REG - Mission Marketing - Half-year Report <Origin Href="QuoteRef">TMMG.L</Origin> - Part 1
RNS Number : 3558RThe Mission Marketing Group PLC21 September 2017The Mission Marketing Group plc
Interim results for the six months to 30 June 2017
The Mission Marketing Group plc ("TMMG" or "the missiontm"), the marketing communications and advertising group, sets out its unaudited interim results for the six months ended 30 June 2017.
Highlights
Good organic growth from the Group's core business
Some great new business wins in the period, including Mars, Neff, Reckitt Benckiser, Revlon, The Royal Mint and Universal Studios
Recently acquired RJW trading well
fuse now officially launched
Mongoose Sports and April Six Asia start-up ventures moved into profitability
Financial
Revenue up 4% to 33.8m (2016: 32.4m)
Like-for-like revenue up 6% in Branding, Advertising and Digital
Headline profit before tax up 11% to 2.9m (2016: 2.6m)
Headline diluted EPS up 11% to 2.58 pence (2016: 2.33 pence)
A strong second-half bias again predicted
Cash inflows from operating activities of 5.8m (2016: 4.8m)
Net bank debt reduced by 2.1m in the six months after settling prior and new acquisition obligations
Dividend
Interim dividend increased by 10% to 0.55p (2016: 0.5p)
Payable on 1 December 2017 to shareholders on the register at 3 November 2017
David Morgan, Chairman, commented: "With our business becoming stronger, including good growth from our core business, we have a great platform from which to grow. We will continue to target further margin improvements, seek new opportunities, drive into new markets and upskill our offering. We again expect a strong second half to the year and are confident that we will deliver another year of growth."
An interview with David Morgan, Chairman, can be viewed from 9.30am today at:
http://www.themission.co.uk/investor-centre/reports
Enquiries:
David Morgan, Executive Chairman
Peter Fitzwilliam, Finance Director
The Mission Marketing Group plc
020 7462 1415
Mark Percy / Patrick Castle / James Wolfe (Corporate Finance)
John Ritchie (Institutional Sales)
Shore Capital (Nomad and Broker)
020 7408 4090
the missiontmis a network of entrepreneurial marketing communications Agencies employing 1,000 people in the UK, Asia and US. The Group comprises three divisions: Integrated Generalists, Sector Specialists and Activity Specialists, which work together to provide Clients with the expertise and resource to make them more successful in today's dynamic environment.
Chairman's Statement
FOCUSSED ON THE FUTURE
In our first six months of trading this year we have continued to grow our business and, as well as consolidating our position, we have kept a keen eye on our future as we implement the plans that match our development strategy. Our confidence in our Agencies, the direction we are heading in and our unique, entrepreneurial structure continues to grow momentum and is, we believe, creating a business model that is very much focussed on the future.
Of the many highlights so far this year the most important strategic development was our acquisition of RJW in April. RJW is a highly-regarded consultancy specialising in pricing and market access in the pharmaceutical sector that works closely with some of the world's leading companies from the very early stages of product development. Working alongside our Solaris Healthcare Agency, which operates further downstream, it allows us to deliver end-to-end marketing and research services to healthcare Clients. It is a delight to have the RJW team join the missiontmand be part of our drive towards creating a new and dynamic force in Healthcare marketing.
The first half of the year also saw some of our start-up investments move into profitability, notably Mongoose Sports and April Six Asia. This, together with continued progress from our core Agencies, has helped us to retain a calm and steady approach against a backdrop of UK uncertainty and nervousness.
With upwards of 250 people across our Group being directly involved in technological developments that enhance our Clients' marketing capabilities, we reported at the end of last year that we had identified a number of innovative IP-owned products and systems that we were bringing together under a dedicated team, branded fuse. This initiative embraces the technological creativity already inherent in our Agencies and takes it to a wider audience. We formally launched fuse in July and are excited by its potential.
