Final Results

Final Results

Next Fifteen Communications Plc

NEXT FIFTEEN COMMUNICATIONS GROUP PLC

FINAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 JULY 2013

Next Fifteen Communications Group plc (‘Next 15’ or ‘the Group’), the worldwide digital communications group, today announces its final unaudited results for the year ended 31 July 2013.

Financial highlights:

  • Revenues increased by 5% to £96.1m (2012: £91.6m)
  • Adjusted profit before tax of £7.7m (2012: £9.6m) (see note 3)
  • Reported profit before tax of £2.1m (2012: £6.0m)
  • Diluted adjusted earnings per share of 6.65p (2012: 10.07p) (see note 8)
  • Basic earnings per share of 0.56p (2012: 6.85p) (see note 8)
  • Final dividend of 1.925p per share (2012: 1.735p), raising the total dividend by 11% to 2.55p (2012: 2.30p)
  • Net debt1 decreased by £0.8m year on year to £1.8m, despite spending of £3.0m on acquisition related payments2
  • Net cash generated from operations up 11% to £11.2m from £10.1m last year

Operational highlights:

  • Acquired 80% of the issued share capital of US based Connections Media, a digital public affairs agency
  • Acquisition of Content & Motion in August 2012, providing Beyond with a talented social media team creating programmes that drive engagement through blogger and media outreach and clients' owned social media presences
  • Launch of Agent3, a new agency that sells technology platforms and data-based marketing services
  • Total investment in the digital transition of £1m as per guidance at the interim stage

Commenting on the results, Chairman of Next 15, Richard Eyre, said:

“While this has been a tough year, it remains a year of progress in many ways. Record revenues and the steady transition of the business will underpin the future growth of the company. Indeed, the Group has made a good start to the current financial year and has already added work from clients such as Sainsbury’s and HBO.”

For further information contact:

Next 15
Tim Dyson
Chief Executive Officer
T: +1 415 350 2801

Canaccord Genuity
Simon Bridges
Henry Fitzgerald-O’Connor
T: +44 (0)20 7523 8000

Attached:

Chairman’s statement

Consolidated income statement (unaudited)

Consolidated statement of comprehensive income (unaudited)

Consolidated balance sheet (unaudited)

Consolidated statement of changes in equity (unaudited)

Consolidated statement of cash flow (unaudited)

Notes to the final results announcement (unaudited)

CHAIRMAN’S STATEMENT

for the year ended 31 July 2013

The headline financial results for 2013 mask two very different outcomes for the brands in the Next 15 Group.

Text 100, OutCast, M Booth and the Blueshirt Group each achieved their highest ever revenues, driving record revenues of £96.1m for the Group as a whole. The US businesses in total delivered 10% organic growth, providing reassurance around the fundamental business model and strategic direction of the Group in what remains its key market by scale.

On the other hand, Bite has had a difficult year compounded by accounting issues in two of its twelve offices. The resulting one off charges have damaged the Group’s overall profitability this year.

In summary, the Group has reported:-

  • Revenue up 5% to £96.1m from £91.6m last year.
  • Adjusted profits before tax of £7.7m compared with £9.6m last year.
  • Diluted adjusted earnings per share of 6.65p compared with 10.07p last year.
  • Profit before tax and charges for goodwill impairment of £4.0m compared with £6.0m last year
  • Reported profit before tax of £2.1m compared with £6.0m last year.
  • Net cash generated from operations up 11% to £11.2m from £10.1m last year.
  • Net debt1 down 31% to £1.8m despite making £3.0m of acquisition related payments

Revenue grew by 5% across the Group to £96.1m compared with £91.6m last time. The Group saw an improvement in organic growth from 1% at the interim stage to 2% for the full year, following gains made in H2, led by our North American businesses. During the second half the US grew at an impressive 17% on an organic basis and now accounts for 55% of group revenues. Using the new divisional splits introduced at the interim stage, Integrated agencies (84% of group revenues) grew by a total of 3% and Specialist agencies grew by 15%. For the full year, the UK saw its revenues decline by 3% primarily due to net client losses at the end of the prior year, EMEA remained flat and APAC declined by 2% given local currency movements. At the same time, the US grew revenues by 10%.

