REG - Mission Group PLC - INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2022
27/09/2022 07:16
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RNS Number : 7016A Mission Group PLC (The) 27 September 2022
27 September 2022
THE MISSION GROUP plc
("MISSION", "the Group")
INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2022
Resilient growth despite challenging trading environment
The MISSION Group plc (AIM: TMG), creator of Work That Counts comprising a
network of 15 Agencies delivering real, sustainable growth for its Clients,
today announces interim results for the six months ended 30 June 2022 ("the
period" or "H1").
FINANCIAL HIGHLIGHTS
· Strong revenue performance combined with diligent cost control delivered good,
profitable growth in H1 2022.
Six months ended 30 June 2022 2021 %
Revenue £37.5m £34.1m +10%
Headline Operating Profit* £2.2m £2.0m +10%
Headline Profit Before Tax* £1.9m £1.8m +5%
Reported Profit Before Tax £1.5m £1.4m +9%
Headline Earnings Per Share (pence)* 1.71 1.70 +1%
Headline Diluted Earnings Per Share * (pence) 1.70 1.68 +1%
· Net bank debt of £7.1m (30 June 2021: £3.9m, 31 December 2021: £10.3m).
· Bank debt leverage ratio closed at 0.8x (30 June 2021: 0.7x, 31 December 2021:
1.2x).
· Interim dividend of 0.83p declared (2021: 0.80p), an increase of 4%.
*Headline results are calculated before acquisition adjustments, Board
restructuring costs and start-up costs.
BUSINESS HIGHLIGHTS
· H1 performance in line with Board's expectations and achieved despite
considerable macro-economic headwinds.
· Group remained at the forefront of activity across higher growth sectors with
a particularly strong performance from its technology division across both the
UK and North American markets.
· Sustained recovery across Agencies most impacted by the pandemic including
events and property.
· New business wins included Disney+, Molson Coors and Phihong.
· Further progress against strategic areas of focus with new acquisitions and
organic investment made during the period.
· Strengthening of Board continues with appointment of Mark Lund as a
Non-Executive Director and Deputy Chair.
OUTLOOK
· As in previous years, the Group expects the majority of its profit to be
generated in the second half of the year.
· Despite the heightened level of global macro-economic uncertainty, we
currently remain on track to deliver against the Board's expectations.
Commenting on the results, Julian Hanson-Smith, Chair of The MISSION Group
plc, said:
"This resilient performance builds on the momentum achieved in 2021. Our
agencies in every geography have continued to build on opportunities available
to them, supported by Mission's strong balance sheet which underpins our
long-term growth plans. The economic uncertainties provide challenge and
opportunity in equal measure, with Clients expecting total commitment and
smart thinking from their agencies. Mission is well placed to provide these
qualities."
ENQUIRIES:
James Clifton, Chief Executive Officer
Giles Lee, Chief Financial Officer
The MISSION Group plc 020 7462 1415
Mark Percy / James Thomas (Corporate Advisory)
Fiona Conroy (Corporate Broking)
Shore Capital (Nomad and Broker) 020 7408 4090
Kate Hoare / Alexander Clelland
HOUSTON (Financial PR and Investor Relations) 0204 529 0549
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 27
locations and 3 continents, the Group successfully combines its diverse
expertise to produce Work That Counts for our Clients, whatever their
ambitions. Creating real standout, sharing real innovation and delivering real
business growth for some of the world's biggest brands. www.themission.co.uk
(https://eur03.safelinks.protection.outlook.com/?url=http%3A%2F%2Fwww.themission.co.uk%2F&data=04%7C01%7C%7C2e2f37c792c7415afaad08d947a9c473%7Cb7e4783d67604ed5b0c156d405b9349b%7C0%7C1%7C637619616734507818%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C2000&sdata=5duO%2FyhgYrmP5I17h1eW4mAaM4%2BhySTEObFl5Dz5R%2Fs%3D&reserved=0)
OVERVIEW
The increased global macroeconomic and geo-political uncertainty coupled with
rising inflation and the cost-of-living crisis that have dominated this year,
are creating challenges from which no sector and few businesses are immune.
