REG - Mission Group PLC - FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2021
29/03/2022 07:00
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RNS Number : 3622G Mission Group PLC (The) 29 March 2022
THE MISSION GROUP plc
("MISSION", "the Group")
FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2021
Sustained improvement in revenues and profitability resulting in FY21 results
ahead of expectations and 2022 has started well
Reinstatement of the Group's progressive dividend policy
29 March 2022
The MISSION Group plc (AIM: TMG), creator of Work That Counts TM,
comprising a network of 17 Agencies delivering real, sustainable growth for
its Clients, is pleased to announce its final results for the year ended 31
December 2021.
FINANCIAL HIGHLIGHTS
Year ended 31 December 2021 2020 increase
· REVENUE (OPERATING INCOME) £72.5m £61.5m +£11.0m
· HEADLINE OPERATING PROFIT* £8.0m £1.9m +£6.1m
· HEADLINE PROFIT MARGINS 11.1% 3.1% +8.0%
· HEADLINE PROFIT BEFORE TAX* £7.5m £1.2m +£6.3m
· REPORTED PROFIT (LOSS) BEFORE TAX £6.8m (£2.1m) +£8.9m
· HEADLINE EARNINGS PER SHARE* 6.57p 1.00p +5.57p
· HEADLINE DILUTED EARNINGS PER SHARE* 6.47p 1.00p +5.47p
· TOTAL DIVIDEND PER SHARE 2.40p NA NA
*Headline results are calculated before acquisition adjustments, start-up
costs and exceptional restructuring costs (as set out in Note 3).
· Headline profit before tax for full year 2021 ahead of market
expectations.
· Revenue growth of 18% driving very strong profit and margin
recovery versus 2020.
· Excellent year on year growth across all segments demonstrates
resilience of Agencies in our portfolio.
· Strong balance sheet with acquisition obligations significantly
reduced to lowest level since 2013.
· Debt leverage ratios remain comfortably within Board limits.
· Progressive dividend policy returns. Final dividend of 1.60 pence
per share proposed.
BUSINESS HIGHLIGHTS
· Excellent progress against strategic priorities, notably
investment in MISSION's creative and customer experience capabilities and data
and analytics offering.
· Continued strong Client retention across Agencies with new Client
wins adding to our blue-chip global client base including Reckitt Benckiser,
BMW/Mini, Fuji Xerox and the Met Office.
· Completed Board restructure to better position the Group for
strategic growth opportunities ahead.
· Settlement of major Acquisition Obligations and HMRC COVID-19
payment deferrals in 2021 leaves Group well set to return to efficient cash
generation from future trading.
· 'Work That Counts TM' Brand refresh launched to better reflect
our vision to be the preferred creative partner for real business growth.
· Further progress made against our ESG manifesto, 'Making Positive
Change'.
OUTLOOK
· Trading in 2022 has started well and in line with Board's
expectations.
· Group remains at the forefront of opportunities across our
markets and since the year end have confirmed the acquisition of Livity, the
youth focused creative consultancy.
· Confident that MISSION is well positioned for future growth and will
continue to make further progress against its strategy in the year ahead and
beyond.
Julian Hanson-Smith, MISSION's Non-Executive Chair,
commented: "MISSION's performance in 2021 has demonstrated the resilience,
adaptability and strength of the Group. We have delivered a sustained
improvement in revenues and profitability, as well as reinstating the Group's
progressive dividend policy. The Board is optimistic for 2022, notwithstanding
the current macroeconomic uncertainty and the implications of increasing
general costs and in particular wage inflation. Trading year to date is in
line with our expectations, and we continue to explore opportunities to add
additional capabilities in dynamic areas of our markets."
ENQUIRIES
James Clifton, Chief Executive Officer
Giles Lee, Chief Financial Officer
The MISSION Group plc 020 7462 1415
Mark Percy / James Thomas / Fiona Conroy 020 7408 4090
Shore Capital (Nomad and Broker)
Kate Hoare / Laura Stewart 0204 529 0549
HOUSTON (Financial PR and Investor Relations)
To access a video interview with MISSION's CEO, James Clifton, discussing the
Group's FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2021, please follow the
link here
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.
NOTES TO EDITORS
MISSION is a collective of Creative and MarTech Agencies led by entrepreneurs
who encourage an independent spirit. Employing 1,000 people across 29
locations and 3 continents, the Group successfully combines its diverse
expertise to produce Work That Counts TM for our Clients, whatever their
ambitions. Creating real standout, sharing real innovation and delivering real
growth for some of the world's biggest brands.
www.themission.co.uk (http://www.themission.co.uk)
CHAIR'S STATEMENT
MISSION's performance in 2021 has demonstrated the resilience, adaptability
and strength of the Group. Despite the year's challenges, MISSION has achieved
impressive growth, delivering a sustained improvement in revenues and
profitability, as well as reinstating the Group's progressive dividend policy.
This would not have been possible without the continued hard-work and
determination of MISSION's entire team, embodying the entrepreneurial spirit
that defines the Group.
A strong testament to MISSION's people and the quality of their work has been
the excellent Client retention demonstrated during these last two years - to
have 47% of the Group's revenues generated by Clients of five years or more
underpins our ability to deliver results to both Clients and to our
Stakeholders.
The Group has made progress against its strategic priorities during the year,
with investments in dynamic areas of our markets that have expanded MISSION's
creative and customer experience capabilities. We have also begun to
strengthen and grow our data and analytics offering which represents a
significant growth opportunity.
During the year MISSION underwent a brand refresh, refining our purpose and
proposition to better demonstrate how we work with our Clients. MISSION
exists to deliver Work That Counts, aiming to become a long-term creative
partner that consistently delivers real, sustainable growth for our Clients.
Board changes
There were significant changes to the structure of the Board in 2021.
In April, Giles Lee assumed the role of Group Chief Financial Officer,
following Peter Fitzwilliam's retirement.
After ten years as Executive Chairman, David Morgan retired in October but
remains a significant and supportive shareholder. I took on the role of
Non-Executive Chair, having acted as a Non-Executive Director of MISSION since
2015.
Further retirements from the Board in the year included Robert Day and Barry
Cook. On behalf of the Group, I would like to thank David for his outstanding
leadership of the Group, and also Peter, Robert and Barry for their
significant contributions to the business.
In December we announced a new Non-Executive Director, Dr Eliza Filby. Eliza
is a 'Generational Intelligence' expert who brings unique specialist expertise
on generational differences and trends, which is highly relevant and valuable
to much of the work MISSION does for its Clients.
