TIDMEBQ
RNS Number : 7071N
Ebiquity PLC
26 September 2019
Ebiquity plc
Interim Results for the six months ended 30 June 2019
Transitioning our business
Ebiquity plc ("Ebiquity" or the "Company"), a leading
independent marketing and media consultancy, announces interim
results for the six months ended 30 June 2019.
Headline Results
2019 2018 Change
GBPm GBPm GBPm
------- ----- ----------
Group
Revenue 35.3 35.3 0.0
------- ----- ----------
Underlying Operating
Profit (1) 3.4 3.7 (0.3)
------- ----- ----------
Underlying Profit before
Tax (1) 2.9 3.0 (0.1)
------- ----- ----------
Underlying Earnings
per Share (1) 2.6p 2.4p 0.2p
------- ----- ----------
Statutory Operating
(Loss)/Profit (3.8) 2.8 (6.6)
------- ----- ----------
Statutory (Loss)/Profit
before Tax (4.2) 2.2 (6.4)
------- ----- ----------
Statutory Earnings per
Share (6.2)p 0.7p (6.9)p
------- ----- ----------
Note 1: Underlying operating profit is defined as the operating
profit excluding highlighted items. These include share-based
payments, amortisation of purchased intangibles and non-recurring
items. Underlying profit before tax and earnings per share are
calculated based on the underlying operating profit.
This is the first reporting period following the completion of
the sale of the AdIntel business, which took place, earlier this
year, on 2 January 2019. Subsequent to the disposal, this half year
has been a transitional period in which our focus has been on
establishing the basis for improving performance of the continuing
business.
Highlights
-- Maintained Group Revenue of GBP35.3m
-- Underlying Operating Profit of GBP3.4m, in line with board expectations (2018: GBP3.7m)
-- Underlying operating costs kept under tight control
-- Underlying earnings per share increased to 2.6p (2018: 2.4p)
-- Net debt at 30 June 2019 reduced significantly to GBP7m (31
December 2018: GBP28m) following completion of the Ad Intel sale in
January 2019
-- Cost reduction programme initiated; planned measures expected
to yield annualised benefits of GBP1m
-- Significant client wins include Deliveroo, Facebook, Nike and Volvo
-- Investment continued in growth areas such as analytics, digital and automation
-- Impairment charge of GBP5.9m taken relating to Stratigent,
the loss-making US MarTech business, following decision to
wind-down its operation
Divisional highlights
-- Media: Media Management, Media Performance and Contract Compliance
o Revenue of GBP27.7m, reduced by 1%
o Contract Compliance revenue increased by 15%
o Media Performance & Management revenue declined by 3%
o New shared service media delivery centre in Spain expanding
and delivering operational efficiencies
-- Analytics and Tech: Advanced Analytics, MarTech and AdTech
o Revenue grew by 4% to GBP7.6m
o Operating profit increased by 57% to GBP0.7m
o Advanced Analytics practice expanded into France and US
o AdTech advisory practice increased revenue by 124%
Michael Karg, CEO, commented:
"Our first half results as expected reflect a transitional phase
for Ebiquity as we become a more streamlined business following the
sale of AdIntel. We have a clear focus on driving our higher margin
consulting practices, optimising our cost base and strengthening
the foundations to deliver future revenue growth. In addition our
significantly reduced debt provides the financial flexibility to
invest in our key practice areas and markets to deliver improved
performance.
Although the economic and political environment creates
uncertainty around our clients' media budgets, we are well-placed
to serve their evolving needs. We are on track to meet full year
expectations in terms of profitability and remain confident that
Ebiquity will be able to fulfil its potential and deliver improved
performance in the medium term."
26 September 2019
Enquiries:
Ebiquity
Michael Karg, CEO
Alan Newman, CFO 020 7650 9600
Instinctif Partners
Matthew Smallwood
Guy Scarborough 020 7457 2020
Numis Securities
Nick Westlake, Hugo Rubinstein
(NOMAD)
Matt Lewis 020 7260 1000
Chief Executive and Financial Review
This is the first reporting period following the completion of
the sale of the AdIntel business, which took place earlier this
year, on 2 January 2019. Subsequent to the sale, this half year has
been a transitional period in which our focus has been on
establishing the basis for improving performance of the less
commoditised, growing, higher margin continuing businesses. We are
therefore pleased to report that the results for the six months to
30 June 2019, are in line with our expectations in terms of
profitability. Group revenue of GBP35.3m was maintained at similar
level as in the comparable period last year reflecting a
combination of 4% growth in our Analytics and Tech practice but
offset by a small decline of 1% in our Media practice revenue.
While we continued to win new business (notably in the telecom and
tech sectors), including several significant multi-market projects,
growth in the period was held back by specific challenges in some
industry sectors (e.g. FMCG, retail) impacting some local markets
and by changes in project phasing from one year to another.
As made clear in the 2018 annual report, the Board recognises
the need to improve profitability in the medium term, in particular
by ensuring that the Group's costs are better aligned with our
changed revenue base. In the last six months, we have tightly
controlled staff costs (which account for most of our total costs)
while continuing to invest in areas which are strategically
important for our future development (such as analytics and
digital). However, as anticipated, we have borne continuing costs
in the transitional period following the AdIntel sale while
fulfilling obligations to deliver support services to Nielsen. Our
total underlying operating costs were virtually static at GBP31.9m
compared to GBP31.6m in the comparable period. Consequently,
underlying operating profit for the period was GBP3.4m compared to
GBP3.7m in the six months ended 30 June 2018.
During the period, we initiated a detailed review of
opportunities for further efficiency gains across the business as
well as examining our investment areas to ensure that these fit
with the Group's strategic priorities. This has enabled the Board
to identify a number of measures designed to reduce the Group's
operating costs over the coming year. These actions are expected to
yield benefits of approx. GBP1.0 m on an annualised basis and will
enable us to start the next financial year with a more focused and
lower cost base. This is an ongoing process and we anticipate some
marginal savings in the second half of the current year.
