Tangent, a leading integrator of technology and
marketing strategy, with industry leading digital print
facilities, today announces interim results for the period
March to August 2011.
Highlights
• Underlying operating profit(1) up
by 10.3% to £0.95m (2010: £0.86m)
• Operating profit up 34% to £0.95m
(2010:
£0.70m)
• Underlying operating margin 8.6%
(2010: 7.3%)
• Basic earnings per share up 36%
to 0.38p (2010: 0.28p)
• Cash generated from operations
£0.89m (2010: £0.56m)
• Launch of printed.com to
accelerate online revenues for print products
• Combined Tangent Snowball
launches and secures new business with Experian, Pearson
and Aston Martin.
(1)Underlying
operating profit is defined as operating profit after share
based payment charges before restructuring
costs
Tangent's CEO, Timothy Green commented:
"Improved margins and increased profits have been
delivered in the first half, notably at the operating
level. We have seen a growing demand, for printed products
online and for our web development services. The commercial
exploitation of these areas is expected to deliver
significant value for the business and will be supported by
a growing investment".
For further information, please contact:
Tangent Communications plc
Timothy
Green
020 7462 6100
Collins Stewart Europe Ltd
Matt Goode / Ileana
Antypas
020 7523 8350
About the Company: Tangent employs 230 people across four
locations in London, Newcastle, Cheltenham and Melbourne
and is quoted on AIM (AIM: TNG). For more information
please visit www.tangentplc.com
Chief executive's review
Period Performance
First half operating profits increased by 34%. The strategy
set 18 months ago to consolidate and grow the business
organically has generated another period of good results.
The comparison to 2010-11 performance is particularly
positive given that as expected revenues from the General
Election project were not repeated.
The sales mix continues to improve with higher margin
services replacing high volume work leaving total revenues
for the first half lower than 2010-11 by £759k. However,
excluding the one-off £1m+ revenues from the General
Election campaign in 2010-11, sales would have been
marginally higher for the period. With the exception of
seasonal fluctuations we now expect the revenue trend to
turn upwards, as growth of fee income and online print
sales are expected to outstrip any decline from low margin
services.
Operating margin improved by 1% as pricing was improved and
costs of production were reduced. There is still room for
further margin growth as the quality and efficiency of our
customer engagements improve.
The launch of printed.com now takes over from our previous
online presence. Advertising expenditure for the site has
increased to an annual run rate above £300,000, as the next
period of growth for the business gains momentum. The costs
of acquiring new customers to the site are being recovered
by immediate sales but the full potential value is yet to
be factored into our forecasts. When a longer period of
trading can be analysed, lifetime customer value will be
measured and the full return on this investment becomes
clearer.
Segment Performance - Software and Communications (Tangent
Snowball)
Revenues
Fee income continues to grow and is now above 70% of
revenues for this segment. The reduction in revenues has
come in print and postage as the £1m in revenue from last
year's General Election campaign was not repeated. New
business activities have started to pick up pace following
the rebranding of Tangent One and Snowball into Tangent
Snowball at the end of July 2011. New agreements have been
formed with Aston Martin, Experian, Pearson and Richemont
showing the high calibre of our customer engagements.
E-commerce Platform Investment
Investment has stepped up above an annual run rate of
£250,000, as resources are now expended on the development
and support for our TaoShop platform. The cost has not been
capitalised although we do expect to gain from increasing
margins on projects in 2012 / 13 and beyond. The open
source nature of the platform allows for more flexible and
collaborative resourcing models, generating fast and cost
effective solutions. .
Outlook
The digital market is competitive yet we continue to win
larger budgets from both new and existing customers as the
breadth of our offering develops. The consolidation of this
business segment into one unit is complete with sales
growth and margin benefits set to continue for the
remainder of the year and into 2012-13.
Segment Performance - Design and Print (Ravensworth,
printed.com and T/OD)
Revenues
Revenues for the segment increased, in aggregate by 3% over
the same period in the previous year. Higher revenues
through the online print shop were offset by static
revenues from the estate agency sector and reduced direct
mail sales. The shift in the sales mix to higher value
digital print products is set to continue and will be
reflected in an improving gross margin for print sales. The
dependency on large budgets from single clients will
diminish as the volume of customers climbs. Over 500 new
customers have been added through the online channel in the
first six months of the year and a similar build up is
expected over the second half.
