1. business and industrial
2. company
3. merger and acquisition

th
25 March 2015
CHIME COMMUNICATIONS PLC
ANNOUNCEMENT OF AUDITED PRELIMINARY RESULTS FOR
ST
THE YEAR ENDED 31 DECEMBER 2014
A year of transformation and growth
Strengthened position as an international communications and sports marketing group
Chime Communications plc, the international communications and sports marketing group, today announces
st
its full year results for the year ended 31 December 2014.
OPERATIONAL HIGHLIGHTS
•
•
•
•
•
•
•
•
•
•
Group now structured into four operating divisions: Sport and Entertainment, Advertising and Marketing
Services, Healthcare Communications and Insight and Engagement
2
Strong growth in income and profits in all four divisions – like for like growth in operating profits of 10%
Net new business of £31 million already won for 2015 compared to £23 million won in the same period in
2014
Two significant contracts delayed from 2014 are in final stages of negotiation
Zak Brown, currently Chief Executive of JMI, appointed as Chief Executive of our Sport and
Entertainment division, reporting to Lord Coe and restructuring plan now being developed. Roopesh
Prashar has also been appointed as Finance Director of this division
Major events in 2015 include European Games in Baku and the Rugby World Cup in the UK and we are
involved in both
Expansion into US continuing following successful acquisitions of JMI and SJX
Advertising and Marketing Services had a successful year with double digit income growth and margin
improvement
Healthcare and Insight and Engagement divisions continue to grow ahead of the marketplace
Board further strengthened in 2014 through the appointment of Lord Coe
HEADLINE FINANCIAL HIGHLIGHTS
1
2014
£m
Operating Income
Operating Profit
Profit Before Tax
Operating Profit Margin
Earnings Per Share
Total Dividend
198.9
32.2
30.1
16.2%
22.0p
8.40p
2013
£m
168.0
26.0
25.2
15.5%
19.7p
7.34p
2014
% Change
+18
+24
+19
+5
+12
+14
2014
Like for Like
2
% Change
+6
+10
+6
st
•
Net bank debt as at 31 December 2014 of £53.1 million compared to a new five year facility of £130
million agreed with RBS and HSBC until September 2019
•
Final dividend increased with total dividend for the year increased by 14% to 8.40p (2013: 7.34p)
Christopher Satterthwaite, Chief Executive of Chime Communications, said:
“2014 was a year of good growth and saw the development of CSM as a global player in the sport and
entertainment marketing businesses. Our communications businesses continue to grow and with the
proportion of shared clients also increasing, we are sharpening our competitiveness as an international
communications and sports marketing group”.
1
STATUTORY FINANCIAL HIGHLIGHTS
Operating Income
Operating Profit
Profit/(Loss) Before Tax
Operating Profit Margin
Profit/(Loss) Per Share
Note:
2014
£m
2013
£m
%
Change
2014
Like for Like
2
% Change
200.2
18.3
15.8
9.1%
9.6p
170.1
(4.7)
(12.6p)
+18
+100
-
+6
+454
+813
1. All numbers and comments shown in this section are headline unless otherwise stated. The appendix to this
announcement shows a reconciliation of these headline numbers to the reported numbers. The headline
numbers adjust for the following:
•
Deemed remuneration charge add back in respect of the change in accounting policy adopted in the
st
year ended 31 December 2012 for earn-out payments including LLP capital based payments.
•
Add back of charges to the income statement in respect of amortisation of intangible assets, impairment
of goodwill (see note 7) and costs relating to acquisition and restructuring.
•
Add back of results from businesses classed as discontinued that do not meet the definition of
discontinued operations under the accounting standard.
2. Like for Like comparisons are calculated by taking current year actual results (which include acquisitions
from the relevant date of completion) compared with prior year actual results, adjusted to include the results
of acquisitions for the commensurate period in the prior year.
For further information please contact:
Christopher Satterthwaite, Chief Executive
Chime Communications
020 7096 5888
Mark Smith, Chief Operating Officer and Finance Director
Chime Communications
020 7096 5888
James Henderson/Victoria Geoghegan/Elizabeth Snow
Bell Pottinger
020 3772 2562
OVERVIEW
Performance in 2014 was well ahead of 2013 with growth in operating income and profit across all four
divisions. The performance of the Advertising and Marketing Services division was particularly strong. Our
Sports and Entertainment division has continued to expand both its international reach and its reputation and
we are now being asked to pitch for more international briefs than ever before.
We have now restructured the Group from five divisions into four, with the Public Relations division being
integrated into two other divisions. The Good Relations branded businesses have become part of the Sport
and Entertainment division, with the other businesses joining the Chime Specialist Group, part of the
Advertising and Marketing Services division.
STRATEGY
We continue to develop our strategic capability as an international sports marketing and communications
group and we continue to invest in Sport and Entertainment and Advertising and Marketing Services
businesses particularly in new geographies and disciplines.
2
KEY PERFORMANCE INDICATORS
Average Fee per Client
Average fee per client for 2014 was £111,000, compared to £99,000 in 2013. 289 clients paid us over
£100,000 in 2014 compared to 247 in 2013. Our largest client represented 8.6% of total operating income
(2013: 12.6%). The breadth and quality of our client list continues to improve and our top 30 clients now
represent 41% of total income compared to 44% in 2013.
Income from Shared Clients
The Group acted for 1,786 clients in 2014 compared to 1,689 in 2013. 306 of these clients used more than
one of our businesses (2013: 284) which represented 70% of total operating income (2013: 68%).
Operating Profit Margin
Operating profit margin for 2014 was 16.2% compared to 15.5% in 2013 reflecting our focus in 2014 on
margin, particularly in our Advertising and Marketing Services division.
Income from Overseas Offices
Income from overseas offices increased by 53% in 2014 and as a percentage of total income increased from
18% in 2013 to 24% in 2014. International expansion continues to be a major part of our growth strategy.
Earnings per Share
1
Earnings per share in 2014 increased 12% to 22.0p (2013: 19.7p).
