Preliminary Results & Four Acquisitions

7th March 2012

CHIME COMMUNICATIONS PLC

ANNOUNCEMENT OF AUDITED PRELIMINARY RESULTS FOR

THE YEAR ENDED 31ST DECEMBER 2011

AND FOUR ACQUISITIONS

Chime Communications PLC, the leading marketing services group, today announces its preliminary results for the year ended 31 December 2011.

SUMMARY OF RESULTS

FINANCIAL HIGHLIGHTS

·; Reported profit before tax up 16% to £24.7 million (2010: £21.2 million)

·; Reported operating income up 10% (2010: 21%)

·; Reported operating profit up 15% to £25.5 million (2010: £22.1 million)

·; Operating profit margin3up to 19.5% (2010: 18.3%)

·; Earnings per share from continuing operations1 and 3 up 9% to 26.56p (2010: 24.38p)

·; Net cash as at 31 December 2011 of £3.3 million (2010: £6.9 million)

·; Total dividend of 6.58p per share (2010: 6.05p), an increase of 9%

OPERATIONAL HIGHLIGHTS

• Strong performance from Sports Marketing and Advertising

• Successful realignment of business mix following the end of main American Government contract

• Satisfactory performance of Public Relations Division which now includes a strong healthcare business

• Continued investment and expansion in Sports Marketing

• VCCP named Marketing magazine's "Agency of the Year"

• Fast Track named Marketing magazine's "Sponsorship Agency of the Year"

• Insight and Engagement Division continuing to recover

• Developed digital and social capability organically and through start-ups

• Further international expansion - total of 27 overseas offices in 2011

POST YEAR END HIGHLIGHTS

·; First quarter trading so far in line with management expectations

·; Discussions continue for the sale of certain parts of the Public Relations Division to relevant management

·; Earnings enhancing acquisitions of:

- McKenzie Clark - a sports based graphic and digital design business

- iLUKA - management and activation of major sports based events

- Rough Hill (60%) - youth marketing

- StratAgile (40%) -data analytics based in Singapore

- Succinct (announced on 1st February 2012)

Note: 1. Reported fully diluted earnings per share was 19.8p (2010: 18.4p)

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.

3. Before taking account of amortisation of acquired intangible assets and impairment of goodwill (£3.3 million, 2010: £3.0 million) and costs relating to acquisitions and restructuring (£3.0 million, 2010: £2.2 million). In the Income Statement this is referred to as Headline Operating Profit.

Lord Bell, Chairman of Chime Communications, commented:

"In 2011 Chime has had its seventh successive year of growth in operating income, operating profit and margin. We think this is an impressive achievement given the difficult economic conditions in 2011. The Group is well positioned for the future with a very positive year ahead for Sports Marketing in particular. We are making four earnings enhancing acquisitions which will continue to strengthen our offering in growth markets."

For further information please contact:

Lord Bell, Chairman 020 7861 8515

Chime Communications

Christopher Satterthwaite, Chief Executive 020 7861 8515

Chime Communications

James Henderson/ Victoria Geoghegan 020 7861 3232

Pelham Bell Pottinger

REVIEW OF OPERATIONS

2011 was a year in which the company continued to grow and improve its operating profit and margin.

The major highlight was the continued development of the Sports Marketing Division which through a combination of acquisitions and organic growth has evolved into a world class leading sports marketing agency. The sector is projected to grow 5% per year. We now have Sports Marketing offices in 11 countries and are ideally positioned to benefit from this growth. We have major contracts for the 2012 Olympics, including:

·; Organising the in-stadia activities for 18 Olympic sports and 8 Paralympic sports

·; Activating Olympic sponsorship programmes for BT, GSK, G4S and the National Lottery

·; Handling on behalf of LOCOG all event look, branding and wayfinding across all Olympic venues. Also appointed to do the same for the GLA across London and all other UK cities involved in Olympic branding programmes

·; Securing commercial partnerships with corporate sponsors for five Olympic sports: athletics, basketball, triathlon, gymnastics and paralympic sport