Dr Filby replaces Non-Executive Director Andrew Nash as Chair of the Company's
Remuneration Committee, with Andrew taking on the role of Senior Independent
Director and Chair of MISSION's Audit and Risk Committee.
Dividend
The Board has taken confidence from MISSION's sustained strong trading
recovery and is keen to return to the pre-pandemic progressive dividend policy
that balances continued investment in the Group's capabilities with the needs
of Shareholders. Following the reinstatement of an H1 dividend (0.80 pence per
share), the Board is proposing a final dividend of 1.60 pence per share. This
brings the total dividend for the year to 2.40 pence per share.
Whilst the Board chose not to pay any dividends in 2020 due to the pandemic,
the total dividend for 2021 represents a 4% increase on the total dividend
declared in 2019.
Outlook
The Board is optimistic for 2022, notwithstanding the current macroeconomic
uncertainty due to the ongoing geopolitical situation in Ukraine and the
implications of increasing general, and in particular, wage inflation. During
the pandemic our leadership teams have re-organized their businesses to build
in greater resilience and flexibility. This positions them well to respond to
opportunities and to remain relevant as employers of choice and as critical
business partners for their Clients.
Trading year to date is in line with our expectations, and we continue to
explore opportunities to add additional capabilities in dynamic areas of our
markets.
Julian Hanson-Smith
Non-Executive Chair
CHIEF EXECUTIVE'S STATEMENT
Well, that was not the year that we or anyone expected!
Starting with a prolonged third lockdown in the UK in the first half of the
year and the rise of the Omicron variant in the latter, we all continued to
face unexpected and unprecedented challenges.
That's why I am so delighted to report that MISSION has delivered strong,
profitable growth in 2021, even beating the City's, and indeed our own,
expectations. A result of which I and the wider Leadership Team are incredibly
proud.
This result was made possible by the strategic progress that the Group has
made in recent years underpinning our ability to deliver against this evolving
trading environment, achieving revenue (operating income) growth of 18% at
£72.5m (2020: £61.5m) with headline operating profits of £8.0m (2020:
£1.9m) and headline profit margin improving to 11.1% (2020: 3.1%).
Strong Trading Recovery
The Group delivered strong year on year growth across all business segments.
The vast majority of our Agencies within the Advertising & Digital segment
delivered year on year growth over the course of 2021. We were delighted to
see a continued strong performance from our Agencies that operate in sectors
which have proven more resilient to the pandemic such as April Six, our
specialist technology and mobility Agency which delivered an 14.7% increase in
revenue. However, it was also particularly rewarding to see strong
performances from our Agencies exposed to sectors which were hardest hit by
the pandemic.
ThinkBDW, our specialist property and marketing Agency, delivered a 34.1%
increase in revenue following their investment in new skills and tools during
2020. Mongoose Promotions also saw a significant increase in revenues up 40.0%
over the course of the year, with the Agency launching a successful rebranding
in early 2022 to become SPARK Marketing Services Limited (SPARK). The move
aimed at showcasing their expanding service offering and further
differentiating them from Mongoose Sports & Entertainment, which also grew
its revenues by 20.3% within our Public Relations segment.
Our Events segment recovered well to deliver revenue growth of 69.1% as
Clients started to resume event activity with key projects during the period
including the UK Pavilion at the Dubai Expo.
Over the course of the year, the Group also benefitted from a full year of the
now fully embedded behavioural science practice, Innovation Bubble, acquired
in 2020, which now shares many new Clients with other MISSION Agencies.
As Julian has said, Client retention across MISSION remained strong, with 47%
of Group revenues generated from Clients who have been with us for five years
or longer. This was balanced by a number of exciting new business
opportunities with new Client wins throughout the year including the following
that have not been previously reported: Reckitt Benckiser, BMW/Mini, Fuji
Xerox, Met Office, Moda, Leightons, California Psychics, Island Poke, LRQA and
Vegetarian Express.
Finally, the collaborative culture at MISSION continues to underpin strong
working relationships across the Group's Agencies, with all of our Agencies
increasingly benefiting from the centralised support that the MISSION
Advantage offers them. New, agile working practices which have evolved
throughout the different phases of the pandemic, continue to support this.
Work That Counts TM
2021 saw the Group introduce a new descriptor with the goal of better
reflecting MISSION's vision to be the preferred creative partner for real
business growth. This descriptor; 'Work That Counts', demonstrates that
everything we do is designed to make the difference our Clients are looking
for and why they consider us to be a long-term creative partner that
consistently delivers that real business growth.
Investment in our capabilities
2021 saw us outline and sharpen our focus on three strategic areas of
opportunity, through which we intend to expand our capabilities to support our
clients.
Firstly, we are focused on further strengthening MISSION's data and analytics
capability, driving further enhancements to our established offering and
developing the centralised support we can offer all our Agencies to support
client and new business growth. One of the first initiatives successfully
launched in the second half of the year has been the 'MISSION BRAND BONDING
INDEX' (MBBI), a free to use online platform using comprehensive data and a
bespoke algorithm to benchmark global brands. The MBBI has been adapted to
align with sector prospecting targets across all Group Agencies and is proving
to be an important tool to showcase our growing expertise in this field.
The second strategic area of focus is enhancing our creative and customer
experience (CX) capability. We have identified an opportunity to leverage the
power of our existing CX capabilities, with meaningful creative talent, which
allows us to have continued breadth and depth of expertise and services to fit
today's customer challenges. We further strengthened our position in this
space with the acquisition of Soul, the psychology-led customer engagement
Agency whose approach fits perfectly with our Clients' need to understand
their customers on a deeper level. Since the financial year end we have also
launched krow.x - the creative CX agency.
The third strategic opportunity for the Group is around delivering effective
ecommerce solutions. As well as focusing on creating an enhanced data and
analytics capability for ecommerce with an external partner, we are continuing
to build our capability within MISSION Made to support all Agencies in
delivering effective ecommerce websites for Clients.
Making Positive Change
Following the successful launch of our inaugural Environmental, Social and
Governance (ESG) manifesto 'Making Positive Change' in 2020, I am delighted to
have seen the Group make further progress against our commitments over the
course of the year.
One of our key areas of focus throughout 2021 was continuing to support our
people in their working environment, despite the continued disruptions to
working practices which the pandemic continued to pose.
All of our offices were reopened over the course of the year with every care
taken to ensure our workspaces remained safe. Resilience and Wellbeing
Workshops were delivered from March to June and made available to everyone
across the Group in preparation for their return to office-based work.
