TIDMTMMG
RNS Number : 5347N
The Mission Marketing Group PLC
25 September 2019
The Mission Group plc
Interim results for the six months to 30 June 2019
The Mission Group plc ("MISSION", "the Group" or "the Company")
is pleased to announce its unaudited interim results for the six
months ended 30 June 2019 and sets out its new positioning.
Interim results
-- Revenue from continuing operations* up 9% to GBP39.2m (2018: GBP36.1m)
-- Headline** profit before tax up 10% to GBP3.4m (2018: GBP3.1m)
-- Headline** diluted EPS up 9% to 3.12 pence (2018: 2.85 pence)
-- Net bank debt GBP5.1m (30 June 2018: GBP7.8m)
-- A strong second-half bias again predicted
-- Pathfindr progressing well
Dividend
-- Interim dividend increased by 10% to 0.77p (2018: 0.70p)
-- Payable on 29 November 2019 to shareholders on the register at 1 November 2019
Repositioning of MISSION
-- New positioning to reflect Mission's coming of age
-- A real and credible alternative to the established agency networks
-- Focus will be on developing creative partnerships, not just marketing communications
-- Collaboration and co-working moving to a new level
-- Fewer but larger Agencies
* Continuing operations exclude the results of BroadCare, sold
on 12 November 2018
** Headline results are calculated on continuing operations and
excluding the profit/loss on investments, acquisition-related items
and start-up losses
David Morgan, Chairman, commented: "The Group continues to make
good progress and I am really pleased with how James Clifton is
settling into his role as Chief Executive. Today's evolved
positioning as the alternative group for ambitious brands, with a
new visual identity, is a bold and confident statement about what
Mission is today and where it can be tomorrow"
An interview with James Clifton, Chief Executive, can be viewed
today at: http://www.themission.co.uk/investors/results-centre
Enquiries:
James Clifton, Chief Executive
Peter Fitzwilliam, Finance Director
The Mission Group plc 020 7462 1415
Mark Percy / James Thomas / Sarah Mather
(Corporate Advisory)
Shore Capital (Nomad and Broker) 020 7408 4090
MISSION is a collective of creative Agencies led by
entrepreneurs who encourage an independent spirit. Employing 1,150
people in the UK, Europe, Asia and US, the Group combines the
expertise of Integrated and Specialist Agencies to bring
commercially effective solutions to business challenges.
www.themission.co.uk
Summary of the period
So far 2019 has been a successful and transitional year for
MISSION.
There is no doubt that within MISSION we have created unique
skills and processes which enhance what we do for our Clients
within an ever-changing marketplace. This approach has set us apart
from our competitors and enhanced the performance of our Agencies
and the Group as a whole. So earlier this year we took a long hard
look at ourselves and what makes us special and this autumn we are
launching a new look MISSION, more of which below.
But it is what's behind the face that matters most.
The first half of 2019 has panned out as we expected in
delivering our revenue and profit targets whilst maintaining a
strong balance sheet. Our Agencies performed well, with major new
contracts being won and existing Client support continuing.
Whilst the day to day issues are of paramount importance, our
continued growth forms the platform from which we are embracing a
determined positioning, refining our structure and creating greater
opportunities for our people. As part of this, the promotion of
James Clifton to Group CEO in April is already having a significant
impact. James' objective is to build on our multi-Agency approach
that ensures our Clients get a best in class team with unparalleled
resources working on their business.
Our policy of going where our Clients wish us to be continues.
Major global wins this year from Cummins, Docker and Fuji Xerox,
supplemented by new Clients in our recently opened Seattle Agency,
plus our expanded Asia presence, are helping us strengthen our
footprint in those territories. In addition we have recently opened
an office in Munich, the Group's first opening in Mainland Europe.
We will continue to grow overseas but in a measured and risk-averse
manner.
So in a market that continues to be challenging, we are growing
our businesses and strengthening our resources in a way that
provides us with a level of confidence that will take us into 2020
and beyond.
Our fuse technology division is seeing some exciting new
initiatives develop, a couple of which should be ready for launch
in 2020, whilst our Pathfindr Asset Management System continues to
expand its Client base with some excellent new contracts. It is
gratifying to note that wherever Pathfindr is trialed, it quite
quickly becomes the system of choice; so much so that we will be
accelerating our investment and reaching out into new markets.
Trading results
Comparisons
The Group's BroadCare business was sold in November 2018 and, as
a result, the following financial comparisons and commentary are
based on like-for-like trading from continuing operations.
In addition, the Group has implemented IFRS 16: Leases and 2018
comparatives have been restated accordingly. The impact of IFRS 16
on the Group's net profitability is insignificant but the bringing
onto the balance sheet of future lease commitments and the
reclassification of operating lease costs into depreciation and
interest costs affects EBITDA and leverage ratios. The impact of
the application of IFRS 16 is included in Note 2 and, where
significant, referred to in the commentary below.
Billings and revenue
Turnover ("billings") for the six months ended 30 June 2019
increased by 5% to GBP82.3m (2018: GBP78.1m), while operating
income ("revenue") increased by 9% to GBP39.2m (2018: GBP36.1m),
continuing our track record of consistent revenue growth over many
years and achieving our target growth of at least 5% pa.
Profit, margins and earnings per share
Headline operating profits increased by 5% to GBP3.6m (2018:
GBP3.4m). Headline operating profit margins were slightly lower in
the first six months, at 9.2% (2018: 9.6%), primarily due to
changes in phasing of spend by certain large Clients. As in prior
years, we expect our trading to have a strong bias towards the
second half and, coupled with further efficiency improvements
anticipated from our Shared Services initiative, we expect overall
margins to increase as a result.