Advertising
Our marketing expenditure is growing, as the cost of
attracting new customers to printed.com shifts away from
traditional sales methods to PPC (Pay Per Click) and SEO
(Search Engine Optimisation). We are experiencing excellent
returns on this expenditure and budgets are increasing
monthly as we aim to capture a greater share of the market.
We are investing in a brand which will increase its
share of the expanding market place of printed products
ordered via the internet.
Production
With control over our own manufacturing, we are able to
increase our product range swiftly, placing us at an
advantage against some competitors that outsource. As sales
for each product in the range builds we will realise
increased efficiencies of production and this will result
in our margins increasing yet further. This efficiency
cycle is yet to be fully developed as the market is new and
fast moving, yet we are confident that it represents a
greater opportunity for long term returns rather than an
immediate challenge.
Outlook
Currently we are funding all our growth activities with a
view to deliver immediate returns. We will need to move to
a longer term strategy to ensure we can build scale and
barriers to entry that ensure the print asset in Tangent is
both protected and expanded. We are currently reviewing the
options available to us to best achieve our objective. We
expect to report more fully on the progress of printed.com
at the full year and set out our plans for expansion.
Consolidated statements of comprehensive
income
Half-year
Half-year
Year
ended
ended
ended
31 August
31 August
28 February
2011
2010
2011
(unaudited)
(unaudited)
(audited)
Notes
£000
£000
£000
Revenue
11,057
11,816
22,394
Cost of sales
(5,269)
(5,759)
(11,426)
Gross profit
5,788
6,057
10,968
Operating expenses
(4,842)
(5,199)
(9,617)
Underlying operating profit
946
858
1,351
Group restructuring expense
(-)
(154)
(297)
Operating profit
946
704
1,054
Finance costs
(8)
(2)
(2)
Profit before tax
938
702
1,052
Tax
(283)
(228)
(279)
Profit for the period
655
474
773
Other comprehensive income
Exchange differences on translating foreign
operations
6
(1)
4
Total comprehensive income for the
period
661
473
777
Earnings per share (pence)
4
Basic
0.38
0.28
0.45
Diluted
0.36
0.27
0.43
The results shown above relate to continuing
operations and are attributable to equity shareholders of
the company.
Consolidated statements of changes in
equityfor the half-year ended 31
August 2011
Share
Share
Merger
Other
Retained
Total
capital
premium
Reserve
Reserves
earnings
equity
£000
£000
£000
£000
£000
£000
Half year ended 31 August 2011
At 1 March 2011
1,748
12
1,374
2,443
14,508
20,085
Comprehensive income
Profit for the period
-
-
-
-
655
655
Other comprehensive income
-
-
-
-
6
6
Total comprehensive income
-
-
-
-
661
661
Transactions with owners
Equity dividend
-
-
-
-
(347)
(347)
Credit to equity for equity-settled
share based payments
-
-
-
15
-
15
Shares to be issued
-
-
-
38
-
38
Total transactions with owners
-
-
-
53
(347)
(294)
At 31 August 2011
1,748
12
1,374
2,496
14,822
20,452
Half-year ended 31 August 2010
At 1 March 2010
1,706
12
917
2,856
14,078
19,569
Comprehensive income
Profit for the period
-
-
-
-
474
474
Other comprehensive income
-
-
-
-
(1)
(1)
Total comprehensive income
-
-
-
-
473
473
Transactions with owners
Equity dividend
-
-
-
-
(347)
(347)
Credit to equity for equity-settled
share based payments
-
-
-
6
-
6
Issue of shares
42
-
457
(499)
-
-
Total transactions with owners
42
-
457
(493)
(347)
(341)
At 31 August 2010
1,748
12
1,374
2,363
14,204
19,701
Year ended 28 February 2011
At 1 March 2010
1,706
12
917
2,856
14,078
19,569
Comprehensive income
Profit for the year
-
-
-
-
773
773
Other Comprehensive income
-
-
-
-
4
4
Total comprehensive income
-
-
-
-
777
777
Transactions with owners
Equity dividend
-
-
-
-
(347)
(347)
Credit to equity for equity-settled
share based payments
-
-
-
17
-
17
Shares to be issued
-
-
-
69
-
69
Issue of shares
42
-
457
(499)
-
-
Total transactions with owners
42
-
457
(413)
(347)
(261)
At 28 February 2011
1,748
12
1,374
2,443
14,508
20,085
Consolidated balance sheet
at 31 August 2011
31 August
31 August
28 February
2011
2010
2011
(unaudited)
(unaudited)
(audited)
Notes
£000
£000
£000
Assets
Non-current assets
Intangible assets - goodwill
16,397
15,932
16,234
Other intangible assets
14
49
27
Property, plant and equipment