However, despite this backdrop, the Group is pleased to have continued to
build on the strong momentum achieved in H1 delivering robust financial
results for the first half of 2022 that are in line with the Board's
expectations and demonstrate growth across both revenue and profitability.
This has resulted in revenues for the period of £37.5m (2021: £34.1m), a
headline operating profit of £2.2m (2021: £2.0m) and a reported profit
before tax of £1.5m (2021: £1.4m).
The strategic changes implemented across the business in recent years have
placed us in good stead to manage the current industry headwinds. The
decentralised and entrepreneurial nature of our agency model continues to be
an important driver behind this resilience. Whilst rising costs are forcing
Clients to focus on budgets and efficiencies, we have seen good underlying
trading from our Agencies, reflecting our increasing exposure to more robust
sectors and geographies. This is further underpinned by the benefits of the
investments we have made in dynamic areas of our markets to expand our
capabilities and services.
As a business, our own careful control of costs has remained a priority.
Talent costs are one of the key variables for us and whilst wage inflation,
coupled with the contraction in the employment market is clearly a challenge
for the whole industry, we were quick to recognise the potential impact this
would have in the current year and have managed this well, investing ahead to
improve our people proposition in a competitive market. More broadly, strong
cash flow and careful balance sheet management have seen us reduce total debt
(net bank debt plus acquisition obligations) to £9.6m, its lowest level since
2014.
Performance and progress
We continued to see good performances from all our Agencies within the
Advertising and Digital segment, with the majority delivering year on year
growth on the same period in the prior year.
Our exposure to higher growth B2B sectors such as Technology and Healthcare
has underpinned this resilient performance and we have seen particularly good
growth in North America through April Six (our specialist technology and
mobility Agency) as revenues increased by 31% on the equivalent period last
year.
We continue to see a sustained recovery from our Agencies which were exposed
to some of the hardest hit sectors during the pandemic. ThinkBDW (property)
continues to benefit from a recovery in its markets whilst Bray Leino Events
(Events) has experienced significantly increased activity year on year,
resulting in revenue growth of 69% versus 2021.
As part of our focus on ensuring all our Agencies are best positioned to
support Client demand, in April we took the decision to merge Story and
Chapter to create Story Group. Already sister Agencies in culture, heart and
spirit, the merger unites them to offer better scale, geographic reach,
broader sector experience and further enhance their collective reputation.
Whilst the new business landscape remains challenging, opportunities have
continued to present themselves across the Group with Client wins throughout
the period including Westmill Foods, BAM clothing, McCarthy Stone and Croda.
The growing strength of the MISSION Group capability was also integral to our
appointment to new Client Taiwanese electrical group Phihong who will be
working with three of our Agencies as part of a new Group mandate.
We are also making good progress in clarifying our growth ambitions for
Pathfindr, our Industrial IoT solutions business which provides customers with
real-time insights into their assets and processes. Whilst supply chain
logistics challenges and wider economic uncertainty have had some impact on
the pace of installation, progress continues to be made with a number of
trials to explore new routes to market and new product lines. Conversations
regarding several potential partnerships are also progressing.
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. Alongside that commitment we continue to explore strategic
areas of opportunity to expand our capabilities to support our customers
including data and analytics, creative and customer experience (including
eCommerce solutions) and performance media.
We are pleased with the momentum we are making in these areas. We continue to
see the benefit of the investments made in the prior year and during the
period were also pleased to announce the launch of krow.x- the creative CX
agency and the acquisition of Livity, a youth focussed creative consultancy.
We have also further expanded our centralised capability MISSION Made, with
the launch of our new 24/7 digital support hub in Vietnam.
FINANCIAL PERFORMANCE
Billings and Revenue
Turnover ("billings") for the six months ended 30 June 2022 increased by 17%
to £81.2m (2021: £69.5m) while operating income ("revenue") increased by 10%
to £37.5m (2021: £34.1m).