Over the course of the year, we have also taken further strides forward as
part of our commitment to being a Mindful Employer with over 40 Mental Health
First Aiders now trained across the Group.
A key part of our manifesto is focused on introducing and developing talent in
the industry. This is especially critical following the 'The Great
Resignation' to which our Industry was not immune. That is why we are
committing to investing at record levels in recruiting and retaining the best
talent in 2022. The Group recognises this will have some short-term impact on
its cost base, but it will ultimately underpin its ability to deliver in
future years.
Outlook
Trading in 2022 has started well and in line with our expectations, though we
note that, whilst we have no operations in the region, the war in Ukraine
is heart-breaking and creating a level of economic uncertainty that is
difficult to predict.
We remain at the forefront of opportunities across our markets and since the
year end have been delighted to confirm the acquisition of Livity, the youth
focused creative consultancy.
This latest acquisition is testament to our continued strategy to focus on
exploring opportunities that further enhance our compelling infrastructure and
builds on our strong track record of acquiring and integrating earning
accretive businesses, which enhance our services, geographic reach and sector
expertise. With minimal earn-out obligations due, the MISSION's highly cash
generative nature means we are well placed to continue to capitalise on
further new opportunities that we believe 2022 will undoubtedly bring.
We are confident that MISSION is well positioned for future growth and will
continue to make further progress against its strategy in the year ahead and
beyond.
James Clifton
Group Chief Executive
CHIEF FINANCIAL OFFICER'S REVIEW
Trading performance
Overview
As has been described in the Chairman's and Chief Executive's statements, the
business has recovered very strongly from the depths of the pandemic, and this
comes through powerfully in the financial performance that is detailed in the
coming paragraphs.
2021 saw revenue growth of 18% and this, alongside an improvement in headline
operating margins to 11% (2020: 3%), delivered an £8.8m increase in reported
profit before tax (from a loss of £2.1m to a profit of £6.8m) and a £6.3m
increase in adjusted, headline profit before tax from £1.2m in 2020 to £7.5m
in 2021 (as set out in Note 3).
Billings and revenue
Turnover (billings) was 26% higher than the previous year, at £153.3m (2020:
£121.9m), 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. Taken as a whole, the Group's operating income (referred to
as "revenue") for the year increased by 18% to £72.5m (2020: £61.5m), with
growth delivered across all reported business segments.
Of this £11.0m growth in revenue, £10.2m was organic, reflecting the strong
recovery of those MISSION Agencies most effected by the pandemic across the
business segments, namely those exposed to property (ThinkBDW), events (Bray
Leino Events) and cinema-related sales promotions sectors (Mongoose). April
Six, our specialist technology and mobility Agency that grew strongly during
the pandemic continued to out-perform with Amazon Web Services (AWS) now an
important Group Client.
The remaining £0.8m of growth came primarily from the benefit of a full year
of Innovation Bubble trading (acquired July 2020) and supplemented at the end
of the year by the impact of new MISSION agency Soul (acquired October 2021).
Whilst the majority of our businesses were largely unaffected by the
disruption of COVID-19 travel restrictions around the world, this did impact
on Pathfindr somewhat with turnover down to £0.7m (2020: £1.5m). Pathfindr
had adapted innovatively to the pandemic with good sales of its Safe
Distancing Assistant during 2020. Unsurprisingly however, further demand for
this product fell away in 2021. Whilst Pathfindr suffered somewhat from the
inability to travel and deliver face to face demonstrations of new Asset
Tracking products to potential Clients, it has invested confidently in
developing these markets with improved products during 2021 and has already
been rewarded by trials with large-scale Clients in early 2022. Pathfindr will
continue to invest in product development in 2022 to capitalise on the
potential demand in the marketplace with the resulting opportunities expected
to be realised in 2023 and beyond.
One of the differentiating features of MISSION is the longevity and loyalty of
its Client base. We believe this is due to the dynamic and Agency-first
culture which ensures Clients feel they are receiving a boutique level of
Client service but supported by the resources of a multi-national group.
Profit and margins
Reported operating profit recovered resoundingly this year, from a 2020 loss
of £1.3m to a 2021 profit of £7.3m, an increase of £8.6m.
The revenue growth of 18% on 2020 was delivered at an impressive incremental
profit margin of 55%. The headline operating expenditure base increased in the
year by only 8% (from £59.6m in 2020 to £64.5m in 2021). Our commitment to
our Shared Services initiative ensured that support and infrastructure costs
were tightly managed whilst our Agency-first model empowered Agency CEOs to
increase resources in careful response to improving revenue demand.
In 2020 the Group benefited from £3.0m of furlough receipts. We were pleased
to note that in 2021 this dropped to only £0.3m as most employees returned to
work to service the increased revenues. This enabled recruitment, onboarding
and training costs to be reduced, improving business efficiency through the
recovery, and demonstrates the success of the Coronavirus Job Retention Scheme
across our business.
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 acquisition adjustments, exceptional
items and losses from start-up activities (as set out in Note 3).
Headline operating profit improved immensely on the previous year to £8.0m
(2020 £1.9m), an increase of £6.1m. Furthermore, our profit margin for the
year (headline operating profit as a percentage of revenue) also increased
significantly to 11.1% (2020 3.1%).
Headline Profit before tax
The reported profit before tax was £6.8m (2020: loss of £2.1m), an increase
of £8.8m.
Adjustments to reported profits, detailed further in Note 3, totalled £0.7m
(2020: £3.2m). The total value of adjustments reduced significantly in 2021.
This was primarily due to adjustments relating to acquisition-related items of
£0.2m profit compared to £1.9m costs in 2020. Furthermore, and specifically
within this, the movement in fair value of contingent consideration for 2021
totalled £0.8m profit compared to £1.3m cost in 2020. This year-on-year
correction followed a somewhat over-cautious forecast review on 2020 that
crystallised and resulted in a lower consideration payment in 2021.
In addition to this, there were no COVID-19 related adjustments to profit in
2021 (2020: £1.0m).
As has already been described by my colleagues, the Board engaged in a
significant restructuring and resizing in 2021. The resultant one-off costs
associated with this restructure totalled £0.5m.
The final adjustment relates to losses from start-up activities of £0.4m
(2020: £0.3m) as we expanded our Mongoose business into Singapore. After
these adjustments, the reported profit before tax was £6.8m (2020: loss of
£2.1m).