5
1,746
1,427
1,796
Deferred tax asset
132
-
112
18,289
17,408
18,169
Current assets
Inventories
110
98
135
Trade and other receivables
5,866
5,784
5,358
Cash and cash equivalents
2,489
1,505
1,934
8,465
7,387
7,427
Total assets
26,754
24,795
25,596
Liabilities
Current liabilities
Borrowings
(89)
(56)
(112)
Trade and other payables
(4,536)
(4,313)
(4,450)
Dividend payable
6
(347)
(347)
-
Current tax liabilities
(733)
(378)
(432)
Provisions
7
(358)
-
(233)
(6,063)
(5,094)
(5,227)
Non-current liabilities
Borrowings
(239)
-
(284)
(239)
-
(284)
Total liabilities
(6,302)
(5,094)
(5,511)
Net assets
20,452
19,701
20,085
Equity
Share capital
8
1,748
1,748
1,748
Share premium
12
12
12
Merger reserve
1,374
1,374
1,374
Other reserves
2,496
2,363
2,443
Retained earnings
14,822
14,204
14,508
Total equity - attributable to equity
shareholders of the company
20,452
19,701
20,085
Consolidated statements of cash flows
for the half-year ended 31 August 2011
Half-year
Half-year
Year
Ended
ended
Ended
31 August
31 August
28 February
2011
2010
2011
(unaudited)
(unaudited)
(audited)
Notes
£000
£000
£000
Operating activities
Cash flow from operations
9
891
549
1,827
Interest paid
(8)
(2)
(2)
Tax received/(paid)
-
9
(100)
Net cash inflow from operating
activities
883
556
1,725
Investing activities
Purchase of property, plant and
equipment
(280)
(171)
(903)
Sale of property, plant and equipment
20
6
5
Net cash used in investing activities
(260)
(165)
(898)
Financing activities
Dividends paid
-
-
(347)
Repayment of borrowings
(68)
(31)
(62)
New finance leases raised
-
-
371
Net cash used in financing activities
(68)
(31)
(38)
Increase in cash and cash equivalents
555
360
789
Cash and cash equivalents at beginning of
period
1,934
1,145
1,145
Cash and cash equivalents at end of
period
2,489
1,505
1,934
Notes to the financial
informationfor the half-year
ended 31 August 2011
1. Basis of preparation
This consolidated half-yearly financial information,
which is condensed and unaudited for the half-year ended 31
August 2011, has been prepared in accordance with the
accounting policies which the group expects to adopt in its
next annual report and is consistent with those adopted in
the consolidated financial statements for the year
ended 28 February 2011. These accounting policies
are based on the EU-adopted International Financial
Reporting Standards ("IFRS") and International
Financial Reporting Interpretations Committee
("IFRIC") interpretations that the group expects
to be applicable at that time. This consolidated
half-yearly information for the half-year ended 31 August
2011 has been prepared in accordance with IAS 34: Interim
Financial Reporting, as adopted by the EU and under the
historical cost convention.
The information relating to the half-years ended 31
August 2011 and 31 August 2010 is unaudited and does
not constitute statutory financial statements as
defined in section 434 of the Companies Act 2006. It has,
however, been reviewed by the auditors and their
report is set out at the end of this document. The
comparative figures for the year ended 28 February
2011 have been extracted from the consolidated financial
statements, on which the auditors gave an
unqualified opinion and did not include a statement under
section 498 (2) or (3) of the Companies Act 2006. The
annual report and accounts for the year ended 28 February
2011 has been filed with the Registrar of Companies.
The group's financial risk management objectives
and policies are consistent with those disclosed in the
2011 annual report and accounts.
The half-yearly report was approved by the board of
directors on 28 October 2011.
The half-yearly report is available on Tangent's
website, www.tangentplc.com, and is being sent to
shareholders. Further copies are available at the
Tangent's registered office, 84-86 Great
Portland Street, London W1W 7NR.
Going concern
The directors are satisfied that the group has
sufficient resources to continue in operation for the
foreseeable future, a period of not less than 12 months
from the date of this report. Accordingly, they continue to
adopt the going concern basis in preparing the financial
statements.
2. Operating segments
On 1st March 2011 Tangent revised its business
segments as follows:-
Software and communications
This segment includes Tangent Snowball and Tangent
Labs.
Design and print
This segment includes Ravensworth and Tangent on
Demand.
