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RNS

Half-year Report

Released 07:00 21-Sep-2017

RNS Number : 3558R
The Mission Marketing Group PLC
21 September 2017
 

The Mission Marketing Group plc

Interim results for the six months to 30 June 2017

 

 

The Mission Marketing Group plc ("TMMG" or "the missiontm"), the marketing communications and advertising group, sets out its unaudited interim results for the six months ended 30 June 2017.

 

Highlights

·      Good organic growth from the Group's core business

·      Some great new business wins in the period, including Mars, Neff, Reckitt Benckiser, Revlon, The Royal Mint and Universal Studios

·      Recently acquired RJW trading well

·      fuse now officially launched

·      Mongoose Sports and April Six Asia start-up ventures moved into profitability

 

Financial

·      Revenue up 4% to £33.8m (2016: £32.4m)

·      Like-for-like revenue up 6% in Branding, Advertising and Digital

·      Headline profit before tax up 11% to £2.9m (2016: £2.6m)

·      Headline diluted EPS up 11% to 2.58 pence (2016: 2.33 pence)

·      A strong second-half bias again predicted

·      Cash inflows from operating activities of £5.8m (2016: £4.8m)

·      Net bank debt reduced by £2.1m in the six months after settling prior and new acquisition obligations

 

Dividend

·      Interim dividend increased by 10% to 0.55p (2016: 0.5p)

·      Payable on 1 December 2017 to shareholders on the register at 3 November 2017

 

David Morgan, Chairman, commented: "With our business becoming stronger, including good growth from our core business, we have a great platform from which to grow. We will continue to target further margin improvements, seek new opportunities, drive into new markets and upskill our offering. We again expect a strong second half to the year and are confident that we will deliver another year of growth."

 

An interview with David Morgan, Chairman, can be viewed from 9.30am today at:

http://www.themission.co.uk/investor-centre/reports

 

Enquiries:                                                                                                

  David Morgan, Executive Chairman

  Peter Fitzwilliam, Finance Director

  The Mission Marketing Group plc

 

 

020 7462 1415

 

Mark Percy / Patrick Castle / James Wolfe (Corporate Finance)

John Ritchie (Institutional Sales)


Shore Capital (Nomad and Broker)

020 7408 4090

 

the missiontm is a network of entrepreneurial marketing communications Agencies employing 1,000 people in the UK, Asia and US. The Group comprises three divisions: Integrated Generalists, Sector Specialists and Activity Specialists, which work together to provide Clients with the expertise and resource to make them more successful in today's dynamic environment.

 

www.themission.co.uk

 

 

Chairman's Statement

 

FOCUSSED ON THE FUTURE

 

In our first six months of trading this year we have continued to grow our business and, as well as consolidating our position, we have kept a keen eye on our future as we implement the plans that match our development strategy. Our confidence in our Agencies, the direction we are heading in and our unique, entrepreneurial structure continues to grow momentum and is, we believe, creating a business model that is very much focussed on the future.

 

Of the many highlights so far this year the most important strategic development was our acquisition of RJW in April. RJW is a highly-regarded consultancy specialising in pricing and market access in the pharmaceutical sector that works closely with some of the world's leading companies from the very early stages of product development. Working alongside our Solaris Healthcare Agency, which operates further downstream, it allows us to deliver end-to-end marketing and research services to healthcare Clients. It is a delight to have the RJW team join the missiontm and be part of our drive towards creating a new and dynamic force in Healthcare marketing.

 

The first half of the year also saw some of our start-up investments move into profitability, notably Mongoose Sports and April Six Asia. This, together with continued progress from our core Agencies, has helped us to retain a calm and steady approach against a backdrop of UK uncertainty and nervousness.

 

With upwards of 250 people across our Group being directly involved in technological developments that enhance our Clients' marketing capabilities, we reported at the end of last year that we had identified a number of innovative IP-owned products and systems that we were bringing together under a dedicated team, branded fuse. This initiative embraces the technological creativity already inherent in our Agencies and takes it to a wider audience. We formally launched fuse in July and are excited by its potential.

