CHIME COMMUNICATIONS PLC
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30TH JUNE 2007
Chime Communications PLC, the leading marketing services group, today announces its interim results for the six months ended 30th June 2007 and the acquisition of The Corporate Citizenship Company, a leading corporate responsibility consultancy.
* Operating income up 15.9% to £43.9 million (£37.8 million)
- Organic growth of 9.8%
* Operating profit up 21.8% to £7.3 million (£6.0 million)
- Organic growth of 13.6%
* Margin improvement to 16.7% (15.9%)
* Profit before tax up 20.8% to £6.4 million (£5.3 million)
* Earnings per share up 17.2% to 1.70p (1.45p)
* Net debt of £5.2 million compared to net cash at 31st December 2006 of £2.9 million
* Acquisition and integration of Fast Track completed
* Interim dividend increased by 22.2% to 0.22p per share (0.18p)
(Bracketed figures are for 2006 first half year).
Lord Bell, Chairman of Chime Communications, said:
"A very good performance for the half year with all our divisions growing. We have continued to outperform the market since 2004. A strong new business performance across the Group for the half year and a full new business pipeline makes us confident about the outcome for the year".
For further information please contact:
Lord Bell, Chairman 020 7861 8515
Chime Communications
Christopher Satterthwaite, Chief Executive 020 7861 8515
Chime Communications
Charles Cook/Chris Hamilton 020 7861 3232
Bell Pottinger Corporate & Financial
SUMMARY OF RESULTS
Six months to 30th June
Actual
Organic (1)
2007
£m
2006
£m
%
change
2007
£m
2006
£m
% change
Operating income
43.9
37.8
+16%
41.6
37.8
+10%
Operating profit
7.3
6.0
+22%
7.1
6.3
+14%
Operating profit margin
16.7%
15.9%
(1) Excluding acquisitions in 2006 and 2007
The strong performance in 2006 has continued in the first half of 2007 with excellent performance across all three of our divisions. We have outperformed the market since 2004.
Operating income in the first half of 2007 increased by 15.9% to £43.9 million and operating profit increased by 21.8% to £7.3 million, resulting in an operating profit margin increase to 16.7%.
Operating income (excluding acquisitions) rose by 9.8% and operating profit grew by 13.6%.
The Board is proposing an interim dividend of 0.22p per share compared to 0.18p in 2006, an increase of 22.2%.
Net debt at 30th June 2007 was £5.2 million compared to net cash of £2.9 million at 31st December 2006 due to the payment of the cash element (£10 million) of the initial consideration for the acquisition of Fast Track.
REVIEW OF OPERATIONS
In the first half of 2007 all three divisions showed growth well ahead of the marketplace in both operating income and operating profit.
Public Relations remains our largest division being 55% of operating income (2006 - 59%), Advertising and Marketing Services was 36% (2006 - 34%) and Research 9% (2006 - 7%).
Public Relations - Bell Pottinger Group
Six months to 30th June
2007
2006
% change
£m
£m
Operating income
24.2
22.3
+8.3
Operating profit
4.4
3.9
+13.3
Operating margin
18.2%
17.4%
The public relations market continues to grow ahead of other marcoms sectors fuelled by the need for companies to protect and build their reputation both online (including social networking) and offline where the value of good relationships with stakeholders is at an increasing premium. Our Public Relations Division has continued to show strong growth ahead of this marketplace growth.
Operating income for the first half of 2007 increased by 8% to £24.2 million and operating profit increased by 13% to £4.4 million, resulting in an operating profit margin of 18.2%.
The Bell Pottinger Group has once again retained its no. 1 position at the top of the PR Week league table published in April 2007.
New business wins in the first half of 2007 have included :
ABN Amro Hoare Govett
Pilsner Urquell Global
Adobe
Principle Capital
AOL UK
Renewable Energy Group
Cisco
Science Museum
Duchy of Lancaster
The John Templeton Foundation
Dunlop Aerospace
Trafigura
Hamleys
Twinjet
Infinis
World Nuclear Association
MTV
6up
Open Learning Exchange
Advertising and Marketing Services - VCCP Group, Fast Track, Teamspirit and TTA
Six months to 30th June
2007
£m
2006
£m
% change
Operating income
16.0
13.0
+23.2
Operating profit
2.4
1.8
+32.8
Operating profit margin
15.1%
14.0%
These are the first results to include the acquisition of Fast Track (2 months) which has integrated well with the rest of the Group. There are already several opportunities for the cross marketing of business.