Financing costs reduced to GBP0.3m (2018: GBP0.4m) reflecting
lower net bank debt levels, and headline profit before tax
increased by 10% to GBP3.4m (2018: GBP3.1m), in line with our
target growth of at least 10% pa.
Adjustments to headline profits in 2019, at GBP1.0m, were higher
than the prior year (2018: GBP0.6m) due to an increase in the
estimate of future contingent consideration obligations. After
these adjustments, reported profit before tax was GBP2.4m (2018:
GBP2.5m).
The Group estimates an effective tax rate on headline profits
before tax of 20% (2018: 20%), resulting in a 9% increase in
headline earnings to GBP2.7m for the six months (2018: GBP2.5m),
and reported profit after tax of GBP1.8m (2018: GBP2.0m). Fully
diluted headline EPS increased 9% to 3.12 pence (2018: 2.85
pence).
Balance sheet and cash flow
Two key balance sheet ratios measured and monitored by the Board
are the ratios of net debt and total debt, including acquisition
liabilities, to headline EBITDA ("leverage ratios"). The adoption
of IFRS 16 increases both EBITDA and debt. The increase in EBITDA
from the reclassification of operating lease costs into
depreciation and interest costs is GBP2.6m in a full year. The
recognition of future lease payments as balance sheet liabilities
increases total debt by over GBP7m. There is no impact from the
adoption of IFRS 16 on net cash flow, nor on bank covenant tests,
which remain calculated on a pre-IFRS 16 basis, but the standard
increases the debt leverage ratios by approximately x0.5.
Net bank debt at 30 June 2019 was GBP5.1m (30 June 2018:
GBP7.8m). Together with lease liabilities, net debt totalled
GBP12.7m (30 June 2018: GBP17.1m), resulting in a reduced leverage
ratio of net debt to headline EBITDA of x0.9 (30 June 2018:
x1.3).
GBP3.2m of acquisition obligations from prior years were settled
in the first half of the year and after adjustments to estimated
future contingent consideration payments, the total estimated
acquisition liability at 30 June 2019 totalled GBP9.1m (30 June
2018: GBP11.0m). Including estimates of acquisition liabilities
(calculated by reference to current levels of profitability), total
debt leverage reduced to x1.4 (30 June 2018: x1.9).
Virtually all of the Group's acquisition obligations are
dependent on post-acquisition earn-out profits. GBP2.3m is expected
to fall due for payment in cash within 12 months and a further
GBP5.9m in the subsequent 12 months. The Directors believe that the
strength of the Group's cash generation can comfortably accommodate
these obligations. Furthermore, to achieve maximum earn-outs, the
acquired Agencies would need to perform very strongly, which would
generate much of the cash required to meet these obligations.
Dividend
Reflecting the growth in headline earnings, the Directors have
declared an interim dividend of 0.77p, representing a 10% increase
over last year, payable on 29 November 2019 to shareholders on the
register at 1 November 2019. The ex-dividend date is 31 October
2019.
A new MISSION
All agency groups strive for cooperation and collaboration
within their organisations. From its inception, MISSION has been
different from the rest. Founded as a cooperative of like-minded
entrepreneurs, we have flourished best when MISSION has supported
rather than directed, harnessing the innate ambition and
independent spirit of our Agency CEOs. We have grown revenue and
profit each year over the last decade, winning prestigious and
progressively bigger business. We have acquired businesses with
fantastic reputations that elevate our standing in the sector. At
the same time, we have retained virtually all the founders of the
businesses we have acquired, providing them with opportunities to
develop and grow both their businesses and themselves from an
increasingly international platform.
Over the years, we have progressively developed methodologies
and structures to encourage and support collaboration and
multi-agency working. We truly believe we have found an alternative
and better way to help our Clients.
As a group of collaborative specialists, we are no longer purely
a marketing communications group, selling our marketing wares.
Instead we are a business partner with a range of creative skills
to help solve business challenges. In recognition of this, we have
re-named our group The Mission Group PLC ("MISSION") and put
MISSION at the forefront of our new business activity as the
alternative group for ambitious brands, with a new visual identity.
In addition, we have refined our business structure to create a
simplified, more effective service offering. Three key structural
changes are: the merger of bigdog and krow into a single integrated
agency, retaining the name krow; the expansion of Story into Leeds
and Newcastle, taking on our Robson Brown agency; and the merger of
April Six and RLA into a single agency to leverage both
complementary skillsets and the existing April Six international
footprint.
This new-look MISSION celebrates and drives forward the Group's
open, collaborative culture whilst retaining the entrepreneurial
spirit on which it has been built.
Outlook
As in previous years, we expect the majority of our profit to be
generated in the second half of the year. Despite the heightened
level of Brexit uncertainty, we remain on track to deliver against
expectations. We feel confident in ourselves and our ability to
establish trusted creative partnerships with Clients that deliver
real business growth. We are excited about MISSION's prospects.