 

We have also taken a long look at our overall Group strategy, culminating in a host of new initiatives to bring greater clarity and external understanding of why our business is not only robust but very special. We enjoy greater Client longevity and our people stay with us longer than is normal in our sector, and we have an enviable growth and debt repayment record. All of which have been evident again in the first half and are being explained more fully in our new website and materials.

 

New business continues to be our 'cream on top' with wins across the Group from such famous names as Mars, Neff, Reckitt Benckiser, Revlon, The Royal Mint and Universal Studios.

 

Trading results

 

Turnover ("billings") for the six months ended 30 June 2017 reduced by 4% to £71.2m (2016: £74.2m) in part due to year-on-year changes in the phasing of Client spending and in part due to the market trend away from traditional broad-based media expenditure in favour of more targeted activities. Billings include pass-through costs (e.g. TV companies' charges for buying air-time) and thus 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 ("revenue") increased 4% overall in the six months, to £33.8m (2016: £32.4m). Within our primary activity of Branding, Advertising and Digital, representing 80% of our Group revenue, growth was 8%, of which like-for-like growth was 6% with a further 2% from RJW. Growth in our other activities was more subdued, with both Events and Media likely to have a stronger weighting towards the second half of the year due to the phasing of Client campaigns.

 

Headline operating profits increased by 9% to £3.1m (2016: £2.8m), showing a modest but pleasing year-on-year improvement in margins. Our business is traditionally busier and more profitable in the second half and, with a number of initiatives aimed at improving profit margins, we anticipate maintaining this progress.

 

Adjustments to headline profits in 2017 totalled £1.1m (2016: £0.6m), explained further in Note 3. Among these adjustments are restructuring costs, flagged at the time of our 2016 results, totaling £0.6m (2016: £nil). After these adjustments, reported operating profits were £2.0m (2016: £2.2m).

 

After unchanged financing costs of £0.2m, headline profit before tax increased by 11% to £2.9m (2016: £2.6m); reported profit before tax was £1.8m (2016: £2.0m).

 

The Group estimates an effective tax rate on headline profits before tax of 22% (2016: 22%), resulting in an 11% increase in headline earnings to £2.2m for the six months (2016: £2.0m), and reported profit after tax of £1.3m (2016: £1.5m). Fully diluted headline EPS increased 11% to 2.58 pence (2016: 2.33 pence). 

 

Balance sheet, cash flow and dividend

 

Net cash inflows from operating activities were £5.8m in the six months ended June 2017 (2016: £4.8m). These strong operating cash flows funded the settlement of acquisition obligations from prior years totalling £1.7m, initial acquisition consideration payments totaling £1.9m and also a £2.1m reduction in net debt to £9.2m. The Group has no further commitments to settle prior acquisition liabilities in the remainder of the year but the Group's normal phasing of working capital requirements is expected to result in a modest increase in net debt in the second half.

 

Following the purchase of RJW, the Group's acquisition obligations total £6.4m. All of this is dependent on post-acquisition earn-out profits, some to the end of 2020. £1.7m is expected to fall due within 12 months and a further £1.9m in the subsequent 12 months. The Directors believe that the strength of the Group's cash generation can comfortably accommodate these obligations. Furthermore, to achieve maximum earn-outs, the acquired Agencies would need to perform very strongly, which would generate much of the cash required to meet these obligations.

 

The Employee Benefit Trust continued to make periodic share purchases when appropriate and at 30 June 2017 held 1,422,265 ordinary shares.

 

Reflecting the growth in headline profits, the Directors have declared an interim dividend of 0.55p, representing a 10% increase over last year, payable on 1 December 2017 to shareholders on the register at 3 November 2017. The ex-dividend date is 2 November 2017.

 

Current trading and outlook

 

With our business becoming stronger, including good growth from our core business, we have a great platform from which to grow. We will continue to target further margin improvements, seek new opportunities, drive into new markets and upskill our offering. Underpinned by our strong cash generation, we will continue to explore accretive acquisition opportunities, or establish start-ups, that enhance our overall offering that supports our Clients wherever and however they need us to without being myrmidons. We again expect a strong second half to the year and are confident that we will deliver another year of growth.

