Interim - Chime Communications PLC

The Chime Group helps clients create,manage, monitor and market theirbusinesses, brands and reputationsboth in the UK and internationally.Chime is the holding company for the UK’sleading public relations group, Bell Pottinger;the UK’s leading research and engagementgroup, Opinion Leader; and one of the fastestgrowing advertising and marketing servicesgroups in the UK, that includes VCCP,Teamspirit and Fast Track.ContentsSummary of results 01Chairman’s statement 02Condensed consolidated income statement 05Condensed consolidated statementof recognised income and expense 05Condensed consolidated balance sheet 06Condensed consolidated cash flow statement 07Condensed reconciliation of equity attributableto equity holders of the parent 08Notes to the accounts 09Forward looking statements 12Responsibility statement 12Independent review report toChime Communications plcibc

Interim Report 2009New business wins in 2009 included:Divisional performanceTrading conditions remained difficult in the first half of 2009but our diversified business model enabled us to maintain ourprofit performance. Those businesses that were affected bythe difficult conditions were offset by businesses thatcontinued to grow.We have continued to focus on costs and whilst headcounthas risen in those businesses that are doing well, overall ourheadcount has reduced since the end of 2008.Based on operating income, Public Relations continues to beour largest division at 55% (2008 full year: 55%), Advertisingand Marketing Services was 40% (2008 full year: 39%) andResearch was 5% (2008 full year: 6%).Public Relations – Bell Pottinger Group includingGood Relations, Harvard, Insight and CorporateCitizenshipThe Public Relations Division has performed extremely wellin the first half of 2009. Cost control remained good with the10% increase in revenue resulting in a 25% increase inoperating profit. Margin improved to 20.9%.Less good performance in public affairs, financial publicrelations and technology public relations was offset by strongperformance in geopolitical, corporate and socialresponsibility, the Middle East and consumer.Advertising and Marketing Services – VCCP Group,Fast Track and TeamspiritThe operating income in the Advertising and MarketingServices Division increased by 10% in the first half of 2009but operating profit decreased by 4%. Income in this division,particularly in VCCP and Fast Track, is weighted towards thesecond half of the year, but costs remain constant, thereforewe expect the second half to show an increase in profit.Summary of resultsFirst Half First Half2009 2008 %£m £m changeActualOperating income 58.4 54.5 +7%Operating profit 9.4 9.1 +3%Operating profit margin 16.1% 16.8%Public Relations Division2009 2008 %£m £m changeOperating income 32.0 29.3 +10%Operating profit 6.7 5.3 +25%Operating profit margin 20.9% 18.4%Advertising and Marketing Services Division2009 2008 %£m £m changeOperating income 23.4 21.1 +10%Operating profit 3.4 3.6 -4%Operating profit margin 14.8% 17.0%Research and Engagement Division2009 2008 %£m £m changeOperating income 3.0 4.1 -26%Operating profit 0 0.5 -105%Operating profit margin – 11.3%VCCP Digital and VCCP Search continued to grow at a fastrate (up over 50% in operating profit) as they have done sinceour initial investment two years ago.Overall this division is expected to show operating profitgrowth for the full year 2009.Research - Opinion Leader, Facts International andCaucus WorldA very disappointing first half year. The marketplace remainsdifficult but this was compounded by lower profits at OpinionLeader and continued investment in Caucus World,our digital platform.The launch of Caucus World was delayed but it has nowstarted to generate income and should become profitableduring the second half of 2009. The second half of 2009is likely to remain difficult at Opinion Leader as furtherrestructuring plans are put in place.3

