NFC: Next Fifteen Comm: Final Results

  NFC: Next Fifteen Comm: Final Results

UK Regulatory Announcement

LONDON

NEXT FIFTEEN COMMUNICATIONS GROUP PLC

FINAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 JULY 2013

Next Fifteen Communications Group plc (‘Next 15’ or ‘the Group’), the
worldwide digital communications group, today announces its final unaudited
results for the year ended 31 July 2013.

Financial highlights:

  *Revenues increased by 5% to £96.1m (2012: £91.6m)
  *Adjusted profit before tax of £7.7m (2012: £9.6m) (see note 3)
  *Reported profit before tax of £2.1m (2012: £6.0m)
  *Diluted adjusted earnings per share of 6.65p (2012: 10.07p) (see note 8)
  *Basic earnings per share of 0.56p (2012: 6.85p) (see note 8)
  *Final dividend of 1.925p per share (2012: 1.735p), raising the total
    dividend by 11% to 2.55p (2012: 2.30p)
  *Net debt^1 decreased by £0.8m year on year to £1.8m, despite spending of
    £3.0m on acquisition related payments^2
  *Net cash generated from operations up 11% to £11.2m from £10.1m last year

Operational highlights:

  *Acquired 80% of the issued share capital of US based Connections Media, a
    digital public affairs agency
  *Acquisition of Content & Motion in August 2012, providing Beyond with a
    talented social media team creating programmes that drive engagement
    through blogger and media outreach and clients' owned social media
    presences
  *Launch of Agent3, a new agency that sells technology platforms and
    data-based marketing services
  *Total investment in the digital transition of £1m as per guidance at the
    interim stage

Commenting on the results, Chairman of Next 15, Richard Eyre, said:

“While this has been a tough year, it remains a year of progress in many ways.
Record revenues and the steady transition of the business will underpin the
future growth of the company. Indeed, the Group has made a good start to the
current financial year and has already added work from clients such as
Sainsbury’s and HBO.”

For further information contact:

Next 15
Tim Dyson
Chief Executive Officer
T: +1 415 350 2801

Canaccord Genuity
Simon Bridges
Henry Fitzgerald-O’Connor
T: +44 (0)20 7523 8000

Attached:

Chairman’s statement

Consolidated income statement (unaudited)

Consolidated statement of comprehensive income (unaudited)

Consolidated balance sheet (unaudited)

Consolidated statement of changes in equity (unaudited)

Consolidated statement of cash flow (unaudited)

Notes to the final results announcement (unaudited)

CHAIRMAN’S STATEMENT

for the year ended 31 July 2013

The headline financial results for 2013 mask two very different outcomes for
the brands in the Next 15 Group.

Text 100, OutCast, M Booth and the Blueshirt Group each achieved their highest
ever revenues, driving record revenues of £96.1m for the Group as a whole. The
US businesses in total delivered 10% organic growth, providing reassurance
around the fundamental business model and strategic direction of the Group in
what remains its key market by scale.

On the other hand, Bite has had a difficult year compounded by accounting
issues in two of its twelve offices. The resulting one off charges have
damaged the Group’s overall profitability this year.

In summary, the Group has reported:-

  *Revenue up 5% to £96.1m from £91.6m last year.
  *Adjusted profits before tax of £7.7m compared with £9.6m last year.
  *Diluted adjusted earnings per share of 6.65p compared with 10.07p last
    year.
  *Profit before tax and charges for goodwill impairment of £4.0m compared
    with £6.0m last year
  *Reported profit before tax of £2.1m compared with £6.0m last year.
  *Net cash generated from operations up 11% to £11.2m from £10.1m last year.
  *Net debt^1 down 31% to £1.8m despite making £3.0m of acquisition related
    payments

Revenue grew by 5% across the Group to £96.1m compared with £91.6m last time.
The Group saw an improvement in organic growth from 1% at the interim stage to
2% for the full year, following gains made in H2, led by our North American
businesses. During the second half the US grew at an impressive 17% on an
organic basis and now accounts for 55% of group revenues. Using the new
divisional splits introduced at the interim stage, Integrated agencies (84% of
group revenues) grew by a total of 3% and Specialist agencies grew by 15%. For
the full year, the UK saw its revenues decline by 3% primarily due to net
client losses at the end of the prior year, EMEA remained flat and APAC
declined by 2% given local currency movements. At the same time, the US grew
revenues by 10%.

