The Mission Group Regulatory News (TMG)

The Mission Marketing Group plc

Interim results for the six months to 30 June 2016

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 2016.

Trading

· Some great new business wins in the period, including Fuji Xerox, Golden Wonder, Greene King, Halfords, Mondelez, O2 and Sky Betting & Gaming

· Good progress made upscaling people, systems and technology

· Recent acquisitions trading well and global capabilities strengthened

· Expect to have a strong second-half bias as in previous years and remain confident for full year outlook

Income statement

· Revenue up 10% to £32.4m (2015: £29.5m)

· Headline profit before tax up 10% to £2.6m (2015: £2.3m*)

· Reported profit before tax up 14% to £2.0m (2015: £1.7m*)

· Headline diluted EPS up 15% to 2.33 pence (2015: 2.03 pence*)

Balance sheet and cash flow

· Cash inflows from operating activities of £4.8m (2015: £2.3m)

· Acquisition obligations of £3.0m settled since year-end

· Period-end acquisition obligations reduced to £5.4m, of which only £2.5m due within one year

· Net bank debt reduced by £1.5m in the six months to £9.4m

· Debt levels continue to reduce and are comfortably within the Board's limits

Dividend

· Interim dividend increased by 67% to 0.5p (2015: 0.3p)

· Payable on 2 December 2016 to shareholders on the register at 4 November 2016

*restated as explained in Note 1

David Morgan, Chairman, commented: "The first half of 2016 went very well for us as we continue to build on our profitable platform. We look forward to a positive second half and remain confident in the outturn for the full year, continuing the consistent growth achieved over recent years. To reflect our confidence in the business, the Board has decided to substantially increase the dividend."

An interview with David Morgan, Chairman, can be viewed from 9.30am today at:

http://www.themission.co.uk/investor-centre/reports

Enquiries:

the missiontm is a network of entrepreneurial marketing communications Agencies employing over 950 people in the UK, Asia and San Francisco. The Group comprises a complementary mix of integrated generalists, specialists in specific marketing/communications activities and specialists in particular market sectors, all providing award-winning solutions to national and international Clients.

www.themission.co.uk

Chairman's Statement

A GAME OF TWO HALVES. BOTH LOOKING GOOD

I am delighted to report that the first half of 2016 went very well for us and we continue to progress as we had hoped despite the uncertainties that surrounded the UK market.

It is difficult to assess the actual effect of Brexit on us and, whilst there have been the occasional budget-reducing decisions, our Clients are maintaining investment in their businesses and as a result we remain confident that our Agencies will continue to grow alongside them through the remainder of 2016.

Across our Group we have focused on upscaling our Agencies where increased creativity is being supported by technology-enabled systems that bring a leading marketing edge to our Clients. Our core businesses have continued to progress and our recent acquisitions, Chapter and Echo, have repaid our confidence in them. In-fills in our Mongoose Sports Marketing Agency are helping that business develop and a move into the Sales Promotion arena will be underway shortly. We continue to build.

We also continue to offer best-in-class teams, drawn from across a number of Agencies, to support those Clients that require access to our breadth of service and depth of talent. We have strengthened our position in Asia and the USA by adding new resources into our Bray Leino and April Six Agencies there. Earlier this year we launched our April Six Proof PR Agency in San Francisco and early indications are positive.

Our Solaris Healthcare Agency recently finalised agreements with Vivactis and Precision Effect to enable them to operate on a more global scale, thereby providing their Pharma Clients with seamless brand activities wherever they operate.

New business wins have continued apace with assignments from the likes of Fuji Xerox, Golden Wonder, Greene King, Halfords, Mondelez, O2 and Sky Betting & Gaming, whilst bolstering our businesses with further development of our Pathfindr and Ethology products into Rolls Royce and Aviva.

In other news, Mike Smith joined our Automotive Agency, RLA as CEO bringing with him a wealth of expertise of the market and we welcome him on board. Greg Delaney has joined the Bray Leino Board as a Non Executive to bring wise counsel on creative matters, and Rob Grahamslaw has been appointed to run our Global Events Agency, joining us from BP.

Our debt continues to reduce and our profits continue to increase. We believe that through new initiatives, very talented management teams that utilise original techniques, continued investment in our Agencies and our entrepreneurial approach, we are well set and anything is possible.

As a management team, we are very much focused on building on our solid platform. We are looking to create ever greater collaboration across the Group which will help drive organic growth and with it increased profitability and cashflow. Margins remain a key focus. Over the last couple of years we have successfully expanded our footprint while further adding to our expertise and reach. We will continue to look for accretive acquisitions that add to our capabilities and enhance our Client offering. Whilst we have a significant pipeline of opportunities, we will focus on those with the potential to deliver greatest shareholder value.

Trading results

Turnover ("billings") for the six months ended 30 June 2016 increased by 11% to £74.2m (2015: £66.6m). 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 10% in the six months to £32.4m (2015: £29.5m). Whilst organic growth rates remain modest in a very competitive market, there have been some high quality new business wins and the acquisitions made in 2015 have made very positive contributions.

