TIDMTMMG
RNS Number : 2613A
The Mission Marketing Group PLC
23 March 2017
The Mission Marketing Group plc
Audited results for the year ended 31 December 2016
23 March 2017
The Mission Marketing Group plc ("TMMG" or "the mission(tm") ),
the marketing communications and advertising group, is pleased to
announce its audited results for the year ended 31 December
2016.
Financial headlines
-- Revenue up 8% to GBP65.9m (2015: GBP61.0m)
-- Over 20% of revenue again from Clients of 20+ years standing
-- Headline trading profit (operating profit before central
costs) up 9% to GBP9.3m (2015: GBP8.5m)
-- Headline operating profit margins improved slightly to 11.5% (2015: 11.4%)
-- Headline profit before tax up 9% to GBP7.0m (2015: GBP6.5m)
-- Headline diluted EPS up by 8% to 6.41 pence (2015: 5.91 pence)
-- Full year dividend up by 25% to 1.5p (2015: 1.2p)
-- Free cash flow of GBP5.3m generated
-- Total debt reduced by over GBP3m
-- Debt leverage headroom very comfortable
-- GBP0.8m invested in software development, creating new forms of intellectual property
David Morgan, Chairman, commented: "All the stuff going on in
the world didn't make for an easy 2016, so I'm delighted to report
that we made good progress and delivered another year of continued
growth.
We expect 2017 to be another year of further revenue and profit
growth. We again have a high degree of visibility over forecast
revenue and current indications are that we should expect good
organic growth during the year ahead. We continue to seek out
attractive acquisition opportunities to further enhance both our
range of services and our rate of growth. The other area of focus
for 2017 will be Fuse, a central sales and marketing hub created to
commercialise the opportunities created by our new technology
products. All in all it promises to be another busy and exciting
year."
Enquiries:
The Mission Marketing Group
plc 020 7462 1415
David Morgan, Executive Chairman
Peter Fitzwilliam, Finance
Director
finnCap Ltd 020 7220 0500
Geoff Nash/James Thompson
(Corporate Finance)
Stephen Norcross (Corporate
Broking)
the mission(tm) is a network of entrepreneurial marketing
communications Agencies employing over 950 people in the UK, Asia
and San Francisco. The Group comprises a complementary mix of
integrated generalists, specialists in specific
marketing/communications activities and specialists in particular
market sectors, all providing award-winning solutions to national
and international Clients.
www.themission.co.uk
The information communicated in this announcement contains
inside information for the purposes of Article 7 of the Market
Abuse Regulation (EU) No. 596/2014.
Chairman's Statement
All the stuff going on in the world didn't make for an easy
2016, but I'm delighted to report that our Agencies very much rose
to the occasion. As a result, we delivered another year of
continued growth and are well placed to make 2017 another
successful year.
A combination of spirit, passion, planning and focus ensured
that we made real progress against our internal performance
measures. Our focus on concinnity, where our moving parts often
behave as one, brought increased support and expertise to our
Clients and helped each Agency to deliver remarkable successes.
More business-related innovation saw further development of our
Pathfindr and Ethology technology-driven initiatives, and our
Broadcare patient management system has now been widely adopted
within the NHS.
Awards for creative excellence across many of our Agencies added
to the excitement generated across the mission(tm) , as did further
development in Asia, a revitalisation of our Speed and Mongoose
brands, and the latter's venture into Sales Promotion.
Core Clients continued to underpin our revenues, and strong new
business generation was achieved throughout the mission(tm) - wins
from the likes of O2, Thomson Reuters, Sky Bingo, HS2, Abbvie,
Bosch, Muller, Porsche China, Dulux and First Direct will help us
make further progress in 2017.
The acquisition of Chapter in 2015 is proving to be a great
success both financially and culturally as they have segued
seamlessly into the mission(tm) . Our start-up investments are
beginning to gain traction and we are seeing strong support for our
integrated approach where cross-Agency teams are being focused on
Clients' requirements. There remain many opportunities to provide
existing Clients with additional expertise and services. This
integrated approach helps underpin our confidence for the year
ahead.
In April 2016 Mike Smith joined us from Innocean as CEO of our
RLA Agency. Mike brings a wealth of advertising and automotive
experience and sees clear opportunities for RLA to build further
through the commercialisation of its technology platforms that he
considers to be unrivalled in the sector.
We will endeavour to capitalise on our syncretistic strategy as
we grow, developing and expanding both the reach and the expertise
of our business in a way that delivers a truly excellent service to
our Clients. Our continued progress across the business endorses
our objective of being the UK's most respected Agency group.
David Morgan
Chairman
Financial Review
Summary
2016 was a year of further progress for the Group, achieving all
the plans we set out this time last year. Chapter, acquired in
2015, has contributed well to the growth of our business, and the
Group has again been strengthened during the year through further
investments in core skills and new initiatives. April Six's
expansion into Asia took root during 2016 and is now sustainably
profitable. We also launched a new Sales Promotion start-up venture
in the second half of the year, established a healthcare joint
venture to formalise our relationship with our European partners,
and April Six launched its PR offering in the US.
Elsewhere, 2016 saw strong developments in the use of technology
as a product in its own right. We have long used technology to
enable the delivery of communications via multiple channels but
recently we have been developing intellectual property that can be
sold in new and innovative ways. 2017 will see an increased focus
in this area.