HEADLINE DIVISIONAL PERFORMANCE
Sport and Entertainment
Operating Income
Operating Profit
Operating Profit Margin
2014
£m
2013
£m
81.2
13.5
63.2
10.8
16.6%
17.1%
%
Change
+28
+25
2014
Like for Like
% Change
+1
Our Sport and Entertainment division continued to grow its income, profits and international reach in 2014.
Overall the three major events in 2014, the World Cup in Brazil, the Winter Olympics in Sochi and the
Commonwealth Games in Glasgow were successful for us, providing a strong base from which we can build
for the Olympics in Brazil in 2016 and the World Cup in Russia in 2018 and for providing invaluable learning
for those future events.
We are investing in global management capability in this division under the chairmanship of Lord Coe with
Jim Glover taking on a new role as Deputy Chairman leading the increasing number of global accounts and
new business opportunities. Zak Brown, currently CEO of JMI, has now been appointed CEO of this
division. We have appointed Roopesh Prashar as Finance Director of this division. This management team
has commenced an investment and restructuring programme to ensure we are well placed to achieve our
future growth targets and properly control and forecast the major contracts we are winning.
We continue to operate strongly in seven of the top ten sports by value in the world and as the global sports
market continues to grow, we are exploring many new opportunities, particularly in North America where Zak
Brown’s experience will be invaluable.
In the 2015 Rugby World Cup in the UK we are handling Land Rover’s sponsorships and managing 82
players who are expected to play from the eight top world ranked countries.
3
Our major acquisition in November 2013, JMI (motorsport business based in the UK and US) has integrated
well into the Group, continued its expansion and had double digit growth in both income and profits.
Good Relations, our brand and corporate public relations business, grew profits by over 10% and is
expected to show continuing strong growth as it increases its international expansion using the CSM
international network. Global new business pitches using this model are already underway.
New business wins include: International Paralympic Committee, Unilever, Ford, VW, Epson, Bose, Haas F1,
Verizon IndyCar Series, Williams Martini Racing, Banco do Brasil, Fédération Equestre Internationale, FIA
Formula E Competition, PruHealth/Vitality, Waitrose, Hardys, Clifford Chance, Remy, Volvo Ocean Race,
Rio 2016, Bradesco, Saudi Olympic Committee, Coca-Cola, MetLife, Infiniti, Samsung and Southeastern.
Advertising and Marketing Services
Operating Income
Operating Profit
Operating Profit Margin
2014
£m
2013
£m
86.8
12.4
14.2%
77.2
9.5
12.3%
%
Change
2014
Like for Like
% Change
+12
+30
+11
+23
In 2014 this division focused on developing the new clients it won in 2013 as well as margin improvement.
VCCP was also the advertising agency with the most new client opportunities and the agency with the most
wins in the UK (Source: AAR).
This division now includes Corporate Citizenship (corporate and social responsibility), Harvard (technology
based communications) and inEvidence (customer reference) which have come together with Teamspirit and
Pure Media to form the Chime Specialist Group of businesses under the leadership of Joanne Parker.
New business wins include: BMW Motorad, Kia, World First, Royal London, ING (Australia), Qatari Diar,
BILD and CBRE.
Healthcare Communications
2014
£m
Operating Income
Operating Profit
Operating Profit Margin
21.8
4.3
20.1%
2013
£m
%
Change
18.5
3.9
21.0%
+18
+13
2014
Like for Like
% Change
+18
+13
A year of successful consolidation of previous acquisitions with the strong focus on market access and
patient data delivering both double digit income and profit growth. All Open Health communications
agencies showed strong growth and we continue to invest in digital communications.
New business wins include: Astra Zeneca, Eisai, Celgene, Novartis and Janssen.
Insight and Engagement
2014
£m
Operating Income
Operating Profit
Operating Profit Margin
9.1
3.1
34.1%
2013
£m
%
Change
9.1
2.8
31.2%
+10
2014
Like for Like
% Change
+10
This division has grown its operating profit mainly due to the continued growth of its high margin digital
research business and the development of a ‘full service’ offering to the research and insight marketplace.
New business wins include: Paypoint, Brakes, npower, Allianz, Ulster Bank and Anglian Water.
4
BOARD AND MANAGEMENT CHANGES
In May 2014 Lord Coe joined the Board of Chime, further improving our ability to expand in the fast growing
sports marketing sector. He also remains as Executive Chairman of our Sport and Entertainment division.
th
Martin Glenn will resign from the Board on 12 May 2015 following his appointment as Chief Executive
Officer of the Football Association. We would like to thank Martin for his valuable contribution since his
appointment in August 2013.
Zak Brown has been appointed CEO of our Sport and Entertainment division and will join the Executive
Management Board. He is an American businessman and former professional racing driver who currently
lives in Surrey. He founded JMI in 1995. His accomplishments as a sports marketeer have been reflected
through multiple industry recognitions including as a marketeer of the year by Promo magazine, being
named four times in the INC 500 Fastest Growing Private Companies of the Year and his inclusion in the
Sports Business Journal’s Forty under 40 Hall of Fame, having been presented with the award three times.
CORPORATE ACTIVITY
2014 was a year in which we focused mainly on organic growth and consolidating acquisitions made in
previous years. We did however, acquire three smaller sports businesses, SJX, Blaze and ABC, which have
improved our activities in the US and rugby player management.
CASH FLOW AND BANKING ARRANGEMENTS
st
st
Net bank debt at 31 December 2014 was £53.1 million compared to £39.8 million at 31 December 2013.
An increased facility has been agreed with RBS and HSBC for £130 million. This runs until September 2019,
with an interest rate of between 1.50% and 2.9%, depending on use of the facility compared to EBITDA and
the level of borrowing. The estimated earn-outs (which include consideration treated as deemed
remuneration) payable in 2015 total £11.4 million of which £3.5 million is payable in shares or loan notes.
As expected there was a working capital outflow in 2014 reflecting both the change in working capital profile
of the Group and the delay in completion of some major sporting contracts. Whilst we still expect to be cash
st
generative, the nature of our business now will, from time to time, require working capital investment. At 31
December 2014 the company had a working capital requirement of £10.2 million compared to a negative
st
requirement of £1.8 million at 31 December 2013.
