TIDMTMG
RNS Number : 3165I
Mission Group PLC (The)
01 April 2020
1 APRIL 2020
The Mission Group plc
("MISSION" "The Company" or "The Group")
FINAL RESULTS FOR THE YEARED 31 DECEMBER 2019
NINTH CONSECUTIVE YEAR OF GROWTH DELIVERED AGAINST CHALLENGING
TRADING BACKDROP
MISSION (AIM:TMG), the alternative group for ambitious brands,
is pleased to announce final results for the year ended 31 December
2019.
FINANCIAL HIGHLIGHTS
Year ended 31 December 2019 2018
* REVENUE GBP81.0M GBP77.6M 4%
* OPERATING PROFIT * GBP10.8M GBP9.9M 8%
* PROFIT MARGINS 13.3% 12.8%
* HEADLINE PROFIT BEFORE TAX* GBP10.2M GBP9.2m 11%
* REPORTED PROFIT BEFORE TAX GBP8.3M GBP7.7M 8%
* EARNINGS PER SHARE* 9.47p 8.67p 9%
* DILUTED EARNINGS PER SHARE* 9.00p 8.46p 6%
* Headline results are calculated before acquisition
adjustments, start-up costs and profit/loss on investments (as set
out in Note 4).
* Ninth consecutive year of growth despite challenging
market backdrop
* Robust performance reflects strength of Agencies in
our portfolio
* Strong cash generation with net cash from operating
activities increasing to GBP9.3m
* Debt leverage ratios remain comfortably within Board
limits
* Decision to pay final dividend of 1.53p per share
remains on hold, as part of measures to conserve cash
in current unprecedented trading conditions as a
result of the outbreak of COVID-19
BUSINESS HIGHLIGHTS
* Successful completion of launch and repositioning of
MISSION brand during the year is already driving
early successes in new business development in 2020
* Continued strong Client retention across Agencies
with new Client wins adding to our blue-chip global
client base
* Further progress through our central innovation hub
Fuse, with a strong performance from our embryonic
asset tracking business Pathfindr
* All Agencies successfully onboarded onto MISSION
shared services platform
Commenting, David Morgan, Chairman of The Mission Group plc
said: "Given the well documented UK and sector challenges in 2019,
I can only congratulate the people who run and work in our Agencies
on a remarkable performance that delivered on forecast revenue and
profit growth, thereby maintaining the upward progression that has
been the hallmark of the rebirth of our Group for the last ten
years.
Whilst the impact of Covid-19 on the global economy will
inevitably impact on the Group's performance in the current
financial year, the Board is confident that MISSION is well placed
to continue to serve our Clients' needs and benefit from future
opportunities when normal conditions return."
ENQUIRIES:
THE MISSION GROUP PLC Tel: 020 7462 1415
James Clifton, Chief Executive
Peter Fitzwilliam, Chief Financial
Officer
SHORE CAPITAL (Nomad and Broker) Tel: 020 7408 4090
Mark Percy / James Thomas/ Sarah
Mather
HOUSTON (Financial PR and Investor Tel: 0203 760 7668
Relations)
Kate Hoare / Laura Stewart
NOTES TO EDITORS
MISSION is a collective of creative Agencies. 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.
Founded as a cooperative of like-minded entrepreneurs, MISSION
has built an impressive track record. The Group has grown revenue
and profit each year for the last nine years, winning prestigious
and progressively bigger business across its blue-chip Client base
and acquiring new Agencies with fantastic reputations, expanding
its service capability even further.
In addition to the Group's creative Agencies sits Fuse,
MISSION's central innovation hub through which the Group has
successfully trialled and developed a number of emerging
technologies. Many of these have been grown into successful
commercial products that not only bring value to the MISSION family
of Agencies, but which have been successfully able to realise
market value at sale.
www.themission.co.uk
CHAIRMAN'S STATEMENT
Rising to the Challenge
Given the well documented UK and sector challenges in 2019, I
can only congratulate the people who run and work in our Agencies
on a remarkable performance that delivered on forecast revenue and
profit growth, thereby maintaining the upward progression that has
been the hallmark of the rebirth of our Group for the last ten
years.
2019 was undoubtedly a transitional year for the Group.
Following the appointment of James Clifton, formerly CEO of our
Agency bigdog, as Group Chief Executive in April, MISSION has
undergone a repositioning to reflect its coming of age as a real
and credible challenger to the established agency networks. Our
entrepreneurial spirit, driven culture and diverse offering makes
MISSION more relevant than ever as brands seek alternatives to the
traditional agencies.
MISSION 's new identity has put business development at the
heart of the Group, driving greater multi-Agency collaboration. At
the same time, we have refined our business structure to create a
simplified, more effective service offering. This has included
mergers of some of our Agencies across the UK, including bigdog and
krow. The new-look MISSION celebrates and drives forward the
Group's open, collaborative culture whilst aiming to retain the
entrepreneurial spirit on which it has been built.
Profitable growth delivered during 2019 once again came from
increased mandates from existing Clients, new Client wins and
assignments and a continued focus on operating costs and margins.
We are also very pleased to see continued good progress from our
Pathfindr and wider Fuse initiatives. Giles Lee formally took on
the role of Commercial Director at the start of the year, and new
centralised initiatives and structures are already protecting and
fuelling margin performance.
Board
As well as the appointment of James Clifton as Group CEO in
April 2019, we also welcomed Barry Cook, one of the founding
directors of krow, to MISSION 's Board in June. krow has been a
terrific addition to the Group and I have every confidence in our
leadership team and their ability to deliver going forward.
Dividend
The Board adopts a progressive dividend policy, aiming to grow
dividends each year in line with earnings but always balancing the
desire to reward our shareholders via dividends with the need to
fund the Group's growth ambitions and maintain a strong balance
sheet. When we published our Trading Update in January, it was our
intention to pay a final dividend of 1.53 pence per share, bringing
the total for the year to 2.3 pence per share, representing an
increase of 10% over 2018. The Board has proposed a resolution for
a final dividend in its AGM Notice, recognising how important the
dividend is to our shareholders. However, in the light of the
current economic uncertainty as a result of the impact of Covid-19
on the global economy, we will make a final decision as we approach
the AGM on 15 June.
Outlook and impact of Covid-19
2020 began well for MISSION and whilst we have been delighted
with the early progress we have made against our plans, the
Covid-19 pandemic has resulted in an unprecedented global trading
environment to which few businesses are immune.
The health and well-being of our teams is our priority and we
have taken decisive steps to protect them, in line with the
Government guidance. The majority of our staff are used to working
remotely therefore causing minimum disruption for our Client
service and day to day operations.