As with any group, not all our Agencies quite met expectations
but our portfolio nature reduces our exposure to any individual
Agency and there are many reasons to feel positive about the year
ahead.
Key Performance Indicators
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 revised its financial
KPIs during the year, introducing specific performance targets. The
revised KPIs, which are quantified and commented on in the
Financial Review of the Year below, are:
-- 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% to 14% over the next three
years;
-- headline profit before tax, which the Group aims to increase by 10% year-on-year; and
-- indebtedness, where the Group intends to maintain the ratio
of net bank debt to EBITDA* below x2.0 and the ratio of total debt
(including both bank debt and deferred acquisition consideration)
to EBITDA below x2.5.
*EBITDA is headline operating profit before depreciation and
amortisation charges.
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.
Headline Trading Performance
The Directors are primarily interested in monitoring and
managing the Group's core operating activities, without the
volatility and distortions created by one-off events and non-cash
accounting adjustments relating to acquisitions. Accordingly, the
Directors measure and report the Group's performance by reference
to headline results, calculated before exceptional items,
acquisition adjustments and losses from start-up activities (as set
out in Note 3).
Billings and revenue
Turnover (billings) was 9% higher than the previous year, at
GBP144.1m (2015: GBP132.2m) but since billings include pass-through
costs (eg. TV companies' charges for buying air-time), the Board
does not consider turnover to be a key performance measure.
Instead, the Board views operating income (turnover less third
party costs) as a more meaningful measure of Agency activity
levels.
Operating income (referred to as "revenue") increased 8% to
GBP65.9m (2015: GBP61.0m) continuing the consistent revenue growth
achieved over the last five years.
Although the acquisition of Chapter in 2015 boosted revenue
growth during the year, it was particularly pleasing to see
underlying growth in both our core activity of Branding,
Advertising and Digital, and also in Events and Learning, which
showed the benefit of the restructuring carried out in 2015.
The property sector was where we saw the biggest uncertainties
resulting from the Brexit vote and, as a consequence, revenue from
our Media buying activities reduced slightly, but our other
specialist property marketing activities held up well.
Given the general delays, cancellations and uncertainties
created by the referendum, we are pleased to have achieved overall
revenue growth of 8%. Helping us to achieve this growth, our new
business performance and Client retention record were again very
strong, with net new business wins amounting to over GBP5m and more
than 20% of our revenue again being generated from Clients that
have been with us for 20 years or more. The Board believes this
Client retention statistic is second to none in the marketing
services sector.
Profit and margins
Trading profits (i.e. segmental headline operating profit,
before central costs, as set out in Note 2) increased by 9%,
slightly ahead of revenue growth, to GBP9.3m (2015: GBP8.5m) and
headline operating profit also increased by 9% to GBP7.6m (2015:
GBP6.9m).
Clients' spending patterns repeated those of previous years,
with the second half of the year particularly busy, resulting in
over 60% of our operating profits being generated in this period.
Profit margins (headline operating profit as a percentage of
revenue) were over 14% in H2 (2015: 14%), increasing our overall
margin for the year to 11.5% (2015: 11.4%). With no sign of any
easing in the downward pressure on margins, we are again pleased
with this small year-on-year improvement.
Net interest costs, at GBP0.5m, were almost unchanged from the
previous year, reflecting the cash investment in expansion during
the year (see cash flow below) which resulted in a small increase
in net bank debt over the course of the year.
After financing costs and a small loss from share of joint
ventures and associates, headline profit before tax increased by 9%
to GBP7.0m (2015: GBP6.5m), continuing the growth achieved over the
last five years.
Taxation
The Group's effective headline tax rate increased slightly to
21.0% (2015: 20.2%), compared with the statutory rate of 20.0%
(2015: 20.25%). The Group's effective tax rate is normally above
the statutory rate as a result of non-deductible entertaining
expenditure and the higher rates of taxation in the US. In 2015 the
effective tax rate was somewhat reduced as a result of adjustments
to prior year estimates.
Headline Items and Reported Profit
Adjustments to reported profits in 2016 comprise
acquisition-related items of GBP0.7m (2015: GBP0.1m) and losses
from start-up activities totaling GBP0.5m (2015: GBP0.3m). In 2015
profits were also adjusted for restructuring costs totaling
GBP0.9m; there were no such exceptional items incurred during 2016.
After these adjustments, reported profit before tax was 14% higher
at GBP5.9m (2015: GBP5.1m).
The Group's effective reported tax rate in 2016 was 23.3% (2015:
20.2%). The effective tax rate is expected to be consistently
higher than the statutory rate since the amortisation of
acquisition-related intangibles is not deductible for tax purposes.
This effect was offset in 2015 as a result of the more significant
movements in the fair value of contingent consideration, which are
non-taxable.
Earnings Per Share
On a headline basis, EPS increased by 8% to 6.63 pence (2015:
6.14 pence) and fully diluted EPS increased similarly, to 6.41
pence (2015: 5.91).
Reported EPS increased by 10% to 5.36 pence (2015: 4.86 pence)
and fully diluted EPS increased by 11% to 5.19 pence (2015: 4.68
pence).
