PRELIMINARY RESULTS FY04

1
PRELIMINARY RESULTS FY04

• Prepared October 14th 2004

2
AGENDA

• Financial summary
• Key developments
• Business performance
• Financial Review
• Tim Dyson
• CEO

3
FINANCIAL SUMMARY

• Net revenue up 7.2 to 37.7m from 35.2m
• Up 11.5 in constant currencies
• Pre-tax profit up 18.4 to 1.93m from 1.63m
• Up 27.7 in constant currencies
• Dividend up 10 to 1.1p

• Adjusted EPS up 4.5 to 3.98p
• Net Assets of 7.7m up 9

4
FY04 NEWS

• Jan 04 new Chairman Will Whitehorn from Virgin
• Successful acquisition of Applied Communications
  assets (profit contribution in H2)
• Generated positive operating cashflow enabling
  Group to maintained strong cash position despite
  acquisition(3m)
• Expanded in China (Shanghai and Hong Kong)
• Introduced Context Analytics
• Major client wins during year Sun Microsystems,
  NEC, Olympus, PalmOne, Samsung
• Since year end Mothercare, Gartner, Autodesk,
  Siebel, Yahoo!, Software AG

5
GROUP BUSINESSES
EMEA US
GLOBAL
GLOBAL
EMEA US
UK
UK
6
CURRENT TREND

• H1 v H2
• Revenues up 8.9 in second six months versus
  previous six months
• APAC grew 8.7
• EMEA grew 2
• US grew 17.2
• Text 100 grew 8.4
• August.One declined 5.4
• Bite grew 19.9

7
REVENUE/PROFIT
BY REGION
REVENUE
PROFIT
8
REVENUE/PROFIT
BY BRAND
PROFIT
REVENUE
9
BUSINESSPERFORMANCE
10
PR INDUSTRY

• PR industry est. 4bn fees tech PR 25
• 2004 PR industry growth around 3
• Major comms firms showing varied levels of
  performance WPP flat, Omnicom 10 growth in
  last quarter)
• Similar growth expected for next 2 years
• Outsourcing increasing as economy improves
• New business opportunities increasing and pitch
  process normalizing
• Budgets showing increases over previous 12 months
• Boutiques showing good growth

11
OUR GOALS

• Increase market share in tech sector
• 3 year goal 10 market share
• Improve margins across Group
• Target average brand operating margin 16
• Increase number of international clients
• Increase credibility in non-tech PR market
• 3 year goal 25 revenue outside tech sector

12
STRATEGIES

• Grow revenue from existing clients
• International expansion of Bite and Text 100
• Acquisitions of established businesses in key
  geographies or sectors
• Acquire interests in emerging businesses
• Lock down senior talent through new LTIP
• Assess AIM market for growth flexibility

13
TEXT 100

• Strategy
• Better utilize international footprint
• Expand APAC by organic growth and additional
  offices in China
• Develop tier one client base in US
• Develop deeper product set to extend existing
  client engagements
• Results
• Overall revenues grew 10.2 in constant
  currencies (5.2 at actual rates)
• Strong US business expansion revenue increased
  11.6 in constant currencies (1.3 at actual
  rates)
• Gartner, Fuji, Earthlink, NEC, McData
• Strong APAC expansion revenue increased 19.5
• Opened in Shanghai and Hong Kong
• Introduced Context Analytics Cisco, Genentech,
  Nokia
• Launched MCM product set
• FY05
• Limited international expansion
• Focus on Corporate PR practice area

14
AUGUST.ONE

• Strategy
• Merge with JPR
• Focus on being a strong UK agency
• Simplify and narrow target areas for business
  around WOI offering
• Results
• Loss of significant clients during merger
  including eBay, Casio, 3 and AXA
• Won new business from Olympus, Mothercare, MAD,
  Lipovitan, DNA Interactive and Envirowise
• Consolidated business around UK operations with
  dual MDs for tech and non-tech clients
• Signed new agency agreement with Microsoft
• FY05
• Maintain focus on key target areas
• Expansion of UK client base