Whilst the impact of Covid-19 on the global economy will
inevitably impact on the Group's performance in the current
financial year ending 31 December 2020, MISSION has a strong
balance sheet and a resilient business model servicing a broad
range of Clients operating across numerous sectors and geographies.
As such, the Board is confident that MISSION is well placed to
continue to serve our Clients' needs and benefit from future
opportunities when normal conditions return.
David Morgan
Chairman
1 April 2020
CHIEF EXECUTIVE'S REVIEW
I am delighted to be leading MISSION during this exciting period
for our business. Founded as a cooperative of like-minded
entrepreneurs, over the last ten years MISSION has built an
impressive track record. We have grown revenue and profit each
year, winning prestigious and progressively bigger business from
across our growing, blue-chip Client base and acquired new Agencies
with fantastic reputations, strengthening our standing in our
sector even further.
2019 has seen us continue to build on this strong momentum to
deliver our 9(th) consecutive year of growth, despite a difficult
trading backdrop during which Brexit uncertainty continued to
hamper Client decision making and restrict budgets. Over the course
of the year we also took stock of the progress that we have
achieved to date, refining our growth plans as we look forward to
2020 and beyond.
Strategy
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 to a broad portfolio of UK and
international brands with a range of creative skills to help solve
business challenges. In recognition of this, in September 2019 we
announced the re-naming of our Group to The MISSION Group plc ("
MISSION ") supported by a launch of the Group's vision, values and
beliefs to our Clients, staff and the industry. This vision puts
MISSION at the heart of both our business model and new business
strategy as the alternative group for ambitious brands.
We see huge opportunity to grow our Client-partner relationships
through increased collaboration across our Agencies and through the
adoption of a more strategic approach to leveraging our global
footprint. I'm delighted that we have already seen early progress
here, with an excellent example during the period being our work
for leading UK sofa retailer DFS, through an integrated campaign
led by krow supported by two other MISSION Agencies.
As we move forwards fostering a cohesive approach, we have
refined our business structure to create a more effective service
offering. This has included 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 transition has been smooth and we have been very pleased
with the initial feedback from these Agencies. Through this
simplified structure we now have an even stronger platform from
which we can deliver further organic growth and identify the right
acquisition opportunities to expand our capabilities and network
both in the UK and overseas.
As we work to develop our vision to be the alternative group for
ambitious brands, we are placing increasing focus on the additive
value that MISSION can bring to the entrepreneurial Agencies within
our network, helping them to unlock new growth opportunities and
optimise their business operations. By the close of the year we had
successfully completed the onboarding of all of the Agencies in our
portfolio onto our shared services platform, giving them access to
centralised functions such as Finance, IT and HR. We are also
making further investments in our central platform to help underpin
better collaboration across our network and expect to see the
results of some of these initiatives start to flow through in the
new financial year.
We will continue to build on our track record of embracing
emerging technologies, providing our Agencies with access to these
evolving capabilities through our central innovation hub Fuse .
Here we bring together the most curious and creative minds from
across our business, collaborating to create new software and
hardware products. We have grown many of these incubator ideas into
successful commercial products that not only bring value to the
MISSION family of Agencies, but which in the case of BroadCare we
were able to realise market value at sale. Some exciting new
initiatives are in development, a couple of which should be ready
for launch in 2020.
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. We truly believe we have found
an alternative and better way to help our Clients.
Performance Overview
Despite a challenging trading environment as a result of the
heightened level of political uncertainty, we were delighted to
deliver a good full year performance.
Revenue increased 4% to GBP81.0m (2018: GBP77.6m), representing
our ninth consecutive year of growth. Our profit margin (headline
operating profit as a percentage of revenue) again improved, to
13.3% (2018: 12.8%), and headline profit improved by 11% to
GBP10.2m (2018: GBP9.2m), all from our core business.
Our Agencies performed well, with strong Client retention rates
maintained and major new contracts won including Cummins Inc,
Docker and Fuji Xerox. The structural refinements to our Agency
portfolio were completed over the course of the final quarter of
the year and we have been delighted with the smooth integration and
the Client and employee feedback to date.
International expansion over the period continued to be
Client-led, resulting in expansion into Seattle, Chicago and
Beijing. In addition, we have recently opened an office in Munich,
the Group's first opening in Mainland Europe.
We are also pleased with the progress of Mongoose Sports and
Mongoose Promotions, our start-ups of three years ago, both of
which moved into profit far earlier than we expected and continued
to grow through the year.
During the course of the year we were particularly pleased with
the progress achieved by Pathfindr, our embryonic asset tracking
business, which nearly doubled its turnover to GBP0.9m (2018:
GBP0.5m) as it expanded the installed base for its tracking devices
and grew its customer numbers. The time taken from initial quote
and proof of concept to securing invoiced revenue has proven to be
different, and longer, than for our Agency businesses, but the
prospects for further growth in the coming years remain very
strong.
Our People
The collaborative nature and entrepreneurial spirit that MISSION
fosters is the cornerstone of our culture and we are particularly
proud of the focus we place on developing our people, drawing great
talent into our business from across the country and offering
exciting career paths throughout the Group. Through the
introduction of our new Strategic People Plan we have focused on
our priority areas of Developing Talent, Supporting Performance,
Reward and Recognition, Leadership and Development, Equality,
Diversity and Inclusion and Organisational Development.
A particular highlight during 2019 was our new partnership with
Creative Access. As part of our focus on promoting diversity within
our own business, we recognise that people from BAME backgrounds
are under-represented across our industry as a whole. This
important initiative is focussed on helping to attract talent from
more diverse backgrounds and to actively promote opportunities to
join the Group. As part of this programme, senior leaders from
across the Group will mentor young people from BAME backgrounds
looking to progress in the industry.
With collaboration being a core focus for MISSION , we also
launched Ignition, a Group-wide competition led by our Fuse
business. This competition encourages new and innovative
suggestions for tomorrow's products and services. The winning
entrant receives backing from the Group to develop their idea into
proof of concept, prototype and beyond, and the opportunity to
participate personally in its commercial success.
At the time of writing, the world is changing rapidly. But as
demonstrated by these results, MISSION is a diverse mix of
collaborative specialists who work together to deliver real
business growth for our Clients. It is exactly this ethos and
approach that our Clients will continue to demand, arguably even
more so, when the world returns to normality.
