TIDMSAA
RNS Number : 5044W
M&C Saatchi PLC
18 April 2023
M&C SAATCHI PLC
(the "Company" or "M&C Saatchi")
Audited Results for the Year Ended 31 December 2022
The Company today announces its audited results for the year
ended 31 December 2022. The Company has delivered another year of
record results with its highest ever net revenue, Headline
operating profit, Headline profit before tax and Headline
earnings.
Highlights
-- Record 2022 net revenue of GBP271.1m, growth of 8.7% versus
2021.
-- Record 2022 Headline profit before tax of GBP31.8m (2021:
GBP27.3m).
-- Results underpinned by strong growth in the Issues, Consulting
and Passions specialisms, and central cost savings.
-- 2022 Statutory profit before tax of GBP5.4m (2021: GBP21.6m),
adversely affected predominantly by GBP10.8m of one-off
defence costs relating to the failed takeover bids for
the Company.
-- 2022 Headline operating profit margin improved to 13.1%
(2021: 12.5%).
-- Strong net operating cashflow generation of GBP42.2m,
with cash conversion of 99%.
-- Net cash of GBP30.0m (2021: GBP34.4m) after paying for
put options and one-off defence costs relating to the
takeover bids. Borrowings reduced to GBP7m (2021: GBP20m).
-- Reinstated dividend payments with a recommended final
dividend of 1.5 pence per share.
-- New wins include: Diageo, Tinder, LVMH, PepsiCo, UK Covid-19
Inquiry account and Australia Retirement Trust and being
appointed to the Emirates Airline, Samsung, and Volkswagen
global rosters.
-- Good momentum in recently launched consultancies in the
sustainability, data analytics and digital innovation
sectors.
-- Completed Phase 1 of a global efficiency programme with
material cost savings identified.
-- Planet commitments launched, targets validated by Science
Based Targets initiative.
Financial results for the year ended 31 December 2022
Headline * Statutory
GBPm 2022 2021 Movement 2022 2021 Movement
Billings** 597.5 533.4 12.0% - - -
Revenue 462.5 394.6 17.2% 462.5 394.6 17.2%
Net revenue** 271.1 249.3 8.7% - - -
EBITDA** 45.2 40.8 10.8% - - -
Operating profit 35.4 31.1 13.8% 10.5 27.3 -61.5%
Profit before taxation 31.8 27.3 16.5% 5.4 21.6 -75.0%
Profit for the year 24.0 20.0 20.5% 0.2 13.2 -98.5%
Earnings*** 18.1 13.7 32.8% 0.1 12.8 -99.2%
Earnings per share 14.9p 11.3p 31.9% 0.1p 10.5p -99.3%
Tax rate 24.5% 26.6% -2.1pts 95.5% 39.1% +56.4pts
* Headline results represent the underlying trading
profitability of the group and exclude:
-- Separately disclosed items that are one-off in nature and are
not part of running the business.
-- Acquisition-related costs (including amortisation of acquired
intangibles and impairment of goodwill).
-- Gains or losses generated by disposals of subsidiaries and associates.
-- Fair value adjustments to unlisted equity investments,
acquisition related contingent consideration and put options.
-- Dividends paid to IFRS 2 put option holders.
Although our peers may use these same terms, they are not
necessarily calculated on the same basis. However, as measures of
Headline performance, they have been included to better assess the
underlying performance of the business and to enable better
comparability both across the industry and when comparing
year-on-year results.
** Billings, net revenue and EBITDA excluded from Statutory
results as these are not IFRS terms.
*** Earnings are calculated after deducting share of profits
attributable to non-controlling interests.
Current trading and outlook
The Company expects Headline profit before tax for 2023 to be in
line with market expectations of GBP36.5m-GBP38.0m, representing a
15-19% increase on the record profits of 2022.
Along with the wider market, we have seen some impact in the
year to date from the headwinds in the technology sector,
particularly in our Media specialism. However, we continue to see
the benefit of our diverse range of businesses with strong
pipelines in the Consulting, Issues and Passions specialisms, which
gives us confidence for the remainder of the year. In addition, the
cost efficiency programme is expected to deliver savings in the
second half of 2023. Consequently, profit will be more weighted to
the second half of 2023, than in 2022.
Commenting on the 2022 performance and outlook, Moray MacLennan,
Chief Executive Officer said:
"Another year of record results, in a year not without
challenges. Through a relentless focus on developing core
capabilities both within and beyond advertising, alongside careful
cost management, we have delivered high-margin and high-revenue
growth and are pleased to reinstate dividend payments.
We approach 2023 with guarded optimism. Whilst macroeconomic
uncertainties will require careful navigation and management, we
have a clear roadmap in place and look forward to building on our
solid foundations for profitable growth."
For further information please call:
M&C Saatchi plc +44 (0)20-7543-4500
Gareth Davis, Chairman
Moray MacLennan, Chief Executive Officer
Numis Securities +44 (0)20-7260-1000
Nick Westlake, Iqra Amin
Liberum +44 (0)20-3100-2000
Max Jones, Tim Medak, Mark Harrison, Benjamin
Cryer, Will King
Brunswick +44 (0)207-404-5959
Andrew Porter, Sumeet Desai, Kate Pope
Chief Executive Statement
2022 was another record year. Unexpected events were met with
remarkable resilience and remarkable profitability. Growth was
achieved in spite of obstacles.
In 2020 we stabilised the Company and laid the foundations for
future success. In 2021 we gained momentum. In 2022 our record net
revenue, Headline operating profit, Headline profit before tax and
Headline earnings demonstrated the extent of the turnaround.
Targets were set at the Capital Markets Day in 2021, and all of
our 2022 targets were surpassed . Between 2020 and 2022 we
delivered net revenue CAGR of 10%, Headline operating profit CAGR
of 71% and an operating margin improvement from 5% to 13%. As a
result, at the Capital Markets Day in February 2023, the Company
set out new five-year growth targets to 2027.
This performance is due to our people. They deliver the
award-winning work and the revenue day-in, day-out.
On new business, we were appointed to the Emirates Airline,
Samsung and Volkswagen global rosters. We won the UK Covid-19
Inquiry account, Australia Retirement Trust, a new global
assignment from Diageo, and Vattenfall, one of the world's leading
sustainable energy companies.
New client offers were launched in four areas: data analytics,
sustainability, digital innovation and B2B SaaS.
We completed the first phase of our global efficiency programme
which will result in further simplification of our operating model
globally and start delivering cost savings in the second half of
2023.
And all of this with a successful defence against the two failed
takeover bids.
Strategy
At our Capital Markets Day this year, we announced our ambition
to be the world's leading creative solutions company, of specialist
expertise, connected through data and tech, to deliver meaningful
change.
Our strategy will focus on high-margin organic growth, improved
efficiency, further simplification and M&A.
This includes investment in key capabilities, focusing on data,
digital transformation and CX, across our high-margin businesses,
increased productisation within all specialisms, expansion into
geographic growth markets, and development of a new media
proposition.
We initiated a global efficiency programme in the last quarter
of 2022, with cost savings and margin improvements expected to be
delivered from the second half of 2023, and on an ongoing basis
thereafter.
The focus on simplification also involves streamlining the
operating model and reducing both legal and operating entities in
2023 and 2024.
We will pursue selective bolt-on M&A opportunities to
further strengthen our market proposition.
Specialism performance
The business operates through five connected specialisms. Today,
75% of our operating profit and over half of our revenue come from
specialisms other than Advertising. We are no longer just an
advertising agency, we are much more than that, we are a creative
solutions company. Specialist expertise in disciplines you may
expect, such as performance media, PR and data analytics. But also
in some that you may not, such as: influencer management, eSports
marketing and behaviour change. This specialist expertise connects,
through data and technology, to deliver meaningful, commercial and
societal change.
2022 People and Planet
A global employee engagement survey, The Loop, was launched and
initial results were encouraging with high, positive engagement. A
Global Head of Diversity, Equity and Inclusion ("DE&I") was
hired to support and drive the DE&I strategy. Employee-led
networks were expanded globally to support protected groups,
including: gender, ethnicity, LGBTQ+, and family.
Planet commitments were published to halve greenhouse gas
emissions across the Company's own operations and its value chain
by 2030, validated by the Science Based Targets initiative.
Commitment has been made to improving the positive impact of our
work, and grow the percentage of revenue from planet-positive
campaigns.
Outlook
Whilst there are clear and obvious headwinds affecting society,
business in general and our sector, we have a clear roadmap for the
next stage of our transformation journey.
We are well placed and remain confident that further progress
will be made in the current year, and that we will continue to
accelerate change and deliver profitable growth.
For the first time, in a long time, we have a clear runway ahead
of us.
2022 Financial Review
Financial performance
The Group manages its financial performance through a number of
key performance measures, which are stated below.
-- Net revenue of GBP271.1m, up 8.7% from GBP249.3m; like-for-like
growth of 4.3%.
-- Headline operating profit margin of 13.1%, up from 12.5%.
-- Headline profit before tax of GBP31.8m, the highest ever
for the Group, up from GBP27.3m.
-- Statutory profit before tax of GBP5.4m, down from GBP21.6m.
-- Headline earnings per share of 14.8p, up from 11.3p.
-- Statutory earnings per share of 0.1p, down from 10.5p.
-- Net cash of GBP30.0m, down from GBP34.4m.
-- Drawdown on the Company's revolving multicurrency credit
facility of GBP7.0m, reduced from GBP20.0m.
Headline Statutory
GBPm 2022 2021 Movement 2022 2021 Movement
Billings* 597.5 533.4 12.0% - - -
Revenue 462.5 394.6 17.2% 462.5 394.6 17.2%
Net revenue* 271.1 249.3 8.7% - - -
EBITDA* 45.2 40.8 10.8% - - -
Operating profit 35.4 31.1 13.8% 10.5 27.3 -61.5%
Profit before taxation 31.8 27.3 16.5% 5.4 21.6 -75.0%
Profit for the year 24.0 20.0 20.5% 0.2 13.2 -98.5%
Earnings** 18.1 13.7 32.8% 0.1 12.8 -99.2%
Earnings per share 14.8p 11.3p 31.7% 0.1p 10.5p -99.3%
Tax rate 24.5% 26.6% -2.1pts 95.5% 39.1% +56.4pts
*Billings, net revenue and EBITDA are excluded from Statutory
results, as these are not IFRS terms. Although our peers may use
these same terms, they are not necessarily calculated on the same
basis. However, as measures of Headline performance they have been
included to better assess the underlying performance of the
business and to enable better comparability both across the
industry and when comparing year-on-year results.
**Earnings are calculated after deducting share of profits
attributable to non-controlling interests.
Headline results
The Headline results are alternative performance measures that
the Board considers the most appropriate basis to assess the
underlying performance of the business, monitor its results on a
month-to-month basis, enable comparison with industry peers and
measure like-for-like, year-on-year performance.
Group Headline operating profit was GBP35.4m, increasing from
GBP31.1m in 2021. The Group reported a Statutory operating profit
of GBP10.5m, down from GBP27.3m in 2021, due to defence advisory
costs and other non-trading items.
The Group's Headline profit improvement compared to 2021 was
driven largely by strong performance in the Issues and Passions
specialisms and by central cost savings. Despite reduced revenue in
Advertising, an improvement in the operating profit margin resulted
in increased absolute profit in this specialism.
The Group Headline operating profit margin increased to 13.1%
from 12.5% in 2021. This represents continued progress towards the
Group's operating profit margin target of 18% by 2027 announced at
the Capital Markets Day in February 2023.
The key movements between Statutory to Headline results
Year ended Year ended
31 December 31 December
2022 2021
---------------------------------------- ------------ ------------
GBP000 GBP000
Statutory profit before taxation 5,423 21,632
Separately disclosed items 13,352 (3,783)
Dividends paid to IFRS 2 put option
holders 7,811 5,270
Put option accounting - IFRS 9
and IFRS 2 2,233 2,121
Movement of FVTPL investments under
IFRS 9 1,587 (2,510)
Amortisation of acquired intangibles 597 965
Impairment of non-current assets 564 2,770
Revaluation of contingent consideration 266 532
Loss on disposal of subsidiaries
and associates - 83
Revaluation of associates on transition
to subsidiaries - 234
Headline profit before taxation 31,833 27,314
The larger items causing the movement between Statutory and
Headline results for 2022 are explained below and further details
are provided in Notes 1 and 2 of the financial statements.
Separately disclosed items
During 2022, GBP10.8m of costs were incurred as the Company was
subject to two competing bids to take control and full ownership of
the business. Managing the Company's response to these two takeover
bids resulted in a number of one-off external advisory and
additional internal management costs. In addition, we commenced a
global efficiency programme which incurred one-off professional
fees of GBP1.0m, and we restructured and closed a number of
businesses with costs of GBP1.8m. Last year's credit of GBP3.8m
arose as a result of the forgiveness of GBP2.2m of US Paycheck
Protection Program (PPP) loans and the GBP2.8m release of a
long-term incentive plan accrual, partially offset by lease
surrender expenses and the cost arising from the repayment of
GBP1.0m of furlough money to the UK government.
Dividends paid to IFRS 2 put option holders
Local management in some of the Group's subsidiaries own
minority shareholdings in those subsidiaries. As shareholders, they
also have rights to receive dividends, and, as they are employees
of those subsidiaries, these are recognised as staff costs.
FVTPL investments under IFRS 9 - financial assets at fair value
through profit and loss
The Group holds unlisted equity investments in early-stage
companies (detailed in Note 19 of the financial statements). The
revaluation of these companies is excluded from Headline results.
Market weakness in the technology sector made fundraising and
trading more difficult for them in 2022, resulting in an impairment
of GBP2.9m and downwards revaluations of GBP2.7m. However, this was
partially offset by upwards revaluations of GBP3.0m and profit on
disposal of GBP1.2m.
Put option accounting - IFRS 9 and IFRS 2
These charges relate to the revaluations of the put option
liabilities (both IFRS 2 and IFRS 9) during the year.
Amortisation of acquired intangibles
Acquired intangibles relate to brand names and customer
relationships. Refer to Note 14 of the financial statements for
details.
Impairment of non-current assets
In 2022, the Group recorded an impairment charge of GBP0.6m,
which primarily relates to the write-off of goodwill in M&C
Saatchi (Hong Kong) Limited and Scarecrow Communications Limited.
The 2021 charge mainly consisted of a GBP1.9m goodwill write-off in
Santa Clara Participações Ltda, along with smaller intangible
write-offs.
Net revenue performance by specialism
Group net revenue increased 8.7% in 2022 (4.3% on a
like-for-like basis). A like-for-like basis applies constant
foreign exchange rates and removes entities disposed of or acquired
during 2021, since there were no disposals or acquisitions during
2022; it also adjusts for any reclassification of entities between
the specialisms. The Passions and Issues specialisms saw the
largest like-for-like net revenue growth of all specialisms in
2022.
Net revenue Reported Like-for-Like
by
---------------------------- --------------------
Specialism 2022 Growth 2022 Growth
GBPm versus 2021 GBPm versus 2021
Advertising 124.3 (2.3)% 118.1 (4.0)%
Media 34.2 4.2% 34.2 (1.5)%
Issues 42.2 24.4% 41.4 22.0%
Consulting 37.0 19.6% 37.0 7.7%
Passions 33.4 36.7% 33.4 22.6%
Group 271.1 8.7% 264.1 4.3%
Advertising remains the largest specialism, comprising 46% of
total net revenue (2021: 51%) on a reported basis. However, the
other four specialisms have increased their share of total net
revenue to 54% (2020: 49%). This shift away from Advertising
continues to support operating profit growth, as these other
specialisms have an average operating profit margin of 24% compared
to Advertising with an operating profit margin of 9%. There has
been a marked shift in revenue between the different specialisms
over recent years as shown by the table below:
Reported net revenue Advertising Media Issues Consulting Passions Total
2022 46% 13% 15% 14% 12% 100%
2021 51% 13% 14% 12% 10% 100%
2020 61% 10% 13% 8% 8% 100%
2019 64% 11% 10% 7% 8% 100%
Net revenue performance by region
At a regional level, 2022 saw a reduction in Australia's
reported revenue, due to the loss of two major clients. The largest
regional increase was in the Americas with a 33% increase in
reported revenue but the Middle East and Africa, and Asia also grew
significantly.
Net revenue Reported Like-for-Like
by
-------------------- --------------------
Region 2022 Growth 2022 Growth
GBPm versus 2021 GBPm versus 2021
UK 98.2 3.3% 98.2 3.3%
Europe 15.3 0.7% 15.3 (1.1)%
Middle East and
Africa 23.4 15.6% 23.4 11.7%
Asia 26.1 12.1% 22.1 10.3%
Australia 52.9 (2.1)% 52.9 (5.4)%
Americas 55.2 33.1% 52.2 13.9%
Group 271.1 8.7% 264.1 4.3%
The UK remains the largest region in the Group comprising 36% of
total net revenue (2021: 39%) on a reported revenue basis. The
recent shifts in share of revenue by region can be seen in the
table below:
Reported net UK Europe* Middle Asia* Australia Americas* Total
revenue East and
Africa
2022 36% 6% 9% 10% 19% 20% 100%
2021 39% 6% 8% 8% 22% 17% 100%
2020 39% 13% 7% 5% 21% 15% 100%
2019 40% 12% 7% 5% 20% 16% 100%
*Includes material acquisitions or disposals during this period.
The businesses in France and Spain (Europe) were disposed of and
the businesses in China and Pakistan (Asia) and Brazil (Americas)
were acquired.
Financial income and expense
The Group's finance income and expense includes bank interest,
lease interest and fair value adjustments to minority shareholder
put option liabilities (IFRS 9). Further details can be found in
Note 7 of the financial statements.
Bank interest payable for the year was GBP1.2m (2021: GBP1.6m).
Higher interest rates on the Company's revolving multicurrency
credit facility agreement were offset by optimal allocation of cash
around the Group, which reduced the drawdown on the Facility.
The interest on leases increased to GBP3.0m (2021: GBP2.8m) due
to the full-year impact of leases entered into in 2021.
The fair value adjustment of put option liabilities created a
charge of GBP1.1m (2021: charge of GBP0.9m). This increase is due
to increased profitability in the agencies where there are
outstanding put option arrangements.
Tax
Headline Tax
Our Headline tax rate has reduced marginally from 26.6% to
24.5%. The reduction is due to the use of prior years' tax losses
(caused in part by the Covid-19 pandemic) to offset current
profitability and an increase in profits from countries with lower
tax rates, partly offset by increased expenditure on disallowable
costs.
Statutory Tax
The Statutory tax rate increased from 39.1% in 2021 to 95.5% in
2022. In general, we expect large variations in Statutory tax
rates. This is because items such as share-based payments (option
charges) and put options arising from investments in subsidiaries
are non-deductible against corporation tax, due to their being
capital in nature. In 2022, two parties tried to acquire the
Company and a proportion of the defence costs was disallowable due
to their being capital in nature. This increased our non-deductible
expenses.
Non-controlling interests (minority interests)
On a Headline basis, the non-controlling interest share of the
Group's profit represents the minority shareholders' share of each
of the Group's subsidiaries' profit or loss for the year. In 2022,
the share of profits attributable to non-controlling interests
reduced to GBP5.9m (2021: GBP6.4m) and minority interests reduced
to 25% of profit after tax (2021: 32%). This reflects a reduction
during the year in the minority interest shareholdings in several
Group entities, as a result of the settlement of put options, to
the value of GBP12.1m.
On a Statutory basis, non-controlling interests excludes any
minority interests which relate to IFRS 2 put option holders
(holders of put options that are contingent on being employed by
the relevant company), whose share of the entity's Statutory profit
is paid as dividends each year, and are reported as staff costs in
the Statutory results.
Dividends
The Board believes that the Group has significant growth
potential. Accordingly, the Board believes that the Group would be
best served, and this potential realised, from investing annual
profits back into the business and into new growth initiatives.
However, the Board recognises the importance of dividends within
the Company's capital allocation policy, alongside the settlement
of put options and investment in growth initiatives. The Board has
therefore decided to resume payment of dividends in 2023 and
intends to adopt a progressive dividend policy in future, targeting
a payout ratio of 25% in the medium term.
The Company did not pay a dividend to its shareholders in 2022
(2021: nil). But given the financial performance during the year,
the Board is recommending the payment of a final dividend of 1.5
pence per share.
Subject to shareholder approval at the Annual General Meeting,
to be held on 14 June 2023, the dividend will be paid on 12 July
2023 to shareholders on the register of members at 9 June 2023. The
shares will go ex-dividend on 8 June 2023.
Cash flow and banking arrangements
Total gross cash (excluding bank overdrafts) at 31 December 2022
was GBP41.5m (2021: GBP69.4m). Cash net of bank borrowings was
GBP30.0m, compared to GBP34.4m in 2021.
In 2022, the Group generated operating cash from trading (before
working capital) of GBP43.0m, before the costs associated with the
takeover defence (GBP10.8m) and before dividends and allocations
paid to IFRS 2 put option holders (GBP7.8m). There was a GBP4.8m
net inflow from working capital (2021: GBP15.2m outflow), driven
mainly by a focus on billing more quickly and collecting more
promptly. This was offset by GBP10.3m of lease payments (2021:
GBP9.0m) and GBP12.1m of payments to acquire non-controlling
interests (2021: GBP5.3m). In addition, GBP5.6m of tangible and
intangible fixed assets were purchased in 2022 (compared to GBP2.6m
in 2021), primarily due to investment in the new office in Sydney,
Australia.
Net operating cashflow (operating cash from trading, net of
working capital, purchases of intangible/tangible fixed assets, and
the principal payment on leases) for the year was GBP34.9m, which
represents a cash conversion from Headline operating profit of
99%.
The following table sets out the key movements in net cash
during 2022:
Movement in net cash during 2022 GBPm
Net cash at the beginning of the
year 34.4
Increase in cash from trading 43.0
Increase in cash from working capital
movements 4.8
Net interest paid (0.8)
Purchases of intangible/tangible fixed
assets (5.6)
Tax paid (6.7)
Dividends and allocations paid to
IFRS 2 put option holders (7.8)
Payment of lease liabilities (10.3)
Costs associated with the takeover
defence (10.8)
Cash consideration for non-controlling
interest acquired (12.1)
Other movements 1.9
Net cash at the end of the year 30.0
The Company has a revolving multicurrency credit facility
agreement with National Westminster Bank Plc and Barclays Bank PLC
for up to GBP47.0m (the "Facility") which terminates on 21 May
2024, with an option to extend for an additional year. The Facility
includes a GBP2.5m overdraft and the ability to draw up to GBP3.0m
as a bonding facility as required. The primary purpose of the
Facility is to provide the Group with additional liquidity headroom
to support any variations in working capital.
At 31 December 2022, GBP7.0m was drawn on the Facility compared
to GBP20.0m at 31 December 2021.
Capital expenditure
Total capital expenditure in 2022 (including software acquired)
increased to GBP5.6m (2021: GBP2.6m). This included GBP1.7m on
furniture, fittings and other equipment (2021: GBP0.3m), GBP1.6m
(2021: GBP1.4m) on computer equipment, GBP1.1m (2021: GBP0.1m) on
leasehold improvements, and GBP1.0m (2021: GBP0.8m) on software and
film rights. The remaining GBP0.2m (2021: nil) was spent on
acquiring the customer relationships of the Channel Mum influencer
network.
Share-based incentive arrangements
The Group operates a business model through which certain
members of senior management have minority ownership in the
subsidiary companies they operate, through share-based incentive
(put option) arrangements. Given the Group's strong cash position,
we intend to settle put options in cash rather than shares when the
options fall due, which reduces the risk of substantial share
dilution to shareholders.
The table below presents a range of potential cash payments to
settle put options for the next six years based on the future share
price of the Company, the estimated future business performance for
each business unit and assuming the put options are exercised as
soon as possible. These forecasts are based on the Group's
three-year plans which were developed as part of our budget
cycle.
Potentially payable
2023 2024 2025 2026 2027 2028 Total
Future Share Price of the Company GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 151p* GBP17,498 GBP2,470 GBP373 GBP2,932 GBP924 GBP740 GBP24,937
At 160p GBP18,324 GBP2,609 GBP401 GBP2,978 GBP979 GBP784 GBP26,075
At 175p GBP19,746 GBP2,841 GBP448 GBP3,102 GBP1,071 GBP858 GBP28,066
At 200p GBP22,323 GBP3,227 GBP526 GBP3,522 GBP1,224 GBP981 GBP31,803
At 225p GBP24,800 GBP3,512 GBP604 GBP3,941 GBP1,377 GBP1,103 GBP35,337
At 250p GBP27,226 GBP3,747 GBP682 GBP4,360 GBP1,530 GBP1,226 GBP38,771
At 300p GBP32,121 GBP4,217 GBP838 GBP5,199 GBP1,836 GBP1,471 GBP45,682
*Share price at 31 December 2022
Put option holders are not required to exercise their options at
the first opportunity. Many do not and prefer to remain
shareholders in the subsidiary companies they manage. As a result,
some put option holders may exercise their options later than the
dates we have estimated in the table above.