Operating income for the first half of 2007 increased by 23% to £16.0 million and operating profit increased by 33% to £2.4 million, resulting in an operating profit margin of 15.1%. Excluding Fast Track operating income grew by 10.9% and operating profit by 11.2%.
New business wins in the first half of 2007 have included :
AEG The 02
Glasgow 2014 Commonwealth Games
British Basketball
Hyundai (below the line)
BUSA
Legal and General
Carbon Trust
Levi Strauss
Comparethemarket.com
Mark Warner
Diageo's Reserve Brands
Met Life
Diet Coke Plus
PruHealth
GE Money
Tanqueray (Diageo)
Research - The Research Group
Six months to 30th June
2007
2006
% change
£m
£m
Operating income
3.7
2.5
+45.7
Operating profit
0.8
0.6
+37.2
Operating profit margin
20.6%
21.9%
These results include Facts International which was acquired in February 2007 and which has enjoyed its best six months' performance ever.
Operating income for the first half of 2007 increased by 46% to £3.7 million and operating profit increased by 37% to £0.8 million. Operating profit margin reduced slightly to 21% owing to continued investment in the business including a new managing director for Opinion Leader.
Excluding Facts International, operating income grew by 18% and operating profit grew by 24%.
The Research Group has continued to show very strong organic growth particularly in the area of deliberative research where it has a market leading position.
New business wins in the first half of 2007 have included :
2012 Olympics (ODA and LOCOG)
Hobsons
Aegon
John Lewis Partnership
Anglian Water
National Trust
Association of British Insurers
Pepsico
Business in the Community
Pernod Ricard
Barrett Developments
Prudential
BSkyB
Scottish Widows
G.E. Money
St James's Place
Hiscox
BUSINESS ACTIVITY
The Group acted for 982 clients in the first half of 2007 compared to 905 in the same period in 2006. 56% of operating income came from clients using more than one of our companies (2006: 49%). This was through 146 shared clients the same as in 2006.
162 clients paid us over £50,000 in the first half of 2007 compared to 134 in the same period in 2006. Our 30 largest clients represented 45% of total operating income (2006 - 43%).
During the first six months of 2007 two of our clients have represented 16.3% of our operating income, 8.2% and 8.1% respectively. Both contracts are high margin long term and have normal renewal periods. One was renewed in the last six months and both clients have retained us since 2003. Confidentiality clauses prevent us giving more detailed information. No other client represents more than 5% of our operating income
Average fee income per client was £45,000 compared to £42,000 in the first half of 2006. Average income per employee in the first half year was £52,000 (2006 - £52,000).
11.8% of our operating income came from digital activity in the first half of 2007 (2006: 9%) and 33% came from international work (international clients and work done overseas) (2006: 32%).
High profile activities where we advised clients included :
* Advising McLaren F1 on its dispute with Ferrari.
* Advising Thaksin Shinawatra on the acquisition of Manchester City and the Thai military junta's attack on his reputation.
* Imperial Tobacco's contested £11 billion offer for Altadis of Spain.
* BAE Systems' £2 billion acquisition of Armor Group in the US.
* Dobbies Garden Centres in their takeover approach from Tesco.
* Bloomsbury Publishing's latest successful Harry Potter book.
* BSkyB's The Bigger Picture, their responsible business campaign and initiative.
* Representing Mark Warner Holidays during the Madeleine McCann crisis.
* Working with Boris Becker as the face of Polo Ralph Lauren for its sponsorship at the Wimbledon tennis tournament.
* The Prince of Wales' May Day Business Summit on Climate Change with Business in the Community, bringing together over 1,000 chief executives and senior directors across England.
* The combination of Highmark Blue Cross Blue Shield with Independence Blue Cross to form the largest health insurance company in the US.
* The highly successful launch of The 02, London's newest and most spectacular entertainment venue.
* The launch of The Carbon Trust's first brand advertising campaign.
* The launch of Four Seasons Ocean Residences, a £500 million, 719 foot luxury vessel with 112 private residences.