James Clifton
Group Chief Executive
1 April 2020
CHIEF FINANCIAL OFFICER'S REPORT
The Group manages its internal operational performance and
capital management by monitoring various key performance indicators
("KPIs"). The KPIs are tailored to the level at which they are used
and their purpose. The Board has reviewed and retained its long
term financial KPIs, which are quantified and commented on in the
financial review of the year below, as follows:
-- operating income ("revenue"), which the Group aims to grow by at least 5% per year;
-- headline operating profit margins, which the Group is
targeting to increase from 11.5% in 2016 to 14% by 2021;
-- headline profit before tax, which the Group aims to increase by 10% year-on-year; and
-- indebtedness, where the Group has set a limit for the ratio
of net bank debt to EBITDA* of x1.5 and for the ratio of total debt
(including both bank debt and deferred acquisition consideration)
to EBITDA of x2.0.
*EBITDA is headline operating profit before depreciation and
amortisation charges and before the impact of IFRS 16.
At the individual Agency level, the Group's financial KPIs
comprise revenue and controllable profitability measures,
predominantly based on the achievement of the annual budget. More
detailed KPIs are applied within individual Agencies. In addition
to financial KPIs, the Board periodically monitors the length of
Client relationships, the forward visibility of revenue and the
retention of key staff.
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 following commentary.
TRADING PERFORMANCE
Overview
2019 saw revenue growth on continuing operations of 4%, all
organic, an improvement in operating margins to 13.3% and growth in
headline profit before tax of 11%. Debt leverage ratios remained
comfortably within the Board's limits.
Billings and Revenue
Turnover (billings) was 7% higher than the previous year, at
GBP171.1m (2018: GBP159.9m), but since billings include
pass-through costs (e.g. TV companies' charges for buying airtime),
the Board does not consider turnover to be a key performance
measure for its Agencies. Instead, the Board views operating income
(turnover less third-party costs) as a more meaningful measure of
activity levels. The exception to this is Pathfindr, the Group's
embryonic asset tracking business, where turnover is a more
relevant measure to gauge progress over time and against relevant
competitors.
Operating income (referred to as "revenue") increased 4% to
GBP81.0m (2018: GBP77.6m), representing our ninth consecutive year
of growth. 2019 was undoubtedly a challenging year given the
considerable political uncertainty, and we were pleased that the
mix of businesses in our portfolio was resilient against this
backdrop.
All growth in the year came from our core business, since we
made no acquisitions during 2019, and all of our different business
activities showed year-on-year progress.
Pathfindr showed good progress during the year, nearly doubling
its turnover to GBP0.9m (2018: GBP0.5m) as it expanded the install
base for its tracking devices and grew its customer numbers. The
time taken from initial quote and proof of concept to securing
invoiced revenue has proven to be different, and longer, than for
our Agency businesses, but the prospects for further growth in the
coming years remain very strong.
Profit and Margins
The Directors measure and report the Group's performance
primarily by reference to headline results, in order to avoid the
distortions created by one-off events and non-cash accounting
adjustments relating to acquisitions. Headline results are
calculated before the profit/loss on investments, acquisition
adjustments and losses from start-up activities (as set out in Note
4).
Headline operating profit improved by 8% to GBP10.8m (2018:
GBP9.9m), all from our core business. Our profit margin for the
year (headline operating profit as a percentage of revenue) again
improved, to 13.3% (2018: 12.8%). This was the result of several
factors, including changes in mix between Agencies and lower
central costs.
The bias of profitability towards the second half of the year as
a consequence of Clients' spending patterns repeated itself again,
with 66% (2018: 65%) of our operating profit generated in this
period but, more than ever, Client spending came towards the end of
the year.
After GBP0.1m of profits from joint ventures (2018: GBPnil) and
largely unchanged financing costs of GBP0.7m, headline profit
before tax increased by 11% to GBP10.2m (2018: GBP9.2m).
Adjustments to reported profits, detailed further in Note 4,
totalled GBP1.9m (2018: GBP1.5m), comprising acquisition-related
items of GBP1.3m, up from GBP1.0m in 2018, reflecting the krow
acquisition made during 2018, losses from start-up activities of
GBP0.4m, up from GBP0.1m in 2018 as we expanded into China and
Germany, and investment write-downs of GBP0.1m (2018: GBP0.3m).
After these adjustments, reported profit before tax was GBP8.3m
(2018: GBP7.7m).
Taxation
The Group's headline tax rate increased slightly, to 20.5%
(2018: 20.1%). Consistent with previous years, the rate was above
the statutory rate, mainly as a result of non-deductible trading
losses and entertaining expenditure.
On a reported basis, the Group's tax rate was 22.5% (2018:
16.2%). The tax rate is expected to be consistently higher than the
statutory rate (of 19.0%, unchanged from 2018) since the
amortisation of acquisition-related intangibles is not deductible
for tax purposes but, in 2018, the tax rate was significantly
reduced by the tax-free profit on the sale of BroadCare. Excluding
the BroadCare sale, the reported rate in 2018 was 22.1%.
Earnings Per Share
Headline EPS increased by 9% to 9.47 pence (2018: 8.67 pence)
and, on a diluted basis, increased by 6% to 9.00 pence (2018: 8.46
pence). Growth in diluted EPS was lower than growth in profits due
to the effect of the Growth Share Scheme, for which the performance
condition was met during 2019.
After tax, reported profit for the year was GBP6.4m (2018:
GBP6.0m) and EPS was 7.51 pence (2018: 7.08 pence). On a diluted
basis, EPS was 7.14 pence (2018: 6.91 pence).
DIVIDS
The Board adopts a progressive dividend policy, aiming to grow
dividends each year in line with earnings but always balancing the
desire to reward shareholders via dividends with the need to fund
the Group's growth ambitions and maintain a strong balance
sheet.
A dividend of 0.77 pence per share was paid in December 2019,
representing a 10% increase over last year. The Board has proposed
a resolution for a 10% higher final dividend of 1.53 pence per
share in its AGM Notice, recognising how important the dividend is
to our shareholders, but in the light of the coronavirus pandemic
and the considerable uncertainty about both the severity and
duration of its impact, will make a final decision in the light of
prevailing circumstances as we approach the AGM on 15 June.
BALANCE SHEET
In common with other marketing communications groups, the main
features of our balance sheet are the goodwill and other intangible
assets resulting from acquisitions made over the years, and the
debt taken on in connection with those acquisitions.
The level of intangible assets relating to acquisitions remained
virtually unchanged during the year but in contrast, the level of
total debt (combined net bank debt and acquisition obligations)
reduced by GBP2.0m.
The Board undertakes an annual assessment of the value of all
goodwill, explained further in Note 12, and at 31 December 2019
again concluded that no impairment in the carrying value was
required.
The Group's acquisition obligations at the end of 2019 were
GBP8.9m (2018: GBP11.8m), to be satisfied by a mix of cash and
shares. All of this is dependent on post-acquisition earn-out
profits. GBP3.3m is expected to fall due for payment in cash within
12 months and a further GBP3.7m in cash in the subsequent 12
months.