TAXATION
The effective tax rate for 2014 was 22.5% compared to 25.8% for 2013. This lower tax rate was due to the
use of historical tax losses in the US following the acquisition of JMI. Going forward lower tax rates in the UK
will be offset by higher tax rates in some international territories.
DIVIDENDS
The Board proposes a final dividend of 5.87p per share (2013: 5.14p per share). This will be payable on 12
nd
st
June 2015 to shareholders on the register at 22 May 2015. The ex-dividend date is 21 May 2015.
th
Total dividend for the year will be 8.40p compared to 7.34p in 2013. An increase of 14%. This represents a
dividend cover of 2.6 times, compared to 2.4 times in 2013 and 3.0 times in 2012.
5
OUTLOOK
We continue to grow both our sports marketing and communications businesses with like for like profit
growth of 10% in 2014.
As sport and entertainment properties provide the opportunity for global brands to reach mass audiences as
never before, we are investing in our global management capabilities in the Sport and Entertainment Division
in order to compete for major global contracts. The value of sport and entertainment rights therefore
continues to grow and we believe the long term prospects for our Sport and Entertainment business are
extremely good. However, the nature of large sporting contracts and the cycle of sporting events mean there
will be inevitable highs and lows in our sports business.
Digital marketing continues to outstrip traditional advertising growth rates which plays to the strengths of our
Advertising and Marketing Services division. Our Healthcare Communications and Insight and Engagement
divisions are also trading strongly and are well placed for good organic growth ahead of the marketplace.
With sports marketing and digital marketing at the heart of the Chime group and the strength of our brands
we look forward to long term growth.
6
Appendix - Reconciliation of Income Statement to headline results for
the year ended 31 December 2014
The reconciliation below sets out the headline results of the group and the related adjustments to the reported Income
Statement that the directors consider necessary in order to provide an indication of the underlying trading performance.
Headline
2014
£’000
Continuing Operations
Revenue
Cost of sales
Operating income
Operating expenses
2013
£’000
Statutory Income
Statement
2014
2013
£’000
£’000
386,171
(187,316)
293,383
(125,405)
4,195
(2,887)
5,803
(3,652)
390,366
(190,203)
299,186
(129,057)
198,855
167,978
1,308
2,151
200,163
170,129
(166,687)
(141,953)
(15,169)
(28,157)
(181,856)
(170,110)
8,165
7,800
1,281
558
5,093
5,281
Deemed remuneration
Loss/(profit) on business being
discontinued
Amortisation of acquired intangibles and
goodwill impairment
Acquisitions and transaction related
costs/(credit) and restructuring costs
(678)
Operating profit
32,168
26,025
Other gains and losses
Share of results of associates
Investment income
Finance costs
Finance cost of deferred consideration
Finance cost of deemed remuneration
1,048
291
(3,148)
(287)
-
1,053
66
(1,637)
(309)
-
Profit/(loss) before tax
30,072
Tax
Profit/(loss) for the period from
continuing operations
Discontinued operations
(Loss)/profit from discontinued operations
Adjustments
2014
2013
£’000
£’000
12,367
(13,861)
(26,006)
18,307
(101)
(294)
(3,225)
(361)
(345)
947
291
(3,148)
(287)
(294)
(3,225)
692
66
(1,637)
(309)
(345)
25,198
(14,256)
(29,937)
15,816
(4,739)
(6,758)
(6,494)
2,022
2,065
(4,736)
(4,429)
23,314
18,704
(12,234)
(27,872)
11,080
(9,168)
(982)
(3,739)
982
3,739
19
-
-
Profit/(loss) for the period
22,332
14,965
(11,252)
(24,133)
11,080
(9,168)
Attributable to:
Equity holders of the parent
Minority interest
20,710
1,622
13,302
1,663
(11,252)
-
(24,133)
-
9,458
1,622
(10,831)
1,663
22,332
14,965
(11,252)
(24,133)
11,080
(9,168)
21.1p
21.01p
15.51p
15.37p
9.64p
9.60p
-12.63p
-12.63p
22.1p
19.87p
9.64p
-12.63p
Earnings per share
From continuing and discontinued
operations
Basic
Diluted
From continuing operations
Basic
The headline numbers have been adjusted for the following:
•
•
•
•
Deemed remuneration charge and finance cost add back in respect of employment linked earn-out payments including LLP
capital based payments.
Add back of charges to the income statement in respect of loss on disposal of subsidiaries, amortisation of intangible assets,
impairment of goodwill and costs relating to acquisition and restructuring.
Add back results from businesses classed as discontinued operations by management, not meeting the requirements to be
disclosed as discontinued for statutory purposes under the relevant accounting standard. These include Ex Nihilo Limited,
Traffic Gmbh, VCCP Me, Rough Hill Limited, UTR Events Limited, Fast Track Agency Scotland Limited and Essentially Australia
Rugby businesses ( 2013: MMK-Good Relations Group GmbH and Conduit Marketing Limited). 2013 has been restated for
these businesses.
The group was restructured in early 2015 and the segmental has been prepared to reflect changes in the way the group
operates and the manner in which information in respect of decision making is presented. The Public Relations Divisions has
been split with Good Relations reported as part of CSM. All other businesses previously within the Public Relations Division are
now reported as part of Advertising Marketing Services. 2013 has been restated for this restructure.
