscounted). As at 31 December 2013, £1,795,855 (discounted for finance costs) has been provided for as deemed remuneration. The deemed remuneration is expected to be paid in 2015 and 2017. The total maximum consideration and deemed remuneration payable for CLG is £12,600,000.

CLG was acquired by Chime's Sport and Entertainment division.

The fair value of the net assets acquired is detailed below

The adjustment to investments is to de-recognise investments in non-core businesses. The adjustment to intangible fixed assets is to recognise £1,895,558 of intangibles relating to customer contracts and relationships. The adjustments to creditors relates to the recognition of deferred tax on intangible fixed assets.

Costs amounting to £87,954 have been expensed during the year and are included in operating expenses.

Goodwill represents the rights held by CLG to Lord Coe's income streams for the next 15 years. Lord Coe is one of the most high profile figures in world sport and the proposed acquisition of CLG will assist CSM Sport & Entertainment in its ambition to become one of the top three sports and entertainment businesses in the world CLG contributed revenue of £1,490,949 and an operating loss of £1,667,222 (after a deemed remuneration charge of £1,795,855 million) to the results of the Group since acquisition. If the acquisition had been completed at the beginning of the year, the Group revenue for the period would also have been £1,490,949 and group operating profit would have been £1,667,222.

WARL Group

On 15 May 2013 the group acquired 100% of The WARL Group Limited ('WARL'), a company incorporated in the United Kingdom, for initial consideration of £5,046,000 of which £1,331,000 was paid in shares and £3,715,000 was paid in cash. 

Additional amounts are payable contingent on the results of the business, capped at the maximum of £8,300,000 (undiscounted). As at 31 December 2013, £776,000 (discounted for finance costs) has been provided for as deemed remuneration. The deemed remuneration is expected to be paid in 2016 and 2019. The total maximum consideration and deemed remuneration payable for WARL is £13,400,000.

WARL was acquired by Chime's Advertising and Marketing Services division.

The fair value of the net assets acquired is detailed below.

The adjustment to intangible fixed assets is to de-recognise £88,231 that was recognised on an internally generated basis and to recognise £2,697,046 of intangibles relating to customer contracts and relationships. 

The adjustments to creditors relate to additional accruals identified by management and to recognise deferred tax on intangible fixed assets.

Costs amounting to £253,657 have been expensed during the year and are included in operating expenses.

Goodwill represents the specialist retail and shopper marketing skills held by WARL, which adds significant capacity to VCCP's existing offering for integrated communications.

WARL contributed revenue of £5,280,631 and operating loss of £699,429 (after a deemed remuneration charge of £776,316) to the results of the Group since acquisition. If the acquisition had been completed at the beginning of the year, management estimate that Group revenue for the period would have been £8,646,734 and Group operating loss would have been £102,704.

People Marketing

On 15 May 2013 the group acquired 100% of People Marketing Limited ('PM'), a company incorporated in the United Kingdom, for initial consideration of Hong Kong $128,000,000 (£10,974,644). This consideration was payable over 2 tranches, one of Hong Kong $25,600,000 (£2,168,646) in cash and a second tranche of Hong Kong $102,400,000 (£8,805,998) payable via cash Hong Kong $89,600,000 (£7,522,487) and shares Hong Kong $12,800,000 (£1,283,511).

Additional amounts are payable contingent on the results of the business, capped at the maximum of Hong Kong $97.0 million (approximately £7.6 million undiscounted). As at 31 December 2013 no provision has been made for deemed remuneration in accordance with the expected profile of payment. The deemed remuneration is expected to be paid in 2015 and 2016. The total maximum consideration and deemed remuneration payable for PM is Hong Kong $225.0 million (approximately £18.6 million).

PM was acquired by Chime's Sport and Entertainment division.

The fair value of the net assets acquired is detailed below.

The adjustment to intangible fixed assets is to recognise £2,537,580 of intangibles relating to customer contracts and relationships. The adjustments to creditors relates to the recognition of deferred tax on intangible fixed assets.

Costs amounting to £808,030 have been expensed during the year and are included in operating expenses.

Goodwill represents the specialist skills held by PM which will significantly enhance the geographical spread of CSM Sport and Entertainment's activities and provide access to the Chinese and South East Asia markets.

PM contributed revenue of £3,319,609 and operating profit of £458,186 to the results of the Group since acquisition. If the acquisition had been completed at the beginning of the year, management estimate that Group revenue for the period would have been £7,576,609 and Group operating profit would have been £2,765,186.

Just Marketing Inc.

On 20 November 2013 the group acquired 100% of Just Marketing Inc. ('JMI'), a company incorporated in the United States, for initial consideration of USD$68,039,703 (£42,296,296) of which USD$51,359,945 (£31,939,414) was paid in cash, USD$2,795,508 (£1,735,801) was paid in shares and USD$13,884,250 (£8,621,081) was paid via issue of Escrow Consideration Shares to an escrow agent. This comprised of Claims Escrow Consideration shares (USD$5,018,402 (£3,116,052)) and Revenue Escrow Consideration Shares (USD$8,865,848 (£5,505,028).

The claims escrow consideration shares will be released on 20 November 2014 should there be no claims and the warranty provision in the sale and purchase agreement. The revenue escrow consideration shares will be released based on revenues due to be received by JMI during the period 1 January 2015 to 31 December 2017 pursuant to new contracts entered into following 31 August 2013,

Additional deferred consideration shares will be issued up to a maximum of 685,865 shares (approx. USD$3.5m (£2.2m)). This comprises 247,903 Claims Escrow Deferred shares (approx. USD$1.3m (£0.8m)) and 437,962 Revenue Escrow deferred shares (approx. USD$2.2m (£1.4m)). Deferred consideration shares have been provided for of £2,160,475.

JMI was acquired by Chime's Sport and Entertainment division.

The fair value of the net assets acquired is detailed below.