CASH FLOW
Net cash inflow from operating activities increased to GBP9.3m
despite t he back-ended nature of our trading which resulted in an
increase in working capital requirements at the end of the year.
This cash flow funded capital expenditure of GBP1.3m (2018:
GBP1.0m), increased software development investment of GBP0.8m
(2018: GBP0.4m), the settlement of contingent consideration
obligations relating to the profits generated by previous
acquisitions, totaling GBP2.7m (2018: GBP1.7m), and dividends of
GBP1.8m (2018: GBP1.7m).
At the end of the year, the Group's net bank debt stood at
GBP4.9m (2018: GBP4.0m). On an adjusted basis (pre-IFRS 16), the
leverage ratio of net bank debt to headline EBITDA remained below
x0.5 at 31 December 2019 (2018: x0.5). The Group's adjusted ratio
of total debt, including remaining acquisition obligations, to
EBITDA at 31 December 2019 remained unchanged at x1.1.
GOING CONCERN
As mentioned in our statement of Principal Risks &
Uncertainties, in view of the UK political uncertainty and real
possibility of a no-deal Brexit, we undertook a stress test on our
banking facilities during the year to ensure that the Group could
withstand an economic downturn of the magnitude experienced
following the 2008 global financial crisis, when the Group's
profits reduced by around 30%. The conclusion of this assessment
was that the Group had sufficient facilities to withstand a repeat
of similar magnitude.
The potentially more severe impact from the coronavirus pandemic
has caused us to revisit that stress testing and to model various
scenarios and the Group's ability to adapt and take mitigating
actions. The consensus view at the time of writing is that there is
likely to be a sharp slowdown in the second quarter of the year,
with a recovery in H2. We have modelled downturns of differing
severity and duration and concluded that the Group can weather the
storm within its committed banking facilities, which have recently
been increased to GBP20m.
Notwithstanding that conclusion, the Board has already taken,
and will be taking further, mitigating actions. The Board has
placed the final dividend due for payment in July under review and
all Board members have voluntarily reduced their salaries.
Capital expenditure has been reduced to a minimum and the Group
will seek to defer a proportion of its other commitments. The Group
will also look to take advantage of the financial assistance being
offered by the Government.
Together, these actions will result in additional headroom
against our banking facilities and are considered sufficient to
enable the Group to withstand the impact of Covid-19.
Peter Fitzwilliam
Chief Financial Officer
1 April 2020
Consolidated Income Statement
For the year ended 31 December 2019
Total
Year to Continuing Discontinued Year to
31 operations operations 31 December
2018
December 2018 2018
2019 (Restated) (Restated)
Note GBP'000 GBP'000 GBP'000 GBP'000
TURNOVER 3 171,091 159,916 1,476 161,392
Cost of sales (90,119) (82,331) (221) (82,552)
OPERATING INCOME 3 80,972 77,585 1,255 78,840
Headline operating expenses (70,219) (67,666) (776) (68,442)
HEADLINE OPERATING PROFIT 10,753 9,919 479 10,398
Acquisition adjustments 4 (1,320) (1,010) - (1,010)
Start-up costs 4 (431) (139) - (139)
(Loss) / profit on investments 4 (109) (312) 2,981 2,669
----------- ------------- -------------- ---------------
OPERATING PROFIT 8,893 8,458 3,460 11,918
Share of results of associates
and joint ventures 69 (1) - (1)
----------- ------------- -------------- ---------------
PROFIT BEFORE INTEREST
AND TAXATION 8,962 8,457 3,460 11,917
Net finance costs 6 (668) (735) - (735)
PROFIT BEFORE TAXATION 7 8,294 7,722 3,460 11,182
Taxation 8 (1,868) (1,710) (96) (1,806)
----------- ------------- -------------- ---------------
PROFIT FOR THE YEAR 6,426 6,012 3,364 9,376
----------- ------------- -------------- ---------------
Attributable to:
Equity holders of the
parent 6,314 5,901 3,364 9,265
Non-controlling interests 112 111 - 111
----------- ------------- -------------- ---------------
6,426 6,012 3,364 9,376
----------- ------------- -------------- ---------------
Basic earnings per share
(pence) 10 7.51 7.08 4.04 11.12
Diluted earnings per share
(pence) 10 7.14 6.91 3.94 10.85
Headline basic earnings
per share (pence) 10 9.47 8.67 0.46 9.13
Headline diluted earnings
per share (pence) 10 9.00 8.46 0.45 8.90
2018 comparative information has been restated in all primary
statements and notes to the financial statements following the
adoption of IFRS16 (see note 2).
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2019
Total
Year to Continuing Discontinued Year to
31 December operations operations 31 December
2019 2018 2018
2018 (Restated)
(Restated)
GBP'000 GBP'000 GBP'000 GBP'000
PROFIT FOR THE YEAR 6,426 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 (50) 73 - 73
-------------- ------------- -------------- --------------
TOTAL COMPREHENSIVE INCOME
FOR THE YEAR 6,376 6,085 3,364 9,449
-------------- ------------- -------------- --------------
Attributable to:
Equity holders of the
parent 6,285 5,933 3,364 9,297
Non-controlling interests 91 152 - 152
-------------- ------------- -------------- --------------
6,376 6,085 3,364 9,449
-------------- ------------- -------------- --------------
Consolidated Balance Sheet
As at 31 December 2019
As at As at
31 December 31 December
2019 2018
(Restated)
Note GBP'000 GBP'000
FIXED ASSETS
Intangible assets 11 95,859 96,121
Property, plant and equipment 3,225 3,125
Right of use assets 8,135 7,733
Investments in associates and
joint ventures 12 177 -
Deferred tax assets - 23
107,396 107,002
------------- -------------
CURRENT ASSETS
Stock 1,091 850
Trade and other receivables 13 40,998 39,727
Cash and short term deposits 5,028 5,899
------------- -------------
47,117 46,476
CURRENT LIABILITIES
Trade and other payables 14 (36,015) (37,060)
Corporation tax payable (742) (668)
Acquisition obligations 17 (3,424) (3,258)
(40,181) (40,986)
------------- -------------
NET CURRENT ASSETS 6,936 5,490
TOTAL ASSETS LESS CURRENT LIABILITIES 114,332 112,492
------------- -------------
NON CURRENT LIABILITIES
Bank loans 15 (9,927) (9,886)
Lease liabilities 16 (6,229) (6,022)
Acquisition obligations 17 (5,458) (8,537)
Deferred tax liabilities (417) (451)
------------- -------------
(22,031) (24,896)
------------- -------------
NET ASSETS 92,301 87,596
------------- -------------
CAPITAL AND RESERVES
Called up share capital 18 8,530 8,436
Share premium account 43,015 42,506
Own shares 19 (659) (299)
Share-based incentive reserve 700 498
Foreign currency translation
reserve 88 117
Retained earnings 40,021 35,826
------------- -------------
EQUITY ATTRIBUTABLE TO EQUITY
HOLDERS OF THE PARENT 91,695 87,084
------------- -------------
Non-controlling interests 606 512
------------- -------------
TOTAL EQUITY 92,301 87,596
------------- -------------
Consolidated Cash Flow Statement
For the year ended 31 December 2019
Year to Year to
31 December 31 December
2019 2018
(Restated)
GBP'000 GBP'000
