Chairman’s statement

I am pleased to present Writtle’s accounts for 2013. We achieved another excellent result as Writtle continued to benefit from organic growth and acquisitions, as well as the disposal of non-core operations.

Results and dividends

Turnover from continuing operations was £78.80m (2012: £75.20m) and operating profit from continuing operations was £4.97m (2012: £4.01m). Additional profits on exceptional items of £1.19m were derived from the sale of discontinued operations and contributed to overall profit before amortisation and share-based payment charges of £5.91m (2012: £5.45m) and profit before tax and minority interests of £5.93m (2012: £3.60m)

Writtle’s year end net debt was reduced by £4.11m to £7.58m (2012: £11.69m) reflecting proceeds from disposals and good cash conversion.

The directors are recommending a final dividend for 2013 of £405,000 (6.00p per share) to ordinary shareholders making a total of £586,000 (8.75p per share) for the year (2012: £509,000 being 7.75p per share). Subject to shareholders’ approval, the dividend will be paid on 30 May 2014 to shareholders on the register on 26 March 2014.

Principal activities and review of business

Writtle invests in media and marketing communications businesses with the aim of creating a substantial international marketing group. 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 dictated by the centre, although when larger opportunities have been identified, as Loewy Group was in 2011, we have integrated the individual companies into Writtle by dismantling any 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, each written by its directors. Each operating company has its own unique style and apart from overlaying similar financial controls, Writtle encourages individual company autonomy and identity.

As the results and individual company reviews demonstrate, 2013 was another excellent year for Writtle. The economic conditions were kinder than in the past, but there is no substitute for the talent and innovation contained within our businesses which are nurtured and allowed to flourish within the Writtle model. However, business is never easy and we must acknowledge that we don’t win them all. Of the two companies I mentioned in the 2013 Interim Report as having weaker first halves, 20.20 recovered strongly but Interact failed to re-establish itself and left the group in the first quarter this year.

Once again, many acquisition opportunities were reviewed but only one, the acquisition of Technik by Magnet Harlequin, was completed and financial details can be found in note 25. Early indications are that Technik will prove to be another successful acquisition. Most discarded acquisition opportunities have been on grounds of unrealistic price expectation by vendors or where we felt there was insufficient upside, but we have had discussions with larger groups where we felt there were compelling synergies in overlaying the Writtle model. While some discussions have foundered because of Writtle’s spartan view of head office downsizing not always being embraced by potential targets, we have an ongoing strategy to achieve further transformational acquisitions of scale, alongside bolt-ons for operating companies.

In 2013 Writtle also made its first exits from non-core investments, both generating profits for shareholders. The disposals were of Writtle’s packaging interests of Connect Packaging Ltd and Connect Archive and Mailing Products Ltd (financial details in note 25). With Writtle’s increasing focus on the media and marketing communications sector, Connect Packaging was on the periphery of core operations and its future better suited to a corrugated packaging specialist to which Writtle sold the business at the year end. We wish our many friends within Connect Packaging every success.

Summary

The profitable disposal of two businesses in 2013 completes a set of value creating landmarks by Writtle. The Writtle model has achieved success with start-ups (Creo Retail Marketing, Beyond, Maglabs, Less Packaging), investing for growth (Magnet Harlequin), turnarounds (Arken), integration of major acquisitions (Loewy Group) and now profitable disposals.

Writtle has become a well-established and substantial marketing communications business with an international reach. Our model is attracting more talent and companies to approach us and we feel there are significant opportunities ahead.

We look forward to reporting further progress in 2014.

Robert Essex
Chairman
17 April 2014