Profit, Margins and Earnings Per Share
The increased revenues, combined with firm cost control alongside a continued
commitment to sharing infrastructure through the MISSION Made and Shared
Services initiatives, have delivered improved earnings compared to the first
half of 2021.
Headline operating profits increased by 10% to £2.2m (H1 2021: £2.0m).
Headline operating margins held at 5.9% (H1 2021: 5.9%).
Financing costs increased to £0.4m (H1 2021: £0.3m), reflecting both a
higher average level of debt in the period and an increase in interest rates
payable on the debt. Headline profit before tax increased to £1.9m (H1 2021:
£1.8m).
Adjustments to headline profits in the first half of 2022, at £0.3m, were
slightly less than the prior year comparable period (H1 2021: £0.4m). After
these adjustments, reported profit before tax was £1.5m (H1 2021: £1.4m).
The Group estimates an effective tax rate on headline profits before tax of
22% (H1 2021: 20%), resulting in an increase in headline earnings to £1.5m
for the six months (H1 2021: £1.4m) and reported profit after tax of £1.2m
(H1 2021: £1.1m). Fully diluted EPS increased to 1.37 pence (H1 2021: 1.34
pence), while headline diluted EPS increased to 1.70 pence (H1 2021: 1.68
pence).
Balance Sheet and Cash Flow
The key balance sheet ratio measured and monitored by the Board is the ratio
of debt to headline EBITDA ("leverage ratio"). The Group started the year in a
strong financial position with a net bank debt leverage ratio of x1.2 and
closed the half year at x0.8 (30 June 2021: x0.7). The Board also monitors the
ratio of total debt, including remaining acquisition obligations, to EBITDA
and this ratio has decreased to x1.0 (30 June 2021: x1.8, 31 December 2021:
x1.5).
Furthermore, a total of £0.8m of acquisition obligations from prior years
were settled in the first half of the year, all of which was in cash (30 June
2021: £1.2m of which £1.2m also in cash). After adjustments to estimated
future contingent consideration payments the total estimated acquisition
liability at 30 June 2022 totalled £2.5m (30 June 2021: £7.3m). Of this none
is due for payment in the second half of 2022.
Trade and other receivables increased markedly against last year to £51.6m
(30 June 2021: £36.3m) primarily because of an unusually high level of Client
prepayments. Trade and other payables also increased by a similar quantum to
£52.0m (30 June 2021: £35.9m) the majority of which reflects the deferral of
revenue that results from these prepayments. The net change to working capital
is therefore relatively low.
Consequently, the Group's net bank debt on 30 June 2022 of £7.1m compares
well with the positions on 30 June 2021 (£3.9m) and 31 December 2021
(£10.3m). Total debt (being net bank debt plus acquisition obligations) of
£9.6m (30 June 2021: £11.2m) now stand at its lowest level since 2014.
Dividend
As a reflection of this robust performance in the first half of the year, the
Directors have declared an interim dividend of 0.83 pence per ordinary share
(H1 2021: 0.80 pence), representing a 4% increase on the prior year. This will
be payable on 2 December 2022 to all shareholders on the register on 4
November 2022. The ex-dividend date is 3 November 2022.
BOARD
Following significant changes to the structure of the Board in 2021 we are
delighted to confirm today the appointment of Non-Executive Director Mark
Lund, who joins the Board as Non-Executive Director and Deputy Chair with
immediate effect. Mark has spent over 25 years leading and founding marketing
and advertising organisations, as an entrepreneur and executive and his
experience will be invaluable as we continue to make progress against our
long-term ambitions.
At the same time, Andy Nash has informed the Board of his intention to step
down. Mark Lund will assume his role as Chair of the Board's Audit and Risk
Committee. On behalf of everyone at MISSION the Board would like to thank Andy
for his significant contribution to the Group.