 

 

David Morgan

Chairman



 

Condensed Consolidated Income Statement for the 6 months ended 30 June 2017



 

6 months to

 

6 months to

 

Year ended



30 June 2017

30 June 2016

31 December 2016



Unaudited

Unaudited

Audited


Note

£'000

£'000

£'000






TURNOVER

2

71,237

74,162

144,096






Cost of sales


(37,440)

(41,797)

(78,198)

 

OPERATING INCOME

2

 

33,797

 

32,365

 

65,898






Headline operating expenses


(30,710)

(29,537)

(58,341)

HEADLINE OPERATING PROFIT

2

 

3,087

 

2,828

 

7,557






Exceptional items

4

(550)

-

-

Acquisition adjustments

5

(367)

(386)

(666)

Start-up costs


(158)

(212)

(491)

 

OPERATING PROFIT


 

2,012

 

2,230

6,400






Share of results of associates and joint ventures


 

(10)

 

(9)

(33)

 

PROFIT BEFORE INTEREST AND TAXATION


 

2,002

 

2,221

6,367






Net finance costs

6

(227)

(243)

(487)

 

PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION


 

 

1,775

 

 

1,978

 

 

5,880






Taxation

7

(470)

(518)

(1,369)

 

PROFIT FOR THE PERIOD


 

1,305

 

1,460

 

4,511






Attributable to:





Equity holders of the parent


1,286

1,440

4,434

Non-controlling interests


19

20

77



1,305

1,460

4,511






Basic earnings per share (pence)

8

1.55

1.74

5.36

Diluted earnings per share (pence)

8

1.50

1.68

5.19

Headline basic earnings per share (pence)

8

 

2.66

 

2.41

 

6.63

Headline diluted earnings per share (pence)

 

8

 

2.58

 

2.33

 

6.41

 

 

Condensed Consolidated Statement of Comprehensive Income for the 6 months ended 30 June 2017



 

6 months to

 

6 months to

 

Year ended



30 June 2017

30 June 2016

31 December 2016



Unaudited

Unaudited

Audited



£'000

£'000

£'000






PROFIT FOR THE PERIOD


1,305

1,460

4,511






Other comprehensive income - items that may be reclassified separately to profit or loss:





Exchange differences on translation of foreign operations


(49)

(2)

214

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD


 

1,256

 

1,458

 

4,725






Attributable to:





Equity holders of the parent


1,242

1,435

4,578

Non-controlling interests


14

23

147



1,256

1,458

4,725

 

 

 

 



Condensed Consolidated Balance Sheet as at 30 June 2017

 



As at  

As at  

As at



30 June 2017

30 June 2016

31 December 2016



Unaudited

Unaudited

Audited


Note

£'000

£'000

£'000

FIXED ASSETS





Intangible assets

9

87,549

81,956

83,075

Property, plant and equipment


3,391

4,384

3,531

Interests in joint ventures


-

7

-

Investments in associates


314

341

324

Deferred tax assets


28

45

45



91,282

86,733

86,975

CURRENT ASSETS





Stock and work in progress


665

482

485

Trade and other receivables


36,741

36,268

32,611

Cash and short term deposits


5,092

3,610

1,002



42,498

40,360

34,098

CURRENT LIABILITIES





Trade and other payables


(33,656)

(32,374)

(26,194)

Corporation tax payable


(648)

(580)

(527)

Bank loans

10

(2,500)

(1,750)

(2,250)

Acquisition obligations

11

(1,735)

(2,528)

(1,645)



(38,539)

(37,232)

(30,616)

NET CURRENT ASSETS


3,959

3,128

3,482

TOTAL ASSETS LESS CURRENT LIABILITIES


95,241

89,861

90,457

 

NON CURRENT LIABILITIES


 

 

 

 


Bank loans

10

(11,803)

(11,242)

(10,023)

Other long term loans


-

(76)

(76)

Obligations under finance leases


(173)

(257)

(216)