If, in the future, the Company decides to fulfil the put options
by way of shares in the Company, then the number of shares in the
Company that will be provided is equal to the liability divided by
the Company's share price at the date of exercise.
Summary
The Company's performance in 2022 was strong, particularly given
the distractions of the potential takeovers. Driven by a 9%
increase in revenue and a further increase in Headline operating
profit margin to 13.1% (2021: 12.5%), the Company generated its
highest ever net revenue, Headline operating profit, Headline
profit before tax and Headline earnings. The strategy set out in
2021, and reinforced in 2023, continues to reap rewards and we have
a clear path towards further margin and profit increases.
The Company expects Headline profit before tax for 2023 to be in
line with market expectations of GBP36.5m-GBP38.0m, representing a
15-19% increase on the record profits of 2022.
Along with the wider market, we have seen some impact in the
year to date from the headwinds in the technology sector,
particularly in our Media specialism. However, we continue to see
the benefit of our diverse range of businesses with strong
pipelines in the Consulting, Issues and Passions specialisms, which
gives us confidence for the remainder of the year. In addition, the
cost efficiency programme is expected to deliver savings in the
second half of 2023. Consequently, profit will be more weighted to
the second half of 2023, than in 2022.
This statement along with the audited consolidated statutory
financial statements is available on our website:
https://www.mcsaatchiplc.com/reports-results/2022
Printed copies of the Annual Report are being posted to
shareholders who have requested hard copies.
Consolidated Income Statement
2022 2021
Total Total
Year ended 31 December Note GBP000 GBP000
---------- ----------
Billings (unaudited) 4 597,520 533,350
------------------------------------------ ------ ---------- ----------
Revenue 4 462,533 394,575
Project cost / direct cost (191,393) (145,239)
Net revenue 4 271,140 249,336
Staff costs 5 (198,765) (172,493)
Depreciation 16,17 (9,326) (9,196)
Amortisation 14 (1,060) (1,412)
Impairment charges 14,17 (564) (2,937)
Other operating charges (49,474) (39,573)
Other (losses) / gains 19 (1,403) 3,533
Operating profit 10,548 27,258
------------------------------------------ ------ ---------- ----------
Share of results of associates and joint
ventures 15 (10) (190)
Gain on disposal of subsidiaries 11 - 42
Impairment of associate investment 15 - (357)
Finance income 7 391 260
Finance expense 7 (5,506) (5,381)
------------------------------------------ ------ ---------- ----------
Profit before taxation 5,423 21,632
------------------------------------------ ------ ---------- ----------
Taxation 8 (5,178) (8,459)
------------------------------------------ ------ ---------- ----------
Profit for the year 245 13,173
------------------------------------------ ------ ---------- ----------
Attributable to:
Equity shareholders of the Group 90 12,757
Non-controlling interests 155 416
------------------------------------------ ------ ---------- ----------
Profit for the year 245 13,173
------------------------------------------ ------ ---------- ----------
Profit per share
Basic (pence) 1 0.07p 10.53p
Diluted (pence) 1 0.07p 9.38p
------------------------------------------ ------ ---------- ----------
Headline results
Operating profit 1 35,388 31,136
Profit before taxation 1 31,833 27,314
Profit after tax attributable to equity
shareholders of the Group 1 18,105 13,687
Basic earnings per share
(pence) 1 14.81p 11.30p
Diluted earnings per
share (pence) 1 13.47 p 10.06p
EBITDA 45,168 40,821
------------------------------------------ --- -------- -------
The following notes form part of these consolidated financial
statements.
Consolidated Statement of Other Comprehensive Income
2022 2021
Year ended 31 December GBP000 GBP000
--------------------------------------------- ------- -------
Profit for the year 245 13,173
--------------------------------------------- ------- -------
Other comprehensive profit*
Exchange differences on translating foreign
operations 4,785 664
--------------------------------------------- ------- -------
Other comprehensive profit for the year
net of tax 4,785 664
Total comprehensive profit for the year 5,030 13,837
--------------------------------------------- ------- -------
Total comprehensive profit attributable
to:
Equity shareholders of the Group 4,875 13,421
Non-controlling interests 155 416
--------------------------------------------- ------- -------
Total comprehensive profit for the year 5,030 13,837
--------------------------------------------- ------- -------
*All items in the consolidated statement of comprehensive income
may be reclassified to the income statement.
The following notes form part of these consolidated financial
statements.
Consolidated Balance Sheet
2022 2021
At 31 December Note GBP000 GBP000
--------------------------------------- ----- --------- ---------
Non-current assets
Intangible assets 14 41,968 40,499
Investments in associates and JV 15 191 202
Plant and equipment 16 8,310 6,333
Right-of-use assets 17 43,992 44,397
Other non-current assets 18 1,107 1,211
Deferred tax assets 9 5,131 6,777
Financial assets at fair value through
profit or loss 19 11,986 15,183
Deferred and contingent consideration 13 914 -
---------------------------------------
113,599 114,602
--------------------------------------- ----- --------- ---------
Current assets
Trade and other receivables 20 132,067 132,741
Current tax assets 3,909 247
Cash and cash equivalents 41,492 69,419
---------------------------------------
177,468 202,407
--------------------------------------- ----- --------- ---------
Current liabilities
Trade and other payables 21 (155,547) (154,049)
Provisions 22 (1,056) (1,193)
Current tax liabilities (481) (837)
Borrowings 23 (4,430) (14,737)
Lease liabilities 17 (6,448) (6,950)
Deferred and contingent consideration 13 - (984)
Minority shareholder put option
liabilities 26/27 (18,419) (20,788)
--------------------------------------- ----- ---------
(186,381) (199,538)
--------------------------------------- ----- --------- ---------
Net current (liabilities) / assets (8,913) 2,869
--------------------------------------- ----- --------- ---------
Total assets less current liabilities 104,686 117,471
--------------------------------------- ----- --------- ---------
Non-current liabilities
Deferred tax liabilities 9 (1,245) (777)
Corporation tax liabilities 9 (856) -
Borrowings 23 (6,802) (19,821)
Lease liabilities 17 (49,122) (49,895)
Minority shareholder put option
liabilities 26/27 (4,429) (11.572)
Other non-current liabilities 24 (4,046) (2,549)
--------------------------------------- ----- ---------
(66,500) (84,614)
--------------------------------------- ----- --------- ---------
Total net assets 38,186 32,857
--------------------------------------- ----- --------- ---------
2022 2021
At 31 December Note GBP000 GBP000
------------------------------------- ---- -------- --------
Equity
Share capital 28 1,227 1,227
Share premium 50,327 50,327
Merger reserve 37,554 37,554
Treasury reserve (550) (550)
Minority interest put option reserve (2,896) (6,615)
Non-controlling interest acquired (32,984) (29,190)
Foreign exchange reserve 6,638 1,853
Accumulated losses (21,303) (22,122)
------------------------------------- ---- -------- --------
Equity attributable to shareholders
of the Group 38,013 32,484
Non-controlling interest 173 373
------------------------------------- ---- -------- --------
Total equity 38,186 32,857
------------------------------------- ---- -------- --------
Reserves are defined in note 35.
These consolidated financial statements were approved and
authorised for issue by the Board of Directors on 17 April 2023 and
signed on its behalf by:
Bruce Marson
Chief Financial Officer
M&C Saatchi plc
Company Number 05114893
Consolidated Statement of Changes in Equity
Retained
earnings
MI put Non-controlling Foreign / Non-controlling
Share Share Merger Treasury option interest exchange (accumulated Sub interest
capital premium reserve reserve reserve acquired reserves losses) total in equity Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------- -------- ------- ------- ------- -------- ------- --------------- -------- ------------ -------- --------------- --------
At 31 December
2020 1,159 44,607 37,554 (550) (4,953) (29,190) 1,210 (4,939) 44,898 233 45,131
--------------- -------- ------- ------- ------- -------- ------- --------------- -------- ------------ -------- --------------- --------
Acquisitions
including
deferred
consideration 12,13,26 54 4,949 - - (2,000) - - - 3,003 - 3,003
Exercise of
Minority
Interest put
options 26 5 419 - - 338 - - - 762 - 762
Transfer from
equity
to
cash-settled
put
options 27 - - - - - - - (32,555) (32,555) - (32,555)
Transfer from
cash
to
equity-settled
put options 27 - - - - - - - 994 994 - 994
Share option
charge 27 - - - - - - - 2,235 2,235 - 2,235
Buyout of
equity
put options in
cash - - - - - - - (632) (632) - (632)
Issue of shares 6 352 - - - - - - 358 - 358
Exercise of put
options 3 - - - - - - (3) - - -
Disposal of
subsidiaries - - - - - - (21) 21 - - -
Dividends 10 - - - - - - - - - (276) (276)
--------------- -------- ------- ------- ------- -------- ------- --------------- -------- ------------ -------- --------------- --------
Total
transactions
with owners 68 5,720 - - (1,662) - (21) (29,940) (25,835) (276) (26,111)
Total profit
for
the year - - - - - - - 12,757 12,757 416 13,173
Total other
comprehensive
income for the
year - - - - - - 664 - 664 - 664
--------------- -------- ------- ------- ------- -------- ------- --------------- -------- ------------ -------- --------------- --------
At 31 December
2021 1,227 50,327 37,554 (550) (6,615) (29,190) 1,853 (22,122) 32,484 373 32,857
--------------- -------- ------- ------- ------- -------- ------- --------------- -------- ------------ -------- --------------- --------
Share option
charge 27 - - - - - - - 1,229 1,229 - 1,229
Amounts paid on
settlement
of LTIP 27 - - - - - - - (500) (500) - (500)
Exercise of put
options 26 - - - - 3,719 (3,794) - - (75) 75 -
Dividends 10 - - - - - - - - - (430) (430)
--------------- -------- -------
Total
transactions
with owners - - - - 3,719 (3,794) - 729 654 (355) 299
Total profit
for
the year - - - - - - - 90 90 155 245
Total other
comprehensive
income for the
year - - - - - - 4,785 - 4,785 - 4,785
--------------- --------
At 31 December
2022 1,227 50,327 37,554 (550) (2,896) (32,984) 6,638 (21,303) 38,013 173 38,186
--------------- -------- ------- ------- ------- -------- ------- --------------- -------- ------------ -------- --------------- --------
The following notes form part of these consolidated financial
statements.
Consolidated Cash Flow Statement
2022 2021
Year ended 31 December Note GBP000 GBP000
-------------------------------------------------- ---- -------- --------
Operating profit 10,548 27,258
-------------------------------------------------- ---- -------- --------
Adjustments for:
Depreciation of plant and equipment 16 2,480 2,237
Depreciation of right-of-use assets 17 6,846 6,959
Loss on sale of plant and equipment 165 95
Loss on sale of software intangibles 175 824
Revaluation of financial assets at FVTPL 19 1,403 (3,533)
Revaluation of contingent consideration 13 266 532
Amortisation of acquired intangible assets 14 597 965
Impairment of goodwill and other intangibles 14 556 1,900
Impairment and amortisation of capitalised
software intangible assets 14 635 1,484
Exercise of share-based payment schemes with
cash 26 (500) -
Equity settled share-based payment expenses 27 1,229 2,235
-------------------------------------------------- ---- -------- --------
Operating cash before movements in working
capital 24,400 40,956
-------------------------------------------------- ---- -------- --------
(Increase) in trade and other receivables (4,187) (38,912)
Increase in trade and other payables 9,104 23,434
(Decrease) / increase in provisions (137) 316
-------------------------------------------------- ---- -------- --------
Cash generated from operations 29,180 25,794
-------------------------------------------------- ---- -------- --------
Tax paid (6,712) (6,844)
-------------------------------------------------- ---- -------- --------
Net cash from operating activities 22,468 18,950
-------------------------------------------------- ---- -------- --------
Investing activities
Acquisitions of subsidiaries net of cash acquired 12 - 633
Disposal of associate or subsidiary (net of
cash disposed of) 11 - (2)
Acquisitions of unlisted investments 19 - (81)
Proceeds from sale of unlisted investments 19 918 209
Proceeds from sale of plant and equipment - 223
Purchase of plant and equipment 16 (4,383) (1,789)
Purchase of capitalised software 14 (1,192) (837)
Interest received 7 391 260
-------------------------------------------------- ---- -------- --------
Net cash consumed by investing activities (4,266) (1,384)
-------------------------------------------------- ---- -------- --------
Net cash from operating and investing activities 18,202 17,566
-------------------------------------------------- ---- -------- --------
Financing activities
-------------------------------------------------- ---- -------- --------
Dividends paid to non-controlling interest (430) (152)
Cash consideration for non-controlling interest
acquired and other options 27 (12,104) (5,348)
Payment of deferred consideration 13 (1,250) -
Buyout of equity put options in cash - (632)
Payment of lease liabilities 17 (7,307) (6,210)
Proceeds from bank loans 23 - 9,301
Repayment of bank loans 23 (13,410) (16,909)
Borrowing costs - (602)
Interest paid 7 (1,200) (1,555)
Interest paid on leases 17 (2,970) (2,800)
-------------------------------------------------- ---- -------- --------
Net cash consumed by financing activities (38,671) (24,907)
-------------------------------------------------- ---- -------- --------
Net decrease in cash and cash equivalents (20,469) (7,341)
-------------------------------------------------- ---- -------- --------
Effect of exchange rate fluctuations on cash
held 2,711 (55)
Cash and cash equivalents at the beginning
of the year 54,979 62,375
-------------------------------------------------- ---- -------- --------
Total cash and cash equivalents at the end
of the year 37,221 54,979
-------------------------------------------------- ---- -------- --------
Cash and cash equivalents 41,492 69,419
Bank overdrafts* 23 (4,271) (14,440)
-------------------------------------------------- ---- -------- --------
Total cash and cash equivalents at the end
of the year 37,221 54,979
-------------------------------------------------- ---- -------- --------
Bank loans and borrowings** 23 (7,212) (20,590)
-------------------------------------------------- ---- -------- --------
Net cash 30,009 34,389
-------------------------------------------------- ---- -------- --------
*These overdrafts are legally offset against balances held in
the UK; however, they have not been netted off in accordance with
the requirements of IAS32.42.
**Bank loans and borrowings are defined in note 23; they exclude
the lease liability of GBP55,570k (2021 GBP56,845k) (note 17)
The following notes form part of these consolidated financial
statements.
Preparation
Basis of preparation
The consolidated financial statements have been prepared in
accordance with UK adopted international accounting standards, in
conformity with the requirements of the Companies Act 2006.
The consolidated financial statements are presented in pounds
sterling and, unless stated otherwise, rounded to the nearest
thousand. They have been prepared under the historical cost
convention, except for the revaluation of certain financial
instruments.
Going concern
These financial statements have been prepared on the going
concern basis.
The Board have concluded that under the most likely going
concern scenarios, the Group will have sufficient liquidity and
headroom on bank covenants to continue to operate for a period of
not less than a year from approving the financial statements.
The Board have formed their opinion after evaluating 5 different
severe but plausible forecast scenarios and a reverse stress test,
extending to 31 December 2025, comprising:
1. a significant reduction in new business wins;
2. a significant increase in wage inflation;
3. a significant number of top clients are lost;
4. a significant economic downturn; and
5. a reverse stress test case.
These severe but plausible scenarios are assumed to materialise
from Q1 2023 onwards. The estimated decline in profit before tax
ranges from GBP22m to GBP26m compared to the base case plan for the
cumulative period ending 31 December 2024, including a GBP11m to
GBP18m decline in profit before tax in 2023.
The reverse stress test case evaluates how extreme conditions
would need to be for the Group to break its covenants within the
going concern review period. The conditions go significantly
further than the severe but plausible scenarios and reflect a
scenario that the Directors consider to be highly unlikely.
The Directors have also considered the impact of climate change
on going concern, taking into account the Company's support for Ad
Net Zero (the industry initiative to tackle climate change led by
the Advertising Association and its members), and do not believe
that there is a significant financial impact.
The Board is satisfied that the Group's forecasts, which take
into account reasonably possible changes in trading performance,
show that there are no material uncertainties over going concern,
and that, even under the severe but plausible scenarios, the Group
will continue to have sufficient liquidity and headroom to operate
within the terms of its banking covenants. The Board, therefore,
have concluded the going concern basis of preparation continues to
be appropriate.
Foreign exchange
Transactions in foreign currencies are translated at the
exchange rate ruling at the dates of the transactions. Monetary
assets and liabilities denominated in foreign currencies are
retranslated at the exchange rates ruling at the balance sheet
date, with the resulting exchange differences recognised in the
income statement.
The accounts of each subsidiary are prepared using the
functional currency of that subsidiary. The income statements of
foreign subsidiary undertakings are translated into pounds sterling
at average exchange rates on consolidation. The assets and
liabilities of overseas subsidiaries (which comprise the Group's
net investment in foreign operations) are translated at the
exchange rate ruling at the balance sheet date. The resulting
exchange differences are recognised in other comprehensive income
and accumulated in equity within the foreign exchange reserve.
Consolidation
The Group's financial statements consolidate the results of the
Company and its subsidiary entities, and include the share of its
joint ventures' and associates' results accounted for under the
equity method.
A subsidiary is an entity controlled by the Group. The Group
controls a subsidiary when it is exposed, or has the rights, to
variable returns from its involvement with the subsidiary and has
the ability to affect those returns through its power over the
subsidiary.
The results of subsidiaries are included from the date of
acquisition. Where necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies into
line with those of the Group. Intra-group transactions, balances,
income, and expenses are eliminated on consolidation.
Where a consolidated company is less than 100% owned by the
Group, the treatment of the non-controlling interest share of the
results and net assets is dependent on how the non-controlling
interests' equity award is accounted for. Where the equity is
accounted for as a share-based payment award under IFRS 2, all
dividend outflow is taken to staff costs, and there is no
non-controlling interest. In all other cases, the non-controlling
interest share of the results and net assets is recognised at each
reporting date in equity, separately from the equity attributable
to the shareholders of the Company.
Significant accounting policies
The significant accounting policies applied in the preparation
of these consolidated financial statements are set out in the
relevant notes. These policies have been applied consistently to
all the years presented, unless otherwise stated.
Critical accounting policies
Certain of the Group's significant accounting policies are
considered by the Directors to be critical, due to the level of
complexity, judgement, or estimation involved in their application
and their potential impact on the consolidated financial
statements. The critical accounting policies are listed below and
explained in more detail in the relevant notes to the Group
financial statements.
Revenue recognition
The Group applied IFRS 15 Revenue on contracts with customers
from the start of 2018.
The Group's revenue is earned from the provision of advertising
and marketing services, together with commission-based income in
relation to media spend and commission-based income in relation to
talent performance. Revenue from contracts with customers is
recognised as, or when, the performance obligations present within
the contractual agreements are satisfied. Depending on the
arrangement with the client, the Group may act as principal or as
agent in the provision of these services.
See note 4 for a full listing of the Group's revenue accounting
policies.
Put option accounting (IFRS 2 and IFRS 9)
It is common for equity partners in the Group's subsidiaries to
hold put options over their equity, such that they can require the
Group to purchase their non-controlling interest for either a
variable number of the Company shares or cash. Dependent on the
terms and substance of the underlying agreement, these options are
either recognised as a put option liability under IFRS 9 (note 26)
or as a put option under IFRS 2 (note 27) - see significant
judgements below.
An IFRS 9 scheme should be considered as reward for future
business performance and is not conditional on the holder being an
employee of the business. These instruments are recognised in full
at the amortised cost of the underlying award on the date of
inception, with both a liability on the balance sheet and a
corresponding amount within the minority interest put option
reserve being recognised. At each period end, the amortised cost of
the put option liability is calculated in accordance with the put
option agreement, to determine a best estimate of the future value
of the expected award. Resultant movements in the amortised cost of
these instruments are charged to the income statement within
finance income/expense. The put option liability will vary with
both the Group's share price and the subsidiary's financial
performance. Upon exercise of an award by a holder, the liability
is extinguished and the associated minority interest put option
reserve is transferred to the non-controlling interest acquired
reserve.
An IFRS 2 scheme should be considered as reward for future
business performance and is conditional on the holder being an
employee of the business. These schemes are recognised as staff
costs over the vesting period (if equity-settled) or until the
option is exercised (if cash-settled). In September 2021, the Board
made the decision to move to cash settlement of these put options
going forward. This required a fair value assessment on the day of
the modification and a movement between reserves and
liabilities.
See note 27 for a full description of the Group's accounting
policy for IFRS 2 put options.
Headline results
As stated in the Financial Review, the Directors believe that
the Headline results and Headline earnings per share (see note 1)
provide additional useful information on the underlying performance
of the business. The Headline results reflect the underlying
profitability of the business units, by excluding a number of items
that are not part of routine business income and expenses.
In addition, the Headline results are used for internal
performance management and reward, and they are also used to
calculate minority shareholder put option liabilities. The term
'Headline' is not a defined term in IFRS. Note 1 reconciles
Statutory results to Headline results and the segmental reporting
(note 3) reflects Headline results, in accordance with IFRS 8.
The items that are excluded from Headline results are:
-- Exceptional separately disclosed items that are one-off in nature and are not part of running
the business.
-- Acquisition-related costs.
-- Gains or losses generated by disposals of subsidiaries and associates.
-- Fair value adjustments to unlisted equity investments, acquisition related contingent consideration
and put options.
-- Dividends paid to IFRS 2 put option holders.
Unlisted investments
The Group holds certain unlisted equity investments which are
classified as financial assets at FVTPL (see note 19). These
investments are initially recognised at their fair value. At the
end of each reporting period, the fair value is reassessed, with
gains or losses being recognised in the income statement.
Significant accounting judgements and key sources of estimation
uncertainty
In the course of preparing financial statements, management
necessarily makes judgements and estimates that can have a
significant impact on the financial statements. The estimates and
judgements that are made are continually evaluated, based on
historical experience and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. The estimates and judgements that have a significant
risk of causing a material adjustment to the financial statements
within the next financial year are outlined below:
Significant accounting judgements
Management has made the following judgements, which have the
most significant effect in terms of the amounts recognised, and
their presentation, in the consolidated financial statements.
Non-controlling interest put option accounting - IFRS 2 or IFRS
9
The key judgement is whether the awards are given beneficially
as a result of employment, which can be determined where there is
an explicit service condition, where the award is given to an
existing employee, where the employee is being paid below market
value or where there are other indicators that the award is a
reward for employment. In such cases, the awards are accounted for
as a share-based payment in exchange for employment services under
IFRS 2.
Otherwise, where the holder held shares prior to the Group
acquiring the subsidiary, or gained the equity to start a
subsidiary using their unique skills, and there are no indicators
it should be accounted for under IFRS 2, then the award is
accounted for under IFRS 9.
Impairment - assessment of CGUs and assessment of indicators of
impairment
Impairment reviews are undertaken annually, or more frequently
if events or changes in circumstances indicate a potential
impairment. Assets with finite lives are reviewed for indicators of
impairment (an impairment "trigger") and judgement is applied in
determining whether such a trigger has occurred. External and
internal factors are monitored by management, including a) adverse
changes in the economic or political situation of the geographic
locale in which the underlying entity operates, b) heightened risk
of client loss or chance of client gain, and c) internal reporting
suggesting that an entity's future economic performance is better
or worse than previously expected. Where management have concluded
that such an indication of impairment exists, then the recoverable
amount of the asset is assessed.
The Group assesses whether an impairment is required by
comparing the carrying value of the CGU assets (including the
right-of-use assets under IFRS 16) to their value in use.
Discounted cash flow models, based on the Group's latest budget and
3 year financial plan, and a long term growth rate, are used to
determine the recoverable amount for the CGUs. The appropriate
estimates and assumptions used require judgement and there is
significant estimation uncertainty. The results of impairment
reviews conducted at the end of the year are reported in note 14
(Intangible Assets), note 15 ( Investments in associates and joint
ventures ), and note 17 ( Leases ).
The Group has recognised a total impairment charge of GBP564k in
the year (2021: GBP3,294k), of which GBP728k relates to Intangibles
(2021: GBP2,937k) and GBP164k relates to the reversal of a previous
impairment of right-of-use assets, for a property which has been
sublet in 2022 (2021: GBPNil). There was no impairment in the year
of plant and equipment (2021: GBPNil), or associate investments
(2021: GBP357k).
Significant estimates and assumptions
Some areas of the Group's financial statements are subject to
key assumptions and other significant sources of estimation
uncertainty at the reporting date, that have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year. The Group has based its
assumptions and estimates on parameters available when the
financial statements were prepared.
Deferred tax assets
The Group assesses the future availability of carried forward
losses and other tax attributes, by reference to
jurisdiction-specific rules around carry forward and utilisation,
and it assesses whether it is probable that future taxable profits
will be available against which the attribute can be utilised.