Chime Communications plcFacts International, after a difficult first quarter, has had anextremely good second quarter with several new client wins.These client wins should lead to strong growth in the secondhalf of 2009.Overall the year is likely to remain difficult but we expect theDivision to return to making profits in the second half of 2009.During the course of the remainder of the year we will bring innew management and reposition the Research Division withthe expectation of a strong performance in 2010.Cash flow, banking arrangements anddeferred considerationsNet cash at 30 June 2009 was £18.1 million compared tonet debt at 30 June 2008 of £13.2 million and net cash at 31December 2008 of £6.3 million. The Group continued tofocus on improving its credit control and cash collectionprocesses but also benefited, once again, from unusuallyhigh cash receipts close to the period end. Without thesereceipts the cash balance would probably have been similarto the balance at 31 December 2008.The Group generated cash from trading activities in thefirst half of 2009 of £17.6 million (H1 2008: £1.0 million)representing a cash conversion of 206% (H1 2008: 12%).Excluding the improvement in working capital, cashgenerated from trading in the first half of 2009 was £10.3million and cash conversion was 121%.The Group continued to operate well within its bankingcovenants and has a borrowing facility of £32 million whichcontinues until July 2013.Deferred considerations still payable total a maximum of£35.5 million, comprising £18.5 million payable in cash and£17.0 million payable in shares or cash at Chime’s discretion.No payments are payable in the remainder of 2009, £9.9million is payable in 2010, £2.1 million in 2011 with thebalance payable between 2012 and 2014, subject to targetsbeing met.TaxationThe effective tax charge for the first half of 2009 was 31.6%in line with the full year 2008. This is expected to continue forthe full year 2009.DividendsThe Board has declared an interim dividend of 1.60p pershare (H1 2008: 1.54p).Outlook• The outlook is good although economic uncertaintyhangs over the market.• Our business model is becoming more attractive andmore relevant to clients.• Reputation management is now more important than ever.• Our digital work and expertise is growing and expandingand our international model is becoming morecompetitive.• It appears that this year being a one stop shop,integrated and diversified, channel neutral and low costis the new black.• Big is not as beautiful or as safe as it once was.• As marketing expenditure continues to decline, internetsolutions become more effective. We think this is apermanent change.• Our small cost base compared to the big four gives usa real competitive advantage.The new business pipeline is strong, a large proportion ofsecond half operating income is committed (nearly 90%),our costs are under control, our cash management is strongand we have the opportunity to make some strategicacquisitions to develop our business ready for a possibleupturn at some point in 2010.We have had a good first half and by delivering the highestpretax profit in our history we have outperformed the marketand our competition.We remain cautiously optimistic for the full year.Lord BellChairman24th August 2009The interim dividend will be payable on 16 October 2009to shareholders on the register at 25 September 2009.The ex-dividend date is 23 September 2009.4

Interim Report 2009Condensed consolidated income statementSix months ended 30 June 20096 months to 6 months to 12 months to30 June 30 June 31 December2009 2008 2008(unaudited) (unaudited) (audited)Note £’000 £’000 £’000Continuing operationsRevenue 137,485 115,497 277,394Cost of sales (79,112) (61,038) (165,304)Operating income 58,373 54,459 112,090Operating expenses (48,858) (45,265) (93,846)Amortisation of intangible assets (88) (67) (134)Operating profit 1 9,427 9,127 18,110Share of results of associates (6) 135 186Disposal of assets held for sale (188) - -Impairment in carrying value of investment (95) - -Investment income 47 71 456Finance costs (215) (548) (1,393)Finance cost of deferred consideration (449) (615) (1,020)Profit before tax 8,521 8,170 16,339Tax (2,693) (2,533) (5,164)Profit for the period 5,828 5,637 11,175Attributable to:Equity holders of the parent 5,768 5,286 10,783Minority interest 60 351 3925,828 5,637 11,175Earnings per share 3From continuing operationsBasic 10.44p 9.98p 19.87pDiluted 10.32p 9.86p 19.59pCondensed consolidated statement of recognised income and expenseSix months ended 30 June 20096 months to 6 months to 12 months to30 June 30 June 31 December2009 2008 2008(unaudited) (unaudited) (audited)£’000 £’000 £’000Gain/(loss) on revaluation of available for sale investments 136 (32) (113)Exchange differences on translation of foreign subsidiaries (1,200) 348 1,866Net profit recognised directly in equity (1,064) 316 1,753Profit for the period 5,828 5,637 11,175Total recognised income and expense for the period 4,764 5,953 12,928Attributable to:Equity holders of the parent 4,704 5,602 12,536Minority interest 60 351 392Total recognised income and expense relating to the period 4,764 5,953 12,9285