The board of directors (‘Board’) is satisfied that the adverse impact on this year’s earnings has resulted from issues that have been identified and are being managed. The agency portfolio is strong and our strategy is delivering organic growth, particularly in our largest market. Accordingly, the Board is recommending a final dividend of 1.925p per share, which increases the dividend for the year by 11% to 2.55p (2012: 2.30p).

The marketing sector is being radically changed by the way people discover, consume and distribute content. Thanks to the social and increasingly mobile web, consumers share their experiences of products and services in real time, in ways that greatly influence buying behaviour. Marketing can no longer be a brand’s clothing; it must be its skin. Advancing into today’s new marketing techniques is a natural step for this Group as these entail the joining of conversations and engaging people in fascinating content, skills which are an extension of Next 15’s PR heritage.

Next 15 is now essentially helping clients to become publishers and broadcasters, like Virgin whose new site, virgin.com, was designed and built by Beyond. A sophisticated content engine underpins this new site, creating reasons for Virgin customers to return with greater frequency and hold conversations with others while they are visiting. Symptomatic of the Group’s digital transition, Beyond’s work included sophisticated analytics that enable the content on the site to adapt to people’s interests.

The re engineering of the Next 15 Group for this new marketing context started several years ago and excellent progress has been made. Assignments for major brands such as American Express, Virgin, IBM, Cisco, Google and Facebook are no longer simple media relations work. In some cases, this has enabled the Group to expand its relationship with key clients (Google and American Express). In all cases, sophisticated social and digital programs tie into the media relations content generated by these businesses. In 2013, I am pleased to report, Next 15 has made real strides towards becoming an integrated social and digital communications group.

The Group has had to deal with growing pains as it makes this transition. The challenges at Bite and the accounting issues that were unearthed in this year’s audit have certainly impacted reported profits but they are not evidence of a flawed business model. Importantly, they are issues that can be contained and solved. Mistakes were certainly made, especially where systems did not keep up with change but management has moved quickly to adapt and the business will emerge stronger as a result.

Following David Dewhurst’s agreement to step down as finance director, the Board is focused on bringing in an experienced leader for the finance function to further develop the finance and accounting infrastructure within the brands, and reporting lines to Group, such that there is full financial transparency but without impeding the entrepreneurial nature of the brands. This will build on the actions already taken during the year which included the appointment of head of internal audit, recruitment of lead internal auditors in US and UK, an overhaul of treasury controls and the roll out of a 2 – 3 year cyclical review plan.

Looking ahead, the Group has a sound balance sheet with low net debt1 at £1.8m, giving it the opportunity to add further agencies such as Connections Media which became part of Next 15 six months ago, adding depth to the portfolio of client services. This Washington DC-based digital agency provides specialist digital services in the public affairs arena, a reflection that every area of marketing is being reinvented in the digital revolution.

The Group is also keen to continue to participate in the creation and development of new businesses. In the last year it invested in the start-up of Agent 3, a digital marketing agency founded by three employees. The agency sells technology platforms and data-based marketing services that help companies connect their CRM systems to their marketing activities. This type of organic investment is an important part of the long term growth of the Group. Overall, during the year, the Group has invested an additional £1m in its digital transition, in line with guidance given at the interims.

While this has been a tough year, it remains a year of progress in many ways. Record revenues and the steady transition of the business will underpin the future growth of the company. Indeed, the Group has made a good start to the current financial year and has already added work from clients such as Sainsbury’s and HBO.

On behalf of the Board, I would like to thank our staff, in 11 agencies and 19 countries for their hard work, creativity and ingenuity this year.