Acquisition obligations

11

(4,690)

(2,928)

(3,014)

Deferred tax liabilities


(219)

(264)

(200)



(16,885)

(14,767)

(13,529)

NET ASSETS


78,356

75,094

76,928






CAPITAL AND RESERVES




Called up share capital


8,436

8,412

8,412

Share premium account


42,506

42,431

42,431

Own shares


(590)

(548)

(556)

Share option and growth share reserve


 

334

 

412

 

249

Foreign currency translation reserve


151

46

195

Retained earnings


27,048

23,890

25,740

EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT


 

77,885

 

74,643

 

76,471

Non controlling interests


471

451

457

TOTAL EQUITY


78,356

75,094

76,928

 



 

Condensed Consolidated Cash Flow Statement for the 6 months ended 30 June 2017


 

6 months to

 

6 months to

 

Year ended


30 June 2017

30 June 2016

31 December 2016


Unaudited

Unaudited

Audited


£'000

£'000

£'000





 

Operating profit

2,012

2,230

6,400

 

Depreciation and amortisation charges

1,019

1,030

2,120

 

Movements in the fair value of contingent consideration

 

40

 

(15)

 

(48)

 

(Profit) / loss on disposal of property, plant and equipment

 

(34)

 

(12)

 

4

 

Loss on disposal of intangible assets

-

-

2

 

Non cash charge / (credit) for share options, growth shares and shares awarded

 

85

 

118

 

(45)

 

Increase in receivables

(3,786)

(4,746)

(1,037)

 

Increase in stock and work in progress

(180)

(21)

(24)

 

Increase in payables

7,415

7,334

1,120

 

OPERATING CASH FLOW

6,571

5,918

8,492

 

Net finance costs

(201)

(201)

(422)

 

Tax paid

(523)

(901)

(1,869)

 

Net cash inflow from operating activities

5,847

4,816

6,201

 





 

INVESTING ACTIVITIES




 

Proceeds on disposal of property, plant and equipment

 

38

 

77

 

33

 

Purchase of property, plant and equipment

(461)

(613)

(914)

 

Investment in software development

(131)

-

(777)

 

Acquisition of subsidiaries and joint ventures

(1,910)

(325)

(466)

 

Payment of obligations relating to acquisitions made in prior periods

 

(1,653)

 

(2,382)

(3,179)

 

Cash acquired with subsidiaries

610

147

65

 

Net cash outflow from investing activities

(3,507)

(3,096)

(5,238)

 





 

FINANCING ACTIVITIES




 

Dividends paid

-

-

(1,158)

 

Dividends paid to non-controlling interests

-

-

(118)

 

Repayment of finance leases

(41)

(46)

(90)

 

Increase in / (repayment of) long term bank loans

 

2,000

 

250

(500)

 

(Repayment of) / proceeds from other long term loans

 

(76)

 

76

 

76

 

Purchase of own shares held in EBT

(84)

(172)

(169)

 

Net cash inflow / (outflow) from financing activities

 

1,799

 

108

 

(1,959)

 

Increase / (decrease) in cash and cash equivalents

 

4,139

 

1,828

 

(996)

 

Exchange differences on translation of foreign subsidiaries

 

(49)

 

(2)

 

214

 

Cash and cash equivalents at beginning of period

 

1,002

 

1,784

 

1,784

 

Cash and cash equivalents at end of period

5,092

3,610

1,002

 



Condensed Consolidated Statement of Changes in Equity for the 6 months ended 30 June 2017

 


 

 

 

 

Share

capital

£'000

 

 

 

 

Share premium

£'000

 

 

 

 

Own shares

£'000

Share option and growth share reserve

£'000

 

 

Foreign currency translation reserve

£'000

 

 

 

 

Retained earnings

£'000

 

Total attributable to equity holders of parent

£'000

 

 

 

Non-controlling interest

£'000

 

 

 

 

Total equity

£'000

 

 

 










At 1 January 2016

8,361

42,268

(455)

298

51

22,414

72,937

428

73,365











Profit for the period

-

-

-

-

-

1,440

1,440

20

1,460

Exchange differences on translation of foreign operations

 