MAKING POSITIVE CHANGE
Over the course of the period, we are pleased to have made further progress
against our Environmental, Social and Governance (ESG) commitments, outlined
in our manifesto 'Making Positive Change'. An important priority has been the
clarification of our Environmental journey, which has seen us benchmark and
set our emissions reduction targets in line with the Paris Climate Agreement
and validate these targets via the Science-Based Targets initiative (SBTi)
Net-Zero Standard. We have targeted a 21% reduction in our Emissions by 2024
with an aim to achieve ISO 14001 status for the majority of our Agencies in
2023. We will be working with a number of identified partners to ensure a
faster transition in line with these goals and to improve our measurement and
reporting.
OUTLOOK
As in previous years, we expect the majority of Group profit to be generated
in the second half of the year. Whilst we remain mindful of the current
macro-economic uncertainty and are closely monitoring its impact on our
markets, trading in the second half of the year to date has continued to track
in line with the Board's expectations.
Condensed Consolidated Income Statement for the six months ended 30 June 2022
Six months to Six months to Year ended
30 June 30 June 31 December
2022 2021 2021
Unaudited Unaudited Audited
Note £'000 £'000 £'000
TURNOVER 2 81,226 69,518 153,287
Cost of sales (45,712) (35,380) (80,792)
2
OPERATING INCOME 37,514 34,138 72,495
Headline operating expenses (35,297) (32,126) (64,476)
HEADLINE OPERATING PROFIT
2,217 2,012 8,019
Acquisition adjustments 4 (346) (224) 156
Board restructuring costs - - (496)
Start-up costs - (149) (367)
7,312
OPERATING PROFIT 1,871 1,639
Share of results of associates and joint ventures 140
75 50
7,452
PROFIT BEFORE INTEREST AND TAXATION
1,946 1,689
Net finance costs 5 (432) (296) (701)
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
1,514 1,393 6,751
Taxation 6 (358) (295) (1,432)
PROFIT FOR THE PERIOD 1,156 1,098 5,319
Attributable to:
Equity holders of the parent 1,250 1,218 5,423
Non-controlling interests (94) (120) (104)
1,156 1,098 5,319
Basic earnings per share (pence) 7 1.38 1.35 6.02
Diluted earnings per share (pence) 7 1.37 1.34 5.92
Headline basic earnings per share (pence) 7
1.71 1.70 6.57
Headline diluted earnings per share (pence)
7 1.70 1.68 6.47
Condensed Consolidated Statement of Comprehensive Income for the six months
ended 30 June 2022
Six months to Six months to Year ended
30 June 30 June 31 December 2021
2022 2021
Unaudited Unaudited Audited
£'000 £'000 £'000
PROFIT FOR THE PERIOD 1,156 1,098 5,319
Other comprehensive income - items that may be reclassified separately to
profit or loss:
Exchange differences on translation of foreign operations 189 (38) 70
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
1,345 1,060 5,389
Attributable to:
Equity holders of the parent 1,526 1,194 5,489
Non-controlling interests (181) (134) (100)
1,345 1,060 5,389
Condensed Consolidated Balance Sheet as at 30 June 2022
As at As at As at
30 June 2022 30 June 2021 31 December 2021
Unaudited Unaudited Audited
Note £'000 £'000 £'000
FIXED ASSETS
Intangible assets 8 99,639 95,859 98,974
Property, plant and equipment 2,045 2,154 2,102
Right of use assets 9 8,746 9,898 9,149
Investments, associates and joint ventures
592 427 517
Deferred tax assets - 15 -
111,022 108,353 110,742
CURRENT ASSETS
Stock 2,457 1,228 2,112
Trade and other receivables 51,607 36,314 40,538
Cash and short term deposits 7,847 5,914 6,066
61,911 43,456 48,716
CURRENT LIABILITIES
Trade and other payables (51,993) (35,904) (37,338)
Corporation tax payable (819) (42) (380)
Acquisition obligations 11 (405) (6,709) (692)
(53,217) (42,655) (38,410)
NET CURRENT ASSETS 8,694 801 10,306
TOTAL ASSETS LESS CURRENT LIABILITIES 119,716 109,154 121,048
NON CURRENT LIABILITIES
Bank loans 10 (14,917) (9,862) (16,393)