Richard Eyre
Chairman

UNAUDITED CONSOLIDATED INCOME STATEMENT

for the year ended 31 July 2013

                             
        Note       2013
£’000 		      2013
£’000 		      2012
£’000		       2012
£’000
Billings                       113,360               108,453
Revenue 2 96,069 91,583
Staff costs 68,261 62,767
Depreciation 1,540 1,328
Amortisation 1,589 1,483
Impairment 3 1,950 –
Charge for misappropriation of assets 3 526 1,778
Other operating charges               19,198               17,589        
Total operating charges                       (93,064)               (84,945)
Operating profit 2 3,005 6,638
Finance expense 6 (3,331) (2,170)
Finance income       7               2,490               1,477
Net finance expense                       (841)               (693)
Share of (losses)/profits of associate                       (79)               14
Profit before income tax 2,3 2,085 5,959
Income tax expense       4               (1,364)               (1,652)
Profit for the year                       721               4,307
Attributable to:
Owners of the parent 328 3,906
Non-controlling interests                       393               401
                        721               4,307
Earnings per share 8
Basic (pence) 0.56 6.85
Diluted (pence)                       0.49               6.04
 

UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 July 2013

                   
                2013
£’000 		      2012
£’000
Profit for the year 721 4,307
Other comprehensive income:
Exchange differences on translating foreign operations 951 229
Translation differences on long-term foreign currency intercompany loans (118) (80)
Net investment hedge               (229)       (235)
Other comprehensive income for the year               604       (86)
Total comprehensive income for the year               1,325       4,221
Total comprehensive income attributable to:
Owners of the parent 932 3,820
Non-controlling interests               393       401
                1,325       4,221
 

UNAUDITED CONSOLIDATED BALANCE SHEET

as at 31 July 2013

                             
        Note       2013
£’000 		      2013
£’000 		      2012
£’000		       2012
£’000
Assets
Property, plant and equipment 3,165 2,721
Intangible assets 41,369 41,019
Investment in equity accounted associate 1 80
Trade investment 219 212
Deferred tax assets 3,662 3,320
Other receivables               1,041               875        
Total non-current assets 49,457 48,227
Trade and other receivables 26,646 24,661
Cash and cash equivalents 9 8,064 8,436
Corporation tax asset               2,883               240        
Total current assets                       37,593               33,337
Total assets                       87,050               81,564
Liabilities
Loans and borrowings 9 9,131 10,750
Deferred tax liabilities 1,388 245
Other payables 26 6
Provisions 407 129
Deferred consideration 9 1,319 –
Contingent consideration 9 2,945 4,987
Share purchase obligation       9       3,251               3,989        
Total non-current liabilities (18,467) (20,106)
Loans and borrowings 9 591 259
Trade and other payables 24,280 19,605
Corporation tax liability 1,811 1,101
Derivative financial liabilities 206 320
Share purchase obligation 9 295
Contingent consideration       9       3,207               2,945        
Total current liabilities                       (30,390)               (24,230)
Total liabilities                       (48,857)               (44,336)
Total net assets                       38,193               37,228
Equity
Share capital 1,494 1,454
Share premium reserve 7,557 6,935
Merger reserve 3,075 3,075
Share purchase reserve (2,673) (2,673)
Foreign currency translation reserve 3,184 2,351
Other reserves (583) (133)
Retained earnings               23,954               24,100        
Total equity attributable to owners of the parent 36,008 35,109
Non-controlling interests                       2,185               2,119
Total equity       9               38,193               37,228
 

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 July 2013

        Share capital £’000       Share
premium
reserve
£’000 		      Merger
reserve
£’000 		      Share
purchase
reserve
£’000 		      Foreign
currency
translation
reserve
£’000 		      Other