-

 

-

 

-

 

-

 

(5)

 

-

 

(5)

 

3

 

(2)

Total comprehensive income for the period

 

-

 

-

 

-

 

-

 

(5)

 

1,440

 

1,435

 

23

 

1,458











New shares issued

51

163

-

-

-

-

214

-

214

Credit for share option scheme

-

-

-

114

-

-

114

-

114

Own shares purchased by EBT

-

-

(172)

-

-

-

(172)

-

(172)

Shares awarded from own shares

-

-

79

-

-

36

115

-

115

At 30 June 2016

8,412

42,431

(548)

412

46

23,890

74,643

451

75,094

Profit for the period

-

-

-

-

-

2,994

2,994

57

3,051

Exchange differences on translation of foreign operations

 

-

 

-

 

-

 

-

 

149

 

-

 

149

 

67

 

216

Total comprehensive income for the period

 

-

 

-

 

-

 

-

 

149

 

2,994

 

3,143

 

124

 

3,267

Debit for share option scheme

-

-

-

(163)

-

-

(163)

-

(163)

Own shares purchased by EBT

-

-

(40)

-

-

-

(40)

-

(40)

Shares awarded from own shares

-

-

32

-

-

14

46

-

46

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

Profit for the period

-

-

-

-

-

1,286

1,286

19

1,305

Exchange differences on translation of foreign operations

 

-

 

-

 

-

 

-

 

(44)

 

-

 

(44)

 

(5)

 

(49)

Total comprehensive income for the period

 

-

 

-

 

-

 

-

 

(44)

 

1,286

 

1,242

 

14

 

1,256











New shares issued

24

75

-

-

-

-

99

-

99











Credit for share option scheme

-

-

-

63

-

-

63

-

63

Credit for growth share scheme

-

-

-

22

-

-

22

-

22

Own shares purchased by EBT

-

-

(84)

-

-

-

(84)

-

(84)

Shares awarded from own shares

-

-

50

-

-

22

72

-

72

At 30 June 2017

8,436

42,506

(590)

334

151

27,048

77,885

471

78,356

 

 

 

 

 

 

 



Notes to the unaudited Interim Report for the six months ended 30 June 2017

 

1.   Accounting Policies

 

Basis of preparation

 

The condensed consolidated interim financial statements for the six months ended 30 June 2017 have been prepared in accordance with the IAS 34 "Interim Financial Reporting" and the Group's accounting policies.

 

The Group's accounting policies are in accordance with International Financial Reporting Standards as adopted by the European Union and are set out in the Group's Annual Report and Accounts 2016 on pages 48-49. These are consistent with the accounting policies which the Group expects to adopt in its 2017 Annual Report. The Group has not early-adopted any Standard, Interpretation or Amendment that has been issued but is not yet effective.

 

The information relating to the six months ended 30 June 2017 and 30 June 2016 is unaudited and does not constitute statutory financial statements as defined in Section 434 of the Companies Act 2006. The comparative figures for the year ended 31 December 2016 have been extracted from the Group's Annual Report and Accounts 2016, on which the auditors gave an unqualified opinion and did not include a statement under section 498 (2) or (3) of the Companies Act 2006. The Group Annual Report and Accounts for the year ended 31 December 2016 have been filed with the Registrar of Companies.

 

Going concern

 

The Directors have considered the financial projections of the Group, including cash flow forecasts, the availability of committed bank facilities and the headroom against covenant tests for the coming 12 months. They are satisfied that the Group has adequate resources for the foreseeable future and that it is appropriate to continue to adopt the going concern basis in preparing these interim financial statements.

 

Accounting estimates and judgements

 

The Group makes estimates and judgements concerning the future and the resulting estimates may, by definition, vary from the actual results. The Directors considered the critical accounting estimates and judgements used in the financial statements and concluded that the main areas of judgement are:

 

·      Potential impairment of goodwill;

·      Contingent deferred payments in respect of acquisitions;

·      Revenue recognition policies in respect of contracts which straddle the period end; and

·      Valuation of intangible assets on acquisitions.