7
Diluted
22.01p
19.69p
9.60p
-12.63p
Appendix - Reconciliation of Business Segments to adjusted results for
the year ended 31 December 2014
Reported Segmental
Headline Operating
Note
Income
Adjustments
2013
Operating Income
2013
2013
2014
restated
2014
restated
2014
restated
£’000
£’000
£’000
£’000
£’000
£’000
Sport & Entertainment
81,158
63,201
269
251
81,427
63,452
Advertising and Marketing Services
86,845
77,259
1,039
1,900
87,884
79,159
Healthcare
21,750
18,451
-
-
21,750
18,451
9,102
9,067
-
-
9,102
9,067
198,855
167,978
1,308
2,151
200,163
170,129
Insight & Engagement
Headline Operating Profit
Adjustments
2013
Operating Profit
2013
2013
2014
restated
2014
restated
2014
restated
£’000
£’000
£’000
£’000
£’000
£’000
Sport & Entertainment
13,494
10,819
(8,520)
(19, 781)
4,974
(8,962)
Advertising and Marketing Services
12,359
9,508
(4,730)
(4,451)
7,629
5,057
Healthcare
4,363
3,866
(294)
(1,267)
4,069
2,599
Insight & Engagement
3,102
2,826
-
(159)
3,102
2,667
33,318
27,019
(13,544)
(25,658)
19,774
1,361
(317)
(348)
(1,467)
(1,342)
(13,861)
(26,006)
18,307
19
Unallocated corporate expenses
(1,150)
Operating profit
32,168
Other gains and losses
Share of results of associates
Investment income
Finance costs
(994)
26,025
-
-
-
(3,225)
-
(3,225)
1,048
1,053
(101)
(361)
947
692
291
66
-
-
291
66
(3,148)
(1,637)
-
-
(3,148)
(1,637)
(287)
(309)
-
-
(287)
(309)
Finance cost of deferred
consideration
Finance cost of deemed
remuneration
Profit/(loss) before tax
-
-
(294)
(345)
(294)
(345)
30,072
25,198
(14,256)
(29,937)
15,816
(4,739)
Headline Operating Profit
Operating Profit
Margin
Margin
2013
2013
2014
restated
2014
restated
%
%
%
%
Sport & Entertainment
16.6%
17.1%
6.1%
Advertising and Marketing Services
14.2%
12.3%
8.7%
6.4%
Healthcare
20.1%
21.0%
18.7%
14.1%
Insight & Engagement
34.1%
31.2%
34.1%
29.4%
16.8%
16.1%
9.9%
0.8%
-
-
Unallocated corporate expenses
-
-
-14.1%
The headline numbers have been adjusted for the following:
•
•
•
•
Deemed remuneration charge and finance cost add back in respect of employment linked earn-out payments including LLP
capital based payments.
Add back of charges to the income statement in respect of loss on disposal of subsidiaries, amortisation of intangible assets,
impairment of goodwill and costs relating to acquisition and restructuring.
Add back results from businesses classed as discontinued operations by management, not meeting the requirements to be
disclosed as discontinued for statutory purposes under the relevant accounting standard. These include Ex Nihilo Limited,
Traffic Gmbh, VCCP Me, Rough Hill Limited, UTR Events Limited, Fast Track Agency Scotland Limited and Essentially Australia
Rugby businesses ( 2013: MMK-Good Relations Group GmbH and Conduit Marketing Limited). 2013 has been restated for
these businesses.
The group was restructured in early 2015 and the segmental has been prepared to reflect changes in the way the group
operates and the manner in which information in respect of decision making is presented. The Public Relations Divisions has
been split with Good Relations reported as part of CSM. All other businesses previously within the Public Relations Division are
now reported as part of Advertising Marketing Services. 2013 has been restated for this restructure.
8
16.2%
15.5%
9.1%
0.0%
The headline numbers have been adjusted for the following:
•
•
•
•
Deemed remuneration charge and finance cost add back in respect of employment linked earn-out payments including LLP
capital based payments.
Add back of charges to the income statement in respect of loss on disposal of subsidiaries, amortisation of intangible assets,
impairment of goodwill and costs relating to acquisition and restructuring.
Add back results from businesses classed as discontinued operations by management, not meeting the requirements to be
disclosed as discontinued for statutory purposes under the relevant accounting standard. These include Ex Nihilo Limited,
Traffic Gmbh, VCCP Me, Rough Hill Limited, UTR Events Limited, Fast Track Agency Scotland Limited and Essentially Australia
Rugby businesses ( 2013: MMK-Good Relations Group GmbH and Conduit Marketing Limited). 2013 has been restated for
these businesses.
The group was restructured in early 2015 and the segmental has been prepared to reflect changes in the way the group
operates and the manner in which information in respect of decision making is presented. The Public Relations Divisions has
been split with Good Relations reported as part of CSM. All other businesses previously within the Public Relations Division are
now reported as part of Advertising Marketing Services. 2013 has been restated for this restructure.
9
Consolidated Income Statement
Year ended 31 December 2014
Notes
Continuing operations
Revenue
Cost of sales
2014
£'000
2013
£'000
390,366
(190,203)
299,186
(129,057)
Operating income
200,163
170,129
Operating expenses
(181,856)
(170,110)
Operating profit
18,307
Other gains and losses
Share of results of associates
Investment income
Finance costs
Finance cost of deferred consideration
Finance cost of deemed remuneration
947
291
(3,148)
(287)
(294)
(3,225)
692
66
(1,637)
(309)
(345)
Profit/(loss) before tax
15,816
(4,739)
Tax
(4,736)
(4,429)
Profit/(loss) for the year from continuing operations
11,080
(9,168)
9,458
1,622
(10,831)
1,663
11,080
(9,168)
Attributable to:
Equity holders of the parent
Non-controlling interest
Earnings per share (pence)
From continuing and discontinued operations
Basic
Diluted
3
10
9.64p
9.60p
19
-12.63p
-12.63p
Consolidated Statement of Comprehensive Income
Year ended 31 December 2014
2014
£'000
2013
£'000
11,080
(9,168)
93
1,123
160
(298)
Total comprehensive income for the year
12,296
(9,306)
Attributable to:
Equity holders of the parent
Non-controlling interest
10,683
1,613
(11,003)
1,697
12,296
(9,306)
Profit for the year
Items that may be reclassified subsequently to profit or loss:
Profit on revaluation of available for sale investments
Exchange differences on translation of foreign operations
11
Consolidated Balance Sheet as at 31 December 2014
Notes
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Investments in associates
Other investments
Deferred consideration receivable
Other financial assets
Deferred tax asset
7
Current assets