BANKING ARRANGEMENTS
The Group generated £3.6 million of cash from trading activities in the first half of 2007 (2006 - £4.3 million). Net debt at 30th June 2007 was £5.2 million compared to net cash at 31st December 2006 of £2.9 million. The outflow of funds was caused principally by the acquisitions of Fast Track and Facts International which had combined cash acquisition costs of £12 million.
The Group continues to operate comfortably within its banking covenants and debt facility of £25 million. This is a three year facility maturing in February 2010.
TAXATION
The effective tax charge for the first half of 2007 was 29.5%. Due to the Chancellor's announcement in the 2007 budget of a future reduction in the corporation tax rate from 30% to 28%, the deferred tax asset in our balance sheet has had to be reflected at the new reduced rate. The reduction in value of the asset has given rise to an additional one-off tax charge in the income statement which is likely to increase the effective tax rate from the previously announced 28.5% to 29.5% for 2007.
DIVIDENDS
The Board is proposing to pay an interim dividend of 0.22p per share (2006 - 0.18p), an increase of 22%. This will be payable on 8th November 2007 to shareholders on the register at 12th October 2007. The ex-dividend date is 10th October 2007.
CORPORATE AND SOCIAL RESPONSIBILITY
The Group has continued to make progress on its environmental practices. We became carbon neutral on 1st January 2007 and have committed to reduce our carbon emissions by 30% by the end of 2007.
We have just published our second corporate responsibility report the major focus of which was our response to growing concerns about climate change. This will be distributed to shareholders with our interim announcement.
CORPORATE DEVELOPMENT
We made two acquisitions in the first half of 2007, Facts International and Fast Track and we are today announcing the acquisition of The Corporate Citizenship Company.
Facts International - 75% of this fieldwork research business was acquired in February 2007. The remaining 25% is held by the new Chairman of Facts International.
Fast Track - The acquisition of the UK's leading sports marketing agency was completed at the end of April 2007. The initial consideration was £15 million payable £10 million in cash and £5 million in Chime shares. Deferred consideration is payable on the average profits for the three years ended 31st December 2009 and the three years ended 31st December 2012. The maximum total consideration (initial and deferred) is £43 million. The transaction (initial and deferred) is based on a multiple of 7 times the average pretax profits. The four main shareholders of Fast Track have warranted pretax profits for the year to 31st December 2007 of £2.5 million.
The Corporate Citizenship Company - We have today announced the acquisition of the Corporate Citizenship Company from David Logan and Mike Tuffrey, the founders of the business, who will continue to run the business. Chime's current Corporate Responsibility business, Smart, will initially work alongside The Corporate Citizenship Company, with Amanda Jordan (Smart), David Logan and Mike Tuffrey leading the combined businesses in the future. Our aim is to bring the two businesses together from January 2008 to become the first port of call for clients who want a full range of services across the corporate responsibility practice both in the UK and globally. Net assets of The Corporate Citizenship Company at 31st March 2007 were £735,000.
Clients of the Corporate Citizenship Company include Unilever, Ford, Deutsche Bank, Cadbury Schweppes, Diageo and B.P.
BOARD AND COMMITTEE COMPOSITION
Rodger Hughes (formerly Managing Partner of PricewaterhouseCoopers UK) was appointed to the Board as a Non-Executive Director on 1st July 2007. He will assume the role of Senior Independent Director on 1st October 2007 when the current Senior Independent Director Julian Seymour steps down. Julian will continue as a Non-Executive Director until the end of the year.
Following this appointment the composition of the Board committees has been changed. Julian Seymour, Rodger Hughes and Catherine Biner Bradley sit on all three committees and Paul Richardson sits on the Audit Committee.
OUTLOOK
The first half of 2007 saw us make further encouraging progress, continuing to achieve the targets we set in our three year plan.
We have had a strong new business performance across the Group and we have a full new business pipeline. In addition we expect the Group to grow strongly in the following areas:
* Digital in which we have continued to make good progress in the first half of 2007.
* International - our Middle East, US and German operations have progressed well in the first half of 2007 and we see very good prospects for further growth.
* High growth sectors in which we see the opportunity for further expansion.
* High growth disciplines which will grow ahead of general market growth, eg. sports marketing and research.
We are confident about the outcome for the year and remain very optimistic about our future prospects.