 

These estimates are based on historical experience and various other assumptions that management and the Board of Directors believe are reasonable under the circumstances.

 

 

2.   Segmental Information

 

Business segmentation

 

The Group increased to fourteen operating units during the period, each of which carries out a range of activities. These activities have been divided into four business and operating segments as defined by IFRS 8 which form the basis of the Group's primary reporting segments, namely: Branding, Advertising and Digital; Media; Public Relations; and Events and Learning.  

 


6 months to

6 months to

Year ended


30 June

2017

30 June

2016

31 December

 2016


Unaudited

Unaudited

Audited


£'000

£'000

£'000







Turnover


Business segment




Branding, Advertising & Digital

39,972

40,096

79,657

Media

22,375

25,358

45,741

Public Relations

4,190

4,155

8,776

Events and Learning

4,700

4,553

9,922


71,237

74,162

144,096

 



Operating income


Business segment




Branding, Advertising & Digital

27,339

25,394

51,740

Media

1,964

2,209

4,061

Public Relations

3,452

3,285

6,777

Events and Learning

1,042

1,477

3,320


33,797

32,365

65,898

 



Headline Operating Profit


Business segment




Branding, Advertising & Digital

3,069

2,878

7,323

Media

446

663

1,135

Public Relations

544

243

487

Events and Learning

26

104

325


4,085

3,888

9,270

Central costs

(998)

(1,060)

 (1,713)


3,087

2,828

7,557

 

 

Geographical segmentation

 

Whilst the Group continues to expand geographically, operating income from business based and executed outside the UK remains less than 10% of the total.

 

 

3.   Reconciliation of Reported Profit to Headline Profit

 


6 months to

30 June

 2017

Unaudited

£'000

6 months to

30 June

 2016

Unaudited

£'000

Year ended

31 December

 2016

Audited

£'000



PBT

PAT

PBT

PAT

PBT

PAT

 


£'000

£'000

£'000

£'000

£'000

£'000

 








 

Headline profit

2,850

2,224

2,576

2,009

7,037

5,559

 

Exceptional items (Note 4)

(550)

(429)

-

-

-

-

 

Acquisition-related items (Note 5)

(367)

(366)

(386)

(383)

(666)

(655)

 

Start-up costs

(158)

(124)

(212)

(166)

(491)

(393)

 

Reported profit

1,775

1,305

1,978

1,460

5,880

4,511

 

 

 

In order to provide a clearer understanding of underlying profitability, headline profits exclude exceptional items, acquisition-related costs and adjustments, and start-up costs. Start-up costs derive from organically started businesses and comprise the trading losses of such entities until the earlier of two years from commencement or when they show evidence of becoming sustainably profitable.

 

Start-up costs in 2017 relate to Mongoose Sports & Entertainment, Mongoose Promotions and April Six's new PR business in the USA. Start-up costs in 2016 related to the launch of Mongoose Sports & Entertainment and April Six's new ventures in Singapore and the USA.

 

 

4.   Exceptional Items


6 months to

30 June

 2017

6 months to

30 June

 2016

Year ended

31 December

 2016


Unaudited

Unaudited

Audited


£'000

£'000

£'000

 

Restructuring costs

 

(550)

 

-

 

-

 

 

 

Exceptional items consist of 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 2017 comprise 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 for the second half of the year and beyond.

 

 

 

5.   Acquisition Adjustments

 


6 months to

30 June

2017

Unaudited

6 months to

30 June

2016

Unaudited

Year ended

31 December 2016

Audited

 


£'000

£'000

£'000

 





Movement in fair value of contingent

consideration

(40)

15

48

Amortisation of other intangible assets

recognised on acquisitions

(259)

(340)

(645)

Acquisition transaction costs expensed

(68)

(61)

(69)

 


(367)

(386)

(666)

 

The movement in fair value of contingent consideration relates to a net (upward) / downward revision in the estimate payable to vendors of businesses acquired in prior years. Acquisition transaction costs relate to professional fees associated with the acquisitions.