reserves1

£’000

      Retained
earnings
£’000 		      Equity attributable to owners
of the parent
£’000 		      Non-controlling interests
£’000 		      Total
equity
£’000
At 31 July 2012       1,454       6,935       3,075       (2,673)       2,351       (133)       24,100       35,109       2,119       37,228
Profit for the year       –       –       –       –       –       –       328       328       393       721
Other comprehensive income for the year       –       –       –       –       833       (229)       –       604       –       604
Total comprehensive income for the year       –       –       –       –       833       (229)       328       932       393       1,325
Shares issued in satisfaction of vested share options 25 72 – – – – – 97 – 97
Shares issued on acquisitions 15 550 – – – – – 565 – 565
Movement due to ESOP share
purchases		 – – – – – (245) – (245) – (245)
Movement due to ESOP share
option exercises		 – – – – – 24 – 24 – 24
Movement in relation to share-based payments – – – – – – 569 569 – 569
Deferred tax on share-based payments – – – – – – (84) (84) – (84)
Share based payment charge for disposal of equity in a subsidiary to employees – – – – – – 450 450 – 450
Dividends to Owners of the parent – – – – – – (1,409) (1,409) – (1,409)
Non-controlling interest arising on acquisition – – – – – – – – 176 176
Non-controlling interest dividend       –       –       –       –       –       –       –       –       (503)       (503)
At 31 July 2013       1,494       7,557       3,075       (2,673)       3,184       (583)       23,954       36,008       2,185       38,193

1 Other reserves include ESOP reserve, treasury reserve and hedging reserve

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 July 2012

        Share capital £’000       Share
premium
reserve
£’000		       Merger
reserve
£’000		       Share
purchase
reserve
£’000		       Foreign
currency
translation
reserve
£’000		       Other
reserves
£’000		       Retained
earnings
£’000		       Equity attributable to owners
of the parent
£’000		       Non-controlling interests
£’000		       Total
equity
£’000
At 31 July 2011       1,416       5,996       3,075       (4,261)       2,202       (525)       21,137       29,040       3,293       32,333
Profit for the year       –       –       –       –       –       –       3,906       3,906       401       4,307
Other comprehensive income for the year       –       –       –       –       149       (235)       –       (86)       –       (86)
Total comprehensive income for the year       –       –       –       –       149       (235)       3,906       3,820       401       4,221
Shares issued in satisfaction of vested share options 11 82 – – – 595 (595) 93 – 93
Shares issued on acquisitions 27 857 – – – – – 884 – 884
Share purchase obligation settled on acquisition of non-controlling interest – – – 1,588 – – 538 2,126 (1,549) 577
Movement due to ESOP share option exercises – – – – – 32 (30) 2 – 2
Movement in relation to share-based payments – – – – – – 312 312 – 312
Deferred tax on share-based payments – – – – – – 40 40 – 40
Dividends to Owners of the parent – – – – – – (1,208) (1,208) – (1,208)
Non-controlling interest arising on acquisition – – – – – – – – 254 254
Non-controlling interest dividend       –       –       –       –       –       –       –       –       (280)       (280)
At 31 July 2012       1,454       6,935       3,075       (2,673)       2,351       (133)       24,100       35,109       2,119       37,228
 

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOW

for the year ended 31 July 2013

        Note       2013
£’000 		      2013
£’000 		      2012
£’000		       2012
£’000
Cash flows from operating activities                              
Profit for the year 721 4,307
Adjustments for:
Depreciation 1,540 1,328
Amortisation 1,589 1,483
Impairment 1,950 –
Finance expense 6 3,331 2,170
Finance income 7 (2,490) (1,477)
Share of loss/(profit) from
equity-accounted associate		 79 (14)
Loss on sale of property, plant and equipment 82 11
Income tax expense 1,364 1,652
Share-based payment charge 1,019 312
Movement in fair value of forward
foreign exchange contracts		       3       -               13        
Net cash inflow from operating activities before changes in working capital 9,185 9,785
Change in trade and other receivables (1,178) 3,229
Change in trade and other payables 2,911 (2,960)
Increase/(decrease) in provisions               269               (2)        
Change in working capital                       2,002               267
Net cash generated from operations 11,187 10,052
Income taxes paid                       (2,686)               (2,520)
Net cash from operating activities 8,501 7,532
Cash flows from investing activities
Acquisition of subsidiaries and trade and assets, net of cash acquired (962) (1,101)
Payment of contingent consideration (2,058) (4,563)
Acquisition of property, plant and equipment (1,786) (835)
Proceeds on disposal of property, plant and equipment - 3
Acquisition of intangible assets (161) (90)
Net movement in long-term cash deposits (166) (35)
Interest received       7       48               51        
Net cash outflow from investing activities                       (5,085)               (6,570)
Net cash from operating and
investing activities 		                      3,416               962
 