Fair value measurement of financial instruments
The Group holds certain financial instruments, which are
recorded on the balance sheet at fair value at the point of
recognition and remeasured at the end of each reporting period. At
the year-end these relate to:
i. equity investments at FVTPL in non-listed limited companies (note 19); and
ii. certain contingent consideration (note 13).
No formal market exists to trade these financial instruments
and, therefore, their fair value is measured by the most
appropriate valuation techniques available, which vary based on the
nature of the instruments. The inputs to the valuation models are
taken from observable markets where possible, but, where this is
not feasible, judgement is required to establish fair values.
The basis of calculation of the estimated fair value of these
financial instruments (in addition to sensitivity analyses on the
estimates' salient inputs) is detailed in note 29.
Share-based incentive arrangements
Share-based incentives are valued at the date of the grant,
using stochastic Monte Carlo pricing models with non-market vesting
conditions. Typically, the value of these awards is directly
related to the performance of a particular entity of the Group in
which the employee holds a minority interest. The key inputs to the
pricing model are risk-free interest rates, share price volatility
and expected future performance of the entity to which the award
relates. Management apply judgement to these inputs, using various
sources of information, including the Group's share price,
experience of past performance and published data on risk-free
interest rates (government gilts).
Details of awards made in the year are shown in note 27.
Leasing estimates
Within IFRS 16, two estimates are used for the recognition of
new leases and making amendments to existing leases:
i. Derivation of the interest rate used for discounting future cash flows - the discount rate used
in the calculation of the lease liability involves estimation on a lease-by-lease basis. This
involves an estimate of incremental borrowing costs, driven by the territory risk (which comprises
both the currency used and the risk-free rates of that country), the date of lease inception,
and the lease term.
ii. Anticipated length of lease term - IFRS 16 defines the lease term as the non-cancellable period
of a lease, together with the options to extend or terminate a lease, if the lessee is reasonably
certain to exercise that option. Where a lease includes the option for the Group to extend the
lease term, the Group takes a view, at inception, as to whether it is reasonably certain that
the option will be exercised. This will take into account the length of time remaining before
the option is exercisable, current trading, future trading forecasts and the level and type of
any planned capital investment. The assessment of whether the option will be exercised is reassessed
in each reporting period. A reassessment of the remaining life of the lease could result in a
recalculation of the lease liability and a material adjustment to the associated balances.
Non-statutory accounts statement
The financial information for the year ended 31 December 2022
and the year ended 31 December 2021 does not constitute the
company's statutory accounts for those years.
Statutory accounts for the year ended 31 December 2021 have been
delivered to the Registrar of Companies. The statutory accounts for
the year ended 31 December 2022 will be delivered to the Registrar
of Companies in due course.
The auditor's reports on the accounts for 31 December 2022 and
2021 were unqualified, did not draw attention to any matters by way
of emphasis, and did not contain any statement under 498(2) or
498(3) of the Companies Act 2006.
Notes to the Financial Statements
1. Headline results and earnings per share
The analysis below provides a reconciliation between the Group's
Statutory results and the Headline results for the current
year.
Dividends
Impairment paid to
Separately of FVTPL IFRS 2
disclosed Amortisation non-current investments Revaluation put Put option
items of acquired assets under IFRS of contingent holders accounting
Statutory (note intangibles (note 14 9 (note consideration (note (note 26 Headline
2022 2) (note 14) & 17) 19) (note 13) 5)* & 27) results
Year ended 31
December
2022 Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------- ----- --------- ---------- ------------ ----------- ------------ ------------- --------- ---------- ---------
Billings
(unaudited) 597,520 - - - - - - - 597,520
---------------- ----- --------- ---------- ------------ ----------- ------------ ------------- --------- ---------- ---------
Revenue 462,533 - - - - - - - 462,533
---------------- ----- --------- ---------- ------------ ----------- ------------ ------------- --------- ---------- ---------
Net revenue 271,140 - - - - - - - 271,140
---------------- ----- --------- ---------- ------------ ----------- ------------ ------------- --------- ---------- ---------
Staff costs 5 (198,765) 3,412 - - - - 7,811 1,119 (186,423)
Depreciation 16,17 (9,326) - - - - - - - (9,326)
Amortisation 14 (1,060) - 597 - - - - - (463)
Impairments 14,17 (564) - - 564 - - - - -
Other operating
charges (49,474) 9,940 - - (272) 266 - - (39,540)
Other losses 19 (1,403) - - - 1,403 - - - -
-----
Operating profit 10,548 13,352 597 564 1,131 266 7,811 1,119 35,388
---------------- ----- --------- ---------- ------------ ----------- ------------ ------------- --------- ---------- ---------
Share of results
of associates
and JV 15 (10) - - - - - - - (10)
Finance income 7 391 - - - - - - - 391
Finance expense 7 (5,506) - - - 456 - - 1,114 (3,936)
---------------- ----- --------- ---------- ------------ ----------- ------------ ------------- --------- ----------
Profit before
taxation 8 5,423 13,352 597 564 1,587 266 7,811 2,233 31,833
---------------- ----- --------- ---------- ------------ ----------- ------------ ------------- --------- ---------- ---------
Taxation 8 (5,178) (1,982) (174) - (409) - - (47) (7,790)
---------------- ----- --------- ---------- ------------ ----------- ------------ ------------- --------- ---------- ---------
Profit for the
year 245 11,370 423 564 1,178 266 7,811 2,186 24,043
---------------- ----- --------- ---------- ------------ ----------- ------------ ------------- --------- ---------- ---------
Non-controlling
interests (155) - - - - - (5,783) - (5,938)
---------------- ----- --------- ---------- ------------ ----------- ------------ ------------- --------- ---------- ---------
Profit
attributable to
equity holders
of the
Group** 90 11,370 423 564 1,178 266 2,028 2,186 18,105
---------------- ----- --------- ---------- ------------ ----------- ------------ ------------- --------- ---------- ---------
* The non-controlling interest charge is moved to operating
profit due to underlying equity being defined as a IFRS 2 put
option.
** Headline earnings are profit attributable to equity holders
of the Group after adding back the adjustments noted above.
1. Headline results and earnings per share continued
The analysis below provides a reconciliation between the Group's
Statutory results and the Headline results for the prior year.
Revaluation
Gain on of Dividends
Impairment disposal associates FVTPL paid to
Separately of of on investments IFRS 2
disclosed Amortisation non-current subsidiaries transition under IFRS Revaluation put Put option
items of acquired assets and related to 9 (note of contingent holders accounting
Statutory (note intangibles (note costs (note subsidiaries 19) consideration (note (note 26 Headline
2021 2) (note 14) 14 & 15) 11) (note 15) (note 13) 5)* & 27) results
Year ended 31
December
2021 Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------- ----- --------- ---------- ------------ ----------- ------------ ------------ ------------ ------------- --------- ---------- ---------
Billings
(unaudited) 533,350 - - - - - - - - - 533,350
----------------- ----- --------- ---------- ------------ ----------- ------------ ------------ ------------ ------------- --------- ---------- ---------
Revenue 394,575 - - - - - - - - - 394,575
----------------- ----- --------- ---------- ------------ ----------- ------------ ------------ ------------ ------------- --------- ---------- ---------
Net revenue 249,336 - - - - - - - - - 249,336
----------------- ----- --------- ---------- ------------ ----------- ------------ ------------ ------------ ------------- --------- ---------- ---------
Staff costs 5 (172,493) (3,975) - - 28 - - - 5,270 1,225 (169,945)
Depreciation 16,17 (9,196) - - - - - - - - - (9,196)
Amortisation 14 (1,412) - 965 - - - - - - - (447)
Impairments 14 (2,937) - - 2,413 - - - - - - (524)
Other operating
charges (39,573) 192 - - 97 - 664 532 - - (38,088)
Other gains 19 3,533 - - - - - (3,533) - - - -
-----
Operating profit 27,258 (3,783) 965 2,413 125 - (2,869) 532 5,270 1,225 31,136
----------------- ----- --------- ---------- ------------ ----------- ------------ ------------ ------------ ------------- --------- ---------- ---------
Share of results
of
associates and
JV 15 (190) - - - - 234 - - - - 44
Gain on disposal
of
subsidiaries 11 42 - - - (42) - - - - - -
Impairment of
associate
investment 15 (357) - - 357 - - - - - - -
Finance income 7 260 - - - - - - - - - 260
Finance expense 7 (5,381) - - - - - 359 - - 896 (4,126)
----------------- ----- --------- ---------- ------------ ----------- ------------ ------------ ------------ ------------- --------- ----------
Profit before
taxation 8 21,632 (3,783) 965 2,770 83 234 (2,510) 532 5,270 2,121 27,314
----------------- ----- --------- ---------- ------------ ----------- ------------ ------------ ------------ ------------- --------- ---------- ---------
Taxation 8 (8,459) 743 (246) - - - 680 - 11 - (7,271)
----------------- ----- --------- ---------- ------------ ----------- ------------ ------------ ------------ ------------- --------- ---------- ---------
Profit for the
year 13,173 (3,040) 719 2,770 83 234 (1,830) 532 5,281 2,121 20,043
----------------- ----- --------- ---------- ------------ ----------- ------------ ------------ ------------ ------------- --------- ---------- ---------
Non-controlling
interests (416) - - - - - - - (5,940) - (6,356)
----------------- ----- --------- ---------- ------------ ----------- ------------ ------------ ------------ ------------- --------- ---------- ---------
Profit
attributable
to equity
holders
of the Group** 12,757 (3,040) 719 2,770 83 234 (1,830) 532 (659) 2,121 13,687
----------------- ----- --------- ---------- ------------ ----------- ------------ ------------ ------------ ------------- --------- ---------- ---------
* The non-controlling interest charge is moved to operating
profit due to underlying equity being defined as a IFRS 2 put
option.
**Headline earnings are profit attributable to equity holders of
the Group after adding back the adjustments noted above.
Headline results and earnings per share continued
Earnings per share
Basic and diluted earnings per share are calculated by dividing
the appropriate earnings metrics by the weighted average number of
shares of the Company in issue during the year.
Diluted earnings per share is calculated by adjusting the
weighted average number of the Company's ordinary shares in issue
on the assumption of conversion of all potentially dilutive
ordinary shares. Anti-dilutive potential ordinary shares are
excluded. The dilutive effect of unvested outstanding options is
calculated based on the number that would vest had the balance
sheet date been the vesting date. Where schemes have moved from
equity to cash payment and vice-versa the potential dilution is
calculated as though they had been in their year-end position for
the whole year.
Headline
Year ended 31 December 2022 2022 2022
Profit attributable to equity shareholders of the
Group (GBP000) 90 18,105
--------------------------------------------------------- -------- --------
Basic earnings per share
Weighted average number of shares (thousands) 122,257 122,257
Basic EPS 0.07p 14.81p
--------------------------------------------------------- -------- --------
Diluted earnings per share
Weighted average number of shares (thousands) as
above 122,257 122,257
Add
- LTIP 905 905
- Put options 11,302 11,302
--------------------------------------------------------- -------- --------
Total 134,464 134,464
Diluted EPS 0.07p 13.47p
--------------------------------------------------------- -------- --------
Excluding the put options (payable in cash) (11,302) (11,302)
Weighted average number of shares (thousands) including
dilutive shares 123,162 123,162
--------------------------------------------------------- -------- --------
Diluted EPS - excluding items the Group intends
and is able to pay in cash 0.07p 14.70p
--------------------------------------------------------- -------- --------
Headline
Year ended 31 December 2021 2021 2021
Profit attributable to equity shareholders of the
Group (GBP000) 12,757 13,687
--------------------------------------------------------- -------- --------
Basic earnings per share
Weighted average number of shares (thousands) 121,130 121,130
Basic EPS 10.53p 11.30p
--------------------------------------------------------- -------- --------
Diluted earnings per share
Weighted average number of shares (thousands) as
above 121,130 121,130
Add
- LTIP 178 178
- Restrictive Shares 649 649
- Deferred consideration (payable in cash) 695 695
- Put options (payable in cash) 13,342 13,342
--------------------------------------------------------- -------- --------
Total 135,994 135,994
Diluted EPS 9.38p 10.06p
--------------------------------------------------------- -------- --------
135,994 135,994
Excluding the deferred consideration (payable in
cash) (695) (695)
Excluding the put options (payable in cash) (13,342) (13,342)
Weighted average number of shares (thousands) including
dilutive shares 121,957 121,957
--------------------------------------------------------- -------- --------
Diluted EPS - excluding items the Group intends
and is able to pay in cash 10.46p 11.22p
--------------------------------------------------------- -------- --------
2. Separately disclosed items
Policy
Separately disclosed items include one off, non-recurring
revenues or expenses. These are shown separately and are excluded
from Headline profit to provide a better understanding of the
underlying results of the Group.
Analysis
Separately disclosed items for the year ended 31 December 2022
comprise of the following:
After
Operating Staff tax
costs costs Taxation total
2022 GBP000 GBP000 GBP000 GBP000
----------------------------------- --------- ------- -------- -------
Takeover transaction costs 9,210 1,623 (1,294) 9,539
Strategic review and restructuring 992 1,789 (688) 2.093
Other (262) - - (262)
Total separately disclosed items 9,940 3,412 (1,982) 11,370
----------------------------------- --------- ------- -------- -------
During 2022, the Company has been subject to two competing bids
to take control and full ownership of the business. Managing the
Company's response to these two bids has resulted in a number of
external advisory costs and a refocusing of several key internal
personnel away from the day-to-day running of the business.
Included in the above is GBP811k related to senior management costs
(including GBP360k representing CEO time), as an estimate of time
spent on the transaction where they have been unable to undertake
other planned strategic activities and day-to-day management of the
business. In addition, incremental bonus costs were paid to several
key individuals of GBP594k to reflect the significant additional
workload they had to undertake.
In 2022, the Group has commenced a global cost efficiency
programme, with the assistance of PricewaterhouseCoopers LLP. The
professional fees incurred in relation to this project have been
classified as non-Headline (GBP992k). In addition, within three of
the agencies in the Group, a strategic review has been commenced
which has resulted in staff redundancy costs in the year
(GBP1,789k).
Other separately disclosed items relate to the release of the
provision associated with the Financial Conduct Authority
investigation, which is now closed with no enforcement action being
taken, the cost of which was previously treated as non-Headline. In
addition, legal fees were incurred in relation to a put option.
Separately disclosed items for the year ended 31 December 2021
comprise the following:
After
Operating Staff tax
costs costs Taxation total
2021 GBP000 GBP000 GBP000 GBP000
------------------------------------- --------- ------- -------- -------
Strategic review and restructuring 192 (2,751) 466 (2,093)
Forgiveness of US Payment Protection
Program ("PPP") loan - (2,200) 462 (1,738)
Repayment of UK furlough money - 976 (185) 791
Total separately disclosed items 192 (3,975) 743 (3,040)
------------------------------------- --------- ------- -------- -------
In 2021, the Group recognised the repayment of the UK furlough
money that was received in 2020 and the forgiveness of the US "PPP"
loans that were received in 2020. Included within strategic review
and restructuring are the release of a long-term incentive plan
accrual for a previous employee who is no longer part of the
business (GBP1.8m of this relates to pre-2021), and the lease
surrender expense, due to restructuring of two lease spaces.
3. Segmental information
Headline segmental income statement
Segmental results are reconciled to the income statement in note
1. The Board reviews Headline results.
The Group's operating segments are aligned to those business
units that are evaluated regularly by the chief operating decision
maker ("CODM"), namely, the Board, in making strategic decisions,
assessing performance, and allocating resources.
The operating segments have historically comprised of individual
country entities, the financial information of which is provided to
the CODM and is aggregated into specific geographic regions on a
headline basis, with each geographic region considered a reportable
segment. Each country included in that region has similar economic
and operating characteristics. The products and services provided
by entities in a geographic region are all related to marketing
communications services and generally offer complementary products
and services to their customers.
The Group's performance is also assessed under a structure of
specialisms, and this is reported under two segments: Advertising
and High Growth Specialisms, excluding Group Central Costs.
Segmental Information by Geography
UK Europe Middle Asia Australia Americas Group Total
East and Central
Africa Costs
Year Ended GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
31 December
2022
------------- -------- -------- ---------- -------- ---------- --------- ------------- ---------
Net revenue 98,241 15,316 23,368 26,154 52,855 55,206 - 271,140
Operating
profit /
(loss) 19,528 1,852 2,625 6,951 5,817 9,970 (11,355) 35,388
Operating
profit
margin 19% 12% 11% 29% 11% 18% - 13%
Profit /
(loss)
before
tax 17,416 1,832 2,345 6,757 4,904 8,278 (9,699) 31,833
------------- -------- -------- ---------- -------- ---------- --------- ------------- ---------
UK Europe Middle Asia Australia Americas Group Central Total
East and Costs
Africa
Year Ended 31 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
December
2021*
-------------- -------- -------- ---------- -------- ---------- --------- -------------- ---------
Net revenue 95,104 15,207 20,216 23,324 53,997 41,488 - 249,336
Operating
profit /
(loss) 17,837 1,929 2,842 7,331 5,832 7,525 (12,160) 31,136
Operating
profit
margin 19% 13% 14% 31% 11% 18% - 12%
Profit /
(loss)
before
tax 17,426 1,906 2,430 6,702 5,257 6,441 (12,848) 27,314
-------------- -------- -------- ---------- -------- ---------- --------- -------------- ---------
*2021 figures have been restated to bring geographical split of
Performance entities in line with internal management
reporting.
Included within the Group's revenues is a customer that makes up
more than 10% of total revenue, contributing GBP32.8m (2021:
GBP23.6m). This is included within UK, Americas and within the High
Growth Specialisms.
Segmental Information by Specialisms
Advertising High Growth Group Central Total
Specialisms Costs
Year Ended 31 December 2022 GBP000 GBP000 GBP000 GBP000
----------------------------- ------------ ------------- -------------- ---------
Net revenue 124,300 146,840 - 271,140
Operating profit / (loss) 11,728 35,015 (11,355) 35,388
Operating profit margin 9% 24% - 13%
Profit / (loss) before tax 9,928 31,604 (9,699) 31,833
----------------------------- ------------ ------------- -------------- ---------
Advertising* High Growth Group Central Total
Specialisms* Costs
Year Ended 31 December 2021 GBP000 GBP000 GBP000 GBP000
----------------------------- ------------- -------------- -------------- ---------
Net revenue 127,195 122,141 - 249,336
Operating profit / (loss) 11,052 32,244 (12,160) 31,136
Operating profit margin 9% 26% - 12%
Profit / (loss) before tax 9,370 30,792 (12,848) 27,314
----------------------------- ------------- -------------- -------------- ---------
*In 2022 two agencies were included in High Growth Specialisms,
compared to Advertising in 2021. The figures relating to these
entities in 2021 were net revenue, GBP2,623k, operating loss,
GBP175k and loss before tax, GBP156k.
4. Revenue from contracts with customers
Billings comprise all gross amounts billed, or billable, to
clients and is stated exclusive of VAT and sales taxes. Billings is
a non-GAAP measure and is included as it influences the quantum of
trade and other receivables recognised at a given date. The
difference between Billings and Revenue is represented by costs
incurred on behalf of clients with whom entities within the Group
operate as an agent, and timing differences, where invoicing occurs
in advance or in arrears of the related revenue being
recognised.
Net revenue is a non-GAAP measure and is reviewed by the CODM
and other stakeholders as a key metric of business performance
(note 3).
Revenue recognition policies
Revenue is stated exclusive of VAT and sales taxes. Net revenue
is exclusive of third-party costs recharged to clients, where
entities within the Group are acting as principal.
Performance obligations
At the inception of a new contractual arrangement with a
customer, the Group identifies the performance obligations inherent
in the agreement. Typically, the terms of the contracts are such
that the services to be rendered are considered to be either
integrated or to represent a series of services that are
substantially the same with the same pattern of transfer to the
customer. Accordingly, this amalgam of services is accounted for as
a single performance obligation.
Where there are contracts with services which are distinct
within the contract, then they are accounted for as separate
obligations. In these instances, the consideration due to be earned
from the contract is allocated to each of the performance
obligations, in proportion to their stand-alone selling price.
Further discussion of performance obligations arising in terms
of the main types of services provided by the Group, in addition to
their typical pattern of satisfaction, is provided below.
Measurement of revenue
Based on the terms of the contractual arrangements entered into
with customers, revenue is typically recognised over time. This is
based on either the fact that (i) the assets generated under the
terms of the contracts have no alternative use to the Group and
there is an enforceable right to payment, or (ii) the client exerts
editorial oversight during the course of the assignment such that
they control the service as it is provided.
Principal vs agent
When a third-party supplier is involved in fulfilling the terms
of a contract then, for each performance obligation identified, the
Group assesses whether the Group is acting as principal or agent.
The primary indicator used in this assessment is whether the Group
is judged to control the specified services prior to the transfer
of those services to the customer. In this instance it is typically
concluded the Group is acting as principal.
When entities within the Group act as an agent, the revenue
recorded is the net amount retained. Costs incurred with external
suppliers are excluded from revenue. When the Group acts as
principal the revenue recorded is the gross amount billed and when
allowable by the terms of the contract, out-of-pocket costs, such
as travel, are also recognised as the gross amount billed with a
corresponding amount recorded as an expense.
Treatment of costs
Costs incurred in relation to the fulfilment of a contract are
generally expensed as incurred if revenue is recognised over
time.
Disaggregation of revenue
The Group monitors the composition of revenue earned by the
Group on a geographic basis and by specialism.
Reported
2022 vs
Revenue 2022 2021 2021
------ ------ ---------
Specialism GBPm GBPm Movement
-------------- ------ ------ ---------
Advertising* 221.8 193.8 14.5%
Media 36.6 33.1 10.6%
Issues 92.7 87.7 5.7%
Consulting* 45.9 39.5 16.1%
Passions* 65.5 40.5 61.6%
-------------- ------ ------ ---------
Group 462.5 394.6 17.2%
-------------- ------ ------ ---------
*Included in 2021 Advertising Revenue is GBP2,441k relating to
an agency recognised in Passions in 2022 and GBP1,345k relating to
an agency recognised in Consulting in 2022.
Reported
2022 vs
Revenue 2022 2021 2021
------ ------ ---------
Region GBPm GBPm Movement
---------------------- ------ ------ ---------
UK 139.3 101.1 38.1%
Europe 24.9 26.9 (7.5)%
Middle East & Africa 53.0 37.9 39.8%
Asia 39.0 41.3 (5.7)%
Australia 89.5 82.8 8.%
Americas 116.8 104.6 11.5%
---------------------- ------ ------ ---------
Group 462.5 394.6 17.2%
---------------------- ------ ------ ---------
Assets and liabilities related to contracts with customers
Contract assets and liabilities arise when there is a difference
(generally due to timing) in the amount of revenue which can be
recognised and the amount which can be invoiced under the terms of
the contractual arrangement.
Where revenue earned from customers is recognised over time,
many of the Group's contractual arrangements have terms which
permit the Group to remit invoices for the amount of work performed
to date on a specific contract (described in the accounting
policies as 'right-to-invoice'). Where the terms of a contractual
arrangement do not carry such right to invoice, then a contract
asset is recognised over time, as work is performed until such
point that an invoice can be remitted.
Where revenue earned from customers is recognised at a point in
time, then this will be dependent on satisfaction of a specific
performance obligation. At such point, it is usual that there are
no other conditions required to be met for receipt of consideration
and, as such, a trade receivable should be recognised at the point
the entity's right to consideration is unconditional, which
normally will be at the time the PO is satisfied (which may not be
the same as when an invoice is raised).
Contract liabilities comprise instances where a customer has
made payments relating to services prior to their provision. Where
payments are received in advance, IFRS 15 requires assessment of
whether these cash transfers contain any financing component. Under
the terms of the contractual arrangements entered into by entities
within the Group, there are no instances where such financing
elements arise. This is the case even for those arrangements where
the Group receives monies more than a year in advance by virtue of
the terms of the contractual agreement so entered into.
The Group operates a standard 30 day credit terms policy. All
contract liabilities and contract assets (other receivables per
note 20) brought forward have been recognised in the current
period.
Revenue recognition policies and performance obligation
satisfaction by category of services performed
Further details regarding revenue recognition and performance
obligations of the Group's main service offerings are summarised
below.
Provision of advertising and marketing services
The provision of advertising and marketing services to clients
typically meets the criteria identified above for revenue to be
recognised over time. The quantum of revenue to be recognised over
the period of the assignments is either based on the
'right-to-invoice' expedient or as the services are provided,
depending on the contractual terms. In measuring the progress of
services provided in an assignment, the Group uses an appropriate
measure depending on the circumstances, which may include inputs
(such as internal labour costs incurred) or outputs (such as media
posts). Where projects are carried out under contracts, the terms
of which entitle an entity within the Group to payment for its
performance only when a discrete point is reached (such as an event
has occurred or a milestone has been reached), then revenue is
recognised at the time that payment entitlement occurs, i.e. at a
point in time.