Work in progress
Trade and other receivables
Current tax receivable
Cash and cash equivalents
2014
£'000
2013
£'000
224,347
19,253
10,274
6,975
607
245
400
2,810
264,911
227,810
7,038
9,837
6,089
514
282
100
3,510
255,180
6,216
92,806
20,274
119,296
8,196
80,259
18,267
106,722
(88,899)
(2,510)
(73)
(1,596)
(6,138)
(2,779)
(101,995)
(91,019)
(2,180)
(20)
(171)
(5,725)
(1,671)
(1,420)
(102,206)
Total assets
Current liabilities
Trade and other payables
Current tax liabilities
Obligations under finance leases
Bank loans and overdrafts
Deferred consideration
Deemed remuneration
Short-term provisions
Net current assets
17,301
Non-current liabilities
Bank loans payable after more than one year
Deferred consideration
Deemed remuneration
Deferred tax liabilities
Long-term provisions
Total liabilities
Net assets
12
4,516
(73,293)
(10,976)
(6,560)
(991)
(67)
(91,887)
(193,882)
(57,852)
(11,608)
(4,880)
(657)
(652)
(75,649)
(177,855)
190,325
184,047
Consolidated Balance Sheet as at 31 December 2014 (continued)
2014
Equity
Share capital
Share premium account
Own shares
Translation reserve
Accumulated profit
Equity attributable to equity holders of the parent
Written put option over non controlling interests
Non-controlling interest
Total equity
13
2013
£'000
£'000
25,040
127,769
(1,655)
976
37,882
190,012
(2,487)
2,800
190,325
24,529
122,939
(1,718)
(156)
36,319
181,913
2,134
184,047
Consolidated Statement of Changes in Equity
Balance at 1 January 2014
Total comprehensive income for the period
Transactions with owners:
Acquisition of subsidiaries
Share placing
Issued to staff under options
Share issue costs
Disposed on exercise of options
Purchase of own shares
Purchase of non- controlling interest
Equity dividends
Credit in relation to share based payments
Tax on share based payment exercises
Recycle purchase of non-controlling interest on
disposal
Disposal of subsidiary
LLP partnership share
Written put options over non-controlling interests
Release of capital reduction reserve
Balance at 31 December 2014
Share
capital
£'000
Share
premium
£'000
24,529
-
122,939
-
411
100
25,040
4,624
254
(48)
127,769
Own
shares
£'000
Translati
on
reserves
£'000
(1,718)
-
(156)
1,132
Accumulated
profit/
(loss)
£'000
Total
£'000
Written
put
options
over noncontrollin
g
interests
£,000
36,319
9,551
181,913
10,683
-
2,134
1,613
5,035
-
36
(1,055)
-
717
(654)
-
-
(714)
(7,570)
918
(119)
354
(48)
3
(654)
(7,570)
918
(119)
(1,655)
976
(503)
37,882
(503)
190,012
14
(2,487)
(2,487)
Noncontrollin
g
interests
£'000
Total
£'000
184,047
12,296
72
2,800
5,035
354
(48)
3
(654)
36
(8,625)
918
(119)
(503)
(2,487)
72
190,325
Consolidated Cash Flow Statement
Year ended 31 December 2014
Net cash from operating activities
Investing activities
Interest received
Dividends received from investments and associates
Proceeds on disposal of property, plant and equipment
Purchases of property, plant and equipment
Purchases of other intangible assets
Acquisition of subsidiaries (net of cash acquired)
Disposal of subsidiary/associate
Deferred consideration received
Net cash used in investing activities
Financing activities
Dividend paid
Dividends paid to minorities
Increase in borrowings
Repayment of borrowings
Repayment of obligations under finance leases
Proceeds on issue of ordinary share capital
Purchase of own shares
Purchase of non-controlling interests
Net cash used in financing activities
Notes
2014
£'000
2013
£'000
5
10,807
3,146
271
80
164
(5,022)
(504)
(9,279)
38
(14,252)
56
320
19
(5,746)
(379)
(58,156)
(134)
1,025
(62,995)
(7,570)
(1,055)
73,363
(58,022)
(20)
306
(1,651)
(468)
4,883
(6,289)
(998)
57,977
(13,565)
(117)
24,142
(164)
(894)
60,092
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes
Cash and cash equivalents at end of year
1,438
243
18,267
569
20,274
17,892
131
18,267
20,274
(73,366)
(107)
(53,199)
18,267
(58,023)
(20)
(809)
(40,585)
Cash and cash equivalents comprise cash at bank and loan note deposits less overdrafts.
Net cash comprises:
Cash and cash equivalents
Bank loans
Finance leases
Loan notes outstanding
Overall net cash
15
Notes:
1.
Basis of preparation
The financial information set out above does not constitute the company’s statutory accounts for the
years ended 31 December 2014 or 2013. Statutory accounts for 2013 have been delivered to the
Registrar of Companies and those for 2014 will be delivered following the company’s annual general
meeting. The auditor’s reports on both the 2014 and 2013 accounts were unqualified, did not draw
attention to any matters by way of emphasis and did not contain statements under s498(2) or (3) of
Companies Act 2006. Whilst the financial information included in this preliminary announcement has
been computed in accordance with International Financial Reporting Standards (IFRSs) this
announcement does not in itself contain sufficient information to comply with IFRSs. The Company
expects to publish full financial statements that comply with IFRSs in April 2014.
The information in this preliminary announcement was approved by the Board on 25 March 2015.
The consolidated income statement, consolidated balance sheet, consolidated statement of
comprehensive income, consolidated statement of changes in equity and consolidated cash flow
statement have been prepared on a basis consistent with the financial statements for the year ended
31 December 2014.
Going Concern Basis
The Group meets its day to day working capital requirements through a £5 million revolving credit
overdraft facility and a committed facility of £125 million which matures in September 2019.
In preparing forecasts the directors have taken into account the following key factors:
•
The rate of growth of the UK and global economy on the Group’s business during the economic
recovery;
•
Key client account renewals;
•
Planned acquisitions and disposals;
•
Anticipated payments under deemed remuneration and deferred and contingent consideration;
•
The level of committed and variable costs; and
•
Current new business targets compared to levels achieved in previous years.
The Group’s forecasts and projections, taking account of reasonably possible changes in trading
performance, show that the Group should be able to operate within the level of its current facility and
banking covenants.