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOW CONTINUED

for the year ended 31 July 2013

        Note       2013
£’000 		      2013
£’000 		      2012
£’000		       2012
£’000
Net cash from operating and
investing activities 		                  3,416             962
Cash flows from financing activities
Proceeds from sale of own shares 95 96
Issue costs on issue of ordinary shares (5) (8)
Purchase of own shares (221) –
Capital element of finance lease rental repayment (59) (72)
Net cash movement in bank borrowings (1,286) 983
Interest paid 6 (483) (521)
Dividend and profit share paid to
non-controlling interest partners 		(503) (280)
Dividend paid to shareholders of the parent (1,409) (1,208)
Net cash outflow from financing activities                       (3,871)               (1,010)
Net decrease in cash and cash equivalents                       (455)               (48)
Cash and cash equivalents at beginning of the year 8,436 8,517
Exchange gains/(losses) on cash held                       83               (33)
Cash and cash equivalents at end of the year       9               8,064               8,436
 

NOTES TO THE FINAL RESULTS ANNOUNCEMENT

for the year ended 31 July 2013

1 Basis of preparation

The financial information set out within the final results announcement does not constitute the company's statutory accounts for 2013 or 2012 . Statutory accounts for the year ended 31 July 2012 have been reported on by the Independent Auditors. The Independent Auditors' Report on the Annual Report and Financial Statements for 2012 was unmodified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

The results for 2013 are unaudited. Statutory accounts for the year ended 31 July 2013 will be finalised based on the information presented in this announcement. The independent Auditors’ Report will be based on those statutory accounts once they are complete.

The financial information for the year ended 31 July 2013 has been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively Adopted IFRSs).

Accounting policies

The accounting policies applied are consistent with those of the audited statutory financial statements for the year ended 31 July 2012, as described in those financial statements.

Statutory accounts for the year ended 31 July 2012 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 July 2013, prepared under IFRS, will be delivered to the Registrar in due course.

2 Segment information

Reportable segments

The Board of Directors has identified the operating segments based on the reports it reviews as the chief operating decision maker to make strategic decisions, assess performance and allocate resources. The Group’s business is separated into a number of brands which are considered to be the underlying operating segments. These brands are organised into two reportable segments, being those providing Integrated Communications and those considered to be Specialist Agencies. Integrated Communications incorporates the two segments reported in the prior year as public relations services in the technology and consumer markets. Specialist Agencies incorporate results of the digital and research consultancy, and corporate communications consultancy reported separately in the prior year. Within these two reportable segments the Group operates a number of separate competing businesses in order to offer services to clients in a confidential manner where otherwise there may be issues of conflict.

Measurement of operating segment profit

The Board of Directors assesses the performance of the operating segments based on a measure of adjusted operating profit before intercompany recharges, which reflects the internal reporting measure used by the Board of Directors. This measurement basis excludes the effects of certain fair value accounting charges, including movement in fair value of financial instruments, amortisation of acquired intangibles, and goodwill impairment charges. Other information provided to them is measured in a manner consistent with that in the financial statements. Head office costs relate to Group costs before allocation of intercompany charges to the operating segments. Intersegment transactions have not been separately disclosed as they are not material. The Board of Directors does not review the assets and liabilities of the Group on a segmental basis and therefore this is not separately disclosed.

2 Segment information

Measurement of operating segment profit

        Integrated Communications
£’000 		      Specialist Agencies
£’000 		     

Head Office
£’000

      Total
£’000
Year ended 31 July 2013                        
Revenue 80,570 15,499 – 96,069
Segment adjusted operating profit       10,170       2,828       (4,778)       8,220
Year ended 31 July 2012
Revenue 78,100 13,483 – 91,583
Segment adjusted operating profit       11,934       2,299       (4,186)       10,047
 

