Annual report and accounts
year ended 31 december
marketing group plc 2015 annual report
contents
Introduction to the Group
Board of Directors
Chairman’s Statement
Financial Highlights
Strategic Report
Report of the Directors
Corporate Governance
Independent Auditor’s Report
Consolidated Statements of Income
Consolidated Balance Sheet
Consolidated Cash Flow Statement
Consolidated Statement of Changes in Equity
Notes to the Consolidated Financial Statements
Independent Auditor’s Report: Company
Company Balance Sheet
Company Statement of Changes in Equity
Notes to the Company Financial Statements
Notice of Annual General Meeting
Advisors
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The Mission Marketing Group plc ( ) is based predominantly
in the UK with offices also in the USA and Asia. We’re proud to be built
from a rich partnership of specialist and full service Agencies, including:
• Integrated, multi-discipline, multi-sector Agencies
• Specialists in specific marketing and communications activities
• Specialists in particular market sectors
We are united by a single purpose – to make our Clients’ businesses
more valuable. Quite simply, that’s .
2
marketing group plc 2015 annual report own ideas
Welcome to the Agency Group where everyone thinks differently.
may be one Group, but our biggest strength
is diversity. When a new Agency joins, we don’t impose
doctrines or change them to fit in with Group policies.
We encourage them to flourish in the way that’s best
for them, their people and, above all, their Clients.
We encourage collaboration and empower people to
make their own decisions. In fact, we make it easier
for Agencies to do all the things that made us choose
them in the first place.
This philosophy holds true at the highest level.
Because, unlike other Groups, our Board is comprised
of the entrepreneurs who run our Agencies. Talented
people with a passion to make our Clients famous and
successful.
We’re proud that so many of the people who originally
founded our Agencies stay with us after they’ve joined
the Group. In fact, we think it makes all the difference.
Because, by being focused on their Agencies yet fully
supportive of the Group, they deliver the creativity and
innovation of a boutique with the powerful resource of
a multinational.
Motivation through Ownership
Our senior team don’t just share common values,
they also share ownership. In total, 50% of
Group equity is held by people directly connected to
our operating companies. Their personal investment in
our shared success acts as a powerful added incentive.
As owners, our people have even more motivation to
grow their Agencies and the Group as a whole.
Right across the Group, our goal is to make our Clients’
brands and businesses more valuable. Our unique,
predominantly CEO-led Board structure enables this
through more partnership and more collaboration,
offering specialist disciplines from around the Group
to any individual Agency’s Clients. This leads to a more
integrated, streamlined and commercially effective
service for our Clients as well as enhancing revenue
across the business.
Together, we are growing into the nation’s most
respected and influential creative communications Group.
3
Our 13 Agencies work towards just one bottom line, giving each and every one of our Clients the best advice and the strongest resources we can offer. marketing group plc 2015 annual report the agencies
950+ PEOPLE 24 OFFICES 13 AGENCIES 1 MISSION
The symbol represents the shared ambitions, values and goals
that unite every Agency in Group. The award-winning
names you see here represent a huge variety of skills, experience,
specialisms and expertise.
the
agencies
The UK’s leading technology
channel marketing Agency
working successfully with global
brands on an international basis.
A multi-award winning, creative
Agency producing compelling,
media-neutral ideas that you
can’t ignore.
A pioneer of integrated brand-
building, this top-20 Agency
works with Clients through
every channel and across the
business spectrum.
Delivering the award-winning
high standards and expertise
of a large creative Agency with
the cost base and agility of
a small one. Not bigger and
better, but Sharper & Better.
A sports and entertainment
marketing Agency, harnessing
the power of sponsorship to
drive actionable insight and
business growth.
A specialist PR Agency, part
of April Six, helping science,
engineering and technology
organisations clearly
communicate complex subjects.
Clients span multinational
technology, world-class
science, global engineering
and government departments.
An ambitious, creative and
commercially-driven PR
Agency specialising in driving
businesses and brands forward.
Speed’s sector expertise covers
Consumer & Lifestyle, Business
& Corporate and Sport.
Specialising in automotive
whilst offering full-service
Agency capabilities. With
unrivalled expertise in
international channel marketing
programmes in the automotive,
retail and allied sectors.
Headquartered in Singapore
with offices in Shanghai, Hong
Kong, Malaysia and Vietnam,
a full-service digital Agency
helping multinational brands
build websites and market
their products across all digital
channels.
Regarded as one of the North
of England’s major advertising
brands with proven skills in
integrated communications.
Based in Edinburgh, Story is
an award-winning integrated
Agency working with leading
consumer brands and services.
A specialist medical, full service
global communications Agency
thriving in areas of unmet
need or when innovative
targeted technologies can make
a positive impact. Delivering
communications that are
scientifically robust
and creatively engaging.
The leading property integrated
marketing Agency in the UK,
working with developers across
all aspects of their sales support
programmes from advertising to
show homes. ThinkMedia is one
of the largest buyers of Estate
Agency media in the UK.
Together, we are
6
marketing group plc 2015 annual report concinnity
concinnity
Concinnity is at the heart of everything we do. It means working together
in the most powerful way possible. Employing the right blend of skills,
experience and disciplines from our network to deliver the best result
for each Client.
INTEGRATED GENERALISTS
Our integrated generalist Agencies drive business growth through
consistent brand messaging and measurable results across all
marketing channels.
ACTIVITY SPECIALISTS
Our specialist Agencies span digital, social media, branded content,
PR, events, learning, film production, ecommerce and sports marketing.
All working across a range of sectors to deliver their expertise.
SECTOR SPECIALISTS
Across technology, science, engineering, automotive, healthcare and
property, our sector specialists offer in-depth knowledge, contacts and
working practices - all tailored to their Clients’ particular needs.
At every step, everything we do is about working together to share our
abilities and add value for our Clients. It adds up to a potent mix that can
transform a Client’s business or even their entire market.
“We’re more
powerful together.”
7
integrated
generalists
activity
specialists
sector
specialists
Bringing together the right skills,
for the right Clients, at the right time.
Our Clients are all different. But we’re in the perfect position to deliver an Agency service that suits them perfectly. in action
Most marketing groups talk about their agencies working
closely together. But we actually do it – with a flexible,
innovative approach that benefits Agencies and Clients alike.
Our unique Board structure includes the CEOs of our principal
Agencies – helping to create a strong mutual trust and
common interest. This means the management team of any
one Agency can feel confident about introducing their Clients
to relevant, specialist services from their partner Agencies.
Our collaborative philosophy greatly enhances the service
delivered to our Clients; broadening the range of consultancy
and skills available to help their businesses prosper.
“Collaboration helps us deliver
more for our Clients – and grow
our own business from within.”
9
The mutual support throughout our Group can be seen
in action on a daily basis. And naturally, it enables us to
grow our business from within.
In 2015, nearly £1m of additional revenue from over 30
incumbent Clients flowed into the Group thanks to inter-
Agency Client introductions. All of this was enhanced
by shared new business opportunities and referrals.
What’s more, many of these new relationships will grow
in 2016 and beyond. And new connections are being
made all the time. The appointment of Chris Goodwin
as Commercial Director of the Group will see even more
focus on the development of this strategy. We’ll also be
looking to use more of the Group’s resources in favour
of sourcing from external service providers.
All this progress is enabled by our unique approach.
Delivering the finest solutions to Clients on a Group-
wide basis. One Agency supporting another. Or, as we
like to call it, in action.
key trading relationships in 2015
Introducing Agency
Delivering Agency
Splash
Bray Leino
Speed
Splash
Solaris
bigdog
Bray Leino
Solaris
Bray Leino
Robson Brown
Bray Leino
April Six
bigdog
Bray Leino
Bray Leino
Bray Leino
RLA
Solaris
Speed
Speed
Story
ThinkBDW
10
Just some of the major brands that benefit from the skills and experience of Group Agencies. marketing group plc 2015 annual report great work for great brands
we do great
work for
great brands
We’re proud to work for some of the leading brands in
the world. Not to mention many reputable less well-known
names and emerging brands. Between them, our Clients
cover technology, automotive, FMCG, healthcare, property,
financial services and many other sectors besides. But in
every case, we’re continually working to make them more
famous, more loved and more successful.
PMS 321C
marketing group plc 2015 annual report revenue visibility
revenue visibility
“We have a unique long-term view on revenue.
Our Client relationships are something we
work very hard to maintain and grow.”
We like to look ahead.
• 890 Clients across the Group
And with such a strong culture of collaboration,
it’s no wonder our Agencies create long-lasting,
profitable relationships with many of our Clients.
We have a clear view of future revenue from many
brands that we’ve worked with and grown over
a period of time. So, when it comes to business
planning, we never underestimate the value of a
long-term partnership.
Naturally, new business is also very important to us.
We have Group-wide systems in place to provide
real-time visibility of all of our new business pipeline.
• High degree of visibility of 2016 revenue
• Further growth from existing Clients forms
a key part of new business targets
• 59% of Client revenue is from Clients that have
been with us for 5 years or more,
39% from Clients of 10 years or more and 21%
from Clients of 20 years or more
• Group-wide new business pipeline visibility.
YEARS WITH MISSION AGENCIES
SOME EXAMPLES
16YEARS 24YEARS 41YEARS 32YEARS 29YEARS
April Six
bigdog
Bray Leino
RLA
ThinkBDW
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Revenue visibility across the Group is greatly enhanced by our valuable portfolio of long-established Clients with contracted or predictable spends. marketing group plc 2015 annual report original ideas, owned initiatives
original ideas,
owned initiatives
“We don’t just come up with new communications
ideas, we come up with new ways to communicate.”
At , we do things that have never been
done before. Going far above and beyond traditional
Agency models to deliver new and original commercial
opportunities. Using the wealth of talent across
the Group, we’re developing new ways to manage
information, to analyse data and to interact with
audiences. As a result of this pioneering approach,
we’re enhancing our Clients’ businesses, but also
creating marketable products. Owned initiatives which
add value to our Group.
Here are just some examples of our original thinking
in action.
BroadCare
Designed for organisations managing NHS-funded
Continuing Care; Broadcare software makes data
collection, storage and retrieval quick and simple.
Bringing together data from different locations to
save significant amounts of time and money.
Thrive
From car dealers to supermarkets, organisations
with multiple outlets face the challenge of translating
their brand vision into powerful local marketing.
Thrive, from RLA, makes the task easier with a single,
adaptable programme. Thrive incorporates everything
from integrated asset management and ad building,
through to media planning and sales tracking.
Delivering a 360° campaign journey in one platform.
Mall to Mobile
Mall to Mobile is a unique software solution developed
for retail destinations. The system delivers promotions,
news, events and local interest stories straight to the
palm of your customers’ hands – and is currently used by
more than a dozen retail centre portfolios across the UK.
Pathfindr
When Rolls-Royce wanted to reduce the time spent
tracking down parts on their factory floor, bigdog
worked with them to develop Pathfindr - a cutting
edge Integrated Asset Tracking solution. The system
accurately logs locations and makes it easy to scan
and pinpoint parts and tools with a smartphone.
And all at a fraction of the cost of established big-name
solutions. Rolls-Royce’s time-to-find has dropped by
80%, while Pathfindr is now being offered for retail,
hospitality and industrial applications.
Ethology
From online to in-store, customers interact with brands
in more ways than ever. Our Ethology consultancy
was established in 2015 to help businesses measure,
plan and improve the experience they provide at every
touchpoint. With everything from strategic guidance
through to full user-centred design, the offering is
bespoke for each Client – using insight and research
to inform creative decisions. Whilst part of bigdog,
Ethology supports other Group Agencies
too, having worked closely with Bray Leino Yucca,
RLA and April Six.
Easl
While we create great innovations for Clients, we also
apply innovative thinking to our own business. For
example, dissatisfied with Agency Management Systems
available on the market, Easl was developed by Bray
Leino and is now used by a number of the Group’s
Agencies. This negated outsourcing and reduced
external expenditure. This tailor-made software
enables detailed planning, tracking, costing and
reporting as well as accurate recording of staff time.
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marketing group plc 2015 annual report smart work, smart people
smart work, smart people
is home to many highly talented and creative individuals. All with a passion
for new ideas and new ways to connect. Together, we’ve developed outstanding work
for a wide range of Clients. Here are a few of our best examples.
The King of
All Test Rides
A unique experience for custom motorcycle riders.
Harley-Davidson is an American icon. So to generate
interest across Europe, bigdog came up with The
King of All Test Rides. Take a test ride for the chance
to win a once-in-a-lifetime US trip and your dream
custom Harley® motorcycle. Promoted by a powerful
combination of press, E-CRM and digital comms, the
incentive proved irresistible for an audience who like
to try something new - becoming Harley Europe’s
most successful campaign to date.
“143% above test ride targets.
Over 25,000 test rides booked.”
Scotch Mist
Encouraging a taste for whisky with a magical mist.
Ardbeg single malt is distilled on Islay – a remote Scottish
island often shrouded in a thick sea mist known as the
Haar. To grow awareness amongst premium single malt
drinkers, the Story Agency created an evocative way
to sample Ardbeg – by transforming it into a drinkable
mist. This unique tasting experience was rolled out
internationally during 2015 and whisky lovers from around
the globe took the chance to sip clouds of Ardbeg from
specially designed glasses.
“Taipei, Taiwan acquired 1,000
new Ardbeg Committee
Members in under a week.”
17
marketing group plc 2015 annual report smart work, smart people
A Virtual Car
Showroom
How do you show customers a new car
if it has yet to reach the UK?
That was the challenge posed by Mazda to bigdog,
in order to support their nationwide dealer tour for
the launch of the all-new Mazda2.
The solution, was to go virtual.
A virtual reality showroom was created, complete with
the all-new Mazda2. By wearing an Oculus Rift headset
and using a specially designed joystick, customers can
move around the showroom and view the car from all
angles. They can view changes to the paintwork colour
and trim levels and, with a click of a button, they can
be transported inside the car, giving them a feel for
the interior too. Created from a 3D production model,
the virtual reality car is as close to the real thing as it is
possible to get.
The Mazda2 tour was a great success, with positive
national press coverage.
The same technology was used to power the nationwide
tour for the all-new Mazda CX-3 and the launch of the
Mazda MX-5, with Oculus Rift kits in circulation across
the country to support dealer launch events.
“Transforming a car that
didn’t exist into a brand
new retail experience.”
A Clear Winner
Making Freederm the no. 1 name in spot treatment.
For teenagers, spot-free skin is about feeling confident
and uninhibited. Using this insight, Bray Leino cast aside
category norms with a campaign featuring no spots,
skin or people. Instead, they delivered a pure and
entertaining expression of freedom. With a little help
from the Freederm Goose.
In 2015, the campaign spread its wings across TV, cinema
and online video. All supported by digital and social
content, including live tweets from the Goose himself.
“Freederm became the most talked about
skincare brand among 14 to 17 year olds.”
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marketing group plc 2015 annual report it’s a rare thing
it’s a rare
thing
“We attract Agencies with great talent. And keep it.”
When an Agency joins Group, we want it to stay true to its
original vision. That’s why we’re delighted that so many members of our
Agencies’ senior management teams choose to stay with us. In some 95%
of cases, the core management of our acquired businesses remains in
place today. People who are driven by a passion for creative innovation
and building the value of our Group.
And it’s gratifying to hear from the businesses that we acquire that what
we describe as our unique style and culture is as motivating in practice as
Joining the mission Group
has been brilliant. The Digital
Workgroup, in particular, has
highlighted how many seriously
capable people there are in
the mission and I’m delighted
to be part of this. I’m really excited
about what we will achieve
together in the future.
Charlie Cutler,
The Weather (part of Story)
it is in theory.
The mission has made promises
on which it has delivered.
It promised to allow us to run the
business our own way; to provide
us support when we needed it;
to give us space when we didn’t
and to talk to us if we wanted
to. The mission has been, above
everything else, unwaveringly fair,
honest and human. It understands
us as people, not just resources.
And that, I think, is rare these days.
Richard Moss,
Proof Communication
Our first year with the mission
has been a blast. Shanghai saw
very substantial growth from
mission Group opportunities.
Singapore had the privilege
of working with two mission
colleagues and the fun of seeing
them grow their teams. Vietnam
saw opportunities in supporting
the mission Group with technical
development. I am quite confident
that this collaboration will bring
about greater integration and
expansion of opportunities for
both the UK and Asia.
Lee Kuok Ming,
Splash Interactive
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What makes a Group Agency? There’s no one answer. We’re simply drawn to creativity and innovation, helping members flourish in the way that’s best for them and their Clients. We think it’s what attracts Agencies in the first place. And what keeps most Agency management teams with us after they’ve joined the Group. marketing group plc 2015 annual report board of directors
‹
David Morgan
Executive Chairman
David founded Bray Leino, the Group’s
largest Agency, in 1974 and was its
CEO until 2008. He became Non-
Executive Chairman of Bray Leino
in 2008 and was appointed Chairman
of in April 2010. Before
founding Bray Leino he worked in
a number of London advertising
agencies including Dorlands.