Operating profit 8,893 11,918
Depreciation and amortisation charges 4,832 4,738
Movements in the fair value of contingent
consideration 433 (67)
Profit on disposal of property, plant
and equipment (49) (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 215 183
Increase in receivables (1,271) (2,022)
Increase in stock (241) (182)
Decrease in payables (1,106) (210)
------------- -------------
OPERATING CASH FLOWS 11,706 11,684
Net finance costs paid (626) (826)
Tax paid (1,805) (1,906)
------------- -------------
Net cash inflow from operating activities 9,275 8,952
------------- -------------
INVESTING ACTIVITIES
Proceeds on disposal of property, plant
and equipment 151 30
Purchase of property, plant and equipment (1,472) (1,014)
Investment in software development (848) (377)
Proceeds from disposal of BroadCare - 4,099
Acquisition of subsidiaries - (2,990)
Acquisition of investments in associates
and joint ventures (108) -
Payment relating to acquisitions made
in prior years (2,731) (1,748)
Cash disposed of and costs of disposal
of BroadCare - (584)
Cash acquired with subsidiaries - 553
Net cash outflow from investing activities (5,008) (2,031)
------------- -------------
FINANCING ACTIVITIES
Dividends paid (1,831) (1,546)
Dividends paid to non-controlling interests - (149)
Repayment of lease liabilities (2,579) (2,446)
Repayment of bank loans - (3,125)
Issue of shares to minority interests 3 -
(Purchase) / sale of own shares held
in EBT (681) 311
Net cash outflow from financing activities (5,088) (6,955)
------------- -------------
Decrease in cash and cash equivalents (821) (34)
Exchange differences on translation
of foreign subsidiaries (50) 73
Cash and cash equivalents at beginning
of year 5,899 5,860
------------- -------------
Cash and cash equivalents at end of
year 5,028 5,899
------------- -------------
Consolidated Statement of Changes in Equity For the year ended
31 December 2019
Total
Share- Foreign attributable
based currency to equity Non-controlling
Share Share Own incentive translation Retained holders interest Total
capital premium shares reserve reserve earnings of parent equity
(Restated) (Restated) GBP'000 (Restated)
GBP'000 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 the
year - - - - - 9,265 9,265 111 9,376
Exchange
differences
on
translation
of foreign
operations - - - - 32 - 32 41 73
--------------- --------- --------- --------- ----------- ------------- ------------ -------------- ----------------- ------------
Total
comprehensive
income
for the
year - - - - 32 9,265 9,297 152 9,449
Share option
charge - - - 69 - - 69 - 69
Growth
share charge - - - 88 - - 88 - 88
Shares
awarded
and sold
from own
shares - - 303 - - 35 338 - 338
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 the
year - - - - - 6,314 6,314 112 6,426
Exchange
differences
on
translation
of foreign
operations - - - - (29) - (29) (21) (50)
--------------- --------- --------- --------- ----------- ------------- ------------ -------------- ----------------- ------------
Total
comprehensive
income
for the
year - - - - (29) 6,314 6,285 91 6,376
New shares
issued 94 509 - - - - 603 3 606
Share option
charge - - - 127 - - 127 - 127
Growth
share charge - - - 75 - - 75 - 75
Own shares
purchased - - (681) - - - (681) - (681)
Shares
awarded
and sold
from own
shares - - 321 - - (288) 33 - 33
Dividend
paid - - - - (1,831) (1,831) - (1,831)
--------------- --------- --------- --------- ----------- ------------- ------------ -------------- ----------------- ------------
At 31 December
2019 8,530 43,015 (659) 700 88 40,021 91,695 606 92,301
--------------- --------- --------- --------- ----------- ------------- ------------ -------------- ----------------- ------------
Notes to the Consolidated Financial Statements
1. Principal Accounting Policies
Basis of preparation
The results for the year to 31 December 2019 have been extracted
from the audited consolidated financial statements, which are
expected to be published by 15 April 2020.
The financial information set out above does not constitute the
Company's statutory accounts for the years to 31 December 2019 or
2018 but is derived from those accounts. Statutory accounts for the
year ended 31 December 2018 were delivered to the Registrar of
Companies following the Annual General Meeting on 15 June 2019 and
the statutory accounts for 2019 are expected to be published on the
Group's website ( www.themission.co.uk ) shortly, posted to
shareholders at least 21 days ahead of the Annual General Meeting
("AGM") on 15 June 2020 and, after approval at the AGM, delivered
to the Registrar of Companies.
The auditors, PKF Francis Clark, have reported on the accounts
for the years ended 31 December 2019 and 31 December 2018; their
reports in both years were (i) unqualified, (ii) did not include a
reference to any matters to which the auditors drew attention by
way of emphasis without qualifying their report and (iii) did not
contain a statement under Section 498 (2) or (3) of the Companies
Act 2006 in respect of those accounts.
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 year.
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
Year to 31 Year to 31
December December
2019 2018
Note GBP'000 GBP'000
Decrease in operating
lease expenses i 2,766 2,649
Increase in depreciation
expense i (2,396) (2,194)
----------- -----------
Increase in headline
operating profit 370 455
Increase in finance
costs i (272) (266)
----------- -----------
Increase in headline
PBT, headline PAT
and profit for the
period 98 189
----------- -----------
Impact on earnings per share
Year to Year to 31
31
December December
2019 2018
Increase in reported and headline
earnings per share:
Basic earnings per share (pence) 0.12 0.23
Diluted earnings per share (pence) 0.11 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 31 December 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 3,294 (69) 3,225
Right of use assets i, ii - 8,135 8,135
Prepayments iii 2,802 (43) 2,759
Impact on total assets 8,421
Other creditors and
accruals iii (9,154) (179) (9,333)
Short term lease liabilities i (42) (2,533) (2,575)
Long term lease liabilities i - (6,229) (6,229)
--------------------
Impact on total liabilities (8,941)
Retained earnings 40,541 (520) 40,021
--------------------
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
IFRS 15: Revenue from Contracts with Customers requires the
disaggregation of revenue into categories that depict how the
nature, amount, timing and uncertainty of revenue and cash flows
are affected by economic factors. The Board has considered how the
Group's revenue might be disaggregated in order to meet the
requirements of IFRS 15 and has concluded that the activity and
geographical segmentation disclosures set out below represent the
most appropriate categories of disaggregation. The Board considers
that neither differences between types of Clients, sales channels
and markets nor differences between contract duration and the
timing of transfer of goods or services are sufficiently
significant to require further disaggregation.