15
BITE

• Strategy
• Integrate Applied acquisition
• Add to talent pool
• Look at extending US presence
• Develop international clients
• Results
• Business grew 65
• US business generating strong returns and
  experiencing high growth
• Barry Leggater recruited as Chairman
• Secured new business from Siebel, Autodesk, N2
  Broadband, Applied Materials in US, and Samsung
  and Yahoo! in UK
• Expanded relationships with VeriSign and Juniper
  Networks in US
• Stockholm new business wins including Telenor,
  Fujitsu Siemens and Canal Digital
• FY05
• Strong growth in US to continue
• NYC office
• Establishment of practices in UK behind consumer
  and B2B

16
FINANCIAL REVIEW
17
HIGHLIGHTS

• Revenue up 7
• Pre-tax profits up 18
• Cash of 0.6m generated in H2
• US revenue growth of 39, 8 organic.
• APAC revenue growth of 10
• David Dewhurst
• Finance Director

18
PL

• 2002 2003 2004 Growth
  m m m
• Turnover 40.2 39.7 43.1 8.5
• Net Revenue 35.8 35.2 37.7 7.2
• Operating Profit 2.0 2.4 2.5 5.3
• Operating Margin 5.6 6.9 6.8 (1.7)
• Profit before tax 4.1 1.6 1.9 18.4
• Tax (1.6) (0.7) (0.8)
• Retained profit 2.0 0.5 0.6
• Dividend per share 0.9p 1.0p 1.1p 10.0
• Adjusted Basic EPS 2.18p 3.81p 3.98p 4.5
• before reorganisation costs, 947k and profit
  on trademark sale, 3,132k
• before reorganisation costs, 794k and goodwill
  amortisation, 45k
• before reorganisation costs, 447k and goodwill
  amortisation, 197k

19
TAX EPS

• adjusted EPS up 4.5 at 3.98p
• effective tax rate is 43, but before goodwill
  this falls to 39
• Tax rate is rising, as 70 of revenue generated
  outside UK. US, India, Spain Italy high
  effective rates.

20
INVESTMENTS

• 2002
• Bite Stockholm
• Text 100 licensed in Korea and Taiwan for IBM
  work
• 2003
• Text 100 Beijing
• Text 100 Denmark
• 2004
• Text 100 Shanghai
• Bite San Francisco through Applied acquisition
• Context Analytics
• Text 100 Hong Kong

21
BALANCE SHEET

• 2002 2003 2004 m m m
• Fixed Assets
• Intangible - 0.1 0.8
• Tangible 3.2 2.6 2.1
• Net Current Assets 4.4 5.0 5.2
• Creditors gt1 year (0.7) (0.4) (0.4)
• Net Assets 6.9 7.0 7.7
• Share capital 1.1 1.1 1.1
• Reserves 7.2 7.8 8.1
• ESOP reserve (1.5) (2.0) (1.8)
• Equity shareholders funds 6.8 7.0 7.4
• Minority interests 0.1 0.1 0.3
• Total 6.9 7.0 7.7
• Net funds 4.0 3.5 2.9

22
CASHFLOW

• 2002 2003
  2004
• m m m
• Operating profit items 2.9 3.5 3.4
• Working capital items 1.4 - (0.9)
• Provisions - 0.1 (0.3)
• Net inflow from operations 4.3 3.6 2.2
• Taxation (0.7) (1.9) (1.1)
• Net capital expenditure (0.8) (1.1) (0.9)
• Trademark disposal 3.1 - -
• (Purchase)/sale of own shares - (0.5) 0.2
• Acquisitions - (0.1) (0.5)
• Dividends - (0.5) (0.4)
• Financing
• bank loan (2.3) (0.1) -
• hire purchase (0.4) (0.2) (0.2)
• Increase/(decrease) in cash 3.1 (0.9) (0.7)
• 0.85m of this is the working capital required
  in the acquired Applied Communications
  businesses.

23
SUMMARY

• US grew 27, despite weak
• APAC grew 10
• Margins improving in operating businesses
• Momentum strong Cadence, Siebel, Autodesk, NEC,
  McData, Olympus, Mothercare, Nokia, Cisco
• Strong new business pipeline
• Cash position 3m
• Evaluating AIM for growth flexibility