As part of this process, it has been decided to wind down the
activities of Stratigent, the Chicago-based marketing technology
business which had been trading at a loss due to significantly
reduced demand in the US market for the software technology on
which its skills were focussed. This has resulted in an impairment
charge of GBP5.9m being recognised as a highlighted item in the
period.
Strategic Direction and Future plans
We have a clearly-defined vision to become the trusted advisor
to the Chief Marketing Officer. The demand from brand owners for
independent media and marketing consulting services continues to
grow. Ebiquity in turn continues to exploit its unique position as
their leading independent consultancy, enabling advertisers to
measure, evaluate, drive accountability, and maximise returns from
their marketing spend. Independent, conflict free, high quality
advice is sought by advertisers and Ebiquity is one of the few
unbiased, expert-led, data driven consultancies in our marketplace.
This is evidenced by Ebiquity winning business from a leading
competitor who advertisers regard as having conflicts of interest
due to their expansion into media buying and programmatic
advertising services.
The media market globally continues to undergo significant
change, most notably the increasing shift by consumers across the
world away from traditional media to greater reliance on digital
and non-linear media. This in turn has led to advertisers
substantially changing the nature and mix of their media spend so
as to reach their target audiences. As a result, expenditure on
traditional advertising such as TV and press has been losing media
share in most major markets. At the same time, recent challenges to
growth in the world's major economies is leading to downward
pressure on brand marketing budgets, notably in the FMCG, retail
and automotive sectors. Conversely, growth businesses in the
technology, and online sectors are increasing their media spend
globally.
Consistent with these trends, advertisers are increasingly
seeking to optimise their media expenditure and ensure they
maximise returns from it. While brand owners continue to seek
confirmation that their media expenditure is being bought
competitively, they increasingly require more advice on planning
and optimising their media expenditure in order to maximise
returns. This need is accentuated by the fragmentation of spend
between different media types and the increasing complexity of the
digital media value chain, most notably in the programmatic
advertising area. Conversely, the tightening of media budgets
creates business challenges, notably for our media performance
practice.
Ebiquity's services address advertisers' requirements and map
into the key stages of our clients' media lifecycle. We leverage
our extensive global media expertise, independence, and benchmarks
to help brands select and manage their trading partners, achieve
higher levels of accountability and best-in-class media
measurement, and drive greater media performance, financial
compliance and transparency.
Our strategy responds to the trends in media by aiming to expand
the range and value generated by our consultancy services while
maintaining our global leadership in the more traditional media
performance service areas. As previously reported, our strategy
also assumes, given advertisers' spending patterns, that our
revenue growth will be proportionately higher in the practices that
focus on forward-looking advice as distinct from the assessment of
historic media performance. This expected trend has been evident in
the relative performance of Ebiquity's practice areas in the
current and previous periods.
Review of Performance
Revenue
H1 19 H1 18 Variance
--------------- ------ --------- -----
GBPm GBPm GBPm %
--------------- ------ --------- -----
Media 27.7 28.0 (0.3) (1)%
--------------- ------ --------- -----
Analytics and Tech 7.6 7.3 0.3 4%
--------------- ------ --------- -----
Total 35.3 35.3 0.0 0%
--------------- ------ --------- -----
Media
In the period under review, Media revenue was GBP27.7 million,
being 1% below the prior period.
Within the Media segment, the Contract Compliance practice
(branded as "FirmDecisions") increased its revenue by 15% while
revenue from Media Performance and Management fell by 3%
overall.
Within the Media segment, our Media Management practice advises
clients on topics such as the management and selection of media
agencies and setting of media buying objectives. It conducts close
to 100 agency selections annually, both at global level and within
individual markets. This service is now supported by our new
proprietary tool, "Select" which was launched in 2018 and enables
us to automate the comparison of the rates offered by agencies in
their tenders. Our Media Performance practice, which remains our
largest revenue contributor, assists advertisers to monitor and
evaluate their agencies' media buying performance. It harnesses the
expert knowledge of our global network of media specialists, the
most extensive of its kind, and our access to unique client media
spend data pools to assess the value for money delivered, both in
comparison to the market and to the client's specific objectives.
Brand owners also seek accountability and transparency from their
chosen media supply partners, especially given the industry's
complex purchasing arrangements.
Media Performance and Management's revenue in the period was
partly impacted by phasing compared to the previous year, as there
were fewer agency selection projects as well as by lower levels of
new business in some markets, notably Australia, USA and Germany.
However, it has continued to win significant new or expanded
projects from clients especially technology and online businesses
and projects involving multi-market performance assessment. These
clients include Deliveroo, Nike, Sony and PSA, the French based
automotive group.
Our Contract Compliance practice (branded as "FirmDecisions")
supports brands by helping to ensure that agencies deliver services
as contractually agreed through reviews conducted by a team of
specialists. It has continued to benefit from demand for its
in-depth financial compliance services and from expanding its
global client list with recent additions including Amex, Microsoft
and Sanofi. Its growth also reflects recent expansion of its local
operations in markets such as Germany and India.
Geographically, there were significant variations in revenue
trends between regions. UK & Ireland, our largest Media region
grew revenue by 3%, largely due to its specialist international
group which manages multi-market projects for global advertisers
which won a number of new projects. Revenue in Continental Europe
was flat overall, although within this Italy grew by 21% and France
by 10%. Germany and Russia saw revenue decreases in the period due
to local market issues. New country managers have now been
appointed in both markets. USA revenue fell by 3% compared to a
strong first half in 2018, mainly due to lower Media Management
work in the period although Contract Compliance grew well. APAC
fell by 14% with Australia experiencing declines in demand from
sectors such as FMCG and retail. Singapore, which grew strongly in
2018, won comparatively less new business in this period. The
region is expected to perform better in the second half.