Dividends
Since the Group was refinanced in 2010, the Board has taken a
cautious approach to dividends but, after a period of sustained and
strong cash generation, recommends a final dividend of 1.0 pence
per share, bringing the total for the year to 1.5 pence per share,
representing an increase of 25% over 2015. The final dividend will
be payable on 24 July 2017 to shareholders on the register at 14
July 2017. The corresponding ex-dividend date is 13 July 2017. The
Board will continue to keep under regular review the best use of
the Group's cash resources, always balancing the desire to reward
shareholders via dividends with the need to fund further growth,
but it remains the Board's intention to follow a progressive policy
provided trading conditions allow.
Balance Sheet
As a people business, the main features of the Group's 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
decreased slightly over the course of 2016 as the level of annual
amortisation exceeded the additional goodwill acquired from the
small in-fill acquisitions made during the year. At the same time,
the level of total debt (combined bank debt and acquisition
obligations) reduced by over GBP3m.
Cash Flow
In 2016, the Group returned to its more normal record of strong
cash flow, with headline profit after tax of GBP5.6m converting
into GBP5.3m of "free cash flow" (defined as net cash inflow from
operating activities less tangible capital expenditure).
This free cash flow was used to expand the business, develop new
initiatives, make acquisitions and pay dividends as follows:
-- new acquisitions, amounting to GBP0.4m (2015: GBP0.7m);
-- settlement of contingent consideration obligations relating
to the strong performance and profits generated by our previous
acquisitions, totaling GBP3.2m (2015: GBP0.9m);
-- investment in a number of other areas in support of the
Group's expansion, notably GBP0.8m (2015: nil) invested in software
development; and
-- dividends of GBP1.3m (2015: GBP0.9m)
Despite a year in which significant cash investments have been
made in the development of the Group, net bank debt increased by
only GBP0.3m to GBP11.3m (2015: GBP11.0m). Importantly, the
leverage ratio of net bank debt to headline EBITDA remained
unchanged at x1.3 at 31 December 2016. The Group's ratio of total
debt, including remaining acquisition obligations, to EBITDA at 31
December 2016 (calculated by reference to the amount of
consideration which would be payable if the acquired business were
to maintain its current level of profitability) reduced to x1.7
(2015: x2.0), increasing the already comfortable headroom against
the Board's limit of x2.5.
Outlook
We expect further revenue and profit growth in the coming year.
Although there are a number of macro economic uncertainties, we
again have a high degree of visibility over forecast revenue and
current indications are that we should expect good organic growth
during the year ahead. We continue to seek out attractive
acquisition opportunities to further enhance both our range of
services and our rate of growth. With our newly-set KPIs, we have
an increased focus on margins and have streamlined a number of
activities in the first quarter of 2017. The restructuring costs
associated with this action are estimated at GBP0.5m. The other
area of focus for 2017 will be Fuse, a central sales and marketing
hub created to introduce new markets to the opportunities created
by our new technology products. All in all it promises to be
another busy and exciting year.
Peter Fitzwilliam
Finance Director
Consolidated Income Statement
For the year ended 31 December 2016
Year to Year to
31 December 31 December
2016 2015
Note GBP'000 GBP'000
TURNOVER 2 144,096 132,246
Cost of sales (78,198) (71,209)
OPERATING INCOME 2 65,898 61,037
Headline operating
expenses (58,341) (54,107)
HEADLINE OPERATING
PROFIT 7,557 6,930
Exceptional items 3 - (873)
Acquisition adjustments 3 (666) (108)
Start-up costs 3 (491) (343)
------------- -------------
OPERATING PROFIT 6,400 5,606
Share of results of
associates and joint (33) -
ventures
------------- -------------
PROFIT BEFORE INTEREST
AND TAXATION 6,367
Net finance costs 6 (487) (469)
PROFIT BEFORE TAXATION 7 5,880 5,137
Taxation 8 (1,369) (1,035)
------------- -------------
PROFIT FOR THE YEAR 4,511 4,102
------------- -------------
Attributable to:
Equity holders of the
parent 4,434 4,011
Non-controlling interests 77 91
------------- -------------
4,511 4,102
------------- -------------
Basic earnings per
share (pence) 10 5.36 4.86
Diluted earnings per
share (pence) 10 5.19 4.68
Headline basic earnings
per share (pence) 10 6.63 6.14
Headline diluted earnings
per share (pence) 10 6.41 5.91
The earnings per share figures derive from continuing and total
operations.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2016
Year to Year to
31 December 31 December
2016 2015
GBP'000 GBP'000
PROFIT FOR THE YEAR 4,511 4,102
Other comprehensive
income - items that
may be reclassified
separately to profit
or loss:
Exchange differences
on translation of foreign
operations 214 21
------------- -------------
TOTAL COMPREHENSIVE
INCOME FOR THE YEAR 4,725 4,123
Attributable to:
Equity holders of the
parent 4,578 4,032
Non-controlling interests 147 91
------ ------
4,725 4,123
------ ------
Consolidated Balance Sheet
As at 31 December 2016
As at As at
31 December 31 December
2016 2015
Note GBP'000 GBP'000
FIXED ASSETS
Intangible assets 11 83,075 82,102
Property, plant and equipment 3,531 4,526
Interests in joint ventures - 7
Investments in associates 324 350
Deferred tax assets 45 146
86,975 87,131
------------- -------------
CURRENT ASSETS
Stock and work in progress 485 461
Trade and other receivables 12 32,611 31,347
Cash and short term deposits 1,002 1,784