The provision of advertising and marketing services can
encompass provision of a range of media deliverables in addition to
development and deployment of a media strategy. Regular assessment
of the effectiveness of the project with regards to the objective
of the contractual arrangement may also be included. Often the
range of services provided within these arrangements is considered
to be integrated to an extent that no separable performance
obligations can be identified other than a single over-arching
combined performance obligation relating to the delivery of the
project. In these instances, revenue is recognised over time as the
performance obligation is being satisfied depending on the
circumstances, which may include inputs (such as internal labour
costs incurred) or outputs (such as media posts).
When services provided are considered separable, and not
integrated, then multiple performance obligations are recognised.
Multiple performance obligations are most common in projects where
there are clearly separable conceptual preparatory obligations
culminating in a customer deliverable, such as an event. In these
scenarios the conceptual preparation element and the deliverable
are concluded as forming separate performance obligations with the
revenue and corresponding cost of sales (typically third-party
pass-through costs) assigned to the obligation to which they
relate.
Whilst it is uncommon for projects to be such that revenue is
not able to be recognised over time, examples can occur. In these
instances, the element of the transaction price assigned to each
performance obligation (in proportion to stand-alone selling
prices) is recognised as revenue once an obligation has been fully
satisfied, for example an event has occurred or a milestone has
been reached.
The entity within the Group enters into retainer fees that
relate to arrangements whereby the nature of the entity's
contractual promise is to agree to 'stand-ready' to deliver
services to the customer for a period of time rather than to
deliver the goods or services underlying that promise. Revenue
relating to retainer fees is recognised over the period of the
relevant assignments or arrangements, typically in line with the
'stand-ready' incurred costs.
Where fees are remunerated to the agency in excess of the
services rendered then a contract liability is recognised.
Conversely where the services rendered are in excess of the actual
fees paid, then a contract asset is recognised when there is a
right to consideration.
Certain of these arrangements have contractual terms relating to
the agency meeting specific customer identified KPIs. As a result,
the overall level of consideration can vary by increasing or
decreasing as a result of performance against these KPI metrics. To
reflect this variability in the overall level of consideration,
management estimate the most likely outcome and then reflect that
outcome in the revenue recognised as the performance obligation(s)
of the contract are satisfied. When determining the likely outturn
position the estimated consideration is such that it is highly
probable there will not be significant reversal of the revenue in
the future. The estimated portion of the variable element is
recalculated at the earlier of the completion of the contract or
the next reporting period and revenue is adjusted accordingly.
These estimates are based on historical award experience,
anticipated performance and best judgement at the time.
Commission based income in relation to media spend
The Group arranges for third parties to provide the related
goods and services to its customers in the capacity of an agent.
Revenue is recognised in relation to the amount of commission the
Group is entitled to. Often additional integrated services are
provided at the same time with regards to the development and
deployment of an overarching media strategy. Due to the integration
of the services provided under the terms of the contract,
management judgement is applied to assess whether there is a single
combined performance obligation.
The performance obligation for media purchases is considered to
have been satisfied when the associated advertisement has been
purchased. In the majority of instances where the Group purchases
media for clients, the Group is acting as agent.
Commission based income in relation to talent performance
Revenue in relation to talent performance involves the Group
acting as agent. Typically, such arrangements have a single, or a
sequence, of specific performance obligations relating to the
talent (or other third party) providing services. The performance
obligations are generally satisfied at a point in time once the
service has been provided, at which point, revenue is recognised.
The consideration for the services is normally for a fixed amount
(as a percentage of the talent's fee) with no degree of
variability.
Recognition of supplier discounts and rebates as revenue from
contracts with customers
The Group receives discounts and rebates from certain suppliers
for transactions entered into on behalf of clients, which the
clients have agreed the Group can retain. When the contractual
terms of the agreements entered into are such that the Group acts
as agent in these instances, then such rebates are recognised as
revenue from contracts with customers. By contrast, when the
contractual terms of the agreements are such that the Group is
acting as principal then such rebates are recognised as a reduction
in direct costs. Certain of the Group's clients, however, have
contractual terms such that the pricing of their contracts is
structured with the rebate being passed through to them.
5. Staff costs
Policy
Contributions to personal pension plans are charged to the
income statement in the period in which they are due. Bonuses are
given on an ad hoc basis, or as otherwise agreed, and are accrued
in the year to which the services performed relate (when there is
an expectation these will be awarded).
Staff costs (including Directors)
2022 2021
Year ended 31 December GBP000 GBP000
------------------------------------------------ -------- --------
Wages and salaries 156,476 141,615
Social security costs 16,152 13,085
Pension costs 8,833 5,403
Other staff costs* 5,832 6,950
------------------------------------------------ -------- --------
Total 187,293 167,053
------------------------------------------------ -------- --------
Allocations and dividends paid to holders
of IFRS 2 put options 1 7,811 5,270
------------------------------------------- --- -------- --------
Share based incentive plans:
Cash settled 27 2,432 (2,065)
Equity settled 27 1,229 2,235
------------------------------------------- --- -------- --------
Total share based incentive plans 3,661 170
------------------------------------------- --- -------- --------
Total staff costs 198,765 172,493
------------------------------------------- --- -------- --------
*Other staff costs include profit share, LTIP charges and other
staff benefits.
Staff numbers 2022 2021
------------------------ ------ ------
UK 772 734
Europe 166 161
Middle East and Africa 421 383
Asia 596 592
Australia 439 465
Americas 340 318
------------------------
Total 2,734 2,653
------------------------ ------ ------
These staff numbers are based on the average number of staff
throughout the year in 2022.
Pensions
The Group does not operate any defined benefit pension schemes.
The Group makes payments, on behalf of certain individuals, to
personal pension schemes.
Compensation for key management personnel and directors
2022 2021
Key management remuneration GBP000 GBP000
----------------------------- ------- -------
Wages and salaries 2,214 2,741
Pension costs 53 82
Share based payments* 381 268
----------------------------- ------- -------
Total 2,648 3,091
----------------------------- ------- -------
* Included within share based payments is GBP174k (2021:
GBP220k) relating to Mickey Kalifa who left the Company in May
2022.
Key management personnel include the Directors and employees
responsible for planning, directing and controlling the activities
of the Group.
6. Auditors' remuneration
The Company paid the following amounts to its auditors in
respect of the audit of the financial statements and for other
services provided to the Group:
2022 2021
Year ended 31 December GBP000 GBP000
---------------------------------------------------------------------- ------- -------
Audit services
Fees payable to the Company's auditor for the audit of the Company's
annual accounts 1,506 1,450
Fees payable to associates of the Company's auditor for the audit
of the accounts of subsidiaries 174 237
Audit fees relating to the prior period 300 -
---------------------------------------------------------------------- ------- -------
1,980 1,687
---------------------------------------------------------------------- ------- -------
Other services provided by the Auditors:
Other assurance services - interim agreed upon procedures 25 46
Corporate finance services 499 -
Taxation compliance services 168 66
Taxation advisory services 176 112
---------------------------------------------------------------------- ------- -------
868 224
---------------------------------------------------------------------- ------- -------
Total 2,848 1,911
---------------------------------------------------------------------- ------- -------
7. Net finance expense
Policy
Interest income and expense, including fair value adjustments to
IFRS 9 put options, are recognised in the income statement in the
period in which they are incurred, except for the amortisation of
loan costs which are recognised over the life of the loan.
Analysis
Year ended 31 December 2022 2021
GBP000 GBP000
------------------------------------------------------- -------- --------
Bank interest receivable 331 187
Other interest receivable 55 47
Sublease finance income 5 26
Financial income 391 260
------------------------------------------------------- -------- --------
Bank interest payable (1,200) (1,555)
Amortisation of loan costs (222) (130)
Interest on lease liabilities (2,970) (2,800)
Valuation adjustment to IFRS 9 put option liabilities
(Note 26) (1,114) (896)
Financial expense (5,506) (5,381)
------------------------------------------------------- -------- --------
Net finance expense (5,115) (5,121)
------------------------------------------------------- -------- --------
8. Current taxation
Policy
Current tax, including UK and foreign tax, is provided for using
the tax rates and laws that have been substantively enacted at the
balance sheet date.
Analysis
Income statement charge for year ended
31 December 2022 2021
GBP000 GBP000
----------------------------------------- ------- -------
Taxation in the year
UK 730 1,832
Overseas 3,020 4,470
Withholding taxes payable 14 31
Adjustment for (over) / under provision
in prior periods (986) 1,476
------------------------------------------ ------- -------
Total 2,778 7,809
------------------------------------------ ------- -------
Deferred taxation
Recognition of temporary differences 1,719 1,651
Adjustment for under / (over) provision
in prior periods 709 (974)
Effect of changes in tax rates (28) (27)
------------------------------------------ ------- -------
Total 2,400 650
------------------------------------------ ------- -------
Total taxation 5,178 8,459
------------------------------------------ ------- -------
The differences between the actual tax and the standard rate of
corporation tax in the UK applied to the Group's statutory profit
for the year are as follows:
2022 2022 2021 2021
Year ended 31 December GBP000 % GBP000 %
----------------------------------------------------------- ------- ------- ------- ------
Profit before taxation 5,423 21,632
----------------------------------------------------------- ------- ------- ------- ------
Taxation at UK corporation tax rate of 19.00% (2019:
19.00%) 1,030 19.0% 4,110 19.0%
Expenses not deductible for tax 1,314 24.2% 386 1.8%
Different tax rates applicable in overseas jurisdictions 1,081 20.0% 1,467 6.8%
Option charges not deductible for tax 1,070 19.7% 925 4.3%
Tax losses for which no deferred tax asset was recognised 834 15.4% 528 2.4%
Impairment with no tax credit 138 2.5% 537 2.5%
Withholding taxes payable 14 0.3% 31 0.1%
Tax effect of associates 2 0.0% 1 0.0%
Effect of changes in tax rates on deferred tax (28) -0.5% (27) -0.1%
Adjustment for tax (over)/under provision in prior
periods (277) -5.1% 491 2.3%
Effect of changes in tax rates - 0.0% (6) 0.0%
Disposal of subsidiaries on which no tax is charged - 0.0% 16 0.1%
------- ------- ------- ------
Total taxation 5,178 95.5 % 8,459 39.1%
----------------------------------------------------------- ------- ------- ------- ------
Effective tax rate 95.5 % 39.1%
----------------------------------------------------------- ------- ------- ------- ------
Large variations in future tax rates of the statutory accounts
are expected due to significant items such as share-based payments
(option charges) and put options being non-deductible against
corporation tax as a result of these items being capital in
nature.
The key differences between actual and standard tax rates are as
follows:
-- Expenses not deductible for tax: in 2022 two parties tried to acquire the Company and a proportion
of the defence costs was disallowable due to their being capital in nature. This increased the
non-deductible expenses. In addition, as the world returned to normal following the Covid-19
pandemic, there was increased client entertaining which is disallowable for corporation tax
purposes. There were also capital allowances resulting from office refurbishment that could
not be claimed.
-- Option charges include dividends paid to those shareholders in the subsidiary companies that
also have a put option arrangement in place within that entity, which are not deductible for
tax: the Group's share-based payment schemes mostly relate to equity held in subsidiary companies.
The Group generally receives no tax benefit on the exercise of these put options nor on the
payment of the dividends.
-- Different tax rates applicable in overseas jurisdictions. The Group operates in multiple locations
round the world where tax rates are higher than the UK, e.g., Australia (30%) and USA (between
21% to 28%).
-- The net effect of the adjustment for current and deferred tax in prior periods is a release
of an over provision of GBP279k (2021: GBP491k under provision) of total tax charge.
-- Impairment with no tax credit: On most of the acquisitions no tax benefit was received from
the acquisition of goodwill. During the period some of the goodwill was impaired with no future
tax benefit of such impairments.
Looking forward, UK corporation tax will increase from 19% to
25% from April 2023. Large variations in future tax rates are
expected due to significant items such as share-based payments
(option charges), put options and investment in subsidiaries being
non-deductible against corporation tax as a result of these items
being capital in nature.
Tax on Headline profits
As can be seen in the Headline tax reconciliation, the largest
drivers of Headline tax charge are the local entities'
profitability with central costs being incurred in the UK, a lower
tax market, and profits being made in higher tax countries such as
Australia and USA.
Our Headline tax rate has reduced from 26.6% to 24.5%. The
reduction is due to the use of prior years' tax losses (caused in
part by the Covid-19 pandemic) to offset current profitability and
an increase in profits from countries with lower tax rates, partly
offset by increased expenditure on disallowable costs.
2022 2022 2021 2021
Year ended 31 December GBP000 % GBP000 %
-------------------------------------------------------------- ------- ------ ------- ------
Headline profit before taxation (Note 1) 31,833 27,314
-------------------------------------------------------------- ------- ------ ------- ------
Taxation at UK corporation tax rate of 19.00% (2021: 19.00%) 6,048 19.0% 5,189 19.0%
Different tax rates applicable in overseas jurisdictions 1,297 4.1% 1,510 5.4%
Tax losses for which no deferred tax asset was recognised 683 2.1% 528 1.9%
Expenses not deductible for tax 781 2.5% 386 1.4%
Effect of changes in tax rates on deferred tax 29 0.1% (230) -0.8%
Withholding taxes payable 14 0.0% 31 0.1%
Tax effect of associates 2 0.0% (44) -0.2%
Adjustment for tax (over)/under provision in prior periods (246) -0.8% 502 1.8%
Non-controlling interest share of partnership income (818) -2.6% (595) -2.2%
Effect of changes in tax rates - 0.0% (6) 0.0%
------- ------ ------- ------
Headline taxation (Note 1) 7,790 24.5% 7,271 26.6%
-------------------------------------------------------------- ------- ------ ------- ------
Headline effective tax rate 24.5% 26.6%
-------------------------------------------------------------- ------- ------ ------- ------
9. Deferred taxation
Policy
Deferred tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated
financial statements. Deferred tax is not, however, provided for
temporary differences that arise from: (i) initial recognition of
an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither
accounting nor taxable profit or loss, (ii) the initial recognition
of goodwill.
Deferred tax is determined using tax rates (and laws) that have
been enacted or substantively enacted by the balance sheet date and
are expected to apply when the related deferred tax asset is
realised or the deferred tax liability is settled. Deferred tax
assets are recognised to the extent that it is probable future
taxable profit will be available against which the temporary
differences can be utilised.
Deferred tax is provided on temporary differences arising on
investments in subsidiaries and associates, except where the timing
of the reversal of the temporary difference is controlled by the
Group and it is probable that the temporary difference will not
reverse in the foreseeable future. Deferred income tax assets and
liabilities are offset when there is a legally enforceable right to
offset current tax assets against current tax liabilities and the
Group intends to settle its current tax assets and current tax
liabilities on a net basis.
Current and deferred tax is recognised in profit or loss, except
to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax
is also recognised in other comprehensive income or directly in
equity, respectively.
Analysis
2022 2021
At 31 December GBP000 GBP000
-------------------------- -------- -------
Deferred tax assets 5,131 6,777
Deferred tax liabilities (1,245) (777)
-------------------------- -------- -------
Net deferred tax 3,886 6,000
-------------------------- -------- -------
The Deferred tax asset is recoverable against future profits,
and future corporation tax liabilities. The following table shows
the deferred tax asset / (liability) recognised by Group and
movements in 2022 and 2021.
Capital Purchased Working
Intangibles allowances Tax losses investments capital differences Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------- ------------ ------------ ----------- ------------- -------------------- --------
At 31 December 2020 236 1,326 8,503 (465) (1,704) 7,896
--------------------
Exchange
differences (16) (52) (337) - 237 (168)
Income statement
(charge) / credit (47) 103 (4,460) (767) 4,522 (649)
Acquisitions (1,150) - 71 - - (1,079)
------------ ------------ ----------- ------------- -------------------- --------
At 31 December 2021 (977) 1,377 3,777 (1,232) 3,055 6,000
-------------------- ------------ ------------ ----------- ------------- -------------------- --------
Exchange
differences 124 (15) (198) - 375 286
Income statement
(charge) / credit 484 581 (1,561) 238 (2,142) (2,400)
------------ ------------ ----------- ------------- -------------------- --------
At 31 December 2022 (369) 1,943 2,018 (994) 1,288 3,886
-------------------- ------------ ------------ ----------- ------------- -------------------- --------
Based on the 2023 budget and 3-year plans, approved by the
Board, the Group has reviewed the deferred tax asset created by tax
losses for their recoverability. Where the Group believes such
losses may not be recoverable they have not been recognised on the
balance sheet and have been included in unrecognised deferred tax
assets.
Within the local entities GBP1,556k (2021: GBP3,101k) of
deferred tax has been naturally offset. Disregarding this offset,
the split of deferred tax is as follows:
Capital Purchased Working capital
Intangibles allowances Tax losses investments differences Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------- ------------ ------------ ----------- ------------- ---------------- --------
At 31 December 2021
Deferred tax assets 47 1,377 3,777 - 4,677 9,878
Deferred tax liabilities (1,024) - - (1,232) (1,622) (3,878)
--------------------------
Net deferred tax (977) 1,377 3,777 (1,232) 3,055 6,000
-------------------------- ------------ ------------ ----------- ------------- ---------------- --------
At 31 December 2022
Deferred tax assets 706 1,943 2,304 - 1,734 6,687
Deferred tax liabilities (1,075) - (286) (994) (446) (2,801)
-------------------------- ------------ ------------ ----------- ------------- ---------------- --------
Net deferred tax (369) 1,943 2,018 (994) 1,288 3,886
-------------------------- ------------ ------------ ----------- ------------- ---------------- --------
The working capital differences mostly relate to the tax effects
of working capital in Australia which calculates tax on a cash
basis rather tha n the accruals basis used in other countries;
along with the continuing tax effects of the adoption of IFRS16
(Leases); and tax provision on any long term deferred bonuses.
UK tax legislation was implemented on 24 May 2021 which
increased the UK corporation tax from 19% to 25% with effect from 1
April 2023. The effect on the revaluation of the deferred tax
balance of this change is partly reliant on future projections so
it is an estimate.
The unrecognised deferred tax assets in respect of certain
losses in overseas territories, referred to in the tables above,
have not been recognised as there is insufficient certainty of
future taxable profits against which these would reverse. An
unrecognised deferred tax asset in respect of carried forward tax
losses is shown below:
Deferred
Losses tax impact
GBP000 GBP000
------------------------- -------- ------------
At 1 January 2022 6,426 1,457
Exchange differences 772 180
Written off in year (1,158) (326)
Losses utilised in year (1,653) (465)
Losses in year 6,246 1,299
------------------------- -------- ------------
At 31 December 2022 10,633 2,145
------------------------- -------- ------------
Expiry date of losses:
2022 2021
GBP000 GBP000
------------------- ------- -------
One to five years 24 -
Five to ten years 565 648
Ten years or more 1,556 809
-------------------- ------- -------
Total 2,145 1,457
-------------------- ------- -------
10. Dividends
Policy
Interim dividends are recognised when they have been approved by
the Board and are legally payable. Final dividends are recognised
when they have been approved by the shareholders at the Company's
Annual General Meeting.
No interim or final dividends were declared for 2021. No interim
dividends were declared in 2022.
A final dividend of 1.5 pence per share has been recommended by
the Board, which is a total amount of GBP1,834k. The final
dividend, if approved at the Company's Annual General Meeting on 14
June 2023, will be paid on 12 July 2023 to all shareholders on the
Company's register of members as at 9 June 2023. The ex-dividend
date for the shares is 8 June 2023.
The payment of this dividend will not have any tax consequences
for the Group.
11. Disposals
Policy
Disposals of entities in the Group are accounted for in
accordance with IFRS 10:25 . When the parent's ownership of a
subsidiary company changes and results in the parent's loss of
control of a subsidiary within the Group, the parent:
-- derecognises the assets and liabilities attributable to the former subsidiary from the consolidated
balance sheet;
-- recognises any investment retained in the former subsidiary when control is lost and subsequently
accounts for it and for any amounts owed by or to the former subsidiary in accordance with relevant
IFRS standards; and
-- recognises the gain or loss associated with the loss of control attributable to the former controlling
interest.
Analysis
There were no disposals in 2022.
The Board made a strategic decision at the start of 2020 to
eliminate loss-making businesses from the Group by the end of the
year, which was communicated to the market and to shareholders.
This process continued into 2021, with four entities either ceasing
trading or being divested. These entities were Creative Spark (Pty)
Ltd, M&C Saatchi PR LLP, M&C Saatchi Marketing Arts Ltd and
Create Collective PTE Ltd. These entities contributed GBP39k of
losses to the 2021 results.
The Headline results of the entities disposed, which were
included in the results, were as follows:
2022 2021
GBP000 GBP000
------------------------------------------------- ---------- ---------
Plant and equipment - 2
Trade and other receivables - 21
Cash and cash equivalents - 2
Trade and other payables - (67)
Add net liabilities - (42)
------------------------------------------------- ---------- ---------
Gain on disposal of subsidiaries - 42
------------------------------------------------- ---------- ---------
Within note 1 in 2021, there are costs of GBP125k that relate to
severance and legal fees for the disposal.
12. Acquisitions of subsidiaries
There were no acquisitions in 2022.
On 2 February 2021, the Group acquired two entities that were
previously associates, 40% of M&C Saatchi (Hong Kong) Ltd and
25.1% of Santa Clara Participações Ltda. In addition, on 1 January
2021, the Group had control of the 51% held in M&C Saatchi
World Services Pakistan (Pvt) Ltd , therefore obtaining control of
the three entities. M&C Saatchi (Hong Kong) Limited's primary
activity is consultancy, and both Santa Clara Participações Ltda
and M&C Saatchi World Services Pakistan (Pvt) Ltd are marketing
agencies, these qualify as a business as defined in IFRS 3.
The amounts recognised in 2021, in respect of the identifiable
assets acquired and liabilities assumed are as set out in the table
below.
M&C Saatchi Santa Clara Pakistan Total
(Hong Kong) GBP000s GBP000s GBP000s
GBP000s
-------------------------------------------- ------------- ------------ --------- ---------
Financial assets 4,158 1,879 482 6,519
Property, plant and equipment 284 29 48 361
Identifiable intangible assets 1,653 2,211 - 3,864
Financial liabilities (3,395) (3,472) (530) (7,397)
Deferred tax liabilities (343) (736) - (1,079)
-------------------------------------------- ------------- ------------ --------- ---------
Total identifiable assets acquired and
liabilities assumed 2,357 (89) - 2,268
Plus: goodwill 2,677 1,945 - 4,622
Net assets acquired 5,034 1,856 - 6,890
Satisfied by:
Equity instruments 2,627 1,856 - 4,483
Fair value of associate investment 2,407 - - 2,407
Total consideration transferred 5,034 1,856 - 6,890
-------------------------------------------- ------------- ------------ --------- ---------
Net cash outflow arising on acquisition:
Cash and cash equivalent balances acquired 750 513 29 1,292
750 513 29 1,292
-------------------------------------------- ------------- ------------ --------- ---------
13. Deferred and contingent consideration
Policy
Certain acquisitions made by the Group include contingent or
deferred consideration, the quantum of which is dependent on the
future performance of the acquired entity. Such consideration is
recorded at fair value in line with IFRS 13 (note 29).
The balances are remeasured at the earlier of either the end of
each reporting period or crystallisation of the consideration
payment. The movements in the fair value are recognised in profit
or loss.
Analysis
Liabilities 2022 2021
GBP000 GBP000
---------------------------------------- ------- -------
Current
Deferred consideration
Levergy Marketing Agency (Pty) Limited - (984)
Total current - (984)
---------------------------------------- ------- -------
Assets 2022 2021
GBP000 GBP000
-------------------------- ------- -------
Non-current
Contingent consideration
Saatchinvest Ltd 914 -
Total non-current 914 -
-------------------------- ------- -------
Movements in liabilities in the year 2022 2021
GBP000 GBP000
------------------------------------------- ------- --------
At 1 January (984) (1,679)
Exchange differences - 48
Charged to the income statement * (266) (532)
Conditional consideration paid in cash ** 1,250 659
Conditional consideration paid in equity - 520
At 31 December - (984)
------------------------------------------- ------- --------
* GBP266k revaluation of deferred consideration due to Levergy
Marketing Agency (Pty) Limited on payment
** GBP1,250k paid to Levergy Marketing Agency (Pty) Limited.
Movements in assets in the year 2022 2021
GBP000 GBP000
------------------------------------------------------ ------- -------
At 1 January - -
Reclassification from financial assets at fair value 914 -
through profit or loss (note 19) ***
At 31 December 914 -
------------------------------------------------------ ------- -------
*** The GBP914k of contingent consideration relates to the sale
of Dataseat Ltd ("Dataseat"), one of the entities in the Group's
portfolio of unlisted companies, in which it held a 5.18%
shareholding. The sale to Verve Group took place in July 2022, and
GBP779k of cash was received as initial consideration. Verve Group
is part of Media and Games Invest Se ("MGI"), a Swedish company
which is listed on the Nasdaq Market in Stockholm and in the Scale
segment of the Frankfurt Stock Exchange. Two further tranches of
consideration may be received, on which the Group has undertaken a
probability assessment in determining the value recognised:
Tranche 2:
Up to GBP534k to be received as cash or MGI shares. The exact
amount to be received will be reduced proportionately based on:
1) one or both of the two Dataseat founders leaving the
employment of Dataseat before July 2025,
2) if they leave, the terms and timing of their departures,
3) whether the consideration is paid in cash or shares.