We continued to invest and innovate in support of our automation
strategy in Media with particular focus on three key tools:
EbiquityConnect(TM), EbiquitySelect(TM) and EbiquitySync(TM). These
are designed to increase the speed and efficiency of analysis work
and improve data security and handling. EbiquityConnect(TM)
automates data ingestion from agencies, many of which have given
positive feedback following the system's introduction.
EbiquitySelect supports our agency selection work. EbiquitySync(TM)
provides a standardised tool for benchmarking paid digital media
spend and continued to be rolled out in the period. Within digital
services, we have also been developing specialist methods for
assessing paid search and are piloting a tool for assessing paid
social media spend (developed within our Italian practice).
Our shared services media delivery centre in Spain became fully
operational at the beginning of 2019 and is continuing to increase
the level of work taken on from the network. Centralising media
analysis helps to standardise processes and free up the time of
specialist consultants in local markets for higher value-added
activities. This development is already beginning to yield cost
savings as well as quality benefits.
Analytics and Tech
In the period under review, Analytics and Tech grew revenue by
4% to GBP7.6 million.
Within this segment, our Advanced Analytics practice helps
brands to plan and optimise their investment in media. Its team,
which includes data scientists, econometricians and statisticians,
applies advanced analytical techniques to attribute and forecast
the impact of marketing investments on business outcomes (e.g.
sales) and to optimise these investments. The scope of its work
covers traditional and digital media channels as well as factors
such as pricing and promotions. Its methods include market mix
modelling, brand equity modelling and forecasting which are
increasingly supported by automated planning tools that it delivers
to clients. Our AdTech practice, which was established in 2018,
helps brand owners to address the specific challenges of managing
digital media and automated trading programmes by designing the
data and technology ecosystem best suited to deliver their
marketing strategy and optimise their digital media investments.
Their solutions include the evaluation and planning of in-housing
alternatives and the selection of advertising technology
partners.
During this half-year, Advanced Analytics continued to expand
its client base winning significant global projects, including with
Volkswagen and a global telecoms group, and won its first project
in the USA. Towards the end of the period, it expanded its
operations in France with the appointment of a well-regarded senior
specialist, which will enable it to exploit the substantial
opportunities in that market. This move has already led to a major
project for a leading European airline. Despite the new business
success, revenue in the period was impacted by a substantial
reduction in work from an existing large UK retail client due to
the client's business difficulties. As a result, total revenue in
the period was at the same level as the comparable period in 2018,
although the practice is expected to return to growth in the second
half of the year.
Our AdTech practice increased revenues by 124%, reflecting
momentum demand for its specialist service seen following its
launch in 2018. It is undertaking major in-housing projects for two
global brands and recently expanded into the US with the
appointment of a local practice head, winning its first engagement
with a leading global energy group.
The MarTech practice comprises two units, Digital Balance in
Australia and Stratigent in the USA. Both of these provide similar
technology and data advisory services, but their recent performance
has differed significantly.
Digital Balance helps brands to improve the effectiveness of
their digital presence and to connect to their customers by
creating better, personalised experiences across all digital
touchpoints. It provides a range of consulting, analytics and
optimisation services across a variety of website analytics
platforms including Google Analytics and Adobe. Digital Balance has
been growing its client base and revenue since its acquisition by
the Group in September 2017 and its revenue increased by 36%
compared to the six months ended 30 June 2018
In contrast, Stratigent's revenue which has been declining over
recent years, fell by 15% in the current period. This trend has
mainly been due to its business having focussed on a software
application whose use has been reducing in the USA. It has also
faced increasing price competition from independent and offshore
suppliers. Actions were taken at the beginning of the year to
re-position the business and target new clients, but these have
failed to yield sufficient new revenue. With a loss projected for
the current year, it was decided that the business should be wound
down with effect from September 2019.
Operating Profit Analysis
Underlying Operating Profit Underlying Operating
Profit Margin
H1 19 H1 18 Variance H1 19 H1 18
------- ------- ---------------- ----------- ----------
GBPm GBPm GBPm % % %
------- ------- --------- ----- ----------- ----------
Media 6.7 7.2 (0.5) (7)% 24% 26%
------- ------- --------- ----- ----------- ----------
Analytics and Tech 0.7 0.4 0.3 57% 9% 6%
------- ------- --------- ----- ----------- ----------
Unallocated costs (4.0) (4.0) - - -
------- ------- --------- ----- ----------- ----------
Total 3.4 3.7 (0.3) (8)% 10% 10%
------- ------- --------- ----- ----------- ----------
Underlying Operating Profit of GBP3.4m is GBP0.3m lower than the
prior year due to the small increase in total underlying operating
costs on static revenue. Media Operating Profit of GBP6.7m is
GBP0.5m below the comparable period reflecting the revenue fall and
a small increase in costs associated with international projects.
Analytics and Tech's operating profit has increased by 57% to
GBP0.7m, broadly in line with its revenue increase.
As part of the adjustments following the AdIntel sale, premises
formerly occupied by Ad Intel in Hamburg and Sydney have been
vacated with consequential reduction in long-term lease
liabilities. We retain continuing obligations in Chicago. We will
be relocating the London office, our largest operation, in November
2019 due to the expiry of the current lease. The new office is
better suited to our future business requirements but the move will
lead to one-off costs during the transition and fitting-out period
which will largely be treated as highlighted items.
Outlook
Following the AdIntel sale, Ebiquity entered a period of
transition during which we have focussed on improving the
profitability of our more streamlined business and strengthened the
foundations for future revenue growth. We have tightened controls
over staff costs restructured under-performing businesses and
identified further measures to re-align the cost base that will
yield benefits of at least GBP1 million over the coming year.