The board of directors (‘Board’) is satisfied that the adverse impact on this
year’s earnings has resulted from issues that have been identified and are
being managed. The agency portfolio is strong and our strategy is delivering
organic growth, particularly in our largest market. Accordingly, the Board is
recommending a final dividend of 1.925p per share, which increases the
dividend for the year by 11% to 2.55p (2012: 2.30p).

The marketing sector is being radically changed by the way people discover,
consume and distribute content. Thanks to the social and increasingly mobile
web, consumers share their experiences of products and services in real time,
in ways that greatly influence buying behaviour. Marketing can no longer be a
brand’s clothing; it must be its skin. Advancing into today’s new marketing
techniques is a natural step for this Group as these entail the joining of
conversations and engaging people in fascinating content, skills which are an
extension of Next 15’s PR heritage.

Next 15 is now essentially helping clients to become publishers and
broadcasters, like Virgin whose new site, virgin.com, was designed and built
by Beyond. A sophisticated content engine underpins this new site, creating
reasons for Virgin customers to return with greater frequency and hold
conversations with others while they are visiting. Symptomatic of the Group’s
digital transition, Beyond’s work included sophisticated analytics that enable
the content on the site to adapt to people’s interests.

The re engineering of the Next 15 Group for this new marketing context started
several years ago and excellent progress has been made. Assignments for major
brands such as American Express, Virgin, IBM, Cisco, Google and Facebook are
no longer simple media relations work. In some cases, this has enabled the
Group to expand its relationship with key clients (Google and American
Express). In all cases, sophisticated social and digital programs tie into the
media relations content generated by these businesses. In 2013, I am pleased
to report, Next 15 has made real strides towards becoming an integrated social
and digital communications group.

The Group has had to deal with growing pains as it makes this transition. The
challenges at Bite and the accounting issues that were unearthed in this
year’s audit have certainly impacted reported profits but they are not
evidence of a flawed business model. Importantly, they are issues that can be
contained and solved. Mistakes were certainly made, especially where systems
did not keep up with change but management has moved quickly to adapt and the
business will emerge stronger as a result.

Following David Dewhurst’s agreement to step down as finance director, the
Board is focused on bringing in an experienced leader for the finance function
to further develop the finance and accounting infrastructure within the
brands, and reporting lines to Group, such that there is full financial
transparency but without impeding the entrepreneurial nature of the brands.
This will build on the actions already taken during the year which included
the appointment of head of internal audit, recruitment of lead internal
auditors in US and UK, an overhaul of treasury controls and the roll out of a
2 – 3 year cyclical review plan.

Looking ahead, the Group has a sound balance sheet with low net debt^1 at
£1.8m, giving it the opportunity to add further agencies such as Connections
Media which became part of Next 15 six months ago, adding depth to the
portfolio of client services. This Washington DC-based digital agency provides
specialist digital services in the public affairs arena, a reflection that
every area of marketing is being reinvented in the digital revolution.

The Group is also keen to continue to participate in the creation and
development of new businesses. In the last year it invested in the start-up of
Agent 3, a digital marketing agency founded by three employees. The agency
sells technology platforms and data-based marketing services that help
companies connect their CRM systems to their marketing activities. This type
of organic investment is an important part of the long term growth of the
Group. Overall, during the year, the Group has invested an additional £1m in
its digital transition, in line with guidance given at the interims.