The directors have a reasonable expectation that the Company and the Group have adequate
resources to continue in operational existence for the foreseeable future. Thus they continue to
adopt the going concern basis of accounting in preparing the annual financial statements.
Forward looking statements
The preliminary announcement contains certain forward looking statements in respect of Chime
Communications plc and the operation of its subsidiaries. These statements and forecasts involve
risk and uncertainty because they relate to events and depend upon circumstances that may or may
not occur in the future. There are a number of factors that could cause actual results or
developments to differ materially from those expressed or implied by these forward looking
statements and forecasts. Nothing in this announcement should be construed as a profit forecast.
16
2.
Business Segments
For management purposes the Group is organised into operating segments. At the end of 2014 the
operational structure was amended as shown below.
The principal activities in 2014 were as follows:
Sport & Entertainment
CSM Sport & Entertainment is a group of internationally recognised agencies, working together to put
clients and people at the heart of the world’s greatest experiences in sport and entertainment. Working with
brands, rights holders, governing bodies, governments and athletes across the globe, CSM specialises in
strategic consultancy, rights sales, sponsorship activation, hospitality, branding and wayfinding, athlete
management and communications across major sporting events.
Advertising and Marketing Services (‘AMS’)
The AMS division includes the VCCP Partnership and the Chime Specialist Group. VCCP operates in
advertising and marketing services, direct marketing, digital communication, search relations, point of sale,
sales promotion, data consultancy and technical design, multimedia content, youth marketing and
experiential, marketing consulting, retail and shopper marketing and specialist media planning and buying.
The Specialist Group includes agencies operating in niche markets; corporate responsibility and
sustainability consultancy; for technology brands; providing customer reference and advocacy and; in
professional and financial services.
Insight & Engagement
The Insight & Engagement division brings together researchers, technologists and insight specialists who
deliver to clients, globally, in real time, actionable solutions. The Division has particular expertise in
delivering clients in FMCG, financial services, utilities and retail with experience performance improvement
plans, mystery shopping programmes and advertising and brand tracking. The Insight & Engagement
division includes leading specialist brands such as Watermelon - a specialist digital agency, CherryPicked a specialist recruitment agency, Facts International - a specialist fieldwork agency and full service agencies
Opinion Leader and CIE.
Healthcare
OPEN Health is a healthcare communications and market access group. It comprises ten different
specialist businesses that bring a breadth of expertise focussed principally on pharma, health device and
diagnostic clients. OPEN Health’s companies cover most aspects of the communications mix including
advertising, PR, medical communications, market access consulting, real world data collection, market
research and patient engagement programmes.
Reorganisation
We have reorganised our operating segments reducing to four from five. The companies that previously
made up the Public Relations Division, with the exception of Good Relations, have joined Teamspirit and
Pure Media as the Chime Specialist Group and will operate alongside VCCP forming the Advertising and
Marketing Services Segment. Good Relations has joined CSM and will report under the Sport and
Entertainment Segment. The Insight and Engagement and Healthcare divisions remain unchanged.
17
2.
Business Segments (continued)
Revenue
Sport & Entertainment
Advertising and Marketing Services
Healthcare
Insight & Engagement
2014
£’000
£’000
£’000
£’000
174,003
176,648
26,096
13,619
390,366
120,333
146,122
21,661
11,070
299,186
81,427
87,884
21,750
9,102
200,163
63,452
79,159
18,451
9,067
170,129
Operating Profit
2013
2014
restated
£’000
£’000
Unallocated corporate expenses
Operating profit
4,974
7,629
4,069
3,102
19,774
(1,467)
18,307
(8,962)
5,057
2,599
2,667
1,361
(1,342)
19
Other gains and losses
Share of results of associates
Investment income
Finance costs
Finance cost of deferred consideration
Finance cost of deemed remuneration
(Loss)/Profit before tax
947
291
(3,148)
(287)
(294)
15,816
(3,225)
692
66
(1,637)
(309)
(345)
(4,739)
Sport & Entertainment
Advertising and Marketing Services
Healthcare
Insight & Engagement
18
Operating Income
2013
2014
restated
2013
restated
Operating Profit
Margin
2013
2014
restated
%
6.1%
8.7%
18.7%
34.1%
9.9%
9.1%
%
-14.1%
6.4%
14.1%
29.4%
0.8%
0.0%
3.
Earnings per share
Year
ended
31 Dec
2014
Earnings from continuing and discontinued operations
Basic
Diluted
Year
ended
31 Dec
2013
9.64p
9.60p
(12.63p)
(12.63p)
The calculation of the basic and diluted earnings per share is based on the following data:
Earnings for the purposes of basic and diluted earnings per share being net Loss
attributable to equity holders of the parent
£’000
£’000
9,458
(10,831)
Number
Number
Effect of dilutive potential ordinary shares:
Deferred shares
Share options
98,139,802
291,499
139,150
85,742,203
295,494
522,342
Weighted average number of ordinary shares for the purposes of diluted
earnings per share
98,570,451
86,560,039
Weighted average number of ordinary shares for the purposes of basic
earnings per share
Diluted earnings per share is calculated on the profit for the year attributable to parent company
shareholders divided by the weighted average number of ordinary shares outstanding during the
year adjusted for the potentially dilutive impact of employee share incentive schemes and shares to
be issued as part of deferred or contingent consideration on acquisitions of subsidiaries.
Some share options that had a higher purchase price than the average market price of the shares
for the year ended 31 December 2014 were outstanding. These options have been excluded from
the calculation of diluted earnings per share as they would have been antidilutive.
From continuing operations
Earnings per share
Basic
Diluted
Earnings
Net profit/(loss) attributable to equity holder of the parent
Earnings from continuing operations for the purpose of basic earnings per share
being net profit attributable to the equity holders of the parent
9.64p
9.60p
(12.63p)
(12.63p)
£’000
£’000
9,458
(10,831)
9,458
(10,831)
The denominators used are the same as those detailed above for both basic and diluted earnings
per share from continuing and discontinued operations.
19
4.