Dylan Bogg
Executive Director
‹
Dylan is Chief Creative Officer of bigdog
and was one of the founding partners
of Big Communications. He had built
a successful business by the age of 24
and this was used as the bedrock for the
launch of Big Communications in 1996.
Dylan oversees all creative output for
bigdog across four UK locations. Dylan
was appointed to the Board in April 2010.
Giles Lee
Executive Director
‹
Giles joined Bray Leino in 2005 as Group
Finance Director following his successful
role in transforming Merrydown plc from
its fundamental financial restructure in
2000 to its acquisition in 2005. Giles was
appointed CFO/COO of Bray Leino in
2011 and Executive Chairman in 2013 and
has overseen fourteen acquisitions and a
number of strategic investments. He was
appointed to the Board in March 2013.
‹
James Clifton
Executive Director
Chief Executive of bigdog, James
started out Client-side before working
for various agencies within the global
networks that are Omnicom and WPP.
He created balloon dog in 2008 having
led an MBO of Fox Murphy. balloon
dog was acquired by
and James was appointed to the
Board in October 2012.
Robert Day
Executive Director
‹
Robert is Chief Executive of
ThinkBDW, a company he founded
as Robert Day Associates in 1987
at the age of 22. Re-branding as
ThinkBDW in 2004, Robert has led
the company to its position as the
leading property marketing specialist
in the UK. The business was acquired
by in March 2007 and
Robert joined the Board in April 2010.
Sue Mullen
Executive Director
‹
Sue is Chief Executive of Story and
started her advertising career at Branns
in Cirencester before moving to
Edinburgh to head up One Agency.
She left in 2002 and, alongside
three colleagues, set up Story, an
award-winning creative and direct
communications Agency. Story was
acquired by in 2007 and
Sue joined the Board in June 2012.
marketing group plc 2015 annual report board of directors
‹
Chris Morris
Non-Executive Deputy Chairman
Chris adds further operational experience
to the Board as a founder partner of
Big Communications, bought by
in 2005 prior to its AIM listing
in 2006. Chris has over 35 years’ industry
knowledge having previously been
Managing Director of Cogent Elliott,
one of the UK’s top three regional
advertising agencies. Chris was appointed
to the Board in December 2009.
‹
Fiona Shepherd
Executive Director
Fiona is Chief Executive of April Six and
Proof Communication and has worked
in the technology industry for over 20
years, holding both Client and Agency
positions, with some of the world’s
largest technology brands. Fiona was
a founder of April Six and has managed
its success as a well respected global
technology Agency with offices in
London, San Francisco and Singapore.
Fiona joined the Board in April 2010.
Julian Hanson-Smith
Non-Executive Director
‹
An entrepreneur and PE investor with
significant experience in marketing services.
In 1986 Julian co-founded what is now
FTI Consulting, one of Europe’s largest
business communications consultancies,
and following its sale in 1999 became COO
of Lighthouse Global Network. In 2001 he
joined US-based PE firm Lake Capital before
co-founding Iceni Capital in 2007, investing
in UK-based business services companies.
He joined the Board on 1 October 2015.
‹
Mike Rose
Executive Director
After working at some of the best
regional agencies in the UK,
Mike founded Chapter, along with his
two Creative Director partners, in April
2009. The three of them went on to
build Chapter into an award-winning,
internationally respected creative agency.
acquired Chapter in
November 2015 and Mike was appointed
to the Board on 1 January 2016.
‹
Peter Fitzwilliam
Finance Director
Peter is a Chartered Accountant with
over 25 years’ financial and management
advisory experience in private and
quoted companies across a range
of industry sectors. Finance Director
of Business Post Group plc (now UK
Mail Group plc) from 1999-2006,
he helped take it into the FTSE 250.
Peter supported through
its refinancing in April 2010 and joined
the Board in September 2010.
Chris Goodwin
Executive Director
‹
Chris is Chief Executive of RLA and
has over 25 years’ experience in the
automotive industry at Firestone
and then Federal-Mogul, with varied
experience in sales, marketing and
general management roles, both at
regional and global levels. In 2008 he
crossed over from the Client side to
focus on strategic business development
within Bray Leino. He was appointed to
the Board in April 2011.
marketing group plc 2015 annual report chairman’s statement
“We are going in the right
direction with our intrapreneurial
approach and innovative ideas.”
David Morgan, Chairman - March 2016
23
marketing group plc 2015 annual report chairman’s statement
A cracking second half performance from our
Agencies helped us deliver our forecasted numbers
and springboard us into 2016 in very good shape.
2015 was a busy year for the mission where we
saw ever so slightly improved market conditions
and benefits from important improvements to our
portfolio in line with the strategy that we set five
years ago. At the same time we have been able
to continue to upgrade the quality of our team
and our expertise.
Towards the end of 2015 we acquired Chapter
which is one of the UK’s fastest growing Agencies
based in the Midlands. Chapter brings to us a top
notch management team and an exciting array of
Clients and capabilities through its truly unique style
and approach which fits perfectly with the mission.
As such Chapter will also further consolidate our
position in the region.
Their CEO, Mike Rose joined the Group Board
which was also strengthened by the introduction
of Julian Hanson-Smith as our senior independent
Non-Executive Director. His breadth of experience
will serve us well in the years to come, I’m sure.
At the end of the year Stephen Boyd stood down
from the Board and I would like to thank him for
his contribution.
Lots of news elsewhere to report in 2015, not the
least being April Six’s move into Singapore on the
back of their strengthening position in San Francisco,
Bray Leino’s introduction into Chicago for tactical
reasons, a relocation of our Edinburgh based Story
Agency who integrated The Weather digital team
and our investment in Watchable, a very smart film
and video content business. Watchable brings to our
Clients greater options in branded content through
their measurable seeded messaging capability.
Late in 2015, our Solaris Healthcare Agency
absorbed the pharma specialist Agency, Echo, into
their fold adding further strength and breadth to
their offering.
We launched Mongoose Sports and Entertainment
Marketing in July which is now picking up steam
and working with our Agencies to bring greater
marketing and sponsorship options to our
Clients. Further plans to build this business will be
announced during 2016 suffice to say that we are
delighted to be entering into this arena with such
a dynamic young team.
In the early part of 2015 we merged our Bray
Leino PR business into our just acquired Speed
PR Agency and I’m encouraged by the way their
integration has gone and the positive plans for
the future.
All good stuff.
New Client wins in 2015 include British Airways,
BMW, Byron Burgers, Citibank, Pfizer and the Post
Office with our Agencies developing well in the
UK and USA and through our Splash Group in Asia.
A couple of major restructures included a Bray
Leino repositioning of locations and the merger of
Big and balloon dog into bigdog. The latter proved
to be more challenging than we had hoped but
unlike the home countries’ teams in the Rugby
World Cup they ended the year flying. Six pitches
six wins!
Looking forward to 2016 we are planning the next
stage of our journey. We are already considering
adjustments to our portfolio and have a pipeline
of initiatives and potential acquisitions that meet
with our objective to embrace and utilise smarter
technologies that are strategically and creatively
empowered and lock into audience mindsets.
All of which will fuel the quality of what we do
and the success we bring to our Clients.
I feel that we are going in the right direction with
our intrapreneurial approach and innovative ideas.
We aren’t quite sansculottes but we are a Group
focused on building value through a measured
approach to the future that even our doryphores
should find it hard to question.
Onwards and very much upwards, methinks.
24
marketing group plc 2015 annual report financial highlights
operating income (‘revenue’):
up11%to
£61.0m(2014: £55.0m)
2015 was another year of success, with each of our five key financial
performance indicators met:
Key performance
measure
Target
Achieved
in 2015?
Achievement
in 2015
Yes
Yes
Yes
Yes
Yes
Operating income
Operating profit
margins
Increase each
year, from both
organic growth
and acquisition
Achieve levels
at least in line
with industry
averages
Headline profits
before tax
Grow year-
on-year
Ratio of net bank
debt to EBITDA
Maintain
below x2
Ratio of total debt
to EBITDA
Maintain
below x2.5
*Kingston Smith Annual Survey
Increase of 11%
achieved
Margins, at 11%,
were again ahead
of our peer group
of UK quoted
marketing companies
(excluding WPP)*
Increase of 17%
achieved
Bank debt leverage
ratio below x1.3 at
31 December 2015
Total debt leverage
ratio x2.0 at 31
December 2015
25
total cash investment in growth:
£4.0macquisitions, start-ups and capex
new business generated from cross-Agency referrals:
nearly
£1.0m
revenue from Clients of 5 or more years:
almost
60%
(over 20% from Clients of 20+ years standing)
marketing group plc 2015 annual report financial highlights
headline trading profit (operating profit before central costs):
up11%to
£8.5m(2014: £7.7m)
headline profit before tax:
headline diluted eps:
full year dividend:
up 17% to £6.5m
(2014: £5.5m)
up 15% to 5.9p
(2014: 5.13p)
up 9% to 1.2p (2014: 1.1p)
26
marketing group plc 2015 annual report strategic report
strategic
report
AIMS AND AMBITION
Our mission is simple: to work together to make our Clients’
brands and businesses more valuable; and fuelled by their
success, to grow into the UK’s most respected
and influential creative communications group. To achieve
this, we will continue to focus on building long term,
mutually beneficial, Client partnerships that provide us
with greater security of relationship and them with a deeper,
more proactive, responsive approach that helps them build
their businesses more successfully.
We aim to reward shareholders both through capital growth
and dividends and to provide a rewarding, challenging and fun
environment for our staff. We will grow first and foremost by
organic growth but we will add services, expertise and talent
where we find it complementary to our objectives and financially
affordable. As well as acquisitions of existing businesses, we
will also consider launching new businesses that may require
more time to become established but which will have a smaller
investment cost/lower risk profile. Although primarily operating
in the UK, we will continue to develop our international footprint
in response to Client demand and where we see strong
opportunities to leverage our well-established UK strengths
elsewhere in the world. We will maintain a balance of equity and
debt financing to give shareholders the advantages of financial
leverage but without placing the business at financial risk.
RISKS AND UNCERTAINTIES
The Group’s principal operating risks and uncertainties are
set out below. The management of risk is the responsibility of
the Board, assisted where appropriate by the Remuneration
and Audit Committees, as described further in the Corporate
Governance Report. The Directors have carried out a
robust assessment of the principal risks facing the Group,
including those that would threaten its business model, future
performance, solvency and liquidity.
Adverse economic conditions
Such conditions could lead to a reduction in Clients’ marketing
budgets. As a network of Agencies which are run, in most cases,
by the entrepreneurs who originally founded them, we believe
that we offer strong local and personalised, “boutique” Client
service backed up by a multi-national infrastructure. We believe
that this highly personalised service makes us less susceptible
to the generic effects of the economy. We also undertake
strenuous new business activity and we minimise overheads
wherever possible, always recognising that there is a level below
which overheads cannot be reduced without Client service being
affected. As the Group expands outside the United Kingdom,
we are also reducing the concentration of economic risk.
Loss of key Clients
There are many reasons why a Client changes its
communications agency, several of which are outside our
control. The risk of Client loss as a result of something we
can control is mitigated by the efforts of dedicated account
teams, who strive to ensure the quality of work we do meets
or exceeds our Clients’ expectations at all times and who
modify our approach when necessary. The risk of Client loss for
reasons beyond our control is mitigated by the Group’s broad
spread of Clients, which limits its exposure to any individual
loss. No Client represents more than 10% of Group operating
income. One measure of our success is that, in 2015, 59% of
our revenue was from Clients that have been with us for 5
years or more and over 20% from Clients of 20 years or more.
Loss of key staff
In common with all service businesses, the Group is reliant on
the quality of its staff. Strenuous efforts are made to provide
a rewarding work environment and remuneration package
to retain and motivate our leadership teams. The system of
financial rewards is reviewed regularly by the Board. One
measure of our success is that, in some 95% of cases, the core
management of our acquired businesses remains in place today.
Underperformance of acquired businesses
Potential acquisitions are carefully considered by the full Board
as part of its recurring business, and legal, commercial and
financial due diligence is carried out on all but the smallest
acquisitions. The Directors consider that the main risk is
overpaying for the level of profits subsequently generated and
so, wherever possible, agree payment terms for acquisitions
in a way that results in the majority of consideration being
conditional on the post-acquisition profitability of the acquired
business. In this way, if it underperforms against expectations
set at the time of the acquisition, the total amount paid for the
business will reduce correspondingly.
27
marketing group plc 2015 annual report strategic report
KEY PERFORMANCE INDICATORS
The Group manages its internal operational performance and
capital management by monitoring various key performance
indicators (“KPIs”). The KPIs are tailored to the level at which they
are used and their purpose. The Group’s current financial KPIs,
which are quantified and commented on in the Financial Review
of the Year below, are:
• operating income (“revenue”), which the Group aims to
increase year-on-year both via organic growth and from
acquisitions;
• operating profit margins, where the Group aims to achieve
levels at least in line with industry averages;
• headline profits before tax, which the Group aims to increase
year-on-year;
• the ratio of net bank debt to EBITDA*, which the Group is
aiming to maintain below x2.0; and
• the ratio of total debt (including both bank debt and deferred
acquisition consideration) to EBITDA, which the Group is
aiming to maintain below x2.5.
*EBITDA is headline operating profit before depreciation and
amortisation charges.
At the individual Agency level, the Group’s financial KPIs
comprise revenue and profitability measures, predominantly the
achievement of annual budget. More detailed KPIs are applied
within individual Agencies.
In addition to financial KPIs, the Board periodically monitors
the length of Client relationships, the forward visibility of
revenue and the retention of key staff. This year’s annual
report contains statistics to illustrate the Group’s performance
against these measures.
BUSINESS AND FINANCIAL REVIEW
OF THE YEAR
A review of the business and future developments is provided
below and in the Chairman’s Statement, which forms part of
this Strategic Report.
2015 was a year of significant progress for the Group, with each
of the Group’s five financial KPIs again met. Acquisitions made
in 2014 have contributed well to the growth of our business
and the Group has again been strengthened during the year
not just via further acquisitions but also through “revenue
investments” (ie funded from profits rather than acquisition
consideration) in new start-up ventures (a first for the Group)
and hirings, not only in the UK but in Asia and the US. Although
the merger of balloon dog and Big Communications resulted
in some initial teething difficulties which impacted on profits,
these were compensated for by a more streamlined business
elsewhere following restructuring to accelerate growth. Overall,
in a market which showed only modest signs of improvement,
we are pleased to have delivered 17% growth in headline profits
and again hit market expectations.
28
Trading performance
Turnover (billings) was 5% higher than the previous year,
at £132.2m (2014: £125.5m) but since billings include pass-
through costs (eg TV companies’ charges for buying air-time),
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 11% to £61.0m (2014:
£55.0m), once again achieving the first of our KPIs. The chart
below illustrates the consistent growth in revenue achieved
over the last five years.
65
60
55
50
45
40
35
30
25
20
ANNUAL REVENUES (£’m)
2011
2012
2013
2014
2015
The majority of revenue growth in 2015 resulted from
acquisitions made in 2014 and 2015, but simplistic distinctions
between organic and acquisitive growth are misleading since
several of our acquired Agencies have grown rapidly since
they joined the Group precisely because of the opportunities
afforded by being part of . Accordingly, the Board is
primarily concerned with growth irrespective of its source. Of
equal interest to the Board is the quality of Client relationships,
illustrated by the facts that nearly £1m of revenue flowed into
the Group from over 30 incumbent Clients thanks to inter-
Agency Client introductions and that 59% of revenue in 2015
was from Clients that have been with us for 5 years or more
and over 20% from Clients that have been with us for 20 years
or more. In the fast-paced and ever-changing marketing
communications sector, this is a strong achievement.
The Directors measure the Group’s profit performance by
reference to headline profits, calculated before exceptional
items, acquisition adjustments and losses from start-up activities
(as set out in Note 3). Headline trading profits (ie segmental
operating profit, before central costs, as set out in Note 2)
increased by 11%, in line with revenue growth, to £8.5m (2014:
£7.7m) and, after reduced central costs, headline operating
profit increased by 14% to £6.9m (2014: £6.1m).
marketing group plc 2015 annual report strategic report
strategic
report
Although we would prefer it otherwise, Clients’ spending
appears to have developed a predictable pattern of second
half bias, with the consequence that we end our financial
year frantically busy. Although this imbalance in workload is
difficult to manage, we are pleased to report that our second
half operating profits were again very strong in 2015, delivering
profit margins (headline operating profit as a percentage
of revenue) of 14% in H2 (2014: 14%), increasing our overall
margin for the year to 11.4% (2014: 11.1%). In a market which
continues to apply relentless downward pressure on margins,
we are pleased with this year-on-year improvement and
again to have comfortably exceeded margins achieved by
the Group’s peer group of UK quoted marketing companies
(excluding WPP, which is so large it distorts all comparisons).