------------- -------------
34,098 33,592
CURRENT LIABILITIES
Trade and other payables 13 (15,119) (14,032)
Accruals (11,075) (10,833)
Corporation tax payable (527) (1,064)
Bank loans 14 (2,250) (1,500)
Acquisition obligations 15.1 (1,645) (3,203)
(30,616) (30,632)
------------- -------------
NET CURRENT ASSETS 3,482 2,960
TOTAL ASSETS LESS CURRENT
LIABILITIES 90,457 90,091
------------- -------------
NON CURRENT LIABILITIES
Bank loans 14 (10,023) (11,210)
Other long term loans (76) -
Obligations under finance
leases (216) (298)
Acquisition obligations 15.1 (3,014) (4,954)
Deferred tax liabilities (200) (264)
------------- -------------
(13,529) (16,726)
------------- -------------
NET ASSETS 76,928 73,365
------------- -------------
CAPITAL AND RESERVES
Called up share capital 16 8,412 8,361
Share premium account 42,431 42,268
Own shares 17 (556) (455)
Share option reserve 249 298
Foreign currency translation
reserve 195 51
Retained earnings 25,740 22,414
------------- -------------
EQUITY ATTRIBUTABLE TO
EQUITY HOLDERS OF THE
PARENT 76,471 72,937
Non-controlling interests 457 428
------------- -------------
TOTAL EQUITY 76,928 73,365
------------- -------------
Consolidated Cash Flow Statement
for the year ended 31 December 2016
Year to Year to
31 December 31 December
2016 2015
GBP'000 GBP'000
Operating profit 6,400 5,606
Depreciation and amortisation
charges 2,120 2,122
Movements in the fair value
of contingent consideration (48) (618)
Loss on disposal of property,
plant and equipment 4 6
Loss on disposal of intangible 2 -
assets
Non cash (credit) / charge
for share options and shares
awarded (45) 37
Increase in receivables (1,037) (3,963)
Increase in stock and work
in progress (24) (94)
Increase in payables 1,120 1,256
------------- -------------
OPERATING CASH FLOWS 8,492 4,352
Net finance costs (422) (711)
Tax paid (1,869) (1,233)
------------- -------------
Net cash inflow from operating
activities 6,201 2,408
------------- -------------
INVESTING ACTIVITIES
Proceeds on disposal of property,
plant and equipment 33 74
Purchase of property, plant
and equipment (914) (1,295)
Investment in software development (777) -
Acquisition of subsidiaries,
joint ventures and associates
during the year (466) (2,086)
Payment of obligations relating
to acquisitions made in prior
years (3,179) (871)
Cash acquired with subsidiaries 65 1,431
Net cash outflow from investing
activities (5,238) (2,747)
------------- -------------
FINANCING ACTIVITIES
Dividends paid (1,158) (948)
Dividends paid to non-controlling (118) -
interests
Repayment of finance leases (90) (57)
(Repayment of) / increase in
long term bank loans (500) 1,875
Proceeds from other long term 76 -
loans
Purchase of own shares held
in EBT, net of disposals (169) (317)
Net cash (outflow) / inflow
from financing activities (1,959) 553
------------- -------------
(Decrease) / increase in cash
and cash equivalents (996) 214
Exchange differences on translation
of foreign subsidiaries 214 21
Cash and cash equivalents at
beginning of year 1,784 1,549
------------- -------------
Cash and cash equivalents at
end of year 1,002 1,784
------------- -------------
Consolidated Statement of Changes in Equity for the year ended
31 December 2016
Total
Foreign attributable
Share currency to equity Non-controlling
Share Share Own option translation Retained holders interest Total
capital premium shares reserve reserve earnings of parent GBP'000 equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1
January
2015 8,340 42,203 (260) 264 30 19,470 70,047 337 70,384
--------------- --------- --------- --------- --------- ------------- ---------- -------------- ----------------- ---------
Profit
for the
year - - - - - 4,011 4,011 91 4,102
Exchange
differences
on
translation
of foreign
operations - - - - 21 - 21 - 21
--------------- --------- --------- --------- --------- ------------- ---------- -------------- ----------------- ---------
Total
comprehensive
income
for the
year - - - - 21 4,011 4,032 91 4,123
New shares
issued 21 65 - - - - 86 - 86
Share
option
charge - - - 34 - - 34 - 34
Own shares
purchased - - (317) - - - (317) - (317)
Shares
awarded
to employees
from
own shares - - 122 - - (119) 3 - 3
Dividend
paid - - - - (948) (948) - (948)
--------------- --------- --------- --------- --------- ------------- ---------- -------------- ----------------- ---------
At 31
December
2015 8,361 42,268 (455) 298 51 22,414 72,937 428 73,365
--------------- --------- --------- --------- --------- ------------- ---------- -------------- ----------------- ---------
Profit
for the
year - - - - - 4,434 4,434 77 4,511
Exchange
differences
on
translation
of foreign
operations - - - - 144 - 144 70 214
--------------- --------- --------- --------- --------- ------------- ---------- -------------- ----------------- ---------
Total
comprehensive
income
for the
year - - - - 144 4,434 4,578 147 4,725
New shares
issued 51 163 - - - - 214 - 214
Share
option
credit - - - (49) - - (49) - (49)
Own shares
purchased - - (212) - - - (212) - (212)
Shares
awarded
and sold
from
own shares - - 111 - - 50 161 - 161
Dividend
paid - - - - (1,158) (1,158) (118) (1,276)
--------------- --------- --------- --------- --------- ------------- ---------- -------------- ----------------- ---------
At 31
December
2016 8,412 42,431 (556) 249 195 25,740 76,471 457 76,928
--------------- --------- --------- --------- --------- ------------- ---------- -------------- ----------------- ---------
Notes to the Consolidated Financial Statements
1. Principal Accounting Policies
Basis of preparation
The results for the year to 31 December 2016 have been extracted
from the audited consolidated financial statements, which are
expected to be published by 24 March 2017.