Taxation
The headline tax rate reduced to more normal levels during 2021, being 22.0%
(2020: 42.6%). In 2020 COVID-19 had a significant effect on the Group's
headline tax rate with non-deductible tax losses and the temporary bias
towards US-based profits pushing the headline tax rate higher.
On a reported basis, in 2020 the impact of COVID-19 described above, coupled
with a large non-deductible loss on the remeasurement of contingent
consideration, resulted in a tax charge of £0.2m on a reported loss before
tax of £2.1m. As with the headline tax rate, the reported tax rate also
returned to more normal levels in 2021 at 21.2%, largely back in line with the
tax rate in 2019 of 22.5%. The tax rate is expected to be consistently higher
than the statutory rate (of 19.0%, unchanged from 2020) since the amortisation
of acquisition-related intangibles is not deductible for tax purposes and tax
rates on our US operations are substantially higher that the UK corporation
tax rate.
Earnings Per Share
After tax, the reported profit for the year was £5.3m (2020: loss of £2.2m)
and EPS was 6.0 pence (2020: loss of 2.3 pence). On a diluted basis, EPS was
5.9 pence (2020: loss of 2.3 pence).
After adjustments, Headline EPS was 6.6 pence (2020: 1.0 pence) and, on a
diluted basis, was 6.5 pence (2020: 1.0 pence).
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
shareholders via dividends with the need to fund the Group's growth ambitions
and maintain a strong balance sheet and healthy distributable reserves (2021:
£38.7m, 2020: £37.0m).
A dividend of 0.80 pence per share was paid in December 2021. The Board has
proposed a resolution for a final dividend of 1.60 pence per share in its AGM
Notice, bringing the total for the year to 2.40 pence per share. No dividends
were declared in 2020. The total dividend for the year of 2.40 pence per share
represents a 4% increase on the total dividend declared in 2019.
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 and internal
investments increased by £2.8m in the year following the acquisition of Soul
in October. The level of 'total debt' (combined net bank debt and acquisition
obligations) increased by £4.0m.
The Board undertakes an annual assessment of the value of all goodwill,
explained further in Note 10, and at 31 December 2021 again concluded that no
impairment in the carrying value was required.
The Group's acquisition obligations at the end of 2021 were £3.3m (2020:
£8.5m), to be satisfied by a mix of shares and cash. All of this is dependent
on post-acquisition earn-out profits. £0.7m is expected to fall due for
payment in cash within 12 months and a further £0.4m in cash in the
subsequent 12 months. The Directors believe that the strength of the Group's
balance sheet can comfortably accommodate these obligations alongside the
Group's commitments to capital expenditure (expected to run at similar levels
to recent years) and dividend payments.
Consolidated Net Current Assets closed at £10.3m (2020 net liabilities of
£8.9m).
This was in part the result of the major reduction in Acquisition Obligations
noted above and in part because a new three year, £20m Revolving Credit
Facility was agreed in April 2021 with our longstanding bankers, NatWest. This
arrangement also has an "accordion option" to increase the facility by up to
£5m and by one year.
At the end of the year the Group's net bank debt stood at £10.3m (2020:
£1.2m). On an adjusted basis (pre IFRS16) the leverage ratio of net bank debt
to headline EBITDA was x1.2 at 31 December 2021 (2020: x0.6). The Group's
adjusted ratio of total debt, including remaining acquisition obligations, to
EBITDA at 31 December 2021 was significantly reduced to x1.5 (2020: x4.3).
Cash flow
The underlying cash performance is strong following the settlement of a number
of prior-period obligations.
The closing net bank debt position for 2021 was £10.3m. This represents an
increase in net debt of £9.1m on the 2020 year-end net bank debt of £1.2m,
which in itself is an historic low for the Group.
Headline profit after tax of £5.8m (2020: £0.7m) converted into £1.7m
(2020: £8.9m) of 'free cash flow' (defined as net cash inflow from operating
activities less tangible and intangible capital expenditure).
Bank loans increased by £11.5m and this, coupled with the free cash flow
provided funding for new acquisitions amounting to £0.7m (2020: £0.2m), the
settlement of contingent obligations relating to the profits generated by
previous acquisitions totalling £6.7m (2020: 2.0m), dividends of £2.1m
(2020: Nil) and a working capital outflow of £4.8m.
With regards to the working capital outflow, as expected, the Group's cash
flow during 2021 was impacted by some unwinding of the temporary working
capital movements that followed the much-reduced trading experienced in 2020
over and above those deferred payments noted above. The working capital
outflow is defined as the aggregate movement in receivables, stock and
payables and was reported as £4.8m (2020: £6.4m inflow).
However, if the COVID-related deferrals noted above are adjusted for then the
underlying working capital outflow is revealed as £1.7m (2020: £3.3m
inflow), with this outflow occurring as trading activity accelerated through
the second half year. By both measures it is clear to see that the working
capital movements have very much followed the trading recovery.
Going concern
There is now widespread belief around the globe that the peak economic
uncertainty of COVID-19 has passed. However, further scenario modelling has
been undertaken of the Group's net debt position into the reasonably
foreseeable future. This modelling included cautious assumptions about trading
performance, investment plans and acquisition consideration obligations. The
principal uncertainty in the projections is when and to what extent the
Group's revenues will return to pre-pandemic levels. The central scenario
anticipates that revenues will remain below 2019 levels until Q3 2022. Against
this scenario, the Group was demonstrated to have adequate headroom against
its £20m banking facilities which has an "accordion option" to increase the
facility by up to £5m. These facilities were also demonstrated to be
sufficient to cater for a downside scenario whereby the Group's trading in H1
2022 repeated that seen in H1 2020, the worst in the Group's history.
Accordingly, the Board has concluded that it is appropriate to adopt the going
concern basis in preparing the financial statements.
Key performance indicators
KPIs are designed to monitor the Group's revenue and profit growth, within a
safe capital structure. Whilst COVID-19 has interrupted the Group's consistent
track record of growth, the Board has reviewed and reconfirmed the Group's KPI
targets as being appropriate for a post-pandemic environment.
The targets, along with the outcome for 2021 are as follows:
· Achieve organic revenue growth of at least 5% per year [delivered
+ 17%];
· Increase headline operating profit margins to 14% [delivered
11%];
· Grow headline profit before tax by 10% year-on-year; and
[delivered 539%]
· Maintain the ratio of net bank debt to EBITDA* at or below x1.5
[delivered x1.2] and the ratio of total debt (including both bank debt and
deferred acquisition consideration) to EBITDA at or below x2.0 [delivered
x1.5].