For management purposes the Group monitored 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.
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 Total
& Digital Buying & Learning Relations
Year to 31 December 2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------ -------- ------------ ----------- --------
Turnover 109,421 30,855 20,162 10,653 171,091
------------ -------- ------------ ----------- --------
Operating income 64,510 3,694 5,226 7,542 80,972
------------ -------- ------------ ----------- --------
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
Turnover - discontinued
operations 1,476 - - - 1,476
------------ -------- ------------ ----------- --------
Turnover - 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
Operating income - discontinued 1,255 - - - 1,255
------------ -------- ------------ ----------- --------
Operating income - total
Group 63,060 3,469 5,202 7,109 78,840
------------ -------- ------------ ----------- --------
As contracts typically have an original expected duration of
less than one year, the full amount of the accrued income balance
at the beginning of the year is recognised in revenue during the
year. All media buying turnover is recognised at a point in time.
Virtually all other turnover from continuing operations is
recognised over time.
Assets and liabilities are not split between activities.
Geographical segmentation
The following table provides an analysis of the Group's
operating income by region of activity:
Year to 31 Year to
31
December December
2019 2018
GBP'000 GBP'000
From continuing operations
UK 72,228 68,519
USA 4,618 4,005
Asia 4,103 5,061
Rest of Europe 23 -
80,972 77,585
----------- ---------
From discontinued operations
UK - 1,255
-------- ------
From continuing and
discontinued operations
UK 72,228 69,774
USA 4,618 4,005
Asia 4,103 5,061
Rest of Europe 23 -
80,972 78,840
----------- -------
4. Reconciliation of Headline Profit to Reported Profit
The Board believes that headline profits, which eliminate
certain amounts from the reported figures, provide a better
understanding of the underlying trading of the Group. The
adjustments to reported profits generally fall into three
categories: acquisition-related items, start-up costs and profit /
loss on investments.
Year ended Year ended
31 December 31 December
2019 2018
(Restated)
GBP'000 GBP'000
PBT PAT PBT PAT
GBP'000 GBP'000 GBP'000 GBP'000
From continuing operations
Headline profit 10,154 8,075 9,183 7,334
Acquisition-related items (Note
5) (1,320) (1,200) (1,010) (895)
Start-up costs (431) (358) (139) (115)
Write off of investments and
associates (109) (91) (312) (312)
------------ -------- -------- ------
Reported profit 8,294 6,426 7,722 6,012
------------ -------- -------- ------
From discontinued operations
Headline profit - - 479 383
Profit on sale of BroadCare - - 2,981 2,981
Reported profit - - 3,460 3,364
From continuing and discontinued
operations
Headline profit 10,154 8,075 9,662 7,717
Profit on sale of BroadCare - - 2,981 2,981
Acquisition-related items (Note
5) (1,320) (1,200) (1,010) (895)
Start-up costs (431) (358) (139) (115)
Write off of investments and associates (109) (91) (312) (312)
Reported profit 8,294 6,426 11,182 9,376
------------ -------- -------- ------
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. Start-up costs in 2019 relate to the
launches of April Six's new venture in Germany and Story's new
venture in Leeds, and trading losses at April Six's China operation
. Start- up costs in 2018 related to April Six's venture in China
and trading losses at Mongoose Promotions (now profitable).
5. Acquisition Adjustments
Year to Year to
31 December 31 December
2019 2018
GBP'000 GBP'000
Amortisation of other intangibles recognised
on acquisitions (870) (915)
Movement in fair value of contingent consideration (433) 67
Acquisition transaction costs expensed (17) (162)
------------- -------------
(1,320) (1,010)
------------- -------------
The movement in fair value of contingent consideration relates
to a net upward (2018: downward) revision in the estimate payable
to vendors of businesses acquired in prior years . Acquisition
transaction costs relate to professional fees in connection with
acquisitions made or contemplated.
6. Net Finance Costs
Year to Year to
31 December 31 December
2019 2018
(Restated)
GBP'000 GBP'000
Interest on bank loans and overdrafts,
net of interest on bank deposits (351) (394)
Amortisation of bank debt arrangement
fees (41) (66)
Interest expense on lease liabilities (276) (275)
Net finance costs (668) (735)
------------- -------------
7. Profit Before Taxation
Profit on ordinary activities before taxation is stated after
charging / (crediting):
Year to Year to
31 December 31 December
2019 2018
(Restated)
GBP'000 GBP'000
Depreciation of owned tangible fixed assets 1,270 1,164
Depreciation expense on right of use assets 2,452 2,228
Amortisation of intangible assets recognised
on acquisitions 870 915
Amortisation of other intangible assets 240 371
Expense relating to short term leases 77 108
Expense relating to low value leases 23 40
Income from subleasing right of use assets (30) -
Staff costs 52,931 51,363
Bad debts and net movement in provision for
bad debts (3) 27
Auditors' remuneration 205 271
Loss / (gain) on foreign exchange 160 (114)
Auditors' remuneration may be analysed by:
Year to Year to
31 December 31 December
2019 2018
GBP'000 GBP'000
Audit of Group's annual report and financial
statements 42 41
Audit of subsidiaries 110 133
Audit related assurance services 5 5
Tax advisory services 26 26
Corporate finance 16 61
Other services 6 5
205 271
------------- -------------
8. Taxation
Year to Year to
31 December 31 December
2019 2018
GBP'000 GBP'000
Current tax:-
UK corporation tax at 19.00% (2018: 19.00%) 1,693 1,752
Adjustment for prior periods (64) (58)
Foreign tax on profits of the period 290 214
------------- -------------
1,919 1,908
Deferred tax:-
Current year originating temporary differences (51) (102)
Tax charge for the year 1,868 1,806
------------- -------------
Factors Affecting the Tax Charge for the Current Year:
The tax assessed for the year is higher (2018: lower) than the
standard rate of corporation tax in the UK. The differences
are:
Year to Year to
31 December 31 December
2019 2018
(Restated)
GBP'000 GBP'000
Profit before taxation 8,294 11,182
------------- -------------
Profit on ordinary activities before tax
at the standard rate of corporation tax
of 19.00% (2018: 19.00%) 1,576 2,125
Effect of:
Non-deductible expenses 161 238
Losses not utilised 157 54
Non-taxable profit on sale of Broadcare - (581)
Non-deductible impairment of investments 19 60
Adjustments in respect of prior periods (43) (58)
Other differences (2) (32)
------------- -------------
Actual tax charge for the year 1,868 1,806
------------- -------------
9. Dividends
Year to Year to
31 December 31 December
2019 2018
GBP'000 GBP'000
Amounts recognised as distributions to equity
holders in the year:
Interim dividend of 0.77 pence (2018: 0.7
pence) per share 648 585
Prior year final dividend of 1.4 pence (2018:
1.15 pence) per share 1,183 961
------------- -------------
1,831 1,546
------------- -------------
A final dividend of 1.53 pence per share is to be paid in July
2020 should it be approved by shareholders at the AGM. In
accordance with IFRS this final dividend will be recognised in the
2020 accounts.