The financial information set out above does not constitute the
Company's statutory accounts for the years to 31 December 2016 or
2015 but is derived from those accounts. Statutory accounts for the
year ended 31 December 2015 were delivered to the Registrar of
Companies following the Annual General Meeting on 13 June 2016 and
the statutory accounts for 2016 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 19 June 2017 and, after approval at the AGM, delivered
to the Registrar of Companies.
The auditors, Francis Clark LLP, have reported on the accounts
for the years ended 31 December 2016 and 31 December 2015; 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.
The annual financial statements have been prepared in accordance
with International Financial Reporting Standards (IFRS) adopted by
the European Union and the Companies Act 2006.
Basis of consolidation
The results of subsidiaries acquired or disposed of during the
year are included in the Consolidated Statement of Comprehensive
Income from the effective date of acquisition or up to the
effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring accounting policies used into
line with those used by the Group.
All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
Turnover and revenue recognition
The Group's operating subsidiaries carry out a range of
different activities. The following policies apply consistently
across subsidiaries and business segments.
Turnover represents fees, commissions, rechargeable expenses and
sales of materials performed subject to specific contracts. Income
is recognised on the following basis:
-- Retainer fees are apportioned over the time period to which they relate
-- Project income is recognised by apportioning the fees billed
or billable to the time period for which those fees were earned by
relationship to the percentage of completeness of the project to
which they relate
-- Media commission is recognised when the advertising has been satisfactorily aired or placed
-- Unbilled costs relating to contracts for services are
included at rechargeable value in accrued income.
Where recorded turnover exceeds amounts invoiced to Clients, the
excess is classified as accrued income (within Trade and other
receivables). Where amounts invoiced to Clients exceed recorded
turnover, the excess is classified as deferred income (within
Accruals).
Goodwill and other intangible assets
Goodwill
Goodwill arising from the purchase of subsidiary undertakings
and trade acquisitions represents the excess of the total cost of
acquisition over the Group's interest in the fair value of the
identifiable assets, liabilities and contingent liabilities of the
subsidiary acquired. The total cost of acquisition represents both
the unconditional payments made in cash and shares on acquisition
and an estimate of future contingent consideration payments to
vendors in respect of earn-outs.
Goodwill is not amortised, but is reviewed annually for
impairment. Goodwill impairment is assessed by comparing the
carrying value of goodwill for each cash-generating unit to the
future cash flows, discounted to their net present value using an
appropriate discount rate, derived from the relevant underlying
assets. Where the net present value of future cash flows is below
the carrying value of goodwill, an impairment adjustment is
recognised in profit or loss and is not subsequently reversed.
Other intangible assets
Costs associated with the development of identifiable software
products where it is probable that the economic benefits will
exceed the costs of development are recognised as intangible
assets. These assets are carried at cost less accumulated
amortisation and are amortised over periods of between 3 and 5
years. Amortisation of software development costs is included
within operating expenses.
Other intangible assets separately identified as part of an
acquisition are amortised over periods of between 3 and 10 years,
except certain brand names which are considered to have an
indefinite useful life. The value of such brand names is not
amortised, but rather an annual impairment test is applied and any
shortfall in the present value of future cash flows derived from
the brand name versus the carrying value is recognised in profit
and loss. Amortisation and impairment charges are excluded from
headline profit.
Contingent consideration payments
The Directors manage the financial risk associated with making
business acquisitions by structuring the terms of the acquisition,
wherever possible, to include an element of the total consideration
payable for the business which is contingent on its future
profitability (ie earn-out). Contingent consideration is initially
recognised at its estimated fair value based on a reasonable
estimate of the amounts expected to be paid. Changes in the fair
value of the contingent consideration that arise from additional
information obtained during the first twelve months from the
acquisition date, about facts and circumstances that existed at the
acquisition date, are adjusted retrospectively, with corresponding
adjustments against goodwill. The fair value of contingent
consideration is reviewed annually and subsequent changes in the
fair value are recognised in profit or loss, but excluded from
headline profits.
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, in order of
significance:
Potential impairment of goodwill
The potential impairment of goodwill is based on estimates of
future cash flows derived from the financial projections of each
cash-generating unit over an initial three year period and
assumptions about growth thereafter, discussed in more detail in
Note 11.
Contingent payments in respect of acquisitions
Contingent consideration, by definition, depends on uncertain
future events. At the time of purchasing a business, the Directors
use the financial projections obtained during due diligence as the
basis for estimating contingent consideration. Subsequent estimates
benefit from the greater insight gained in the post-acquisition
period and the business' track record of financial performance.
Revenue recognition policies in respect of contracts which
straddle the year end
Estimates of revenue to be recognised on contracts which
straddle the year end are typically based on the amount of time so
far committed to those contracts by reference to timesheets in
relation to the total estimated time to complete them.