Chime Communications plcCondensed consolidated balance sheetas at 30 June 2009As at As at As at30 June 30 June 31 December2009 2008 2008(unaudited) (unaudited) (audited)£’000 £’000 £’000Non-current assetsGoodwill 112,527 110,852 113,086Other intangible assets 823 718 805Property, plant and equipment 4,081 4,478 4,589Investments in associates 881 731 858Other investments 255 350 350Due from deferred consideration 504 568 551Available for sale investments – 195 113Deferred tax asset 836 1,191 829119,907 119,083 121,181Current assetsWork in progress 2,507 2,527 2,019Trade and other receivables 42,944 51,249 47,705Cash and cash equivalents 18,207 12,295 6,80463,658 66,071 56,528Total assets 183,565 185,154 177,709Current liabilitiesTrade and other payables (72,473) (67,033) (69,536)Current tax liabilities (2,420) (2,922) (2,706)Obligations under finance leases (35) (30) (48)Deferred consideration payable (9,944) (339) (207)Short-term provisions (99) (274) (181)(84,971) (70,598) (72,678)Net current liabilities (21,313) (4,527) (16,150)Non-current liabilitiesBank loans – (17,411) –Long-term provisions (7,320) (12,919) (16,524)Obligations under finance leases (11) (44) (16)(7,331) (30,374) (16,540)Total liabilities (92,302) (100,972) (89,218)Net assets 91,263 84,182 88,491EquityShare capital 14,264 14,264 14,264Share premium account 37,121 37,121 37,121Own shares (5,395) (4,928) (4,952)Equity reserve 32,385 32,385 32,385Translation reserve 812 494 2,012Accumulated profits 13,187 3,816 8,731Equity attributable to equity holders of the parent 92,374 83,152 89,561Written put options over minority interests (2,000) – (2,000)Minority interest 889 1,030 930Total equity 91,263 84,182 88,4916

Interim Report 2009Condensed consolidated cash flow statementSix months ended 30 June 20096 months to 6 months to 12 months to30 June 30 June 31 December2009 2008 2008(unaudited) (unaudited) (audited)Note £’000 £’000 £’000Net cash inflow/(outflow) from operating activities 5 15,070 (416) 21,277Investing activitiesInterest received 59 71 330Dividend received from investment 47 – 126Proceeds on disposal of property, plant and equipment 12 29 39Purchases of property, plant and equipment (512) (946) (2,021)Proceeds from disposal of investment held for sale 63 – –Purchases of other intangible assets (151) (36) (207)Acquisition of investment in an associate – – (117)Loans granted to associates 20 (8) (59)Acquisition of subsidiaries (346) (10,579) (10,728)Disposal of subsidiary (14) – –Deferred consideration received 47 – 17Net cash used in investing activities (775) (11,469) (12,620)Financing activitiesDividend paid (1,766) (1,352) (2,219)Dividends paid to minorities (87) (246) (366)(Repayments)/increases in borrowings – 9,036 (8,375)Issue/(repayment) of loan notes (339) 7,120 (480)Repayments of obligations under finance leases (18) (28) (38)Proceeds on issue of ordinary share capital – – –Purchase of own shares (682) (546) (571)Net cash (used in)/from financing activities (2,892) 13,984 (12,049)Net increase/(decrease) in cash and cash equivalents 11,403 2,099 (3,392)Cash and cash equivalents at beginning of period 6,804 10,196 10,196Cash and cash equivalents at end of period 18,207 12,295 6,804Cash and cash equivalents comprise cash at bank, loan note deposits less overdrafts. Taking into account the following borrowings net cash was:Bank loans: – (17,411) –Finance leases (46) (74) (64)Loan notes outstanding (77) (8,017) (416)Overall net cash/(debt) 18,084 (13,207) 6,3247

