Writtle 2012 Annual Report and Accounts

Chairman’s statement

Writtle made further good progress in 2012 as its ongoing model of equity involvement and decentralised growth created a motivational environment with low central costs. All operating companies were profitable and recent acquisitions continued to flourish.

Results and dividends

Turnover was £88.87m (2011: £62.89m), headline operating profit was £5.45m (2011: £3.78m) and profit before tax and minority interests was £3.60m (2011: £3m). The main exceptional item was a £0.97m loss on deemed disposal relating to the sale of minority shareholdings in the former Loewy Group companies to their management.
The directors are recommending a final dividend for 2012 of £345,000 (5.25p per share) to ordinary shareholders, making a total of £509,000 (7.75p per share) for the year (2011: £321,000 being 7.00p per share). The dividend will be paid on 31 May 2013 to shareholders on the register on 27 March 2013.

Principal activities and review of business

Writtle invests in media and marketing communications businesses with the aim of creating a substantial international marketing group.

There are two central pillars underpinning Writtle’s strategy: equity involvement and decentralised growth. Writtle will typically acquire majority shareholdings alongside management in businesses with potential for expansion and look for growth in these individual businesses, organically or by acquisition, rather than try to determine growth from the centre. If an opportunity to acquire a group of businesses in our sector presents itself, as Loewy did in 2011, we will look to dismantle any centralised head office or marketing structure and instead promote the individual company brands. Alongside this decentralised approach comes a re-incentivisation package for operational management through the opportunity to purchase equity on favourable terms in their companies, and participation in share option schemes in Writtle. This creates a lean head office structure as well as considerable incentives for management in their individual companies and the group as a whole.

A short review by operating company, each written by its directors, can be found in the 2012 Annual Report within the Investor relations section of the Writtle website. Each operating company has its own unique style and apart from overlaying similar financial controls, Writtle encourages individual company autonomy and identity.

2012 was an excellent year for Writtle. The performance of the Loewy Group companies acquired in 2011 exceeded expectations in their first full year of trading and the appointment of four directors from these companies to the Writtle Board reflects the important financial and strategic contribution to the group that these businesses are now making. The other 2011 acquisition, Arken, continued to perform well and we have more than recovered its purchase price in profits since Writtle took ownership. The acquisition vintage of 2011 sets the benchmark for future transactions and it is significant that in 2012 Writtle made only one acquisition, that of KTB PR through our Speed Communications business, as many potential targets failed to meet our strict criteria. If we cannot see substantial value uplift through growth or turnaround we will not pursue a transaction.

Other Writtle businesses continued to perform well, although business is never easy within an unsettled global economy. The retail sector in particular is haunted by the spectre of insolvency and we did not survive unscathed by bad debts with Clinton Cards and more recently Dreams going into administration. These losses were kept low by tight credit controls but nonetheless provided a sharp reminder that getting paid is as important as winning new business.

The other noteworthy factor in 2012 was the central cash management which reduced the group’s indebtedness by £2.92m over the year, to £11.69m, as our cash conversion from profits was excellent. This momentum has continued into 2013 and net debt levels have fallen by over £5m since their peak immediately after the Loewy acquisition in July 2011.

Post year end events

On 13 March 2013 we sold our 51% shareholding in Connect Archive and Mailing Products Limited for £460,000. The shareholding had been acquired in December 2011 for £10,000 as an opportunistic investment within the packaging sector, where the group still has an interest through Connect Packaging. As a low margin and capital intensive business Connect Archive and Mailing Products was not considered a long-term growth prospect and the consideration received represented an attractive return on our investment.

On 15 March 2013 Magnet Harlequin completed the acquisition of Bosham Holdings Limited, the holding company of Technik Limited, a £3.5m turnover company operating in a similar market to Magnet Harlequin which is one of the group’s most successful operating companies. The acquisition was funded through Magnet Harlequin’s own cash flow and a loan from Writtle. Magnet Harlequin’s directors are actively managing the new acquisition although the due diligence and acquisition contract were largely handled by Writtle head office to avoid distraction to Magnet Harlequin’s management team.

Further financial details of both the above transactions will be provided in the 2013 Annual Report.


Writtle has grown considerably over the past few years and yet your directors feel that there is considerable growth still to be achieved. The Writtle model is unusual in our sector where earn outs and centralised structure still prevail in a number of competitor groups. We firmly believe that in people businesses the real talent that clients seek lies not in head office but rather the brilliance of our specialist agencies.

We will continue to pursue this course; it has served us well thus far.

Robert Essex

24 April 2013