Condensed Consolidated Income Statement for the six months ended
30 June 2019
Continuing Discontinued Continuing Discontinued
operations operations Total operations operations Total
Six Six months Six months Six Year ended Year ended Year
months to to months ended
to to
30 June 30 June 30 June 30 June 31 December 31 December 31
2019 2018 2018 2018 2018 2018 December
2018
Unaudited Unaudited Unaudited Unaudited Audited Audited Audited
(Restated) (Restated) (Restated) (Restated)
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
TURNOVER 3 82,300 78,112 1,116 79,228 159,916 1,476 161,392
Cost of sales (43,140) (42,056) (127) (42,183) (82,331) (221) (82,552)
---------- ------------ -------------- ----------- ------------ -------------- -----------
OPERATING
INCOME 3 39,160 36,056 989 37,045 77,585 1,255 78,840
Headline
operating
expenses (35,545) (32,608) (451) (33,059) (67,666) (776) (68,442)
---------- ------------ -------------- ----------- ------------ -------------- -----------
HEADLINE
OPERATING
PROFIT 3,615 3,448 538 3,986 9,919 479 10,398
(Loss) / profit
on investments - - - - (312) 2,981 2,669
Acquisition
adjustments 5 (925) (508) - (508) (1,010) - (1,010)
Start-up costs (74) (74) - (74) (139) - (139)
---------- ------------ -------------- ----------- ------------ -------------- -----------
OPERATING
PROFIT 2,616 2,866 538 3,404 8,458 3,460 11,918
Share of results
of associates
and joint
ventures 69 (9) - (9) (1) - (1)
---------- ------------ -------------- ----------- ------------ -------------- -----------
PROFIT BEFORE
INTEREST
AND TAXATION 2,685 2,857 538 3,395 8,457 3,460 11,917
Net finance
costs 6 (289) (361) - (361) (735) - (735)
-------------- -----------
PROFIT ON
ORDINARY
ACTIVITIES
BEFORE
TAXATION 2,396 2,496 538 3,034 7,722 3,460 11,182
Taxation 7 (608) (527) (108) (635) (1,710) (96) (1,806)
-------------- -----------
PROFIT FOR THE
PERIOD 1,788 1,969 430 2,399 6,012 3,364 9,376
---------- ------------ -------------- ----------- ------------ -------------- -----------
Attributable to:
Equity holders
of the
parent 1,757 1,910 430 2,340 5,901 3,364 9,265
Non-controlling
interests 31 59 - 59 111 - 111
---------- ------------ -------------- ----------- ------------ -------------- -----------
1,788 1,969 430 2,399 6,012 3,364 9,376
---------- ------------ -------------- ----------- ------------ -------------- -----------
Basic earnings
per share
(pence) 8 2.10 2.30 0.52 2.82 7.08 4.04 11.12
Diluted earnings
per share
(pence) 8 2.04 2.24 0.50 2.75 6.91 3.94 10.85
Headline basic
earnings
per share
(pence) 8 3.20 2.92 0.52 3.44 8.67 0.46 9.13
Headline diluted
earnings
per share
(pence) 8 3.12 2.85 0.50 3.35 8.46 0.45 8.90
Condensed Consolidated Statement of Comprehensive Income for the
six months ended 30 June 2019
Continuing Discontinued Continuing Discontinued
operations operations Total operations operations Total
Six Six months Six months Six months Year ended Year ended Year ended
months to to to
to
30 June 30 June 30 June 30 June 31 December 31 December 31 December
2019 2018 2018 2018 2018 2018 2018
Unaudited Unaudited Unaudited Unaudited Audited Audited Audited
(Restated) (Restated) (Restated) (Restated)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
PROFIT FOR THE
PERIOD 1,788 1,969 430 2,399 6,012 3,364 9,376
Other
comprehensive
income
- items that may
be reclassified
separately to
profit or loss:
Exchange
differences on
translation
of foreign
operations 226 7 - 7 73 - 73
----------- ------------ -------------- ------------ ------------ -------------- ------------
TOTAL
COMPREHENSIVE
INCOME
FOR THE PERIOD 2,014 1,976 430 2,406 6,085 3,364 9,449
Attributable to:
Equity holders
of the parent 1,926 1,907 430 2,337 5,933 3,364 9,297
Non-controlling
interests 88 69 - 69 152 - 152
----------- ------------ -------------- ------------ ------------ -------------- ------------
2,014 1,976 430 2,406 6,085 3,364 9,449
----------- ------------ -------------- ------------ ------------ -------------- ------------
Condensed Consolidated Balance Sheet as at 30 June 2019
As at As at As at
30 June 30 June 31 December
2019 2018 2018
Unaudited Unaudited Audited
(Restated) (Restated)
Note GBP'000 GBP'000 GBP'000
FIXED ASSETS
Intangible assets 9 95,629 96,079 96,121
Property, plant and equipment 3,100 3,003 3,125
Right of use assets 6,875 8,415 7,733
Investments in associates
and joint ventures 69 306 -
Investments 100 - -
Deferred tax assets 20 44 23
---------- ----------- ------------
105,793 107,847 107,002
---------- ----------- ------------
CURRENT ASSETS
Stock 1,062 684 850
Trade and other receivables 44,985 38,444 39,727
Cash and short term deposits 2,811 6,102 5,899
---------- ----------- ------------
48,858 45,230 46,476
---------- ----------- ------------
CURRENT LIABILITIES
Trade and other payables (41,057) (37,875) (37,060)
Corporation tax payable (1,110) (877) (668)
Bank loans 10 - (13,852) -
Acquisition obligations 11 (2,398) (3,084) (3,258)
---------- ----------- ------------
(44,565) (55,688) (40,986)
---------- ----------- ------------
NET CURRENT ASSETS / (LIABILITIES) 4,293 (10,458) 5,490
---------- ----------- ------------
TOTAL ASSETS LESS CURRENT
LIABILITIES 110,086 97,389 112,492
NON CURRENT LIABILITIES
Bank loans 10 (7,906) - (9,886)
Lease liabilities (5,163) (6,754) (6,022)
Acquisition obligations 11 (6,707) (7,889) (8,537)
Deferred tax liabilities (393) (538) (451)
---------- ----------- ------------
(20,169) (15,181) (24,896)
---------- ----------- ------------
NET ASSETS 89,917 82,208 87,596
---------- ----------- ------------
CAPITAL AND RESERVES
Called up share capital 8,530 8,436 8,436
Share premium account 43,015 42,506 42,506
Own shares (419) (304) (299)
Share-based incentive reserve 607 465 498
Foreign currency translation
reserve 286 82 117
Retained earnings 37,295 30,445 35,826
---------- ----------- ------------
EQUITY ATTRIBUTABLE TO EQUITY