Chime Communications plcCondensed reconciliation of equity attributable to equity holders of the parentAs at As at As at30 June 30 June 31 December2009 2008 2008(unaudited) (unaudited) (audited)£’000 £’000 £’000Balance at 1 January 89,561 73,074 73,074Dividends paid (1,766) (1,352) (2,219)Credit in relation to share based payments 558 526 892Purchase of own shares (443) (547) (571)Own shares disposed of on exercise of options (240) – –Net profit for the period attributable to equity holders of the parent 4,704 5,602 12,536Increase in share capital – 5,849 5,849Balance at 30 June/31 December 92,374 83,152 89,5618

Interim Report 2009Notes to the accounts1. Business segmentsFor management purposes, the group is organised into three operating divisions – Public Relations, Advertising and Marketing Services and Research.Principal activities of these divisions are as follows:Public RelationsThe Public Relations division comprises some of the leading names in the industry, including Bell Pottinger, Good Relations, Harvard, Insight,Resonate, De Facto and Corporate Citizenship. It is the ranked number 1 PR Group in the UK in the PR Week public relations consultancy leaguetable for 2008. It serves major UK and international brands, as well as governments, government departments, pharmaceutical and healthcarecompanies, charities, not-for-profit organisations, professional service firms, consumer brands and famous people.Advertising and Marketing Services (‘AMS’)The AMS division possesses specialist skills in advertising and marketing services – direct marketing, digital communication, sponsorshipexploitation, point of sale, sales promotion and specialist media planning and buying. It also specialises in the niche market of financial services.Research and EngagementThe Research and Engagement division is made up of Opinion Leader, Ledbury Research and Facts International. Opinion Leader is one of the UK’sleading research consultancies and Ledbury Research provides research and advice to brands who market and sell to high net worth consumers.The group’s operations are located in the United Kingdom, Germany, Spain, the Middle East and USA.RevenueOperating Income6 months to 6 months to 12 months to 6 months to 6 months to 12 months to30 June 30 June 31 December 30 June 30 June 31 December2009 2008 2008 2009 2008 2008(unaudited) (unaudited) (audited) (unaudited) (unaudited) audited£’000 £’000 £’000 £’000 £’000 £’000Class of businessPublic Relations:Continuing operations 86,442 68,077 178,955 32,033 29,249 61,352Advertising and Marketing Services:Continuing operations 46,463 40,003 86,320 23,345 21,140 43,778Research:Continuing operations 4,580 7,417 12,119 2,995 4,070 6,960137,485 115,497 277,394 58,373 54,459 112,090Public Relations:Continuing operations 6,710 5,380 12,115 20.9% 18.4% 19.7%Advertising and Marketing Services:Continuing operations 3,446 3,589 6,166 14.8% 17.0% 14.1%Research:Continuing operations (23) 460 376 (0.8%) 11.3% 5.4%10,133 9,429 18,657 17.4% 17.3% 16.6%Chime central costs (706) (302) (547)Operating profit 9,427 9,127 18,110 16.1% 16.8% 16.2%Share of results of associates (6) 135 186Sale of assets held for sale (188) – –Impairment in carrying value of investment (95) – –Investment income 47 71 456Finance costs (215) (548) (1,393)Finance cost of deferred consideration (449) (615) (1,020)Profit before tax 8,521 8,170 16,339As required by IFRS8 (Operating Segments) the prior comparatives for the 6 months to 30 June 2008 have been restated to reflect the changein management reporting of TTA Public Relations within the group. TTA Public Relations was previously reported within advertising and marketingservices, it is now included within public relations. The effect of this change is as follows for 6 months to 30 June 2008: revenue £1,931,000,operating income £1,522,000, operating profit £236,000. The results to 31 December 2008 were reported using these segments and thereforeno change is necessary to these numbers.9

