Writtle 2016 Annual Report and Accounts

Chairman’s statement

I am pleased to present the Writtle accounts for 2016. A good trading performance and sale of
an investment contributed to a record year’s profit for Writtle, and a significant return of cash
to shareholders.

Results and dividends

Turnover was £72.20m (2015: £83.12m) and profit before tax was £9.23m (2015: £3.61m).

Turnover and profit before tax from continuing operations was £60.96m (2015: £57.21m) and
£3.66m (£1.75m) respectively, with a profit of £5.19m being made on the sale of Creo Retail
Marketing Limited (Creo) on 22 June 2016.

Net cash at the year-­end was £7.04m (2015: debt £4.28m).

The directors are recommending a final dividend of 9.25p per share (2015: 8.2p) making total
dividends of 63p per share (2015: 11.5p) for the year, following payment of a special dividend
of 50p per share on 29 July 2016 and an interim dividend of 3.75p per share on 31 October
2016. Subject to shareholders’ approval, the final dividend will be paid on 31 May 2017 to
shareholders on the register on 30 March 2017.

Principal activities

Writtle is a UK-­centred marketing services group with an international client base.

Design and technology are at the heart of all our businesses, but we now group them under
Innovation, Implementation and Instore to describe better their principal focus. We report
the three groupings’ trading results in note 6 to the accounts.

Writtle also has a property company which owns the freehold properties from which some of
its companies operate.

Writtle’s model continues to be based on equity involvement and decentralised growth.
Whether a group company was a start-­up or acquired, Writtle will typically hold a majority
shareholding alongside management, which creates a motivational structure. Writtle looks for
businesses in the media and marketing communications sector which can demonstrate
potential for further growth either organically or by acquisition, and where Writtle can add
value through its experience or by funding further expansion. Growth opportunities are
typically identified by operating company management rather than by the centre. However,
when larger opportunities have been identified, as with the acquisition of Loewy Group, we
have integrated the individual companies into Writtle by reducing the central head office and
marketing function and instead promoted 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 follows this section, written by its directors. Each
operating company has its own style and, apart from overlaying similar financial controls,
Writtle encourages individual company autonomy and identity.

Review of business

A good year overall masked varying performances amongst our businesses, once again
demonstrating the strength of our portfolio approach.

Our Innovation businesses had a difficult year, with only one company reaching its profit
budget, as orders slowed during the second quarter. Whether as a result of the much
publicised corporate inertia surrounding the Brexit vote or not, the impact was uniformly felt
across our London-­based businesses over the third and fourth quarters, necessitating
restructuring costs of £0.28m which are expensed in these accounts. Bristol-­based Epoch
bucked the capital’s trend and produced another excellent year.

Our Implementation businesses traded very strongly. The Magnet Harlequin Group (MHG)
continued to make gains in the competitive retail sector through its increasing use of technology
and in-­group global resources, with Technik the stand-­out performer. A new agency,
WMHAdaptive, was established in the final quarter of 2016 within MHG to provide a fully
integrated ‘concept to consumer’ offer, and has met with remarkable early success.

Our Instore business, Arken POP International, had a record year as it continued to win work
in the beauty category of retailers and the additional capacity created by its new premises in
Sandy, Bedfordshire, facilitated a 30% increase in turnover.

Corporate activity

The sale of Creo on 22 June 2016 was the major corporate event of the year, generating an
excellent return on Writtle’s initial start-­up investment and further demonstrating Writtle’s ability
to create value through equity involvement. Creo’s management held minority shareholdings
and with fully aligned interests reached the same conclusion as Writtle that a sale, rather than a
capital-­absorbing expansion into continental Europe, was the best outcome for all parties.

The cash generated from the Creo sale extinguished all debt, allowed a special dividend of
£3.49m to be paid to shareholders on 29 July 2016, and still leaves Writtle holding substantial
cash balances for further investments or cash returns.

Given the wish of our private equity shareholders, ABRY Partners and Veronis Suhler
Stevenson, to sell all or part of their combined 27% shareholding, we intend to use part of our
cash balances to support a larger than usual share trading opportunity this year. Shareholders
who wish to participate, either buying or selling, should follow the guidelines in the letter
accompanying this report.

Post-­balance sheet event – acquisition

We are pleased to announce the acquisition of Identica Limited, a brand strategy and design
agency, on 22 March 2017. Founded over 25 years ago, Identica will continue to operate
autonomously from its premises in Clerkenwell, London, servicing its worldwide client base.
Financial details of the transaction will be given in Writtle’s 2017 annual report.


I am pleased to announce the appointment of Graeme Harris as Chief Executive and Matt
Gilmore as Finance Director of Writtle, with effect from 1 January 2017.


Despite difficult trading conditions in 2016 for some Innovation businesses in the group, overall
Writtle delivered a record year of profit and paid a first special dividend to shareholders. The
acquisition of Identica after the year-­end marked our first acquisition for some time, the length of
time elapsed was more a reflection of our exacting criteria than a shortage of opportunities. We
are determined to add value to our acquisitions and maintain our successful track record. I hope
shareholders will agree that our recent focus on organic growth and progressive dividends has
been rewarding, but we intend to cast our net a little wider in 2017 and beyond.

Robert Essex

11 April 2017