We have also taken a long look at our overall Group strategy, culminating in a host of new initiatives to bring greater clarity and external understanding of why our business is not only robust but very special. We enjoy greater Client longevity and our people stay with us longer than is normal in our sector, and we have an enviable growth and debt repayment record. All of which have been evident again in the first half and are being explained more fully in our new website and materials.
New business continues to be our 'cream on top' with wins across the Group from such famous names as Mars, Neff, Reckitt Benckiser, Revlon, The Royal Mint and Universal Studios.
Trading results
Turnover ("billings") for the six months ended 30 June 2017 reduced by 4% to 71.2m (2016: 74.2m) in part due to year-on-year changes in the phasing of Client spending and in part due to the market trend away from traditional broad-based media expenditure in favour of more targeted activities. Billings include pass-through costs (e.g. TV companies' charges for buying air-time) and thus the Board does not consider turnover to be a key performance measure. Instead, the Board views operating income (turnover less third party costs) as a more meaningful measure of Agency activity levels.
Operating income ("revenue") increased 4% overall in the six months, to 33.8m (2016: 32.4m). Within our primary activity of Branding, Advertising and Digital, representing 80% of our Group revenue, growth was 8%, of which like-for-like growth was 6% with a further 2% from RJW. Growth in our other activities was more subdued, with both Events and Media likely to have a stronger weighting towards the second half of the year due to the phasing of Client campaigns.
Headline operating profits increased by 9% to 3.1m (2016: 2.8m), showing a modest but pleasing year-on-year improvement in margins. Our business is traditionally busier and more profitable in the second half and, with a number of initiatives aimed at improving profit margins, we anticipate maintaining this progress.
Adjustments to headline profits in 2017 totalled 1.1m (2016: 0.6m), explained further in Note 3. Among these adjustments are restructuring costs, flagged at the time of our 2016 results, totaling 0.6m (2016: nil). After these adjustments, reported operating profits were 2.0m (2016: 2.2m).
After unchanged financing costs of 0.2m, headline profit before tax increased by 11% to 2.9m (2016: 2.6m); reported profit before tax was 1.8m (2016: 2.0m).
The Group estimates an effective tax rate on headline profits before tax of 22% (2016: 22%), resulting in an 11% increase in headline earnings to 2.2m for the six months (2016: 2.0m), and reported profit after tax of 1.3m (2016: 1.5m). Fully diluted headline EPS increased 11% to 2.58 pence (2016: 2.33 pence).
Balance sheet, cash flow and dividend
Net cash inflows from operating activities were 5.8m in the six months ended June 2017 (2016: 4.8m). These strong operating cash flows funded the settlement of acquisition obligations from prior years totalling 1.7m, initial acquisition consideration payments totaling 1.9m and also a 2.1m reduction in net debt to 9.2m. The Group has no further commitments to settle prior acquisition liabilities in the remainder of the year but the Group's normal phasing of working capital requirements is expected to result in a modest increase in net debt in the second half.
Following the purchase of RJW, the Group's acquisition obligations total 6.4m. All of this is dependent on post-acquisition earn-out profits, some to the end of 2020. 1.7m is expected to fall due within 12 months and a further 1.9m in the subsequent 12 months. The Directors believe that the strength of the Group's cash generation can comfortably accommodate these obligations. Furthermore, to achieve maximum earn-outs, the acquired Agencies would need to perform very strongly, which would generate much of the cash required to meet these obligations.
The Employee Benefit Trust continued to make periodic share purchases when appropriate and at 30 June 2017 held 1,422,265 ordinary shares.
Reflecting the growth in headline profits, the Directors have declared an interim dividend of 0.55p, representing a 10% increase over last year, payable on 1 December 2017 to shareholders on the register at 3 November 2017. The ex-dividend date is 2 November 2017.