Consolidated Income Statement
Six months ended 30 June 2007
6 months to
6 months to
12 months to
30 June
30 June
31 December
2007
2006
2006
(unaudited)
(unaudited)
(audited)
£'000
£'000
£'000
Note
CONTINUING OPERATIONS
Turnover
94,810
82,510
164,143
Cost of sales
(50,949)
(44,662)
(86,222)
OPERATING INCOME
43,861
37,848
77,921
Operating expenses
(36,551)
(31,845)
(65,686)
OPERATING PROFIT
7,310
6,003
12,235
Share of results of associates
(104)
(241)
(280)
Investment income
60
62
93
Finance costs
(324)
(256)
(402)
Finance cost of deferred
consideration
(522)
(253)
(612)
PROFIT BEFORE TAX
6,420
5,315
11,034
Tax
(1,894)
(1,660)
(3,147)
PROFIT FOR THE PERIOD FROM
CONTINUING OPERATIONS
4,526
3,655
7,887
DISCONTINUED OPERATIONS
(Loss)/profit for the period from
(27)
42
20
discontinued operations
PROFIT FOR THE PERIOD
4,499
3,697
7,907
Attributable to:
Equity holders of the parent
4,328
3,584
7,647
Minority interest
171
113
260
4,499
3,697
7,907
EARNINGS PER SHARE
2
From continuing operations
Basic
1.72p
1.43p
3.08p
Diluted
1.64p
1.42p
3.02p
From continuing and discontinued
operations
Basic
1.70p
1.45p
3.08p
Diluted
1.63p
1.44p
3.03p
Consolidated Statement of Recognised Income and Expense
Six months ended 30 June 2007
6 months to
6 months to
12 months to
30 June
30 June
31 December
2007
2006
2006
(unaudited)
(unaudited)
(audited)
£'000
£'000
£'000
Gain on revaluation of available for sale
investments
35
-
-
Exchange differences on translation of foreign
subsidiaries
(16)
(36)
(106)
Net expense recognised directly in equity
19
(36)
(106)
Profit for the period
4,499
3,697
7,907
Total recognised income and expense for
the period
4,518
3,661
7,801
Attributable to:
Equity holders of the parent
4,347
3,548
7,541
Minority interest
171
113
260
Total recognised income and expense
relating to the period
4,518
3,661
7,801
Consolidated Balance Sheet as at 30 June 2007
As at
As at
As at
30 June
30 June
31 December
2007
2006
2006
(unaudited)
(unaudited)
(audited)
£'000
£'000
£'000
Non-current assets
Goodwill
103,061
72,956
74,730
Other intangible assets
55
75
10
Property, plant and equipment
3,917
2,681
2,972
Investments in associates
638
680
582
Due from deferred consideration
950
950
950
Available for sale investments
285
-
-
Deferred tax asset
1,650
1,340
1,747
110,556
78,682
80,991
Current assets
Work in progress
2,245
1,141
686
Trade and other receivables
42,134
31,826
30,813
Cash and cash equivalents
5,717
2,642
6,652
50,096
35,609
38,151
Total assets
160,652
114,291
119,142
Current liabilities
Trade and other payables
(53,904)
(41,455)
(37,996)
Current tax liabilities
(2,958)
(2,772)
(2,475)
Obligations under finance leases
(69)
(127)
(109)
Short-term provisions
(13,755)
(2,106)
(2,133)
(70,686)
(46,460)
(42,713)
Net current liabilities
(20,590)
(10,851)
(4,562)
Non-current liabilities
Bank loans
(9,839)
(911)
(2,928)
Long-term provisions
(10,553)
(11,406)
(13,167)
Obligations under finance leases
(20)
(83)
(49)
(20,412)
(12,400)
(16,144)
Total liabilities
(91,098)
(58,860)
(58,857)
Net assets
69,554
55,431
60,285
Equity
Share capital
13,286
12,654
12,684
Share premium account
31,929
26,475
26,594
Own shares
(3,984)
(7,397)
(5,968)
Equity reserve
34,203
32,957
33,764
Revaluation of fair value of available for sale
investment
35
-
-
Translation reserve
(261)
(103)
(245)
Accumulated losses
(6,133)
(9,460)
(6,971)
Equity attributable to equity holders of the