Voluntary information on geographical results

        UK
£’000 		     

Europe and Africa
£’000

      US
£’000 		      Asia Pacific
£’000 		      Head Office
£’000 		      Total
£’000
Year ended 31 July 2013                                    
Revenue 19,119 10,504 52,468 13,978 – 96,069
Segment adjusted operating profit       1,146       (217)       11,804       265       (4,778)       8,220
Year ended 31 July 2012
Revenue 19,744 10,470 47,113 14,256 – 91,583
Segment adjusted operating profit       3,345       907       9,312       669       (4,186)       10,047
 

A reconciliation of segment adjusted operating profit to profit before income tax is provided as follows:

       

2013
£’000

     

2012
£’000
Segment adjusted operating profit       8,220       10,047
Amortisation of acquired intangibles       (1,378)       (1,181)
Impairment of Goodwill (note 3) (1,950) –
Reorganisation costs (note 3) (779) (437)
Charges associated with equity transactions accounted for as share based payments (581) –
Charge for misappropriation of assets (note 3) (265) (1,778)
Cost associated with investigation and response to fraudulent activity (579) –
Recovery of misappropriated assets 317 –
Movement in fair value of forward foreign exchange contracts       –       (13)
Total operating profit       3,005       6,638
Unwinding of discount on contingent consideration (797) (968)
Unwinding of discount on share purchase obligation (370) (453)
Change in estimate of future contingent consideration payable (254) 532
Change in estimate of future share purchase obligation 901 584
Movement in fair value of interest rate cap-and-collar contract 114 84
Share of profits of associate (79) 14
Other finance expense (483) (523)
Other finance income       48       51
Profit before income tax       2,085       5,959
 

3 Reconciliation of pro forma financial measures

        2013
£’000 		      2012
£’000
Profit before income tax       2,085       5,959
Movement in fair value of interest rate cap-and-collar contract (114) (84)
Movement in fair value of forward foreign exchange contracts – 13
Unwinding of discount on contingent and deferred consideration 797 968
Unwinding of discount on share purchase obligation 370 453
Charge for misappropriation of assets 1 265 1,778
Cost associated with investigation and response to fraudulent activity 579 –
Income from recovery and sale of misappropriated assets (318) –
Change in estimate of future contingent consideration payable 254 (532)
Change in estimate of future share purchase obligation (901) (584)
Charges associated with equity transactions accounted for as share based payments 581 –
Restructuring and reorganisation costs associated with digital transitions within brands 2 779 437
Amortisation of acquired intangibles 1,378 1,181
Impairment of goodwill3       1,950       –
Adjusted profit before income tax       7,705       9,589
 

Adjusted profit before income tax has been presented to provide additional information which will be useful to the reader to gain a better understanding of the underlying performance of the Group. The adjusted measure is also used for the performance calculation of the adjusted earnings per share used for the vesting of employee share options and performance shares.

1 The charge for misappropriation of assets relates to the prior year’s fraud whereby cash was extracted from the business by a long-serving employee in a trusted position and hidden through recognition of fictitious assets and understated liabilities across two of the Group’s North American Bite subsidiaries. The overstated assets have been written off and liabilities re-instated. The cost in the current year relates to the element of that same fraud which fell into the current financial year prior to identification.
2 Restructure costs relate to significant non-recurring spend within Brands wholly required to transition them into Integrated Communications businesses with more focus on digital services.
3 The impairment for goodwill relates to Bite Germany. Following management restructure, accounting errors and provisions recognised in the current year, the value associated with the acquired business has been re-assessed. Revised expectations of discounted future cashflows over the 5 year projection period have led to a full impairment of the acquired goodwill.

4 Income tax expense

The total tax charge for the year is £1.4m (2012: £1.7m) on consolidated profit before tax of £2.1m (2012: £6.0m). Certain important factors are having a significant effect on the tax rate in FY13 as follows: (i) There were losses in certain territories (£0.7m negative rate impact), notably the UK (£0.3m), Germany (£0.3m) and other territories (£0.1m), where it would not be prudent to recognize deferred tax assets; (ii) Charges made in the income statement associated with adjustments to acquisition accounting for subsidiaries that are not taxable (£0.7m negative tax rate impact); (iii) Higher rates of tax for overseas subsidiaries (£0.9m negative rate impact); (iv) The rate benefited from deductions taken for overseas taxes (£0.9m) and by the adjustment to the prior year tax liability of £0.4m following management revision of estimates for future tax exposures.