Valuation of intangible assets on acquisitions
Determining the separate components of intangible assets
acquired on acquisitions is a matter of judgement exercised by the
Directors. Brand names, customer relationships and intellectual
property rights are the most frequently identified intangible
assets. When considering the valuation of intangible assets on
acquisitions, a range of methods is undertaken both for identifying
intangibles and placing valuations on them. The valuation of each
element is assessed by reference to commonly used techniques, such
as "relief from royalty" and "excess earnings" and to industry
leaders and competitors. Estimating the length of customer
retention is the principal uncertainty and draws on historic
experience.
2. Segmental Information
Business segmentation
For management purposes the Group had thirteen operating units
during the year, each of which carries out a range of activities.
These activities have been divided into four business and operating
segments as set out below.
Branding, Media Events Public Group
Advertising & Learning Relations
& Digital
Year to 31 December GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2016
Turnover 79,657 45,741 9,922 8,776 144,096
------------- -------- ------------ ----------- --------
Operating income 51,740 4,061 3,320 6,777 65,898
------------- -------- ------------ ----------- --------
Segmental operating
profit ("trading
profit") 7,323 1,135 325 487 9,270
Unallocated central
costs (1,713)
------------- -------- ------------ ----------- --------
Headline operating
profit 7,557
Share of results
of associates and
joint ventures (33)
Net finance costs (487)
------------- -------- ------------ ----------- --------
Headline profit before
tax 7,037
------------- -------- ------------ ----------- --------
Branding, Media Events Public Group
Advertising & Learning Relations
& Digital
Year to 31 December GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2015
Turnover 71,728 45,732 7,146 7,640 132,246
------------- -------- ------------ ----------- --------
Operating income 47,715 4,210 2,765 6,347 61,037
------------- -------- ------------ ----------- --------
Segmental operating
profit ("trading
profit") 6,228 1,245 265 768 8,506
Unallocated central
costs (1,576)
------------- -------- ------------ ----------- --------
Headline operating
profit 6,930
Net finance costs (469)
------------- -------- ------------ ----------- --------
Headline profit before
tax 6,461
------------- -------- ------------ ----------- --------
Geographical segmentation
The Group's continues to expand its activities outside the UK,
but substantially all the Group's business remains based and
executed in the UK, with less than 10% of operating income
attributed to territories outside of the UK.
3. 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 fall into three categories:
exceptional items, acquisition-related items and start-up
costs.
Year to Year to
31 December 31 December 2015
2016
PBT PAT PBT PAT
GBP'000 GBP'000 GBP'000 GBP'000
Headline profit 7,037 5,559 6,461 5,157
Exceptional items
(Note 4) - - (873) (694)
Acquisition adjustments
(Note 5) (666) (655) (108) (89)
Start-up costs (491) (393) (343) (272)
-------- -------- --------- ---------
Reported profit 5,880 4,511 5,137 4,102
-------- -------- --------- ---------
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 2016 relate to the launch
of new ventures Mongoose Sports & Entertainment and Mongoose
Promotions and April Six's new operations in Singapore and the US.
Start-up costs in 2015 related to the launch of Mongoose Sports
& Entertainment and April Six's new operations in
Singapore.
4. Exceptional Items
Exceptional items represent revenue or costs that, either by
their size or nature, require separate disclosure in order to give
a fuller understanding of the Group's financial performance.
Exceptional costs in 2015 comprised amounts payable for loss of
office and other costs incurred relating to the restructuring of
certain operations in order to streamline activities and underpin
the Board's growth expectations.
5. Acquisition Adjustments
Year to Year to
31 December 31 December
2016 2015
GBP'000 GBP'000
Movement in fair value of contingent
consideration 48 618
Amortisation of other intangibles
recognised on acquisitions (645) (574)
Acquisition transaction costs
expensed (69) (152)
------------- -------------
(666) (108)
------------- -------------
The movement in fair value of contingent consideration relates
to a net downward revision in the estimate payable to vendors of
businesses acquired in prior years..