parent
69,075
55,126
59,858
Equity minority interest
479
305
427
Total equity
69,554
55,431
60,285
Consolidated Cash Flow Statement
Six months ended 30 June 2007
6 months to
6 months to
12 months to
30 June
30 June
31 December
2007
2006
2006
(unaudited)
(unaudited)
(audited)
£'000
£'000
£'000
Note
Net cash inflow from operating
activities
4
3,622
4,279
7,694
Investing activities
Interest received
60
62
93
Proceeds on disposal of property, plant
and equipment
7
29
69
Purchases of property, plant and equipment
(566)
(846)
(1,703)
Acquisition of investment in an
associate
-
(51)
-
Disposal of investment in associate
-
-
2,862
Loans granted to associates
(160)
(1)
13
Acquisition of subsidiaries
(9,133)
(334)
(359)
Net proceeds from disposal of subsidiaries
-
2,888
(74)
Net cash (outflow)/inflow from returns on
investment and servicing of finance
(9,792)
1,747
901
Financing activities
Dividend paid
(1,043)
(793)
(1,243)
Dividends paid to minorities
(113)
(92)
(92)
Drawdowns of/(repayments) of borrowing
6,912
(7,574)
(5,557)
Repayment of loan notes
(282)
(530)
(878)
Repayments of obligations under
finance leases
(68)
(81)
(156)
Proceeds on issue of ordinary share capital
292
-
-
Buy back of warrants
-
(800)
(800)
Sale/(purchase) of own shares
(463)
(511)
(214)
Net cash from/(used in) financing
activities
5,235
(10,381)
(8,940)
Net decrease in cash and cash
equivalents
(935)
(4,355)
(345)
Cash and cash equivalents at
beginning of period
6,652
6,997
6,997
Cash and cash equivalents at end
of period
5,717
2,642
6,652
Cash and cash equivalents comprise cash at bank, loan note deposits less overdrafts and taking into account
the following borrowings net (debt)/cash was:
Bank loans
(9,839)
(911)
(2,928)
Finance leases
(89)
(210)
(158)
Loan notes outstanding
(1,009)
(724)
(642)
Overall net (debt)/cash
(5,220)
797
2,924
Notes:
1. Business Segments
For management purposes, the group is organised into three operating divisions - Public Relations, Advertising and Marketing Services and Research. These divisions are the basis on which the group reports its primary segment information.
Principal activities are as follows:
Public Relations
The Public Relations division comprises some of the leading names in the industry, including Bell Pottinger, Good Relations, Harvard, Insight, Resonate, De Facto and The SMART Company. It is the ranked number 1 PR Group in the UK in the PR Week public relations consultancy league table for 2006. It serves more than 600 major UK and international brands, as well as governments, government departments, pharmaceutical and healthcare companies, charities, not-for-profit organisations, professional service firms, consumer brands and famous people
Advertising and Marketing Services ('AMS')
The AMS division is the fastest growing marketing services group in the UK. It possesses specialist skills in advertising and marketing services - direct marketing, digital communication, sponsorship exploitation, point of sale, sales promotion and specialist media planning and buying. It also specialises in the niche markets of property and financial services.
Research
The Research division is made up of Opinion Leader Research, Ledbury Research and Facts International. Opinion Leader Research is one of the UK's leading research consultancies and Ledbury Research provides research and advice to brands who market and sell to high net worth consumers.