*EBITDA is headline operating profit before depreciation and amortisation
charges.
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.
Outlook
We entered the year expecting 2022 to be another year of growth, albeit at the
time of writing the financial markets are still absorbing the shock of the
invasion of Ukraine.
The year has started well and prospects for organic growth are good. We also
expect to make additional margin improvements in spite of the macro-economic
cost pressures impacting our sector and we anticipate reporting upon the
substantial progress of Pathfindr. Furthermore, the significant reduction
reported in future acquisition consideration obligations will enable this
growth to be highly cash generative.
Giles Lee
Group Chief Financial Officer
Consolidated Income Statement
For the year ended 31 December 2021
Year to Year to
31 December 31 December
2021 2020
Note £'000 £'000
TURNOVER 2 153,287 121,927
Cost of sales (80,792) (60,409)
OPERATING INCOME 2 72,495 61,518
Headline operating expenses (64,476) (59,585)
HEADLINE OPERATING PROFIT 8,019 1,933
Acquisition adjustments 3 156 (1,891)
COVID restructuring costs 3 - (1,004)
Board restructuring costs 3 (496) -
Start-up costs 3 (367) (335)
OPERATING PROFIT / (LOSS) 7,312 (1,297)
Share of results of associates and joint ventures
140 56
PROFIT / (LOSS) BEFORE INTEREST AND TAXATION 7,452 (1,241)
Net finance costs 5 (701) (821)
PROFIT / (LOSS) BEFORE TAXATION 6 6,751 (2,062)
Taxation 7 (1,432) (186)
PROFIT / (LOSS) FOR THE YEAR 5,319 (2,248)
Attributable to:
Equity holders of the parent 5,423 (2,033)
Non-controlling interests (104) (215)
5,319 (2,248)
Basic earnings per share (pence) 9 6.0 (2.3)
Diluted earnings per share (pence) 9 5.9 (2.3)
Headline basic earnings per share (pence) 9 6.6 1.0
Headline diluted earnings per share (pence) 9 6.5 1.0
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2021
Year to Year to
31 December 2021 31 December 2020
£'000 £'000
PROFIT / (LOSS) FOR THE YEAR 5,319 (2,248)
Other comprehensive income - items that may be reclassified separately to
profit or loss:
Exchange differences on translation of foreign operations
70 (173)
TOTAL COMPREHENSIVE INCOME / (LOSS) FOR THE YEAR
5,389 (2,421)
Attributable to:
Equity holders of the parent 5,489 (2,187)
Non-controlling interests (100) (234)
5,389 (2,421)
Consolidated Balance Sheet
As at 31 December 2021
As at As at
31 December 31 December
2021 2020
Note £'000 £'000
FIXED ASSETS
Intangible assets 10 98,974 96,186
Property, plant and equipment 2,102 2,394
Right of use assets 9,149 10,729
Investments, associates and joint ventures 11 517 317
110,742 109,626
CURRENT ASSETS
Stock 2,112 1,194
Trade and other receivables 12 40,538 33,314
Cash and short term deposits 6,066 3,806
48,716 38,314
CURRENT LIABILITIES
Trade and other payables 13 (37,338) (34,138)
Corporation tax payable (380) (359)
Bank loans 14 - (4,969)
Acquisition obligations 16.1 (692) (7,765)
(38,410) (47,231)
NET CURRENT ASSETS / (LIABILITIES) 10,306 (8,917)
TOTAL ASSETS LESS CURRENT LIABILITIES 121,048 100,709
NON CURRENT LIABILITIES
Bank loans 14 (16,393) -
Lease liabilities 15 (8,077) (9,414)
Acquisition obligations 16.1 (2,623) (720)
Deferred tax liabilities (483) (346)
(27,576) (10,480)
NET ASSETS 93,472 90,229
CAPITAL AND RESERVES
Called up share capital 17 9,102 9,102
Share premium account 45,928 45,928
Own shares 18 (518) (591)
Share-based incentive reserve 868 642
Foreign currency translation reserve - (66)
Retained earnings 37,820 34,842
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
93,200 89,857
Non-controlling interests 272 372
TOTAL EQUITY 93,472 90,229
Consolidated Cash Flow Statement
For the year ended 31 December 2021
Year to Year to
31 December 2021 31 December 2020
£'000 £'000
Operating profit / (loss) 7,312 (1,297)
Depreciation and amortisation charges 4,029 4,836
Movements in the fair value of contingent consideration (761) 1,276
Loss on disposal of property, plant and equipment 11 35
Non-cash charge for share options, growth shares and shares awarded, net of (48) 183
awards settled in cash
(Increase) / decrease in receivables (6,703) 7,684
Increase in stock (918) (103)
Increase / (decrease) in payables 2,798 (1,175)
OPERATING CASH FLOWS 5,720 11,439
Net finance costs paid (781) (763)
Tax paid (1,355) (640)
Net cash inflow from operating activities 3,584 10,036
INVESTING ACTIVITIES
Proceeds on disposal of property, plant and equipment 72 3
Purchase of property, plant and equipment (884) (421)
Investment in software and product development (1,024) (696)
Acquisitions of or investments in businesses (663) (184)
Payment relating to acquisitions made in prior years (6,714) (2,018)
Cash acquired with subsidiaries 435 -
Net cash outflow from investing activities (8,778) (3,316)
FINANCING ACTIVITIES
Dividends paid (2,100) -
Payment of lease liabilities (2,016) (2,769)
Increase in / (repayment of) bank loans 11,500 (5,000)
Net cash inflow / (outflow) from financing activities 7,384 (7,769)
Increase / (decrease) in cash and cash equivalents 2,190 (1,049)
Exchange differences on translation of foreign subsidiaries
70 (173)
Cash and cash equivalents at beginning of year 3,806 5,028
Cash and cash equivalents at end of year 6,066 3,806
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
Total attributable to equity holders of parent
Share- based incentive Foreign currency translation reserve
reserve £'000 Non-controlling interest
Share Share premium Own shares £'000 Retained earnings Total equity
capital £'000 £'000
£'000 £'000 £'000 £'000
£'000
At 1 January 2020
8,530 43,015 (659) 700 88 40,021 91,695 606 92,301
Loss for the year - - - - - (2,033) (2,033) (215) (2,248)
Exchange differences on translation of foreign operations
- - - - (154) - (154) (19) (173)
Total comprehensive loss for the year
- - - - (154) (2,033) (2,187) (234) (2,421)
New shares issued 28 135 - - - - 163 - 163
Share option charge - - - 179 - - 179 - 179
Growth share charge - - - 34 - - 34 - 34
Settlement of growth shares 544 2,778 - (271) - (3,051) - - -
Shares awarded and sold from own shares
- - 68 - - (95) (27) - (27)
At 31 December 2020
9,102 45,928 (591) 642 (66) 34,842 89,857 372 90,229
Profit for the year - - - - - 5,423 5,423 (104) 5,319
Exchange differences on translation of foreign operations
- - - - 66 - 66 4 70
Total comprehensive income for the year
- - - - 66 5,423 5,489 (100) 5,389
Share option charge - - - 174 - - 174 - 174
Growth share charge - - - 52 - - 52 - 52
Shares awarded and sold from own shares
- - 73 - - (345) (272) - (272)
Dividend paid - - - - - (2,100) (2,100) - (2,100)
At 31 December 2021
9,102 45,928 (518) 868 - 37,820 93,200 272 93,472
Notes to the Consolidated Financial Statements
1. Principal Accounting Policies
Basis of preparation
The results for the year to 31 December 2021 have been extracted from the
audited consolidated financial statements, which are expected to be published
by 31 March 2022.