10. 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.
Year to Year to
31 December 31 December
2019 2018
(Restated)
GBP'000 GBP'000
Earnings
Reported profit for the year
From continuing operations 6,426 6,012
Attributable to:
Equity holders of the parent 6,314 5,901
Non-controlling interests 112 111
------------- -------------
6,426 6,012
------------- -------------
From discontinued operations - 3,364
Attributable to:
Equity holders of the parent - 3,364
Non-controlling interests - -
------------- -------------
- 3,364
------------- -------------
From continuing and discontinued operations 6,426 9,376
Attributable to:
Equity holders of the parent 6,314 9,265
Non-controlling interests 112 111
------------- -------------
6,426 9,376
------------- -------------
Headline earnings (Note 4)
From continuing operations 8,075 7,334
Attributable to:
Equity holders of the parent 7,963 7,223
Non-controlling interests 112 111
------------- -------------
8,075 7,334
------------- -------------
From discontinued operations - 383
Attributable to:
Equity holders of the parent - 383
Non-controlling interests - -
------------- -------------
- 383
------------- -------------
From continuing and discontinued operations 8,075 7,717
Attributable to:
Equity holders of the parent 7,963 7,606
Non-controlling interests 112 111
8,075 7,717
Number of shares
Weighted average number of Ordinary shares
for the purpose of basic earnings per share 84,056,636 83,338,888
Dilutive effect of securities:
Employee share options 4,426,774 2,081,410
Weighted average number of Ordinary shares
for the purpose of diluted earnings per
share 88,483,410 85,420,298
From continuing operations
Basic earnings per share (pence) 7.51 7.08
Diluted earnings per share (pence) 7.14 6.91
From discontinued operations
Basic earnings per share (pence) - 4.04
Diluted earnings per share (pence) - 3.94
From continuing and discontinued operations
Basic earnings per share (pence) 7.51 11.12
Diluted earnings per share (pence) 7.14 10.85
Headline basis:
From continuing operations
Basic earnings per share (pence) 9.47 8.67
Diluted earnings per share (pence) 9.00 8.46
From discontinued operations
Basic earnings per share (pence) - 0.46
Diluted earnings per share (pence) - 0.45
From continuing and discontinued operations
Basic earnings per share (pence) 9.47 9.13
Diluted earnings per share (pence) 9.00 8.90
A reconciliation of the profit after tax on a reported basis and
the headline basis is given in Note 4.
11. Intangible Assets
31 December 31 December
2019 2018
(Restated)
GBP'000 GBP'000
Goodwill 91,752 91,752
Other intangible assets 4,107 4,369
95,859 96,121
------------- ------------
Goodwill
Year to Year to
31 December 31 December
2019 2018
(Restated)
GBP'000 GBP'000
Cost
At 1 January 96,025 89,064
Recognised on acquisition of subsidiaries - 6,961
At 31 December 96,025 96,025
------------- -------------
Impairment adjustment
At 1 January and 31 December 4,273 4,273
Net book value at 31 December 91,752 91,752
------- -------
In accordance with the Group's accounting policies, an annual
impairment test is applied to the carrying value of goodwill. The
review performed assesses whether the carrying value of goodwill is
supported by the net present value of projected cash flows derived
from the underlying assets for each cash-generating unit ("CGU").
For all CGUs, the Directors assessed the sensitivity of the
impairment test results to changes in key assumptions (in
particular expectations of future growth) and concluded that a
reasonably possible change to the key assumptions would not cause
the carrying value of goodwill to exceed the net present value of
its projected cash flows.
Other intangible assets
Software Trade names Customer Total
development relationships
and licences
GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January 2018 2,192 1,033 3,985 7,210
-------------- ------------ --------------- --------
Additions 377 748 1,886 3,011
Disposals (832) - - (832)
At 31 December 2018 1,737 1,781 5,871 9,389
-------------- ------------ --------------- --------
Additions 848 - - 848
Disposals (122) - - (122)
At 31 December 2019 2,463 1,781 5,871 10,115
-------------- ------------ --------------- --------
Amortisation and impairment
At 1 January 2018 1,010 174 2,866 4,050
-------------- ------------ --------------- --------
Charge for the year 371 132 783 1,286
Disposals (316) - - (316)
-------------- ------------ --------------- --------
At 31 December 2018 1,065 306 3,649 5,020
-------------- ------------ --------------- --------
Charge for the year 240 75 795 1,110
Disposals (122) - - (122)
-------------- ------------ --------------- --------
At 31 December 2019 1,183 381 4,444 6,008
-------------- ------------ --------------- --------
Net book value at 31
December 2019 1,280 1,400 1,427 4,107
-------- -------- -------- --------
Net book value at 31
December 2018 672 1,475 2,222 4,369
------ -------- -------- --------
Additions of GBP848,000 (2018: GBP377,000) in the year include
costs associated with the development of identifiable software
products that are expected to generate economic benefits in excess
of the costs of development.
Intangible assets include an amount of GBP617,000 (2018:
GBP692,000) relating to the krow trade name, which has attained
recognition in the marketplace and plays a role in attracting and
retaining Clients. This value will be amortised over the next 8
years (2018: 9 years). Also included is an amount of GBP1,336,000
(2018: GBP1,650,000) relating to krow customer relationships. Krow
has developed a base of customers to whom the Group would expect to
continue selling in the future. The remaining useful life of these
customer relationship is deemed to by 4 years (2018: 5 years) and
the value will be amortised over this period.
12. Investments in Associates and Joint Ventures
Year to Year to
31 December 31 December
2019 2018
GBP'000 GBP'000
At 1 January - 313
Profit / (loss) during the year 69 (1)
Additions 108 -
Write down of investment - (312)
------------ ------------
At 31 December 177 -
------------ ------------
In 2019 the Group transferred its Learning activities into an
established company, Fenturi Limited, in exchange for a 25%
shareholding in that company. Fenturi is a Bristol-based digital
learning agency with historical, positive previous associations
with Bray Leino.