This achieves the second of our KPIs as illustrated by the chart
below (source: Kingston Smith annual surveys).
16%
14%
12%
10%
8%
6%
4%
2%
0%
PROFIT MARGINS
2011
2012
2013
2014
2015
quoted companies average
Underlying net interest costs fell 14% from the prior year to
£0.5m, an encouraging result given the expansion of the Group
in both 2014 and 2015 via acquisition. This in part reflects our
cautious approach to acquisitions, which limits the level of
up-front cash consideration and places more emphasis on post-
acquisition payments linked to post-acquisition profits. This is
of course not always possible but has served us well overall.
After financing costs, headline profit before tax increased by
17% to £6.5m (2014: £5.5m), achieving the third of our KPIs.
29
The chart below illustrates the growth in headline profit over
recent years.
7.0
6.5
6.0
5.5
5.0
4.5
4.0
3.5
3.0
2.5
2.0
HEADLINE PBT (£’m)
2011
2012
2013
2014
2015
Adjustments to reported profits in 2015 comprise restructuring
costs totaling £0.9m, treated as exceptional items (2014: nil),
acquisition-related items of £0.1m (2014: not significant) and
losses from start-up activities totalling £0.3m (2014: nil).
The restructuring costs relate to 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. An example of the positive
effect of this can be seen in the improvement in profitability
from Events and Learning, which showed a more-than-doubling
of profits (see Note 2).
As well as expanding the Group via acquisition and organic
growth, we launched a Sports Marketing Agency in the
second half of the year, the first start-up Agency in the Group’s
history, and, towards the end of the year, expanded April Six’s
operations into Singapore. In line with industry practice, we
have excluded start-up losses from our headline results. The
combined adjustment in 2015 for these two new ventures
amounted to £0.3m.
After these adjustments, reported profit before tax was £5.1m
(2014: £5.4m).
marketing group plc 2015 annual report strategic report
Taxation and Earnings per Share
The Group’s effective tax rate reduced to 20.2% (2014: 21.7%),
compared with the statutory rate of 20.25% (2014: 21.5%).
The Group’s effective tax rate is normally above the statutory
rate, primarily due to non-deductible staff and Client-related
expenditure, however in both years this has been offset by
the non-taxable movements in the fair value of contingent
consideration. In 2015, other elements which have offset
each other are the impact of the growth of our US activities,
where corporation tax rates are higher than in the UK, and
adjustments in respect of prior years.
After tax, the headline diluted EPS increased by 15% to 5.91
pence (2014: 5.13 pence).
Dividends
The Group has a progressive dividend policy, aiming to grow
dividends each year, but always balancing the desire to reward
shareholders via dividends with the need to preserve cash to
fund the Group’s growth ambitions. The Board’s recommended
final dividend of 0.9 pence per share brings the total for the year
to 1.2 pence per share, representing an increase of 9%. The final
dividend will be payable on 18 July 2016 to shareholders on the
register at 8 July 2016. The Board will continue to keep under
regular review the best use of the Group’s cash resources but
it remains the Board’s intention to follow a progressive policy
provided trading conditions allow.
Balance Sheet and Cash Flow
During the year cash consideration payments totalling
£3.0m were made, comprising initial consideration for new
acquisitions and investments of £2.1m and deferred contingent
consideration in respect of acquisitions made in prior years of
£0.9m (2014: total of £2.9m). Cash totalling £1.4m was acquired
with the businesses purchased during the year, of which £0.8m
was committed for the settlement of short-term obligations.
The net cash outlay in respect of acquisitions in the year was
therefore £2.4m. In addition, £1.3m was invested in capital
expenditure, lower than in the prior year due to the relocation
in that year of two of our Agencies, and a further £0.3m was
invested in supporting the Mongoose and April Six Asia start-up
ventures. The total cash investment in support of the Group’s
expansion during the year was £4.0m.
Working capital, adjusted for the effect of obligations acquired
with the business purchased, increased by £2.0m, exacerbated
by changes in processes within the NHS, which resulted in a
significant increase in outstanding debts, and changes in the
number of Clients choosing to make payments in advance of
work being done. As a result, net bank debt increased by £1.5m
to £10.9m (2014: £9.4m). Despite this, the Group’s “leverage
ratio” (ratio of net bank debt to headline EBITDA) remained
virtually unchanged at x1.3 at 31 December 2015 (2014: x1.25),
comfortably achieving our fourth KPI. Including an assessment
of the amount of contingent acquisition consideration
payable, the ratio of total debt to EBITDA at 31 December 2015
(calculated by reference to the amount of consideration which
would be payable if the acquired business were to maintain
its current level of profitability) was x2.0, higher than at 31
December 2014 due to the acquisitions made during the year
but still comfortably within our final KPI.
Early in the financial year, we agreed new bank facilities to
extend their term (from December 2015 to February 2019).
At the same time, we agreed an increase in the level of
committed loan facilities, from £11m to £15m, to support our
growth ambitions. In addition to these committed loan facilities,
we have a further overdraft facility of £3m. Interest rate margins
on the loans are subject to a ratchet depending on leverage
ratios but, at every ratio level, are lower than under previous
arrangements. More detail of the facilities is set out in Note 19.
At 31 December 2015, the Board undertook its annual assessment
of the value of goodwill, explained further in Note 12, and
concluded that no impairment in the carrying value was required.
Outlook
Further progress is expected in 2016. We have a high degree of
visibility of forecast revenue and fully expect to benefit from the
acquisitions and investments we made during 2015. In addition,
we already have plans to launch a new Sales Promotion Agency,
beef up our Healthcare reach through partnership in Europe,
build on our Sports Marketing business and introduce new
technology and data-based products to keep us at the forefront
of this ever-developing marketing arena. It looks set to be
another busy and productive year.
On behalf of the Board, Peter Fitzwilliam
Finance Director - 22 March 2016
30
marketing group plc 2015 annual report report of the directors
report of
the directors
The Directors have pleasure in presenting their report and the financial
statements of The Mission Marketing Group plc ( ) for the year
ended 31 December 2015. The Directors provide a separate Corporate
Governance Report, which forms part of this Report of the Directors.
Directors
The following Directors
held office during the year;
Dylan Bogg
Stephen Boyd –
resigned 31 December 2015
James Clifton
Robert Day
Peter Fitzwilliam
Julian Hanson-Smith –
appointed 1 October 2015
Giles Lee
David Morgan
Christopher Morris
Sue Mullen
Christopher Goodwin
Fiona Shepherd
Directors’ Interests in Shares and Options
The interests of the Directors and their families in the shares of the Company were as follows:
Number of ordinary shares of 10p each
31 December 2015
31 December 2014
or on appointment
Dylan Bogg
Stephen Boyd
James Clifton
Robert Day
Peter Fitzwilliam
Christopher Goodwin
Giles Lee
David Morgan
Christopher Morris
Sue Mullen
Fiona Shepherd
1,469,323
109,918
165,113
6,128,560
648,940
378,847
732,058
6,089,533
1,015,009
1,081,154
1,264,773
1,486,323
109,918
165,113
6,141,924
688,420
389,012
749,790
6,144,018
1,025,009
1,084,054
1,270,073
31
marketing group plc 2015 annual report report of the directors
The following unexercised options over shares were held by Directors:
Directors
At 1 January 2015
(or on appointment)
Lapsed
in year
Exercised
in year
Granted
in year
At 31 December
2015
Date from which
exercisable
Expiry date
Dylan Bogg
70,000
(52,500)
(17,500)
James Clifton
30,000
17,500
-
56,000
31,215
-
-
-
-
-
-
-
-
-
-
-
-
-
Robert Day
96,667
(72,501)
(24,166)
110,000
60,000
-
-
-
-
-
-
-
Peter Fitzwilliam
40,000
(30,000)
(10,000)
50,000
25,000
-
-
-
-
-
-
-
Chris Goodwin
40,000
(30,000)
(10,000)
35,000
20,000
-
-
-
-
-
-
-
Giles Lee
100,000
(75,000)
(25,000)
70,000
80,000
-
-
-
-
-
-
-
Chris Morris
40,000
(30,000)
(10,000)
50,000
25,000
-
-
-
-
-
-
-
David Morgan
40,000
(30,000)
(10,000)
50,000
25,000
-
-
-
-
-
-
-
Sue Mullen
20,000
(15,000)
(5,000)
22,500
10,000
-
-
-
-
-
-
-
Fiona Shepherd
40,000
(30,000)
(10,000)
50,000
20,000
-
-
-
-
-
-
-
-
-
-
52,000
-
-
52,000
-
-
-
46,667
-
-
-
25,000
-
-
-
17,500
-
-
-
72,000
-
-
-
25,000
-
-
-
25,000
-
-
-
10,000
-
-
-
40,000
-
July 2015
July 2022
30,000
17,500
52,000
56,000
31,215
52,000
July 2016
July 2023
July 2017
July 2024
April 2018 March 2025
July 2016
July 2023
July 2017
July 2024
April 2018 March 2025
-
July 2015
July 2022
110,000
60,000
46,667
July 2016
July 2023
July 2017
July 2024
April 2018 March 2025
-
July 2015
July 2022
50,000
25,000
25,000
July 2016
July 2023
July 2017
July 2024
April 2018 March 2025
-
July 2015
July 2022
35,000
20,000
17,500
July 2016
July 2023
July 2017
July 2024
April 2018 March 2025
-
July 2015
July 2022
70,000
80,000
72,000
July 2016
July 2023
July 2017
July 2024
April 2018 March 2025
-
July 2015
July 2022
50,000
25,000
25,000
July 2016
July 2023
July 2017
July 2024
April 2018 March 2025
-
July 2015
July 2022
50,000
25,000
25,000
July 2016
July 2023
July 2017
July 2024
April 2018 March 2025
-
July 2015
July 2022
22,500
10,000
10,000
July 2016
July 2023
July 2017
July 2024
April 2018 March 2025
-
July 2015
July 2022
50,000
20,000
40,000
July 2016
July 2023
July 2017
July 2024
April 2018 March 2025
All share options in existence at 31 December 2015 are nil-cost options granted under the Company’s Long Term Incentive Plan.
Options granted in 2015 are dependent upon the achievement of profit targets over the period ending 31 December 2017. In all
cases, the vesting of share options is at the overriding discretion of the independent members of the Remuneration Committee.
32
marketing group plc 2015 annual report report of the directors
report of
the directors
Substantial Shareholdings
Other than the Directors’ interests disclosed above, as at 22
March 2016, notification had been received of the following
interests in 3% or more of the issued share capital of the
Company:
Number of shares
%
Herald Investment Management Ltd
4,500,000
5.38
Objectif Investissement Microcaps FCP 4,230,477
5.06
Polar Capital Forager Fund Ltd
3,995,000
4.78
Share Capital
The issued share capital of the Company at the date of this
report is 83,608,331 Ordinary shares. The total number of
voting rights in the Company is 83,608,331.
Directors’ Indemnity Insurance
As permitted by Section 233 of the Companies Act 2006,
the Company has purchased insurance cover on behalf of
the Directors, indemnifying them against certain liabilities
which may be incurred by them in relation to the Company.
Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report
and the Group financial statements in accordance with
applicable law and International Financial Reporting Standards
as adopted by the European Union, and the Company financial
statements in accordance with applicable law and United
Kingdom accounting standards (United Kingdom Generally
Accepted Accounting Practice), including FRS 102, the Financial
Reporting Standard applicable in the United Kingdom and the
Republic of Ireland.
International Accounting Standard 1 requires that financial
statements present fairly for each financial period the Group’s
financial position, financial performance and cash flows. This
requires the faithful representation of the effects of transactions,
other events and conditions in accordance with the definitions
and recognition criteria for assets, liabilities, income and
expenses set out in the International Accounting Standards
Board’s “Framework for the Preparation and Presentation
of Financial Statements”. In virtually all circumstances, a fair
presentation will be achieved by compliance with all applicable
International Financial Reporting Standards. A fair presentation
also requires the Directors to:
- consistently select and apply appropriate accounting policies;
- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information; and
- provide additional disclosures when compliance with
specific requirements in IFRS is insufficient to enable users to
understand the impact of particular transactions, other events
and conditions on the entity’s financial position and financial
performance.
Company law requires the Directors to prepare Group and
Company financial statements for each financial year. The
Directors must not approve the financial statements unless
they are satisfied they give a true and fair view of the state of
affairs of the Group and the Company and the profit or loss
of the Group and the Company for that period. In preparing
the financial statements of the Company under UK GAAP,
the Directors are required to:
- select suitable accounting policies and then apply them
consistently;
- make judgements and estimates that are reasonable and
prudent;
- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that disclose with reasonable accuracy at any time
the financial position of the Group and the Company and
enable them to ensure that the financial statements comply
with the Companies Act 2006. They are also responsible for
safeguarding the assets of the Group and the Company and
hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Group’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
33
marketing group plc 2015 annual report report of the directors
The Directors consider the annual report and accounts, taken as
a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group and
Company’s position, performance, business model and strategy.
Future Developments
An indication of likely future developments in the business
of the Group is provided in the Chairman’s Statement and
Strategic Report.
Auditors
Francis Clark LLP have indicated their willingness to continue in
office and, in accordance with the provisions of the Companies
Act 2006, it is proposed that they be re-appointed auditors to
the Company for the ensuing year.
Disclosure of Information to Auditors
So far as the Directors are aware, there is no relevant audit
information of which the Group’s auditors are unaware. Each of
the Directors has taken all steps that they ought to have taken
as Directors in order to make themselves aware of any relevant
audit information and to establish that the Group’s auditors are
aware of that information.
Financial Risk Exposure
and Management
As a communications Agency Group, the main financial risks
that arise from day-to-day activities are credit and currency risk.
The Group’s policy is to eliminate risk where it is cost-effective,
including the use of credit insurance and currency hedges, and
to mitigate it where not, including close monitoring of credit-
worthiness and the use of Client payment plans if possible.
The Group’s policy is not to use any financial instruments for
speculating.
In common with any business, the Group is exposed to
cash flow risk if the capital structure is not balanced (relative
proportions of debt and equity and the availability of cash
resources). Several years ago, the Group had too much debt
and its ability to continue as a going concern was seriously
endangered, but has progressively reduced debt, increased
equity and secured banking facilities which provide comfortable
levels of headroom within the Group’s covenants. The Group’s
policy is to maintain a balance of equity and debt financing
to give shareholders the advantages of financial leverage but
without placing the business at financial risk.
Further details on the Group’s capital and financial risk
management are set out in Note 27.
Post Balance Sheet Events
There were no material post balance sheet events.
Going Concern
The Directors have considered the financial projections for
the Group, including cash flow forecasts and the availability of
committed bank facilities for the coming 12 months. They are
satisfied that, taking account of reasonably possible changes
in trading performance, it is appropriate to adopt the going
concern basis in preparing the financial statements.
The Environment
The business of the Group is delivering marketing and
advertising related services to Clients. The direct and indirect
impact of these services on the environment is negligible and
considered low risk, however we continue to take action to
reduce our environmental impact where viable.
Employee Policies
It is the Group’s policy not to discriminate between employees
or potential employees on any grounds. The Group is
committed to full and fair consideration of all applications.
Selection of employees for recruitment, training, development
and promotion is based on their skills, abilities and relevant
requirements for the job.
The Group places considerable value on the involvement of its
employees and has continued its previous practice of keeping
them informed on matters affecting them as employees and
on various factors affecting the performance of the Group.
Employees are consulted regularly on a wide range of matters
affecting their current and future interests.
Applications for employment by disabled persons are always
fully considered, bearing in mind the aptitudes and abilities
of the applicant concerned. In the event of members of
staff becoming disabled, every effort is made to ensure their
employment with the Group continues and that the appropriate
training is arranged. It is the policy of the Group that the
training, career development and promotion of disabled
persons should, as far as possible, be identical to that of other
employees.
Dividends
The Group paid a dividend of 0.3 pence per share in December
2015 and the Board recommends the payment of a final
dividend of 0.9 pence, subject to approval by shareholders at
the Annual General Meeting.
Annual General Meeting
A notice convening the Annual General Meeting to be held on
Monday 13 June 2016 at 12 noon is enclosed with this report. In
relation to Resolution 16, shareholders should note that, to the
extent that the Directors seek to use this power to allot equity
securities in respect of more than 5 per cent of the issued
share capital of the Company, such excess will only be used in
connection with an acquisition or specified capital investment
which is either announced at the same time as the issue, or
which has taken place in the preceding six month period and is
disclosed in the announcement of the issue.
On behalf of the Board, Peter Fitzwilliam
Finance Director - 22 March 2016
34
marketing group plc 2015 annual report corporate governance
corporate
governance
The Board of The Mission Marketing
Group plc is collectively accountable to
the Company’s shareholders for good
corporate governance. As an AIM-listed
company, is not required
to comply with the UK Corporate
Governance Code (September 2014)
(the “Code”) but has regard to it.