The group's operations are located in the United Kingdom, Germany, the Middle East and USA. The group's Advertising and Marketing Services and Research divisions are located solely in the United Kingdom. Public relations is carried out in the United Kingdom, Germany, The Middle East and USA
1. Business segments (continued)
Operating Income
Operating Profit
6 months to
6 months to
12 months to
6 months to
6 months to
12 months to
30 June
30 June
31 December
30 June
30 June
31 December
2007
2006
2006
2007
2006
2006
(unaudited)
(unaudited)
(audited)
(unaudited)
(unaudited)
(audited)
£'000
£'000
£'000
£'000
£'000
£'000
Class of business
Public Relations:
Continuing operations
24,208
22,363
46,952
4,408
3,890
8,233
Advertising and Marketing Services:
Continuing operations
14,364
12,956
26,264
2,022
1,819
3,519
Acquisitions
1,604
-
-
394
-
-
15,968
12,956
26,264
2,416
1,819
3,519
Research:
Continuing operations
2,984
2,529
4,705
687
554
1,021
Acquisitions
701
-
-
73
-
-
3,685
2,529
4,705
760
554
1,021
43,861
37,848
77,921
7,584
6,263
12,773
Chime Central Costs
-
-
-
(274)
(260)
(538)
43,861
37,848
77,921
7,310
6,003
12,235
Operating Margin
6 months to
6 months to
12 months to
30 June
30 June
31 December
2007
2006
2006
(unaudited)
(unaudited)
(audited)
%
%
%
Class of business
Public Relations:
Continuing operations
18.2%
17.4%
17.5%
Advertising and Marketing Services:
Continuing operations
14.1%
14.0%
13.4%
Acquisitions
24.6%
15.1%
14.0%
13.4%
Research:
Continuing operations
23.0%
21.9%
21.7%
Acquisitions
10.4%
20.6%
21.9%
21.7%
17.3%
16.5%
16.4%
Chime Central Costs
Other operating income
16.7%
15.9%
15.7%
2. Earnings per share
From continuing and discontinued operations
The calculation of the basic and diluted earnings per share is based on the following data:
12 months
Six months ended 30 June
31 December
2007
2006
2006
(unaudited)
(unaudited)
(audited)
£'000
£'000
£'000
Earnings
Earnings for the purpose of basic earnings per share being net profit attributable to the equity holders of the parent
4,328
3,584
7,647
Number of shares
Weighted average number of ordinary shares for the purposes of basic earnings per share
253,943,574
247,504,382
247,920,453
Effect of dilutive potential ordinary shares:
Share options and deferred shares
10,923,902
1,227,355
4,390,908
Weighted average number of ordinary shares for the purposes of diluted earnings per share
264,867,476
248,731,737
252,311,361
From continuing operations
12 months
Six months ended 30 June
31 December
2007
2006
2006
(unaudited)
(unaudited)
(audited)
£'000
£'000
£'000
Earnings
Net profit attributable to equity holders of the parent
4,328
3,584
7,647
Adjustments to exclude loss/(profit) for the period from discontinued operations
27
(42)
(20)
Earnings from continuing operations for the purposes of basic earnings per share excluding discontinued operations
4,355
3,542
7,627
The denominators used are the same as those detailed above for both the basic and diluted earnings per share from continuing and discontinued operations.
From discontinued operations
12 months
Six months ended 30 June
31 December
2007
2006
2006
(unaudited)
(unaudited)
(audited)
Basic
(0.01)p
0.02p
-
Diluted
(0.01)p
0.02p
0.01p
The denominators used are the same as those detailed above for both the basic and diluted earnings per share from continuing and discontinued operations.
3. Dividends
12 months
Six months ended 30 June
31 December
2007
2006
2006
(unaudited)
(unaudited)
(audited)
£'000
£'000
£'000
Amounts recognised as distributions to equity holders in the period
(approved):
Interim dividend for the year ended 31 December 2006 of 0.18p (2005: 0.16p) per share
-
-
450
Final dividend for the year ended 31 December 2006 of 0.40p (2005:0.32p) per share
1,043
793
793
1,043
793
1,243
Amounts not recognised as distributions to equity holders in the
Period (declared):
Proposed interim dividend for the year ended 31 December 2007 of 0.22p (2006: 0.18p) per share
580
446
-
Proposed final dividend for the year ended 31 December 2006 of 0.40p per share
-
-
1,001
446
1,001
The proposed interim dividend was approved by the Board on 10 September 2007 and has not been included as a liability as at 30 June 2007. The dividend will be paid on 8 November 2007 to those shareholders on the register at 12 October 2007. The expected ex-dividend date is 10 October 2007.
Under an agreement dated 3 April 1996, The Chime Communications Employee Trust which holds 2,143,455 ordinary shares representing 0.80% of the company's called-up share capital, has agreed to waive all dividends.