 

 

6.   Net Finance Costs

 


6 months to

6 months to

Year ended    


30 June

2017

30 June

2016

31 December 2016


Unaudited

Unaudited

Audited


£'000

£'000

£'000





Net interest on bank loans, overdrafts and deposits

(192)

(203)

(407)

Amortisation of bank debt arrangement fees

 

(29)

 

(33)

 

(64)

Interest on finance leases

(6)

(7)

(16)

Net finance costs

(227)

(243)

(487)

 

 

7.   Taxation

 

The taxation charge for the period ended 30 June 2017 has been based on an estimated effective tax rate on headline profit on ordinary activities of 22% (30 June 2016: 22%).

 

 

8.   Earnings Per Share

 

The calculation of the basic and diluted earnings per share is based on the following data, determined in accordance with the provisions of IAS 33: "Earnings per Share".

 

 


6 months to

6 months to

Year ended 


30 June

2017

30 June

2016

31 December 2016


Unaudited

Unaudited

Audited


£'000

£'000

£'000

Earnings

 




Reported profit for the year

1,305

1,460

4,511

Attributable to:




Equity holders of the parent

1,286

1,440

4,434

Non-controlling interests

19

20

77


1,305

1,460

4,511





Headline earnings (Note 3)

2,224

2,009

5,559

Attributable to:




Equity holders of the parent

2,205

1,989

5,482

Non-controlling interests

19

20

77


2,224

2,009

5,559





Number of shares




Weighted average number of ordinary shares for the purpose of basic earnings per share

 

 

82,843,306

 

 

82,577,286

 

 

82,651,400

Dilutive effect of securities**:




Employee share options

2,622,493

2,928,569

2,862,471

Weighted average number of ordinary shares for the purpose of diluted earnings per share

 

 

85,465,799

 

 

85,505,855

 

 

85,513,871

Reported basis:




Basic earnings per share (pence)

1.55

1.74

5.36

Diluted earnings per share (pence)

1.50

1.68

5.19

Headline basis:




Basic earnings per share (pence)

2.66

2.41

6.63

Diluted earnings per share (pence)

2.58

2.33

6.41

 

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.

 

** On 22nd February 2017, the Company announced details of a new Growth Share Scheme. If all the shares in the Scheme vest they will be exchanged into 5.7m Ordinary Shares, which will result in dilution. However, since the performance criterion is that the Company's share price must equal or exceed 75p for at least 15 days and this condition had not been satisfied at 30 June 2017, the Growth Shares are not included in the calculation of diluted earnings per share.

 

 

9.   Intangible Assets


 30 June

2017

 30 June

2016

31 December 2016


Unaudited

Unaudited

Audited


£'000

£'000

£'000





Goodwill

84,074

79,527

79,779

Other intangible assets

3,475

2,429

3,296


87,549

81,956

83,075

 

 

Goodwill


6 months to 30 June

2017

6 months to 30 June

2016

Year ended 31 December 2016


Unaudited

Unaudited

Audited


£'000

£'000

£'000





Cost




At 1 January

84,052

83,606

83,606

Recognised on acquisition of subsidiaries

4,295

197

457

Adjustment to consideration

-

(3)

(11)

At 30 June / 31 December

88,347

83,800

84,052

 

Impairment adjustment




At beginning and end of period

4,273

4,273

4,273





Net book value

84,074

79,527

79,779

 

In accordance with the Group's accounting policies, an annual impairment test is applied to the carrying value of goodwill, unless there is an indication that one of the cash generating units has become impaired during the year, in which case an impairment test is applied to the relevant asset. The next impairment test will be undertaken at 31 December 2017.