Lease liabilities 9 (7,700) (8,648) (8,077)
Acquisition obligations 11 (2,120) (580) (2,623)
Deferred tax liabilities (412) (328) (483)
(25,149) (19,418) (27,576)
NET ASSETS 94,567 89,736 93,472
CAPITAL AND RESERVES
Called up share capital 9,102 9,102 9,102
Share premium account 45,928 45,928 45,928
Own shares (759) (538) (518)
Share-based incentive reserve 944 703 868
Foreign currency translation reserve 276 (90) -
Retained earnings 38,998 34,393 37,820
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
94,489 89,498 93,200
Non-controlling interests 78 238 272
TOTAL EQUITY 94,567 89,736 93,472
Condensed Consolidated Cash Flow Statement for the six months ended 30 June
2022
Six months to Six months to Year ended
30 June 2022 30 June 2021 31 December 2021
Unaudited Unaudited Audited
£'000 £'000 £'000
Operating profit 1,871 1,639 7,312
Depreciation and amortisation charges 2,123 2,080 4,029
Movements in the fair value of contingent consideration
- - (761)
Loss on disposal of fixed assets 10 4 11
Non cash charge for share options, growth shares and shares awarded
26 80 (48)
Increase in receivables (10,917) (3,060) (6,703)
Increase in stock (345) (34) (918)
Increase in payables 13,793 1,822 2,798
OPERATING CASH FLOW 6,561 2,531 5,720
Net finance costs (412) (412) (781)
Tax refund / (paid) 40 (645) (1,355)
Net cash inflow from operating activities 6,189 1,474 3,584
INVESTING ACTIVITIES
Proceeds on disposal of property, plant and equipment
- 11 72
Purchase of property, plant and equipment (535) (320) (884)
Investment in software development (469) (153) (1,024)
Acquisition of or investments in businesses (100) - (663)
Payment relating to acquisitions made in prior periods
(790) (1,196) (6,714)
Cash acquired with subsidiaries 84 - 435
Net cash outflow from investing activities (1,810) (1,658) (8,778)
FINANCING ACTIVITIES
Dividends paid - (1,379) (2,100)
Dividends paid to non-controlling interests (13) - -
Repayment of lease liabilities (1,012) (1,037) (2,016)
(Repayment of) / increase in bank loans (1,500) 5,000 11,500
Purchase of own shares held in EBT (262) (254) -
Net cash (outflow) / inflow from financing activities
(2,787) 2,330 7,384
Increase in cash/equivalents 1,592 2,146 2,190
Exchange differences on translation of foreign subsidiaries
189 (38) 70
Cash/cash equivalents at beginning of period 6,066 3,806 3,806
Cash and cash equivalents at end of period 7,847 5,914 6,066
Condensed Consolidated Statement of Changes in Equity for the six months ended
30 June 2022
Total attributable to equity holders of parent
Share-based incentive reserve Foreign currency translation reserve £'000
£'000 £'000 Non-controlling interest
Share Share premium Own shares Retained earnings £'000 Total equity
capital £'000 £'000 £'000 £'000
£'000
At 1 January 2021 9,102 45,928 (591) 642 (66) 34,842 89,857 372 90,229
Profit for period - - - - - 1,218 1,218 (120) 1,098
Exchange differences on translation of foreign operations
- - - - (24) - (24) (14) (38)
Total comprehensive income for period
- - - - (24) 1,218 1,194 (134) 1,060
Share option charge - - - 61 - - 61 - 61
Own shares purchased by EBT - - (254) - - - (254) - (254)
Shares awarded and sold from own shares - - 307 - - (288) 19 - 19
Dividend paid - - - - - (1,379) (1,379) - (1,379)
At 30 June 2021 9,102 45,928 (538) 703 (90) 34,393 89,498 238 89,736
Profit for period - - - - - 4,205 4,205 16 4,221
Exchange differences on translation of foreign operations
- - - - 90 - 90 18 108
Total comprehensive income for period
- - - - 90 4,205 4,295 34 4,329
Share option charge - - - 113 - - 113 - 113
Growth share charge - - - 52 - - 52 - 52
Own shares purchased by EBT - - 254 - - - 254 - 254
Shares awarded and sold from own shares - - (234) - - (57) (291) - (291)
Dividend paid - - - - - (721) (721) - (721)
At 31 December 2021 9,102 45,928 (518) 868 - 37,820 93,200 272 93,472
Profit for period - - - - - 1,250 1,250 (94) 1,156