Board of Directors
Throughout the year, the Board consisted
of the CEOs of the Group’s seven principal
Agencies, most of whom are the original
founders of those Agencies, a Finance
Director and two Non-Executive Directors
(increasing to three during a three month
transition period), under the Executive
Chairmanship of David Morgan, the
founder of the Group’s largest Agency.
This structure results in an operator-led
and entrepreneurial organisation, but
with a suitable balance of independent
oversight and input. David Morgan is well
regarded both within and
within the industry and the Board
continues to believe that, although
combining the roles of Chairman and
Chief Executive does not meet “best
practice” under the Code, his role as
Executive Chairman remains appropriate
and that introducing a separate Chief
Executive would disturb the balance of the
Board. Since the end of the financial year,
Mike Rose, the CEO of recently-acquired
Chapter Agency Ltd, joined the Board.
The Non-Executive Directors during
the year were Stephen Boyd and Chris
Morris, with the addition of Julian
Hanson-Smith from 1 October 2015.
Stephen stepped down from the Board
with effect from 31 December 2015.
Stephen has a broad range of business
interests and experience, both in the UK
and internationally, and was independent
from management by virtue of having
no other connection with the Group
other than his Director’s fees and his
shareholding. Chris was one of the
founders of Big Communications, now
part of bigdog, but has not been actively
involved in day-to-day management for
some years. Although Chris is a recipient
of share options and provides some
consulting services to the Group, neither
of which is significant in financial value,
he is considered to be independent of
management by virtue of his attitude.
Julian is a private equity investor with
significant experience in marketing
services, having co-founded Financial
Dynamics (now FTI Consulting) in 1986
and co-founded Iceni Capital, specialising
in UK-based business services companies,
in 2006. Julian is independent by virtue
of having no other connection with the
Group other than his Director’s fees.
The Directors are collectively responsible
for the strategic direction, investment
decisions and effective control of the
Group. The principal risks and uncertainties
facing the Group are set out in more detail
in the Strategic Report and the Non-
Executive Directors periodically consider
whether or not these remain up to date.
Of these risks, primary responsibility for
maintaining strong Client relationships
and retaining key staff lies with the Agency
CEOs and this is monitored both via
written monthly reports and also Board
attendance. Potential acquisitions and
changes in incentive and rewards systems,
designed to motivate and retain key staff,
are considered by the full Board when
it meets in person, most months, or via
regular telephonic and electronic contact
in between meetings.
The Board is satisfied that it receives
information of a quality and to a timetable
that permits it to discharge its duties.
All Directors are subject to election by
Shareholders at the first opportunity after
their appointment. They are required to
retire every three years and may seek
re-appointment.
35
The Board has established three
committees to deal with specific aspects
of the Group’s affairs.
Audit Committee
The Audit Committee consists of the two
independent Non-Executive Directors,
with Stephen Boyd as Chairman during
the year (now replaced by Julian Hanson-
Smith). The Committee considers
matters relating to the reporting of
results, financial controls and the cost
and effectiveness of the audit process. It
aims to meet at least twice a year with the
Group’s external auditors in attendance.
Other Directors attend as required. The
terms of reference of the Committee are
available on request.
The Audit Committee is satisfied that the
Group’s auditors, Francis Clark LLP, have
been objective and independent of the
Group. The Group’s auditors performed
non-audit services for the Group as
outlined in Note 7 but the value of this
work was neither significant in relation to
the size of the audit fee nor carried out
by the audit team and as a consequence
the Audit Committee is satisfied that their
objectivity and independence was not
impaired by such work.
Remuneration Committee
The Board maintains a policy of providing
executive remuneration packages that
will attract, motivate and retain Directors
of the calibre necessary to deliver the
Group’s growth strategy and to reward
them for enhancing shareholder value.
The Remuneration Committee consists
of the two independent Non-Executive
Directors, with Stephen Boyd as Chairman
during the year (now replaced by Chris
Morris). The Committee determines the
remuneration of the Executive Directors
and makes recommendations to the
Board with regard to remuneration policy
and related matters.
marketing group plc 2015 annual report corporate governance
With regard to Executive Directors’
remuneration, their packages consist of
three elements:
• basic salary and benefit package
• performance-related bonus – the
Group operates a performance-related
bonus scheme, related to the delivery
of profit targets
• share option incentives – details of
share options granted to the Executive
Directors at the discretion of the
Remuneration Committee are shown
in the Directors’ report.
The Remuneration Committee reviews the
components of each Executive Director’s
remuneration package annually.
With regard to remuneration policy, the
Remuneration Committee gives specific
consideration each year to the nature and
quantum of incentive arrangements to
ensure they remain relevant and effective
for the retention of key staff, including not
just Executive Directors but also senior
staff within the Group’s Agencies. Inter
alia, this includes setting the profit targets
which trigger annual performance-related
cash bonuses, determining the amount of
the Group’s share capital to make available
for annual share option awards, and
approving the allocation of incentives to
individuals.
The remuneration and terms and
conditions of appointment of the Non-
Executive Directors are determined by
the Board. No Director is involved in
setting his or her own remuneration. The
Remuneration Committee meets as and
when required. The terms of reference of
the Committee are available on request.
Nomination Committee
The Nomination Committee consists of
the Group’s Executive Chairman, David
Morgan, as the Committee Chairman, and
the two Non-Executive Directors. The
Committee is responsible for reviewing
and making proposals to the Board on the
appointment of Directors and meets as
necessary. The terms of reference of the
Committee are available on request.
Shareholder
Communications
The Company believes in good
communication with shareholders. The
Board encourages shareholders to attend
its Annual General Meeting. The Chairman
and the Finance Director meet analysts
and institutional shareholders periodically
in order to ensure that the strategy and
performance of the Group are clearly
understood, and they provide the first point
of contact for any queries raised
by shareholders. In the event that these
Directors fail to resolve any queries, or
where a Non-Executive Director is more
appropriate, the Senior Independent
Director (Stephen Boyd until his resignation
on 31 December 2015, subsequently
Julian Hanson-Smith), is available to meet
shareholders.
Internal Financial Control
The Board is responsible for ensuring
that the Group maintains a system of
internal financial controls. The objective
of the system is to safeguard Group
assets, ensure proper accounting records
are maintained and that the financial
Summary of Directors’ Attendance
information used within the business and
for publication is timely and reliable. Any
such system can only provide reasonable,
but not absolute, assurance against
material loss or misstatement.
The Board does not consider it would
be appropriate to have its own internal
audit function at the present time, given
the Group’s size and the nature of its
business. At present the internal audit of
internal financial controls forms part of
the responsibilities of the Group’s finance
function.
All the day-to-day operational decisions
are taken initially by the Executive
Directors, in accordance with the Group’s
strategy. The Executive Directors are also
responsible for initiating commercial
transactions and approving payments,
save for those relating to their own
employment.
The key internal controls include the
specific levels of delegated authority
and the segregation of duties; the prior
approval of all acquisitions; the review of
pertinent commercial, financial and other
information by the Board on a regular
basis; the prior approval of all significant
strategic decisions; and maintaining a
formal strategy for business activities.
On behalf of the Board
Peter Fitzwilliam
Finance Director
22 March 2016
Board Meetings
Remuneration Committee
Audit Committee
Entitled to attend
Attended
Entitled to attend
Attended
Entitled to attend
Attended
Dylan Bogg
Stephen Boyd
James Clifton
Robert Day
Peter Fitzwilliam
Chris Goodwin
Julian Hanson-Smith
Giles Lee
David Morgan
Chris Morris
Sue Mullen
Fiona Shepherd
10
10
10
10
10
10
3
10
10
10
10
10
9
9
10
9
10
10
3
9
8
10
8
8
n/a
2
n/a
n/a
n/a
n/a
n/a
n/a
n/a
2
n/a
n/a
n/a
3
n/a
n/a
n/a
n/a
1
n/a
n/a
3
n/a
n/a
n/a
2
n/a
n/a
n/a
n/a
1
n/a
n/a
3
n/a
n/a
n/a
2
n/a
n/a
n/a
n/a
n/a
n/a
n/a
2
n/a
n/a
36
marketing group plc 2015 annual report financial statements
Independent Auditor’s Report to the Members of The Mission Marketing Group plc
Report on the Group Financial Statements
Our opinion
In our opinion the Group financial statements:
• give a true and fair view of the state of the Group’s affairs as at 31 December 2015 and of its profit for the year then ended;
• have been properly prepared in accordance with IFRSs as adopted by the European Union; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
This opinion is to be read in the context of what we say in the remainder of this report.
What we have audited
We have audited the financial statements of The Mission Marketing Group plc for the year ended 31 December 2015 which comprise
the Consolidated Statement of Comprehensive Income, the Consolidated Balance Sheet, the Consolidated Cash Flow Statement,
the Consolidated Statement of Changes in Equity and the related notes. The financial reporting framework that has been applied
in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
Our responsibilities and those of the Directors for the financial statements and the audit
As explained more fully in the Directors’ Responsibilities Statement set out on page 33, the Directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical
Standards for Auditors.
This report is made solely to the Company’s shareholders, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the Company’s shareholders those matters we are required
to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s shareholders as a body, for our audit work, for this report, or
for the opinions we have formed.
What an audit of financial statements involves
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material misstatement, whether caused by fraud or error.
This includes an assessment of: whether the accounting policies are appropriate to the Group’s circumstances and have been
consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the
overall presentation of the financial statements.
In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the
audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent
with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements
or inconsistencies we consider the implications for our report.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which the consolidated
financial statements are prepared is consistent with the consolidated financial statements.
Matters on which we are required to report by exception
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
We have no exceptions to report in respect of either of these matters.
Other matter
We have reported separately on the parent company financial statements of The Mission Marketing Group plc for the year ended 31
December 2015.
Christopher Hicks BA FCA (Senior Statutory Auditor)
For and on behalf of Francis Clark LLP, Chartered Accountants and Statutory Auditors
Sigma House, Oak View Close, Edginswell Park, Torquay, TQ2 7FF
22 March 2016
37
marketing group plc 2015 annual report financial statements
Consolidated Income Statement for the year ended 31 December 2015
TURNOVER
Cost of sales
OPERATING INCOME
Headline operating expenses
HEADLINE OPERATING PROFIT
Exceptional items
Acquisition adjustments
Start-up costs
OPERATING PROFIT
Net finance costs
PROFIT BEFORE TAXATION
Taxation
PROFIT FOR THE YEAR
Attributable to:
Equity holders of the parent
Non-controlling interests
Basic earnings per share (pence)
Diluted earnings per share (pence)
Headline basic earnings per share (pence)
Headline diluted earnings per share (pence)
The earnings per share figures derive from continuing and total operations.
Year to 31
December
2015
Year to
31 December
2014
£’000
132,246
(71,209)
61,037
(54,107)
6,930
(873)
(108)
(343)
5,606
(469)
5,137
(1,035)
4,102
4,011
91
4,102
4.86
4.68
6.14
5.91
£’000
125,547
(70,575)
54,972
(48,895)
6,077
-
14
-
6,091
(670)
5,421
(1,179)
4,242
4,197
45
4,242
5.43
5.06
5.50
5.13
Note
2
2
3
3
3
6
7
9
11
11
11
11
Consolidated Statement of Comprehensive Income for the year ended 31 December 2015
PROFIT FOR THE YEAR
Other comprehensive income – items that may be reclassified
separately to profit or loss:
Exchange differences on translation of foreign operations
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
Attributable to:
Equity holders of the parent
Non-controlling interests
38
Note
Year to 31
December
2015
Year to
31 December
2014
£’000
4,102
21
4,123
4,032
91
4,123
£’000
4,242
42
4,284
4,227
57
4,284
marketing group plc 2015 annual report financial statements
Consolidated Balance Sheet as at 31 December 2015
FIXED ASSETS
Intangible assets
Property, plant and equipment
Interests in joint ventures
Investments in associates
Deferred tax assets
CURRENT ASSETS
Stock and work in progress
Trade and other receivables
Cash and short term deposits
CURRENT LIABILITIES
Trade and other payables
Accruals
Corporation tax payable
Bank loans
Acquisition obligations
NET CURRENT ASSETS/(LIABILITIES)
TOTAL ASSETS LESS CURRENT LIABILITIES
NON CURRENT LIABILITIES
Bank loans
Obligations under finance leases
Acquisition obligations
Deferred tax liabilities
NET ASSETS
CAPITAL AND RESERVES
Called up share capital
Share premium account
Own shares
Share option reserve
Foreign currency translation reserve
Retained earnings
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
Non-controlling interests
TOTAL EQUITY
As at
31 December
2015
As at
31 December
2014
Note
£’000
£’000
12
14
15
16
17
18
19
21.1
19
20
21.1
2
23
24
25
82,102
4,526
7
350
146
77,176
4,366
-
-
60
87,131
81,602
461
31,347
1,784
33,592
(14,032)
(10,833)
(1,064)
(1,500)
(3,203)
(30,632)
2,960
90,091
(11,210)
(298)
(4,954)
(264)
(16,726)
73,365
8,361
42,268
(455)
298
51
22,414
72,937
428
73,365
361
25,859
1,549
27,769
(12,985)
(8,958)
(895)
(11,000)
(1,219)
(35,057)
(7,288)
74,314
-
(11)
(3,893)
(26)
(3,930)
70,384
8,340
42,203
(260)
264
30
19,470
70,047
337
70,384
The financial statements were approved and authorised for issue on 22 March 2016 by the Board of Directors.
They were signed on its behalf by:
Peter Fitzwilliam
Finance Director
Company registration number: 05733632
39
marketing group plc 2015 annual report financial statements
Consolidated Cash Flow Statement for the year ended 31 December 2015
Year to 31
December
2015
Year to
31 December
2014
Note
Operating profit
Depreciation and amortisation charges
Movements in the fair value of contingent consideration
Loss on disposal of property, plant and equipment
Non cash charge for share options and shares awarded
Increase in receivables
(Increase)/decrease in stock and work in progress
Increase in payables
OPERATING CASH FLOWS
Net finance costs
Tax paid
Net cash inflow from operating activities
INVESTING ACTIVITIES
Proceeds on disposal of property, plant and equipment
Purchase of property, plant and equipment
Acquisition of subsidiaries, joint ventures and associates during the year
Payment of obligations relating to acquisitions made in prior years
Cash acquired with subsidiaries
Net cash outflow from investing activities
FINANCING ACTIVITIES
Dividends paid
Repayment of finance leases
Increase in/(repayment of) long term bank loans
Proceeds on issue of ordinary share capital
Cash settlement of equity warrants
Purchase of own shares held in EBT
Net cash outflow from financing activities
Increase in cash and cash equivalents
Exchange differences on translation of foreign subsidiaries
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
40
£’000
5,606
2,122
(618)
6
37
(3,963)
(94)
1,256
4,352
(711)
(1,233)
2,408
74
(1,295)
(2,086)
(871)
1,431
(2,747)
(948)
(57)
1,875
-
-
(317)
553
214
21
1,549
1,784
£’000
6,091
1,815
(701)
2
45
(2,916)
16
1,825
6,177
(314)
(892)
4,971
44
(2,186)
(2,062)
(815)
1,001
(4,018)
(771)
(73)
(571)
2,257
(675)
(184)
(17)
936
42
571
1,549
marketing group plc 2015 annual report financial statements
Consolidated Statement of Changes in Equity for the year ended 31 December 2015
Share
capital
£’000
Share
premium
£’000
Own
shares
£’000
Share
option
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 2014
7,699
40,288
(462)
614
Profit for the year
Exchange differences
on translation of
foreign operations
Total comprehensive
income for the year
Non-controlling interest
of new acquisitions
-
-
-
-
-
-
-
-
New shares issued
641
1,915
Credit for share option
scheme
Own shares purchased
Shares awarded
to employees from
own shares
Settlement of warrants
Transfer from share
option reserve to
retained earnings
Dividend paid
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(184)
386
-
-
-
-
-
-
-
-
45
-
-
-
(395)
-
-
30
16,710
64,849
-
64,849
4,197
-
4,197
30
45
12
4,242
42
30
4,197
4,227
57
4,284
-
280
280
-
-
-
-
-
-
-
-
-
-
-
(386)
(675)
395
2,556
45
(184)
-
(675)
-
-
-
-
-
-
-
-
2,556
45
(184)
-
(675)
-
(771)
-
(771)
(771)
At 31 December 2014
8,340
42,203
(260)
264
Profit for the year
Exchange differences
on translation of
foreign operations
Total comprehensive
income for the year
-
-
-
-
-
-
New shares issued
21
65
Credit for share option
scheme
Own shares purchased
Shares awarded
to employees from
own shares
Dividend paid
-
-
-
-
-
-
-
-
-
-
-
-
-
(317)
122
-
-
-
-
-
34
-
-
-
30
-
21
19,470
70,047
337
70,384
4,011
4,011
-
21
91
-
4,102
21
21
4,011
4,032
91
4,123
-
-
-
-
-
-
-
(119)
86
34
(317)
3
(948)
(948)
-
-
-
-
-
86
34
(317)
3
(948)
At 31 December 2015
8,361
42,268
(455)
298
51
22,414
72,937
428
73,365
41
marketing group plc 2015 annual report financial statements
Notes to the Consolidated Financial Statements
1. Principal Accounting Policies
Basis of preparation
The Group’s financial statements consolidate the financial statements of the Company and entities controlled by the Company (its
subsidiaries) made up to 31 December each year. They have been prepared in accordance with International Financial Reporting
Standards (IFRS) adopted by the European Union and on the historical cost basis.