In 2018 the activities of Watchable Limited, a film and video
content company based in London, substantially ceased. As a
consequence, the value of the Group's 25% investment in associate
was written down to zero.
13. Trade and Other Receivables
31 December 31 December
2019 2018
GBP'000 GBP'000
Trade receivables 27,451 27,156
Accrued income 9,779 9,788
Prepayments 2,759 2,050
Other receivables 1,009 733
40,998 39,727
------------ ------------
An allowance has been made for estimated irrecoverable amounts
from the provision of services of GBP82,000 (2018: GBP62,000). The
estimated irrecoverable amount is arrived at by considering the
historic loss rate and adjusting for current expectations, Client
base and economic conditions. Both historic losses and expected
future losses being very low, the Directors consider it appropriate
to apply a single average rate for expected credit losses to the
overall population of trade receivables and accrued income. Accrued
income relates to unbilled work in progress and has substantially
the same risk characteristics as the trade receivables for the same
types of contracts. The Directors consider that the carrying amount
of trade and other receivables approximates their fair value.
31 December 31 December
2019 2018
GBP'000 GBP'000
Gross trade receivables 27,533 27,218
Gross accrued income 9,779 9,788
------------ ------------
Total trade receivables and accrued income 37,312 37,006
Expected loss rate 0.2% 0.2%
Provision for doubtful debts 82 62
14. Trade and Other Payables
31 December 31 December
2019 2018
(Restated)
GBP'000 GBP'000
Trade creditors 14,050 13,645
Other creditors and accruals 9,333 9,847
Deferred income 5,754 6,755
Other tax and social security payable 4,303 4,306
Lease liabilities 2,575 2,507
36,015 37,060
------------ ------------
Deferred income has decreased by GBP1,001,000 as a result of
changes to contractual terms and billings to a few Clients who
accounted for a significant portion of the deferred income balance
at 31 December 2018.
The Directors consider that the carrying amount of trade and
other payables approximates their fair value.
15. Bank Overdrafts, Loans and Net Debt
31 December 31 December
2019 2018
GBP'000 GBP'000
Bank loan outstanding 10,000 10,000
Unamortised bank debt arrangement fees (73) (114)
Carrying value of loan outstanding 9,927 9,886
Less: Cash and short term deposits (5,028) (5,899)
------------ ------------
Net bank debt 4,899 3,987
------------ ------------
The borrowings are repayable as follows:
Less than one year - -
In one to two years 10,000 -
In more than two years but less than
three years - 10,000
10,000 10,000
Unamortised bank debt arrangement fees (73) (114)
9,927 9,866
Less: Amount due for settlement within
12 months (shown under current liabilities) - -
------------ ------------
Amount due for settlement after 12 months 9,927 9,886
------------ ------------
Bank debt arrangement fees, where they can be amortised over the
life of the loan facility, are included in finance costs. The
unamortised portion is reported as a reduction in bank loans
outstanding.
At 31 December 2019, the Group's committed bank facilities
comprised a 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. Since the year end, the option to extend the
facility by GBP5.0m has been implemented and the Group's committed
facilities at the date of this report total GBP20.0m.
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%.
At 31 December 2019, there was a cross guarantee structure in
place with the Group's bankers by means of a fixed and floating
charge over all of the assets of the Group companies in favour of
Royal Bank of Scotland plc.
All borrowings are in sterling.
16. Lease Liabilities
Obligations under leases are due as follows:
31 December 31 December
2019 2018
(Restated)
GBP'000 GBP'000
In one year or less (shown in trade and
other payables) 2,575 2,507
In more than one year 6,229 6,022
8,804 8,529
------------ ------------
The fair values of the Group's lease obligations approximate
their carrying amount.
The Group's obligations under leases are secured by the lessor's
charge over the leased assets.
17. Acquisition Obligations
The terms of an acquisition provide that the value of the
purchase consideration, which may be payable in cash or shares 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 contingent consideration payments is as
follows:
31 December 2019 31 December 2018
Cash Shares Total Cash Shares Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Less than one year 3,261 163 3,424 2,653 605 3,258
Between one and two
years 3,690 160 3,850 2,116 75 2,191
In more than two years
but less than three
years - - - 5,568 295 5,863
In more than three
years but less than
four years 1,552 56 1,608 483 - 483
8,503 379 8,882 10,820 975 11,795
--------- ---------- --------- --------- ---------- ---------
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 (2,731) (615) (3,346)
Adjustments to estimates of
obligations 414 19 433
At 31 December 2019 8,503 379 8,882
--------- --------- ---------
18. Share Capital
31 December 31 December
2019 2018
GBP'000 GBP'000
Allotted and called up:
85,295,565 Ordinary shares of 10p each
(2018: 84,357,351 Ordinary shares of 10
p each) 8,530 8,436
------------ ------------
Share-based incentives
The Group has the following share-based incentives in issue:
At start Granted/ Waived/ Exercised At end
of year acquired lapsed of year
TMMG Long Term Incentive
Plan 1,505,250 - (104,922) (510,066) 890,262
Growth Share Scheme 5,720,171 - (286,009) - 5,434,162
The TMMG Long Term Incentive Plan ("LTIP") was created to
incentivise senior employees across the Group. Nil-cost options are
awarded at the discretion of, and vest based on criteria
established by, the Remuneration Committee. During the year,
510,066 options were exercised at an average share price of 76.7p
and at the end of the year 70,111 of the outstanding options are
exercisable.
Shares held in an Employee Benefit Trust will be used to satisfy
share options exercised under the Long Term Incentive Plan.
A Growth Share Scheme was implemented on 21 February 2017.
Participants in the scheme subscribed for Ordinary A shares in The
Mission Marketing Holdings Limited (the "growth shares") at a
nominal value. The performance condition attaching to these growth
shares was met during 2019 and the shares can be exchanged for an
equivalent number of Ordinary Shares in MISSION during the period
up to 60 days from the announcement of the Group's financial
results for the year ending 31 December 2019, subject only to
continued employment.
19. Own Shares
No. of shares GBP'000
At 31 December 2017 1,452,367 602
Awarded or sold during the year (711,000) (303)
At 31 December 2018 741,367 299
Own shares purchased during the year 623,570 681
Awarded or sold during the year (288,194) (321)
At 31 December 2019 1,076,743 659
-------------- --------
Shares are held in an Employee Benefit Trust to meet certain
requirements of the Long Term Incentive Plan.
20. Post Balance Sheet Events
The Financial Reporting Council has advised that the global
pandemic Covid-19 is not an adjusting post-balance sheet event for
31 December 2019 financial statements. There have been no other
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
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