Current trading and outlook
With our business becoming stronger, including good growth from our core business, we have a great platform from which to grow. We will continue to target further margin improvements, seek new opportunities, drive into new markets and upskill our offering. Underpinned by our strong cash generation, we will continue to explore accretive acquisition opportunities, or establish start-ups, that enhance our overall offering that supports our Clients wherever and however they need us to without being myrmidons. We again expect a strong second half to the year and are confident that we will deliver another year of growth.
David Morgan
Chairman
Condensed Consolidated Income Statement for the 6 months ended 30 June 2017
6 months to
6 months to
Year ended
30 June 2017
30 June 2016
31 December 2016
Unaudited
Unaudited
Audited
Note
'000
'000
'000
TURNOVER
2
71,237
74,162
144,096
Cost of sales
(37,440)
(41,797)
(78,198)
OPERATING INCOME
2
33,797
32,365
65,898
Headline operating expenses
(30,710)
(29,537)
(58,341)
HEADLINE OPERATING PROFIT
2
3,087
2,828
7,557
Exceptional items
4
(550)
-
-
Acquisition adjustments
5
(367)
(386)
(666)
Start-up costs
(158)
(212)
(491)
OPERATING PROFIT
2,012
2,230
6,400
Share of results of associates and joint ventures
(10)
(9)
(33)
PROFIT BEFORE INTEREST AND TAXATION
2,002
2,221
6,367
Net finance costs
6
(227)
(243)
(487)
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
1,775
1,978
5,880
Taxation
7
(470)
(518)
(1,369)
PROFIT FOR THE PERIOD
1,305
1,460
4,511
Attributable to:
Equity holders of the parent
1,286
1,440
4,434
Non-controlling interests
19
20
77
1,305
1,460
4,511
Basic earnings per share (pence)
8
1.55
1.74
5.36
Diluted earnings per share (pence)
8
1.50
1.68
5.19
Headline basic earnings per share (pence)
8
2.66
2.41
6.63
Headline diluted earnings per share (pence)
8
2.58
2.33
6.41
Condensed Consolidated Statement of Comprehensive Income for the 6 months ended 30 June 2017
6 months to
6 months to
Year ended
30 June 2017
30 June 2016
31 December 2016
Unaudited
Unaudited
Audited
'000
'000
'000
PROFIT FOR THE PERIOD
1,305
1,460
4,511
Other comprehensive income - items that may be reclassified separately to profit or loss:
Exchange differences on translation of foreign operations
(49)
(2)
214
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
1,256
1,458
4,725
Attributable to:
Equity holders of the parent
1,242
1,435
4,578
Non-controlling interests
14
23
147
1,256
1,458
4,725
Condensed Consolidated Balance Sheet as at 30 June 2017
As at
As at
As at
30 June 2017
30 June 2016
31 December 2016
Unaudited
Unaudited
Audited
Note
'000
'000
'000
FIXED ASSETS
Intangible assets
9
87,549
81,956
83,075
Property, plant and equipment
3,391
4,384
3,531
Interests in joint ventures
-
7
-
Investments in associates
314
341
324
Deferred tax assets
28
45
45
91,282
86,733
86,975
CURRENT ASSETS
Stock and work in progress
665
482
485
Trade and other receivables
36,741
36,268
32,611
Cash and short term deposits
5,092
3,610
1,002
42,498
40,360
34,098
CURRENT LIABILITIES
Trade and other payables
(33,656)
(32,374)
(26,194)
Corporation tax payable
(648)
(580)
(527)
Bank loans
10
(2,500)
(1,750)
(2,250)
Acquisition obligations
11
(1,735)
(2,528)
(1,645)
(38,539)
(37,232)
(30,616)
NET CURRENT ASSETS
3,959
3,128
3,482
TOTAL ASSETS LESS CURRENT LIABILITIES
95,241
89,861
90,457
NON CURRENT LIABILITIES
Bank loans
10
(11,803)
(11,242)
(10,023)
Other long term loans
-
(76)
(76)
Obligations under finance leases
(173)
(257)
(216)
Acquisition obligations
11
(4,690)
(2,928)
(3,014)
Deferred tax liabilities
(219)
(264)
(200)
(16,885)
(14,767)
(13,529)
NET ASSETS
78,356
75,094
76,928