4. Notes to the consolidated cash flow statement
6 months to
6 months to
12 months to
30 June
30 June
31 December
2007
2006
2006
(unaudited)
(unaudited)
(audited)
£'000
£'000
£'000
Profit from operations
7,310
6,003
12,235
Adjustments for:
(Loss)/profit from discontinued operation
(39)
60
29
Share based payment expense
518
140
371
Translation differences
(11)
(14)
(76)
Depreciation of property, plant and equipment
617
488
1,026
Amortisation of other intangible assets
9
65
130
(Loss)/gain on disposal of property, plant and
equipment
14
(6)
(1)
Decrease in provisions
(43)
(280)
(328)
Operating cash flows before movements in
working capital
8,375
6,456
13,386
Increase in work in progress
(1,522)
(575)
(121)
Increase in receivables
(7,635)
(7,609)
(6,499)
Increase in payables
6,074
6,939
3,692
Cash generated by operations
5,292
5,211
10,458
Income taxes paid
(1,368)
(700)
(2,306)
Interest paid
(302)
(232)
(458)
Net cash from operating activities
3,622
4,279
7,694
5. Accounting Policies
The consolidated income statement, balance sheet, statement of recognised income and expense and cash flow statement have been prepared on a basis consistent with the financial statements for the year ended 31 December 2006.
The results for the 6 months ended 30 June 2007 are unaudited and do not constitute statutory accounts within the meaning of section 240 of the Companies act 1985. The results for the year ended 31 December 2006 have been extracted from the published Financial Statements which have been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified and did not contain any statement under section 237 of the Companies Act 1985.
The prior period comparatives have been restated to reflect the discontinued operations of Rare Corporate Design. The effect of this change is as follows: Reduction in operating income 6 months to 30 June 2006 £469,000, 12 months to 31 December 2006 £895,000; Reduction in operating profit 6 months to 30 June 2006 £60,000, 12 months to 31 December 2006 £29,000.
6. Acquisition of Fast Track
On 30th April 2007, the Group acquired 100% of the issued share capital of Fast Track Sales Limited. The fair value of the consideration given for the acquisition was £40 million, a further £3 million payable on a separate future acquisition of the minority shareholding in Fast Track Sailing Limited takes the total consideration payable to £43 million. An initial payment of £15 million was satisfied by £10 million in cash from within the Groups banking facility and £5 million provided by the issue to the shareholders of Fast Track Sailing Limited of 10,000,000 new ordinary shares of 5p each at a premium of 45p. Costs relating to the acquisition amounted to £985,000, of which £704,000 had been paid during the period. The new ordinary shares are subject to a restriction on sale following completion.
Contingent consideration of £25 million is dependent on the profitability of Fast Track Sales Limited for the six years to 31 December 2012. The Group has provided for contingent consideration of £12,755,000 to date, this has been discounted to a net present value of £9,677,000, with the resulting discounting charge of £3,078,000 to be taken through the income statement over the period.
The following table sets out the Groups preliminary assessment of the fair values of the liabilities acquired and the goodwill. The fair value of the net liabilities acquired was £(2,039,000), resulting in goodwill of £27,701,000 which has been capitalised as an intangible fixed asset.
Book
value £'000
Fair value adjustments £'000
Fair
value £'000
Net assets acquired:
Tangible assets
1,048
-
1,048
Asset available for sale
250
250
Trade and other receivables
2,807
-
2,807
Cash and cash equivalents
2,528
-
2,528
Trade and other payables
(8,705)
-
(8,705)
(2,072)
-
(2,072)
Minority interest
33
(2,039)
Goodwill
27,701
Total consideration
25,662
Satisfied by:
Cash
10,000
Shares allotted
5,000
Directly attributable costs
985
Deferred consideration
9,677
25,662
Net cash outflow arising on acquisition:
Cash consideration
10,704
Cash and cash equivalents acquired
(2,528)
8,176
The Group additionally spent £957,000 on consideration and deferred consideration associated with other acquisitions of the group.
INDEPENDENT REVIEW REPORT TO CHIME COMMUNICATIONS PLC
Introduction
We have been instructed by the company to review the financial information for the six months ended 30 June 2007 which comprise the income statement, the balance sheet, the statement of recognized income and expenses, the cash flow statement and related notes 1 to 6. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.
This report is made solely to the company in accordance with Bulletin 1999/4 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to them in an independent review 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, for our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures are consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with International Standards on Auditing (UK and Ireland) and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2007.
Deloitte & Touche LLP
Chartered Accountants
11 September 2007
Notes: A review does not provide assurance on the maintenance and integrity of the website, including controls used to achieve this, and in particular on whether any changes may have occurred to the financial information since first published. These matters are the responsibility of the directors but no control procedures can provide absolute assurance in this area. Legislation in the United Kingdom governing the preparation and dissemination of financial information differs from legislation in other jurisdictions.
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