Consistent with our aim of being the leading global independent
media and marketing consultancy, we have continued to invest in
areas of strategic value and growth (such as analytics &
digital) in the UK, USA and main European markets. The
significantly reduced level of the Group's net debt since the
AdIntel sale has given us greater financial flexibility to support
future development.
Trading since the half year-end has been as the Board
anticipated and we are on track to meet full year expectations in
terms of profitability, although we remain mindful that our
clients' media budgets may be affected by current economic
conditions and political uncertainties, including Brexit. There are
diverging trends in the market with budgetary pressure on media
budgets contrasting with advertisers' growing need for advice on
managing and maximising returns on their media investments. We
remain confident that Ebiquity will be able to fulfil its potential
and deliver improved performance in the medium term.
Financial Review
Revenues for the half year ended 30 June 2019 of GBP35.3 million
were similar to the comparable period in 2018.
Underlying operating profit (statutory operating profit
excluding highlighted items) was GBP3.4 million, a decrease of
GBP0.3 million, 8% from the prior year. Cost of sales (which
comprise external partner and production costs and direct project
staff costs) increased by 2% to GBP18.7m from GBP18.4m.
Administrative expenses reduced by GBP0.02 million to GBP13.3
million from GBP13.3 million. The underlying operating profit
margin remained at 10%.
Underlying profit before tax reduced slightly to GBP2.9 million
from GBP3.0 million for the six months ended 30 June 2018. Net
finance costs were GBP0.5 million in 2019, a decrease of GBP0.1m
(33%) compared to the prior year. This reduction reflects the
significantly lower level of average debt following the AdIntel
sale that resulted from the receipt of gross proceeds of
approximately GBP26 million, partially offset by the adoption of
IFRS 16 which led to an additional GBP0.1 million interest
charge.
There was a statutory operating loss (after highlighted items)
of GBP3.8 million compared to a profit of GBP2.8m in the prior
year. This reflected an increase in highlighted net costs of GBP6.3
million which was largely due to the goodwill and intangibles
write-down relating to Stratigent, as detailed below. This led to a
reported loss before tax of GBP4.2 million compared to a profit of
GBP2.2 million in the prior year period.
Highlighted items
Highlighted items after tax in the period totalled GBP7.0
million (2018: GBP1.2 million) and include the following:
-- GBP5.9 million charge for the write down of goodwill and
intangible balances relating to Stratigent following the decision
to wind down its operations
-- GBP0.4 million charge for an onerous lease provision for the
new London office whilst it is unoccupied during the fit-out
period
-- GBP0.3 million charge for the one-off costs of relocating to the new London premises
-- GBP0.6 million for purchased intangible asset amortisation (2018: GBP1.0 million)
-- GBP0.2 million profit relating to adjustments to the fair
value deferred consideration provisions
Taxation
The underlying tax charge for the period is GBP0.6m million
compared to GBP1.0 million in the prior year. This reduction is due
to the significant lowering of the effective tax rate to 21% from
33% in 2018, partly due to a prior year provision of GBP0.2m
included in the 2018 charge. The tax credit included in highlighted
items of GBP0.1 million (2018: charge of GBP0.4 million) has arisen
due to the deferred tax impact of intangible assets relating to
Stratigent being written down.
Earnings per share
Underlying basic earnings per share increased to 2.6p (2018:
2.4p) as did underlying diluted earnings per share at 2.6p (2018:
2.4p). There was a statutory basic loss per share of 6.2p compared
to a basic earnings per share of 0.7p in 2018.
Dividend
A dividend of 0.71p per share was paid on 24 June 2019 in
respect of the year ended 31 December 2018. No dividend is declared
for the six months ended 30 June 2019.
Equity
During the six months to 30 June 2019, 239,083 shares were
issued upon the exercise of employee share options. As a result,
the total share capital increased to 79,352,273 ordinary shares (31
December 2018: 79,113,190).
Cash conversion
Six months ended Six months ended
30 June 2019 30 June 2018
GBP'000 GBP'000
Reported cash from operations (1,518) 4,758
Underlying cash from operations 587 4,888
Underlying operating profit 3,365 3,653
Underlying cash from operations represents the cash flow from
operations excluding the impact of highlighted items and totalled
GBP0.6 million in the period compared to GBP4.9 million in the
prior year. The decrease was due to a working capital outflow of
GBP3.9 million compared to an inflow of GBP0.6 million.
This reflected payments to suppliers and other creditors being
made earlier than in the prior year, facilitated by the Group's
greater financial flexibility in 2019.
The resulting underlying cash conversion level was 17% in the
period compared to 134% in the prior year.
Net debt and banking facilities As at As at
30 June 30 June
2019 2018
GBP'000 GBP'000
Cash and cash equivalents net of
bank overdrafts 6,974 8,953
Bank debt(1) (14,000) (34,625)
--------- ---------
Net debt (7,026) (25,672)
--------- ---------
(1) Bank debt in the statement of financial position includes
GBP0.1 million (30 June 2018: GBPnil) of loan arrangement fees that
have been paid and which are amortised over the remaining life of
the facility. The bank debt and net debt figures above exclude
these costs.
All bank borrowings are held jointly with Barclays and Royal
Bank of Scotland ("RBS"). The committed facility at 30 June 2019
consisted of a revolving credit facility of GBP25.0 million,
reduced after the AdIntel sale from GBP35.0 million, of which
GBP14.0 million was drawn (2018: GBP34.0 million). This facility
was due to expire on 30 June 2020 and the drawn balance of GBP14.0
million has therefore been treated as a current liability as at 30
June 2019. On 20 September 2019, the Group entered into a new RCF
facility agreement of GBP24.0 million with broadly similar terms to
the previous one. This has a maturity period of four years,
expiring in September 2023 with an option for the company to extend
for one further year.
Statement of financial position and net assets
Debtor days have reduced to 56 days from 64 days as at 31
December 2018, reflecting improved cash collection processes.