CAPITAL AND RESERVES
Called up share capital
8,436
8,412
8,412
Share premium account
42,506
42,431
42,431
Own shares
(590)
(548)
(556)
Share option and growth share reserve
334
412
249
Foreign currency translation reserve
151
46
195
Retained earnings
27,048
23,890
25,740
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
77,885
74,643
76,471
Non controlling interests
471
451
457
TOTAL EQUITY
78,356
75,094
76,928
Condensed Consolidated Cash Flow Statement for the 6 months ended 30 June 2017
6 months to
6 months to
Year ended
30 June 2017
30 June 2016
31 December 2016
Unaudited
Unaudited
Audited
'000
'000
'000
Operating profit
2,012
2,230
6,400
Depreciation and amortisation charges
1,019
1,030
2,120
Movements in the fair value of contingent consideration
40
(15)
(48)
(Profit) / loss on disposal of property, plant and equipment
(34)
(12)
4
Loss on disposal of intangible assets
-
-
2
Non cash charge / (credit) for share options, growth shares and shares awarded
85
118
(45)
Increase in receivables
(3,786)
(4,746)
(1,037)
Increase in stock and work in progress
(180)
(21)
(24)
Increase in payables
7,415
7,334
1,120
OPERATING CASH FLOW
6,571
5,918
8,492
Net finance costs
(201)
(201)
(422)
Tax paid
(523)
(901)
(1,869)
Net cash inflow from operating activities
5,847
4,816
6,201
INVESTING ACTIVITIES
Proceeds on disposal of property, plant and equipment
38
77
33
Purchase of property, plant and equipment
(461)
(613)
(914)
Investment in software development
(131)
-
(777)
Acquisition of subsidiaries and joint ventures
(1,910)
(325)
(466)
Payment of obligations relating to acquisitions made in prior periods
(1,653)
(2,382)
(3,179)
Cash acquired with subsidiaries
610
147
65
Net cash outflow from investing activities
(3,507)
(3,096)
(5,238)
FINANCING ACTIVITIES
Dividends paid
-
-
(1,158)
Dividends paid to non-controlling interests
-
-
(118)
Repayment of finance leases
(41)
(46)
(90)
Increase in / (repayment of) long term bank loans
2,000
250
(500)
(Repayment of) / proceeds from other long term loans
(76)
76
76
Purchase of own shares held in EBT
(84)
(172)
(169)
Net cash inflow / (outflow) from financing activities
1,799
108
(1,959)
Increase / (decrease) in cash and cash equivalents
4,139
1,828
(996)
Exchange differences on translation of foreign subsidiaries
(49)
(2)
214
Cash and cash equivalents at beginning of period
1,002
1,784
1,784
Cash and cash equivalents at end of period
5,092
3,610
1,002
Condensed Consolidated Statement of Changes in Equity for the 6 months ended 30 June 2017
Share
capital
'000
Share premium
'000
Own shares
'000
Share option and growth share reserve
'000
Foreign currency translation reserve
'000
Retained earnings
'000
Total attributable to equity holders of parent
'000
Non-controlling interest
'000
Total equity
'000
At 1 January 2016
8,361
42,268
(455)
298
51
22,414
72,937
428
73,365
Profit for the period
-
-
-
-
-
1,440
1,440
20
1,460
Exchange differences on translation of foreign operations
-
-
-
-
(5)
-
(5)
3
(2)
Total comprehensive income for the period
-
-
-
-
(5)
1,440
1,435
23
1,458
New shares issued
51
163
-
-
-
-
214
-
214
Credit for share option scheme
-
-
-
114
-
-
114
-
114
Own shares purchased by EBT
-
-
(172)
-
-
-
(172)
-
(172)
Shares awarded from own shares
-
-
79
-
-
36
115
-
115
At 30 June 2016
8,412
42,431
(548)
412
46
23,890
74,643
451
75,094
Profit for the period
-
-
-
-
-
2,994
2,994
57
3,051
Exchange differences on translation of foreign operations
-
-
-
-
149
-
149
67
216
Total comprehensive income for the period
-
-
-
-
149
2,994
3,143
124
3,267
Debit for share option scheme
-
-
-
(163)
-
-
(163)
-
(163)
Own shares purchased by EBT
-
-
(40)
-
-
-
(40)
-
(40)