 

 

Other Intangible Assets

 


6 months to

6 months to

Year ended 

 


30 June

2017

30 June

2016

31 December 2016

 


Unaudited

Unaudited

Audited

 


£'000

£'000

£'000

 





 

Cost




At 1 January

6,611

4,601

4,601

 

Transfer from property, plant and equipment

-

-

 

1,467

 

Additions

599

-

777

 

Disposals

-

-

(234)

 

At 30 June / 31 December

7,210

4,601

6,611

 

 

 




 

Amortisation and impairment




 

At 1 January

3,315

1,832

1,832

 

Transfer from property, plant and equipment

-

-

 

853

 

Amortisation charge for the period

420

340

862

 

Disposals

-

-

(232)

 

At 30 June / 31 December

3,735

2,172

3,315

 





 

Net book value

3,475

2,429

3,296

 

 

 

Other intangible assets consist of intellectual property rights, Client relationships and trade names.



 

10.  Bank Loans and Net Debt


30 June

2017

30 June

2016

31 December 2016


Unaudited

Unaudited

Audited


£'000

£'000

£'000





Bank loan outstanding

14,375

13,125

12,375

Adjustment to amortised cost

(72)

(133)

(102)

Carrying value of loan outstanding

14,303

12,992

12,273

Less: Cash and short term deposits

(5,092)

(3,610)

(1,002)

Net bank debt

9,211

9,382

11,271





The borrowings are repayable as follows:




Less than one year

2,500

1,750

2,250

In one to two years

11,875

2,500

2,500

In more than two but less than three years

-

8,875

7,625


14,375

13,125

12,375

Adjustment to amortised cost

(72)

(133)

(102)


14,303

12,992

12,273

Less: Amount due for settlement within 12 

months (shown under current liabilities)

 

(2,500)

 

(1,750)

 

(2,250)

Amount due for settlement after 12 months

11,803

11,242

10,023

 

11.  Acquisitions

 

11.1 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 payments that may be due is as follows:

 


Cash

£'000

Shares

£'000

Total

£'000

 

30 June 2017

Less than one year

1,735

-

1,735

Between one and two years

1,815

56

1,871

In more than two but less than three years

560

-

560

In more than three but less than four years

2,146

113

2,259


6,256

169

6,425

 

A reconciliation of acquisition obligations during the period is as follows:

 


Cash

£'000

Shares

£'000

Total

£'000





At 31 December 2016

4,659

-

4,659

New obligations created in the period

5,121

288

5,409

Obligations settled in the period

(3,564)

(119)

(3,683)

Adjustments to estimates of obligations

40

-

40

At 30 June 2017

6,256

169

6,425

 

11.2 Acquisition of RJW & Partners Ltd

 

On 26 April 2017, the Group acquired the entire issued share capital of RJW & Partners Ltd ("RJW"), a pricing and market access consultancy operating in the healthcare sector. The fair value of the consideration given for the acquisition was £5,409,000, comprising initial cash and share consideration and deferred contingent cash and share consideration. Costs relating to the acquisition amounted to £68,000 and were expensed.

 

Maximum contingent consideration of £4,250,000 is dependent on RJW achieving a profit target over the period 1 January 2017 to 31 December 2020. The Group has provided for contingent consideration of £3,380,000 to date.

 

The fair value of the net identifiable assets acquired was £696,000 resulting in goodwill and other intangible assets of £4,713,000. Goodwill arises on consolidation and is not tax-deductible. Management carried out a review to assess whether any other intangible assets were acquired as part of the transaction. Management concluded that both a brand name and customer relationships were acquired and attributed a value to each of these by applying commonly accepted valuation methodologies. The goodwill arising on the acquisition is attributable to the anticipated profitability of the Company.

 


Book

value

Fair value adjustments

Fair

value


£'000

£'000

£'000

Net assets acquired:




Fixed assets

2

-

2

Trade and other receivables

344

-

344

Cash and cash equivalents

610

-

610

Trade and other payables

(260)

-

(260)


696

-

696

Other intangibles recognised at acquisition

-

468

468


696

468

1,164

Goodwill



4,245

Total consideration



5,409

Satisfied by:




Cash



1,910

Shares



119

Deferred contingent consideration



3,380




5,409

 

RJW & Partners Ltd contributed turnover of £508,000, operating income of £483,000 and headline operating profit of £176,000 to the results of the Group for the six month period ended 30 June 2017.

 

12.  Post Balance Sheet Events

 

There were no material post balance sheet events.

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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