Chime Communications plc2. Basis of preparationThe results for the 6 months ended 30 June 2009 are unaudited and do not constitute statutory accounts within the meaning of section 240 of theCompanies Act 1985.The information for the year ended 31 December 2008 does not constitute statutory accounts as defined in section 240 of the Companies Act 1985.A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors reported on those accounts: theirreport was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 237(2) or (3) of theCompanies Act 1985.The condensed consolidated income statement, balance sheet, statement of recognised income and expense, cash flow statement andreconciliation of equity attributable to equity holders of parent have been prepared in accordance with International Accounting Standard (IAS) 34‘Interim Financial Reporting’, as adopted by the European Union.The annual financial statements of Chime Communications plc are prepared in accordance with IFRSs as adopted by the European Union.The accounting policies adopted in the preparation of the half year condensed consolidated financial statements are consistent with those followedin the preparation of the Group's annual financial statements for the year ended 31 December 2008, except for the adoption of IFRS 8 OperatingSegments. This standard requires disclosure of information about the Group's operating segments and replaces the requirement to determineprimary (business) and secondary (geographical) reporting segments of the Group. Adoption of this standard did not have any effect on the financialposition or performance of the Group. The Group determined that the operating segments were the same as the business segments previouslyidentified under IAS14 Segment Reporting.Going concern basisThe Directors have prepared cash flow forecasts which indicate that the Group has adequate resources to continue in operational existence for theforeseeable future. In preparing these forecasts the directors have taken into account the following key factors:a. The possible impact of the continued economic downturn on the Group’s business;b. Key client account renewals;c. The level of committed and variable costs; andd. Current new business targets compared to levels achieved in previous years.The Group currently has a borrowing facility of £32 million which continues until July 2013. This facility is subject to banking covenants.At 30 June 2009 the Group was not utilising its loan facilityThe Directors have concluded, based on the cash flow forecasts, that it is appropriate to prepare the accounts on a going concern basis.3. Earnings per shareFrom continuing operationsThe calculation of the basic and diluted earnings per share is based on the following data:6 months to 6 months to 12 months to30 June 30 June 31 December2009 2008 2008(unaudited) (unaudited) (audited)£’000 £’000 £’000EarningsEarnings for the purpose of basic earnings per share being net profit attributableto the equity holders of the parent 5,768 5,286 10,783Number of sharesWeighted average number of ordinary shares for the purposes of basic earnings per share 55,238,494 52,964,896 54,279,428Effect of dilutive potential ordinary shares:Share options and deferred shares 646,348 664,782 754,319Weighted average number of ordinary shares for the purposes of diluted earnings per share 55,884,842 53,629,678 55,033,74710

Interim Report 20094. Dividends6 months to 6 months to 12 months to30 June 30 June 31 December2009 2008 2008(unaudited) (unaudited) (audited)£’000 £’000 £’000Amounts recognised as distributions to equity holders in the period (approved):Interim dividend for the year ended 31 December 2008 of 1.54p (2007: 1.10p) per share – – 867Final dividend for the year ended 31 December 2008 of 3.18p (2007: 2.40p) per share 1,766 1,352 1,352Amounts not recognised as distributions to equity holders in the period (declared):1,766 1,352 2,219Proposed interim dividend for the year ended 31 December 2009 of 1.60p (2008: 1.54p) per share 899 867 –Proposed final dividend for the year ended 31 December 2008 of 3.18p (2007: 2.40p) per share – – 1,789899 867 1,789The proposed interim dividend was approved by the Board on 20 August 2009 and has not been included as a liability as at 30 June 2009.The dividend will be paid on 16 October 2009 to those shareholders on the register at 25 September 2009. The expected ex-dividend date is 23September 2009.Under an agreement dated 3 April 1996, The Chime Communications Employee Trust which holds 895,477 ordinary shares representing 1.57%of the company’s called-up share capital, has agreed to waive all dividends.5. Notes to the consolidated cash flow statement6 months to 6 months to 12 months to30 June 30 June 31 December2009 2008 2008(unaudited) (unaudited) (audited)£’000 £’000 £’000Operating profit 9,427 9,127 18,110Adjustments for:Share based payment expense 558 526 1,292Translation differences (482) 87 727Depreciation of property, plant and equipment 969 872 1,872Amortisation of other intangible assets 45 12 30Amortisation of acquired intangibles 88 67 134Gain on disposal of property, plant and equipment 4 8 17Increase/(decrease) in provisions 258 (193) (418)Operating cash flows before movements in working capital 10,867 10,506 21,764Increase in work in progress (480) (967) (459)Decrease/(increase) in receivables 4,658 (8,336) (4,878)Increase in payables 3,299 1,136 11,274Cash generated by operations 18,344 2,339 27,701Income taxes paid (3,023) (2,161) (4,961)Interest paid (251) (594) (1,463)Net cash inflow/(outflow) from operating activities 15,070 (416) 21,2776. Related party transactionsTransactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosedin this note. There were no significant transactions between the Group and its associates.11