Dividends
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 December 2013 of 5.14p per share (2012:
5.14p)
Interim dividend for the year ended 31 December 2014 of 2.53p per share (2013:
2.20p per share)
Proposed final dividend for the year ended 31 December 2014 of 5.87p per
share (2013: 5.14p per share)
Year
ended
31 Dec
2014
£’000
Year
ended
31 Dec
2013
£’000
5,065
4,402
2,505
7,570
1,887
6,289
5,879
5,043
The proposed final dividend is subject to approval by shareholders at the Annual General Meeting
and has not been included as a liability in these financial statements. The dividend will be paid on
12 June 2015 to those shareholders on the register at 22 May 2015. The ex-dividend date is
21 May 2015.
Under an arrangement dated 3 April 1996, The Chime Communications Employee Trust which holds
731,790 ordinary shares representing 0.7% of the Company’s called-up share capital, has agreed to
waive dividends over 191,316 shares (0.2% of the company’s called up share capital), the difference
being those shares held under the deferred share scheme.
5.
Notes to the cash flow statement
Operating profit
Adjustments for:
Share based payment expense
Deemed remuneration
Changes to deferred consideration
Translation differences
Depreciation of property, plant and equipment
Amortisation of intangible fixed assets
Loss on disposal of property, plant and equipment
(Decrease)/increase in provisions
Operating cash flows before movements in working capital
(Increase)/decrease in work in progress
Increase in receivables
Increase/(decrease) in payables
Cash generated from operations
Income taxes paid
Interest paid
Net cash from operating activities
20
Year
ended
31 Dec
2014
£’000
Year
ended
31 Dec
2013
£’000
18,307
19
918
8,165
(2,107)
(1,234)
4,382
5,139
169
(1,713)
(128)
7,800
3,229
(553)
3,320
5,280
117
(598)
32,026
2,160
(10,738)
(3,289)
20,159
(6,459)
(2,893)
18,486
(4,052)
(8,141)
4,573
10,866
(6,395)
(1,325)
10,807
3,146
6.
Business combinations
In 2014, the Group made a number of acquisitions in order to grow the business.
The Sport and Entertainment division made 3 main acquisitions as follows:
•
The Blaze Agency Pty Ltd, a Rugby player management and marketing agency, based in
Australia. The acquisition will further enhance the geographical coverage of CSM Sport and
Entertainment’s activities within the Asia Pacific market; and
•
ABC Sports Management Limited, one of the UK’s top athlete management businesses, with
particular strength in rugby union. It will further enhance CSM’s Essentially, a leading
sponsorship and athlete management agency; and
•
SJX Business, a sports and entertainment marketing business based in Connecticut, United
States. The acquisition will significantly expand CSM Sport and Entertainment’s business in the
United States.
.
21
6.
Business combinations (continued)
The Blaze Agency Pty Ltd
On 5 March 2014 the group acquired 100% of The Blaze Agency Pty Ltd (“Blaze”), a company
incorporated in Australia, for initial consideration of AUD$2,000,000 (£1,076,000), which was paid in cash.
Additional consideration is payable contingent on the results of the business, capped at the maximum of
AUD$2,000,000 (£1,070,000) (undiscounted). Deemed remuneration of £7,597 has been provided, which
has been discounted for financing costs. The deemed remuneration is expected to be paid in 2016 and
2019. The total maximum consideration and deemed remuneration payable for Blaze is AUD$4,000,000
(£2,146,000).
Blaze was acquired by Chime’s Sport and Entertainment division.
The fair value of the net assets acquired is detailed below.
Intangible fixed assets
Debtors and other current assets
Cash at bank
Creditors
Net assets
Goodwill
Provisional
Book value
£’000
Fair value
adjustments
£’000
Provisional
fair values
£’000
15
79
(92)
2
577
(173)
404
577
(158)
79
(92)
406
670
Fair value of consideration
1,076
Cash consideration
Cash acquired
Cash outflow arising on acquisition
1,076
(79)
997
The adjustment to intangible fixed assets is to recognise £577,000 of intangibles relating to customer
contracts and relationships.
The adjustment to other current assets is the recognition of a deferred tax asset on intangible assets.
Acquisition related costs amounting to £135,000 have been expensed during the period and are included
in operating expenses.
Goodwill represents the specialist skills held by Blaze.
Blaze contributed revenue of £271,797 and an operating profit of £64,159 (after deemed remuneration
charge of £7,597) to the results of the Group since acquisition. If the acquisition had been completed at
the beginning of the period, management estimate that its contribution to Group revenue for the period
would have been £332,774 and its contribution to Group operating result would have been a profit of
£61,623.
22
6.
Business combinations (continued)
ABC Sports Management Limited
On 24 September 2014 the group acquired 100% of ABC Sports Management Limited (“ABC”), a company
incorporated in the United Kingdom, for initial consideration of £810,000, of which £585,000 was paid in
cash and £225,000 was paid in shares.
Additional consideration is payable contingent on the results of the business, capped at the maximum of
£650,000 (undiscounted). Deferred consideration of £100,000 has been provided for and expected to be
paid in 2015. Deemed remuneration of £24,357 has been provided, which has been discounted for
financing costs. The deemed remuneration is expected to be paid in 2017 and 2020. The total maximum
consideration and deemed remuneration payable for ABC is £1,560,000.
ABC was acquired by Chime’s Sport and Entertainment division.
The fair value of the net assets acquired is detailed below.
Intangible fixed assets
Property, plant and equipment
Debtors and other current assets
Cash at bank
Creditors
Net assets
Goodwill
Provisional
Book value
£’000
Fair value
adjustments
£’000
Provisional
fair values
£’000
1
410
155
(162)
404
308
(1)
(11)
(509)
(213)
308
399
155
(671)
191
719
Fair value of consideration
910
Fair value of initial consideration
Fair value of deferred consideration
810
100
Cash consideration
Cash acquired
Cash outflow arising on acquisition
585
(155)
430
The adjustment to intangible fixed assets is to recognise £308,000 of intangibles relating to customer
contracts and relationships.
The adjustment to other current assets is the recognition of a deferred tax asset on intangible assets.
Acquisition related costs amounting to £182,000 have been expensed during the period and are included
in operating expenses.