Exchange differences on translation of foreign operations
- - - - 276 - 276 (87) 189
Total comprehensive income for period
- - - - 276 1,250 1,526 (181) 1,345
Share option charge - - - 17 - - 17 - 17
Growth share charge - - - 59 - - 59 - 59
Own shares purchased by EBT - - (262) - - - (262) - (262)
Shares awarded and sold from own shares - - 21 - - (72) (51) - (51)
Dividend paid - - - - - - - (13) (13)
At 30 June 2022 9,102 45,928 (759) 944 276 38,998 94,489 78 94,567
Notes to the unaudited Interim Report for the six months ended 30 June 2022
1. Accounting Policies
Basis of preparation
The condensed consolidated interim financial statements for the six months
ended 30 June 2022 have been prepared in accordance with the IAS 34 "Interim
Financial Reporting" and the Group's accounting policies.
The Group's accounting policies are in accordance with International Financial
Reporting Standards as adopted by the European Union and are set out in the
Group's Annual Report and Accounts 2021 on pages 57-61. These are consistent
with the accounting policies which the Group expects to adopt in its 2022
Annual Report. The Group has not early-adopted any Standard, Interpretation or
Amendment that has been issued but is not yet effective.
The information relating to the six months ended 30 June 2022 and 30 June 2021
is unaudited and does not constitute statutory financial statements as defined
in Section 434 of the Companies Act 2006. The comparative figures for the year
ended 31 December 2021 have been extracted from the Group's Annual Report and
Accounts 2021, on which the auditors gave an unqualified opinion and did not
include a statement under section 498 (2) or (3) of the Companies Act 2006.
The Group Annual Report and Accounts for the year ended 31 December 2021 have
been filed with the Registrar of Companies.
Going concern
The Directors have considered the financial projections of the Group,
including cash flow forecasts, the availability of committed bank facilities
and the headroom against covenant tests for the coming 12 months. They are
satisfied that the Group has adequate resources for the foreseeable future and
that it is appropriate to continue to adopt the going concern basis in
preparing these interim financial statements.
Accounting estimates and judgements
The Group makes estimates and judgements concerning the future and the
resulting estimates may, by definition, vary from the actual results. The
Directors considered the critical accounting estimates and judgements used in
the interim financial statements and concluded that the main areas of
judgement are:
· Potential impairment of goodwill;
· Contingent payments in respect of acquisitions;
· Revenue recognition policies in respect of contracts which
straddle the period end;
· Valuation of intangible assets on acquisitions; and
· Intangible development costs.
2. Segmental Information
Business segmentation
For management purposes the Board monitors 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
Six months to 30 June 2022 £'000 £'000 £'000 £'000 £'000
Turnover 47,635 16,140 13,242 4,209 81,226
Operating income 28,956 1,916 3,153 3,489 37,514
Advertising Media Buying Events Public Relations Total
& Digital
Six months to 30 June 2021 £'000 £'000 £'000 £'000 £'000
Turnover 47,573 14,114 3,886 3,945 69,518
Operating income 27,410 1,592 1,865 3,271 34,138
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
Geographical segmentation
The following table provides an analysis of the Group's operating income by
region of activity:
Six months to Six months to Year ended
30 June 30 June 31 December
2022 2021 2021
Unaudited Unaudited Audited
£'000 £'000 £'000
UK 32,124 29,681 63,160
USA 4,144 3,163 6,425
Asia 1,148 1,196 2,720
Rest of Europe 98 98 190
37,514 34,138 72,495
3. Reconciliation of Reported Profit / (Loss) to Headline Profit / (Loss)
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.