Receiving shares results in a maximum consideration of GBP534k
rather than GBP485k, and the minimum is 0.
Tranche 3:
Up to GBP924k to be received as cash or MGI shares as part of an
earn-out calculation. The earn-out consideration is dependent on
Dataseat's 2024 net revenue and must be paid by August 2025. The
contingent consideration was calculated following a review of
Dataseat's future prospects and potential net revenues and involved
sensitivity analysis of different revenue scenarios. Receiving any
earn-out consideration is also dependent on the two founders
remaining employed by Dataseat until July 2025. The maximum
consideration which could be received for tranche 3 is GBP1,458k
and the minimum is 0, this has been valued at GBP426k.
14. Intangible assets
Policy
Intangible assets are carried at cost less accumulated
amortisation and impairment losses.
Cost
Goodwill
Under the acquisition method of accounting for business
combinations, goodwill is the fair value of consideration
transferred, less the net of the fair values of the identifiable
assets acquired and the liabilities subsumed.
Other intangibles acquired as part of a business combination
Intangible assets acquired as part of a business combination
(which includes brand names and customer relationships) are
capitalised at fair value, if they are either separable or arise
from contractual or other legal rights and their fair value can be
reliably measured.
Software & film
Purchased software, and internally created software and film
rights are recorded at cost. Internally created software and film
rights are created so that they can be directly used to generate
future client income.
Amortisation
Goodwill is not amortised. Amortisation of other classes of
intangible assets is charged to the income statement on a
straight-line basis over their estimated useful lives as
follows:
Software and film 3 years
rights:
Customer relationships: 1 to 8
years
--------
Brand name: 1 to 10
years
--------
The Group has no indefinite life intangibles other than
goodwill.
Impairment
Goodwill and other intangibles are reviewed for impairment
annually or more frequently if events or changes in circumstances
indicate that the assets may be impaired.
Impairment losses arise when the carrying amount of an asset or
CGU is in excess of the recoverable amount, and these losses are
recognised in the income statement. All recoverable amounts are
from future trading (i.e., their value in use) and not from the
sale of unrecognised assets or other intangibles.
The value in use calculations have been based on the forecast
profitability of each CGU, using the 2023 budget and 3-year plans
approved by the Board, with a residual growth rate of 1.5% p.a.
applied thereafter. This forecast data is based on past performance
and current business and economic prospects. A discount rate is
then applied to create a discounted future cash flow forecast (DCF)
for each CGU, which forms the basis for determining the recoverable
amount of each CGU. If the DCF of a CGU is not in excess of its
carrying amount (that includes the value of its fixed assets and
right-of-use assets), then an impairment loss would be
recognised.
In conducting the review, a residual growth rate of 1.5% has
been used for all countries. Market betas of 1.0 have been used for
Brazil, South Africa and China, while 1.4 has been used for India
and 1.2 has been used for rest of the world.
Pre-tax discount rates are based on the Group's nominal weighted
average cost of capital adjusted for the specific risks relating to
the country and market in which the CGU operates.
Key assumptions used for impairment review Residual Residual Pre-tax Pre-tax
growth growth discount discount
rates rates rates rates
2022 2021 2022 2021
Market % % % %
-------------------------------------------- --------- --------- ---------- ----------
UK 1.5 1.5 16-18 14-17
Asia and Australia 1.5 1.5 15-18 16-19
Middle East 1.5 1.5 15 17
India 1.5 1.5 23 23
South Africa 1.5 1.5 27 28
Europe 1.5 1.5 12 15
Americas 1.5 1.5 14-16 15-18
-------------------------------------------- --------- --------- ---------- ----------
Analysis
Software
Brand Customer and film
Goodwill name relationships rights Total
GBP000 GBP000 GBP000 GBP000 GBP000
Cost
--------- -------- ---------------- ---------- --------
At 31 December 2020 54,308 7,348 11,151 4,359 77,166
---------------------------------- --------- -------- ---------------- ---------- --------
Exchange differences (493) (73) (1) (46) (613)
Acquired - business combinations 4,621 919 2,901 45 8,486
Acquired - - - 837 837
Disposal - - - (1,963) (1,963)
---------------------------------- --------- -------- ---------------- ---------- --------
At 31 December 2021 58,436 8,194 14,051 3,232 83,913
---------------------------------- --------- -------- ---------------- ---------- --------
Exchange differences 2,258 169 355 145 2,927
Acquired - - 200 992 1,192
Disposal - - - (678) (678)
--------- -------- ---------------- ---------- --------
At 31 December 2022 60,694 8,363 14,606 3,691 87,354
---------------------------------- --------- -------- ---------------- ---------- --------
Accumulated amortisation and
impairment
---------------------------------- --------- -------- ---------------- ---------- --------
At 31 December 2020 20,855 7,027 10,731 2,030 40,643
---------------------------------- --------- -------- ---------------- ---------- --------
Exchange differences (295) (79) (20) (45) (439)
Amortisation charge - 181 784 447 1,412
Impairment 1,900 - - 1,037 2,937
Disposal - - - (1,139) (1,139)
---------------------------------- --------- -------- ---------------- ---------- --------
At 31 December 2021 22,460 7,129 11,495 2,330 43,414
---------------------------------- --------- -------- ---------------- ---------- --------
Exchange differences 489 28 57 113 687
Amortisation charge - 104 493 463 1,060
Impairment 556 - - 172 728
Disposal - - - (503) (503)
---------------------------------- --------- -------- ---------------- ---------- --------
At 31 December 2022 23,505 7,261 12,045 2,575 45,386
---------------------------------- --------- -------- ---------------- ---------- --------
Net book value
---------------------------------- --------- -------- ---------------- ---------- --------
At 31 December 2020 33,453 321 420 2,329 36,523
At 31 December 2021 35,976 1,065 2,556 902 40,499
---------------------------------- --------- -------- ---------------- ---------- --------
At 31 December 2022 37,189 1,102 2,561 1,116 41,968
---------------------------------- --------- -------- ---------------- ---------- --------
Goodwill 31 December 31 December
2022 2021
Cash generating units (CGUs) GBP000 GBP000 Region Specialism
------------------------------------------ ------------ ------------ ---------------- -------------
Shepardson Stern + Kaminsky LLP 5,899 5,375 Americas Advertising
LIDA NY LLP (MCD) 5,821 5,198 Americas Consulting
Clear Ideas Ltd 5,031 5,031 Europe Consulting
M&C Saatchi Mobile Ltd 4,283 4,283 UK Media
M&C Saatchi Agency Pty Ltd (Australia) 2,863 2,719 Australia Various
M&C Saatchi Social Ltd 2,612 2,612 UK Passions
M&C Saatchi (Hong Kong) Limited* 2,506 2,806 Asia Advertising
Bohemia Group Pty Ltd (Australia) 1,904 1,812 Australia Media
M&C Saatchi Advertising GmbH 1,376 1,306 Europe Advertising
M&C Saatchi Sport & Entertainment Ltd 1,184 1,184 UK Passions
Levergy Marketing Agency (PTY) Limited Middle East and
(South Africa) 860 820 Africa Passions
M&C Saatchi Merlin Ltd 765 765 UK Passions
Middle East and
M&C Saatchi Middle East Fz LLC (Dubai) 765 684 Africa Advertising
M&C Saatchi Talk Ltd 625 625 UK Advertising
Santa Clara Participações Ltda 624 529 Americas Advertising
M&C Saatchi (M) SDN BHD 71 68 Asia Advertising
Scarecrow Communications Ltd* - 159 Asia Advertising
Total 37,189 35,976
------------------------------------------ ------------ ------------ ---------------- -------------
* With exception of CGUs marked, all other movements in the
table above are due to foreign exchange differences.
The 2022 review of goodwill was undertaken as at 31 December,
and resulted in the impairments of M&C Saatchi (Hong Kong)
Limited GBP396k and Scarecrow Communications Ltd GBP160k (2021:
GBP500k).
The following sensitivity analysis has been performed, showing
the impairment required, if the profit forecasts reduced and the
discount rates increased. The CGUs included in this sensitivity
analysis are those for which a reasonably possible change in a key
assumption could give rise to impairment, being Bohemia Group Pty
Ltd (Australia), Levergy Marketing Agency (PTY) Limited (South
Africa), M&C Saatchi (Hong Kong) Limited and Santa Clara
Participações Ltda (Brazil). These entities remain at risk of
impairment.
Annual profit forecast reduced by
Discount rates increased by 0% 10% 20% 30%
---------------------------- --------- --------- -------- ---------
0% - 603 2,114 3,490
1% - 1,272 2,653 3,913
3% 1,072 2,345 3,519 4,593
5% 2,069 3,168 4,184 5,116
---------------------------- --------- --------- -------- ---------
15. Investments in associates and joint ventures
Policy
The Group invests in associates and joint ventures, either to
deliver its services to a strategic marketplace, or to gain
strategic mass by being part of a larger local or functional
entity.
An associate is an entity over which the Group has significant
influence. Significant influence is the power to participate in the
financial and operating policy decisions of the investee, but it is
neither control nor joint control over those policies.
The carrying value of these investments comprise the Group's
share of their net assets and any purchased goodwill. These
carrying amounts are reviewed at each balance sheet date, to
determine whether there is any indication of impairment.
Analysis
Proportion of ownership
Investment in interest held at 31
associates December
2022 2021 2022 2021
-------------------------------------------------------- -------------- ------- -------------------- -----
Country of
Nature of incorporation
Region & Name business or registration GBP000 GBP000
--------------------- -------------- ------- -------------------- -----
Europe
Cometis SARL* Advertising France 56 - 49% -
M&C Saatchi Little
Stories
SAS PR France - - 25% 25%
M&C Saatchi SAL Advertising Lebanon - - 10% 10%
Asia and Australia
Love Frankie Ltd Advertising Thailand 135 202 25% 25%
February
Communications
Private
Limited Advertising India - - 20% 20%
M&C Saatchi Limited Advertising Japan - - 25% 25%
Total 191 202
* In January 2022, as a result of two put option arrangements,
the Group acquired a 49% holding in Cometis SARL, a French
company.
M&C Saatchi SAL has the following subsidiaries: M&C
Saatchi Mena Ltd and Al Dallah For Creativity & Design LLC.
All shares in associates are held by subsidiary companies in the
Group. Where an associate has the right to use the brand name, the
Group holds the right to withdraw such use, to protect it from
damage.
The Group holds neither associates nor joint ventures in
Australia, Africa, or the UK.
2022 2021
Balance sheet value as at 31 December GBP000 GBP000
Investments intended to be held in the
long term 191 202
Investments categorised as held-for-sale - -
Total associate investments 191 202
2022 2021
Balance sheet movements GBP000 GBP000
At 1 January 202 2,829
Exchange movements (1) (10)
Transferred to subsidiary - (2,407)
Revaluation of associates on transition
to subsidiaries - (234)
Acquisition of associates - 338
Impairment of associate - (357)
Share of (loss) / profit after taxation (10) 43
At 31 December 191 202
2022 2021
Income statement GBP000 GBP000
Share of (loss) / profit after taxation (10) 43
Revaluation of associates on transition
to subsidiaries - (233)
Share of result of Associates and Joint
Ventures (10) (190)
Impairment of associate investment - (357)
Year to 31 December (10) (547)
The results and net assets of the associate entities are set out
below, along with the Group's share of these results and net
assets:
2020
2022 2021
Asia Europe Total Asia Europe Americas Total
Income statement GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue 4,006 712 4,718 4,240 2,580 148 6,968
Operating profit / (loss) 765 165 930 940 71 (14) 997
Profit / (loss) before taxation (201) 143 (58) 215 71 (25) 261
Profit / (loss) after taxation (208) 113 (95) 174 49 (32) 191
Group's share (65) 55 (10) 43 12 (12) 43
Dividends received - - - - - - -
2022 2021
Asia Europe Total Asia Europe Americas* Total
Balance sheet GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Total assets 1,557 151 1,708 1,410 804 - 2,214
Total liabilities (1,088) (38) (1,126) (914) (854) - (1,768)
Net assets / (liabilities) 469 113 583 496 (50) - 446
Our share 117 56 173 124 (12) - 112
Losses not recognised 13 - 13 12 12 - 24
Goodwill 5 - 5 66 - - 66
Total 135 56 191 202 - - 202
* Technology, Humans and Taste LLC was disposed of in 2021,
therefore an income statement is shown above, but nil for the
balance sheet at 31 December 2021.
16. Plant and equipment
Policy
Tangible fixed assets are stated at historical cost less
accumulated depreciation. Depreciation is provided to write off the
cost of all fixed assets, less estimated residual values, evenly
over their expected useful lives.
Depreciation is calculated at the following annual rates:
Leasehold improvements - Lower of useful life and over the period of the lease
Furniture and fittings - 10% straight-line basis
Computer equipment - 33% straight-line basis
Other equipment - 25% straight-line basis
Motor vehicles - 25% straight-line basis
The need for any fixed asset impairment write-down is assessed
by a comparison of the carrying value of the asset against the
higher of a) the fair value less costs to sell, or b) the value in
use.
Assets under construction are recognised at cost and only
commence depreciation once the assets are completed and ready for
use.
Analysis
Furniture,
fittings
Leasehold and other Computer
improvements equipment equipment Motor vehicles Total
Cost GBP000 GBP000 GBP000 GBP000 GBP000
At 31 December 2020 8,490 4,021 4,845 17 17,373
Exchange differences (114) (48) (86) 21 (227)
Additions 145 266 1,352 26 1,789
Additions - business combinations 3 152 177 29 361
Disposals (1,228) (473) (456) (15) (2,172)
At 31 December 2021 7,296 3,918 5,832 78 17,124
Exchange differences 324 121 259 4 708
Additions* 1,145 1,674 1,551 13 4,383
Disposals (1,596) (1,066) (404) - (3,066)
At 31 December 2022 7,169 4,647 7,238 95 19,149
Depreciation
At 31 December 2020 4,084 2,645 3,485 2 10,216
Exchange differences 84 50 53 4 191
Depreciation charge 802 409 1,001 25 2,237
Disposals (940) (449) (449) (15) (1,853)
At 31 December 2021 4,030 2,655 4,090 16 10,791
Exchange differences 230 53 183 3 469
Depreciation charge 990 381 1,087 22 2,480
Disposals (1,579) (926) (396) - (2,901)
At 31 December 2022 3,671 2,163 4,964 41 10,839
Net book value
At 31 December 2020 4,406 1,376 1,360 15 7,157
At 31 December 2021 3,266 1,263 1,742 62 6,333
At 31 December 2022 3,498 2,484 2,274 54 8,310
* The additions in 2022 relate mainly to Australia for the lease
that was entered into at the end of 2021 (GBP745k of Leasehold
Improvements and GBP1,225k of furniture, fittings and other
equipment)
Total depreciation in the income statement is broken down as
follows:
2022 2021
Note GBP000 GBP000
From plant and equipment 16 2,480 2,237
From right-of-use assets 17 6,846 6,959
9,326 9,196
17. Leases
The Group leases various assets, comprising properties,
equipment, and motor vehicles. The determination whether an
arrangement is, or contains, a lease is based on whether the
contract conveys a right to control the use of an identified asset
for a period of time in exchange for consideration.
Policy
The following sets out the Group's lease accounting policy for
all leases, with the exception of leases with a term of 12 months
or less and those of low value assets. In both these instances the
Group applies the exemptions permissible by IFRS 16 Leases. These
are typically expensed to the income statement as incurred.
Right-of-use assets and lease liabilities
At the inception of a lease, the Group recognises a right-of-use
asset and a lease liability.
The value of the lease liability is determined by reference to
the present value of the future lease payments, as determined at
the inception of the lease. Lease liabilities are disclosed
separately on the balance sheet. These are measured at amortised
cost, using the effective interest rate method. Lease payments are
apportioned between a finance charge and a reduction of the lease
liability, based on a constant interest rate applied to the
remaining balance of the liability. Interest expense is included
within net finance costs in the consolidated income statement. The
interest rate applied to a lease is typically the incremental
borrowing rate of the entity entering into the lease. This is as a
result of the interest rates implicit in the leases not being
readily determined. The incremental borrowing rate applied by each
relevant entity is determined based on the interest rate adjudged
to be required to be paid by that entity to borrow a similar amount
over a similar term for a similar asset in a similar economic
environment.
A corresponding right-of-use fixed asset is also recognised at
an equivalent amount adjusted for a) any initial direct costs, b)
payments made before the commencement date (net of lease
incentives), and c) the estimated cost for any restoration costs
the Group is obligated to at lease inception. Right-of-use assets
are subsequently depreciated on a straight-line basis over the
shorter of the lease term or the asset's estimated life. Under IFRS
16, right-of-use assets are tested for impairment in accordance
with IAS 36 'Impairment of Assets', when there is an indication of
impairment.
Lease term
The lease term comprises the non-cancellable period of the lease
contract. Periods covered by an option to extend the lease are
included, if the Group has reasonable certainty that the option
will be exercised. Periods covered by an option to terminate are
included, if it is reasonably certain that this option will not be
exercised.
Lease payments
Lease payments comprise fixed payments and variable lease
payments (that depend on an index or a rate, initially measured
using the minimum index or rate at inception date). Payments
include any lease incentives and any penalty payments for
terminating the lease, if the lease term reflects the lessee
exercising that option. The lease liability is subsequently
remeasured (with a corresponding adjustment to the related
right-of-use asset) when there is a change in future lease payments
due to a) a renegotiation or market rent review, b) a change of an
index or rate, or c) a reassessment of the lease term.
Lease modifications
Where there are significant changes in the scope of the lease,
then the arrangement is reassessed to determine whether a lease
modification has occurred and, if there is such a modification,
what form it takes. This may result in a modification of the
original lease or, alternatively, recognition of a separate new
lease.
Subleases
At times, entities of the Group will sublet certain of their
properties when their underlying business requirements change.
Under IFRS 16, the Group assesses the classification of these
subleases with reference to the right-of-use asset, not the
underlying asset.
When the Group acts as an intermediate lessor, it accounts for
its interests in the head lease and the sublease separately. At
lease commencement, a determination is made whether the lease is a
finance lease or an operating lease. To classify each lease, the
Group makes an overall assessment of whether the lease transfers to
the lessee substantially all of the risks and rewards of ownership
in relation to the underlying asset. If this is the case, then the
lease is a finance lease; if not, then it is an operating lease.
The Group recognises lessor payments under operating leases as
sublease income on a straight-line basis over the lease term. The
Group accounts for finance leases as finance lease receivables,
using the effective interest rate method.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to
those leases that have a lease term of 12 months or less from the
commencement date and do not contain a purchase option. It also
applies the lease of low-value assets recognition exemption to
leases of office equipment that are considered of low value
(defined by the Group as being below GBP3,000). Lease payments on
short-term leases and leases of low-value assets are recognised as
an expense on a straight-line basis over the lease term.
Estimates relating to leases
The Group has made estimates in determining the interest rate
used for discounting of future cash flows, and the lease term.
Analysis
Set out below are the carrying amounts of right-of-use assets
and lease liabilities recognised, and the movements during the
year:
Land & Computer Motor
Buildings equipment vehicles Total
Right-of-use assets GBP000 GBP000 GBP000 GBP000
At 1 January 2021 33,208 716 82 34,006
Additions 16,802 24 60 16,886
Modifications 1,048 9 34 1,091
Disposals (394) (4) - (398)
Depreciation (6,563) (309) (87) (6,959)
Foreign exchange (209) (14) (6) (229)
At 1 January 2022 43,892 422 83 44,397
Additions 3,966 395 134 4,495
Modifications 950 - 24 974
Disposals (96) (116) (49) (261)
Depreciation (6,495) (267) (84) (6,846)
Reversal of impairment 164 - - 164
Sublease (164) - - (164)
Foreign exchange 1,203 29 1 1,233
At 31 December 2022 43,420 463 109 43,992
Land & Computer Motor
Buildings equipment vehicles Total
Lease liabilities GBP000 GBP000 GBP000 GBP000
At 1 January 2021 45,573 767 81 46,421
Additions 16,789 24 50 16,863
Modifications 823 9 34 866
Disposals (425) (4) 0 (429)
Accretion of interest 2,766 31 3 2,800
Payments (8,557) (358) (95) (9,010)
Reclassification* (211) - - (211)
Foreign exchange (426) (24) (5) (455)
At 1 January 2022 56,332 445 68 56,845
Additions 3,966 395 134 4,495
Modifications 260 - 24 284
Disposals (132) (94) (50) (276)
Accretion of interest 2,945 21 4 2,970
Payments (9,889) (308) (80) (10,277)
Foreign exchange 1,508 20 1 1,529
At 31 December 2022 54,990 479 101 55,570
*This relates to lease dilapidations which were reclassified to
Provisions in 2021.
The additions in 2022 predominately relate to the new offices in
Berlin (Germany), Sydney and Melbourne (Australia).
Of lease payments made in the year of GBP10,277k (2021:
GBP9,010k), GBP7,307k (2021: GBP6,210k) related to payment of
principal on the corresponding lease liabilities and the balance to
payment of interest GBP2,970k (2021: GBP2,800k) due on the lease
liabilities.
Lease liabilities Land & Buildings Computer equipment Motor vehicles Total
GBP000 GBP000 GBP000 GBP000
Amounts due within one year 6,196 196 56 6,448
Amounts due after one year 48,794 283 45 49,122
At 31 December 2022 54,990 479 101 55,570
Amounts due within one year 6,624 283 43 6,950
Amounts due after one year 49,708 162 25 49,895
At 31 December 2021 56,332 445 68 56,845
2022 2021
Income statement charge GBP000 GBP000
Depreciation of right-of-use
assets (6,846) (6,959)
Short-term lease expense (505) (300)
Low-value lease expense (68) (263)
Short-term sublease income - 94
Right-of-use asset impairment* 164 -
Charge to operating profit (7,255) (7,428)
Sublease finance income 5 26
Lease liability interest expense (2,970) (2,800)
Lease charge to profit before
tax (10,220) (10,202)
*This is the reversal of an impairment from 2020, as the
impaired asset was sublet during 2022.
The Group does not face a significant liquidity risk with regard
to its lease liabilities and manages them in line with its approach
to other month-to-month liquidity matters, as described in note
30.
The cash payment maturity of the lease liabilities held as at 31
December 2022, net of sublease receipts, is as follows:
2022 2021
Future cash payments GBP000 GBP000
Period ending 31 December:
2023 9,026 8,074
2024 8,149 6,730
2025 7,870 6,689
2026 6,935 5,922
2027 6,415 5,716
Later years 31,363 30,227
Gross future liability before
discounting 69,758 63,358
Of the future lease payments post-2027, GBP21.8m relates to a
single office lease which expires in 2034. This lease agreement was
entered into in December 2019.
18. Other non-current assets
2022 2021
At 31 December GBP000 GBP000
Other debtors including rent deposits 1,107 1,113
Loans to employees - 98
Total other non-current assets 1,107 1,211
19 . Financial assets at fair value through profit and loss
(FVTPL)
Policy
The Group holds certain unlisted equity investments, which are
classified as financial assets at FVTPL. These investments are
initially recognised at their fair value. At the end of each
reporting period the fair value is reassessed, with gains or losses
being recognised in the income statement.
The valuations are based on several factors, including the share
price from the latest funding round, recent financial performance
(where available), discounting for liquidation preference shares
held by other shareholders and discounting for convertible loan
notes.
Analysis
The unlisted equity investments held by Saatchinvest Ltd mainly
relate to 18 (2021: 20) early-stage companies. The Group also owns
10% of one UK company, 59A Limited (via Alive & Kicking Global
Limited). In addition, overseas investments are owned by:
-- M&C Saatchi International Holdings BV, which owns a 10% shareholding in Australie SAS and a
0.76% shareholding in Sesión Tequila Holdings Pty Ltd (Australia).
-- M&C Saatchi Agency Pty Ltd (Australia), which also owns a 2.1% shareholding in Sesión
Tequila Holdings Pty Ltd.
-- M&C Saatchi European Holdings Limited, which owns a 10% shareholding in M&C Saatchi Madrid
SL (Spain).