This disclosure correlates with the information that
is presented to the group's chief decisionmaker, the board of directors, which reviews revenues
and operating profits by segment but assets at a
consolidated level.
The comparative periods below have been amended to
reflect the change in business segments as noted above,
this change does not have any impact on previously reported
operating profits, net assets or earnings per share of the
group.
Software and
Design and
Communications
Print
Central
Total
£000
£000
£000
£000
Half-year ended 31 August 2011
Revenue
5,403
5,684
-
11,087
Less inter segment sales
-
(30)
-
(30)
Revenue from external customers
5,403
5,654
-
11,057
Results
Underlying operating profit
578
524
(156)
946
Group restructuring expense
-
-
-
-
Operating profit
578
524
(156)
946
Finance cost
-
(8)
-
(8)
Profit before tax
578
516
(156)
938
Tax
(283)
Profit for the period
655
2. Operating segments (continued)
Software and
Design and
Communications
Print
Central
Total
£000
£000
£000
£000
Half-year ended 31 August 2010
Revenue
7,494
5,548
-
13,042
Less inter segment sales
(1,187)
(39)
-
(1,226)
Revenue from external customers
6,307
5,509
-
11,816
Results
Underlying operating profit
510
469
(121)
858
Group restructuring expense
(56)
(40)
(58)
(154)
Operating profit
454
429
(179)
704
Finance cost
-
(2)
--
(2)
Profit before tax
454
427
(179)
702
Tax
(228)
Profit for the period
474
Year ended 28 February 2011
Revenue
14,804
10,330
-
25,134
Less inter segment sales
(2,650)
(90)
(2,740)
Revenue from external customers
12,154
10,240
-
22,394
Results
Underlying operating profit
980
629
(258)
1,351
Group restructuring expense
(170)
(69)
(58)
(297)
Operating profit
810
560
(316)
1,054
Finance cost
-
(2)
-
(2)
Profit before tax
810
558
(316)
1,052
Tax
(279)
Profit for the period
773
3. Share options and share-based payment
charge
The total share-based payment charge for the period
was £15,000 (half-year ended 31 August 2010: £6,000 and
year ended 28 February 2011: £17,000) and has been included
with operating expenses.
The movements in share options and the corresponding
weighted average exercise prices ("WAEP") are
summarised below:
Number
WAEP
000
Pence
At 1 March 2011
13,967
4.50
Granted
777
1.00
At 31 August 2011
14,744
4.32
For the share options outstanding at 31 August 2011
exercise prices ranged between 1p and 13.25p per share and
the weighted average remaining contractual life was 4.23
years.
4. Earnings per share
The calculation of the basic and diluted earnings per
share is based on the following:
Half-year
Half-year
Year
ended
Ended
ended
31 August
31 August
28 February
2011
2010
2011
£000
£000
£000
Profit attributable to shareholders
655
474
773
4. Earnings per share (continued)
Number
Number
Number
000
000
000
Weighted average number of shares:
For basic earnings per share
173,264
169,467
173,264
Adjustment for options outstanding
4,924
3,652
3,814
Adjustment for contingent shares
1,753
-
1,126
For diluted earnings per share
179,941
173,119
178,204
Pence
Pence
Pence
per share
per share
per share
Earnings per share:
Basic
0.38
0.28
0.45
Diluted
0.36
0.27
0.43
Diluted earnings per share is calculated by adjusting
the weighted average number of ordinary shares
outstandingto assume conversion of all
dilutive potential ordinary shares. Tangent has two
categories of dilutive potential ordinary shares: share
options and shares contingently issuable as
consideration for an acquisition.
A calculation is performed for the share options to
determine the number of shares that could have been
acquired at fair value based on the monetary value of the
subscription rights attachedto the outstanding
share options. The number of shares from this calculation
is compared with the number of shares that would
have been issued assuming the exercise of the options and
the difference is deemed to be the number of dilutive
shares attributable to share options.
The estimated number of shares that will be issued in
the future as purchase consideration for current
subsidiaries is deemed to be the number of dilutive shares
issuable as consideration for acquisitions.
5. Property, plant and equipment
During the period the group spent £278,195 on
additions to plant, equipment and computers to upgrade
production facilities and enhance client services.
6. Dividends
Amounts recognised as distributions to equity holders
in the period:
Half-year
Half-year
Year
ended
ended
Ended
31 August
31 August
28 February
2011
2010
2011
£000
£000
£000
Dividend for the year ended 28 February 2011 of
0.2p per share
347
347
-
The Tangent employee share ownership trust holds
1,428,340 shares and it has waived its right to receive
dividends.
