INVESTING IN MEDIA COMPANIES

Writtle half year trading report and interim dividend announcement

The first half of 2012 saw the benefits of last year’s acquisition of Loewy Group continue to flow through to produce an excellent result.

Result and dividend
Turnover increased to £42.84m (2011: £23.12m) and trading profit* before tax was £2.96m (2011: £1.18m). The company will be paying an interim dividend of 2.5p per share (2011: 2.25p) on 31 October 2012 to shareholders on the register on 14 August 2012.

All group companies contributed to this fine performance, which further demonstrates the strength of the Writtle model. Equity involvement and decentralised growth provide a motivational management structure for Writtle’s operating companies that enable the group to maintain a low central overhead.

Review
With 18 operating companies, there are many highlights but as in previous years I will focus on major items of shareholder interest. A full review will appear in the annual report.

Equity participation – operating companies. Last year’s acquisition of Loewy Group saw Writtle holding 100 per cent of Loewy’s operating company equity. In order to deliver the Writtle model to our new management teams, we dismantled Loewy’s expensive HQ structure then invited directors of the former Loewy operating companies to subscribe for new equity in their companies. We were delighted with the response and all our latest acquisitions now have directors holding equity interests in their businesses.

Equity participation – Writtle. Given the favourable trading across the group we decided to exercise a call option over certain Loewy vendors’ Writtle shares and offer these shares to existing shareholders and directors. The offer was oversubscribed and we are pleased to welcome a number of operating company directors as shareholders in Writtle.

Sale of freehold property. For some years Seymour Powell has been looking to expand, having outgrown their premises in Fulham, London SW6. We exchanged contracts for the sale of Seymour Powell’s property on 12 June and completed in July with proceeds received of £2m, a profit of £0.35m over book value. Having signed a short lease back on their sold premises, Seymour Powell have up to 18 months to look for more suitable and larger rented premises.

Acquisition opportunities. A number of acquisitions have been reviewed in the period and given our strict criteria the majority were considered unsuitable. However, we did complete one deal, acquiring KTB PR though our Speed Communications PR business just after the period end. KTB has an expertise in sport health and wellbeing PR which complements and is now integrated into Speed’s existing consumer team.

Finance. The good trading has resulted in a reduction in debt of over £1.75m by the end of June, with a further £2m reduction in July on receipt of the Seymour Powell property proceeds.

The performance of Writtle in the first half of the year has left us in a strong position to consider further growth opportunities. However, as usual, caution will be a priority and we will not risk our hard-won financial strength and reputation on deals in the name of ‘adding scale’ or other dubious rationales. We do not expect to avoid all the economic headwinds facing the UK and global economy, but we will be well prepared.

Robert Essex
Chairman
21 August 2012.

* Trading profit is stated before minority interests, exceptional gains on a property sale, amortisation and share-based payment charges and net losses on sale of minority shareholdings to directors, all of which will be itemised in the annual report.