·; Ambassador programmes for Oscar Pistorius, Roger Black, Sharron Davies and Mark Foster

·; Providing strategic guidance on the Olympic Opportunity and hands on activation around guest engagement programmes for 12 Olympic clients including BP, Coca Cola, Samsung, NBC and the International Olympic Committee (iLUKA)

·; Undertaking detailed legacy studies around the Olympic Stadium and other venues for the Olympic Delivery Authority

As announced at the time of the interim results, our main contract with the American Government ended which resulted in some restructuring costs being incurred in 2011. The loss of profit from the client was largely compensated for by a major uplift in the Sports Marketing Division profits through the acquisition of ICON and a very good performance by the Advertising and Marketing Services Division. 

The Group acted for 1,815 clients in 2011 compared to 1,494 in 2010. 325 of these clients used more than one of our businesses (277 in 2010) which represented 68% of total operating income (2010: 66%).

242 clients paid us over £100,000 in 2011, compared to 205 in 2010. Our top 30 clients represented 45% of total operating income (2010: 49%).

Our two largest clients represented 19% of operating income (2010: 21%).

Average fee income per client in 2011 was £90,000 compared to £100,000 in 2010. This reduction was caused by some of our acquisitions having a large number of small clients. The average fee income of our existing businesses remained at about £100,000. Average income per employee was £112,000 in 2011 compared to £120,000 in 2010. Again this reduction was caused by acquisitions. In 2011, 47% of our income came from overseas work compared to 51% in 2010.

DIVISIONAL PERFORMANCE

In 2011, three of our four divisions showed growth in operating income and operating profit both like for like and in total. Excluding the American Government contract, the rest of the Public Relations Division showed growth.

Public Relations represented 42% of operating income (2010: 49%), Advertising and Marketing Services was 28% (2010: 26%), Sports Marketing was 25% (2010: 20%) and Insight and Engagement 5% (2010: 5%). 

Public Relations

Good growth was achieved in the financial, corporate, consumer, technology, Middle East and healthcare. Healthcare now represents over 4% of operating income of this division and this is expected to increase to over 10% in 2012.

New client wins included Weetabix, RIM, TalkTalk, Subway, Bathstore, Universal Music, Suzuki, Lotus, BSI, Berkeley Homes and Maersk Oil

The first quarter of 2012 has also started well.

Note: 3. Before taking account of amortisation of acquired intangible assets and goodwill impairment (£1.5 million, 2010: £1.7 million) and costs relating to acquisitions and restructuring (£0.8 million, 2010: 0.2 million). In the Income Statement this is referred to as Headline Operating Profit.

Advertising and Marketing Services

Strong organic growth was achieved in most businesses, with good margin improvement. Specialist offerings in health, search and digital have all grown well with one third of income from this division now coming from start-ups in the last five years.

New client wins included: easyJet, Carling, Ancestry.co.uk and Saga, Tate & Lyle Sugar, Just Eat, Muller and a digital and social campaign for Spotify.

Note: 3. Before taking account of costs relating to acquisitions and restructuring (£0.6 million, 2010: £nil). In the Income Statement this is referred to as Headline Operating Profit.

Sports Marketing

Three earnings enhancing acquisitions were completed in 2011. Since its acquisition there has been strong growth in ICON. Fast Track Hong Kong and pmplegacy (event bidding consultancy) also grew strongly, the remainder of the business was flat in 2011 but is well positioned for growth in 2012. 2012 has started well, good organic growth is expected and many opportunities are already being identified, particularly in Brazil for 2013 and beyond.

Major client wins included Renewal of UEFA Champions League three year contract for ICON, Baku (Azerbaijan) tender for the 2020 Olympic and Paralympic Games and Investec's 10 year sponsorship of the test match cricket in the UK, HSBC's title sponsorship of the Hong Kong Sevens and Carlsberg's sponsorship of Euro 2012.

Note: 3. Before taking account of amortisation of acquired intangible assets (£1.6 million, 2010: £1.2 million) and costs relating to acquisitions and restructuring (£0.2 million, 2010: £1.1 million). In the Income Statement this is referred to as Headline Operating Profit.

