Snowball Acquisition Hits Tangent's Profit

In the UK, AIM-listed direct marketing group Tangent Communications has reported a 57% drop in underlying operating profit to £0.35m from £0.81m for the first half of the year, as a result of its recent acquisition of consumer insight agency Snowball.

In September, Tangent paid an initial consideration of £1.07m in cash for Snowball, which uses research to help clients identify and target new customers. A further maximum of £2.18m in a combination of cash and shares will be payable, subject to Snowball meeting three year targets.

Snowball has since been integrated into the Tangent One online business, where sales increased from £1.36m to £2.01m for the first half of the year.

'The increased cost base from our recent acquisitions had a negative impact on the overall profitability, although we expect this investment in skills to deliver future growth in higher margin parts of the business,' the group said in a statement.

For the six months to 31 August, revenue was down to £8.51m compared with £8.8m in 2008, while the operating margin fell to 4.1% from 9.1%.

Joint CEO Nicholas Green said that the first half of the year had been a period of investment in the core business activities of online and direct marketing.

The firm's outlook for the rest of the year is in line with management expectations.

Web sites: www.tangentplc.com and www.snowball.co.uk .