Basis of consolidation
The results of subsidiaries acquired or disposed of during the year are included in the Consolidated Statement of Comprehensive
Income from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring accounting policies used into line with
those used by the Group.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Turnover and revenue recognition
The Group’s operating subsidiaries carry out a range of different activities. The following policies apply consistently across subsidiaries
and business segments.
Turnover represents fees, commissions, rechargeable expenses and sales of materials performed subject to specific contracts.
Income is recognised on the following basis:
• Retainer fees are apportioned over the time period to which they relate
• Project income is recognised by apportioning the fees billed or billable to the time period for which those fees were earned by
relationship to the percentage of completeness of the project to which they relate
• Media commission is recognised when the advertising has been satisfactorily aired or placed
• Unbilled costs relating to contracts for services are included at rechargeable value in accrued income.
Where recorded turnover exceeds amounts invoiced to Clients, the excess is classified as accrued income (within Trade and other
receivables). Where amounts invoiced to Clients exceed recorded turnover, the excess is classified as deferred income (within
Accruals).
Goodwill and other intangible assets
Goodwill
Goodwill arising from the purchase of subsidiary undertakings and trade acquisitions represents the excess of the total cost of
acquisition over the Group’s interest in the fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary
acquired. The total cost of acquisition represents both the unconditional payments made in cash and shares on acquisition and an
estimate of future contingent consideration payments to vendors in respect of earn-outs.
Goodwill is not amortised, but is reviewed annually for impairment. Goodwill impairment is assessed by comparing the carrying value
of goodwill for each cash-generating unit to the future cash flows, discounted to their net present value using an appropriate discount
rate, derived from the relevant underlying assets. Where the net present value of future cash flows is below the carrying value of
goodwill, an impairment adjustment is recognised in profit or loss and is not subsequently reversed.
Other intangible assets
Other intangible assets purchased separately, or separately identified as part of an acquisition, are amortised over periods of between
3 and 10 years, except certain brand names which are considered to have an indefinite useful life. The value of such brand names is
not amortised, but rather an annual impairment test is applied and any shortfall in the present value of future cash flows derived from
the brand name versus the carrying value is recognised in profit and loss.
Contingent consideration payments
The Directors manage the financial risk associated with making business acquisitions by structuring the terms of the acquisition,
wherever possible, to include an element of the total consideration payable for the business which is contingent on its future
profitability (ie earn-out). Contingent consideration is initially recognised at its estimated fair value based on a reasonable estimate
of the amounts expected to be paid. Changes in the fair value of the contingent consideration that arise from additional information
obtained during the first twelve months from the acquisition date, about facts and circumstances that existed at the acquisition date,
are adjusted retrospectively, with corresponding adjustments against goodwill. The fair value of contingent consideration is reviewed
annually and subsequent changes in the fair value are recognised in profit or loss, but excluded from headline profits.
42
marketing group plc 2015 annual report financial statements
1. Principal Accounting Policies (cont.)
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, in order of significance:
Potential impairment of goodwill
The potential impairment of goodwill is based on estimates of future cash flows derived from the financial projections of each cash-
generating unit over an initial three year period and assumptions about growth thereafter, discussed in more detail in Note 12.
Contingent payments in respect of acquisitions
Contingent consideration, by definition, depends on uncertain future events. At the time of purchasing a business, the Directors use
the financial projections obtained during due diligence as the basis for estimating contingent consideration. Subsequent estimates
benefit from the greater insight gained in the post-acquisition period and the business’ track record of financial performance.
Revenue recognition policies in respect of contracts which straddle the year end
Estimates of revenue to be recognised on contracts which straddle the year end are typically based on the amount of time so far
committed to those contracts in relation to the total estimated time to complete them.
Valuation of intangible assets on acquisitions
When considering the valuation of intangible assets on acquisitions, a range of methods is undertaken both for identifying intangibles
and placing valuations on them. Brand names, customer relationships and intellectual property rights are the most frequently
identified intangible assets. The valuation of each element is assessed by reference to commonly used techniques, such as “relief
from royalty” and “excess earnings” and to industry leaders and competitors. Estimating the length of customer retention is the
principal uncertainty and draws on historic experience.
Share-based payment transactions
Equity-settled share-based payments, such as share options, are measured at fair value at the date of grant. The fair value determined
at the grant date of the equity-settled share payments is expensed on a straight-line basis over the vesting period, based on the
Group’s estimate of the number of shares that will eventually vest.
Fair value is measured by use of a Black Scholes model on the grounds that there are no market related vesting conditions. The
expected life used in the model has been adjusted, based on the management‘s best estimate, for the effects of non-transferability,
exercise restrictions and behavioural considerations. Market price on any given day is obtained from external publicly available sources.
Foreign currencies
Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date.
Transactions in foreign currencies arising from normal trading activities are translated into sterling at the rate of exchange ruling at the
date of the transaction. Exchange differences are reflected in the profit or loss accordingly.
The income statements of overseas subsidiary undertakings are translated at average exchange rates and the year-end net assets of
these companies are translated at year-end exchange rates. Exchange differences arising from retranslation of the opening net assets
are reported in the Consolidated Statement of Comprehensive Income.
Property, plant and equipment
Tangible fixed assets are stated at cost less accumulated depreciation. Depreciation is provided on all property, plant and equipment
at rates calculated to write off the cost, less estimated residual value based on prices prevailing at the date of acquisition, of each asset
evenly over its expected useful economic life, as follows:
Short leasehold property
Motor vehicles
Period of the lease
25% per annum
Fixtures, fittings and office equipment
10-33% per annum
Computer equipment
25-33% per annum
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter,
the term of the relevant lease.
43
marketing group plc 2015 annual report financial statements
1. Principal Accounting Policies (cont.)
Financial instruments
Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the
contractual provisions of the instrument. Issue costs are offset against the proceeds of such instruments. Financial liabilities are
released to income when the liability is extinguished.
Lease commitments
In accordance with IAS 17, the economic ownership of a leased asset is transferred to the lessee if the lessee bears substantially all the
risks and rewards related to the ownership of the leased asset. The related asset is recognised at the time of inception of the lease at
the fair value of the leased asset or, if lower, the present value of the minimum lease payments plus incidental payments, if any, to be
borne by the lessee. A corresponding amount is recognised as a finance leasing liability.
The interest element of leasing payments represents a constant proportion of the capital balance outstanding and is charged to the
Consolidated Income Statement over the period of the lease.
All other leases are regarded as operating leases and the payments made under them are charged to the Consolidated Income
Statement on a straight-line basis over the lease term. Lease incentives are spread over the term of the lease.
Deferred taxation
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in
the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the
balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the
extent it is probable that taxable profits will be available against which deductible temporary differences can be utilised.
Where material intangible assets are recognised on acquisition which will be amortised over their useful lives, a deferred tax liability is
also recognised and released against income over the corresponding period.
New standards, interpretations and amendments to existing standards
There are no material impacts arising from standards and interpretations applicable for the first time to these financial statements, as
detailed in the prior year financial statements.
The Directors have considered all IFRS and IFRIC Interpretations issued but not yet in force, but most are either not applicable to the
Group or are not expected to have a material impact. IFRS 15, Revenue from Contracts with Customers, will apply to the Group’s 2018
financial statements but, at this stage, the Directors do not believe it will have a material impact.
44
marketing group plc 2015 annual report financial statements
2. Segmental Information
Business segmentation
For management purposes the Group had thirteen operating units during the year, 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; Events and Learning; and Public Relations.
Year to 31 December 2015
Branding,
Advertising
& Digital
£’000
Media
Events &
Learning
Public
Relations
Group
£’000
£’000
£’000
£’000
Turnover
Operating income
Segmental operating profit (“trading profit”)
71,728
47,715
6,228
45,732
4,210
1,245
7,146
2,765
265
7,640
6,347
768
Unallocated central costs
Headline operating profit
Investment income
Finance costs
Headline profit before tax
Profit adjustments (Note 3)
Reported profit before taxation
Taxation
Profit for period
Other Information
Capital expenditure
Unallocated capital expenditure
Total capital expenditure
1,599
28
80
11
Depreciation and amortisation
1,665
114
104
137
Unallocated depreciation and amortisation
Total depreciation and amortisation
Balance Sheet
Assets
Segment assets
Unallocated corporate assets
Consolidated total assets
Liabilities
Segment liabilities
Unallocated corporate liabilities
Consolidated total liabilities
34,069
6,270
2,224
2,100
18,194
6,303
1,056
1,555
132,246
61,037
8,506
(1,576)
6,930
1
(470)
6,461
(1,324)
5,137
(1,035)
4,102
1,718
-
1,718
2,020
6
2,026
44,663
76,060
120,723
27,108
20,250
47,358
Consolidated net assets / (liabilities)
15,875
(33)
1,168
545
73,365
45
marketing group plc 2015 annual report financial statements
2. Segmental Information (cont.)
Unallocated central costs include corporate administration expenses necessary for a quoted company. It is considered impractical
to split the debt interest into segments.
The split of assets and liabilities has been estimated, as the businesses are integrated. Unallocated corporate assets and liabilities
include unallocated IFRS assets and liabilities, corporate assets and liabilities, Group cash reserves and drawn debt liabilities.
Year to 31 December 2014
Branding,
Advertising
& Digital
£’000
Media
Events &
Learning
Public
Relations
Group
£’000
£’000
£’000
£’000
Turnover
Operating income
Segmental operating profit (“trading profit”)
68,786
44,036
6,014
44,393
4,036
949
7,238
2,769
89
5,130
4,131
632
Unallocated central costs
Headline operating profit
Investment income
Headline finance costs
Headline profit before tax
Profit adjustments (Note 3)
Reported profit before taxation
Taxation
Profit for period
Other Information
Capital expenditure
Unallocated capital expenditure
Total capital expenditure
1,942
25
131
85
Depreciation and amortisation
1,432
94
82
125
Unallocated depreciation and amortisation
Total depreciation and amortisation
Balance Sheet
Assets
Segment assets
Unallocated corporate assets
Consolidated total assets
Liabilities
Segment liabilities
Unallocated corporate liabilities
Consolidated total liabilities
27,168
5,903
1,095
4,973
14,763
5,575
557
2,365
125,547
54,972
7,684
(1,607)
6,077
34
(578)
5,533
(112)
5,421
(1,179)
4,242
2,183
3
2,186
1,733
7
1,740
39,139
70,232
109,371
23,260
15,727
38,987
Consolidated net assets
12,405
328
538
2,608
70,384
Geographical segmentation
With the acquisition of Splash Interactive Pte. Ltd, trading in five territories in Asia, and the growth in April Six’s San Francisco operations,
the Group’s activities outside the UK continue to increase, but substantially all the Group’s business remains based and executed in
the UK, with less than 10% of operating income attributed to territories outside of the UK.
46
marketing group plc 2015 annual report financial statements
3. Reconciliation of Headline Profit to Reported Profit
The Board believes that headline profits, which eliminate certain amounts from the reported figures, provide a better understanding
of the underlying trading of the Group. The adjustments to reported profits fall into three categories: exceptional items, acquisition-
related items and start-up costs.
Headline profit
Exceptional items (Note 4)
Acquisition adjustments (Note 5)
Start-up costs
Reported profit
Year to 31 December 2015
Year to 31 December 2014
PBT
£’000
6,461
(873)
(108)
(343)
5,137
PAT
£’000
5,157
(694)
(89)
(272)
4,102
PBT
£’000
5,533
(126)
14
-
5,421
PAT
£’000
4,301
(98)
39
-
4,242
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 2015 relate to the launch of
new venture Mongoose Sports & Entertainment and April Six’s new operations in Singapore.
4. Exceptional Items
Restructuring costs
Exceptional items affecting reported operating profit
Accelerated amortisation of debt arrangement fees
Exceptional items affecting reported profit before tax
Year to
31 December
2015
£’000
Year to
31 December
2014
£’000
(873)
(873)
-
(873)
-
-
(126)
(126)
Exceptional items represent 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 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. In 2014 the exceptional item related to the
accelerated write off of arrangement fees attached to banking facilities which were replaced by the signing of new banking facilities.
5. Acquisition Adjustments
Movement in fair value of contingent consideration
Amortisation of other intangibles recognised on acquisitions
Acquisition transaction costs expensed
Year to
31 December
2015
£’000
Year to
31 December
2014
£’000
618
(574)
(152)
(108)
701
(436)
(251)
14
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 as detailed in Note 21.
47
marketing group plc 2015 annual report financial statements
6. Net Finance Costs
Interest income:
Interest on bank deposits
Finance costs:
Interest on bank loans and overdrafts
Amortisation of bank debt arrangement fees
Interest on finance leases
Headline finance costs
Headline net finance costs
Accelerated amortisation of debt arrangement fees (Note 4)
Net Finance Costs
7. Profit on Ordinary Activities before Tax
Profit on ordinary activities before taxation is stated after charging:-
Depreciation of owned tangible fixed assets
Depreciation of tangible fixed assets held under finance leases
Amortisation of intangible assets
Operating lease rentals – Land and buildings
Operating lease rentals – Plant and equipment
Operating lease rentals – Other assets
Staff costs (see Note 8)
Auditors’ remuneration
Loss on foreign exchange
Auditor’s remuneration may be analysed by:
Audit of Group’s annual report and financial statements
Audit of subsidiaries
Audit related assurance services
Tax compliance services
Tax advisory services
Corporate Finance
Other non audit services
48
Year to
31 December
2015
£’000
Year to
31 December
2014
£’000
1
34
(391)
(65)
(14)
(470)
(469)
-
(469)
(415)
(159)
(4)
(578)
(544)
(126)
(670)
Year to
31 December
2015
£’000
Year to
31 December
2014
£’000
1,476
72
574
2,090
292
129
1,375
4
436
1,897
330
188
41,004
37,046
224
43
36
126
4
21
2
35
-
224
186
6
35
103
4
18
-
23
3
186
marketing group plc 2015 annual report financial statements
8. Employee Information
The average number of Directors and staff employed by the Group during the year analysed by segment, was as follows:
Branding, Advertising & Digital
Media
Events and Learning
Public Relations
Central
The aggregate employee costs of these persons were as follows:
Wages and salaries
Social security costs
Pension costs
Share based payment expense
Year to
31 December
2015
Year to
31 December
2014
760
43
64
98
4
969
671
36
74
67
4
852
Year to
31 December
2015
£’000
Year to
31 December
2014
£’000
35,697
3,645
1,628
34
41,004
32,355
3,504
1,142
45
37,046
The Group operates twenty one defined contributions pension schemes. The pension cost charge for the year represents
contributions payable by the Group to the schemes. At the end of the financial year outstanding contributions amounted to £95,000
(2014: £91,000).
49
marketing group plc 2015 annual report financial statements
8. Employee Information (cont.)
Directors’ Remuneration
Directors’ remuneration and other benefits for the year were as follows (all amounts in £s):
Salary /
Fees
Performance-
related
payments
Benefits
Pension
Gain on
exercise
of share
options*
Total
31
December
2015
Total
31
December
2014
135,734
144,810
136,250
133,200
116,835
8,751
151,146
129,020
61,389
143,750
162,500
-
-
50,000
25,000
-
-
44,000
20,000
-
-
52,000
6,266
2,297
-
328
15,875
-
20,600
42,800
2,405
4,353
3,070
9,750
22,002
7,263
-
159,013
169,109
-
10,029
196,279
33,275
10,867
-
4,150
4,150
-
195,953
147,727
8,751
216,223
179,928
149,570
196,719
147,977
-
14,758
10,375
240,879
199,909
-
46,153
13,125
2,000
4,150
4,150
2,075
4,150
195,970
149,970
114,097
126,999
163,303
223,720
181,347
219,997
37,500
-
-
-
-
37,500
37,500
1,360,885
191,000
97,994
151,930
50,492
1,852,301
1,806,139
Current Directors
Dylan Bogg
James Clifton
Robert Day
Peter Fitzwilliam
Chris Goodwin
Julian Hanson-Smith (Note 2)
(from 1 October 2015)
Giles Lee
David Morgan
Chris Morris (Note 3)
Sue Mullen
Fiona Shepherd
Former Directors
Stephen Boyd (Note 4)
(to 31 December 2015)
Notes:
* The gain on exercise of share options is calculated as the difference between the market price of the shares on the date of exercise
and the price paid for the shares.