Net current assets as at 30 June 2019 totalled GBP4.5m. These
decreased by GBP33.9 million from 31 December 2018 due in part to
the sale of Ad Intel which was treated as a net asset held for sale
(of GBP23.4m) as at 31 December 2018. In addition due to the loan
facility being reclassified as a current liability as at 30 June
2019, this has further reduced net current assets by the drawn
amount of GBP14.0 million.
IFRS 16 has been applied to these financial statements for the
first time in this period. As a result, a right of use asset of
GBP9.0 million has been recognised in non-current assets and a
corresponding lease liability has been included in non-current
liabilities. The latter decreased by GBP25.1 million to GBP11.2
million, reflecting the reclassification of the bank borrowings
offset by the effect of the IFRS 16 adjustment.
Net assets as at 30 June 2019 are GBP41.3m, a decrease of
GBP6.2m since 31 December 2018.
Discontinued Business
The net loss from discontinued operations of GBP1.3m represents
a profit before tax of GBP1.2m arising on the sale of AdIntel,
offset by a tax charge of GBP2.5m. This tax charge is a provisional
estimate at this stage prior to filing of the tax returns in the
jurisdictions where the AdIntel assets were located. Its level
reflects the effect of the taxable profit in some jurisdictions
being higher than the accounting profit
Alternative Performance Measures
In these results we refer to 'underlying' and 'statutory'
results, as well as other non-GAAP Alternative Performance
Measures.
Alternative Performance Measures ('APMs') used by the Group as
defined in the Annual Report are:
-- Underlying operating profit;
-- Underlying operating margin;
-- Underlying profit before tax;
-- Underlying effective rate of tax;
-- Underlying fully dilutive EPS
-- Underlying cash from operations; and
-- Underlying operating cash flow conversion.
Underlying results are not intended to replace statutory results
but are presented by removing the impact of highlighted items in
order to provide a better understanding of the underlying
performance of the business. The above APMs are consistent with how
business performance is measured internally by the Group.
Underlying profit is not recognised under IFRS and may not be
comparable with underlying profit measures used by other
companies.
Highlighted items comprise non-cash charges and non-recurring
items which are highlighted in the consolidated income statement as
separate disclosure is considered by the Directors to be relevant
in understanding the underlying performance of the business. The
non-cash charges include share option charges and amortisation of
purchased intangibles.
The non-recurring items include costs associated with potential
acquisitions (where formal discussion is undertaken), completed
acquisitions and their subsequent integration into the Group,
adjustments to the estimates of contingent consideration on
acquired entities, asset impairment charges, management
restructuring and other significant one-off items. Costs associated
with on-going market landscaping, acquisition identification and
early stage discussion with acquisition targets are reported in
underlying administrative expenses.
Consolidated Income Statement
for the six months ended 30 June 2019
Restated
------------------------------------- -------------------------------------
Unaudited 6 months ended Unaudited 6 months ended
30 June 2019 30 June 2018
------------------------------------- -------------------------------------
Before Highlighted Before Highlighted
highlighted items highlighted items
(note
items (note 3) Total items 3) Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- ----- ------------ ------------ --------- ------------ ------------ ---------
Revenue 2 35,319 - 35,319 35,341 - 35,341
Cost of sales (18,696) - (18,696) (18,414) - (18,414)
----------------- ----- ------------ ------------ --------- ------------ ------------ ---------
Gross profit 16,623 - 16,623 16,927 - 16,927
Administrative
expenses 3 (13,258) (7,124) (20,382) (13,274) (819) (14,093)
----------------- ----- ------------ ------------ --------- ------------ ------------ ---------
Operating
profit/(loss) 3,365 (7,124) (3,759) 3,653 (819) 2,834
Finance income 6 - 6 19 - 19
Finance expenses (456) - (456) (625) - (625)
----------------- ----- ------------ ------------ --------- ------------ ------------ ---------
Net finance
costs (450) - (450) (606) - (606)
Profit/(loss)
before
taxation from
continuing
operations 2,915 (7,124) (4,209) 3,047 (819) 2,228
Taxation
(charge)/credit
- continuing
operations (605) 147 (458) (1,020) (397) (1,417)
----------------- ----- ------------ ------------ --------- ------------ ------------ ---------
Profit/(loss)
for
the period -
continuing
operations 2,310 (6,977) (4,667) 2,027 (1,216) 811
(Loss)/profit
from
discontinued
operations 6 - (1,250) (1,250) 472 (986) (514)
----------------- ----- ------------ ------------ --------- ------------ ------------ ---------
Profit/(loss)
for
the period 2,310 (8,227) (5,917) 2,499 (2,202) 297
Attributable to:
Equity holders
of
the parent 2,077 (8,221) (6,144) 2,232 (2,191) 41
Non-controlling
interests 233 (6) 227 267 (11) 256
----------------- ----- ------------ ------------ --------- ------------ ------------ ---------
2,310 (8,227) (5,917) 2,499 (2,202) 297
----------------- ----- ------------ ------------ --------- ------------ ------------ ---------
Earnings per
share
- continuing
operations
Basic 5 2.62p (6.17)p 2.43p 0.69p
Diluted 5 2.58p (6.17)p 2.36p 0.67p
Earnings per share
- discontinued
operations
Basic 5 - (1.58)p 0.42p (0.64)p
Diluted 5 - (1.58)p 0.41p (0.64)p
-------------------- ------- ------ ------ ------------ ------- --- ---------
Consolidated Statement of Comprehensive Income
for the six months ended 30 June 2019
Unaudited
6 months
ended 30
June 2019
GBP'000
Unaudited
6 months
ended 30
June 2018
GBP'000
-----------
(Loss)/profit for the period (5,917) 297
Other comprehensive income/(expense):
Items that may be reclassified subsequently
to the income statement
Exchange differences on translation of overseas
subsidiaries 387 (210)
Total other comprehensive income/(expense)
for the period 387 (210)
------------------------------------------------- ----------- -----------
Total comprehensive (expense)/income for the
period (5,530) 87
------------------------------------------------- ----------- -----------
Attributable to:
Equity holders of the parent (5,757) (169)
