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Chime Communications plc

Chime Communications plc. 2010 Interim Results For the Six Months Ended 30 th June 2010 25 th August 2010. Agenda. Highlights Operational Review Financial Review Key Performance Indicators Our Growth Plan Sports Marketing Outlook . Chime Since 2005.

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Chime Communications plc

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  1. Chime Communications plc 2010 Interim Results For the Six Months Ended 30th June 2010 25th August 2010

  2. Agenda Highlights Operational Review Financial Review Key Performance Indicators Our Growth Plan Sports Marketing Outlook

  3. Chime Since 2005 • Compound pretax profit growth of 30% • Earnings per share almost doubled • Dividend per share more than doubled

  4. Five Year Trading History

  5. First Half of 2010 • Operating income up 22% - organic growth of 5% • Operating profit up 35% - organic growth of 11% • Profit before tax up 39% to £12.3 million • Operating margin increased to 18.1% from 16.3% • Earnings per share growth of 8% • Interim dividend per share growth of 15% • Net cash of £5.5 million

  6. Operational Highlights • Best first half new business performance in the Company’s history • 91% of full year operating income now contracted • Strong growth in Public Relations and Sports Marketing • International work up 20% with proportion maintained at 46% of total income • Public Relations Group No. 1 in the UK and No. 5 in the world • Sports Marketing Group No. 5 in the world and No. 1 in UK Sponsorship League Table • VCCP – Marketing magazine’s Creative Agency of the Year • Successfully integrated Essentially Group • Acquisition of Tree completed • Completed restructuring of Research Group and returned to growth • Opening of Pelham Bell Pottinger Asia

  7. Operating Profit Analysis

  8. Operational Review

  9. Segmental Analysis

  10. Public Relations • Strong cost control • Improvement across all sectors • Strong growth from financial public relations, public affairs, corporate public relations, corporate and social responsibility, property and international • Geopolitical continues to perform well • Proportion of international work continues to increase • Prospects remain good for the second half across the Group • Wins include Airbus Global, Alternative Hotel Group, Golden Agri, The Government of Sri Lanka, Kurt Geiger, Nintendo, Port of Dover, powerPerfector, St. Tropez, United Arab Emirates University, Qatar Holdings, Qatari Diar and Homesun

  11. Advertising and Marketing Services • Strong revenue growth. Wins include Freesat, Gatwick Express, News International, Land Securities, O2 Digital, Unilever and Zoopla • Increase in resources to cope with new business pitches and gearing up digital capability • VCCP offices in Berlin and Prague ahead of expectation • VCCP Health now well positioned for growth. Wins include Omega Pharma and Roche • Teamspirit, our specialist financial services communications business, grew very strongly • Second half prospects very good with first contribution from O2 Digital account

  12. Sports Marketing • Marketplace and performance remains strong • Wins include Mizuno, Lycra, GSK ,BP, BT, GE, Investec, Lebara and Tottenham Hotspur • Integration of Essentially and Fast Track progressing well • Cost savings being made • Clear growth plan being developed • Fast Track Middle East continues to grow • Essentially performed ahead of our expectation

  13. Research Group • Marketplace performance is improving. • Wins include British Gas, Cheapflights.co.uk, Comres Election Polling, Ofgem, Olympic Development Authority • Management restructuring now complete • Return to profits • Very strong at Facts International (quantitative research) • Opinion Leader (qualitative research) not expected to improve until next year • Tree now joined and trading ahead of expectations • Second half year expected to be better than first half

  14. Diversified Strategy Operating income By division By geography 5% 21% 46% 49% 54% 25%

  15. TMT Financial Services Leisure B2B FMCG Travel & Tourism Government & Public Bodies +19% +34% +59% +62% +138% +118% -16% Operating Income by Industry Sector

  16. Financial Review

  17. Profit Before Tax The above excludes: Amortisation of Intangibles (0.7) (0.1) (0.3) (0.1) Costs of Acquisitions and Restructuring (1.3) - (0.2) - Write Down of Investments - (0.3) (1.0) - Profit on Partial Disposal of Subsidiaries - - 1.3 -

  18. Cash Flow

  19. Balance Sheet

  20. Strong Cash Position • Net cash at 30th June 2010 of £5.5 million (30th June 2009: £18.1 million – 31st December 2009: £4.8 million) • £32 million facility with RBS until July 2013 • Interest rate of 1.3% above LIBOR (£2 million at 2% above LIBOR) • Cash payments for acquisitions and deferred considerations of £9.5 million in first half of 2010 • No further deferred considerations in 2010 and cash deferred considerations expected to be no more than £0.7 million in 2011 • Expect to be at least cash neutral at end of 2010 • Well within bank covenants • Net debt to EBITDA less than 2.0 times • Interest cover of more than 4.5 times

  21. Deferred Considerations Outstanding Maximum payments Note: The split between cash and shares can vary at Chime’s discretion but the above reflects the current expectation.

  22. Key Performance Indicators

  23. Income from Shared Clients 68% 60%* 56% 56% 2007 2008 2009 2010 • Value of income from shared clients in first half of 2010 rose by 7% from £40 million to £43 million. • 2010 operating income includes Essentially Group. If this was excluded, the 2010 percentage of income from shared clients would be 65%.*

  24. Average Fee per Client £64,000 £53,000 £51,000 £45,000 2007 2008 2009 2010 • Essentially has a large number of smaller clients and as a result the Group acted for 1,353 clients in the first half of 2010 compared to 908 in the first half of 2009. If these are excluded 2010 first half average fee per client is the same as 2009.