1. Dylan Bogg, James Clifton, Robert Day, Chris Goodwin, Giles Lee, Sue Mullen and Fiona Shepherd were paid £12,500 as TMMG plc
Directors, with the balance of their remuneration paid as Directors and employees of subsidiary companies for services rendered
there.
2. Julian Hanson-Smith was paid £1,875 as a TMMG plc Director during the year. In addition he was paid £6,876 for his services
through a consultancy practice owned by him, HS Consultancy Services.
3. Chris Morris was paid £65,542 as a TMMG plc Director during the year (2014: £42,500). In addition, he was paid for his consulting
services through a consultancy practice owned by him, Morris Marketing Consultancy.
4. Stephen Boyd was paid £7,500 as a TMMG plc Director during the year (2014: £7,500). In addition he was paid £30,000 for his
services through Stephen Boyd Ltd, a company controlled by him.
50
marketing group plc 2015 annual report financial statements
9. Taxation
Current tax:-
UK corporation tax at 20.25% (2014: 21.5%)
Adjustment for prior periods
Foreign tax on profits of the period
Deferred tax:-
Current year reversing/(originating) temporary differences
Adjustment for prior periods
Foreign deferred tax on overseas subsidiaries
Tax charge for the year
Factors affecting the tax charge for the current year:
Year to
31 December
2015
£’000
Year to
31 December
2014
£’000
907
(49)
289
1,147
(64)
(52)
4
1,035
1,120
(13)
51
1,158
21
-
-
1,179
The tax assessed for the year is marginally lower (2014: higher) than the standard rate of corporation tax in the UK. The differences are:
Profit before taxation
Profit on ordinary activities before tax at the standard rate of corporation
tax of 20.25% (2014: 21.5%)
Effect of:
Non-deductible expenses / income not taxable
Timing differences relating to deductibility of share options
Movement in fair value of contingent consideration, not taxable
Adjustments to prior periods
Higher tax rates on overseas earnings
Depreciation in excess of capital allowances
Other differences
Actual tax charge for the year
10. Dividends
Amounts recognised as distributions to equity holders in the year:
Interim dividend of 0.30 pence (2014: 0.25 pence) per share
Final dividend of 0.85 pence (2014: 0.75 pence) per share
Year to
31 December
2015
£’000
Year to
31 December
2014
£’000
5,137
1,040
121
(23)
(125)
(101)
81
32
10
1,035
5,421
1,165
136
(68)
(151)
(13)
-
100
10
1,179
Year to
31 December
2015
£’000
Year to
31 December
2014
£’000
247
701
948
205
566
771
A final dividend of 0.9 pence per share is to be paid in July 2016. In accordance with IFRS this final dividend will be recognised in the
2016 accounts, should it be approved by shareholders at the AGM.
51
marketing group plc 2015 annual report financial statements
11. 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.
Earnings
Reported profit for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
Headline earnings (Note 3)
Attributable to:
Equity holders of the parent
Non-controlling interests
Number of shares
Year to
31 December
2015
£’000
Year to
31 December
2014
£’000
4,102
4,242
4,011
91
4,102
5,157
5,066
91
5,157
4,197
45
4,242
4,301
4,256
45
4,301
Weighted average number of Ordinary shares for the purpose of basic earnings per share
82,479,427
77,333,357
Dilutive effect of securities:
Employee share options
Bank warrants
3,269,681
-
3,711,804
1,927,758
Weighted average number of Ordinary shares for the purpose of diluted earnings per share
85,749,108
82,972,919
Reported basis:
Basic earnings per share (pence)
Diluted earnings per share (pence)
Headline basis:
Basic earnings per share (pence)
Diluted earnings per share (pence)
4.86
4.68
6.14
5.91
5.43
5.06
5.50
5.13
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.
52
marketing group plc 2015 annual report financial statements
12. Intangible Assets
Goodwill
Cost
At 1 January
Recognised on acquisition of subsidiaries
Adjustment to consideration
At 31 December
Impairment adjustment
At 1 January
Impairment during the year
At 31 December
Net book value at 31 December
Year to
31 December
2015
£’000
Year to
31 December
2014
£’000
79,326
4,315
(35)
83,606
4,273
-
4,273
79,333
75,278
4,048
-
79,326
4,273
-
4,273
75,053
In accordance with the Group’s accounting policies, an annual impairment test is applied to the carrying value of goodwill. The review
performed assesses whether the carrying value of goodwill is supported by the net present value of projected cash flows derived from
the underlying assets for each cash-generating unit (“CGU”). The initial projection period of three years includes the annual budget
for each CGU, based on insight into Clients’ planned marketing expenditure and targets for net new business growth derived from
historical experience, and extrapolations of the budget in subsequent years based on known factors and estimated trends. The key
assumptions used by each CGU concern revenue growth and staffing levels and different assumptions are made by different CGUs
based on their individual circumstances. After the initial projection period, an annual growth rate of 2.5% was assumed for all units
and the resulting pre-tax cash flow forecasts were discounted using the Group’s estimated pre-tax weighted average cost of capital,
which is 8.0%. For all CGUs, the Directors assessed the sensitivity of the impairment test results to changes in key assumptions (in
particular expectations of future growth) and concluded that a reasonably possible change to the key assumptions would not cause
the carrying value of goodwill to exceed the net present value of its projected cash flows.
Goodwill arose from the acquisition of the following subsidiary companies and trade assets and is comprised of the following
substantial components:
April Six Ltd
Big Communications Ltd*
Big Dog Agency Ltd*
Bray Leino Ltd
Chapter Agency Ltd
Fox Murphy Ltd (trading as balloon dog)*
Proof Communication Ltd
Speed Communications Agency Ltd
RLA Group Ltd
Solaris Healthcare Network Ltd
Splash Interactive Pte. Ltd
Story UK Ltd
The Weather Digital and Print Communications Ltd
ThinkBDW Ltd
Other smaller acquisitions
31 December
2015
£’000
31 December
2014
£’000
9,411
-
9,639
27,761
3,440
-
576
3,686
6,572
1,058
2,356
6,969
547
6,283
1,035
79,333
9,411
8,125
-
27,761
-
1,514
576
3,686
6,572
1,058
2,391
6,969
-
6,283
707
75,053
*In 2015, Fox Murphy Ltd was renamed Big Dog Agency Ltd and the business of Big Communications Ltd was transferred across into
this entity. The goodwill of both Fox Murphy Ltd and Big Communications Ltd has therefore been combined in Big Dog Agency Ltd.
53
marketing group plc 2015 annual report financial statements
12. Intangible Assets (cont.)
Other intangible assets
Cost
At 1 January
Additions
At 31 December
Amortisation and impairment
At 1 January
Amortisation charge for the year
Impairment charge for the year
At 31 December
Net book value
Year to
31 December
2015
£’000
Year to
31 December
2014
£’000
3,381
1,220
4,601
1,258
574
-
1,832
2,769
2,079
1,302
3,381
559
436
263
1,258
2,123
Additions of £1,220,000 in the year include Client relationships and trade names acquired relating to the Chapter acquisition, all of
which are being amortised over finite useful lives (2014: £1,302,000 includes Client relationships and trade names acquired relating to
the Proof, Speed and Splash acquisitions, of which £346,000 relates to trade names deemed to have an indefinite useful life).
Included within the value of intangible assets is an amount of £649,000 (2014: £649,000) relating to trade names of businesses
acquired, which are deemed to have indefinite useful lives. These trade names have attained recognition in the market place and
the companies acquired will continue to operate under the relevant trade names, which will play a role in developing and sustaining
customer relationships for the foreseeable future. As such, it is the Directors’ judgement that the useful life of these trade names is
considered to be indefinite.
13. Subsidiaries
The Group’s principal trading subsidiaries are listed below. All subsidiaries are 100% owned and all are incorporated in the United
Kingdom, except for Splash Interactive Pte. Ltd, which is 70% owned and incorporated in Singapore. A list of all other Group companies
at 31 December 2015 can be found in Note 35 to the Company Financial Statements.
Subsidiary undertaking
Nature of business
April Six Ltd
Marketing communications, specialising in the technology sector
Big Dog Agency Ltd
Marketing communications
Bray Leino Ltd
Advertising, media buying, digital marketing, events and training
Chapter Agency Ltd
Marketing communications
Proof Communication Ltd *
Public relations, specialising in science, engineering and technology
Speed Communications Agency Ltd Public relations
RLA Group Ltd
Marketing communications
Solaris Healthcare Network Ltd
Marketing communications, specialising in the medical sector
Splash Interactive Pte. Ltd *
Digital marketing
Story UK Ltd
ThinkBDW Ltd
Brand development and creative direct communication
Property marketing, providing advertising, media, brochures, signage, exhibitions,
CGI, animation, intranet, photography
* All subsidiaries are held directly by The Mission Marketing Group plc except where indicated by an asterisk.
54
marketing group plc 2015 annual report financial statements
14. Property, Plant and Equipment
Short leasehold
property
Fixtures & fittings &
office equipment
Computer
equipment
Motor
vehicles
Total
£’000
£’000
£’000
£’000
£’000
Cost or valuation
At 1 January 2014
Acquisition of subsidiaries
Additions
Disposals
At 31 December 2014
Reclassification
Acquisition of subsidiaries
Additions
Disposals
At 31 December 2015
Depreciation
At 1 January 2014
Acquisition of subsidiaries
Charge for the year
Disposals
At 31 December 2014
Reclassification
Acquisition of subsidiaries
Charge for the year
Disposals
At 31 December 2015
Net book value at 31 December 2015
Net book value at 31 December 2014
1,674
16
369
(72)
1,987
220
14
58
-
2,279
1,207
3
112
(61)
1,261
17
4
159
-
1,441
838
726
3,575
251
983
(513)
4,296
(220)
54
824
(344)
4,610
2,124
182
489
(503)
2,292
(17)
40
544
(270)
2,589
2,021
2,004
4,560
240
10,049
359
813
(1,344)
4,388
-
64
826
(275)
5,003
3,098
316
735
(1,344)
2,805
-
22
820
(272)
3,375
1,628
1,583
-
21
(52)
209
-
10
10
(33)
196
141
-
43
(28)
156
-
6
25
(30)
157
39
53
626
2,186
(1,981)
10,880
-
142
1,718
(652)
12,088
6,570
501
1,379
(1,936)
6,514
-
72
1,548
(572)
7,562
4,526
4,366
The net book amount includes £416,000 (2014: £18,000) in respect of assets held under finance lease agreements. The depreciation
charged to the financial statements in the year in respect of such assets amounted to £72,000 (2014: £4,000).
55
marketing group plc 2015 annual report financial statements
15. Investments in Associates
Cost
At 1 January
Additions
At 31 December
Year to
31 December
2015
£’000
Year to
31 December
2014
£’000
-
350
350
-
-
-
Towards the end of 2015 The Mission acquired a 25% shareholding in Watchable Limited, a film and video content company, based
in London.
16. Trade and Other Receivables
Gross trade receivables
Less: Provision for doubtful debts
Other receivables
Prepayments
Accrued income
Year to
31 December
2015
£’000
Year to
31 December
2014
£’000
23,661
(201)
23,460
718
1,257
5,912
31,347
19,073
(133)
18,940
689
1,568
4,662
25,859
An allowance has been made for estimated irrecoverable amounts from the provision of services of £201,000 (2014: £133,000). The
Directors consider that the carrying amount of trade and other receivables approximates their fair value.
Credit risk
The Group’s principal financial assets are bank balances and cash, trade and other receivables and investments, which represent the
Group’s maximum exposure to credit risk in relation to financial assets.
The Group’s credit risk is primarily attributable to its trade receivables. In order to mitigate this risk, the Group has arranged credit
insurance on certain of its trade receivables as deemed appropriate. Where credit insurance is not considered cost effective, the
Group monitors credit-worthiness closely and mitigates risk, where appropriate, through payment plans.
The credit risk on cash balances is limited because the counterparties are banks with high credit-ratings assigned by international
credit-rating agencies.
17. Cash and Short Term Deposits
Cash and short term deposits comprise cash held by the Group and short term bank deposits.
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marketing group plc 2015 annual report financial statements
18. Trade and Other Payables
Trade creditors
Finance leases
Other creditors
Other tax and social security payable
31 December
2015
£’000
31 December
2014
£’000
9,999
91
244
3,698
14,032
9,258
12
439
3,276
12,985
Trade and other creditors principally comprise amounts outstanding for trade purchases and on-going costs. The Directors consider
that the carrying amount of trade payables approximates their fair value.
19. Bank Overdrafts, Loans and Net Debt
Bank loan outstanding
Unamortised bank debt arrangement fees
Carrying value of loan outstanding
Less: Cash and short term deposits
Net bank debt
The borrowings are repayable as follows:
Less than one year
In one to two years
In more than two years but less than three years
In more than three years but less than four years
Unamortised bank debt arrangement fees
Less: Amount due for settlement within 12 months (shown under current liabilities)
Amount due for settlement after 12 months
31 December
2015
£’000
31 December
2014
£’000
12,875
(165)
12,710
(1,784)
10,926
1,500
2,250
2,500
6,625
12,875
(165)
12,710
(1,500)
11,210
11,000
-
11,000
(1,549)
9,451
11,000
-
-
11,000
-
11,000
(11,000)
-
Bank debt arrangement fees, where they can be amortised over the life of the loan facility, are included in finance costs.
The unamortised portion is reported as a reduction in bank loans outstanding.
At 31 December 2015, the Group had a term loan facility of £6.9m due for repayment by February 2019 on a quarterly basis, and a
revolving credit facility of up to £7.0m (£6.0m drawn at 31 December 2015), expiring on 3 February 2019.
Interest on both the term loan and revolving credit facilities is based on 3 month LIBOR plus 2.25%, payable in cash on loan rollover dates.
In addition to its committed facilities, the Group had available an overdraft facility of up to £3.0m with interest payable by reference to
National Westminster Bank plc Base Rate plus 2.5%.
At 31 December 2015, there was a cross guarantee structure in place with the Group’s bankers by means of a fixed and floating charge
over all of the assets of the Group companies in favour of Royal Bank of Scotland plc.
All borrowings are in sterling.
57
marketing group plc 2015 annual report financial statements
20. Obligations under Finance Leases
Obligations under finance leases are as follows:
In one year or less
Between two and five years
31 December
2015
£’000
31 December
2014
£’000
91
298
389
12
11
23
Assets held under finance leases consist of office equipment. The fair values of the Group’s lease obligations approximate their
carrying amount.
The Group’s obligations under finance leases are secured by the lessor’s charge over the leased assets.
21. Acquisitions
21.1 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 contingent consideration payments that may be due is as follows:
Less than one year
Between one and two years
In more than two years but less than three years
In more than three years but less than four years
In more than four years but less than five years
In more than five years
31 December 2015
31 December 2014
Cash
£’000
2,902
2,009
1,715
710
520
-
Shares
£’000
301
-
-
-
-
-
Total
£’000
3,203
2,009
1,715
710
520
-
Cash
£’000
1,219
1,368
1,113
277
548
547
Shares
£’000
-
40
-
-
-
-
Total
£’000
1,219
1,408
1,113
277
548
547
7,856
301
8,157
5,072
40
5,112
21.2 Acquisition of Chapter Agency Ltd
On 26 November 2015, the Group acquired the whole issued share capital of Chapter Agency Ltd (“Chapter”), a full service marketing
communications agency. The fair value of the consideration given for the acquisition was £5,394,000, comprising initial cash
consideration and deferred contingent cash and share consideration. Costs relating to the acquisition amounted to £19,000 and
were expensed.
Maximum contingent consideration of £3,700,000 is dependent on Chapter achieving a profit target over the period 1 January 2015
to 31 December 2018. The Group has provided for contingent consideration of £3,630,000 to date.
The fair value of the net identifiable assets acquired was £978,000 resulting in goodwill and other intangible assets of £4,416,000.
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.
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marketing group plc 2015 annual report financial statements
21. Acquisitions (cont.)
Net assets acquired:
Fixed assets
Stock and work in progress
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Deferred tax liability
Other intangibles recognised at acquisition
Deferred tax liability adjustment
Goodwill
Total consideration
Satisfied by:
Cash
Deferred initial consideration
Deferred contingent consideration
Book
value
£’000
51
6
1,202
1,122
(1,396)
(7)
978
-
-
978
Fair value
adjustments
£’000
-
-
-
-
-
-
-
1,220
(244)
1,220
Fair
value
£’000
51
6
1,202
1,122
(1,396)
(7)
978
1,220
(244)
1,954
3,440
5,394
1,550
214
3,630
5,394
Chapter contributed turnover of £385,000, operating income of £256,000 and headline operating profit of £112,000 to the results
of the Group since acquisition.