Insight and Engagement

This division has continued to recover and recorded good margin improvement. Tree, our data analytics business, continues to grow and the combined qualitative and quantitative business also grew.

Major account wins include Aviva, HMRC, Green Flag, O2, Post Office, Wellcome Trust and British Red Cross.

A new digital research business, Watermelon Research, has been started and it is already profitable.

Note: 3. Before taking account of amortisation of acquired intangible assets (£0.1 million, 2010: £0.1 million) and costs relating to acquisitions and restructuring (£nil, 2010: £0.8 million). In the Income Statement this is referred to as Headline Operating Profit.

CASH FLOW AND BANKING ARRANGEMENTS

Net cash at 31st December 2011 was £3.3 million compared to £6.9 million at 31st December 2010. 

The Group continued to generate cash in 2011 with cash from operating activities of £12.9 million (2010: £16.4 million) and cash conversion of 59% (2010: 85%).

The Group continues to operate well within its banking covenants and retains its borrowing facility of £32 million which continues until July 2013.

The estimated deferred considerations payable in 2012 total £3.6 million, of which £2.8 million is payable in cash and £0.8 million in shares, or cash at Chime's discretion. 

TAXATION

The effective tax rate for 2011 was 27.6% compared to 28.4% last year after excluding the cost of impairment of goodwill and costs of acquisitions, neither of which is tax deductible. This may reduce further in 2012 as the UK corporation tax rate reduces.

DIVIDENDS

The Board is proposing to pay a final dividend of 4.5p per share (2010: 4.21p), giving a total dividend per share of 6.58p compared to 6.05p in 2010, an increase of 9%. The final dividend will be payable on 15th June 2012 to shareholders on the register at 25th May 2012. The expected ex-dividend date is 23rd May 2012.

CORPORATE ACTIVITY

Our strategy remains to expand the range of services and geographical reach of the services we can offer to clients. 

We completed six acquisitions in 2011:

Sports

·; ICON - experiential marketing

·; Essentially France

·; Golden Goal - Brazil

Healthcare (part of Public Relations)

·; Reynolds Mackenzie - public relations

·; LEC - advertising

Marketing Services

·; Gulliford Consulting - marketing consultancy

Today we have also announced the acquisitions of McKenzie Clark, a 60% interest in Rough Hill Limited and a 40% interest in StratAgile Limited. We have also entered into a conditional agreement to acquire iLUKA Limited ('iLUKA').

McKenzie Clark

Chime has acquired 100% of McKenzie Clark, a leading UK graphics and branding specialist, from Graham Clark and four minority shareholders for initial consideration of £600,000 in cash. Further tranches of deferred consideration totalling a maximum of £3.4 million may be payable depending upon the future trading performance of McKenzie Clark. At Chime's option up to 50% of the deferred consideration may be satisfied through the issue of new Chime ordinary shares.

Rough Hill

Chime has acquired 60% of the share capital of Rough Hill Limited and certain other assets (together, 'Rough Hill') from its three owners Jeremy Simmonds, Matthew Smith and Richard Moore (the 'Rough Hill vendors') for initial consideration of £480,000 in cash and the issue of 83,618 new ordinary shares in Chime and £180,000 in cash representing working capital of Rough Hill at acquisition that is surplus to requirements after Rough Hill joins the group. Rough Hill is a specialist agency focusing on youth marketing. Following acquisition one of Rough Hill's businesses will be injected into a new company within VCCP - VCCP Live which will be 40% owned by Rough Hill's vendors.