HOLDERS OF THE PARENT 89,314 81,630 87,084
Non controlling interests 603 578 512
---------- ----------- ------------
TOTAL EQUITY 89,917 82,208 87,596
---------- ----------- ------------
Condensed Consolidated Cash Flow Statement for the six months
ended 30 June 2019
Six months Six months Year ended
to to
30 June 30 June 31 December
2019 2018 2018
Unaudited Unaudited Audited
(Restated) (Restated)
GBP'000 GBP'000 GBP'000
Operating profit 2,616 3,404 11,918
Depreciation and amortisation
charges 2,329 2,309 4,738
Movements in the fair value of
contingent consideration 479 (30) (67)
Profit on disposal of fixed assets (73) (4) (5)
Loss on write down of investment - - 312
Profit on disposal of BroadCare - - (2,981)
Non cash charge for share options,
growth shares and shares awarded 122 144 183
Increase in receivables (5,258) (735) (2,022)
Increase in stock (212) (16) (182)
Increase / (decrease) in payables 4,075 558 (210)
---------- ------------- -------------
OPERATING CASH FLOW 4,078 5,630 11,684
Net finance costs (266) (319) (826)
Tax paid (221) (722) (1,906)
---------- ------------- -------------
Net cash inflow from operating
activities 3,591 4,589 8,952
---------- ------------- -------------
INVESTING ACTIVITIES
Proceeds on disposal of fixed
assets 150 23 30
Purchase of property, plant and
equipment (640) (286) (1,014)
Investment in software development (85) (45) (377)
Proceeds from disposal of BroadCare - - 4,099
Acquisition of subsidiaries - (2,750) (2,990)
Acquisition of investments (100) - -
Payment of obligations relating
to acquisitions made in prior
periods (2,555) (1,749) (1,748)
Cash disposed of and costs of
disposal of BroadCare - - (584)
Cash acquired with subsidiaries - 553 553
---------- ------------- -------------
Net cash outflow from investing
activities (3,230) (4,254) (2,031)
---------- ------------- -------------
FINANCING ACTIVITIES
Dividends paid - - (1,546)
Dividends paid to non-controlling
interests - - (149)
Repayment of lease liabilities (1,244) (1,161) (2,446)
(Repayment of) / increase in bank
loans (2,000) 750 (3,125)
Issue of shares to minority interests 3 - -
(Purchase) / disposal of own
shares held in EBT (434) 311 311
---------- ------------- -------------
Net cash outflow from financing
activities (3,675) (100) (6,955)
---------- ------------- -------------
(Decrease) / increase in cash/equivalents (3,314) 235 (34)
Exchange differences on translation
of foreign subsidiaries 226 7 73
Cash/cash equivalents at beginning
of period 5,899 5,860 5,860
---------- ------------- -------------
Cash and cash equivalents at
end of period 2,811 6,102 5,899
---------- ------------- -------------
Condensed Consolidated Statement of Changes in Equity for the
six months ended 30 June 2019
Share-based
incentive Total
reserve Foreign attributable
currency to equity Non-controlling
Share Share Own GBP'000 translation Retained holders interest Total
capital premium shares reserve earnings of parent equity
(Restated) (Restated) GBP'000 (Restated)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- --------- --------- --------- ------------ ------------- ------------ -------------- ----------------- ------------
At 1 January
2018 8,436 42,506 (602) 341 85 28,072 78,838 509 79,347
Profit for
period - - - - - 2,340 2,340 59 2,399
Exchange
differences
on
translation
of foreign
operations - - - - (3) - (3) 10 7
--------------- --------- --------- --------- ------------ ------------- ------------ -------------- ----------------- ------------
Total
comprehensive
income for
period - - - - (3) 2,340 2,337 69 2,406
Share option
charge - - - 80 - - 80 - 80
Growth share
charge - - - 44 - - 44 - 44
Shares awarded
and sold
from own
shares - - 298 - - 33 331 - 331
At 30 June
2018 8,436 42,506 (304) 465 82 30,445 81,630 578 82,208
--------------- --------- --------- --------- ------------ ------------- ------------ -------------- ----------------- ------------
Profit for
period - - - - - 6,925 6,925 52 6,977
Exchange
differences
on
translation
of foreign
operations - - - - 35 - 35 31 66
--------------- --------- --------- --------- ------------ ------------- ------------ -------------- ----------------- ------------
Total
comprehensive
income for
period - - - - 35 6,925 6,960 83 7,043
Share option
credit - - - (11) - - (11) - (11)
Growth share
charge - - - 44 - - 44 - 44
Shares awarded
and sold
from own
shares - - 5 - - 2 7 - 7
Dividend
paid - - - - - (1,546) (1,546) (149) (1,695)
--------------- --------- --------- --------- ------------ ------------- ------------ -------------- ----------------- ------------
At 31 December
2018 8,436 42,506 (299) 498 117 35,826 87,084 512 87,596
--------------- --------- --------- --------- ------------ ------------- ------------ -------------- ----------------- ------------
Profit for
period - - - - - 1,757 1,757 31 1,788
Exchange
differences
on
translation
of foreign
operations - - - - 169 - 169 57 226
--------------- --------- --------- --------- ------------ ------------- ------------ -------------- ----------------- ------------
Total
comprehensive
income for
period - - - - 169 1,757 1,926 88 2,014
New shares
issued 94 509 - - - - 603 3 606
Share option
charge - - - 65 - - 65 - 65
Growth share
charge - - - 44 - - 44 - 44
Own shares
purchased
by EBT - - (434) - - - (434) - (434)
Shares awarded
and sold
from own
shares - - 314 - - (288) 26 - 26
At 30 June
2019 8,530 43,015 (419) 607 286 37,295 89,314 603 89,917
--------------- --------- --------- --------- ------------ ------------- ------------ -------------- ----------------- ------------
Notes to the unaudited Interim Report for the six months ended
30 June 2019
1. Accounting Policies
Basis of preparation
The condensed consolidated interim financial statements for the
six months ended 30 June 2019 have been prepared in accordance with
the IAS 34 "Interim Financial Reporting" and the Group's accounting
policies.