Goodwill represents the specialist skills held by ABC.
ABC contributed revenue of £267,380 and an operating profit of £77,373 (after deemed remuneration
charge of £24,357) to the results of the Group since acquisition. If the acquisition had been completed at
the beginning of the period, management estimate that its contribution to Group revenue for the period
would have been £681,933 and its contribution to Group operating result would have been a loss of
£68,665.
23
6.
Business combinations (continued)
SJX Business
On 27 October 2014 the group acquired a 100% of the business and assets of the SJX Business (“SJX”), a
business based in the United States, for initial consideration of USD$8,490,000 (£5,303,000), of which
USD$5,590,000 (£3,719,000) was paid in cash and USD$2,540,000 (£1,584,000) was paid in shares.
Additional consideration is payable contingent on the results of the business, capped at the maximum of
USD$19,510,000 (£12,168,000) (undiscounted). Deferred consideration of £2,515,183 has been provided
for and deemed remuneration of £373,502 has been provided, which have been discounted for financing
costs. The deferred consideration and deemed remuneration is expected to be paid in 2016, 2018 and
2020. The total maximum consideration and deemed remuneration payable for SJX is USD$28,000,000
(£17,463,000).
SJX was acquired by Chime’s Sport and Entertainment division.
The fair value of the net assets acquired is detailed below
Intangible fixed assets
Goodwill
Debtors and other current assets
Cash at bank
Creditors
Net assets
Goodwill
Provisional
Book value
£’000
Fair value
adjustments
£’000
Provisional
fair values
£’000
158
533
31
(722)
-
2,595
2,595
2,595
158
533
31
(722)
2,595
5,223
Fair value of consideration
7,818
Fair value of initial consideration
Fair value of deferred consideration
5,303
2,515
Cash consideration
Cash acquired
Cash outflow arising on acquisition
3,719
(31)
3,688
The adjustment to intangible fixed assets is to recognise £2,595,000 of intangibles relating to customer
contracts and relationships.
Goodwill represents the specialist skills held by SJX. A tax deduction is available in the United States for the
goodwill acquired.
Acquisition related costs amounting to £467,000 have been expensed during the period and are included
in operating expenses.
SJX contributed revenue of £854,433 and an operating loss of £207,532 (after deemed remuneration
charge of £373,502) to the results of the Group since acquisition. If the acquisition had been completed at
the beginning of the year, management estimate that its contribution to Group revenue for the period would
have been £3,647,000 and its contribution to Group operating result would have been a profit of
£2,191,000.
24
6.
Business combinations (continued)
Just Marketing Inc.
On 20 November 2013 the group acquired 100% of Just Marketing Inc. (“JMI”) a company incorporated in
the United States of America and determined provisional fair values at the date of acquisition. These fair
values have been adjusted, with a corresponding impact on goodwill as detailed below.
Provisional
fair value at
31 December
2013
£’000
13
Intangible assets
Property, Plant & Equipment
Debtors and other current assets
Creditors
Cash at bank
Long-term liabilities
Fair value at
Fair value 31 December
adjustments
2014
£’000
£’000
544
11,818
(11,631)
484
(760)
455
44,002
44,457
Goodwill
Total consideration
12,929
(2,950)
9,979
(9,979)
-
12,929
544
8,868
(11,631)
484
(760)
10,434
34,023
44,457
The fair value adjustments arise as a result of recognition of intangible assets relating to customer
contracts and relationships and brand name. The adjustment to other current assets is recognition of
deferred tax liability on intangible assets.
The intangible assets recognised were Brand name of £2,746,103 and Customer contracts and
relationships of £10,182,949.
A tax deduction is available in the United States for the goodwill acquired.
Cash flow on acquisitions
Total deferred consideration and deemed remuneration of £5,302,000 (2013: £11,498,000) was settled in
cash during the year in respect of acquisitions made in previous and current year.
7.
Goodwill
Carrying amount at 1 January
Impairment of goodwill
Exchange differences
Recognised on acquisition of subsidiaries
Other changes in respect of prior year acquisitions
Disposal of subsidiary
At 31 December
2014
£’000
2013
£’000
227,810
(126)
6,771
(9,979)
(129)
224,347
178,109
(1,712)
(483)
54,881
58
(3,043)
227,810
Other changes in respect of prior year acquisitions predominantly include:
•
Changes in respect of prior year acquisitions include revisions to the estimate of deferred
consideration payable relating to acquisitions completed under IFRS (2004) and to the intangible
calculation on JMI Inc.
25
8.
Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note. Transactions between the Group and its associates are
disclosed below.
Trading transactions
During the year, Group companies entered into the following transactions with related parties who are not
members of the Group.
2014
Sales of
services
£’000
Associates
Bell Pottinger Private Limited
Bell Pottinger Public Relations Limited
Bell Pottinger Sans Frontiers
Pelham Bell Pottinger
The Brand Marketing Team Limited
Naked Eye Research Limited
Rare Corporate Design Limited
StratAgile Limited
The Agency of Someone Limited
2013
1,218
5
4
10
12
37
14
1
Sales of
services
£’000
Associates
Bell Pottinger Private Limited
Bell Pottinger Public Affairs Limited
Bell Pottinger Public Relations Limited
Bell Pottinger Sans Frontiers
Pelham Bell Pottinger
The Brand Marketing Team Limited
Naked Eye Research Limited
Rare Corporate Design Limited
StratAgile Limited
The Agency of Someone Limited
X&Y Communications Limited
2,898
25
68
34
53
198
8
53
5
6
41
Purchase
of service
£’000
287
95
2
95
69
676
Purchase
of service
£’000
178
35
466
85
155
2
-
Amounts
owed by
related
parties
£’000
371
3
5
30
Amounts
owed to
related
parties
£’000
54
6
2
3
395
Amounts
owed by
related
parties
£’000
Amounts
owed to
related
parties
£’000
34
68
5
-
273
3
24
8
18
44
1
4
5
-
Sales of goods to related parties were made on an arm’s length basis.
The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given
or received. No provisions have been made for doubtful debts in respect of the amounts owed by
related parties.
26