Following the 2012 results, deferred consideration may become payable in relation to the acquisition of the 60% stake which is capped at £46,000 and will be settled 70% in cash and 30% through the issue of new ordinary shares in Chime (although at Chime's option the whole payment may be in cash)

In addition, the Rough Hill vendors have a put option exercisable between March 2016 and March 2020 whereby they can require Chime to purchase some or all of their remaining 40% interest in Rough Hill at a price calculated in relation to the performance of the Rough Hill businesses but where the total consideration paid by Chime (including the initial and deferred consideration) cannot exceed £5 million. At Chime's option 50% of any additional consideration may be satisfied through the issue of new ordinary shares in Chime.

iLUKA

Chime has entered into a conditional agreement to acquire 100% of the share capital of iLUKA. iLUKA is a sports marketing agency that manages and activates major events on behalf of clients. 

Chime is acquiring the business from its founders, Jon Hillman and Richard Giltinan and Managing Director, Felicity Shankar. Chime expects to complete the acquisition in March or April 2012.

For the year to 30th June 2011, iLUKA reported revenue of £5.8 million, gross profit of £3.7 million and a loss after taxation of £0.3 million. Gross assets at 30th June 2011 were £0.25 million. 

The nature of iLUKA's business is that it generally has positive cash flow and cash at completion is expected to exceed £6 million, reflecting cash paid in advance by clients.

On completion, Chime will pay an initial consideration of £4.0 million in cash and issue 555,361 new Chime ordinary shares. On completion, Chime expects its own net cash position to benefit by around £1 million.

Further tranches of deferred contingent consideration may become payable depending on the future trading performance of iLUKA in March 2013, March 2015 and March 2018. Such deferred payments will not exceed £19.7 million and at Chime's option 50% of each payment may be satisfied through the issue of new Chime ordinary shares.

StratAgile

Chime has acquired 40% of the share capital of StratAgile from its co-founder Thomas Suman Ann for an initial consideration of £190,000 in cash. StratAgile is a data analytics business based in Singapore.

Further tranches of deferred consideration totalling a maximum of £210,000 may be payable depending upon the future trading performance of StratAgile. 30% of the deferred consideration may, at Chime's option, be satisfied through the issue of new Chime ordinary shares.

Application will be made for the 83,618 new ordinary shares of 25 pence each in the capital of Chime (the 'new ordinary shares') being issued as part of the initial consideration for Rough Hill to be listed on the Official List of the Financial Services Authority and to be admitted to trading by the London Stock Exchange on its main market for listed securities. It is expected that dealings in the new ordinary shares will commence on 12th March 2012. The new ordinary shares will rank pari passu with Chime's existing issued shares. Application will be made in due course for the issue of the 555,361 new Chime ordinary shares to be issued on completion of the iLUKA acquisition.

The issued share capital of the Company is currently 81,212,838 ordinary 25p shares each with voting rights. Therefore, following admission of the new Chime ordinary shares issued in connection with the Rough Hill acquisition the issued share capital of the Company on 12th March 2012 will be 81,296,456 ordinary shares each with voting rights.

Chime expects all these transactions to be immediately earnings enhancing.

POSSIBLE SALE OF PART OF THE PUBLIC RELATIONS DIVISION

Discussions continue on the potential buyout of part of the Public Relations Division which represents less than 10% of Group profit. A further announcement will be made in due course.

CORPORATE AND SOCIAL RESPONSIBILITY

We have again made further progress with our corporate responsibility programme this year. We continue to work hard on the reduction of our carbon emissions, reducing our carbon footprint per full time employee in 2010 by 6.6%. We are currently calculating our footprint for 2011 and will publish the results in our CSR Report later in the year. We are expecting a further 5% reduction. Our processes are embedded within the business both in our office operations and in our external relationships with clients, suppliers and partners.

We have also expanded our training programme to deliver improved personal development for our staff at all levels. We continue to run our graduate scheme and have also twinned with a number of organisations to bring a community element to our staff volunteering. Great Ormond Street Hospital, The Passage, Childline, Scope, Shelterbox and Chernobyl Trust are amongst the selected partners of our trading divisions.

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

OUTLOOK

Chime Group's strategy is designed to take advantage of the realignment that is occurring within the communications marketplace. We believe that a significant opportunity exists from exploiting the growing business opportunities in sport over the next ten years. As such, we anticipate a greater contribution from the sports marketing businesses in 2012 and beyond. Chime's Sports Marketing Division is one of the top five sports businesses in the world and it is well placed to benefit from the trends we are seeing.