With regards to the early-stage non-client investments, the most
the Group has invested in any one company over time is GBP0.7m and
the least is GBP0.1m. The Group invests in these companies for long
term return.
The activity in the year relating to the equity investments held
at FVTPL is presented below:
2022 2021
GBP000 GBP000
At 1 January 15,183 11,410
Additions - 501
Disposals (918) (209)
Gain/loss on disposal 1,168 -
Impairment (2,863) -
Revaluation upwards 3,016 4,255
Revaluation downwards (2,724) (722)
Reclassification to contingent consideration
(note 13) (914) -
Foreign exchange 38 (52)
At 31 December 11,986 15,183
Other gains/(losses) in income statement 2022 2021
GBP000 GBP000
Revaluations 292 3,533
Gain/loss on disposal 1,168 -
Impairment (2,863) -
Total (1,403) 3,533
In 2022, there were no additions and the disposals related to
companies in the Saatchinvest portfolio. GBP918k of cash was
received in respect of the disposals, which resulted in a gain on
disposal of GBP1,168k. Within this, GBP779k related to the disposal
of Dataseat, and as part of this disposal there was an additional
amount of contingent consideration recognised, refer to note 13 for
further detail.
An impairment of GBP2,863k was recognised relating to the
investment in StreetTeam Software Limited (Pollen). The GBP3,016k
revaluation upwards and GBP2,705k of the revaluation downwards
relates to the unlisted investments held by Saatchinvest Ltd.
GBP1,741k of the revaluation upwards relates to Picasso Labs, Inc.
and GBP1,484k of the revaluation downwards relates to Citymapper
Limited.
Other revaluation movements relate to investments held by both
the Australian business and M&C Saatchi International Holdings
B.V. in Sesión Tequila Holdings Pty Ltd.
Within the value of GBP11,986k above, investments with a value
of GBP6,082k have no price points since 1 January 2021. The absence
of a market transaction means the Group has less reliable
information on which to base its estimate of fair value, as in many
cases there is limited quantitative financial information available
as the Group is a small minority shareholder in early stage
businesses. There is a greater degree of judgement and exposure to
future movements in fair value upwards and downwards on these
investments in particular, as is evident in the case of some of the
2022 downwards revaluations, 85% of which result from fair value
movements on 2 investment holdings.
In 2021 there were additions of GBP501k, within this GBP420k
relates to a 10% shareholding in an unlisted investment, Australie
SAS, acquired as part of a share for share exchange and the
remainder related to additions of GBP81k by Saatchinvest Ltd. In
2021, the GBP209k disposal was of a company in the Saatchinvest
portfolio and it resulted in neither a gain nor a loss on
disposal.
The Group's 10% shareholdings in M&C Saatchi Madrid SL and
59A Limited are all valued at nil.
20. Trade and other receivables
Policy
Trade receivables
Trade receivables are amounts due from customers for goods sold
or services performed in the ordinary course of business. These
financial assets give rise to cash flows that are 'solely payments
of principal and interest' on the principal amount outstanding.
They are generally due for settlement within 30 - 90 days and
therefore are all classified as current. Trade receivables are
recognised initially at the amount of consideration that is
unconditional. The Group holds trade receivables with the objective
to collect the contractual cash flows and therefore measures them
subsequently at amortised cost using the effective interest
method.
Impairment - Expected credit losses
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses which uses a lifetime expected loss
allowance ('ECL') for all trade receivables and contract assets. To
calculate the lifetime ECL the Group has established a provision
matrix that is based on its historical credit loss experience,
adjusted for forward-looking factors specific to the debtors and
economic environments in which the Group operates.
2022 2021
GBP000 GBP000
Trade receivables 97,431 86,302
Loss allowance (1,829) (877)
Net trade receivables 95,602 85,425
Prepayments 4,890 2,664
Amounts due from associates 38 123
VAT and sales tax recoverable 167 52
Other receivables* 31,370 44,477
Total trade and other receivables 132,067 132,741
*Other receivables comprises accrued income of GBP12.7m (31
December 2021: GBP13.9m), which is considered to constitute trade
receivables as defined in IFRS 15 on the basis its collectability
is subject only to the passage of time, as well as contract assets
of GBP2.2m (31 December 2021 GBP2.4m), unbilled media receivables
balances of GBP12.3m (31 December 2021:GBP23.3m) and other amounts
receivable of GBP4.3m (31 December 2021: GBP4.9m). There is no
additional ECL recorded in relation to these amounts.
Set out below is the movement in the loss allowance (which
includes provision for expected credit losses) of trade receivables
and contract assets.
2022 2021
GBP000 GBP000
As at 1 January (877) (677)
Release / (increase) for expected losses
during the year 96 (40)
Movement in forward looking provision
for specific bad debts:
- Charge during the year (1,469) (375)
- Released during the year 421 190
- Utilisation of provision 0 25
Year-end provision (1,829) (877)
The information about credit exposures is disclosed in note
30.
21. Trade and other payables
Policy
Trade and other liabilities are non-interest bearing and are
stated at their amortised cost subsequent to initial recognition at
their fair value, which is considered to be equivalent to their
carrying amount due to their short-term nature.
2022 2021
GBP000 GBP000
Trade creditors 50,437 36,578
Contract liabilities 20,502 18,939
Sales taxation and social security
payables 3,495 6,059
Accruals 67,601 75,466
Other payables 13,512 17,007
Total trade and other payables 155,547 154,049
Settlement of trade and other payables is in accordance with the
terms of trade established with the Group's local suppliers.
22. Provisions
Policy
Provisions are recognised when the Group has a present legal or
constructive obligation arising as a result of past events and
where it is more likely than not an outflow of resources will be
required to settle the obligation and the amount can be reliably
estimated. Provisions are measured at management's best estimate of
the expenditure required to settle the obligation at the balance
sheet date.
The year-end provision of GBP1.1m (2021: GBP1.2m) comprises of
costs relating to the tax liabilities in Kenya of GBP0.3m (2021:
GBP0.2m), and income protection schemes of GBP0.5m (2021: GBP0.6m),
and GBP0.3m (2021: GBP0.4m) in relation to property
dilapidations.
2022 2021
GBP000 GBP000
At 1 January (1,193) (666)
Reclassification* - (346)
Charged to the income statement:
* Overseas sales taxation and social security
liabilities (92) (16)
* Income protection provision (92) (165)
Utilised or released in the year
- Lease dilapidations 21 -
- Release associated with the FCA investigation 300 -
At 31 December (1,056) (1,193)
*This relates to lease dilapidations which were included within
the lease liability at 31 December 2020 (GBP0.2m), refer to note
17, plus GBP0.1m included within other creditors at 31 December
2020.
As at the end of 2022 all amounts recognised as provisions were
expected to be utilised within 12 months and are held as current
liabilities. The Directors do not anticipate that any of the above
will have a material adverse effect on the Group's financial
position or on the results of its operations.
23. Borrowings
Policy
Loans and overdrafts are recognised initially at fair value,
less attributable transaction costs. Subsequently, loans and
overdrafts are recorded at amortised cost with interest charged to
the income statement under the Effective Interest Rate (EIR)
method. Where there is a significant change to the future cash
flows, the EIR is reassessed with a corresponding change in the
carrying amount of the amortised cost. The change in the carrying
amount is recognised in profit or loss as income or expense.
Interest payable is included within accruals as a current
liability.
Analysis
Amounts due within one year
2022 2021
At 31 December GBP000 GBP000
Overdrafts* (4,271) (14,440)
Local bank loans (159) (297)
(4,430) (14,737)
* These overdrafts can be legally offset with other cash
balances. However, they have not been netted off in accordance with
IAS32.42 as there is no intention to settle on a net basis.
Amounts due after one year
2022 2021
At 31 December GBP000 GBP000
Local bank loans (52) (293)
Secured bank loans (6,750) (19,528)
(6,802) (19,821)
Secured bank loans
On 31 May 2021, the Company entered into a revolving
multicurrency facility agreement with National Westminster Bank Plc
and Barclays Bank PLC for up to GBP47m (the "Facility"). The
Facility includes a GBP2.5m overdraft and the ability to draw up to
GBP3.0m as a bonding facility, as required. The Facility is
provided on a three-year term with an option to extend until the
fourth anniversary. At 31 December 2022, the Group had up to
GBP47.0m (2021: GBP47.0m) of funds available under the
Facility.
The Facility includes two financial covenants, which if either
were to be breached would result in a default of the agreement:
1. Interest Cover - EBIT for the previous 12 months must exceed 5 times the net finance charge (external
debt interest, excluding IFRS16 finance lease interest payments) for the previous 12 months.
2. Leverage - total indebtedness at the period end must not exceed 3.5 times EBITDA for the previous
12 months (adjusted for acquisitions and disposals). This reduced to 3.0 times from 31 March
2022, 2.5 times from 30 June 2022, and reduces to 2.0 times from 31 March 2023.
2022 2021
At 31 December GBP000 GBP000
Gross secured bank loans (7,000) (20,000)
Capitalised finance costs 250 472
Total secured bank loans (6,750) (19,528)
Total secured bank loans are due as follows:
2022 2021
At 31 December GBP000 GBP000
In one year or less, or on demand - -
In more than one year but not more than
five years (6,750) (19,528)
(6.750) (19,528)
Total bank loans and borrowings used to calculate net cash are
as follows, IFRS 16 Leases is excluded from the calculation of net
cash in accordance with the Group's bank covenants:
Gross secured
bank loans Local bank loans Total bank loans*
GBP000 GBP000 GBP000
At 31 December 2020 (27,271) (2,357) (29,628)
Cash movements 7,608 - 7,608
Acquisitions - business combinations - (468) (468)
Non-cash movements
- Foreign exchange (337) 35 (302)
- Other** - 2,200 2,200
At 31 December 2021 (20,000) (590) (20,590)
Cash movements 13,000 410 13,410
Non-cash movements
- Foreign exchange - (32) (32)
At 31 December 2022 (7,000) (212) (7,212)
* The borrowing used to calculate net cash.
**Other includes the forgiveness of the US Paycheck Protection
Program (PPP) loans.
24. Other non-current liabilities
2022 2021
31 December GBP000 GBP000
Employment benefits* 1,846 1,108
Long term bonuses 1,362 1,014
Other** 838 427
4,046 2,549
*This relates to long term service leave in some locations,
deferred contributions to pension schemes and long-term bonus
plans. In addition, a termination indemnity plan in Italy of
GBP535k (2021: GBP547k), this liability is for the 13(th) month
salary accrual for all Italian employees to be paid to them when
they leave the Company, this was included in 'other' in 2021,
reclassified within the table for comparability.
** The main items include a contractual make good liability in
relation to the Australia office lease of GBP690k (2021:
GBP116k).
25. Equity related liabilities
This disclosure note summarises information relating to all
share schemes disclosed in notes 13, 26 and 27.
In the case of contingent consideration (note 13) (value 2022
Nil), IFRS 9 minority shareholder put option liabilities (note 26),
and IFRS 2 put option schemes (note 27), the Group has a choice to
pay in cash or equity. The Board made the decision during 2021 that
put options would, from then on, be settled in cash, where the
Group has cash resources to do so. In the case of the LTIP schemes,
it is the Board's intention that an Employee Benefits Trust is set
up to acquire the shares and fulfil these schemes using the
acquired equity.
In the table below, potential cash payments are presented, based
on the 2022 year-end share price of the Company of 151.0p and the
estimated future business performance for each business unit. The
payments are stated in the year at which the put option schemes
first become exercisable. The forecasts are based on the Group's
three-year plans, developed as part of the budget cycle, and assume
all TSR targets are fulfilled, and that equity is bought by the
Employee Benefits Trust in the year of vesting at a Company share
price of 151.0p. The table also shows the amount of these potential
cash payments that has been recognised as a liability as at 31
December 2022, with the % of the related employment services not
yet delivered to the Group at that date.
Total future expected liabilities as at 31 December 2022
Potentially payable
Services not
yet delivered Balance sheet
as at liability as
At Company share price 2023 2024 2025 2026 2027 2028 Total 31 Dec 2022 at 31 Dec 2022
of 151.0p GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 %* GBP000
IFRS 9 put option
schemes 2,584 - - 1,983 - - 4,567 16% 3,856
IFRS 2 put option
schemes 14,914 2,470 373 949 924 740 20,370 7% 18,992
LTIPs - 2,071 2,881 - - - 4,952 72% -**
17,498 4,541 3,254 2,932 924 740 29,889
*Share based payments (Note 27) charge liability to income
statement over period of vesting i.e., as the employee fulfils
their time obligation to earn the put option.
**LTIPs are accounted for as equity-settled, and thus do not
create a balance sheet liability. The 2025 value of GBP2,881k
relates to the LTIPs issued in December 2022, the new awards have
increased the total potentially payable in the table below,
compared to the previous forecast issued with the interim financial
statements.
Put option holders are not required to exercise their options at
the first opportunity. Many do not and prefer to remain
shareholders in the subsidiary companies they manage. As a result,
some put option holders may not exercise their options on the dates
estimated in the table above.
If the Group in the future decides to settle in equity, then the
amount of equity that will be provided is equal to the liability
divided by the share price.
Effect of a change in share price
The same data from the table above is presented in the table
below, but in this analysis the potential payments are based on a
range of different potential future share prices.
Potentially payable
Future Company share 2023 2024 2025 2026 2027 2028 Total
price GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 151p GBP17,498 GBP4,541 GBP3,254 GBP2,932 GBP924 GBP740 GBP29,889
At 160p GBP18,324 GBP4,804 GBP3,453 GBP2,978 GBP979 GBP784 GBP31,322
At 175p GBP19,746 GBP5,241 GBP3,787 GBP3,102 GBP1,071 GBP858 GBP33,805
At 200p GBP22,323 GBP5,970 GBP4,342 GBP3,522 GBP1,224 GBP981 GBP38,362
At 225p GBP24,800 GBP6,598 GBP4,896 GBP3,941 GBP1,377 GBP1,103 GBP42,715
At 250p GBP27,226 GBP7,176 GBP5,451 GBP4,360 GBP1,530 GBP1,226 GBP46,969
At 300p GBP32,121 GBP8,332 GBP6,561 GBP5,199 GBP1,836 GBP1,471 GBP55,520
26. Minority shareholder put option liabilities (IFRS 9)
Policy
See below but also Basis of Preparation note.
Some of the subsidiaries' local management have a put option
arrangement in place. The put option arrangements give these
employees a right to exchange their minority holdings in the
subsidiary into shares in the Company or cash (at the Group's
choice).
These schemes are considered as rewarding future business
performance and, as they are not conditional on the holder being an
employee of the business, they are accounted for in accordance with
IFRS 9.
These instruments are recognised in full at the amortised cost
of the underlying award on the date of inception, with both a
liability on the balance sheet and a corresponding amount within
the minority interest put option reserve being recognised. At each
period end, the amortised cost of the put option liability is
calculated in accordance with the put option agreement, to
determine a best estimate of the future value of the expected
award. Resultant movements in the amortised cost of these
instruments are charged to the income statement within finance
income/expense.
The put option liability will vary with both the Company's share
price and the subsidiary's financial performance. Current
liabilities are determined by the Company's year-end share price
and the historical results of the companies where the option
holders can exercise within the next twelve months. Non-current
liabilities are determined by the Company's year-end share price
and the projected results of the companies where the option holders
cannot exercise their options within the next twelve months.
Upon exercise of an award by a holder, the liability is
extinguished and the associated minority interest put option
reserve is transferred to the non-controlling interest acquired
reserve.
Analysis
IFRS 9 put options exercisable from year ended 31 December
2022:
% of subsidiaries'
Subsidiary Year shares exercisable
M&C Saatchi (Switzerland)
SA 2023 21.0
M&C Saatchi Merlin Ltd 2023 15.0
Santa Clara Participações
Ltda 2023 25.0
Santa Clara Participações
Ltda 2026 24.9
This Film Studio Pty Ltd 2023 30.0
It is the Group's option to fulfil these options in equity or
cash and it is the Group's present intention to fulfil the options
in cash (if available). However, if they are fulfilled in equity,
the estimated number of the Company shares that will be issued to
fulfil these options at 151.0p is 2,553,018 shares (2021: at
168.50p, 3,108,605 shares would need to be issued).
2022 2021
Liability as at 31 December GBP000 GBP000
Amounts falling due within one year (2,584) (3,238)
Amounts falling due after one year,
but less than three years (1,272) -(2,000)
(3,856) ( 5,238)
2022 2021
Movement in liability during the year GBP000 GBP000
At 1 January (5,238) (2,782)
Exchange difference (1) 16
Exercises 2,497 424
Acquisitions - (2,000)
Income statement charge due to:
- Change in profit estimates (970) (399)
- Change in Company share price 406 (497)
- Amortisation of discount (550) -
Total income statement charge (Note
7) (1,114) (896)
At 31 December (3,856) (5,238)
Put options exercised in year 2022 2021
GBP000 GBP000
Paid in equity - 424
Paid in cash 2,497 -
Total 2,497 424
During the year the put options for 25.9% of Bohemia Group Pty
Limited and 15.0% of Resolution Design Pty Limited were exercised,
and the equity was acquired by the Group.
27. Share-based payments (IFRS 2)
Policy
See below but also Basis of Preparation note.
Local management in some of the Group's subsidiaries (who are
minority interests of the Group) have the right to a put option
over the equity they hold in the relevant subsidiary. Where this
put option is dependent upon the holders' continued employment by
the relevant subsidiary, or where the holder received the option as
a result of employment with the relevant subsidiary, these options
are accounted for under IFRS 2 as equity-settled share-based
payments to employees or as cash-settled share-based payment
schemes. These are redeemable, at the choice of the Group, either
in shares of the Company or by means of a cash payment to the
holder. Such schemes should be considered as rewards for future
business performance, which are conditional on the holder being an
employee of the business.
Equity-settled share-based payment schemes
Where an award is intended to be settled in equity, then the
fair value of the award is calculated at the grant date of each
scheme based on the present Company's share price and its relevant
multiple. The fair value of the awards is calculated by means of a
Monte Carlo model with inputs made in terms of the Company's share
price at the date of grant, risk free rate, the historic volatility
of the share price, the dividend yield and the time to vest. The
Group estimates the shares that will ultimately vest, using
assumptions over conditions, such as profitability of the
subsidiary to which the awards relate. This value is recognised as
an expense in the income statement over the shorter of the vesting
period or the period of required employment on a straight-line
basis, with a corresponding increase in reserves.
In the event a put option arrangement includes a business
continuation clause on departure, that element of the award at
issue is treated as vested and charged to the income statement at
the grant date valuation, and no credit to the income statement is
taken for it in the future. All the remaining award is revalued
annually for the non-market condition (profitability of the
subsidiary) and allocated to the income statement on a
straight-line basis.
Upon exercise of the awards, the nominal value of the shares
issued is credited to share capital with the balance to share
premium.
Cash-settled share-based payment schemes
When an award is intended to be settled in cash, then a
liability is recognised at inception of the award, based on the
present Company's share price and its relevant multiple. This value
is recognised as an expense in the income statement from the date
of award to the date it is exercised, on a straight-line basis,
with a corresponding increase in liabilities.
Conversion from equity-settled to cash-settled
Before 21 September 2021 the Group had settled the options using
equity, where there was a choice to cash settle or equity-settle.
The Board made the decision that put options from that date would
be settled in cash, where cash resources are available to do so. Up
to 21 September 2021, the Group accounted for these put options as
equity-settled. From 21 September 2021, the Group accounted for
these put options as cash-settled.
The transition from equity-settled to cash-settled required a
fair value assessment on the day of the modification and a movement
between equity and liabilities.
Where, for an unvested scheme that existed at 21 September 2021,
the Company's share price multiple (the market condition) at the
inception of the option is higher than the current Company's share
price multiple, then the difference is charged to the income
statement.
The following table sets out a comparison between equity
settlement and cash settlement of IFRS 2 put options:
Equity-settled IFRS 2 scheme Cash-settled IFRS 2 scheme
Cost of the put option Booked to staff costs Booked to staff costs
Liability of the put Booked to equity (no impact on net Booked to liabilities (reduces net assets)
option assets)
Recognition of the cost Spread evenly between the date the Spread evenly between the date the put
put option is issued and the date the option is issued and the date the put option
put option vests. No further costs after vests. Further valuation adjustments are
vesting date. made to the income statement until the
option is exercised.
Revaluation adjustments Adjusted by changes in the profit of Adjusted by changes in the profit of the
the subsidiary only. subsidiary and the relevant share price
multiple.
Exercise of put option New Company shares issued to put option Cash issued to put option holders.
holders.
Summary of schemes
The Group has the following share-based payment schemes:
-- Put options - from 21 September 2021 these put options have been accounted for as cash settled.
-- South African equity purchased with non-recourse loans - some of the South African subsidiaries
have sold equity to staff with non-recourse loans that are repaid out of dividends and from
the proceeds of selling the equity to other employees, with the entity that has issued the equity
acting as an intermediary. The equity does not have any put rights, so there is no obligation
to acquire the equity, however the South African Rand 14,009k (2021 Rand 17,706k) debt lent
to acquire the liability (netted against the fair value of the award) is at risk.
-- Cash awards - these are long term cash schemes that were historically treated as a share-based
scheme. At the end of 2021 one of the put option award holders resigned, causing a one-off reversal
in the charge in the prior year.
-- 2021 LTIP awards - on 28 September 2021 and 21 December 2021, the Group awarded equity-settled
LTIPs to senior executive managers. This scheme grants a future award of the Company's shares,
dependent on the achievement of certain future performance conditions: o Group's total shareholder return (TSR) versus the total shareholder return
(TSR) of the
FTSE Small Cap Index over the 3 years from December 2020 to December 2023 (70%
of the award).
o Group's full year Headline PBT performance in 2023 versus target (30% of the
award).
-- 2022 LTIP awards - on 12 December 2022, the Group awarded equity-settled LTIPs to senior executive
managers. This scheme grants a future award of the Company's shares, dependent on the achievement
of certain future performance conditions: o Group's total shareholder return (TSR) versus the total shareholder return
(TSR) of
the FTSE Small Cap Index over the 3 years from December 2021 to December 2024
(50%
of the award).
o Group's full year Headline PAT performance per share in 2023 versus target (50%
of
the award).
-- Restrictive share awards - the two cash awards made to the previous Chief Financial Officer
on his recruitment were converted to restrictive share awards on 28 September 2021, based on
the 45 day average share price to 28 May 2021 of 137.7p. On departure of the previous Chief
Financial Officer a partial payment was made in cash. At 31 December 2022 there are no restrictive
awards in existence.