The financial information set out above does not constitute the Company's
statutory accounts for the years to 31 December 2021 or 2020 but is derived
from those accounts. Statutory accounts for the year ended 31 December 2020
were delivered to the Registrar of Companies following the Annual General
Meeting on 14 June 2021 and the statutory accounts for 2021 are expected to be
published on the Group's website (www.themission.co.uk
(http://www.themission.co.uk/) ) shortly, posted to shareholders at least 21
days ahead of the Annual General Meeting ("AGM") on 21 June 2022 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 2021 and 31 December 2020; 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.
2. Segmental Information
IFRS 15: Revenue from Contracts with Customers requires the disaggregation of
revenue into categories that depict how the nature, amount, timing and
uncertainty of revenue and cash flows are affected by economic factors. The
Board has considered how the Group's revenue might be disaggregated in order
to meet the requirements of IFRS 15 and has concluded that the activity and
geographical segmentation disclosures set out below represent the most
appropriate categories of disaggregation. The Board considers that neither
differences between types of Clients, sales channels and markets nor
differences between contract duration and the timing of transfer of goods or
services are sufficiently significant to require further disaggregation.
For management purposes the Group monitored the performance of its separate
operating units, each of which carries out a range of activities, as a single
business segment. However, since different activities have different revenue
characteristics, the Group's turnover and operating income has been
disaggregated below to provide additional benefit to readers of these
financial statements.
Following the implementation of a Shared Services function from the start of
2018 and the resulting transfer of certain Agency-specific contracts onto
centrally-managed arrangements, a significant portion of the total operating
costs are now centrally managed and segment information is therefore now only
presented down to the operating income level.
Advertising Media Buying Events Public Relations Total
& Digital
Year to 31 December 2021 £'000 £'000 £'000 £'000 £'000
Turnover 103,062 28,878 13,081 8,266 153,287
Operating income 56,725 3,305 5,492 6,973 72,495
Advertising Media Buying Events Public Relations Total
& Digital
Year to 31 December 2020 £'000 £'000 £'000 £'000 £'000
Turnover 87,418 18,546 8,738 7,225 121,927
Operating income 50,022 2,286 3,248 5,962 61,518
Assets and liabilities are not split between activities.
Geographical segmentation
The following table provides an analysis of the Group's operating income by
region of activity:
Year to 31 Year to 31
December December
2021 2020
£'000 £'000
UK 63,160 53,077
USA 6,425 5,972
Asia 2,720 2,353
Rest of Europe 190 116
72,495 61,518
3. Reconciliation of Headline Profit to Reported Profit
The Board believes that headline profits, which eliminate certain amounts from
the reported figures, provide a better understanding of the underlying trading
of the Group. The adjustments to reported profits generally fall into three
categories: acquisition-related items, exceptional restructuring costs and
start-up costs.
Year ended Year ended
31 December 31 December
2021 2020
£'000 £'000
PBT PAT PBT PAT
£'000 £'000 £'000 £'000
Headline profit 7,458 5,819 1,168 670
Acquisition-related items (Note 4) 156 243 (1,891) (1,806)
COVID restructuring costs - - (1,004) (834)
Board restructuring costs (496) (402) - -
Start-up costs (367) (341) (335) (278)
Reported profit / (loss) 6,751 5,319 (2,062) (2,248)
Board restructuring costs in 2021 comprised leaving packages payable to former
directors Robert Day, Peter Fitzwilliam and David Morgan following their
resignations. COVID restructuring costs in 2020 related to redundancy and
property closure costs in response to the COVID-19 pandemic.
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 2021 relate to the launch of Mongoose Sports' new venture in
Birmingham and the venture Alive, launched in Asia in 2021. Start-up costs in
2020 related to Story's new venture in Leeds, April Six's new venture in
Germany and the launch of Alive in Asia.
4. Acquisition Adjustments
Year to Year to
31 December 2021 31 December 2020
£'000 £'000
Movement in fair value of contingent consideration 761 (1,276)
Amortisation of other intangibles recognised on acquisitions (446) (505)
Acquisition transaction costs expensed (159) (110)
156 (1,891)
The movement in fair value of contingent consideration relates to a net
downward (2020: upward) 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.