Shares awarded from own shares
-
-
32
-
-
14
46
-
46
Dividend paid
-
-
-
-
-
(1,158)
(1,158)
(118)
(1,276)
At 31 December 2016
8,412
42,431
(556)
249
195
25,740
76,471
457
76,928
Profit for the period
-
-
-
-
-
1,286
1,286
19
1,305
Exchange differences on translation of foreign operations
-
-
-
-
(44)
-
(44)
(5)
(49)
Total comprehensive income for the period
-
-
-
-
(44)
1,286
1,242
14
1,256
New shares issued
24
75
-
-
-
-
99
-
99
Credit for share option scheme
-
-
-
63
-
-
63
-
63
Credit for growth share scheme
-
-
-
22
-
-
22
-
22
Own shares purchased by EBT
-
-
(84)
-
-
-
(84)
-
(84)
Shares awarded from own shares
-
-
50
-
-
22
72
-
72
At 30 June 2017
8,436
42,506
(590)
334
151
27,048
77,885
471
78,356
Notes to the unaudited Interim Report for the six months ended 30 June 2017
1. Accounting Policies
Basis of preparation
The condensed consolidated interim financial statements for the six months ended 30 June 2017 have been prepared in accordance with the IAS 34 "Interim Financial Reporting" and the Group's accounting policies.
The Group's accounting policies are in accordance with International Financial Reporting Standards as adopted by the European Union and are set out in the Group's Annual Report and Accounts 2016 on pages 48-49. These are consistent with the accounting policies which the Group expects to adopt in its 2017 Annual Report. The Group has not early-adopted any Standard, Interpretation or Amendment that has been issued but is not yet effective.
The information relating to the six months ended 30 June 2017 and 30 June 2016 is unaudited and does not constitute statutory financial statements as defined in Section 434 of the Companies Act 2006. The comparative figures for the year ended 31 December 2016 have been extracted from the Group's Annual Report and Accounts 2016, on which the auditors gave an unqualified opinion and did not include a statement under section 498 (2) or (3) of the Companies Act 2006. The Group Annual Report and Accounts for the year ended 31 December 2016 have been filed with the Registrar of Companies.
Going concern
The Directors have considered the financial projections of the Group, including cash flow forecasts, the availability of committed bank facilities and the headroom against covenant tests for the coming 12 months. They are satisfied that the Group has adequate resources for the foreseeable future and that it is appropriate to continue to adopt the going concern basis in preparing these interim financial statements.
Accounting estimates and judgements
The Group makes estimates and judgements concerning the future and the resulting estimates may, by definition, vary from the actual results. The Directors considered the critical accounting estimates and judgements used in the financial statements and concluded that the main areas of judgement are:
Potential impairment of goodwill;
Contingent deferred payments in respect of acquisitions;
Revenue recognition policies in respect of contracts which straddle the period end; and
Valuation of intangible assets on acquisitions.
These estimates are based on historical experience and various other assumptions that management and the Board of Directors believe are reasonable under the circumstances.
2. Segmental Information
Business segmentation
The Group increased to fourteen operating units during the period, each of which carries out a range of activities. These activities have been divided into four business and operating segments as defined by IFRS 8 which form the basis of the Group's primary reporting segments, namely: Branding, Advertising and Digital; Media; Public Relations; and Events and Learning.