The Group's accounting policies are in accordance with
International Financial Reporting Standards as adopted by the
European Union and are set out in the Group's Annual Report and
Accounts 2018 on pages 53-58. The comparative figures extracted
have been adjusted as described in Note 2, following the first time
adoption of IFRS 16. These are consistent with the accounting
policies which the Group expects to adopt in its 2019 Annual
Report. The Group has not early-adopted any Standard,
Interpretation or Amendment that has been issued but is not yet
effective.
The information relating to the six months ended 30 June 2019
and 30 June 2018 is unaudited and does not constitute statutory
financial statements as defined in Section 434 of the Companies Act
2006. The comparative figures for the year ended 31 December 2018
have been extracted from the Group's Annual Report and Accounts
2018, 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 Group Annual Report and Accounts for the year ended
31 December 2018 have been filed with the Registrar of
Companies.
Going concern
The Directors have considered the financial projections of the
Group, including cash flow forecasts, the availability of committed
bank facilities and the headroom against covenant tests for the
coming 12 months. They are satisfied that the Group has adequate
resources for the foreseeable future and that it is appropriate to
continue to adopt the going concern basis in preparing these
interim financial statements.
Accounting estimates and judgements
The Group makes estimates and judgements concerning the future
and the resulting estimates may, by definition, vary from the
actual results. The Directors considered the critical accounting
estimates and judgements used in the financial statements and
concluded that the main areas of judgement are:
-- Potential impairment of goodwill;
-- Contingent deferred payments in respect of acquisitions;
-- Revenue recognition policies in respect of contracts which straddle the period end; and
-- Valuation of intangible assets on acquisitions.
These estimates are based on historical experience and various
other assumptions that management and the Board of Directors
believe are reasonable under the circumstances.
New standards, interpretations and amendments to existing
standards
The Group has adopted IFRS 16 Leases for the first time. The
impact on the financial statements of this new standard is detailed
in Note 2.
2. Adoption of IFRS 16 Leases
The Group has applied IFRS 16 Leases for the first time, using
the full retrospective approach, with restatement of comparative
information. IFRS 16 changes how the Group accounts for leases
previously classified off balance sheet as operating leases under
IAS 17, by removing the distinction between operating and finance
leases and requiring the recognition of a right of use asset and a
lease liability at the commencement of all leases except for short
term leases and leases of low value assets.
Applying IFRS 16 for all leases (except as noted below), the
Group:
-- Recognises right of use assets and lease liabilities in the
consolidated balance sheet, initially measured at present value of
future lease payments;
-- Recognises depreciation on right of use assets and interest
on lease liabilities in the consolidated income statement; and
-- Separates the total amount of cash paid into a principal
portion (presented within financing activities) and interest
(presented within operating activities) in the consolidated cash
flow statement.
For short term leases (lease term of 12 months or less) and
leases of low value assets (such as computer equipment), the Group
has opted to recognise a lease expense on a straight line basis as
permitted by IFRS 16. This expense is presented within operating
expenses in the consolidated income statement.
Financial impact of initial application of IFRS 16
The tables below show the amount of adjustment for each
financial statement line item affected by the application of IFRS
16 for the current and prior periods.
The impact of IFRS 16 on the Group's profitability is
insignificant, with the primary impact being one of
reclassification: from operating lease expenses to depreciation and
interest costs. The impact on the balance sheet is to recognise the
Group's operating lease commitments, most of which relate to
Agencies' premises rentals and which were previously reported in
the Notes to the financial statements, as assets and liabilities on
the face of the balance sheet. The value of these right of use
assets and corresponding liabilities will fluctuate over time as
lease terms expire and new leases are entered into.
Impact on profit or loss
Six months Six months Year ended
to to
30 June 30 June 31 December
2019 2018 2018
Unaudited Unaudited Audited
Note GBP'000 GBP'000 GBP'000
Decrease in operating
lease expenses i 1,333 1,319 2,649
Increase in depreciation
expense i (1,117) (1,071) (2,194)
----------- ----------- ------------
Increase in headline
operating profit 216 248 455
Increase in finance
costs i (126) (130) (266)
----------- ----------- ------------
Increase in headline
PBT, headline PAT
and profit for the
period 90 118 189
----------- ----------- ------------
Impact on earnings per share
Six months Six months Year ended
to to
30 June 30 June 31 December
2019 2018 2018
Increase in reported and headline
earnings per share:
Basic earnings per share (pence) 0.11 0.14 0.23
Diluted earnings per share (pence) 0.10 0.14 0.22
The above increases apply to both earnings per share from total
operations and earnings per share for continuing operations. There
is no change in earnings per share from discontinued
operations.