Non-controlling interests 227 256
------------------------------------------------- ----------- -----------
(5,530) 87
------------------------------------------------- ----------- -----------
Consolidated Statement of Financial Position
as at 30 June 2019
Unaudited Audited
as at as at
30 June 31 December
2019 2018
Note GBP'000s GBP'000s
Non-current assets
Goodwill 7 29,692 34,774
Other intangible assets 8 7,279 8,477
Property, plant and equipment 1,046 1,170
Right of use asset 8,994 -
Deferred tax asset 977 979
---------- -------------
Total non-current assets 47,988 45,400
Current assets
Trade and other receivables 30,583 29,408
Assets held for sale 9 - 27,734
Cash and cash equivalents 10 6,974 8,793
---------- -------------
Total current assets 37,557 65,935
Total assets 85,545 111,335
---------- -------------
Current liabilities
Trade and other payables (5,238) (7,510)
Liabilities held for sale 9 - (4,316)
Accruals and contract liabilities (8,864) (10,640)
Financial liabilities 11 (14,488) (2,822)
Current tax liabilities (3,810) (1,358)
Provisions (313) (570)
Deferred tax liability (323) (323)
---------- -------------
Total current liabilities (33,036) (27,539)
Non-current liabilities
Financial liabilities 11 (316) (34,934)
Provisions - (67)
Lease liability (9,819) -
Deferred tax liability (1,095) (1,281)
---------- -------------
Total non-current liabilities (11,230) (36,282)
Total liabilities (44,266) (63,821)
---------- -------------
Total net assets 41,279 47,514
========== =============
Equity
Ordinary shares 19,838 19,778
Share premium 46 44
Other reserves 5,531 5,144
Retained earnings 14,729 21,556
---------- -------------
Equity attributable to the owners
of the parent 40,144 46,522
Non-controlling interests 1,135 992
---------- -------------
Total equity 41,279 47,514
========== =============
Consolidated Statement of Changes in Equity
for the six months ended 30 June 2019
Non-controlling
Ordinary Share Other Retained interests Total
shares premium reserves earnings Total equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
1 January 2018 19,549 21 4,877 27,495 51,942 1,040 52,982
Profit for the period - - - 41 41 256 297
Other comprehensive
expense - - (210) - (210) - (210)
----------- ---------- ----------- ----------- -------- ---------------- ---------
Total comprehensive
(expense)/income for
the period - - (210) 41 (169) 256 87
----------- ---------- ----------- ----------- -------- ---------------- ---------
Shares issued for
cash 60 11 - - 71 - 71
Share options charge - - - 351 351 - 351
Dividends paid to
shareholders - - - (526) (526) - (526)
30 June 2018 19,609 32 4,667 27,361 51,669 1,296 52,965
(Loss)/profit for
the period - - - (5,848) (5,848) 216 (5,632)
Other comprehensive
income - - 477 - 477 - 477
----------- ---------- ----------- ----------- -------- ---------------- ---------
Total comprehensive
income/(expense) for
the period - - 477 (5,848) (5,371) 216 (5,155)
----------- ---------- ----------- ----------- -------- ---------------- ---------
Shares issued for
cash 169 12 - - 181 - 181
Share options charge - - - 43 43 - 43
Dividends paid to
non-controlling interests - - - - - (520) (520)
31 December 2018 19,778 44 5,144 21,556 46,522 992 47,514
(Loss)/profit for
the period - - - (6,144) (6,144) 227 (5,917)
Other comprehensive
income - - 387 - 387 - 387
----------- ---------- ----------- ----------- -------- ---------------- ---------
Total comprehensive
income/(expense) for
the period - - 387 (6,144) (5,757) 227 (5,530)
----------- ---------- ----------- ----------- -------- ---------------- ---------
Shares issued for
cash 60 2 - - 62 - 62
Share options charge - - - 102 102 - 102
Acquisition of
non-controlling
interests - - - (251) (251) (84) (335)
Dividends paid to
shareholders - - - (534) (534) (534)
30 June 2019 19,838 46 5,531 14,729 40,144 1,135 41,279
=========== ========== =========== =========== ======== ================ =========
Consolidated Cash Flow Statement
for the six months ended 30 June 2019
Unaudited Unaudited
6 months 6 months
ended ended
30 June 30 June
2019 2018
Note GBP'000s GBP'000s
Cash flows from operating activities
Cash (used)/generated from operations 13 (1,518) 6,210
Finance expenses paid (464) (539)
Finance income received 6 19
Income taxes paid (668) (713)
Net cash from operating activities (2,644) 4,977
Cash flows from investing activities
Disposal of division 26,000 -
Payments to acquire non-controlling interests (168) -
Payment of contingent consideration (578) (248)
Purchase of property, plant and equipment (138) (436)
Purchase of intangible assets (646) (478)
Net cash flow from investing activities 24,470 (1,162)
Cash flows from financing activities
Proceeds from issue of share capital (net of issue costs) 62 71
Proceeds from bank borrowings - 2,000
Repayment of bank borrowings (20,000) (625)
Repayments of lease liabilities (516) -
Dividends paid to shareholders (534) (526)
Dividends paid to non-controlling interests (289) -
Capital repayment of finance leases - (4)
Net cash flow from financing activities (21,277) 916
Net increase in cash, cash equivalents and bank overdrafts 549 4,731
Cash, cash equivalents and bank overdrafts at beginning of period (as at 31
December 2018) 6,414 4,325
Effect of exchange rate changes on cash and cash equivalents 11 (103)
---------- ----------
Cash, cash equivalents and bank
overdrafts at end of period 10 6,974 8,953
========== ==========
Notes to the interim financial statements for the six months
ended 30 June 2019
1. Accounting policies
Basis of preparation
The condensed consolidated interim financial statements for the
six months ended 30 June 2019 have been prepared in accordance with
International Accounting Standard ('IAS') 34 'Interim Financial
Reporting' as adopted by the European Union ('EU'). These interim
financial statements should be read in conjunction with the Group's
Annual Report and Accounts for the year ended 31 December 2018,
which have been prepared in accordance with International Financial
Reporting Standards as adopted by the European Union, the Companies
Act 2006 that applies to companies reporting under IFRS, and IFRS
Interpretations Committee (IFRIC). The consolidated financial
statements have been prepared on a going concern basis because the
Directors, for the reasons outlined in notes 11 and 15 have a
reasonable expectation that the Company has adequate resources to
continue in operational existence for at least twelve months from
the date of this report.