Six months to Six months to Year ended
30 June 30 June 31 December
2022 2021 2021
Unaudited Unaudited Audited
PBT PAT PBT PAT PBT PAT
£'000 £'000 £'000 £'000 £'000 £'000
Headline profit 1,860 1,451 1,766 1,413 7,458 5,819
Acquisition-related items (Note 4) (346) (295) (224) (191) 156 243
Board restructuring costs - - - - (496) (402)
Start-up costs - - (149) (124) (367) (341)
Reported profit 1,514 1,156 1,393 1,098 6,751 5,319
Board restructuring costs in 2021 comprised leaving packages payable to former
directors Robert Day, Peter Fitzwilliam and David Morgan following their
resignations.
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 related to the launch of Mongoose Sports' new venture
in Birmingham and the venture Alive, launched in Asia in 2021.
4. Acquisition Adjustments
Six months to Six months to Year ended
30 June 30 June 31 December 2021
2022 2021 Audited
Unaudited Unaudited
£'000 £'000 £'000
Amortisation of intangible assets
recognised on acquisitions (259) (224) (446)
Movement in fair value of contingent consideration
- - 761
Acquisition transaction costs expensed (87) - (159)
(346) (224) 156
The movement in fair value of contingent consideration relates to a revision
in the estimate payable to vendors of businesses acquired in prior years.
Acquisition transaction costs relate to professional fees associated with the
acquisitions.
5. Net Finance Costs
Six months to Six months to Year ended
30 June 30 June 31 December 2021
2022 2021
Unaudited Unaudited Audited
£'000 £'000 £'000
Net interest on bank loans, overdrafts and deposits
(235) (82) (283)
Amortisation of bank debt arrangement fees
(24) (31) (67)
Interest expense on leases liabilities (173) (183) (351)
Net finance costs (432) (296) (701)
The increase in net interest on bank loans, overdrafts and deposits in the
period is driven by an increase in the average level of bank debt, caused
predominantly by COVID-19 related deferred payments made during 2021,
including government tax deferral schemes, acquisition payments and dividend
payments, and an increase in the interest rate payable on the bank debt
following general increases in interest rates by the BOE. The decrease in
interest expense on lease liabilities in the period primarily relates to the
decrease in Right of Use Assets and Lease Liabilities following the natural
maturation of property lease terms as referred to in Note 9.
6. Taxation
The taxation charge for the period ended 30 June 2022 has been based on an
estimated effective tax rate on headline profit on ordinary activities of 22%
(30 June 2021: 20%).
7. 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".
Six months to Six months to Year to
30 June 30 June 31 December
2022 2021 2021
Unaudited Unaudited Audited
£'000 £'000 £'000
Earnings
Reported profit for the year
Attributable to:
Equity holders of the parent 1,250 1,218 5,423
Non-controlling interests (94) (120) (104)
1,156 1,098 5,319
Headline earnings (Note 3)
Attributable to:
Equity holders of the parent 1,545 1,533 5,923
Non-controlling interests (94) (120) (104)
1,451 1,413 5,819
Number of shares
Weighted average number of Ordinary shares for the purpose of basic earnings
per share
90,310,055 90,133,831 90,134,211
Dilutive effect of securities:
Employee share options 662,043 1,020,235 1,414,543
Weighted average number of Ordinary shares for the purpose of diluted earnings
per share
90,972,098 91,154,066 91,548,754
Reported basis:
Basic earnings per share (pence) 1.38 1.35 6.02
Diluted earnings per share (pence) 1.37 1.34 5.92
Headline basis:
Basic earnings per share (pence) 1.71 1.70 6.57
Diluted earnings per share (pence) 1.70 1.68 6.47
A reconciliation of the profit after tax on a reported basis and the headline
basis is given in Note 3.