Chime Communications plcForward looking statementsThe interim management report contains certain forward looking statements in respect of Chime Communications plc and the operation of itssubsidiaries. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances thatmay or may not occur in the future. There are a number of factors that could cause actual results or developments to differ materially from thoseexpressed or implied by these forward looking statements and forecasts. Nothing in this announcement should be construed as a profit forecast.Responsibility statementWe confirm that to the best of our knowledge:(a)the condensed set of financial statements has been prepared in accordance with IAS 34 ‘Interim Financial Reporting’;(b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the firstsix months and description of principal risks and uncertainties for the remaining six months of the year); and(c)the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions andchanges therein).By order of the boardMark SmithFinance Director24 August 200912

Interim Report 2009Independent review report to Chime Communications plcWe have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six monthsended 30 June 2009 which comprises the condensed consolidated income statement, the condensed consolidated statement of recognisedincome and expense, the condensed consolidated balance sheet, the condensed consolidated cash flow statement, the condensed reconciliationof equity attributable to equity holders of the parent and related notes 1 to 6. We have read the other information contained in the half-yearly financialreport and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set offinancial statements.This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Reviewof Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has beenundertaken so that we might state to the company those matters we are required to state to them in an independent review report and for no otherpurpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work,for this report, or for the conclusions we have formed.Directors' responsibilitiesThe half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the halfyearlyfinancial report in accordance with the Disclosure and Transparency Rules of the United Kingdom’s Financial Services Authority.As disclosed in note 1, the annual financial statements of the group are prepared in accordance with 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 AccountingStandard 34, "Interim Financial Reporting," as adopted by the European Union.Our responsibilityOur responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report basedon our review.Scope of reviewWe conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim FinancialInformation Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review ofinterim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analyticaland 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 beidentified in an audit. Accordingly, we do not express an audit opinion.ConclusionBased on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearlyfinancial report for the six months ended 30 June 2009 is not prepared, in all material respects, in accordance with International AccountingStandard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.Deloitte LLPChartered Accountants and Registered AuditorsLondon, United Kingdom24 August 2009

CONTACT DETAILSChime Communications plc14 Curzon StreetLondon W1J 5HNwww.chime.plc.ukLord Bell - Chairmanlord.bell@chime.plc.ukChristopher Satterthwaite -Group Chief Executivecsatterthwaite@chime.plc.ukMark Smith - Group Finance Directormsmith@chime.plc.ukRobert Davison - Company Secretaryrdavison@chime.plc.ukDesigned and produced by Rare Corporate Designwww.rarecorporate.co.ukProduct Group from well-managed forestsand other controlled sourceswww.fsc.org Cert no. SGS-COC_003263© 1996 Forest Stewartship CouncilThis Interim Report is printed on FSC certified paper sourced from FSC certified forests.Both the pulp and paper are manufactured under the environmental standard ISO14001. This paper is from an authentic renewable and sustainable naturalresource: no elemental chlorine compounds were used in its manufacture.