5. Net Finance Costs
Year to Year to
31 December 2021 31 December 2020
£'000 £'000
Interest on bank loans and overdrafts, net of interest on bank deposits (283) (329)
Amortisation of bank debt arrangement fees (67) (42)
Interest expense on lease liabilities (351) (450)
Net finance costs (701) (821)
6. Profit or Loss Before Taxation
Profit or loss on ordinary activities before taxation is stated after charging
/ (crediting):
Year to Year to
31 December 2021 31 December 2020
£'000 £'000
Depreciation of owned tangible fixed assets 1,094 1,214
Depreciation expense on right of use assets 1,995 2,645
Amortisation of intangible assets recognized on acquisitions 446 505
Amortisation of other intangible assets 494 472
Expense relating to short term leases 521 77
Expense relating to low value leases 17 15
Income from subleasing right of use assets - (4)
Staff costs before furlough grants 49,870 47,954
Furlough grants received (347) (2,966)
Bad debts and net movement in provision for bad debts 177 53
Auditors' remuneration 179 234
Loss on foreign exchange 51 62
7. Taxation
Year to Year to
31 December 2021 31 December 2020
£'000 £'000
Current tax:-
UK corporation tax at 19.00% (2020: 19.00%) 1,133 15
Adjustment for prior periods (64) (178)
Foreign tax on profits of the period 226 402
1,295 239
Deferred tax:-
Current year originating temporary differences 137 (53)
Tax charge for the year 1,432 186
Factors Affecting the Tax Charge for the Current Year:
The tax assessed for the year is higher (2020: higher) than the standard rate
of corporation tax in the UK. The differences are:
Year to Year to
31 December 2021 31 December 2020
£'000 £'000
Profit / (loss) before taxation 6,751 (2,062)
Profit / (loss) on ordinary activities before tax at the standard rate of 1,283 (392)
corporation tax of 19.00% (2020: 19.00%)
Effect of:
Rate changes 119 -
Non-deductible expenses / income not taxable (42) 210
Depreciation in excess of / enhanced capital allowances (32) 210
Losses not utilised 36 174
Higher rates on overseas earnings 160 151
Adjustments in respect of prior periods (64) (178)
Other differences (28) 11
Actual tax charge for the year 1,432 186
8. Dividends
Year to Year to
31 December 2021 31 December 2020
£'000 £'000
Amounts recognised as distributions to equity holders in the year:
Interim dividend of 0.80 pence (2020: nil) per share 721 -
Deferred 2019 final dividend of 1.53 pence (2020: nil) per share 1,379 -
2,100 -
The 2019 final dividend of 1.53 pence per share was proposed in the 2019
annual report and accounts but subsequently deferred due to the priority to
preserve cash during the pandemic. Following the much-improved net debt
position at 31 December 2020, this dividend was paid in March 2021 and, in
accordance with IFRS, recognised in the 2021 accounts.
A final dividend of 1.60 pence per share is to be paid in July 2022 should it
be approved by shareholders at the AGM. In accordance with IFRS this final
dividend will be recognised in the 2022 accounts.
9. Earnings Per Share
The calculation of the basic and diluted earnings per share is based on the
following data, determined in accordance with the provisions of IAS 33:
Earnings Per Share.
Year to Year to
31 December 31 December
2021 2020
£'000 £'000
Earnings
Reported profit for the year
Attributable to:
Equity holders of the parent 5,423 (2,033)
Non-controlling interests (104) (215)
5,319 (2,248)
Headline earnings (Note 3)
Attributable to:
Equity holders of the parent 5,923 885
Non-controlling interests (104) (215)
5,819 670
Number of shares
Weighted average number of Ordinary shares for the purpose of basic earnings
per share
90,134,211 88,341,383
Dilutive effect of securities:
Employee share options 1,414,543 2,360,072
Weighted average number of Ordinary shares for the purpose of diluted earnings
per share
91,548,754 90,701,455
Reported basis
Basic earnings per share (pence) 6.0 (2.3)
Diluted earnings per share (pence) 5.9 (2.3)
Headline basis:
Basic earnings per share (pence) 6.6 1.0
Diluted earnings per share (pence) 6.5 1.0
A reconciliation of the profit after tax on a reported basis and the headline
basis is given in Note 3.
10. Intangible Assets
31 December 31 December 2020
2021
£'000 £'000
Goodwill 94,604 92,160
Other intangible assets 4,370 4,026
98,974 96,186
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"), discounted using an appropriate discount rate.
It is the Directors' judgement that each distinct Agency represents a CGU. The
initial projection period of four years includes the annual budget for each
CGU, based on insight into Clients' planned marketing expenditure and targets
for net new business growth derived from historical experience, and
extrapolations of the budget in subsequent years based on known factors and
estimated trends. The key assumptions used by each CGU concern revenue growth
and staffing levels and different assumptions are made by different CGUs based
on their individual circumstances. Beyond this initial projection period, a
generic long term growth rate of 2.0% is assumed for all units based on
information published by market analysts. For one CGU the underlying value in
use calculations requires performance in year one that is in excess of that
achieved for the last 4 years, in part as a result of the market disruption
caused by the COVID-19 pandemic. Management is confident that performance will
continue to recover through 2022 to the point that no impairment would be
required on future review.
The resulting pre-tax cash flow forecasts were discounted using a rate of
8.75%, the average of the Weighted Average Cost of Capital ("WACC") over the
10 years from 2012, when the current methodology of calculating WACC was first
adopted (2020: 8.20%, the average WACC over the 9 years from 2012).
The reason for using this average rather than the WACC at 31 December 2021
(the "2021 WACC") was to avoid any distortion that may have been caused by the
exceptional circumstances of COVID-19. Over the pre-COVID 8 years from 2012 to
2019, the Group's WACC was consistently within a range of 7.4% to 8.5% and the
Directors felt it inappropriate to discount cash flows that stretch into the
indefinite future by using a potentially COVID-affected 2021 WACC.
The conclusion from using the above methodology was that no impairment in
goodwill was required. No change to this conclusion is reached as a result of
the following independent changes in assumptions: nil growth in 2022 and a one
year delay in the achievement of 2022 budgets caused by COVID-19; any
reduction in short term growth rates beyond 2022; nil long term growth rates;
a 1% increase in discount rate. The only change in assumptions that would
result in a material impairment in the carrying value of the Group's goodwill
is an increase in discount rate of 3.5%, which management do not believe is a
reasonably possible change in key assumption.
11. Investments, Associates and Joint Ventures
Year to Year to
31 December 31 December
2021 2020
£'000 £'000
At 1 January 317 177
Profit / (loss) during the year 140 56
Additions 60 84
At 31 December 517 317
12. Trade and Other Receivables
31 December 2021 31 December 2020
£'000 £'000
Trade receivables 25,727 22,296
Accrued income 11,551 7,923
Prepayments 2,154 2,180
Other receivables 1,106 915
40,538 33,314
An allowance has been made for estimated irrecoverable amounts from the
provision of services of £225,000 (2020: £97,000). The estimated
irrecoverable amount is arrived at by considering the historic loss rate and
adjusting for current expectations, Client base and economic conditions,
including the potential impact of COVID-19 which has resulted in an increase
in the estimated loss rate in 2021.
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.
31 December 2021 31 December 2020
£'000 £'000
Gross trade receivables 25,952 22,393
Gross accrued income 11,551 7,923
Total trade receivables and accrued income 37,503 30,316
Expected loss rate 0.6% 0.3%
Provision for doubtful debts 225 97
Trade receivables include £7.4m that is past due but not impaired, of which
£1.1m is greater than 3 months past due.