While this has been a tough year, it remains a year of progress in many ways.
Record revenues and the steady transition of the business will underpin the
future growth of the company. Indeed, the Group has made a good start to the
current financial year and has already added work from clients such as
Sainsbury’s and HBO.

On behalf of the Board, I would like to thank our staff, in 11 agencies and 19
countries for their hard work, creativity and ingenuity this year.

Richard Eyre
Chairman

UNAUDITED CONSOLIDATED INCOME STATEMENT

for the year ended 31 July 2013

                                                           
                   Note    2013      2013        2012      2012
                                  £’000        £’000          £’000        £’000
Billings                            113,360              108,453
Revenue                2                       96,069                      91,583
Staff costs                       68,261                      62,767
Depreciation                      1,540                       1,328
Amortisation                      1,589                       1,483
Impairment             3          1,950                       –
Charge for
misappropriation       3          526                         1,778
of assets
Other operating            19,198               17,589    
charges
Total operating                     (93,064)             (84,945)
charges
Operating profit       2                       3,005                       6,638
Finance expense        6                       (3,331)                     (2,170)
Finance income      7                2,490                1,477
Net finance                         (841)                (693)
expense
Share of
(losses)/profits                    (79)                 14
of associate
Profit before          2,3                     2,085                       5,959
income tax
Income tax          4                (1,364)              (1,652)
expense
Profit for the                      721                  4,307
year
Attributable to:
Owners of the                                  328                         3,906
parent
Non-controlling                     393                  401
interests
                                   721                  4,307
Earnings per           8
share
Basic (pence)                                  0.56                        6.85
Diluted (pence)                     0.49                 6.04
                                                                           

UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 July 2013

                                                              
                                                     2013     2012
                                                             £’000       £’000
Profit for the year                                          721         4,307
Other comprehensive income:
Exchange differences on translating foreign                  951         229
operations
Translation differences on long-term foreign                 (118)       (80)
currency intercompany loans
Net investment hedge                                  (229)    (235)
Other comprehensive income for the year               604      (86)
Total comprehensive income for the year               1,325    4,221
Total comprehensive income attributable to:
Owners of the parent                                         932         3,820
Non-controlling interests                             393      401
                                                     1,325    4,221
                                                                         

UNAUDITED CONSOLIDATED BALANCE SHEET

as at 31 July 2013

                                                            
                  Note    2013       2013        2012       2012
                                 £’000         £’000          £’000         £’000
Assets
Property, plant                  3,165                        2,721
and equipment
Intangible                       41,369                       41,019
assets
Investment in
equity                           1                            80
accounted
associate
Trade                            219                          212
investment
Deferred tax                     3,662                        3,320
assets
Other                     1,041                 875        
receivables
Total
non-current                                    49,457                       48,227
assets
Trade and other                  26,646                       24,661
receivables
Cash and cash         9          8,064                        8,436
equivalents
Corporation tax           2,883                 240        
asset
Total current                       37,593                33,337
assets
Total assets                        87,050                81,564
Liabilities
Loans and             9          9,131                        10,750
borrowings
Deferred tax                     1,388                        245
liabilities
Other payables                   26                           6
Provisions                       407                          129
Deferred              9          1,319                        –
consideration
Contingent            9          2,945                        4,987
consideration
Share purchase     9       3,251                 3,989      
obligation
Total
non-current                                    (18,467)                     (20,106)
liabilities
Loans and             9          591                          259
borrowings
Trade and other                  24,280                       19,605
payables
Corporation tax                  1,811                        1,101
liability
Derivative
financial                        206                          320
liabilities
Share purchase        9          295
obligation
Contingent         9       3,207                 2,945      
consideration
Total current                       (30,390)              (24,230)
liabilities
Total                               (48,857)              (44,336)
liabilities
Total net                           38,193                37,228
assets
Equity
Share capital                    1,494                        1,454
Share premium                    7,557                        6,935
reserve
Merger reserve                   3,075                        3,075
Share purchase                   (2,673)                      (2,673)
reserve
Foreign
currency                         3,184                        2,351
translation
reserve
Other reserves                   (583)                        (133)
Retained                  23,954                24,100     
earnings
Total equity
attributable to                                36,008                       35,109
owners of the
parent
Non-controlling                     2,185                 2,119
interests
Total equity       9                 38,193                37,228
                                                                            