8. Intangible Assets
30 June 30 June 31 December 2021
2022 2021
Unaudited Unaudited Audited
£'000 £'000 £'000
Goodwill 95,412 92,160 94,604
Other intangible assets 4,227 3,699 4,370
99,639 95,859 98,974
Goodwill
Six months to 30 June Six months to 30 June Year ended 31 December 2021
2022 2021
Unaudited Unaudited Audited
£'000 £'000 £'000
Cost
At 1 January 98,877 96,433 96,433
Recognised on acquisition of subsidiary 808 - 2,444
At 30 June / 31 December 99,685 96,433 98,877
Impairment adjustment
At beginning and end of period 4,273 4,273 4,273
Net book value 95,412 92,160 94,604
The increase in goodwill during the period relates to the acquisition of
Livity Ltd.
In accordance with the Group's accounting policies, an annual impairment test
is applied to the carrying value of goodwill, unless there is an indication
that one of the cash generating units has become impaired during the year, in
which case an impairment test is applied to the relevant asset. The next
impairment test will be undertaken at 31 December 2022.
Other Intangible Assets
Six months to Six months to Year ended
30 June 30 June 31 December 2021
2022 2021
Unaudited Unaudited Audited
£'000 £'000 £'000
Cost
At 1 January 11,940 10,821 10,821
Additions 469 153 1,284
Disposals - (233) (165)
At 30 June / 31 December 12,409 10,741 11,940
Amortisation and impairment
At 1 January 7,570 6,795 6,795
Amortisation charge for the period 612 480 940
Disposals - (233) (165)
At 30 June / 31 December 8,182 7,042 7,570
Net book value 4,227 3,699 4,370
Other intangible assets consist of Client relationships, trade names, and
software and product development costs.
9. Right of Use Assets and Lease Liabilities
The Group leases several assets, the overwhelming majority of which are the
office premises from which it operates. Under IFRS 16, the Group recognises
Right of Use Assets and Lease Liabilities in relation to these leases. Assets
and liabilities reduce over the period of the lease and increase when a lease
is renewed, or a new lease entered into. The decrease in Right of Use Assets
and Lease Liabilities in the period relates primarily to the natural reduction
in the average remaining lives of the leases.
10. Bank Loans and Net Bank Debt
30 June 30 June 31 December 2021
2022 2021
Unaudited Unaudited Audited
£'000 £'000 £'000
Bank loan outstanding 15,000 10,000 16,500
Adjustment to amortised cost (83) (138) (107)
Carrying value of loan outstanding 14,917 9,862 16,393
Less: Cash and short term deposits (7,847) (5,914) (6,066)
Net bank debt 7,070 3,948 10,327
The borrowings are repayable as follows:
Less than one year - - -
In one to two years 15,000 - -
In more than two years but less than three
years - 10,000 16,500
15,000 10,000 16,500
Adjustment to amortised cost (83) (138) (107)
14,917 9,862 16,393
Less: Amount due for settlement within 12
months (shown under current liabilities) - - -
Amount due for settlement after 12 months 14,917 9,862 16,393
At 30 June 2022, the Group's committed bank facilities comprised a revolving
credit facility of £20.0m, expiring on 5 April 2024, with an option to
increase the facility by £5.0m and by one year. Interest on the 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%.
11. Acquisitions
11.1 Acquisition Obligations
The terms of an acquisition may provide that the value of the purchase
consideration, which may be payable in cash or shares or other securities at a
future date, depends on uncertain future events such as the future performance
of the acquired company. The Directors estimate that the liability for
payments that may be due is as follows:
Cash Shares Total
£'000 £'000 £'000
30 June 2022 405 - 405
Less than one year
In more than three but less than four years 2,120 - 2,120
2,525 - 2,525
A reconciliation of acquisition obligations during the period is as follows:
Cash Shares Total
£'000 £'000 £'000
At 31 December 2021 3,315 - 3,315
Obligations settled in the period (790) - (790)
At 30 June 2022 2,525 - 2,525
11.2 Acquisitions During the Period
During the period Livity Ltd was acquired for a total consideration of
£100,000, all payable up front. Had the Group consolidated the results of
Livity from the beginning of the period, the Directors estimate that the
turnover, operating income and headline operating profit of the Group would
not have been materially different to the numbers presented in the
consolidated income statement.
12. Post balance sheet events
There have been no material post balance sheet events.
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