Impact on assets, liabilities and equity
as at 1 January 2018
As previously IFRS 16 adjustments As restated
reported
Note GBP'000 GBP'000 GBP'000
Property, plant and equipment ii 3,489 (219) 3,270
i,
Right of use assets ii - 8,016 8,016
--------------------
Impact on total assets 7,797
Other creditors and accruals iii (9,845) (246) (10,091)
Short term lease liabilities i (86) (2,227) (2,313)
Long term lease liabilities i (129) (6,131) (6,260)
Impact on total liabilities (8,604)
Retained earnings 28,879 (807) 28,072
--------------------
Impact on assets, liabilities and equity
as at 30 June 2018
As previously IFRS 16 adjustments As restated
reported
Note GBP'000 GBP'000 GBP'000
Goodwill iv 90,450 398 90,848
Property, plant and
equipment ii 3,175 (172) 3,003
Right of use assets i, ii - 8,415 8,415
Trade and other receivables iii 38,436 8 38,444
Impact on total assets 8,649
Other creditors and
accruals and deferred
income iii (21,658) (185) (21,843)
Short term lease liabilities i (88) (2,484) (2,572)
Long term lease liabilities i (85) (6,669) (6,754)
--------------------
Impact on total liabilities (9,338)
Retained earnings 31,134 (689) 30,445
--------------------
Impact on assets, liabilities and equity
as at 31 December 2018
As previously IFRS 16 adjustments As restated
reported
Note GBP'000 GBP'000 GBP'000
Goodwill iv 91,354 398 91,752
Property, plant and
equipment ii 3,250 (125) 3,125
Right of use assets i, ii - 7,733 7,733
Impact on total assets 8,006
Other creditors and
accruals iii (9,623) (224) (9,847)
Short term lease liabilities i (90) (2,417) (2,507)
Long term lease liabilities i (39) (5,983) (6,022)
--------------------
Impact on total liabilities (8,624)
Retained earnings 36,444 (618) 35,826
--------------------
Impact on assets, liabilities and equity
as at 30 June 2019
As if IAS 17 IFRS 16 adjustments As restated
still applied
Note GBP'000 GBP'000 GBP'000
Goodwill iv 91,354 398 91,752
Property, plant and
equipment ii 3,178 (78) 3,100
Right of use assets i, ii - 6,875 6,875
Impact on total assets 7,195
Other creditors, accruals iii (15,312) (220) (15,532)
Short term lease liabilities i (88) (2,340) (2,428)
Long term lease liabilities i - (5,163) (5,163)
--------------------
Impact on total liabilities (7,723)
Retained earnings 37,823 (528) 37,295
--------------------
Notes:
i The application of IFRS 16 to leases previously classified as
operating leases under IAS 17 resulted in the recognition of right
of use assets and lease liabilities. It also resulted in a decrease
in operating leases expenses and an increase in depreciation and
interest expenses.
ii Equipment under finance lease arrangements previously
presented within property, plant and equipment is now presented
within the line item right of use assets. There has been no change
in the amount recognised.
iii Amounts previously recorded in prepayments or accruals under
IAS 17 as a result of differences between operating lease expenses
recognised and amounts paid have been derecognised and the amount
factored into the measurement of the lease liability. The
recognition of accruals for dilapidation costs has also been
adjusted and the amount factored into the measurement of the right
of use assets.
iv Goodwill of companies acquired after 1 January 2018 has been
impacted as a result of the change in net assets as at acquisition
date arising from the application of IFRS 16.
3. Segmental Information
Business segmentation
For management purposes the Board monitors the performance of
its separate operating units, each of which carries out a range of
activities, as a single business segment. However, since different
activities have different revenue characteristics, the Group's
turnover and operating income has been disaggregated below to
provide additional benefit to readers of these financial
statements.
In previous periods, the profitability by activity has been
disclosed. However, following the implementation of a Shared
Services function from the start of 2018 and the resulting transfer
of certain Agency-specific contracts onto centrally-managed
arrangements, a significant portion of the total operating costs
are now centrally managed and segment information is therefore now
only presented down to the operating income level.
Advertising Media Exhibitions Public Group
& Digital Buying & Learning Relations
Six months to 30 June 2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------ -------- ------------ ----------- --------
Turnover 49,746 18,195 9,860 4,499 82,300
------------ -------- ------------ ----------- --------
Operating income 31,560 1,880 2,361 3,359 39,160
------------ -------- ------------ ----------- --------
Advertising Media Exhibitions Public Group
& Digital Buying & Learning Relations
Six months to 30 June 2018 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------ -------- ------------ ----------- --------
Turnover - continuing operations 43,216 20,953 9,249 4,694 78,112
- discontinued operations 1,116 - - - 1,116
------------ -------- ------------ ----------- --------
- total Group 44,332 20,953 9,249 4,694 79,228
------------ -------- ------------ ----------- --------
Operating income - continuing 28,170 1,932 2,528 3,426 36,056
- discontinued 989 - - - 989
------------ -------- ------------ ----------- --------
- total Group 29,159 1,932 2,528 3,426 37,045
------------ -------- ------------ ----------- --------
Advertising Media Exhibitions Public Total
& Digital Buying & Learning Relations
Year to 31 December 2018 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------ -------- ------------ ----------- --------
Turnover - continuing operations 96,615 36,473 17,488 9,340 159,916
- discontinued operations 1,476 - - - 1,476
------------ -------- ------------ ----------- --------
- total Group 98,091 36,473 17,488 9,340 161,392
------------ -------- ------------ ----------- --------
Operating income - continuing 61,805 3,469 5,202 7,109 77,585
- discontinued 1,255 - - - 1,255
------------ -------- ------------ ----------- --------
- total Group 63,060 3,469 5,202 7,109 78,840
------------ -------- ------------ ----------- --------
Geographical segmentation
The following table provides an analysis of the Group's
operating income by region of activity:
Six months Six months Year ended
to to
30 June 30 June 31 December
2019 2018 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
From continuing operations
UK 34,544 32,134 68,519
Asia 2,125 1,948 5,061
USA 2,491 1,974 4,005
----------- ----------- ------------
39,160 36,056 77,585
----------- ----------- ------------
From discontinued operations
UK - 989 1,255
--- ---- ------
From continuing and
discontinued operations
UK 34,544 33,123 69,774
Asia 2,125 1,948 5,061
USA 2,491 1,974 4,005
------- ------- -------
39,160 37,045 78,840
------- ------- -------
4. Reconciliation of Reported Profit to Headline Profit
In order to provide a clearer understanding of underlying
profitability, headline profits exclude exceptional items,
acquisition-related items, and start-up costs. Start-up costs
derive from organically started businesses and comprise the trading
losses of such entities until the earlier of two years from
commencement or when they show evidence of becoming sustainably
profitable.