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 July 2013

                                                                               Foreign           Other                           Equity
                      Share         Share         Merger        Share          currency                           Retained       attributable       Non-controlling       Total
                  capital    premium    reserve    purchase    translation    reserves^1    earnings    to owners       interests          equity
                      £’000         reserve       £’000         reserve        reserve                            £’000          of the             £’000                 £’000
                                    £’000                       £’000          £’000             £’000                           parent
                                                                                                                                 £’000
At 31 July 2012    1,454      6,935      3,075      (2,673)     2,351          (133)         24,100      35,109          2,119              37,228
Profit for the     –          –          –          –           –              –             328         328             393                721
year
Other
comprehensive      –          –          –          –           833            (229)         –           604             –                  604
income for the
year
Total
comprehensive      –          –          –          –           833            (229)         328         932             393                1,325
income for the
year
Shares issued
in satisfaction       25            72            –             –              –                 –                –              97                 –                     97
of vested share
options
Shares issued         15            550           –             –              –                 –                –              565                –                     565
on acquisitions
Movement due to
ESOP share            –             –             –             –              –                 (245)            –              (245)              –                     (245)
purchases
Movement due to
ESOP share            –             –             –             –              –                 24               –              24                 –                     24
option
exercises
Movement in
relation to           –             –             –             –              –                 –                569            569                –                     569
share-based
payments
Deferred tax on
share-based           –             –             –             –              –                 –                (84)           (84)               –                     (84)
payments
Share based
payment charge
for disposal of       –             –             –             –              –                 –                450            450                –                     450
equity in a
subsidiary to
employees
Dividends to
Owners of the         –             –             –             –              –                 –                (1,409)        (1,409)            –                     (1,409)
parent
Non-controlling
interest              –             –             –             –              –                 –                –              –                  176                   176
arising on
acquisition
Non-controlling
interest           –          –          –          –           –              –             –           –               (503)              (503)
dividend
At 31 July 2013    1,494      7,557      3,075      (2,673)     3,184          (583)         23,954      36,008          2,185              38,193
^1 Other reserves include ESOP reserve, treasury reserve and hedging reserve


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 July 2012

                                                                               Foreign                                         Equity
                      Share         Share         Merger        Share          currency          Other          Retained       attributable       Non-controlling       Total
                  capital    premium    reserve    purchase    translation    reserves    earnings    to owners       interests          equity
                      £’000         reserve       £’000         reserve        reserve           £’000          £’000          of the             £’000                 £’000
                                    £’000                       £’000          £’000                                           parent
                                                                                                                               £’000
At 31 July 2011    1,416      5,996      3,075      (4,261)     2,202          (525)       21,137      29,040          3,293              32,333
Profit for the     –          –          –          –           –              –           3,906       3,906           401                4,307
year
Other
comprehensive      –          –          –          –           149            (235)       –           (86)            –                  (86)
income for the
year
Total
comprehensive      –          –          –          –           149            (235)       3,906       3,820           401                4,221
income for the
year
Shares issued
in satisfaction       11            82            –             –              –                 595            (595)          93                 –                     93
of vested share
options
Shares issued         27            857           –             –              –                 –              –              884                –                     884
on acquisitions
Share purchase
obligation
settled on            –             –             –             1,588          –                 –              538            2,126              (1,549)               577
acquisition of
non-controlling
interest
Movement due to
ESOP share            –             –             –             –              –                 32             (30)           2                  –                     2
option
exercises
Movement in
relation to           –             –             –             –              –                 –              312            312                –                     312
share-based
payments
Deferred tax on
share-based           –             –             –             –              –                 –              40             40                 –                     40
payments
Dividends to
Owners of the         –             –             –             –              –                 –              (1,208)        (1,208)            –                     (1,208)
parent
Non-controlling
interest              –             –             –             –              –                 –              –              –                  254                   254
arising on
acquisition
Non-controlling
interest           –          –          –          –           –              –           –           –               (280)              (280)
dividend
At 31 July 2012    1,454      6,935      3,075      (2,673)     2,351          (133)       24,100      35,109          2,119              37,228


UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOW

for the year ended 31 July 2013

                      Note    2013       2013       2012       2012
                                     £’000         £’000         £’000         £’000
Cash flows from
operating                                                      
activities
Profit for the year                  721                         4,307
Adjustments for:
Depreciation                         1,540                       1,328
Amortisation                         1,589                       1,483
Impairment                           1,950                       –
Finance expense           6          3,331                       2,170
Finance income            7          (2,490)                     (1,477)
Share of
loss/(profit) from                   79                          (14)
equity-accounted
associate
Loss on sale of
property, plant and                  82                          11
equipment
Income tax expense                   1,364                       1,652
Share-based payment                  1,019                       312
charge
Movement in fair
value of forward       3       -                    13         
foreign exchange
contracts
Net cash inflow
from operating
activities before                                  9,185                       9,785
changes in working
capital
Change in trade and                  (1,178)                     3,229
other receivables
Change in trade and                  2,911                       (2,960)
other payables
Increase/(decrease)           269                  (2)        
in provisions
Change in working                       2,002                267
capital
Net cash generated                                 11,187                      10,052
from operations
Income taxes paid                       (2,686)              (2,520)
Net cash from
operating                                          8,501                       7,532
activities
Cash flows from
investing
activities
Acquisition of
subsidiaries and
trade and assets,                    (962)                       (1,101)
net of cash
acquired
Payment of
contingent                           (2,058)                     (4,563)
consideration
Acquisition of
property, plant and                  (1,786)                     (835)
equipment
Proceeds on
disposal of                          -                           3
property, plant and
equipment
Acquisition of                       (161)                       (90)
intangible assets
Net movement in
long-term cash                       (166)                       (35)
deposits
Interest received      7       48                   51         
Net cash outflow
from investing                          (5,085)              (6,570)
activities
Net cash from
operating and                           3,416                962
investing
activities
                                                                               

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOW CONTINUED

for the year ended 31 July 2013

                  Note    2013       2013       2012       2012
                                 £’000         £’000         £’000         £’000
Net cash from
operating and                         3,416                 962
investing
activities
Cash flows from
financing
activities
Proceeds from
sale of own                      95                          96
shares
Issue costs on
issue of                         (5)                         (8)
ordinary shares
Purchase of own                  (221)                       –
shares
Capital element
of finance                       (59)                        (72)
lease rental
repayment
Net cash
movement in                      (1,286)                     983
bank borrowings
Interest paid         6          (483)                       (521)
Dividend and
profit share
paid to                          (503)                       (280)
non-controlling
interest
partners
Dividend paid
to shareholders                  (1,409)                     (1,208)
of the parent
Net cash
outflow from                        (3,871)              (1,010)
financing
activities
Net decrease in
cash and cash                       (455)                (48)
equivalents
Cash and cash
equivalents at                                 8,436                       8,517
beginning of
the year
Exchange
gains/(losses)                      83                   (33)
on cash held
Cash and cash
equivalents at     9                 8,064                8,436
end of the year
                                                                           

NOTES TO THE FINAL RESULTS ANNOUNCEMENT

for the year ended 31 July 2013

1 Basis of preparation

The financial information set out within the final results announcement does
not constitute the company's statutory accounts for 2013 or 2012 . Statutory
accounts for the year ended 31 July 2012 have been reported on by the
Independent Auditors. The Independent Auditors' Report on the Annual Report
and Financial Statements for 2012 was unmodified, did not draw attention to
any matters by way of emphasis, and did not contain a statement under 498(2)
or 498(3) of the Companies Act 2006.