21.3 Acquisition of The Weather Digital and Print Communications Ltd
On 13 February 2015, the Group acquired the whole issued share capital of The Weather Digital and Print Communications Ltd
(“The Weather”), one of Scotland’s leading full service digital agencies. The fair value of the consideration given for the acquisition was
£688,000, comprising initial cash and share consideration and deferred contingent cash and share consideration. 210,136 ordinary
shares were issued as part of the initial consideration. Costs relating to the acquisition amounted to £19,000 and were expensed.
Maximum contingent consideration of £540,000 is dependent on The Weather achieving various profit targets over the period
November 2014 to December 2015. The Group has provided for contingent consideration of £315,000.
The fair value of the net identifiable assets acquired was £141,000 resulting in goodwill and other intangible assets of £547,000.
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 and concluded that the value of the business lies in its workforce and as such no other
intangible assets were acquired. The goodwill arising on the acquisition is attributable to the anticipated profitability of the Company.
59
marketing group plc 2015 annual report financial statements
21. Acquisitions (cont.)
Net assets acquired:
Fixed assets
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Goodwill
Total consideration
Satisfied by:
Cash
Shares
Deferred initial consideration
Deferred contingent consideration
Book
value
£’000
10
145
253
(267)
141
Fair value
adjustments
£’000
Fair
value
£’000
-
-
-
-
-
10
145
253
(267)
141
547
688
255
85
33
315
688
Weather contributed turnover of £782,000, operating income of £722,000 and a headline operating profit of £222,000 to the results
of the Group in 2015.
21.4 Other acquisitions
A total of £272,000 was invested in other acquisitions during the year, comprising initial cash consideration of £99,000 and deferred
contingent consideration of £173,000.
21.5 Pro-forma results including acquisitions
The Directors estimate that the turnover, operating income and headline operating profit of the Group would have been approximately
£136.5m, £63.8m and £7.7m had the Group consolidated the results of Chapter, The Weather and the other smaller acquisitions made
during the year, from the beginning of the year.
60
marketing group plc 2015 annual report financial statements
22. Financial Commitments
Operating lease commitments
As at 31 December the Group had commitments under non-cancellable operating leases as follows:
31 December 2015
31 December 2014
Land and
buildings
£’000
1,996
5,297
561
7,854
Other
£’000
465
434
1
900
Land and
buildings
£’000
1,435
2,936
740
5,111
Other
£’000
415
519
70
1,004
31 December
2015
£’000
31 December
2014
£’000
Within one year
Between two and five years
After more than 5 years
23. Share Capital
Allotted and called up:
83,608,331 Ordinary shares of 10p each (2014: 83,398,195 Ordinary shares of 10p each)
8,361
8,340
Options
The Group has the following options in issue:
TMMG Long Term Incentive Plan
3,466,400
1,015,000
(1,200,627)
(297,273)
2,983,500
At start of year
Granted
Waived/lapsed
Exercised
At end of year
The TMMG Long Term Incentive Plan (“LTIP”) was created to incentivise senior employees across the Group. Nil cost options are
awarded at the discretion of the Remuneration Committee of the Board and vest three years later only if the profit performance of the
Group in the intervening period is sufficient to meet predetermined criteria (always subject to Remuneration Committee discretion).
During the year, 297,273 of these options were exercised at a weighted average share price of 41.8p and at the end of the year none
of the outstanding options are exercisable.
Shares held in an Employee Benefit Trust (see Note 24) will be used to satisfy share options exercised under The Mission Marketing
Group Long Term Incentive Plan.
61
marketing group plc 2015 annual report financial statements
24. Own Shares
At 31 December 2013
Own shares purchased during the year
Awarded to employees during the year
At 31 December 2014
Own shares purchased during the year
Awarded to employees during the year
At 31 December 2015
No. of shares
£’000
1,315,595
155,644
(560,255)
910,984
551,373
(183,433)
1,278,924
462
58
(260)
260
317
(122)
455
Shares are held in an Employee Benefit Trust to meet certain requirements of The Mission Marketing Group Long Term Incentive Plan.
25. Share Option Reserve
The share option reserve represents charges to the profit or loss required by IFRS 2 to reflect the cost of the options issued to the
Directors and employees.
26. Share-Based Payments
Options
Fair value on grant date is measured by use of a Black Scholes model. The valuation methodology is applied at each year end and the
valuation revised to take account of any changes in estimate of the likely number of shares expected to vest. Details of the relevant
option schemes are given in Note 23. The key inputs are:
Share price
Risk free rate
Dividend yield
2015
44.0p
0.7%
2.4%
2014
47.75p
1.5%
1.0%
Volatility is based on the historical volatility of the share price over a 3 year trading period although, for nil-cost options issued under
the Group’s Long Term Incentive Scheme, volatility does not impact the calculation of fair value. The weighted average share price
over the three years ending 31 December 2015 was 36.6p.
The Group recognised an expense of £34,000 in 2015 (2014: £45,000).
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marketing group plc 2015 annual report financial statements
27. Financial Assets and Liabilities
Capital management
The Group defines “capital” as being debt plus equity. Net bank debt comprises short and long term borrowings net of cash,
cash equivalents and the unamortised balance of bank renegotiation fees as analysed in Note 19. In addition, the Group treats its
commitment to future consideration payments under acquisition agreements as another component of debt. Equity comprises
issued share capital, reserves and retained earnings as disclosed in the Balance Sheet and in the Consolidated Statement of Changes
in Equity.
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern and maintain an
appropriate capital structure to balance the needs of the Group to grow, whilst operating with sufficient headroom within its bank
covenants. The principal measures by which the Directors monitor capital risk are the ratios of net bank debt to EBITDA and total debt
(including both net bank debt and estimated acquisition consideration payable) to EBITDA. (Note that, since acquisition consideration
is dependent on future levels of profitability in the acquired business, which are inevitably uncertain, the Directors calculate this ratio
by reference to the amount of consideration which would be payable if the acquired business were to maintain its current level of
profitability.) The Directors have set targets of remaining below x2 and x2.5 for these ratios respectively.
Financial risk management
The Group’s financial instruments comprise cash and various forms of borrowings. Short-term debtors and creditors have been
excluded.
Substantially all the Group’s activities take place in the United Kingdom, although April Six’s expansion into the US and the acquisition
of Splash in 2014, have started to expand the Group’s exposure to foreign currencies. Where revenue is generated in one currency and
costs are incurred in another, the Group aims to agree pricing at the outset of a piece of work and then hedge its foreign currency
exposure, if considered significant, through the use of forward exchange contracts. There was no material foreign currency exposure
at the year end.
The main purpose of the Group’s use of financial instruments is for day-to-day working capital and as part of the funding for
past acquisitions. The Group’s financial policy and risk management objective is to achieve the best interest rates available whilst
maintaining flexibility and minimising risk. The main risks arising from the Group’s use of financial instruments are interest rate risk
and liquidity risk.
Interest rate risk
The operations of the Group generate cash and it funds acquisitions through a combination of retained profits, equity issues and
borrowings. The Group’s financial liabilities comprise floating rate instruments. The bank loan’s interest rate is reset from time to time
and accordingly is not deemed a fixed rate financial liability.
Interest on both the Group’s revolving credit facility and its term loan is payable by reference to 3 month LIBOR, subject to downward
or upward ratchets depending on certain ratios of debt to EBITDA on a quarterly basis. The Directors have considered again the
relative merits of the use of hedging instruments to limit the exposure to interest rate risk. The interest rate cap taken out in December
2012 which limited the Group’s exposure to 3 month LIBOR to 1.0% matured on 30 June 2015. Given the Group’s very significant
levels of interest cover (ratio of EBITDA to net finance costs), the Directors have decided not to enter into any new hedging instrument
and the cap arrangement was not renewed
Liquidity risk
The Group’s financial instruments include a mixture of short and long-term borrowings. The Group seeks to ensure sufficient liquidity
is available to meet working capital needs and the repayment terms of the Group’s financial instruments as they mature.
Financial assets
Cash at bank maturing in less than one year or on demand
31 December
2015
£’000
1,784
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marketing group plc 2015 annual report financial statements
27. Financial Assets and Liabilities (cont.)
Financial liabilities
Interest analysis:
Subject to floating rates
Subject to fixed rates
Maturity analysis:
One year or less, or on demand
In one to two years
In two to three years
In three to four years
In four to five years
Bank loan
and overdraft
£’000
Finance
leases
£’000
Acquisition
obligations
£’000
12,875
-
12,875
1,500
2,250
2,500
6,625
-
12,875
-
389
389
91
86
89
92
31
389
-
8,157
8,157
3,203
2,009
1,715
710
520
8,157
Total
£’000
12,875
8,546
21,421
4,794
4,345
4,304
7,427
551
21,421
The Group’s bank loans and overdraft facility are floating rate borrowings and all facilities are secured by a fixed and floating charge
over the assets of all Group companies.
The fair value of the Group’s financial assets and liabilities is not considered to be materially different from their book values.
28. Leave Pay Accrual
No liability or expense has been recognised relating to untaken leave for any of the periods presented. The Group has a policy of not
allowing days to be carried forward from one year to the next, unless in exceptional circumstances. In addition, no payment is made
in lieu of untaken leave which is not carried forward. As a result, there is no material liability relating to untaken leave at year end.
29. Post Balance Sheet Events
There have been no material post balance sheet events.
64
marketing group plc 2015 annual report financial statements
30. Related Party Transactions
The Directors consider that the Directors of the Company represent the Group’s key management personnel for the purposes of
disclosing related party transactions. Directors’ remuneration is disclosed in detail in Note 8. The total compensation payable to key
management personnel is detailed below.
Short-term employee benefits
Post-employment benefits
Share based payments
Year to
31 December
2015
£’000
Year to
31 December
2014
£’000
1,650
152
50
1,852
1,582
90
134
1,806
Bray Leino Ltd rents property from entities under the control of Mr D W Morgan, Chairman of The Mission Marketing Group plc, and
members of his close family. During the year the Company paid annual rental and property fees totalling £158,000 (2014: £158,000).
There were no amounts owed at the balance sheet date to these entities.
ThinkBDW Ltd is contracted to pay annual rent to Robert Day Associates Ltd, a company controlled by Mrs K Day (wife of Robert Day,
Executive Director) and Mrs A Day (wife of Mr A Day, brother of Robert Day, Executive Director). The lease commenced on 2 May 2014
with an amendment in January 2015. Rent payable in the year was £175,000 (2014: £154,315) and was set at market value.
During the year ThinkBDW Ltd rented additional land from Robert Day Associates Ltd on an ad hoc basis at a cost of £20,000 for
storage and a Client demonstration area (2014: Nil). Service charges of £25,000 for the management of the site were also levied
(2014: Nil). ThinkBDW Ltd purchases energy generated by a photovoltaic array owned by Robert Day Associates Ltd at a discounted
commercial rate. The cost to ThinkBDW Ltd of this purchase in 2015 was £10,741.
Big Communications Ltd was contracted to pay annual rent to four individuals, including Dylan Bogg (Executive Director) and Chris
Morris (Non-Executive Director). On 2 March 2015, this lease agreement was assigned to Big Dog Agency Limited. During the year,
total rental of £74,000 (2014: £74,000) was paid.
31. Availability of Annual Report
Copies of the Annual Report for the year ended 31 December 2015 will be circulated to shareholders at least 21 days ahead of the
Annual General Meeting (“AGM”) on 13 June 2016 and, after approval at the AGM, will be delivered to the Registrar of Companies.
Further copies will be available from the Company’s registered office and on the Group’s website, www.themission.co.uk.
65
marketing group plc 2015 annual report financial statements
Independent Auditor’s Report to the Members of The Mission Marketing Group plc
Report on the parent company financial statements
Our opinion
In our opinion the parent company financial statements:
• give a true and fair view of the state of the Company’s affairs as at 31 December 2015;
• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
What we have audited
We have audited the parent company financial statements of The Mission Marketing Group plc for the year ended 31 December 2015 which
comprise the Parent Company Balance Sheet, Statement of Changes in Equity and the related notes. The financial reporting framework
that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted
Accounting Practice), including FRS 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland.
Our responsibilities and those of the Directors for the financial statements and the audit
As explained more fully in the Directors’ Responsibilities Statement set out on page 33 the Directors are responsible for the preparation
of the parent company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and
express an opinion on the parent company financial statements in accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.
This report is made solely to the Company’s shareholders, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the Company’s shareholders those matters we are required
to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s shareholders as a body, for our audit work, for this report, or
for the opinions we have formed.
What an audit of financial statements involves
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material misstatement, whether caused by fraud or error.
This includes an assessment of: whether the accounting policies are appropriate to the parent company’s circumstances and have
been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors;
and the overall presentation of the financial statements.
In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the
audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent
with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements
or inconsistencies we consider the implications for our report.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the parent company financial statements.
Matters on which we are required to report by exception
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received
from branches not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
We have no exceptions to report in respect of any of these matters.
Other matter
We have reported separately on the consolidated financial statements of The Mission Marketing Group plc for the year ended 31
December 2015.
Christopher Hicks BA FCA (Senior Statutory Auditor)
For and on behalf of Francis Clark LLP, Chartered Accountants and Statutory Auditors
Sigma House, Oak View Close, Edginswell Park, Torquay, TQ2 7FF
22 March 2016
66
marketing group plc 2015 annual report financial statements
Company Balance Sheet as at 31 December 2015
NON-CURRENT ASSETS
Intangible assets
Tangible assets
Investments
CURRENT ASSETS
Debtors
Cash at bank
CREDITORS: Amounts falling due within one year
NET CURRENT LIABILITIES
TOTAL ASSETS LESS CURRENT LIABILITIES
CREDITORS: Amounts falling due after more than one year
NET ASSETS
CAPITAL AND RESERVES
Called up share capital
Share premium account
Own shares
Share option reserve
Profit and loss account
SHAREHOLDER’S FUNDS
As at
31 December
2015
As at
31 December
2014
Note
£’000
£’000
33
34
35
36
37
38
41
41
41
25
-
96,925
96,950
2,619
558
3,177
(7,660)
(4,483)
92,467
(14,070)
78,397
8,361
42,268
(455)
298
27,925
78,397
31
3
91,741
91,775
2,313
4
2,317
((16,860)
(14,543)
77,232
(803)
76,429
8,340
42,203
(260)
264
25,882
76,429
The financial statements were approved and authorised for issue on 22 March 2016 by the Board of Directors. They were signed on its
behalf by:
Peter Fitzwilliam
Finance Director
Company registration number: 05733632
67
marketing group plc 2015 annual report financial statements
Company Statement of Changes in Equity for the year ended 31 December 2015
Share
capital
£’000
Share
premium
£’000
Own
shares
£’000
Share option
reserve
£’000
At 1 January 2014
Loss for the year
New shares issued
Credit for share option scheme
Own shares purchased
Shares awarded to employees from
own shares
Settlement of warrants
Loan to Employee Benefit Trust
converted into capital contribution
Transfer from share option reserve
to retained earnings
Dividend paid
7,699
40,288
(462)
-
641
-
1,915
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(184)
386
-
-
-
-
At 31 December 2014
8,340
42,203
(260)
Profit for the year
New shares issued
Credit for share option scheme
Own shares purchased
Shares awarded to employees from
own shares
Dividend paid
-
21
-
-
-
-
-
65
-
-
-
-
-
-
-
(317)
122
-
Retained
earnings
£’000
30,134
(1,925)
-
-
-
(363)
(675)
(912)
Total
equity
£’000
78,273
(1,925)
2,556
45
(184)
23
(675)
(912)
614
-
-
45
-
-
-
-
(395)
(395)
-
-
264
-
-
34
-
-
-
(772)
(772)
25,882
3,111
-
-
-
(120)
76,429
3,111
86
34
(317)
2
(948)
(948)
At 31 December 2015
8,361
42,268
(455)
298
27,925
78,397
68
marketing group plc 2015 annual report financial statements
Notes to the Company Financial Statements
32. Principal Accounting Policies
The principal accounting policies are summarised below. They have all been applied consistently throughout the year and to the
preceding year.
General information and basis of accounting
The Mission Marketing Group plc is a company incorporated in the United Kingdom under the Companies Act. The address of the
registered office is given on page 77. The nature of the Group’s operations and its principal activities are set out in the Strategic Report
on pages 27 to 30.
The financial statements have been prepared under the historical cost convention, modified to include certain items at fair value, and
in accordance with Financial Reporting Standard 102 (FRS 102) issued by the Financial Reporting Council.
No adjustments were required to the prior year financial statements following the adoption of FRS 102 in the current year.
The Mission Marketing Group Plc does not trade as an entity in its own right. The majority of its cash flows are specifically shown
in the consolidated cash flow statement, being investing activities in the form of payments to acquire equity in subsidiaries, and
financing activities in the form of payment of dividends and receipt/(repayment) of bank loans. The only investing activity cash
flow which is not already disclosed in the Consolidated Cash Flow Statement is the receipt by the Company of dividends from its
subsidiaries. The Directors consider that the cost of preparing and presenting a formal cash flow statement when the only additional
information that would be presented relates to intra Group dividends outweighs the benefits to users of the financial statements of
receiving the information.