For the LTIPs it is intended that an Employee Share Option Plan
(Employee Benefits Trust ) is set up to acquire the shares to
fulfil these schemes in equity; thus the schemes are accounted for
as equity settled. The inputs to Monte Carlo models used to
calculate the fair value of these share awards granted during the
year are as follows:
2022 2021 2021
LTIP LTIP LTIP
Issue date 12/12/2022 21/12/2021 28/09/2021
Vesting date 31/05/2025 21/12/2024 28/09/2024
Share price at grant GBP1.48 GBP1.63 GBP1.56
Expected volatility 76% 80% 81%
Risk free rate 3.32% 0.67% 0.51%
Dividend yield 0% 0% 0%
Fair value of award per share GBP1.47 GBP1.62 GBP1.55
TSR element against FTSE Small Cap
index:
Expected volatility 291% 147% 158%
Fair value of award per share GBP0.63 GBP0.72 GBP0.67
Income statement charge
2022 2022 2022 2021 2021 2021
Equity Cash Total Equity Cash Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Put options to 21 September 2021 - equity
settled - - - 1,283 - 1,283
Put options from 22 September 2021
- imputed equity charge due to transition - - - 779 - 779
- charge/(credit) since transition (see below) 580 432 1,012 - (797) (797)
South Africa non-recourse loan scheme - 107 107 - (40) (40)
Total not affecting headline results (Note
1) 580 539 1,119 2,062 (837) 1,225
Release of cash award due to leaver (Note
1) - - - - (2,598) (2,598)
LTIPs 438 - 438 135 - 135
Restrictive share awards 211 - 211 38 - 38
Cash awards - 1,893 1,893 - 1,370 1,370
Total 1,229 2,432 3,661 2,235 (2,065) 170
Total put option liability
2022 2021
Total Total
GBP000 GBP000
Put options liability (IFRS 2) (18,992) (27,122)
Put options liability (IFRS 9) (3,856) (5,238)
Total put options (Note 25) (22,848) ( 32,360)
Current - Minority shareholder put
option liabilities (18,419) (20,788)
Non-current - Minority shareholder
put option liabilities (4,429) (11,572)
Total (22,848) (32,360)
Cash-settled liability
The movement in the liability by scheme is detailed below:
Put options South Africa Cash awards Total
non-recourse
loan scheme
GBP000
GBP000 GBP000 GBP000
At 1 January 2021 - (545) (2,043) (2,588)
Equity-settled options transferred to cash-settled
awards (32,555) - - (32,555)
Offsetable debt 1,691 - - 1,691
Acquisitions (Note 12) (1,848) - - (1,848)
(Charge) / credit to income statement
- Straight-line recognition (692) - (1,043) (1,735)
- Change in subsidiary profit estimates (3,382) - (327) (3,709)
- Change in Company multiple 4,871 40 - 4,911
Total income state (charge) / credit 797 40 (1,370) (533)
Reversal of charge caused by employee resignation - - 2,598 2,598
Settled 4,859 - 489 5,348
Foreign exchange (66) 37 - (29)
At 31 December 2021 (27,122) (468) (326) (27,916)
(Charge) / credit to income statement
- Straight-line recognition (963) - (1,893) (2,856)
- Change in subsidiary profit estimates (1,858) (231) - (2,089)
- Change in Company multiple 2,389 124 - 2,513
Total income statement charge (432) (107) (1,893) (2,432)
Settled 8,553 - 1,054 9,607
Foreign exchange 9 (23) - (14)
At 31 December 2022 (18,992) (598) (1,165) (20,755)
Cash consideration for non-controlling interest acquired and
other options
2022 2021
Total Total
GBP000 GBP000
Put options liability (IFRS 2) (9,607) (5,348)
Put options liability (IFRS 9) (2,497) -
Total cash consideration for non-controlling interest
acquired and other options (12,104) ( 5,348)
Put Options
Vesting % Entity
subject
to the
put option
Clear Deutschland GmbH 2024 20.00%
Clear Deutschland GmbH 2026 20.00%
Clear Ideas (Singapore) Ltd 2023 10.00%
Clear Ideas Ltd - B1 shares Vested 5.00%
Clear Ideas Ltd - B2 shares Vested 5.00%
Clear LA LLC Vested 12.00%
FCINQ SAS Vested 11.62%
Greenhouse Australia Pty Ltd 2023 8.53%
Greenhouse Australia Pty Ltd 2024 4.80%
Human Digital Ltd 2023 23.00%
Human Digital Ltd 2024 17.00%
LIDA NY LLP (MCD) Vested 24.50%
M&C Saatchi (Hong Kong) Limited Vested 20.00%
M&C Saatchi AB Vested 30.00%
M&C Saatchi Advertising GmbH 2023 4.10%
M&C Saatchi Agency Pty Ltd Vested 10.00%
M&C Saatchi Fluency Limited* 2026 7.50%
M&C Saatchi Fluency Limited* 2027 10.00%
M&C Saatchi Fluency Limited* 2028 2.50%
M&C Saatchi Holdings Asia Pte Ltd
(Indonesia) 2024 27.40%
M&C Saatchi Holdings Asia Pte Ltd
(Indonesia) 2026 22.50%
M&C Saatchi Merlin Ltd 2023 15.00%
M&C Saatchi Middle East Holdings Ltd Vested 20.00%
M&C Saatchi Share Inc Vested 20.00%
M&C Saatchi Social Ltd 2023 16.00%
M&C Saatchi Spencer Hong Kong Limited 2024 30.00%
M&C Saatchi Sport & Entertainment
Ltd Vested 25.00%
M&C Saatchi Sport & Entertainment
NY LLP Vested 13.00%
M&C Saatchi Sport & Entertainment
NY LLP 2024 12.50%
M&C Saatchi Sport & Entertainment
NY LLP 2025 5.00%
M&C Saatchi Sport & Entertainment
Pty LTD Vested 10.00%
M&C Saatchi Sports & Entertainment
GmbH Vested 7.00%
M&C Saatchi Talk Ltd Vested 39.00%
M&C Saatchi Talk Ltd 2023 10.00%
M&C Saatchi World Services LLP Vested 15.00%
M&C Saatchi, S.A. DE C.V. 2023 40.00%
Majority LLC 2024 8.00%
RE Team Pty Ltd Vested 13.00%
RE Worldwide UK Ltd Vested 43.20%
Scarecrow M&C Saatchi Ltd Vested 49.00%
The Source (W1) LLP Vested 10.00%
The Source Insight Australia Pty Ltd 2025 35.00%
Thread Innovation Ltd 2027 10.00%
Thread Innovation Ltd 2028 10.00%
*New scheme in year.
At any point in time, the valuation of certain put option
schemes may be in dispute with the put option holders who have
challenged the valuation of the schemes. We believe we have taken a
prudent position in assessing the liabilities, and therefore
consider any adverse outturn to be unlikely. As at 31 December
2022, the maximum aggregate liability that is not accrued amounts
to [GBP2.4m] (2021: GBPnil), which is approximately 10% of the put
option liability.
LTIP and Restrictive Shares
Shares issuable
During the year the Group also awarded LTIPs and settled
restrictive share awards.
The table below shows the number of shares that the Company will
issue at the Company's share price at 31 December 2022 of 151.0p
(2021: 168.5p) assuming all awards under the LTIPs are held to
their vesting date and fully vest.
Restrictive
LTIP shares Total
Number of Shares '000 '000 '000
At 1 January 2022 1,927 799 2,726
Forfeited on departure (556) - (556)
Vested and reclassification to cash settled
scheme on employee departure - (799) (799)
Granted or amended 1,904 - 1,904
At 31 December 2022 3,275 - 3,275
Shares issuable used in these accounts
2022
Number 2022 2021 Number 2021
of shares Share price of shares Share
Note '000 used '000 price used
Per EPS calculation 1 905 163p 828 141.6p
Share based payments 27 3,275 147p-162p 2,726 155p-162p
The share-based payments calculation (note 27) uses the number
of shares that could be issued at the first possible vesting date
after the year. The EPS calculation (note 1) uses the average share
price for the year, calculating the number of shares to be issued
using its formula value had it been possible to exercise on the
year-end date, and takes a deduction for any remaining uncharged
share option charge at start of year and the share of profits that
is allocatable to the equity during the year. Where the scheme has
been issued for part of the year (and is not converted from an
existing cash-based scheme) the shares are reduced by the
proportion of the year that they are in issue. The EPS calculation
is thus attempting to show the dilutive effect rather than the
likely shares that will be issued and is income statement focused
rather than the true future position.
28. Issued share capital (allotted, called up and fully
paid)
Policy
Ordinary shares are classified as equity. Incremental costs
attributable to the issuance of new shares are shown in equity as a
deduction from proceeds, net of tax.
Where the Company reacquires its own equity instruments
(treasury shares), the consideration paid is deducted from equity
attributable to the Company's shareholders and recognised within
the treasury reserve.
Analysis
1p Ordinary
shares
Number of shares GBP000
At 31 December 2020 115,916,590 1,159
Acquisition of 40% of M&C Saatchi (Hong Kong)
Limited 3,027,860 30
Acquisition of 25.1% of Santa Clara Participações
Ltda 2,084,825 21
Acquisition of 19.9% of Little Stories SAS 475,730 5
Acquisition of 5% M&C Saatchi Mobile Asia Pacific
PTE. Ltd 327,239 3
Shares issued for cash 620,180 6
Payment of deferred consideration 291,011 3
At 31 December 2021 122,743,435 1,227
No issue of shares - -
At 31 December 2022 122,743,435 1,227
The Group holds 485,970 (2021: 485,970) of the above Company
shares in treasury.
29. Fair value measurement
Policy
See also basis of preparation note.
Some of the Group's financial assets and liabilities, in
addition to certain non-financial assets and liabilities, are held
at fair value.
The fair value of an asset or liability is the price that would
be received from selling the asset or paid to transfer a liability
in an orderly transaction between market participants at the
balance sheet date.
Both financial and non-financial assets and liabilities measured
at fair value in the balance sheet are grouped into three levels of
a fair value hierarchy. The three levels are defined based on the
observability of significant inputs to the measurement, as
follows:
- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
- Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset
or liability, either directly or indirectly; and
- Level 3: unobservable inputs for the asset or liability.
The Group holds both assets and liabilities which are measured
at fair value on a recurring basis and those which are measured at
fair value on a non-recurring basis. Items measured at fair value
on a non-recurring basis typically relate to non-financial assets
arising as a result of business combinations as accounted for under
the acquisition method. In this regard, during the year the Group
has recognised additions to intangible assets (brand names and
customer lists) totalling GBP200k (2021: GBP3,819k). Refer to note
14 for full details.
In addition, the Group also calculates the fair value of certain
non-financial assets when there is the need to conduct an
impairment review. These calculations also fall within Level 3 of
the IFRS 13 hierarchy and, where applicable, are described in note
14.
Assets and liabilities measured at fair value on a recurring
basis.
The following table shows the levels within the hierarchy of
financial assets and liabilities measured at fair value on a
recurring basis at 31 December 2022 and 31 December 2021:
Level Level Level
1 2 3
At 31 December 2022 GBP000 GBP000 GBP000
Financial assets
Equity investments
at FVTPL - - 11,986
Contingent consideration - - 914
Total - - 12,900
Level Level
1 2 Level 3
At 31 December
2021 GBP000 GBP000 GBP000
Financial assets
Equity investments
at FVTPL - - 15,183
The level at which the financial asset or liability is
classified is determined based on the lowest level of significant
input to the fair value measurement.
The movements in the fair value of the level 3 recurring
financial assets and liabilities are shown as follows:
Equity instruments
at FVTPL
GBP000
At 1 January 2022 15,183
Disposals (918)
Gain on disposal 1,168
Revaluations 292
Impairment (2,863)
Currency movements 38
At 31 December 2022 12,900
Valuation and sensitivity to valuation
The Group's finance team performs valuations of financial items
for financial reporting purposes, including Level 3 fair values.
Where appropriate such valuations are performed in consultation
with third-party valuation specialists for complex
calculations.
The equity instruments at FVTPL relate to unlisted equity
investments as detailed in note 19. Management bases its primary
assessment of their fair values on the share price from the last
funding round but also incorporates discounts depending on
performance, more senior shareholdings held by other investors and
the possibility of future dilution due to the presence of
convertible loan notes. Within the value of GBP12,900k above,
GBP6,082k have no price points in the past 12 months. Fluctuations
in the share price would change the fair value of the investments
recognised at year-end as follows assuming a 10% uplift or
downwards movement in the price:
Increase/ Increase/
(decrease) (decrease)
in in
fair value fair value
of of
asset asset
2022 2021
Adjusted share price GBP000 GBP000
+10% 1,290 1,519
-10% (1,290) (1,519)
In addition, management considers there to be a risk that the
most recent purchase prices are sensitive to a decision to sell the
investments to an unwilling market. If such a market existed, then
discounting the investments to reflect such risk could impact the
value as shown below:
Decrease Decrease
in fair in fair
value value
of asset of asset
2022 2021
Risk adjusted sales price GBP000 GBP000
-30% sales discount due to illiquid
nature* (3,870) (4,556)
-12% risk discount for unwilling market
place** (1,084) (1,276)
Value after discounts 7,946 9,353
* If these illiquid securities were to be sold then such a sale
is expected to yield between a 10% and 50% discount, so sensitivity
based on 30%.
** Risk that if the cash supply dries up, some of the
investments with future growth prospects will run out of cash
requiring a fire sale, reflected by additional risk discount of
12%.
30. Financial risk management
Principal financial instruments
The principal financial instruments held by the Group, from
which financial instrument risk arises, include contract assets,
trade and other receivables, cash and cash equivalents, contract
liabilities, trade and other payables, loans and borrowings,
minority interest put options accounted under IFRS 9 as liabilities
and equity instruments representing long term investments in
non-listed entities.
The Group does not typically use derivative financial
instruments to hedge its exposure to foreign exchange or interest
rate risks arising from operational, financing and investment
activities.
30.1 - General objective, policies and processes
The Board has overall responsibility for the determination of
the Group's and Company's risk management objectives and policies.
Whilst retaining ultimate responsibility for them, the Board has
delegated the authority for designing and operating processes that
ensure the effective implementation of the objectives and policies
to the Group's senior management of each core business unit.
The overall objective of the Board is to set policies that seek
to reduce risk as far as possible without unduly affecting the
Group's competitiveness and flexibility of the global businesses of
which it is comprised. Further details regarding these policies are
set out below.
30.2 - Market risk
Market risk arises from the Group's use of interest-bearing
financial instruments and foreign currency cash holdings. It is the
risk that the fair value of future cash flows on its debt finance
and cash investments will fluctuate because of changes in interest
rates (interest rate risk), foreign exchange rates (currency risk)
and other price risk such as equity price risk and share price
risk. Financial instruments affected by market risk include loans
and borrowings, deposits, debt, equity investments and minority
interest (MI) put options.
Exposure to market risk arises in the normal course of the
Group's business.
30.3 - Foreign exchange risk
Foreign exchange risk arises from transactions and recognised
assets and liabilities and net investments in foreign operations.
The Group's general operating policy historically has been to
conduct business in the currency of the local area in which
businesses of the Group are geographically located, thereby
naturally hedging the consideration resulting from client work.
Businesses of the Group maintain bank accounts in the currency of
these transactions solely for working capital purposes. As the
Group has grown there has been an increase in services rendered
being exported from the UK businesses to clients who transact in
non-GBP currencies. The transactional risk arising from such
exports is mitigated in terms of the structuring of the billing
arrangements and agreement to regular invoices being remitted and
promptly paid (<30 days).
The Group is exposed to movements in foreign currency exchange
rates in respect of the translation of net assets and income
statements of foreign subsidiaries and equity accounted
investments. The Group does not hedge the translation effect of
exchange rate movements on the income statements or balance sheets
of foreign subsidiaries and equity accounted investments as it
regards these as long-term investments.
The estimated impact on foreign exchange gains and losses of a
+/- 10% movement in the exchange rate of the Group's significant
currencies is as follows:
Increase/ Increase/ Increase/ Increase/
(decrease) (decrease) (decrease) (decrease)
in profit in profit in profit in profit
before after tax before after tax
tax tax
2022 2022 2021 2021
Exchange rate GBP000 GBP000 GBP000 GBP000
USD +10% 848 727 362 214
USD -10% (771) (661) (330) (195)
AUD +10% 490 321 526 349
AUD -10% (446) (292) (478) (317)
The year-end and average exchange rates to GBP for the
significant currencies are as follows:
Year-End Rate Average Rate
Currency 2022 2021 2022 2021
USD 1.21 1.35 1.20 1.35
AUD 1.77 1.86 1.77 1.87
The Group assumes that currencies will either be freely
convertible, or the currency can be used in the local market to pay
for goods and services, which the Group can sell to clients in a
freely convertible currency. Within the 2022 year-end cash balances
the Group holds GBP 1,242k in Indian Rupees; GBP524k in Libyan
Dinars; and GBP3,725k in South African Rands.
30.4 - Interest rate risk
The Group is exposed to interest rate risk because it holds a
banking facility of up to GBP47m and a net overdraft facility of up
to GBP2.5m, both based on floating interest risks. The Group does
not consider this risk to be significant.
The sensitivity analysis below has been determined based on the
exposure to interest rates for financial instruments held at the
balance sheet date. The analysis is prepared assuming the amount of
borrowings outstanding at the balance sheet date were outstanding
for the whole year. A 50-basis point increase or decrease is used
when reporting interest rate risk internally to key management
personnel and represents management's assessment of the reasonably
possible changes in interest rates.
If interest rates had been 50 basis points higher/lower and all
other variables were held constant, the Group's profit before tax
for the year ended 31 December 2022 would (decrease)/increase by
GBP(35)k / GBP 35k (2021: GBP(100)k / GBP100k). This is principally
attributable to the Group's exposure to interest rates on its
floating rate loan.
30.5 - Liquidity risk
Liquidity risk arises from the Group's management of working
capital and the finance charges and, when appropriate, principal
repayments on its debt instruments. It is the risk that the Group
will encounter difficulty in meeting its financial obligations as
and when they fall due. The Group's debt instruments carry interest
at SONIA + 3.0%.
The Group's policy is to ensure that it will always have
sufficient cash to allow it to meet its liabilities when they come
due. To achieve this aim, the Group has a planning and budgeting
process in place to determine the funds required to meet its normal
operating requirements on an ongoing basis. The Group and Company
ensures that there are sufficient funds to meet its short-term
business requirements, taking into account its anticipated cash
flows from operations, its holdings of cash and cash equivalent and
proposed strategic investments.
The Board receives current year cash flow projections on a
monthly basis as well as information regarding cash balances. At
the end of the financial year, these projections indicated that the
Group had sufficient liquid resources to meet its obligations under
all reasonably expected circumstances.
The following table sets out the contractual maturities
(representing undiscounted contractual cash flows) of financial
liabilities:
Group
Up to 3 3 to 12
months months 1 to 2 years 2 to 5 years over 5 years
At 31 December 2022 GBP000 GBP000 GBP000 GBP000 GBP000
Trade and other payables* (93,060) (34,996) (2,508) (976) (10)
Lease liabilities (2,256) (6,770) (8,149) (21,220) (31,363)
Loans and borrowings (59) (100) (6,802) - -
Overdrafts (4,271) - - - -
IFRS 9 put options - (2,584) - (1,272) -
Total (99,746) (44,350) (17,459) (23,468) (31,373)
* excludes taxes as these are not considered financial
instruments and contract liabilities as these are not financial
liabilities
Up to 3 3 to 12
months months 1 to 2 years 2 to 5 years over 5 years
At 31 December 2021 GBP000 GBP000 GBP000 GBP000 GBP000
Trade and other payables* (96,561) (25,359) (5,285) (1,846) (1)
Lease liabilities (2,320) (6,960) (8,074) (19,342) (35,943)
Loans and borrowings - - - (19,528) -
Overdrafts (14,440) - - - -
IFRS 9 put options - (3,238) - (1,000) (1,000)
Deferred and contingent consideration - (984) - - -
Total (113,321) (36,541) (13,359) (41,716) (36,944)
* excludes taxes as these are not considered financial
instruments and contract liabilities as these are not financial
liabilities
Company
Up to 3 months 3 to 12 months 1 to 2 years 2 to 5 years over 5 years
At 31 December 2022 GBP000 GBP000 GBP000 GBP000 GBP000
Trade and other payables (5,190) - - - -
Overdrafts (4,271) - - - -
Loans and borrowings - - (6,750) - -
Total (9,461) - (6,750) - -
At 31 December 2021 Up to 3 months 3 to 12 months 1 to 2 years 2 to 5 years over 5 years
GBP000 GBP000 GBP000 GBP000 GBP000
Trade and other payables (3,551) (361) (292) (161) -
Loans and borrowings - - - (19,528) -
Total (3,551) (361) (292) (19,689) -
The Group breached no banking covenants during the year.
30.6 - Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations.
The Group monitors credit risk at both a local and Group level.
Credit terms are set and monitored at a local level according to
local business practices and commercial trading conditions. The age
of debt, and the levels of accrued and deferred income are reported
regularly. Age profiling is monitored, both at local customer level
and at consolidated entity level. There is only local exposure to
debt from significant global clients. The Group continues to review
its debt exposure to foreign currency movements and will review
efficient strategies to mitigate risk as the Group's overseas debt
increases.
Management determines concentrations of credit risk by reviewing
amounts due from customers monthly. The only significant
concentrations of credit risk which are accepted are with
multinational blue chip (or their equivalent) organisations where
credit risk is not considered an issue and the risk of default is
considered low.
Impairment
The Group has one principal class of assets in scope for
expected credit loss test, trade receivables.
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses which uses a lifetime expected loss
allowance for all trade receivables.
The expected loss rates for each business are based on the
payment profiles of sales at least over a period of 24 months
before 31 December 2022 or 31 December 2021 respectively and the
corresponding historical credit losses experienced within this
period. The historical loss rates are adjusted to reflect current
and forward-looking information on macroeconomic factors affecting
the ability of the customers to settle the receivables.
The expected credit loss allowance as at 31 December 2022 and 31
December 2021 was determined as follows for trade receivables under
IFRS 15.
Trade receivables
0 - 30 31 - 91 - > 120 Total
Not past days past 90 days 120 days days past
31 December 2022 due due past due past due due
Expected loss rate (%) 0.02% 0.01% 0.02% 0.51% 3.55%
Trade receivables (GBP000's) 70,673 25,496 9,333 2,701 4,124 112,327
Calculated expected credit loss provision
(GBP000's) 11 3 2 14 146 176
Specific further loss allowances (GBP000's) - - - - 1,653 1,653
Total loss allowance (GBP000's) 11 3 2 14 1,799 1,829
Trade receivables
0 - 30 31 - 91 - > 120 Total
Not past days past 90 days 120 days days past
31 December 2021 due due past due past due due
Expected loss rate (%) 0.02% 0.01% 0.02% 0.51% 3.55%
Trade receivables (GBP000's) 72,941 19,200 6,107 956 3,302 102,506
Calculated expected credit loss provision
(GBP000's) 11 2 1 5 117 136
Specific further loss allowances (GBP000's) - - - - 741 741
Total loss allowance (GBP000's) 11 2 1 5 858 877
Under IFRS 9 Financial Instruments, the expected credit loss is
the difference between asset's gross carrying amount and the
present value of the estimated future cashflows discounted at the
asset's original effective interest rate.
Contract assets relate to work-in-progress, and as the Group has
no experience of material write offs in relation to these financial
assets, no expected credit loss allowance is recognised.
30.7 - Share price risk
As detailed in note 27, the Group has used put option awards to
incentivise certain local key management (who are non controlling
interest). The value of these awards is in part dependent upon the
Company's share price.
30.8 - Equity price risk
The Group's non-listed equity investments are susceptible to
market price risk arising from uncertainties about future values of
the investment securities. The Group manages equity price risk
through diversification and by placing limits on individual and
total equity investment securities. Reports on the equity portfolio
are submitted to the Group's senior management on a regular basis.
The Board reviews and approves all equity investment decisions. The
basis of the fair value calculations and the sensitivity of these
calculations to the key inputs is detailed in note 29.
30.9 - Capital management
The Group manages its capital to ensure that entities in the
Group will be able to continue as a going concern while maximising
the return to shareholders through the optimisation of the debt and
equity balance. Strong financial capital management is an integral
element of the Directors' strategy to achieve the Group's stated
objectives. The Directors review financial capital reports on a
regular basis and the Group finance function does so on a daily
basis ensuring that the Group has adequate liquidity. The
Directors' consideration of going concern is detailed in the
Directors' Report.
The capital structure of the Group consists of debt, which
includes the borrowings disclosed in note 23, cash and cash
equivalents as disclosed in the cash flow statement and equity
attributable to equity holders of the parent as disclosed in the
Statement of Changes in Equity.
31. Group companies
Key
* This subsidiary company is exempt from the requirements relating to the audit of individual accounts
for the year ended 31 December 2022 by virtue of Section 479A of the Companies Act 2006. M&C Saatchi
plc (the "Company") will guarantee the debts and liabilities of the subsidiary company in accordance
with Section 479C of the Companies Act 2006.
** Entities where all equity is directly held by the Company, all other subsidiary companies' equity
is either in part or wholly held via subsidiaries of the Company.