Accrued income has increased by £3,628,000 as a result of an increase in the
volume of work taking place just prior to the 2021 year end, particularly on
the events and sponsorship sides of the business, where the work has been
performed prior to year end, but the customer will only be invoiced and pay in
2022.
13. Trade and Other Payables
31 December 2021 31 December 2020
£'000 £'000
Trade creditors 10,807 9,622
Deferred income 9,128 8,636
Other creditors and accruals 11,196 8,102
Other tax and social security payable 4,611 5,918
Lease liabilities (Note 15) 1,596 1,860
37,338 34,138
Trade creditors, deferred income and other creditors and accruals have all
increased as a result of the increased level of trading in 2021.
14. Bank Overdrafts, Loans and Net Bank Debt
31 December 2021 31 December 2020
£'000 £'000
Bank loan outstanding 16,500 5,000
Unamortised bank debt arrangement fees (107) (31)
Carrying value of loan outstanding 16,393 4,969
Less: Cash and short term deposits (6,066) (3,806)
Net bank debt 10,327 1,163
The borrowings are repayable as follows:
Less than one year - 5,000
In one to two years - -
In two to three years 16,500 -
16,500 5,000
Unamortised bank debt arrangement fees (107) (31)
16,393 4,969
Less: Amount due for settlement within 12 months (shown under current
liabilities)
- (4,969)
Amount due for settlement after 12 months 16,393 -
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 2021, the Group's committed bank facilities comprised a new
revolving credit facility of £20m, expiring on 5 April 2024, with an option
to increase the facility by £5m and by one year. Interest on the new
facility is based on SONIA (sterling overnight index average) plus a margin of
between 1.50% and 2.25% depending on the Group's debt leverage ratio, payable
in cash on loan rollover dates.
In addition to its committed facilities, the Group has available an overdraft
facility of up to £3.0m with interest payable by reference to National
Westminster Bank plc Base Rate plus 2.25%.
At 31 December 2021, 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 National Westminster Bank plc.
All borrowings are in sterling.
15. Lease Liabilities
Obligations under leases are due as follows:
31 December 2021 31 December 2020
£'000 £'000
In one year or less (shown in trade and other payables) 1,596 1,860
In more than one year 8,077 9,414
9,673 11,274
16. Acquisitions
16.1 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 2021 31 December 2020
Cash Shares Total Cash Shares Total
£'000 £'000 £'000 £'000 £'000 £'000
692 - 692 7,461 304 7,765
Less than one year
Between one and two years 430 - 430 140 - 140
In more than two years but less than three years
300 - 300 280 - 280
In more than three years but less than four years
1,893 - 1,893 300 - 300
3,315 - 3,315 8,181 304 8,485
A reconciliation of acquisition obligations during the period is as follows:
Cash Shares Total
£'000 £'000 £'000
At 31 December 2020 8,181 304 8,485
Obligations settled in the period (6,714) - (6,714)
Adjustments to estimates of obligations (457) (304) (761)
New acquisitions 2,305 - 2,305
At 31 December 2021 3,315 - 3,315
16.2 Acquisition of Soul (London) Ltd
On 14 October 2021, the Group acquired the entire issued share capital of Soul
(London) Ltd ("Soul"), a full-service customer engagement Agency based in
London that works with psychologists to help businesses better understand
human nature and human behaviour. The fair value of the consideration given
for the acquisition was £2,968,000, comprising initial cash consideration and
deferred contingent cash consideration. Costs relating to the acquisition
amounted to £72,000 and were expensed.
Maximum contingent consideration of £6,600,000 is dependent on Soul achieving
a profit target over the period 1 January 2021 to 31 December 2024. The Group
has provided for contingent consideration of £2,305,000 to date.
The fair value of the net identifiable assets acquired was £264,000 resulting
in goodwill and previously unrecognised other intangible assets of
£2,704,000. 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 Soul.
Book Fair value adjustments Fair
value value
£'000 £'000 £'000
Net assets acquired:
Fixed assets 1 - 1
Trade and other receivables 579 - 579
Cash and cash equivalents 435 - 435
Trade and other payables (751) - (751)
264 - 264
Other intangibles recognised at acquisition - 260 260
264 260 524
Goodwill 2,444
Total consideration 2,968
Satisfied by:
Cash 663
Deferred contingent consideration 2,305
2,968
Soul contributed turnover of £370,000, operating income of £370,000 and
headline operating profit of £100,000 to the results of the Group in 2021.
16.3 Pro-forma results including acquisitions
The Directors estimate that the turnover, operating income and headline
operating profit of the Group would have been approximately £154.4m, £73.6m
and £8.3m had the Group consolidated the results of the acquisitions made
during the year, from the beginning of the year.
17. Share Capital
31 December 2021 31 December 2020
£'000 £'000
Allotted and called up:
91,015,897 Ordinary shares of 10p each (2020: 91,015,897 Ordinary shares of 9,102 9,102
10p each)
Share-based incentives
The Group has the following share-based incentives in issue:
At start of year Granted/ Waived/ At end of year
acquired lapsed Exercised
TMMG Long Term Incentive Plan 1,197,827 - - (486,616) 711,211
Growth Share Scheme - 3,200,000 - - 3,200,000
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, 486,616 options were exercised at an average share price of 83.6p
and at the end of the year 321,859 of the outstanding options are exercisable.
Shares held in an Employee Benefit Trust (see Note 18) will be used to satisfy
share options exercised under the Long Term Incentive Plan.
A new Growth Share Scheme was implemented in June 2021. Participants in the
scheme subscribed for Ordinary B shares in The Mission Marketing Holdings
Limited (the "growth shares") at a nominal value. These growth shares can be
exchanged for an equivalent number of Ordinary Shares in MISSION if MISSION's
share price equals or exceeds 150p for at least 15 consecutive days during the
period ending on the date the Company's financial results for the year ended
31st December 2023 are announced; if not, they will have no value.
18. Own Shares
No. of shares £'000
At 31 December 2019 1,076,743 659
Awarded or sold during the year (178,929) (68)
At 31 December 2020 897,814 591
Awarded or sold during the year (179,676) (73)
At 31 December 2021 718,138 518
Shares are held in an Employee Benefit Trust to meet certain requirements of
the Long Term Incentive Plan.
19. Post Balance Sheet Events
There have been no material post balance sheet events.
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