6. Net Finance Costs
Year to Year to
31 December 31 December
2016 2015
GBP'000 GBP'000
Interest on bank loans and overdrafts,
net of interest on bank deposits (407) (390)
Amortisation of bank debt arrangement
fees (64) (65)
Interest on finance leases (16) (14)
Net finance costs (487) (469)
------------- -------------
7. Profit Before Taxation
Profit on ordinary activities before taxation is stated after
charging:-
Year to Year to
31 December 31 December
2016 2015
GBP'000 GBP'000
Depreciation of owned tangible
fixed assets 1,164 1,476
Depreciation of tangible fixed
assets held under finance leases 94 72
Amortisation of intangible assets
recognised on acquisitions 645 574
Amortisation of other intangible
assets 217 -
Operating lease rentals - Land
and buildings 2,384 2,090
Operating lease rentals - Plant
and equipment 287 292
Operating lease rentals - Other
assets 139 129
Staff costs 44,352 41,004
Auditors' remuneration 221 224
(Gain) / loss on foreign exchange (14) 43
8. Taxation
Year to Year to
31 December 31 December
2016 2015
GBP'000 GBP'000
Current tax:-
UK corporation tax at 20.00%
(2015: 20.25%) 972 907
Adjustment for prior periods 51 (49)
Foreign tax on profits of the
period 233 289
------------- -------------
1,256 1,147
Deferred tax:-
Current year reversing/(originating)
temporary differences 107 (64)
Adjustment for prior periods 15 (52)
Foreign deferred tax on overseas
subsidiaries (9) 4
------------- -------------
Tax charge for the year 1,369 1,035
------------- -------------
Factors Affecting the Tax Charge for the Current Year:
The tax assessed for the year is higher (2015: lower) than the
standard rate of corporation tax in the UK. The differences
are:
Year to Year to
31 December 31 December
2016 2015
GBP'000 GBP'000
Profit before taxation 5,880 5,137
------------- -------------
Profit on ordinary activities
before tax at the standard rate
of corporation tax of 20.00%
(2015: 20.25%) 1,176 1,040
Effect of:
Non-deductible expenses/income
not taxable 102 121
Timing differences relating to
deductibility of share options (11) (23)
Movement in fair value of contingent
consideration, not taxable 11 (125)
Impact of R&D claims (158) -
Adjustments to prior periods 67 (101)
Higher tax rates on overseas
earnings 80 81
Depreciation in excess of capital
allowances 110 32
Other differences (8) 10
------------- -------------
Actual tax charge for the year 1,369 1,035
------------- -------------
9. Dividends
Year to Year to
31 December 31 December
2016 2015
GBP'000 GBP'000
Amounts recognised as distributions
to equity holders in the year:
Interim dividend of 0.50 pence
(2015: 0.30 pence) per share 414 247
Prior year final dividend of 0.90
pence (2015: 0.85 pence) per share 744 701
------------- -------------
1,158 948
------------- -------------
A final dividend of 1.0 pence per share is to be paid in July
2017 should it be approved by shareholders at the AGM. In
accordance with IFRS this final dividend will be recognised in the
2017 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
2016 2015
GBP'000 GBP'000
Earnings
Reported profit for the year 4,511 4,102
Attributable to:
Equity holders of the parent 4,434 4,011
Non-controlling interests 77 91
------------- -------------
4,511 4,102
------------- -------------
Headline earnings (Note 3) 5,559 5,157
Attributable to:
Equity holders of the parent 5,482 5,066
Non-controlling interests 77 91
------------- -------------
5,559 5,157
------------- -------------
Number of shares
Weighted average number of
Ordinary shares for the purpose
of basic earnings per share 82,651,400 82,479,427
Dilutive effect of securities:
Employee share options 2,862,471 3,269,681
Weighted average number of
Ordinary shares for the purpose
of diluted earnings per share 85,513,871 85,749,108
Reported basis:
Basic earnings per share
(pence) 5.36 4.86
Diluted earnings per share
(pence) 5.19 4.68
Headline basis:
Basic earnings per share
(pence) 6.63 6.14
Diluted earnings per share
(pence) 6.41 5.91
Basic earnings per share includes shares to be issued subject
only to time as if they had been issued at the beginning of the
period.
A reconciliation of the profit after tax on a reported basis and
the headline basis is given in Note 3.
11. Intangible Assets
Goodwill Year to Year to
31 December 31 December
2016 2015
GBP'000 GBP'000
Cost
At 1 January 83,606 79,326
Recognised on acquisition
of subsidiaries 457 4,315
Adjustment to consideration
/ net assets acquired (11) (35)
------------ ------------
At 31 December 84,052 83,606
------------ ------------
Impairment adjustment
At 1 January 4,273 4,273
Impairment during the year - -
At 31 December 4,273 4,273
------------ ------------
Net book value at 31 December 79,779 79,333
------------ ------------
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 Customer Total
development names relationships
and licences
GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January 2015 51 669 2,661 3,381
-------------- -------- --------------- --------
Additions - 230 990 1,220
-------------- -------- --------------- --------
At 31 December
2015 51 899 3,651 4,601
-------------- -------- --------------- --------
Transfer from property,
plant and equipment* 1,467 - - 1,467
Additions 777 - - 777
Disposals (234) - - (234)
At 31 December
2016 2,061 899 3,651 6,611
-------------- -------- --------------- --------
Amortisation and
impairment
At 1 January 2015 9 20 1,229 1,258
-------------- -------- --------------- --------
Charge for the
year 8 - 566 574
-------------- -------- --------------- --------
At 31 December
2015 17 20 1,795 1,832
-------------- -------- --------------- --------
Transfer from property,
plant and equipment* 853 - - 853
Charge for the
year 217 77 568 862
Disposals (232) - - (232)
-------------- -------- --------------- --------
At 31 December
2016 855 97 2,363 3,315
-------------- -------- --------------- --------
Net book value
at 31
December 2016 1,206 802 1,288 3,296
-------- ------ -------- --------
Net book value
at 31
December 2015 34 879 1,856 2,769
----- ------ -------- --------
*As software development costs have become increasingly
significant, they have been transferred from computer equipment and
reported separately within intangible assets.
Additions of GBP777,000 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. In 2015 the additions of GBP1,220,000 included Client
relationships and trade names acquired relating to the Chapter
acquisition, all of which are being amortised over finite useful
lives.
12. Trade and Other Receivables
31 December 31 December
2016 2015
GBP'000 GBP'000
Gross trade receivables 23,843 23,661
Less: Provision for doubtful
debts (234) (201)
------------ ------------
23,609 23,460
Other receivables 670 718
Prepayments 2,524 1,257
Accrued income 5,808 5,912
------------ ------------
32,611 31,347
------------ ------------
An allowance has been made for estimated irrecoverable amounts
from the provision of services of GBP234,000 (2015: GBP201,000).