6 months to
6 months to
Year ended
30 June
2017
30 June
2016
31 December
2016
Unaudited
Unaudited
Audited
'000
'000
'000
Turnover
Business segment
Branding, Advertising & Digital
39,972
40,096
79,657
Media
22,375
25,358
45,741
Public Relations
4,190
4,155
8,776
Events and Learning
4,700
4,553
9,922
71,237
74,162
144,096
Operating income
Business segment
Branding, Advertising & Digital
27,339
25,394
51,740
Media
1,964
2,209
4,061
Public Relations
3,452
3,285
6,777
Events and Learning
1,042
1,477
3,320
33,797
32,365
65,898
Headline Operating Profit
Business segment
Branding, Advertising & Digital
3,069
2,878
7,323
Media
446
663
1,135
Public Relations
544
243
487
Events and Learning
26
104
325
4,085
3,888
9,270
Central costs
(998)
(1,060)
(1,713)
3,087
2,828
7,557
Geographical segmentation
Whilst the Group continues to expand geographically, operating income from business based and executed outside the UK remains less than 10% of the total.
3. Reconciliation of Reported Profit to Headline Profit
6 months to
30 June
2017
Unaudited
'000
6 months to
30 June
2016
Unaudited
'000
Year ended
31 December
2016
Audited
'000
PBT
PAT
PBT
PAT
PBT
PAT
'000
'000
'000
'000
'000
'000
Headline profit
2,850
2,224
2,576
2,009
7,037
5,559
Exceptional items (Note 4)
(550)
(429)
-
-
-
-
Acquisition-related items (Note 5)
(367)
(366)
(386)
(383)
(666)
(655)
Start-up costs
(158)
(124)
(212)
(166)
(491)
(393)
Reported profit
1,775
1,305
1,978
1,460
5,880
4,511
In order to provide a clearer understanding of underlying profitability, headline profits exclude exceptional items, acquisition-related costs and adjustments, and start-up costs. Start-up costs derive from organically started businesses and comprise the trading losses of such entities until the earlier of two years from commencement or when they show evidence of becoming sustainably profitable.
Start-up costs in 2017 relate to Mongoose Sports & Entertainment, Mongoose Promotions and April Six's new PR business in the USA. Start-up costs in 2016 related to the launch of Mongoose Sports & Entertainment and April Six's new ventures in Singapore and the USA.
4. Exceptional Items
6 months to
30 June
2017
6 months to
30 June
2016
Year ended
31 December
2016
Unaudited
Unaudited
Audited
'000
'000
'000
Restructuring costs
(550)
-
-
Exceptional items consist of revenue or costs that, either by their size or nature, require separate disclosure in order to give a fuller understanding of the Group's financial performance.
Exceptional costs in 2017 comprise amounts payable for loss of office and other costs incurred relating to the restructuring of certain operations in order to streamline activities and underpin the Board's growth expectations for the second half of the year and beyond.
5. Acquisition Adjustments
6 months to
30 June
2017
Unaudited
6 months to
30 June
2016
Unaudited
Year ended
31 December 2016
Audited
'000
'000
'000
Movement in fair value of contingent
consideration
(40)
15
48
Amortisation of other intangible assets
recognised on acquisitions
(259)
(340)
(645)
Acquisition transaction costs expensed
(68)
(61)
(69)
(367)
(386)
(666)
The movement in fair value of contingent consideration relates to a net (upward) / downward revision in the estimate payable to vendors of businesses acquired in prior years. Acquisition transaction costs relate to professional fees associated with the acquisitions.
6. Net Finance Costs
6 months to
6 months to
Year ended
30 June
2017
30 June
2016
31 December 2016
Unaudited
Unaudited
Audited
'000
'000
'000
Net interest on bank loans, overdrafts and deposits
(192)
(203)
(407)
Amortisation of bank debt arrangement fees
(29)
(33)
(64)
Interest on finance leases
(6)
(7)
(16)
Net finance costs
(227)
(243)
(487)
7. Taxation
The taxation charge for the period ended 30 June 2017 has been based on an estimated effective tax rate on headline profit on ordinary activities of 22% (30 June 2016: 22%).