5 Dividend

A final dividend of 1.925p per share (2012: 1.735p) has been proposed. This has not been accrued. The interim dividend was 0.625p per share (2012: 0.565p), making a total for the year of 2.55p per share (2012: 2.30p). The final dividend, if approved at the AGM on the 21 January 2014, will be paid on 7 February 2014 to all shareholders on the Register of Members as at 10 January 2014. The ex-dividend date for the shares is 8 January 2014.

6 Finance expense

        2013
£’000 		      2012
£’000
Financial liabilities at amortised cost            
Bank interest payable 464 513
Financial liabilities at fair value through profit and loss
Unwinding of discount on contingent consideration 797 968
Unwinding of discount on share purchase obligation 370 453
Change in estimate of future contingent consideration payable 1,536 118
Change in estimate of future share purchase obligation 145 108
Other
Finance lease interest 8 2
Other interest payable       11       8
Finance expense       3,331       2,170
 

7 Finance income

        2013
£’000 		      2012
£’000
Financial assets at amortised cost            
Bank interest receivable 41 50
Financial assets at fair value through profit and loss
Movement in fair value of interest rate cap-and-collar contract 114 84
Change in estimate of future contingent consideration payable 1,282 650
Change in estimate on future share purchase obligation 1,046 692
Other
Other interest receivable       7       1
Finance income       2,490       1,477
 

8 Earnings per share

        2013
£’000 		      2012
£’000
Earnings attributable to ordinary shareholders       328       3,906
Movement in fair value of interest rate cap-and-collar contract (87) (65)
Movement in fair value of forward foreign exchange contracts - 10
Unwinding of discount on contingent consideration 797 968
Unwinding of discount on share purchase obligation 370 453
Charge for misappropriation of assets 323 1,225
Change in estimate of future contingent consideration payable (360) (534)
Change in estimate of share purchase obligation (953) (589)
Charges associated with equity transactions accounted for as share based payments 550 –
Reorganisation costs 569 336
Amortisation of acquired intangibles 940 803
Impairment of intangibles (note 3)       1,950       –
Adjusted earnings attributable to ordinary shareholders       4,427       6,513
 

8 Earnings per share (continued)

        Number       Number
Weighted average number of Ordinary Shares       59,068,925       57,036,925
Dilutive share options/performance shares outstanding 5,641,070 5,008,853
Other potentially issuable shares       1,863,899       2,645,103
Diluted weighted average number of Ordinary Shares       66,573,894       64,690,881
Basic earnings per share 0.56p 6.85p
Diluted earnings per share 0.49p 6.04p
Adjusted earnings per share 7.49p 11.42p
Diluted adjusted earnings per share       6.65p       10.07p
 

Adjusted and diluted adjusted earnings per share have been presented to provide additional useful information. The adjusted earnings per share is the performance measure used for the vesting of employee share options and performance shares. The only difference between the adjusting items in this note and the figures in note 3 is the tax effect of those adjusting items.

9 Analysis of net debt

Net debt is calculated as total borrowings and finance leases, less cash and cash equivalents. This measure of net debt excludes any acquisition related contingent liabilities or share purchase obligations. The quantum of these obligations is dependent on estimations of forecast profitability. Settlement dates are variable and range from 2012 to 2018.

        2013
£’000 		      2012
£’000
Total loans and borrowings       9,722       11,009
Obligations under finance leases 151 31
Less: cash and cash equivalents       (8,064)       (8,436)
Net debt 1,809 2,604
Total equity       38,193       37,228
Total capital       40,002       39,832
        2013
£’000 		      2012
£’000
Net debt       1,809       2,604
Share purchase obligation 3,546 3,989
Contingent consideration 6,152 7,932
Deferred consideration       1,319       –
        12,826       14,525

1Net debt excludes contingent consideration and share purchase obligations. See note 9 to the final results announcement.

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