REG - Mission Group PLC - Final Results for the year ended 31 December 2019
1 APRIL 2020
The Mission Group plc
("MISSION" "The Company" or "The Group")
FINAL RESULTS FOR THE YEAR ENDED 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
£81.0M
£77.6M
4%
· OPERATING PROFIT*
£10.8M
£9.9M
8%
· PROFIT MARGINS
13.3%
12.8%
· HEADLINE PROFIT BEFORE TAX*
£10.2M
£9.2m
11%
· REPORTED PROFIT BEFORE TAX
£8.3M
£7.7M
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 £9.3m
· 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
James Clifton, Chief Executive
Peter Fitzwilliam, Chief Financial Officer
Tel: 020 7462 1415
SHORE CAPITAL (Nomad and Broker)
Mark Percy / James Thomas/ Sarah Mather
Tel: 020 7408 4090
HOUSTON (Financial PR and Investor Relations)
Kate Hoare / Laura Stewart
Tel: 0203 760 7668
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.
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 9th 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 £81.0m (2018: £77.6m), 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 £10.2m (2018: £9.2m), 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 £0.9m (2018: £0.5m) 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 £171.1m (2018: £159.9m), 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 £81.0m (2018: £77.6m), 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 £0.9m (2018: £0.5m) 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 £10.8m (2018: £9.9m), 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 £0.1m of profits from joint ventures (2018: £nil) and largely unchanged financing costs of £0.7m, headline profit before tax increased by 11% to £10.2m (2018: £9.2m).
Adjustments to reported profits, detailed further in Note 4, totalled £1.9m (2018: £1.5m), comprising acquisition-related items of £1.3m, up from £1.0m in 2018, reflecting the krow acquisition made during 2018, losses from start-up activities of £0.4m, up from £0.1m in 2018 as we expanded into China and Germany, and investment write-downs of £0.1m (2018: £0.3m). After these adjustments, reported profit before tax was £8.3m (2018: £7.7m).
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 £6.4m (2018: £6.0m) and EPS was 7.51 pence (2018: 7.08 pence). On a diluted basis, EPS was 7.14 pence (2018: 6.91 pence).
DIVIDENDS
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 £2.0m.
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 £8.9m (2018: £11.8m), to be satisfied by a mix of cash and shares. All of this is dependent on post-acquisition earn-out profits. £3.3m is expected to fall due for payment in cash within 12 months and a further £3.7m in cash in the subsequent 12 months.
CASH FLOW
Net cash inflow from operating activities increased to £9.3m despite the 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 £1.3m (2018: £1.0m), increased software development investment of £0.8m (2018: £0.4m), the settlement of contingent consideration obligations relating to the profits generated by previous acquisitions, totaling £2.7m (2018: £1.7m), and dividends of £1.8m (2018: £1.7m).
At the end of the year, the Group's net bank debt stood at £4.9m (2018: £4.0m). 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 £20m.
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
Year to 31
December
2019
Continuing operations
2018
(Restated)
Discontinued operations 2018
Total
Year to 31 December
2018
(Restated)
Note
£'000
£'000
£'000
£'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
Year to 31 December 2019
Continuing operations
2018
(Restated)
Discontinued operations 2018
Total
Year to 31 December 2018
(Restated)
£'000
£'000
£'000
£'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
31 December
2019
As at
31 December
2018
(Restated)
Note
£'000
£'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
31 December 2019
Year to
31 December 2018
(Restated)
£'000
£'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
Share
capital
£'000
Share premium
£'000
Own shares
£'000
Share- based incentive
reserve
£'000
Foreign currency translation reserve
£'000
Retained earnings
(Restated)
£'000
Total attributable to equity holders of parent
(Restated)
£'000
Non-controlling interest
£'000
Total equity
(Restated)
£'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
2019
December
2018
Note
£'000
£'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 31
Year to 31
December
2019
December
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 still applied
IFRS 16 adjustments
As restated
Note
£'000
£'000
£'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
& Digital
Media Buying
Exhibitions & Learning
Public Relations
Total
Year to 31 December 2019
£'000
£'000
£'000
£'000
£'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
& Digital
Media Buying
Exhibitions & Learning
Public Relations
Total
Year to 31 December 2018
£'000
£'000
£'000
£'000
£'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
2019
December
2018
£'000
£'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
31 December
2019
£'000
Year ended
31 December
2018
(Restated)
£'000
PBT
PAT
PBT
PAT
£'000
£'000
£'000
£'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
31 December 2019
Year to
31 December 2018
£'000
£'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
31 December 2019
Year to
31 December 2018
(Restated)
£'000
£'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
31 December 2019
Year to
31 December 2018
(Restated)
£'000
£'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
31 December 2019
Year to
31 December 2018
£'000
£'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
31 December 2019
Year to
31 December 2018
£'000
£'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
31 December 2019
Year to
31 December 2018
(Restated)
£'000
£'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
31 December 2019
Year to
31 December 2018
£'000
£'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
2019
31 December
2018
(Restated)
£'000
£'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
2019
31 December 2018
(Restated)
£'000
£'000
Goodwill
91,752
91,752
Other intangible assets
4,107
4,369
95,859
96,121
Goodwill
Year to
31 December
2019
Year to
31 December 2018
(Restated)
£'000
£'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 development and licences
Trade names
Customer relationships
Total
£'000
£'000
£'000
£'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 £848,000 (2018: £377,000) 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 £617,000 (2018: £692,000) 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 £1,336,000 (2018: £1,650,000) 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
2019
31 December
2018
£'000
£'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 2019
31 December 2018
£'000
£'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 £82,000 (2018: £62,000). 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 2019
31 December 2018
£'000
£'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 2019
31 December 2018
(Restated)
£'000
£'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 £1,001,000 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 2019
31 December 2018
£'000
£'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 £15.0m, expiring on 28 September 2021, with an option to extend the facility by a further £5.0m 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 £5.0m has been implemented and the Group's committed facilities at the date of this report total £20.0m.
In addition to its committed facilities, the Group has available an overdraft facility of up to £3.0m 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 2019
31 December 2018
(Restated)
£'000
£'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
£'000
Shares
£'000
Total
£'000
Cash
£'000
Shares
£'000
Total
£'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
£'000
Shares
£'000
Total
£'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 2019
31 December 2018
£'000
£'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 of year
Granted/
acquired
Waived/
lapsed
Exercised
At end 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
£'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.ENDFR BIGDXRSXDGGB
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