Headline operating profits increased by 10%, in line with revenue growth, to £2.8m (2015: £2.6m). In a market which continues to apply relentless downward pressure on margins, we are pleased to have maintained margins in the first half at the levels achieved in the equivalent period last year. As previously reported, our Clients' spending cycles tend to result in a second half bias in our financial results, including higher profit margins, and we expect this pattern to be repeated in 2016.

Adjustments to headline profits in 2016 totalled £0.6m (2015: £0.6m), explained further in Note 3. After these adjustments, reported operating profits were £2.2m (2015: £2.0m).

After unchanged financing costs of £0.2m, headline profit before tax increased by 10% to £2.6m (2015: £2.3m), and reported profit before tax increased by 14% to £2.0m (2015: £1.7m).

The Group estimates an effective tax rate on headline profits before tax of 22% (2015: 24%), resulting in a 13% increase in headline earnings of £2.0m for the six months (2015: £1.8m), and reported profit after tax of £1.5m (2015: £1.4m). Fully diluted headline EPS increased 15% to 2.33 pence (2015: 2.03 pence).

Balance sheet, cash flow and dividend

Net cash inflows from operating activities were £4.8m in the six months ended June 2016 (2015: £2.3m). Of particular note were working capital inflows of £2.6m compared with £0.4m in the prior period. These strong operating cash flows funded the cash settlement of acquisition obligations totalling £2.7m and also a £1.5m reduction in net debt to £9.4m. At 30 June 2016, the Group had £13.1m of committed facilities and an additional overdraft facility of £3m, providing comfortable headroom to accommodate the normal phasing of working capital requirements which tends to result in an increase in net debt in the second half of the year.

The balance sheet has again strengthened during the period. Bank debt continued to fall and is at a comfortable level in the context of our strong cash generation. In addition, acquisition obligations reduced from £8.2m at year-end to £5.4m, of which only £2.5m falls due within twelve months and, of this, the large majority does not fall due until 2017. To achieve these 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 currently holds 1,334,430 Ordinary shares.

The Mission has achieved a great deal over the last six years, with EBITDA, profitability and cashflow all growing strongly since we restructured the Group. The business has added both scale and breadth and I am pleased to report that your Group is in good health. To reflect the increased confidence in the business and its continued growth, the Board has decided to substantially increase the dividend. The Group will continue to follow a progressive dividend policy, whilst being mindful of an appropriate level of dividend cover and considering other uses of cash, such as accretive acquisitions. Accordingly, the Directors have declared an interim dividend of 0.5p, representing a 67% increase over last year, payable on 2 December 2016 to shareholders on the register at 4 November 2016. The ex-dividend date is 3 November 2016.

Current trading and outlook

Without wishing to be seen as a trumbinich, I am pleased to report that we are where we forecasted we would be at half time. We look forward to a positive second half and remain confident in the outturn for the full year, continuing the consistent growth achieved over recent years.

David Morgan

Chairman

The Mission Marketing Group plc

Condensed Consolidated Income Statement for the 6 months ended 30 June 2016

Condensed Consolidated Statement of Comprehensive Income for the 6 months ended 30 June 2016

Condensed Consolidated Balance Sheet as at 30 June 2016

Condensed Consolidated Cash Flow Statement for the 6 months ended 30 June 2016

Condensed Consolidated Statement of Changes in Equity for the 6 months ended 30 June 2016

Notes to the unaudited Interim Report for the six months ended 30 June 2016

1. Accounting Policies

Basis of preparation

The condensed consolidated interim financial statements for the six months ended 30 June 2016 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 2015 on pages 42-44. These are consistent with the accounting policies which the Group expects to adopt in its 2016 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 2016 and 30 June 2015 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 2015 have been extracted from the Group's Annual Report and Accounts 2015, 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 2015 have been filed with the Registrar of Companies.

In the Company's 2015 Annual Report and Accounts, start-up costs were excluded from the calculation of headline profits and, in presenting the results for the six months ended 30 June 2016, comparatives for the equivalent six month period in 2015 have been restated accordingly.

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

For management purposes the Group had thirteen 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.

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

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 2016 relate to the launch of Mongoose Sports & Entertainment and April Six's new ventures in Singapore and the USA. Start-up costs in 2015 related to the launch of Mongoose Sports & Entertainment.

4. Exceptional Items

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 2015 comprised 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.

5. Acquisition Adjustments

The movement in fair value of contingent consideration relates to a net downward revision in the estimate payable to vendors of businesses acquired in prior years. Acquisition transaction costs relate to the acquisitions made during the year.

6. Net Finance Costs

7. Taxation

The taxation charge for the period ended 30 June 2016 has been based on an estimated effective tax rate on headline profit on ordinary activities of 22% (30 June 2015: 24%).

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".

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.

9. Intangible Assets

Goodwill

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 2016.

Other Intangible Assets

Other intangible assets consist of intellectual property rights, Client relationships and trade names.

10. Bank Loans and Net Debt

11. 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:

A reconciliation of acquisition obligations during the period is as follows:

12. Contribution of Newly Acquired/Commenced Ventures to the Results of the Group

Generate Sponsorship Ltd was acquired on 1 April 2016 and contributed turnover of £0.2m, operating income of £0.2m and headline operating profit of less than £0.1m to the results of the Group for the six month period ended 30 June 2016.

13. Post Balance Sheet Events

There were no material post balance sheet events.