The accounting policies adopted are consistent with those of the
previous financial year and corresponding interim reporting period,
except as set out below. These policies have been consistently
applied to all of the periods presented.
Adoption of new standards and interpretations
IFRS 16, 'Leases' (effective on or after 1 January 2019). This
standard replaces IAS 17 'Leases' and related interpretations and
sets out the principles for the recognition, measurement,
presentation and disclosure of leases for both the lessee and the
lessor. The standard addresses the definition of a lease,
recognition and measurement of leases, and it establishes
principles for reporting useful information to users of financial
statements about the leasing activities of both lessees and
lessors. A key change arising from IFRS 16 is that most operating
leases will be accounted for on the statement of financial position
for lessees. The operating lease charge is replaced by a
depreciation charge and an interest charge. IFRS 16 eliminates the
two lease classifications that IAS 17 has (operating and finance
leases) for the lessee, and instead all leases will have the same
classification.
IFRS 16 has been applied in these financial statements using the
modified retrospective method, meaning the comparatives have not
been restated to reflect the effects of IFRS 16.
The standard requires the Group to recognise a 'right of use'
asset, representing the right to use the underlying asset, and a
corresponding lease liability, representing the obligation to make
lease payments, on its statement of financial position, for almost
all lease contracts.
The impact on the income statement is that former operating
lease expenses are replaced by depreciation and interest, thereby
improving EBITDA and operating profit. Total expenses (depreciation
of right of use assets and interest on lease liabilities) are
typically higher in the earlier years of a lease and lower in the
later years, in comparison with former accounting for operating
leases.
The main impact on the statement of cash flows is higher cash
flows from operating activities, since cash payments for the
principal part of the lease liability are classified in the net
cash flow from financing activities.
The tax effect from the adjustments from IFRS 16 have been
measured and recognised accordingly.
The change in accounting policy has impacted the primary
statements as follows:
Income statement Statement Cash flow
of financial statement
position
DR/(CR) DR/(CR) Inflow/(Outflow)
---------------------------- ----------------- -------------- -----------------
Operating lease rentals (592,000) - -
Depreciation charge 645,000 (645,000) -
Interest expense 77,000 (77,000) -
Highlighted items 296,000 - -
Right of use asset - 10,259,000 -
Impairment of right of use - (620,000) -
asset
Provisions - 324,000 -
Lease liability - (9,742,000) -
Accruals - 75,000 -
Deferred tax asset (126,000) 126,000 -
Cash flows from operating
activities - - 516,000
Cash flows from financing
activities - - (516,000)
---------------------------- ----------------- -------------- -----------------
Total impact 300,000 (300,000) -
---------------------------- ----------------- -------------- -----------------
Accounting policy for leases
The Group has various lease arrangements for buildings, cars,
and IT equipment. Lease terms are negotiated on an individual basis
locally. This results in a wide range of different terms and
conditions. At the inception of a lease contract, the Group
assesses whether the contract conveys the right to control the use
of an identified asset for a certain period in exchange for a
consideration, in which case it is identified as a lease. The Group
recognises then a right of use asset and a corresponding lease
liability at the lease commencement date. Lease related assets and
liabilities are measured on a present value basis. Lease related
assets and liabilities are subjected to re-measurement when either
terms are modified or lease assumptions have changed. Such event
results in the lease liability being re-measured to reflect the
measurement of the present value of the remaining lease payments,
discounted using the discount rate at the time of the change. The
lease assets are adjusted to reflect the change in the re-measured
liabilities.
Right of use assets:
Right of use assets include the net present value of the
following components:
-- The initial measurement of the lease liability;
-- Lease payments made before the commencement date of the lease;
-- Initial direct costs; and
-- Costs to restore.
The right of use assets are reduced for lease incentives
relating to the lease. The right of use assets are depreciated on a
straight-line basis over the duration of the contract. In the event
that the lease contract becomes onerous, the right of use asset is
impaired for the part which has become onerous.
Lease liabilities:
Lease liabilities include the net present value of the following
components:
-- Fixed payments excluding lease incentive receivables;
-- Future contractually agreed fixed increases; and
-- Payments related to renewals or early termination, in case
options to renew or for early termination are reasonably certain to
be exercised.
The lease payments are discounted using the interest rate
implicit in the lease. If such rate cannot be determined, the
lessee's incremental borrowing rate is used, being the rate that
the lessee would have to pay to borrow the funds necessary to
obtain an asset of similar value in a similar economic environment
with similar terms and conditions. The discount rate that is used
to calculate the present value reflects the interest rate
applicable to the lease at inception of the contract. Lease
contracts entered into in a currency different than the local
functional currency are subjected to periodically foreign currency
revaluations which are recognised in the income statement in net
finance costs.
The lease liabilities are subsequently increased by the interest
costs on the lease liabilities and decreased by lease payments
made.
2. Segmental reporting
In accordance with IFRS 8 the Group's operating segments are
based on the reports reviewed by the Executive Directors that are
used to make strategic decisions.