As at 31 December Country Company Number Registered Specialism Effective % ownership
2022 Office 2022
Address
United Kingdom
36 Golden
United Square,
LIDA (UK) LLP* Kingdom OC395890 London, W1F 9EE Advertising 100
36 Golden
United Square,
LIDA Limited* Kingdom 03860916 London, W1F 9EE Advertising 100
36 Golden
M&C Saatchi (UK) United Square,
Limited* Kingdom 03003693 London, W1F 9EE Advertising 100
36 Golden
M&C Saatchi Accelerator United Square,
Limited* Kingdom 09660056 London, W1F 9EE Advertising 100
36 Golden
M&C Saatchi Export United Square,
Limited* Kingdom 03920028 London, W1F 9EE Advertising 100
36 Golden
M & C Saatchi Marketing United Square,
Arts Limited* Kingdom 03357727 London, W1F 9EE Advertising 100
36 Golden
M&C Saatchi PR United Square,
International Limited* Kingdom 08838406 London, W1F 9EE Advertising 100
36 Golden
M&C Saatchi PR United Square,
Limited* Kingdom 07280464 London, W1F 9EE Advertising 100
36 Golden
M&C Saatchi PR United Square,
UK LLP* Kingdom OC362334 London, W1F 9EE Advertising 100
36 Golden
M&C Saatchi Shop United Square,
Limited* Kingdom 09660100 London, W1F 9EE Advertising 100
36 Golden
M&C Saatchi Talk United Square,
Limited* Kingdom 04239240 London, W1F 9EE Advertising 51
36 Golden
The Source (London) United Square,
Limited* Kingdom 07140265 London, W1F 9EE Advertising 100
36 Golden
The Source (W1) United Square,
LLP* Kingdom OC384624 London, W1F 9EE Advertising 90
36 Golden
This Is Noticed United Square,
Limited* Kingdom 11843904 London, W1F 9EE Advertising 68.5
36 Golden
Clear Ideas Consultancy United Square,
LLP* Kingdom OC362532 London, W1F 9EE Consulting 90
36 Golden
United Square,
Clear Ideas Limited* Kingdom 04529082 London, W1F 9EE Consulting 90
36 Golden
M&C Saatchi Fluency United Square,
Limited* Kingdom 12853921 London, W1F 9EE Consulting 80
36 Golden
M&C Saatchi Life United Square,
Limited* Kingdom 14338008 London, W1F 9EE Consulting 100
36 Golden
Influence Communications United Square,
Limited* Kingdom 04917646 London, W1F 9EE Consulting 95
36 Golden
United Square,
Re Worldwide Ltd* Kingdom 10503044 London, W1F 9EE Consulting 56.8
36 Golden
Thread Innovation United Square,
Limited* Kingdom 13510974 London, W1F 9EE Consulting 80
36 Golden
Alive & Kicking United Square,
Global Limited* Kingdom 11250736 London, W1F 9EE Dormant 100
36 Golden
Black & White Strategy United Square,
Limited* Kingdom 11295145 London, W1F 9EE Dormant 100
36 Golden
United Square,
H2R Research Limited* Kingdom 11668322 London, W1F 9EE Dormant 85
36 Golden
United Square,
Human Digital Limited* Kingdom 07510403 London, W1F 9EE Issues 60
36 Golden
M&C Saatchi World United Square,
Services LLP* Kingdom OC364842 London, W1F 9EE Issues 85
36 Golden
M&C Saatchi WS United Square,
.ORG Limited* Kingdom 10898282 London, W1F 9EE Issues 85
36 Golden
Tricycle Communications United Square,
Limited* Kingdom 07643884 London, W1F 9EE Issues 85
36 Golden
M & C Saatchi Network United Square, Group Central
Limited* & ** Kingdom 07844657 London, W1F 9EE Costs 100
36 Golden
United Square, Group Central
Saatchinvest Ltd* Kingdom 07498729 London, W1F 9EE Costs 100
M&C Saatchi 36 Golden
International United Square, Group Central
Holdings B.V. Kingdom 24295679 (FC024340) London, W1F 9EE Costs 100
36 Golden
M&C Saatchi European United Square, Group Central
Holdings Limited* Kingdom 05982868 London, W1F 9EE Costs 96
36 Golden
M&C Saatchi German United Square, Group Central
Holdings Limited* Kingdom 06227163 London, W1F 9EE Costs 100
M & C Saatchi 36 Golden
International United Square, Local Central
Limited* Kingdom 03375635 London, W1F 9EE Costs 100
36 Golden
M&C Saatchi Middle United Square, Local Central
East Holdco Limited* Kingdom 09374189 London, W1F 9EE Costs 80
36 Golden
M&C Saatchi WMH United Square, Local Central
Limited* Kingdom 03457658 London, W1F 9EE Costs 100
36 Golden
M&C Saatchi Worldwide United Square, Local Central
Limited* Kingdom 02999983 London, W1F 9EE Costs 100
36 Golden
United Square,
FYND Media Limited* Kingdom 10104986 London, W1F 9EE Media 100
36 Golden
M&C Saatchi Mobile United Square,
Limited* Kingdom 05437661 London, W1F 9EE Media 100
36 Golden
M&C Saatchi Merlin United Square,
Limited* Kingdom 03422630 London, W1F 9EE Passions 70
36 Golden
M&C Saatchi Social United Square,
Limited* (&) ** Kingdom 09110893 London, W1F 9EE Passions 84
M&C Saatchi Sport 36 Golden
& Entertainment United Square,
Limited* Kingdom 03306364 London, W1F 9EE Passions 75
Europe
Boulevard Des
Promenades
8, 1227,
M&C Saatchi Carouge,
(Switzerland) Geneva,
SA Switzerland 660-0442009-4 Switzerland Advertising 76
Skeppsbron 16,
11130,
Stockholm,
M&C Saatchi AB Sweden 556902-1792 Sweden Advertising 70
Munzstrasse
21-23,
M&C Saatchi Advertising 10178, Berlin,
GmbH Germany 95484 Germany Advertising 96
Munzstrasse
21-23,
M&C Saatchi Digital 10178, Berlin,
GmbH Germany 137809 Germany Advertising 100
Skeppsbron 16,
11130,
M&C Saatchi Go! Stockholm,
AB Sweden 559076-6076 Sweden Advertising 70
Skeppsbron 16,
11130,
M&C Saatchi PR Stockholm,
AB Sweden 559103-4201 Sweden Advertising 70
V.Le Monte Nero
76, Milano,
M&C Saatchi PR 20135,
S.r.L Italy IT08977250961 Italy Advertising 100
V.Le Monte Nero
76, Milano,
20135,
M&C Saatchi SpA Italy IT07039280966 Italy Advertising 100
C/O Wework,
Taunusanlage
8, 60329,
Clear Deutschland Frankfurt
GmbH Germany 113523 Am Main, Germany Consulting 57
M&C Saatchi Sport Keizersgracht,
& Entertainment 81015CN,
Benelux B.V. Netherlands 860734560 Amsterdam Passions 100
Munzstrasse
M&C Saatchi Sports 21-23,
& Entertainment 10178, Berlin,
GmbH Germany 142905 Germany Passions 93
Middle East and
Africa
Media Quarter,
5(th) Floor,
Corner,
Somerset And De
Smit Street, De
Black & White Customer Waterkant, Cape
Strategy (Pty) Town, South
Limited South Africa 211/005859/07 Africa Advertising 50.1
Media Quarter,
5(th) Floor,
Corner,
Somerset And De
Smit Street, De
Creative Spark Waterkant, Cape
Interactive (Pty) Town, South
Limited** South Africa 2010/016508/07 Africa Advertising 50.1
Media Quarter,
5(th) Floor,
Corner,
Somerset And De
Smit Street, De
Waterkant, Cape
Dalmatian Communications Town, South
(Pty) Limited** South Africa 2015/396439/07 Africa Advertising 50.1
Media Quarter,
5(th) Floor,
Corner,
Somerset And De
Smit Street, De
Waterkant, Cape
M&C Saatchi Abel Town, South
(Pty) Limited South Africa 2009/022172/07 Africa Advertising 50
Media Quarter,
5(th) Floor,
Corner,
Somerset And De
Smit Street, De
Waterkant, Cape
M&C Saatchi Africa Town, South
(Pty) Limited** South Africa 2013/037719 Africa Advertising 50.1
PO Box: 77932,
Abu Dhabi,
M&C Saatchi FZ United Arab United
LLC Emirates 177 Arab Emirates Advertising 80
M&C Saatchi,
Penthouse,
Building 1,
Twofour54,
PO Box 77932,
Abu
Dhabi, United
M&C Saatchi Middle United Arab Arab
East FZ LLC Emirates 30670 Emirates Advertising 80
9 8(th) Street,
Houghton,
Johannesburg,
Razor Media (Pty) Gauteng, 2198,
Limited South Africa 2017/177757/07 South Africa Advertising 49
M&C Saatchi Bahrain 51,122,1605,316,
W.L.L Bahrain 74157 Manama Center Dormant 100
Media Quarter,
5(th) Floor,
Corner,
Somerset And De
Smit Street, De
Waterkant, Cape
M&C Saatchi Connect Town, South
(Pty) Limited** South Africa 2013/037737/07 Africa Media 50.1
9 8(th) Street,
Houghton,
Johannesburg,
Levergy Marketing Gauteng, 2198,
Agency (Pty) Limited** South Africa 2005/021589/07 South Africa Passions 70
Asia
No. 15B, 2(nd)
Floor, Jalan
Tengku
Ampuan, Zabedah
F9/F, Section 9,
40100 Shah Alam,
Design Factory Selangor Darul
Sdn Bhd Malaysia 201001034805 Ehsan, Malaysia Advertising 100
Room 248, Floor
2, Unit 5,
No.11,
Wanghang Road,
New Lingang
Area,
China (Shanghai)
M&C Saatchi Advertising Pilot Free Trade
(Shanghai) Limited China 91310000740556813A Zone, China Advertising 80
Rm 2610, 26/F
Prosperity,
Millennia Plaza,
663 King's Rd,
North Point,
M&C Saatchi (Hong Hong
Kong) Limited Hong Kong 509500 Kong Advertising 80
1(st) Floor,
Catic
Plaza, No.8
Causeway
M&C Saatchi Spencer Road, Causeway
Hong Kong Limited Hong Kong 2661802 Bay, Hong Kong Advertising 70
Flat No.270-D,
Pocket C Mayur
Vihar Phase II,
M&C Saatchi New Delhi,
Communications 110091,
Pvt Limited India U74300DL2005PTC141682 India Advertising 94.8
2(nd) Floor,
Kamani
Chambers 32
Ramjibhai
Kamani Marg,
Ballard
Estate Mumbai,
Scarecrow M&C Saatchi Mumbai City, MH
Limited** India U22190MH2008PLC188548 400038 IN, India Advertising 51
Dea Tower 1
Mezanine
Floor, Jl. Mega
Kuningan
Kav.e4.3
No.1-2, Kuningan
Timur,
Setiabudi,
PT. MCS Saatchi Jakarta Selatan,
Indonesia Indonesia 576/1/IU/PMA/2018 12920, Indonesia Advertising 50.1
No.15b, 2(nd)
Floor,
Jalan Tengku
Ampuan,
Zabedah F9/F,
Section
9, 40100 Shah
Alam,
M&C Saatchi (M) Selangor,
Sdn Bhd Malaysia 606116-D Malaysia Advertising 100
No.15b, 2(nd)
Floor,
Jalan Tengku
Ampuan,
Zabedah F9/F,
Section
9, 40100 Shah
Alam,
M&C Saatchi Source Selangor,
(M) SDN BHD Malaysia 1313653-D Malaysia Advertising 100
No.15b, 2(nd)
Floor,
Jalan Tengku
Ampuan,
Zabedah F9/F,
Section
9, 40100 Shah
Alam,
Watermelon Production Selangor,
Sdn Bhd Malaysia 1083441 -M Malaysia Advertising 100
48m, Block 6,
M&C Saatchi World P.Ec.H.S,
Services Pakistan Karachi,
(Pvt) Ltd Pakistan 0081911 Pakistan Issues 43
59 Mohamed
Sultan
Road, #02-08,
M&C Saatchi (S) Sultan-Link,
Pte Limited Singapore 199504816C Singapore Advertising 100
59 Mohamed
Sultan
Road, #02-08,
Clear Ideas (Singapore) Sultan-Link,
Pte Limited Singapore 201020335R Singapore Consulting 86
6(th) Floor,
Alexandra
House, 18 Chater
Road, Central,
Clear Asia Limited Hong Kong 1289028 Hong Kong Dormant 95
Rm 2610, 26/F
Prosperity,
Millennia Plaza,
663 King's Rd,
North Point,
Hong
Re HK Limited Hong Kong 2699219 Kong Dormant 100
59 Mohamed
Sultan
M&C Saatchi World Road, #02-08,
Services (Singapore) Sultan-Link,
Pte Limited Singapore 202104508W Singapore Issues 85
Rm 2610, 26/F
Prosperity,
Millennia Plaza,
663 King's Rd,
North Point,
M&C Saatchi Asia Hong Local Central
Limited Hong Kong 1959819 Kong Costs 100
1 Coleman
Street,
#05-06a, The
M&C Saatchi Holdings Adelphi, Local Central
Asia Pte Limited Singapore 20172 5519K 179803 Singapore Costs 50.1
141b First
Floor,
Cl House Shahpur
M&C Saatchi Mobile Jat, New Delhi,
India LLP India AAK-8869 110049, India Media 100
59 Mohamed
Sultan
M&C Saatchi Mobile Road, #02-08,
Asia Pacific Pte Sultan-Link,
Limited Singapore 201410399M Singapore Media 100
Australia
99 Macquarie
Street,
Sydney, NSW
1440 Agency Pty 2000,
Limited Australia 100 473 363 Australia Advertising 90
99 Macquarie
Street,
Sydney, NSW
Bellwether Global 2000,
Pty Limited Australia 114 615 226 Australia Advertising 90
99 Macquarie
Street,
Sydney, NSW
Brands In Space 2000,
Pty Limited Australia 129 800 639 Australia Advertising 90
99 Macquarie
Street,
Sydney, NSW
Elastic Productions 2000,
Pty Limited Australia 635 737 861 Australia Advertising 90
99 Macquarie
Street,
Sydney, NSW
Go Studios Pty 2000,
Limited Australia 092 941 878 Australia Advertising 90
99 Macquarie
Street,
Sydney, NSW
Greenhouse Australia 2000,
Pty Limited Australia 629 584 121 Australia Advertising 78
99 Macquarie
Street,
Sydney, NSW
Hidden Characters 2000,
Pty Limited Australia 108 886 291 Australia Advertising 85.5
99 Macquarie
Street,
Sydney, NSW
LIDA Australia 2000,
Pty Limited Australia 125 908 009 Australia Advertising 90
99 Macquarie
Street,
Sydney, NSW
M&C Saatchi Direct 2000,
Pty Limited Australia 072 221 811 Australia Advertising 90
99 Macquarie
Street,
Sydney, NSW
M&C Saatchi Melbourne 2000,
Pty Limited Australia 004 777 379 Australia Advertising 89.9
99 Macquarie
Street,
Sydney, NSW
M&C Saatchi Sydney 2000,
Pty Limited Australia 637 963 323 Australia Advertising 90
99 Macquarie
Street,
Sydney, NSW
Park Avenue PR 2000,
Pty Limited Australia 604 298 071 Australia Advertising 90
99 Macquarie
Street,
Sydney, NSW
Resolution Design 2000,
Pty Limited Australia 621 985 288 Australia Advertising 90
99 Macquarie
Street,
Sydney, NSW
Saatchi Ventures 2000,
Pty Limited Australia 614 007 957 Australia Advertising 54
99 Macquarie
Street,
Sydney, NSW
The Source Insight 2000,
Australia Pty Limited Australia 618 841 928 Australia Advertising 58.5
99 Macquarie
Street,
Sydney, NSW
This Film Studio 2000,
Pty Limited Australia 624 003 541 Australia Advertising 63
99 Macquarie
Street,
Sydney, NSW
Tricky Jigsaw Pty 2000,
Limited Australia 069 431 054 Australia Advertising 88
99 Macquarie
Street,
Sydney, NSW
Ugly Sydney Pty 2000,
Limited Australia 618 242 710 Australia Advertising 67.5
99 Macquarie
Street,
Sydney, NSW
2000,
Re Team Pty Limited Australia 105 887 321 Australia Consulting 78.8
99 Macquarie
Street,
Sydney, NSW
Yes Agency Pty 2000,
Limited Australia 621 425 143 Australia Consulting 78.8
99 Macquarie
Street,
Sydney, NSW
eMCSaatchi Pty 2000,
Limited Australia 089 856 093 Australia Dormant 90
C/O Walker
Wayland
Services Pty
Ltd,
Suite 11.01,
Leve
11, 60
World Services Castlereagh
(Australia) Pty St, Sydney NSW,
Limited Australia 629 191 420 Australia Issues 85
99 Macquarie
Street,
Sydney, NSW
M&C Saatchi Agency 2000, Local Central
Pty Limited Australia 069 431 054 Australia Costs 90
99 Macquarie
Street,
M&C Saatchi Asia Sydney, NSW
Pac Holdings Pty 2000, Local Central
Limited Australia 097 299 020 Australia Costs 100
99 Macquarie
Street,
Sydney, NSW
Bohemia Group Pty 2000,
Limited Australia 154 100 562 Australia Media 90
99 Macquarie
Street,
M&C Saatchi Sport Sydney, NSW
& Entertainment 2000,
Pty Limited Australia 139 568 102 Australia Passions 81
Americas
Rua Wisard, 305,
Vila Madalena,
3 Andar-Con, Sao
Paolo,
Agência Digital 05434-080,
Zeroacem Ltda Brazil NIRE-3522979148 Brazil Advertising 46
Rua Wisard, 305,
Vila Madalena,
3 Andar-Con, Sao
CSZ Paolo,
Comunicação 05434-080,
Ltda Brazil 03.910.644/0001-05 Brazil Advertising 50.1
Avenida
Brigadeiro
Faria Lima,
1355,
Jardim
Paulistano
16 Andar, Sal,
Lily Sao Paulo,
Participações 01452-919,
Ltda Brazil 21.188.539/0001-96 Brazil Advertising 100
Rua Wisard, 305,
Vila Madalena,
3 Andar-Con, Sao
M&C Saatchi Brasil Paolo,
Participações 05434-080,
Ltda Brazil 10.570.593/0001-85 Brazil Advertising 100
Darwin 74, Piso
1, Miguel
Hidalgo,
11590 Ciudad de
México,
M&C Saatchi, S.A. CDMX,
DE. C.V Mexico N-2017052183 Mexico Advertising 60
874 Walker Rd
Ste
C, Dover, Kent,
Delaware 19904
Majority LLC USA 5445173 USA Advertising 92.32
Rua Wisard, 305,
Vila Madalena,
3 Andar-Con, Sao
Santa Clara Paolo,
Participações 05434-080,
Ltda Brazil 09.349.720/0001-31 Brazil Advertising 50.1
80 State Street,
Albany,
Shepardson Stern 12207-2543,
+ Kaminsky LLP USA 4656653 New York, USA Advertising 100
138 West 25(th)
Street, Floor 5,
New York, Ny
10001,
Clear USA LLC USA 20-8599548 USA Consulting 95
138 West 25(th)
Street, Floor 5,
New York, NY
10001,
LIDA NY LLP (MCD) USA 4902983 USA Consulting 75.5
2711 Centerville
Road, Suite 400,
Wilmington,
Delaware,
Clear LA LLC USA 6241713 19808, USA Dormant 95
1209 Orange
Street
Wilmington,
Delaware
Clear NY LLP USA 30-0891764 19801, USA Dormant 95
251 Little Falls
Drive,
Wilmington,
New Castle,
19808Delaware,
LIDA USA LLP USA 6333479 USA Dormant 100
874 Walker Rd
Ste
C, Dover, Kent,
M&C Saatchi NY Delaware 19904,
LLP USA 45-4683918 USA Dormant 95
1740 Broadway,
M&C Saatchi PR New York, 10019,
LLP USA 27-1665526 USA Dormant 100
160 Greentree Dr
Ste 101, Dover,
M&C Saatchi Share Kent, Delaware,
Inc. USA 5580330 19904 USA Dormant 80
88 Pine Street,
30(th) Floor
New York NY
World Services 10005
US Inc. USA C2543767 United States Issues 100
304 East 45(th)
Street, New
York,
M&C Saatchi Agency New York, 10017, Local Central
Inc. USA 13-3839670 USA Costs 100
2032 Broadway,
Santa Monica
M&C Saatchi Mobile California,
LLC USA 45-3638296 90404 USA Media 100
874 Walker Rd
Ste
M&C Saatchi Sport C, Dover, Kent,
& Entertainment Delaware 19904
LA LLC USA 6369786 USA Passions 90
160 Greentree Dr
M&C Saatchi Sport Ste 101, Dover,
& Entertainment Kent, Delaware,
NY LLP USA 46-5182795 19904 USA Passions 69.5
Associate Entities
Entities in which the Group holds less than 50% of the share
capital and which are accounted for as Associates (Note 15). All
subsidiary companies which the Group controls in line with the
requirements of IFRS 10 have been included in the consolidated
financial statements.
As at 31 December Country Company Number Registered Office Specialism Effective % ownership
2022 Address 2022
571 Rsu Tower,
10(th) Floor, Soi
Sukhumvit 31,
Sukhumvit
Road, Wattana
District,
Love Frankie Limited Thailand 105557000000 Bangkok, Thailand Advertising 21
Quantum Tower,
Charles Malek Avenue,
St Nicolas, Beirut,
M&C Saatchi SAL Lebanon 1010949 Lebanon Advertising 10
32 Rue Notre Dame
M&C Saatchi Little Des Victoires,
Stories SAS France 449386944 75002 Paris, France Advertising 25.77
14 Rue Meslay,
Cometis S.a.r.l France 384769592 75003 Paris, France Advertising 49
1-26-1 Ebisu-Nishi,
Shibuya-Ku, Tokyo
M&C Saatchi Limited Japan 0110-01-060760 150-0021, Japan Advertising 10
141b First Floor,
Cl House Shahpur
February Communications Jat, New Delhi,
Pvt Limited India U74999DL2012PTC233245 110049, India Advertising 20
32. Related party transactions
Key management remuneration
Key management remuneration is disclosed in note 5.
Other related parties
During the year, the Group made purchases of GBP84k (2021:
GBP418k) from its associates. At 31 December 2022, there was GBP31k
due to associates in respect of these transactions (2021:
GBP35k).
During the year, GBP127k (2021: GBP420k) of fees were charged by
Group companies to associates. At 31 December 2022, associates owed
Group companies GBP38k (2021: GBP123k).
33. Commitments
With the introduction of IFRS 16 Leases in 2019, all of the
Group's commitments are shown on the balance sheet except for those
below:
Capital commitments
At the year-end the Group had GBP 56k committed costs (2021:
GBPNil) to acquire property plant and equipment.
Other commitments
Other than the normal contractual commitments to staff and the
commitment to complete profitable projects for clients, the Group
does not have any other material commitments which are not
reflected on the balance sheet.
34. Post-balance sheet events
As part of our simplification strategy, the Group continued to
close down small entities including Clear Deutschland GmbH, M&C
Saatchi Share Inc and Black & White Strategy Limited.
The Directors are not aware of any other events since the end of
the financial year that have had, or may have, a significant impact
on the Group's operations, the results of those operations, or the
state of affairs of the Group in future years.
35. Other accounting policies
Reserves
Equity comprises the following:
Share capital
Represents the nominal value of equity shares in issue.
Share premium
Represents the excess over nominal value of the fair value of
consideration received for equity shares, net of issuance
costs.
Other reserves
Merger reserve
Represents the premium paid for shares above the nominal value
of share capital, caused by the acquisition of more than 90% of a
subsidiaries' shares. The merger reserve is released to retained
earnings when there is a disposal, impairment charge or
amortisation charge posted in respect of the investment that
created it.
Treasury reserve
Represents the amount paid to acquire the Company's own shares
for future use.
Minority interest put option reserve
Represents the initial fair value of the IFRS 9 put option
liabilities at creation. When the put option is exercised, the
related amount in this reserve is taken to the non-controlling
interest acquired reserve.
Non-controlling interest acquired reserve
From 1 January 2010, a non-controlling interest acquired reserve
has been used when the Group acquires an increased stake in a
subsidiary. It represents the either a) the minority interest put
option reserve transferred less the book value of the minority
interest acquired (where the acquisition is due to an IFRS 9 put
option), or b) the consideration paid less the book value of the
minority interest acquired. If the equity stake in the subsidiary
is subsequently sold, impaired or disposed of, then the related
balance from this reserve will be transferred to retained
earnings.
Foreign exchange reserve
For overseas operations, income statement results are translated
at the annual average rate of exchange and balance sheets are
translated at the closing rate of exchange. The annual average rate
of exchange approximates to the rate on the date that the
transactions occurred. Exchange differences arising from the
translation of foreign subsidiaries are taken to this reserve. Such
translation differences will be recognised as income or expense in
the period in which the operation is disposed of.
Retained earnings
Represents the cumulative gains and losses recognised in the
income statement.
36. New and revised standards issued but not yet effective
In the current year, the following Standards and Interpretations
became effective:
-- Amendments to IAS 37 - Onerous Contracts: Cost of Fulfilling a Contract
-- Amendments to IAS 16 - Property, Plant and Equipment: Proceeds before Intended Use
-- AIP (2018-2020 cycle): IFRS 9 Financial Instruments - Fees in the '10 per cent' Test for Derecognition
of Financial Liabilities
-- Amendments to IFRS 3 - Reference to the Conceptual Framework
The above amendments do not have a material difference on the
Group's accounts.
At the date of authorisation of these financial statements, the
Group has not applied the following new and revised IFRS Standards
that have been issued but are not yet effective:
Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets
between an Investor and its
Associate or Joint Venture
Applying IFRS 9 "Financial Instruments" IFRS Insurance
with IFRS 4 'Insurance Contracts' (Amendments
to IFRS 4)
Amendments to IFRS 17 Changes to international insurance
accounting
Classification of Liabilities as Current Application of consistency
or Non-Current (Amendments to IAS 1)
Definition of Accounting Estimate (Amendments Distinguishing between accounting
to IAS 8) policies and estimates
Disclosure of Accounting Policies (Amendments Application of Materiality
to IAS 1 and IFRS Practise Statement
2)
Deferred Tax - Amendments to IAS 12 Recognising deferred tax on
Income Taxes leases
The Directors do not expect that the adoption of the Standards
listed above will have a material impact on the financial
statements of the Group in future periods.
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END
FR KDLFFXZLZBBD
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April 18, 2023 02:00 ET (06:00 GMT)
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