The Directors consider that the carrying amount of trade and other
receivables approximates their fair value.
13. Trade and Other Payables
31 December 31 December
2016 2015
GBP'000 GBP'000
Trade creditors 10,924 9,999
Finance leases 83 91
Other creditors 378 244
Other tax and social security
payable 3,734 3,698
15,119 14,032
------------ ------------
Trade and other creditors principally comprise amounts
outstanding for trade purchases and on-going costs. The Directors
consider that the carrying amount of trade payables approximates
their fair value.
14. Bank Overdrafts, Loans and Net Debt
31 December 31 December
2016 2015
GBP'000 GBP'000
Bank loan outstanding 12,375 12,875
Unamortised bank debt arrangement
fees (102) (165)
Carrying value of loan outstanding 12,273 12,710
Less: Cash and short term deposits (1,002) (1,784)
------------ ------------
Net bank debt 11,271 10,926
------------ ------------
The borrowings are repayable
as follows:
Less than one year 2,250 1,500
In one to two years 2,500 2,250
In more than two years but
less than three years 7,625 2,500
In more than three but less
than four years - 6,625
12,375 12,875
Unamortised bank debt arrangement
fees (102) (165)
12,273 12,710
Less: Amount due for settlement
within 12 months (shown under
current liabilities) (2,250) (1,500)
------------ ------------
Amount due for settlement after
12 months 10,023 11,210
------------ ------------
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 2016, the Group had a term loan facility of
GBP5.4m due for repayment by February 2019 on a quarterly basis,
and a revolving credit facility of up to GBP7.0m, expiring on 3
February 2019. Interest on both the term loan and revolving credit
facilities is based on 3 month LIBOR plus 2.25%, payable in cash on
loan rollover dates.
In addition to its committed facilities, the Group had available
an overdraft facility of up to GBP3.0m with interest payable by
reference to National Westminster Bank plc Base Rate plus 2.5%.
At 31 December 2016, 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.
On 16 March 2017 the Group agreed an increase of GBP5.0m in the
revolving credit facility and an extension to the maturity date for
the revolving credit facility to 30 April 2019. All other terms of
the existing credit facilities remain unchanged.
15. Acquisitions
15.1 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 contingent consideration
payments that may be due is as follows:
31 December 2016 31 December 2015
Cash Shares Total Cash Shares Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Less than one
year 1,645 - 1,645 2,902 301 3,203
Between one and
two years 1,703 - 1,703 2,009 - 2,009
In more than two
years but less
than three years 750 - 750 1,715 - 1,715
In more than three
years but less
than four years 561 - 561 710 - 710
In more than four
years but less
than five years - - - 520 - 520
4,659 - 4,659 7,856 301 8,157
--------- ---------- --------- --------- ---------- ---------
15.2 Acquisitions during the year
A total of GBP502,000 was invested in other acquisitions during
the year, comprising initial cash consideration of GBP466,000 and
deferred contingent consideration of GBP36,000.
15.3 Pro-forma results including acquisitions
The Directors estimate that the turnover, operating income and
headline operating profit of the Group would have been
approximately GBP144.9m, GBP66.4m and GBP7.4m had the Group
consolidated the results of the acquisitions made during the year,
from the beginning of the year.
16. Share Capital
31 December 31 December
2016 2015
GBP'000 GBP'000
Allotted and called up:
84,120,234 Ordinary shares of
10p each (2015: 83,608,331 Ordinary
shares of 10 p each) 8,412 8,361
------------ ------------
Options
The Group has the following options in issue:
At start Granted Waived/ Exercised At end
of year lapsed of year
TMMG Long Term
Incentive Plan 2,983,500 1,070,000 (1,416,930) - 2,636,570
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 the Remuneration Committee of the
Board and vest three years later only if the profit performance of
the Group in the intervening period is sufficient to meet
predetermined criteria (always subject to Remuneration Committee
discretion). During the year, no options were exercised and at the
end of the year none of the outstanding options are
exercisable.
Shares held in an Employee Benefit Trust will be used to satisfy
share options exercised under The Mission Marketing Group Long Term
Incentive Plan.
17. Own Shares
No. of
shares GBP'000
At 31 December 2014 910,984 260
Own shares purchased during
the year 551,373 317
Awarded to employees during
the year (183,433) (122)
At 31 December 2015 1,278,924 455
Own shares purchased during
the year 527,234 212
Awarded or sold during the year (410,228) (111)
At 31 December 2016 1,395,930 556
---------- --------
Shares are held in an Employee Benefit Trust to meet certain
requirements of The Mission Marketing Group Long Term Incentive
Plan.
18. Post Balance Sheet Events
After the end of the financial year, a new company, The Mission
Marketing Holdings Ltd ("TMMH"), was incorporated as a wholly owned
subsidiary of the Company. On 21 February 2017, all the Company's
shareholdings in subsidiaries were transferred to TMMH in return
for the issuance of 20,000,002 Ordinary shares. On the same day,
various individuals subscribed for a total of 5,720,171 A Ordinary
shares in TMMH as part of the Growth Share Scheme referred to in
the Corporate Governance Report.
On 16 March 2017 the Directors agreed an increase and an
extension to the maturity date for the revolving credit facility.
Further details of these facilities are set out in Note 14.
This information is provided by RNS
The company news service from the London Stock Exchange
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