8. Earnings Per Share
The calculation of the basic and diluted earnings per share is based on the following data, determined in accordance with the provisions of IAS 33: "Earnings per Share".
6 months to
6 months to
Year ended
30 June
2017
30 June
2016
31 December 2016
Unaudited
Unaudited
Audited
'000
'000
'000
Earnings
Reported profit for the year
1,305
1,460
4,511
Attributable to:
Equity holders of the parent
1,286
1,440
4,434
Non-controlling interests
19
20
77
1,305
1,460
4,511
Headline earnings (Note 3)
2,224
2,009
5,559
Attributable to:
Equity holders of the parent
2,205
1,989
5,482
Non-controlling interests
19
20
77
2,224
2,009
5,559
Number of shares
Weighted average number of ordinary shares for the purpose of basic earnings per share
82,843,306
82,577,286
82,651,400
Dilutive effect of securities**:
Employee share options
2,622,493
2,928,569
2,862,471
Weighted average number of ordinary shares for the purpose of diluted earnings per share
85,465,799
85,505,855
85,513,871
Reported basis:
Basic earnings per share (pence)
1.55
1.74
5.36
Diluted earnings per share (pence)
1.50
1.68
5.19
Headline basis:
Basic earnings per share (pence)
2.66
2.41
6.63
Diluted earnings per share (pence)
2.58
2.33
6.41
Basic earnings per share includes shares to be issued subject only to time as if they had been issued at the beginning of the period.
A reconciliation of the profit after tax on a reported basis and the headline basis is given in Note 3.
** On 22nd February 2017, the Company announced details of a new Growth Share Scheme. If all the shares in the Scheme vest they will be exchanged into 5.7m Ordinary Shares, which will result in dilution. However, since the performance criterion is that the Company's share price must equal or exceed 75p for at least 15 days and this condition had not been satisfied at 30 June 2017, the Growth Shares are not included in the calculation of diluted earnings per share.
9. Intangible Assets
30 June
2017
30 June
2016
31 December 2016
Unaudited
Unaudited
Audited
'000
'000
'000
Goodwill
84,074
79,527
79,779
Other intangible assets
3,475
2,429
3,296
87,549
81,956
83,075
Goodwill
6 months to 30 June
2017
6 months to 30 June
2016
Year ended 31 December 2016
Unaudited
Unaudited
Audited
'000
'000
'000
Cost
At 1 January
84,052
83,606
83,606
Recognised on acquisition of subsidiaries
4,295
197
457
Adjustment to consideration
-
(3)
(11)
At 30 June / 31 December
88,347
83,800
84,052
Impairment adjustment
At beginning and end of period
4,273
4,273
4,273
Net book value
84,074
79,527
79,779
In accordance with the Group's accounting policies, an annual impairment test is applied to the carrying value of goodwill, unless there is an indication that one of the cash generating units has become impaired during the year, in which case an impairment test is applied to the relevant asset. The next impairment test will be undertaken at 31 December 2017.
Other Intangible Assets
6 months to
6 months to
Year ended
30 June
2017
30 June
2016
31 December 2016
Unaudited
Unaudited
Audited
'000
'000
'000
Cost
At 1 January
6,611
4,601
4,601
Transfer from property, plant and equipment
-
-
1,467
Additions
599
-
777
Disposals
-
-
(234)
At 30 June / 31 December
7,210
4,601
6,611
Amortisation and impairment
At 1 January
3,315
1,832
1,832
Transfer from property, plant and equipment
-
-
853
Amortisation charge for the period
420
340
862
Disposals
-
-
(232)
At 30 June / 31 December
3,735
2,172
3,315
Net book value
3,475
2,429
3,296
Other intangible assets consist of intellectual property rights, Client relationships and trade names.