The results for 2013 are unaudited. Statutory accounts for the year ended 31
July 2013 will be finalised based on the information presented in this
announcement. The independent Auditors’ Report will be based on those
statutory accounts once they are complete.

The financial information for the year ended 31 July 2013 has been prepared
using the recognition and measurement principles of International Accounting
Standards, International Financial Reporting Standards and Interpretations
adopted for use in the European Union (collectively Adopted IFRSs).

Accounting policies

The accounting policies applied are consistent with those of the audited
statutory financial statements for the year ended 31 July 2012, as described
in those financial statements.

Statutory accounts for the year ended 31 July 2012 have been filed with the
Registrar of Companies. The statutory accounts for the year ended 31 July
2013, prepared under IFRS, will be delivered to the Registrar in due course.

2 Segment information

Reportable segments

The Board of Directors has identified the operating segments based on the
reports it reviews as the chief operating decision maker to make strategic
decisions, assess performance and allocate resources. The Group’s business is
separated into a number of brands which are considered to be the underlying
operating segments. These brands are organised into two reportable segments,
being those providing Integrated Communications and those considered to be
Specialist Agencies. Integrated Communications incorporates the two segments
reported in the prior year as public relations services in the technology and
consumer markets. Specialist Agencies incorporate results of the digital and
research consultancy, and corporate communications consultancy reported
separately in the prior year. Within these two reportable segments the Group
operates a number of separate competing businesses in order to offer services
to clients in a confidential manner where otherwise there may be issues of
conflict.

Measurement of operating segment profit

The Board of Directors assesses the performance of the operating segments
based on a measure of adjusted operating profit before intercompany recharges,
which reflects the internal reporting measure used by the Board of Directors.
This measurement basis excludes the effects of certain fair value accounting
charges, including movement in fair value of financial instruments,
amortisation of acquired intangibles, and goodwill impairment charges. Other
information provided to them is measured in a manner consistent with that in
the financial statements. Head office costs relate to Group costs before
allocation of intercompany charges to the operating segments. Intersegment
transactions have not been separately disclosed as they are not material. The
Board of Directors does not review theassets and liabilities of the Group on
a segmental basis and therefore this is not separately disclosed.

2 Segment information

Measurement of operating segment profit

                   Integrated            Specialist       Head          Total
               Communications     Agencies      Office     £’000
                   £’000                 £’000            £’000
Year ended                                                 
31 July 2013
Revenue            80,570                15,499           –             96,069
Segment
adjusted        10,170             2,828         (4,778)    8,220
operating
profit
Year ended
31 July 2012
Revenue            78,100                13,483           –             91,583
Segment
adjusted        11,934             2,299         (4,186)    10,047
operating
profit
                                                                        

Voluntary information on geographical results

                             Europe                    Asia          Head
            UK        and       US        Pacific    Office     Total
                £’000        Africa       £’000        £’000         £’000         £’000
                             £’000
Year
ended 31                                                        
July 2013
Revenue         19,119       10,504       52,468       13,978        –             96,069
Segment
adjusted     1,146     (217)     11,804    265        (4,778)    8,220
operating
profit
Year
ended 31
July 2012
Revenue         19,744       10,470       47,113       14,256        –             91,583
Segment
adjusted     3,345     907       9,312     669        (4,186)    10,047
operating
profit
                                                                                   

A reconciliation of segment adjusted operating profit to profit before income
tax is provided as follows:

                                                     2013       2012
                                                         £’000         £’000
Segment adjusted operating profit                     8,220      10,047
Amortisation of acquired intangibles                  (1,378)    (1,181)
Impairment of Goodwill (note 3)                          (1,950)       –
Reorganisation costs (note 3)                            (779)         (437)
Charges associated with equity transactions              (581)         –
accounted for as share based payments
Charge for misappropriation of assets (note 3)           (265)         (1,778)
Cost associated with investigation and response to       (579)         –
fraudulent activity
Recovery of misappropriated assets                       317           –
Movement in fair value of forward foreign exchange    –          (13)
contracts
Total operating profit                                3,005      6,638
Unwinding of discount on contingent consideration        (797)         (968)
Unwinding of discount on share purchase obligation       (370)         (453)
Change in estimate of future contingent                  (254)         532
consideration payable
Change in estimate of future share purchase              901           584
obligation
Movement in fair value of interest rate                  114           84
cap-and-collar contract
Share of profits of associate                            (79)          14
Other finance expense                                    (483)         (523)
Other finance income                                  48         51
Profit before income tax                              2,085      5,959
                                                                       

3 Reconciliation of pro forma financial measures

                                                         2013     2012
                                                             £’000       £’000
Profit before income tax                                  2,085    5,959
Movement in fair value of interest rate cap-and-collar       (114)       (84)
contract
Movement in fair value of forward foreign exchange           –           13
contracts
Unwinding of discount on contingent and deferred             797         968
consideration
Unwinding of discount on share purchase obligation           370         453
Charge for misappropriation of assets ^1                     265         1,778
Cost associated with investigation and response to           579         –
fraudulent activity
Income from recovery and sale of misappropriated             (318)       –
assets
Change in estimate of future contingent consideration        254         (532)
payable
Change in estimate of future share purchase obligation       (901)       (584)
Charges associated with equity transactions accounted        581         –
for as share based payments
Restructuring and reorganisation costs associated with       779         437
digital transitions within brands ^2
Amortisation of acquired intangibles                         1,378       1,181
Impairment of goodwill^3                                  1,950    –
Adjusted profit before income tax                         7,705    9,589
                                                                         

Adjusted profit before income tax has been presented to provide additional
information which will be useful tothe reader to gain a better understanding
of the underlying performance of the Group. The adjusted measure is also used
for the performance calculation of the adjusted earnings per share used for
the vesting ofemployee share options and performance shares.

^1 The charge for misappropriation of assets relates to the prior year’s fraud
whereby cash was extracted from the business by a long-serving employee in a
trusted position and hidden through recognition offictitious assets and
understated liabilities across two of the Group’s North American Bite
subsidiaries. The overstated assets have been written off and liabilities
re-instated. The cost in the current year relates to the element of that same
fraud which fell into the current financial year prior to identification.
^2 Restructure costs relate to significant non-recurring spend within Brands
wholly required to transition them into Integrated Communications businesses
with more focus on digital services.
^3 The impairment for goodwill relates to Bite Germany. Following management
restructure, accounting errors and provisions recognised in the current year,
the value associated with the acquired business has been re-assessed. Revised
expectations of discounted future cashflows over the 5 year projection period
have led to a full impairment of the acquired goodwill.

4 Income tax expense

The total tax charge for the year is £1.4m (2012: £1.7m) on consolidated
profit before tax of £2.1m (2012: £6.0m). Certain important factors are having
a significant effect on the tax rate in FY13 as follows: (i) There were losses
in certain territories (£0.7m negative rate impact), notably the UK (£0.3m),
Germany (£0.3m) and other territories (£0.1m), where it would not be prudent
to recognize deferred tax assets; (ii) Charges made in the income statement
associated with adjustments to acquisition accounting for subsidiaries that
are not taxable (£0.7m negative tax rate impact); (iii) Higher rates of tax
for overseas subsidiaries (£0.9m negative rate impact); (iv) The rate
benefited from deductions taken for overseas taxes (£0.9m) and by the
adjustment to the prior year tax liability of £0.4m following management
revision of estimates for future tax exposures.