Six months Six months Year ended
to to 31 December
30 June 30 June 2018
2019 2018 Audited
Unaudited Unaudited (Restated)
(Restated)
PBT PAT PBT PAT PBT PAT
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
From continuing operations
Headline profit 3,395 2,716 3,078 2,486 9,183 7,334
Acquisition-related items
(Note 5) (925) (867) (508) (457) (1,010) (895)
Impairment of Watchable - - - - (312) (312)
Start-up costs (74) (61) (74) (60) (139) (115)
------ ------ ------ ------ -------- ------
Reported profit 2,396 1,788 2,496 1,969 7,722 6,012
------ ------ ------ ------ -------- ------
From discontinued operations
Headline profit - - 538 430 479 383
Profit on sale of BroadCare - - - - 2,981 2,981
Reported profit - - 538 430 3,460 3,364
From continuing and discontinued
operations
Headline profit 3,395 2,716 3,616 2,916 9,662 7,717
Profit on sale of BroadCare - - - - 2,981 2,981
Acquisition-related items
(Note 5) (925) (867) (508) (457) (1,010) (895)
Impairment of Watchable - - - - (312) (312)
Start-up costs (74) (61) (74) (60) (139) (115)
------ ------ ------ ------ -------- ------
Reported profit 2,396 1,788 3,034 2,399 11,182 9,376
------ ------ ------ ------ -------- ------
Start-up costs in 2019 relate to the launches of April Six's new
ventures in China and Germany. Start-up costs in 2018 related to
April Six's new venture in China, and trading losses at Mongoose
Promotions (now profitable).
5. Acquisition Adjustments
Six months Six months Year ended
to to 31 December
30 June 30 June 2018
2019 2018 Audited
Unaudited Unaudited
GBP'000 GBP'000 GBP'000
(Increase) / decrease in fair
value of contingent consideration (479) 30 67
Amortisation of intangible assets
recognised on acquisitions (446) (401) (915)
Acquisition transaction costs
expensed - (137) (162)
----------- ----------- -------------
(925) (508) (1,010)
----------- ----------- -------------
The movement in fair value of contingent consideration relates
to a revision in the estimate payable to vendors of businesses
acquired in prior years. Acquisition transaction costs relate to
professional fees associated with the acquisitions.
6. Net Finance Costs
Six months Six months
to to Year ended
30 June 30 June 31 December
2019 2018 2018
Unaudited Unaudited Audited
(Restated) (Restated)
GBP'000 GBP'000 GBP'000
Net interest on bank loans,
overdrafts and deposits (140) (198) (394)
Amortisation of bank debt arrangement
fees (23) (29) (66)
Interest expense on leases liabilities (126) (134) (275)
----------- ----------- ------------
Net finance costs (289) (361) (735)
----------- ----------- ------------
7. Taxation
The taxation charge for the period ended 30 June 2019 has been
based on an estimated effective tax rate on headline profit on
ordinary activities of 20% (30 June 2018: 20%).
8. Earnings Per Share
The calculation of the basic and diluted earnings per share is
based on the following data, determined in accordance with the
provisions of IAS 33: "Earnings per Share".
Six months Six months Year to
to to
30 June 30 June 31 December
2019 2018 2018
Unaudited Unaudited Audited
(Restated) (Restated)
GBP'000 GBP'000 GBP'000
Earnings
Reported profit for the year
From continuing operations 1,788 1,969 6,012
Attributable to:
Equity holders of the parent 1,757 1,910 5,901
Non-controlling interests 31 59 111
----------- ----------- ------------
1,788 1,969 6,012
----------- ----------- ------------
From discontinued operations - 430 3,364
Attributable to:
Equity holders of the parent - 430 3,364
Non-controlling interests - - -
----------- ----------- ------------
- 430 3,364
----------- ----------- ------------
From continuing and discontinued
operations 1,788 2,399 9,376
Attributable to:
Equity holders of the parent 1,757 2,340 9,265
Non-controlling interests 31 59 111
----------- ----------- ------------
1,788 2,399 9,376
----------- ----------- ------------
Headline earnings (Note 4)
From continuing operations 2,716 2,486 7,334
Attributable to:
Equity holders of the parent 2,685 2,427 7,223
Non-controlling interests 31 59 111
----------- ----------- ------------
2,716 2,486 7,334
----------- ----------- ------------
From discontinued operations - 430 383
Attributable to:
Equity holders of the parent - 430 383
Non-controlling interests - - -
----------- ----------- ------------
- 430 383
----------- ----------- ------------
From continuing and discontinued
operations 2,716 2,916 7,717
Attributable to:
Equity holders of the parent 2,685 2,857 7,606
Non-controlling interests 31 59 111
2,716 2,916 7,717
From continuing operations
Basic earnings per share (pence) 2.10 2.30 7.08
Diluted earnings per share (pence) 2.04 2.24 6.91
From discontinued operations
Basic earnings per share (pence) - 0.52 4.04
Diluted earnings per share (pence) - 0.50 3.94
From continuing and discontinued
operations
Basic earnings per share (pence) 2.10 2.82 11.12
Diluted earnings per share (pence) 2.04 2.75 10.85
Headline basis:
From continuing operations
Basic earnings per share (pence) 3.20 2.92 8.67
Diluted earnings per share (pence) 3.12 2.85 8.46
From discontinued operations
Basic earnings per share (pence) - 0.52 0.46
Diluted earnings per share (pence) - 0.50 0.45
From continuing and discontinued
operations
Basic earnings per share (pence) 3.20 3.44 9.13
Diluted earnings per share (pence) 3.12 3.35 8.90
A reconciliation of the profit after tax on a reported basis and
the headline basis is given in Note 4.