Going concern
The Company’s available banking facilities provide comfortable levels of headroom against the Company’s projected cash flows and
the Directors accordingly consider that it is appropriate to continue to adopt the going concern basis in preparing these financial
statements.
Deferred taxation
Deferred taxation is recognised on all timing differences where the transactions or event that give the Company an obligation to
pay more tax in the future, or a right to pay less tax in the future, have occurred by the balance sheet date. Deferred tax assets are
recognised when it is more likely than not that they will be recoverable. Deferred tax is measured using rates of tax that have been
enacted or substantively enacted by the balance sheet date.
Property, plant and equipment
Depreciation is provided on all property, plant and equipment at rates calculated to write off the cost, less estimated residual value
based on prices prevailing at the date of acquisition, of each asset evenly over its expected useful economic life, as follows:
Short leasehold property
Period of the lease
Motor vehicles
25% per annum
Fixtures, fittings and office equipment
10-33% per annum
Computer equipment
25-33% per annum
Financial instruments
Financial assets and financial liabilities are recognised when the Company becomes party to the contractual provisions of the
instrument.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An
equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities.
Financial assets and liabilities
All financial assets and liabilities are initially measured at transaction price (including transaction costs), except for those financial
assets classified as fair value through profit and loss, which are initially measured at fair value.
Financial assets and liabilities are only offset in the statement of financial position when, and only when, there exists a legally
enforceable right to set off the recognised amounts and the Company intends either to settle on a net basis, or to realise the asset
and settle the liability simultaneously.
Debt instruments which meet the conditions to be classified as basic instruments are subsequently measured at amortised cost using
the effective interest method.
Basic debt instruments that are classified as payable or receivable within one year are measured at the undiscounted amount of the
cash or other consideration expected to be paid or received, net of impairment.
Financial liabilities are released to the profit and loss account when the liability is extinguished.
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marketing group plc 2015 annual report financial statements
32. Principal Accounting Policies (cont.)
Contingent consideration payments
The terms of an acquisition may provide that the value of the purchase consideration, which may be payable in cash or shares at a
future date, depends on uncertain future events such as the future performance of the acquired company. The amounts recognised
in the financial statements represent a reasonable estimate at the balance sheet date of the amounts expected to be paid and has
been classified in the balance sheet in accordance with the substance of the transaction. Where the agreement gives rise to an
obligation that may be settled by the delivery of a variable number of shares to meet a defined monetary liability, these amounts are
disclosed as debt.
Investments
In the Company’s financial statements, investments in subsidiary and associate undertakings are stated at cost less provision for any
impairment in value.
Accounting estimates and judgements
The Company 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, in order of significance:
Potential impairment of investments
The potential impairment of investments is based on estimates of future cash flows derived from the financial projections of each
cash-generating unit over an initial three year period and assumptions about growth thereafter.
Contingent payments in respect of acquisitions
Contingent consideration, by definition, depends on uncertain future events. At the time of purchasing a business, the Directors use
the financial projections obtained during due diligence as the basis for estimating contingent consideration. Subsequent estimates
benefit from the greater insight gained in the post-acquisition period and the business’ track record of financial performance.
Lease commitments
Rental costs under operating leases are charged against profits as incurred.
Profit of parent company
As permitted under Section 408 of the Companies Act 2006, the profit and loss account of the Company is not presented as part of
these accounts.
33. Intangible Assets
Cost
Accumulated amortisation
Net book value
31 December
2015
£’000
31 December
2014
£’000
61
(36)
25
61
(30)
31
Intangible assets consist of intellectual property rights which are amortised over 10 years. The amortisation charge for the year was
£6,000 (2014: £6,000).
70
34. Tangible Fixed Assets
Cost
At 1 January 2015
Additions
Disposals
At 31 December 2015
Depreciation
At 1 January 2015
Charge for the year
Disposals
At 31 December 2015
Net book value at 31 December 2015
Net book value at 31 December 2014
35. Investments
Cost
At 1 January 2014
Additions
Adjustment to purchase consideration
At 31 December 2014
Additions
Adjustment to purchase consideration
At 31 December 2015
Impairment
At 1 January 2014
Impairment
At 31 December 2014
Impairment
At 31 December 2015
Net book amount at 31 December 2015
Net book amount at 31 December 2014
marketing group plc 2015 annual report financial statements
Fixtures & fittings
£’000
Office equipment
£’000
Total
£’000
36
-
(35)
1
33
-
(32)
1
-
3
94
-
(93)
1
91
-
(90)
1
-
3
Shares in subsidiary
undertakings
£’000
100,394
745
(955)
100,184
5,768
(584)
105,368
(4,443)
(4,000)
(8,443)
-
(8,443)
96,925
91,741
58
-
(58)
-
58
-
(58)
-
-
-
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marketing group plc 2015 annual report financial statements
35. Investments (cont.)
A list of the principal trading companies in the Group at 31 December 2015 can be found in Note 13 to the Consolidated Financial
Statements. Below is a list of all other companies in the Group. All subsidiaries are 100% owned and incorporated in the United
Kingdom unless otherwise indicated. In addition, the Company holds a 25% investment in Watchable Ltd, treated as an associated
company, and 60% in European Exhibit Services SRO, incorporated in the Czech Republic, treated as a joint venture.
Subsidiary undertaking
Country incorporated
USA
Singapore
Malaysia
Singapore
April Six Inc. *
April Six Pte. Ltd *
Balloon Dog Ltd *
Bell and Watson Ltd *
Big Communications Ltd
Brandon Hill Communications Ltd *
Bray Leino Sdn. Bhd. **
Bray Leino Singapore Pte. Ltd *
Destination CMS Ltd * (50% owned)
Friars 573 Ltd
Fox Murphy Ltd *
Fuse Digital Ltd
Gingernut Creative Ltd *
Jellyfish Ltd *
Mission Studios Ltd *
Mongoose Sports & Entertainment Ltd (75% owned)
Quorum Advertising Ltd *
Robson Brown Ltd
Splash Interactive Ltd **
Splash Interactive Company Ltd **
Splash Interactive Ltd **
Splash Interactive Sdn. Bhd. **
The Weather Digital and Print Communications Ltd *
China
Vietnam
Hong Kong
Malaysia
* All subsidiaries are held directly by The Mission Marketing Group plc except where indicated by an asterisk.
** These subsidiaries are 100% owned by Splash Interactive Pte. Ltd, which is 70% owned by The Mission Marketing Group plc.
36. Debtors
Amounts due from subsidiary undertakings
Corporation tax
Prepayments
Other debtors
31 December
2015
£’000
31 December
2014
£’000
2,099
415
58
47
2,619
1,631
526
60
96
2,313
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marketing group plc 2015 annual report financial statements
37. Creditors: Amounts Falling Due Within One Year
Bank overdraft
Amounts due to subsidiary undertakings
Accruals
Acquisition obligations (see Note 40)
Bank loan (see Note 39)
Other creditors
38. Creditors: Amounts Falling Due After More Than One Year
Bank loan (see Note 39)
Acquisition obligations (see Note 40)
39. Borrowings
Bank loan outstanding
Adjustment to amortised cost
Carrying value of loan outstanding
The borrowings are repayable as follows:
Less than one year
In one to two years
In more than two years but less than three years
In more than three years but less than four years
Adjustment to amortised cost
Less: Amount due for settlement within 12 months (shown under current liabilities)
Amount due for settlement after 12 months
31 December
2015
£’000
31 December
2014
£’000
-
4,489
193
1,399
1,500
79
7,660
818
4,468
256
249
11,000
69
16,860
31 December
2015
£’000
31 December
2014
£’000
11,210
2,860
14,070
-
803
803
31 December
2015
£’000
31 December
2014
£’000
12,875
(165)
12,710
1,500
2,250
2,500
6,625
12,875
(165)
12,710
(1,500)
11,210
11,000
-
11,000
11,000
-
-
11,000
-
11,000
(11,000)
-
Details of the Company’s borrowing facilities and interest rates are set out in Note 19 and not therefore repeated here. All borrowings
are in sterling.
As at 31 December 2015, net assets of the Group were £73,365,000 (2014: £70,384,000) and net borrowings under this Group
arrangement amounted to £10,926,000 (2014: £9,451,000).
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marketing group plc 2015 annual report financial statements
40. 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 are as follows:
Less than one year
Between one and two years
In more than two years but less than three years
In more than three years but less than four years
41. Share Capital and Own Shares
Cash
£’000
1,184
1,340
1,331
189
4,044
Shares
£’000
215
-
-
-
215
Total
£’000
1,399
1,340
1,331
189
4,259
The movements on these items are disclosed within the consolidated financial statements.
A description of Own Shares is disclosed in Note 24. During the year, the Company issued 210,136 Ordinary shares of 10p each and
at 31 December 2015 the number of shares in issue was 83,608,331 (2014: 83,398,195).
42. Operating Lease Commitments
As at 31 December the Company had commitments under non-cancellable operating leases as follows:
Within one year
Between two and five years
After more than 5 years
43. Related party transactions
31 December 2015
Land and buildings
£’000
31 December 2014
Land and buildings
£’000
210
805
-
1,015
-
-
-
-
Details of related party transactions are disclosed in Note 30 of the consolidated financial statements.
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marketing group plc 2015 annual report notice of annual general meeting
notice of annual
general meeting
NOTICE is hereby given that the Annual General Meeting of
The Mission Marketing Group plc (the “Company”) will be held
at 12 noon on Monday 13 June 2016 at the offices of finnCap
Limited, 60 New Broad Street, London, EC2M 1JJ to transact
the following business:
The following resolutions will be proposed as
ordinary resolutions:
Report and Accounts
1. To receive the financial statements and the reports of
the Directors and the auditors for the year ended 31
December 2015.
Dividend
2. To approve a final dividend of 0.9 pence per share for
the year ended 31 December 2015 to shareholders on
the register at the close of business on 8 July 2016.
Directors
3. To elect Julian Hanson-Smith as a Director.
4. To elect Mike Rose as a Director.
5. To re-elect Dylan Bogg as a Director.
6. To re-elect James Clifton as a Director.
7. To re-elect Robert Day as a Director.
8. To re-elect Giles Lee as a Director.
9. To re-elect David Morgan as a Director.
10. To re-elect Chris Morris as a Director.
11. To re-elect Sue Mullen as a Director.
12. To re-elect Fiona Shepherd as a Director
Auditors
13. To re-appoint Francis Clark LLP as auditors of the Company.
14. To authorise the Directors to fix the remuneration of
Francis Clark LLP.
Authority to allot shares
15. THAT the Directors be and are hereby generally and
unconditionally authorised pursuant to Section 551 of the
Companies Act 2006 (the “Act”) to exercise all the powers
75
of the Company to allot shares in the Company and to
grant rights to subscribe for, or to convert any security
into, shares in the Company up to an aggregate nominal
value of £2,786,944 being 33% of the issued share capital
of the Company, provided that this authority shall expire at
the conclusion of the next Annual General Meeting of the
Company after the passing of this resolution, save that the
Company shall be entitled to make an offer or agreement
before the expiry of such authority which would or might
require shares to be allotted or any such rights to be
granted, after such expiry and the Directors shall be entitled
to allot shares or grant any such rights pursuant to any
such offer or agreement as if this authority had not expired
and all unexercised authorities previously granted to the
Directors to allot shares or grant any such rights be and are
hereby revoked provided that the resolution shall not affect
the right of the Directors to allot shares or grant any such
rights in pursuance of any offer or agreement entered into
prior to the date of this resolution.
The following resolutions will be proposed as
special resolutions:
Authority to dis-apply
pre-emption rights
16. THAT (subject to the passing of the resolution numbered
15 above) the Directors be and are hereby empowered
pursuant to Section 570, Section 571 and Section 573 of
the Act to allot equity securities (as defined in Section 560
of the Act) for cash pursuant to the authority conferred by
resolution 15 above as if Section 561 of the Act did not apply
to any such allotment, provided that this power shall be
limited to:
i. the allotment of equity securities in connection with
a rights issue, open offer or other offer of securities in
favour of the holders of ordinary shares on the register
of members at such record date(s) as the Directors
may determine where the equity securities respectively
attributable to the interests of the ordinary shareholders
are proportionate (as nearly as may be) to the respective
numbers of ordinary shares held by them on any such
record date(s), subject to such exclusions or other
arrangements as the Directors may deem necessary
marketing group plc 2015 annual report notice of annual general meeting
or expedient to deal with treasury shares, fractional
entitlements or legal or practical problems arising under
the laws of any overseas territory or the requirements of
any regulatory body or stock exchange or by virtue of
shares being represented by depositary receipts or any
other matter whatever; and
ii. the allotment (other than pursuant to sub-paragraph
(i) above) to any person or persons of equity securities
up to an aggregate nominal value of £836,083.31 being
10% of the issued share capital of the Company.
This power shall expire upon the expiry of the general authority
conferred by resolution 15 above, save that the Company
shall be entitled to make an offer or agreement before the
expiry of such power which would or might require equity
securities to be allotted after such expiry and the Directors
shall be entitled to allot equity securities pursuant to any such
offer or agreement as if the power conferred hereby had not
expired and all unexercised authorities previously granted to the
Directors to allot equity securities be and are hereby revoked
provided that the resolution shall not affect the right of the
Directors to allot equity securities in pursuance of any offer
or agreement entered into prior to the date of this resolution.
Authority to purchase own shares
17. THAT pursuant to section 701 of the Act and subject to, and
in accordance with the Company’s Articles of Association,
the Company be generally and unconditionally authorised
to make market purchases (within the meaning of Section
693(4)of the Act) of ordinary shares of the Company
provided that:
i. the maximum number of ordinary shares hereby
authorised to be acquired is 12,541,249 being 15% of the
issued share capital; and
ii. the minimum price which may be paid for an ordinary
share is the nominal value of such share; and
iii. the maximum price which may be paid for an ordinary
share is an amount equal to 105% of the average of the
middle market quotations for an ordinary share in the
Company as derived from The London Stock Exchange
Daily Official List for the 5 business days immediately
preceding the day on which such ordinary share is
contracted to be purchased; and
iv. the authority hereby conferred shall expire at the
conclusion of the Annual General Meeting of the
Company held in 2017 or 18 months from the date of this
resolution (whichever is earlier); and
v. the Company may make any purchase of its ordinary
shares pursuant to a contract concluded before the
authority hereby conferred expires and which will or
may be executed wholly or partly after the expiry of such
authority; and
vi. all ordinary shares purchased pursuant to the authority
conferred by this resolution 17 shall be cancelled
immediately on completion of the purchase or held in
treasury (provided that the aggregate nominal value of
shares held as treasury shares shall not at any time exceed
10 per cent of the issued share capital of the Company at
any time).
On behalf of the Board
Peter Fitzwilliam
Finance Director
22 March 2016
Note to the Notice of Annual
General Meeting
A member entitled to attend and vote at the Annual General
Meeting may appoint one or more proxies (who need not be
a member of the Company) to attend, speak and vote on his
or her behalf. To appoint as your proxy a person other than
the chairman of the meeting, insert their full name in the box
on the Form of Proxy accompanying the annual report. If you
sign and return the proxy form with no name inserted in the
box, the chairman of the meeting will be deemed to be your
proxy. Where you appoint as your proxy someone other than
the chairman, you are responsible for ensuring that they attend
the meeting and are aware of your voting intentions. If you
wish your proxy to make any commitments on your behalf,
you will need to appoint someone other the chairman, and
give them relevant instructions directly. In order to be valid an
appointment of proxy must be completed, signed and returned
in hard copy form by post, by courier or by hand to Neville
Registrars Limited, Neville House, 18 Laurel Lane, Halesowen,
West Midlands B63 3DA by no later than 48 hours before the
time of the meeting.
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marketing group plc 2015 annual report advisors
advisors
Company Registration Number:
05733632
Registered Office:
36 Percy Street, London, W1T 2DH
Nominated Advisor and Broker:
finnCap Limited, 60 New Broad Street
London, EC2M 1JJ
Auditors:
Solicitors:
Registrars:
Company Secretary:
Bankers:
Francis Clark LLP, Sigma House, Oak View Close
Edginswell Park, Torquay, TQ2 7FF
Lewis Silkin LLP, 5 Chancery Lane, Clifford’s Inn
London, EC4A 1BL
Blake Morgan LLP, Apex Plaza, Forbury Road
Reading, RG1 1AX
Neville Registrars, Neville House, 18 Laurel Lane
Halesowen, West Midlands, B63 3DA
Peter Fitzwilliam, The Mission Marketing Group plc
36 Percy Street, London, W1T 2DH
Royal Bank of Scotland plc, Corporate Banking,
9th Floor, 280 Bishopsgate, London, EC2M 4RB
77
marketing group plc
36 Percy Street, London W1T 2DH
t: +44 (0)207 462 1415
www.themission.co.uk