  25. Operating Profit Margin 18.1% 16.9% 16.7% 16.3% 2007 2008 2009 2010 • Strong cost control • Most businesses performing well

  26. International Income 46% 46% 34% 33% 2010 2007 2008 2009 • Income from international work rose from £27 million to £32 million • International marketplace remains good • Geopolitical work remains strong • Overseas offices performing well

  27. Our Growth Plan

  28. Objectives • More than double profits within the next four years • Maintain a high margin with careful cost control • Remain debt free

  29. Growth Through ‘Modern’ Communications Strategy • Concentrate on diversified strategy and invest in sectors in which we see above average growth, eg. sports marketing • Continue new service development to fuel organic growth, eg. international public affairs, search marketing • Develop international offices in markets with highest growth potential building on success in the Middle East: Pelham Bell Pottinger Asia opened in 2010; Hong Kong and Rio de Janeiro as further opportunities • Build on ‘leading edge’ reputation in digital and social marketing to win accounts similar to O2 Digital • Concentrate on providing ‘integrated’ solutions to major global organisations seeking ‘modern’ ways to manage their reputation

  30. Spotlight on Sport

  31. The Group We are made up of 330 people across the Sports Marketing Group – Top 5 in the world. We operate in 10 cities across the following regions: • Europe – UK, Spain • Australasia – Australia, New Zealand • Middle East – Abu Dhabi • Asia – Japan • Africa – South Africa • Looking at possible operations in South America (Brazil) & Hong Kong Financial • 21% of Chime’s H1 operating income

  32. Worldwide Sponsorship Spending by Property Type Size of Market • 2009 projected worldwide sponsorship market: $44.4bn • Of all forms of sponsorship, sport accounts for 71%:

  33. Regional performance of Sports Marketing Regional growth rates:

  34. Top Ten Sponsored Sports by value:

  35. The growing popularity of sport and audience delivery The Growing Popularity of Sport: Increasing Average TV Audiences for Major Events Event Average Audience 593m (Beijing 2008) Olympic Games: Opening Ceremony 140m (Athens 2004) 252m (Beijing 2008) Olympic Games: Closing Ceremony 105m (Athens 2004) 178m (Beijing 2008) Olympic Games: 100 Men's 100m Final 93m (Athens 2004) 166m (Germany v Spain 2008) Football: Euro Championships final 161m (Portugal v Greece 2004) 104m (NEP v NY Giants 2008) American Football: NFL Super Bowl 97m (Indianapolis Colts v Chicago Bears 2007) 98m (Man Utd v Chelsea 2008) Football: Champions League Final 72m (ACMilan v Liverpool 2007) 80m (Brazilian Grand Prix 08) Formula One 78m (Brazilian Grand Prix 07) 23m (Federer v Nadal 2008) Tennis: Wimbledon men's final 21m (Federer v Nadal 2007) 23m (Canada v Russia 2008) Ice Hockey: World Championship final 6m (Canada v Finland 2007) (Boston Celtics v LA Lakers, game 6, 2008) 20m Basketball: NBA finals 12m (Cleveland Cavaliers v SA Spurs, game 4, 2007) 2008) 19m (US Masters Final Day Golf 21m (US Masters Final Day 2007) (Philadelphia Phillies v Tampa Bay Rays, game 5, 2008) 17m Baseball: MLB World Series (Boston Red Sox v Colarado Rockies, game 4, 2007) 24m 14m (Stage 9, 2008) Cycling: Tour de France 12m (Final Stage 2007) Source: futures sport + entertainment, TV Sports Markets

  36. Chime’s opportunity • Concentrate on top 10 sports: we work in 8/10 already. Olympics & Paralympics Rugby Union Tennis Formula 1

  37. Basketball Cricket Football Golf Chime’s opportunity • Concentrate on top 10 sports: we work in 8/10 already.

  38. Concentrate on EMEA, Asia Pacific and Latin America EMEA Asia Pacific Latin America

  39. - Octagon - Fragmented - Fragmented - Fragmented Leverage ‘full service’ and specialist Chime offering v fragmented competition IPG WPP Publicis Omnicom Havas • Prism • & Fragmented

  40. A Decade of Sport 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

  41. Why is all this increasingly important? Increasing media fragmentation: • Sport and entertainment bring audiences together • Shared passion and participation through TV, spectators, participants and children taking part • Engagement in a way traditional media cannot achieve • Importance to brands and governments: • Event bidding • Domestic health agenda

  42. Build a world leading full-service sports marketing brand

  43. Outlook

  44. Outlook • Our H1 profits are up again – by nearly 40% • Growth areas • M&A and corporate activity • Global regulation and international public affairs • Country promotion • Green technology • Corporate and social responsibility • Sports and sporting events • Internet and mobile technology • We have a strong management team and are developing the ‘stars’ of the future • We have brilliant clients who share our commitment to finding new and better ways to gain value from their communications investment • We remain cautious but optimistic that we will continue to outperform the market

  45. Appendices

  46. Some of Our Leading Clients

  47. For further information please contact: Chris Satterthwaite or Mark Smith on 020 7861 8515 or go to www.chime.plc.uk

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