Chime will remain a broadly based marketing communications group and in addition to the opportunities in Sport, will continue to focus on Public Relations (within which Healthcare is also expected to perform strongly and is another important driver for growth) but should also register good growth in Advertising and Marketing Services. This will be complemented by the recovery of Insight and Engagement which is expected to continue.

We will make further earnings enhancing acquisitions and initiate start-ups which expand the range of services and geographies that we can offer to clients.

We will continue to prioritise both strong cost control and the retention of a high margin. We will also continue to manage the finances prudently.

Lord Bell

Chairman

7th March 2012

Consolidated Income Statement

Year ended 31 December 2011

Consolidated Statement of Comprehensive Income

Year ended 31 December 2011

Consolidated Balance Sheet as at 31 December 2011

Consolidated Statement of Changes in Equity

Consolidated Cash Flow Statement

Year ended 31 December 2011

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 2011 or 2010. Statutory accounts for 2010 have been delivered to the Registrar of Companies and those for 2011 will be delivered following the company's annual general meeting. The auditor's reports on both the 2010 and 2011 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 2012.

The information in this preliminary announcement was approved by the Board on 7 March 2012.

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 2010.

Going Concern Basis

The Group meets its day to day working capital requirements through a rolling overdraft facility and a committed facility which matures in June 2013.

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 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 four operating segments: Public Relations, Advertising and Marketing Services, Sports Marketing, and, Insight and Engagement.

Principal activities are as follows:

Public Relations

The Public Relations division comprises some of the leading names in the industry, including Bell Pottinger, Pelham Bell Pottinger, Good Relations, Harvard, Insight, Resonate, TTA Public Relations and Corporate Citizenship. It is the number 1 ranked PR Group in the UK in the PR Week public relations consultancy league table for 2011. It serves major UK and international brands, as well as governments, government departments, pharmaceutical and healthcare companies, charities, not-for-profit organisations, professional service firms, consumer brands and famous people. Public Relations also includes OPEN Health which commenced trading in 2011, and into which was acquired Open LEC and Reynolds Mackenzie during the year.

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 and specialist media planning and buying. It also specialises in the niche market of financial services. VCCP Group was named Advertising Agency of the year in 2011 by Marketing Magazine for the second time in three years. AMS also includes Gulliford Consulting which was acquired in 2011.

Sports Marketing

The Sports Marketing division is the UK's number one sports marketing group (Marketing Magazine, October 2011) and includes Fast Track, the Essentially Group, and The Sports Business, as well as ICON and Golden Goal which were acquired in 2011.

Insight and Engagement

The Insight and Engagement division (previously Research) is made up of Opinion Leader Research, Facts International and Tree.

Additional information on headline operating profit is provided in note 3.

3. Headline results

*Cost of acquisitions and restructuring includes costs incurred by the Group in reorganising and integrating acquired businesses, non-recurring business restructuring, onerous lease costs and costs associated with senior management changes. Costs have been incurred in the PR division (£836,000), Advertising and Marketing Services (£559,000) and Sports Marketing (£166,000). £1,470,000 relating to acquisitions and restructuring was recorded centrally.

Included within costs of acquisitions and restructuring is £1,092,000 relating to the first six months of 2011 that was not previously disclosed under this heading in the results to 30 June 2011.

The prior year tax impact of adjusting items has been adjusted to be consistent with the current year treatment. This relates to deferred tax on amortisation of acquired intangibles.

4. Earnings per share

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

5. 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 15 June 2012 to those shareholders on the register at 25 May 2012. The expected ex-dividend date is 23 May 2012.

Under an arrangement dated 3 April 1996, The Chime Communications Employee Trust which holds 1,774,266 ordinary shares representing 2.2% of the Company's called-up share capital, has agreed to waive dividends over 854,004 shares (1.1% of the company's called up share capital), the difference being those shares held under the deferred share scheme.

6. Notes to the cash flow statement