9. Intangible Assets
30 June 30 June 31 December
2019 2018 2018
Unaudited Unaudited Audited
(Restated) (Restated)
GBP'000 GBP'000 GBP'000
Goodwill 91,752 90,848 91,752
Other intangible assets 3,877 5,231 4,369
95,629 96,079 96,121
---------- ----------- ------------
Goodwill
Six months Six months Year ended
to 30 June to 30 June 31 December
2019 2018 2018
Unaudited Unaudited Audited
(Restated) (Restated)
GBP'000 GBP'000 GBP'000
Cost
At 1 January 96,025 89,064 89,064
Recognised on acquisition of
subsidiaries - 6,057 6,961
At 30 June / 31 December 96,025 95,121 96,025
------------ ------------ -------------
Impairment adjustment
At beginning and end of period 4,273 4,273 4,273
Net book value 91,752 90,848 91,752
------- ------- -------
In accordance with the Group's accounting policies, an annual
impairment test is applied to the carrying value of goodwill,
unless there is an indication that one of the cash generating units
has become impaired during the year, in which case an impairment
test is applied to the relevant asset. The next impairment test
will be undertaken at 31 December 2019.
Other Intangible Assets
Six months to Six months
to Year ended
30 June 30 June 31 December
2019 2018 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Cost
At 1 January 9,389 7,210 7,210
Additions 85 2,689 3,011
Disposals - - (832)
At 30 June / 31 December 9,474 9,899 9,389
---------- ------------- --------------
Amortisation and impairment
At 1 January 5,020 4,050 4,050
Amortisation charge for
the period 577 618 1,286
Disposals - - (316)
At 30 June / 31 December 5,597 4,668 5,020
---------- ------------- --------------
Net book value 3,877 5,231 4,369
---------- ------------- --------------
Other intangible assets consist of Client relationships, trade
names and software development and licences.
10. Bank Loans and Net Bank Debt
30 June 30 June 31 December
2019 2018 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Bank loan outstanding 8,000 13,875 10,000
Adjustment to amortised cost (94) (23) (114)
---------- ----------- ------------
Carrying value of loan outstanding 7,906 13,852 9,886
Less: Cash and short term deposits (2,811) (6,102) (5,899)
---------- ----------- ------------
Net bank debt 5,095 7,750 3,987
---------- ----------- ------------
The borrowings are repayable
as follows:
Less than one year - 13,875 -
In one to two years - - -
In more than two years but less
than three
years 8,000 - 10,000
8,000 13,875 10,000
Adjustment to amortised cost (94) (23) (114)
---------- ----------- ------------
7,906 13,852 9,886
Less: Amount due for settlement
within 12 - (13,852) -
months (shown under current liabilities)
---------- ----------- ------------
Amount due for settlement after
12 months 7,906 - 9,886
---------- ----------- ------------
On 14 September 2018, the Group signed a new three year
revolving credit facility of GBP15.0m, expiring on 28 September
2021, with an option to extend the facility by a further GBP5.0m
and an option to extend by one year. Interest on the facility is
based on LIBOR plus a margin of between 1.25% and 2.00% depending
on the Group's debt leverage ratio, payable in cash on loan
rollover dates.
In addition to its committed facilities, the Group has available
an overdraft facility of up to GBP3.0m with interest payable by
reference to National Westminster Bank plc Base Rate plus
2.25%.
11. Acquisition Obligations
The terms of an acquisition may provide that the value of the
purchase consideration, which may be payable in cash or shares or
other securities at a future date, depends on uncertain future
events such as the future performance of the acquired company. The
Directors estimate that the liability for payments that may be due
is as follows:
Cash Shares Total
GBP'000 GBP'000 GBP'000
30 June 2019
Less than one year 2,308 90 2,398
Between one and two years 5,930 294 6,224
In more than two but less than - - -
three years
In more than three but less
than four years 483 - 483
8,721 384 9,105
------ ---- ------
A reconciliation of acquisition obligations during the period is
as follows:
Cash Shares Total
GBP'000 GBP'000 GBP'000
At 31 December 2018 10,820 975 11,795
Obligations settled in the
period (2,555) (614) (3,169)
Adjustments to estimates of
obligations 456 23 479
At 30 June 2019 8,721 384 9,105
--------- --------- ---------
12. Post balance sheet events
There have been no material post balance sheet events.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR SEIFWLFUSESU
(END) Dow Jones Newswires
September 25, 2019 02:00 ET (06:00 GMT)
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