The dividend for the year ended 28 February 2011 was
approved by shareholders at the annual general
meetingon 30 August 2011 and paid on 21
September 2011 it has therefore been recognised as a
liability at 31 August 2011.
7. Provisions
Provisions are for the cash consideration payable for
the acquisition of the entire share capital of The DDG
Network Limited together with the business and assets of
Double D Management LLP.
8. Share Capital
Allotted and fully paid
Number of ordinary 1p shares
31 August
31 August
28 February
2011
2010
2011
000
000
000
Bought forward
174,692
170,534
170,534
Issued in the period
-
4,158
4,158
Carried forward
174,692
174,692
174,692
8. Share Capital (continued)
Nominal value
31 August
31 August
28 February
2011
2010
2011
£000
£000
£000
Brought forward
1,748
1,706
1,706
Issued in the period
-
42
42
Carried forward
1,748
1,748
1,748
9. Cash flow from operations
Half-year
Half-year
Year
Ended
ended
Ended
31 August
31 August
28 February
2011
2010
2011
£000
£000
£000
Profit before tax for the period
938
702
1,052
Depreciation and amortisation of non-current
assets
341
348
732
Profit on sale of plant and equipment
(20)
(5)
(3)
Net interest charge
8
2
2
Net foreign exchange gain/(loss)
6
(1)
4
Share-based payment charge
15
6
17
1,288
1,052
1,804
Movements in Working Capital
Decrease/(increase) in inventories
25
8
(29)
Increase in trade and other receivables
(508)
(498)
(72)
Increase/(decrease) in trade and other
payables
86
(13)
124
Cash generated from operations
891
549
1,827
10. Analysis of net funds
1 March
Cash
31 August
2011
flows
2011
£000
£000
£000
Cash at bank and in hand
1,934
555
2,489
Finance Leases
(396)
68
(328)
Net funds
1,538
623
2,161
Independent review report by the auditors for the
half-year ended 31 August 2011
Introduction
We have been engaged by the company to review the
condensed set of financial statements in the
half-yearlyfinancial report for the half-year
ended 31 August 2011 which comprises the consolidated
statement of comprehensive income, consolidated statement
of changes in equity, consolidated balance sheet,
consolidated statement of cash flows and related notes. We
have read the other information contained in the
half-yearly financial report and considered whether it
contains any apparent misstatements or material
inconsistencies with the information in the condensed set
of financial statements.
Directors' responsibilities
The half-yearly financial report is the
responsibility of, and has been approved by, the
directors.The directors are responsible for
preparing the half-yearly financial report in accordance
with the AIM Rules for Companies.
As disclosed in note 1, the annual financial
statements of the group are prepared in accordancewith IFRSs as adopted by the European Union. The
condensed set of financial statements included in
this half-yearly financial report has been prepared in
accordance with International Accounting Standard
34: Interim Financial Reporting, as adopted by the European
Union.
Our responsibility
Our responsibility is to express to the company a
conclusion on the condensed set of financial statements in
the half-yearly financial report based on our
review.
Scope of review
We conducted our review in accordance with
International Standard on Review Engagements (UK and
Ireland) 2010: Review of Interim Financial Information
Performed by the Independent Auditor of the Entity, issued
by the Auditing Practices Board for use in the United
Kingdom. A review of interim financial information consists
of making enquiries, primarily of persons
responsible for financial and accounting matters, and
applying analytical and other review procedures. A review
is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing
(UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our
attention that causes us to believe that the
condensed set of financial statements in the
half-yearly financial report for the half-year ended
31 August 2011 is not prepared, in all
material respects, in accordance with
InternationalAccounting Standard 34 as
adopted by the European Union and the AIM Rules for
Companies.
UHY Hacker Young LLP
Chartered Accountants
Quadrant House
4 Thomas More Square
London E1W 1YW
28 October 2011
Notes
1. The maintenance and integrity of
the Tangent Communications plc website is the
responsibility of the directors; the work carried out
by the auditors does not involve consideration of these
matters and, accordingly, the auditors accept no
responsibility for any changes that may have occurred to
the half-yearly report or the auditors' review report
since they were initially presented on the
website.
2. Legislation in the United
Kingdom governing the preparation and dissemination of
financial information may differ from legislation in other
jurisdictions.
This information is provided by RNS
The company news service from the London Stock Exchange
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