10. Bank Loans and Net Debt
30 June
2017
30 June
2016
31 December 2016
Unaudited
Unaudited
Audited
'000
'000
'000
Bank loan outstanding
14,375
13,125
12,375
Adjustment to amortised cost
(72)
(133)
(102)
Carrying value of loan outstanding
14,303
12,992
12,273
Less: Cash and short term deposits
(5,092)
(3,610)
(1,002)
Net bank debt
9,211
9,382
11,271
The borrowings are repayable as follows:
Less than one year
2,500
1,750
2,250
In one to two years
11,875
2,500
2,500
In more than two but less than three years
-
8,875
7,625
14,375
13,125
12,375
Adjustment to amortised cost
(72)
(133)
(102)
14,303
12,992
12,273
Less: Amount due for settlement within 12
months (shown under current liabilities)
(2,500)
(1,750)
(2,250)
Amount due for settlement after 12 months
11,803
11,242
10,023
11. Acquisitions
11.1 Acquisition Obligations
The terms of an acquisition may provide that the value of the purchase consideration, which may be payable in cash or shares or other securities at a future date, depends on uncertain future events such as the future performance of the acquired company. The Directors estimate that the liability for payments that may be due is as follows:
Cash
'000
Shares
'000
Total
'000
30 June 2017
Less than one year
1,735
-
1,735
Between one and two years
1,815
56
1,871
In more than two but less than three years
560
-
560
In more than three but less than four years
2,146
113
2,259
6,256
169
6,425
A reconciliation of acquisition obligations during the period is as follows:
Cash
'000
Shares
'000
Total
'000
At 31 December 2016
4,659
-
4,659
New obligations created in the period
5,121
288
5,409
Obligations settled in the period
(3,564)
(119)
(3,683)
Adjustments to estimates of obligations
40
-
40
At 30 June 2017
6,256
169
6,425
11.2 Acquisition of RJW & Partners Ltd
On 26 April 2017, the Group acquired the entire issued share capital of RJW & Partners Ltd ("RJW"), a pricing and market access consultancy operating in the healthcare sector. The fair value of the consideration given for the acquisition was 5,409,000, comprising initial cash and share consideration and deferred contingent cash and share consideration. Costs relating to the acquisition amounted to 68,000 and were expensed.
Maximum contingent consideration of 4,250,000 is dependent on RJW achieving a profit target over the period 1 January 2017 to 31 December 2020. The Group has provided for contingent consideration of 3,380,000 to date.
The fair value of the net identifiable assets acquired was 696,000 resulting in goodwill and other intangible assets of 4,713,000. Goodwill arises on consolidation and is not tax-deductible. Management carried out a review to assess whether any other intangible assets were acquired as part of the transaction. Management concluded that both a brand name and customer relationships were acquired and attributed a value to each of these by applying commonly accepted valuation methodologies. The goodwill arising on the acquisition is attributable to the anticipated profitability of the Company.
Book
value
Fair value adjustments
Fair
value
'000
'000
'000
Net assets acquired:
Fixed assets
2
-
2
Trade and other receivables
344
-
344
Cash and cash equivalents
610
-
610
Trade and other payables
(260)
-
(260)
696
-
696
Other intangibles recognised at acquisition
-
468
468
696
468
1,164
Goodwill
4,245
Total consideration
5,409
Satisfied by:
Cash
1,910
Shares
119
Deferred contingent consideration
3,380
5,409
RJW & Partners Ltd contributed turnover of 508,000, operating income of 483,000 and headline operating profit of 176,000 to the results of the Group for the six month period ended 30 June 2017.
12. Post Balance Sheet Events
There were no material post balance sheet events.
This information is provided by RNSThe company news service from the London Stock ExchangeENDIR SEEFMSFWSEIU
Recent news on Mission
See all newsREG - AIM - AIM Notice - 23/04/2024
AnnouncementREG - Mission Group PLC - Issue of Contingent Consideration Shares & TVR
AnnouncementREG - Mission Group PLC - Final Results
AnnouncementREG - Mission Group PLC - Final Results
AnnouncementREG - Mission Group PLC - Holding(s) in Company
Announcement