5 Dividend

A final dividend of 1.925p per share (2012: 1.735p) has been proposed. This
has not been accrued. The interim dividend was 0.625p per share (2012:
0.565p), making a total for the year of 2.55p per share (2012: 2.30p).
Thefinal dividend, if approved at the AGM on the 21 January 2014, will be
paid on 7 February 2014 to all shareholders on the Register of Members as at
10 January 2014. The ex-dividend date for the shares is 8January 2014.

6 Finance expense

                                                         2013     2012
                                                             £’000       £’000
Financial liabilities at amortised cost                           
Bank interest payable                                        464         513
Financial liabilities at fair value through profit and
loss
Unwinding of discount on contingent consideration            797         968
Unwinding of discount on share purchase obligation           370         453
Change in estimate of future contingent consideration        1,536       118
payable
Change in estimate of future share purchase obligation       145         108
Other
Finance lease interest                                       8           2
Other interest payable                                    11       8
Finance expense                                           3,331    2,170
                                                                         

7 Finance income

                                                         2013     2012
                                                             £’000       £’000
Financial assets at amortised cost                                
Bank interest receivable                                     41          50
Financial assets at fair value through profit and loss
Movement in fair value of interest rate cap-and-collar       114         84
contract
Change in estimate of future contingent consideration        1,282       650
payable
Change in estimate on future share purchase obligation       1,046       692
Other
Other interest receivable                                 7        1
Finance income                                            2,490    1,477
                                                                         

8 Earnings per share

                                                         2013     2012
                                                             £’000       £’000
Earnings attributable to ordinary shareholders            328      3,906
Movement in fair value of interest rate cap-and-collar       (87)        (65)
contract
Movement in fair value of forward foreign exchange           -           10
contracts
Unwinding of discount on contingent consideration            797         968
Unwinding of discount on share purchase obligation           370         453
Charge for misappropriation of assets                        323         1,225
Change in estimate of future contingent consideration        (360)       (534)
payable
Change in estimate of share purchase obligation              (953)       (589)
Charges associated with equity transactions accounted        550         –
for as share based payments
Reorganisation costs                                         569         336
Amortisation of acquired intangibles                         940         803
Impairment of intangibles (note 3)                        1,950    –
Adjusted earnings attributable to ordinary                4,427    6,513
shareholders
                                                                         

8 Earnings per share (continued)

                                               Number        Number
Weighted average number of Ordinary Shares      59,068,925    57,036,925
Dilutive share options/performance shares          5,641,070        5,008,853
outstanding
Other potentially issuable shares               1,863,899     2,645,103
Diluted weighted average number of Ordinary     66,573,894    64,690,881
Shares
Basic earnings per share                           0.56p            6.85p
Diluted earnings per share                         0.49p            6.04p
Adjusted earnings per share                        7.49p            11.42p
Diluted adjusted earnings per share             6.65p         10.07p
                                                                    

Adjusted and diluted adjusted earnings per share have been presented to
provide additional useful information. The adjusted earnings per share is the
performance measure used for the vesting of employee share options and
performance shares. The only difference between the adjusting items in this
note and the figures in note 3 is the tax effect of those adjusting items.

9 Analysis of net debt

Netdebt is calculated as total borrowings and finance leases, less cash and
cash equivalents. This measure of net debt excludes any acquisition related
contingent liabilities or share purchase obligations. The quantum of these
obligations is dependent on estimations of forecast profitability. Settlement
dates are variable and range from 2012 to 2018.

                                   2013       2012
                                       £’000         £’000
Total loans and borrowings          9,722      11,009
Obligations under finance leases       151           31
Less: cash and cash equivalents     (8,064)    (8,436)
Net debt                               1,809         2,604
Total equity                        38,193     37,228
Total capital                       40,002     39,832

                            2013      2012
                                £’000        £’000
Net debt                     1,809     2,604
Share purchase obligation       3,546        3,989
Contingent consideration        6,152        7,932
Deferred consideration       1,319     –
                            12,826    14,525

^1Net debt excludes contingent consideration and share purchase obligations.
See note 9 to the final results announcement.

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