The Group reports its results in two business practices (Media
and Analytics & Tech), as this most accurately reflects the way
the Group is being managed. In the prior year there were three
business practices (Media, Analytics & Tech and Intel), however
on 2 January 2019 the sale completed of Intel to Nielsen Media
Research Limited and therefore the results of this division have
been presented within discontinued operations. Refer note 6 for
more details.
The Executive Directors are the Group's chief operating
decision-makers. They assess the performance of the operating
segments based on operating profit before highlighted items. This
measurement basis excludes the effects of expenditure such as
restructuring costs, purchased intangible amortisation and
equity-settled share-based payments from the operating segments.
Interest income and expenditure are not allocated to segments, as
this type of activity is driven by the central treasury function,
which manages the cash position of the Group.
The segment information provided to the Executive Directors for
the reportable segments for the period ended 30 June 2019 is as
follows:
Unaudited 6 months ended 30 June 2019
Analytics Reportable Discontinued
Media & Tech Segments Unallocated operations Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 27,701 7,618 35,319 - - 35,319
Operating
profit/(loss)
before highlighted
items 6,679 664 7,343 (3,978) - 3,365
======== ============ ============= ============== =============== ========
Unaudited 6 month period ended 30 June 2018
Analytics Reportable Discontinued
Media & Tech Segments Unallocated operations Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 27,994 7,347 35,341 - 10,110 45,451
Operating
profit/(loss)
before highlighted
items 7,203 422 7,625 (3,972) 512 4,165
======== ============ ============= ============== =============== ========
A reconciliation of segment operating profit before highlighted
items to total (loss)/profit before tax is provided below:
Unaudited Unaudited
6 months ended 6 months
30 June 2019 ended
30 June 2018
GBP'000 GBP'000
Reportable segment operating profit before
highlighted items 7,343 7,625
Unallocated costs:
Staff costs (2,917) (2,674)
Property costs (488) (317)
Exchange rate movements (27) (25)
Other administrative expenses (546) (956)
Operating profit before highlighted items 3,365 3,653
Highlighted items (note 3) (7,124) (819)
--------------------------- -------------------
Operating (loss)/profit (3,759) 2,834
Net finance costs (450) (606)
(Loss)/profit before tax (4,209) 2,228
=========================== ===================
3. Highlighted items
Highlighted items comprise items which are highlighted in the
income statement because separate disclosure is considered relevant
in understanding the underlying performance of the business.
Unaudited Unaudited
6 months 6 months
ended ended
30 June 2019 30 June 2018
GBP'000s GBP'000s
Share option charge 68 195
Amortisation of purchased intangibles 620 625
Impairment of goodwill and intangibles 5,850 -
Severance and reorganisation costs 104 175
Acquisition, integration and strategic
costs 482 (176)
Total highlighted items before tax 7,124 819
Taxation (credit)/charge (147) 397
Total highlighted items after tax - continuing
operations 6,977 1,216
Highlighted items - discontinued operations 1,250 986
-------------- --------------
Total highlighted items 8,227 2,202
============== ==============
Share option charges include the non-cash IFRS 2 charge of
GBP102,000 (June 2018: GBP307,000) along with the cash element in
relation to the exercising of share options, a credit of GBP34,000
(June 2018: credit of GBP112,000).
Amortisation of purchased intangibles relates to acquisitions
made in prior years GBP620,000 (June 2018: GBP625,000).
Impairment of goodwill and intangibles of GBP5,850,000 is in
relation to the impairment of goodwill and intangibles held in
Stratigent LLC. The impairment was determined with reference to
current net book value of these items, the result being that these
items have been fully written down due to the winding down of the
activities of this operation.
Severance and reorganisation costs of GBP104,000 (June 2018:
GBP175,000) relate to restructuring within the US, UK and German
businesses.
The acquisition, integration and strategic costs of GBP482,000
(June 2018: credit of GBP176,000) predominantly relates to the
recognition of an impairment to the right of use asset of
GBP451,000, in relation to the London office whilst it remains
unoccupied during the fit-out period. Partially offsetting this is
the release of the brought forward provision in relation to the
Hamburg office of GBP107,000 since the Group have been released
from any future obligations on a new tenant being identified in the
period for the previously unoccupied space since AdIntel vacated
the office.
A further GBP297,000 relates to one-off costs of relocating to
the new London premises partially offset by adjustments to the fair
value of contingent consideration amounting to a credit of
GBP159,000 (June 2018: credit of GBP195,000) resulting from an
downward revision of contingent consideration in relation to
discounting all contingent consideration balances to net present
value and a revaluation at the period end to the latest effective
exchange rates.
In the prior year also included within acquisition, integration
and strategic costs was GBP19,000 of stamp duty costs.
4. Dividends
A dividend of GBP534,000 (0.71p per share) was declared on 4
June 2019 and subsequently paid on 24 June 2019 in respect to the
year ended 31 December 2018.
5. Earnings per share
The calculation of basic and diluted earnings per share is based
on the following data:
Period ended 30 June 2019 Period ended 30 June
2018
------------------------------------ ------------------------------------
Continuing Discontinued Total Continuing Discontinued Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Earnings for the purpose
of basic earnings per
share being net profit (4,894) (1,250) (6,144) 541 (501) 41
attributable to equity
holders of the parent
Adjustments:
Impact of highlighted
items (net of tax)1 6,971 1,250 8,221 1,363 829 2,191
----------------------------- ---------- ------------ ---------- ---------- ------------ ----------
Earnings for the purpose
of underlying earnings
per share 2,077 - 2,077 1,904 328 2,232
----------------------------- ---------- ------------ ---------- ---------- ------------ ----------
Number of shares:
Weighted average number
of shares during the period
- basic 79,305,619 - 79,305,619 78,343,984 78,343,984 78,343,984
- dilutive effect of share
options 1,326,363 - 1,326,363 2,212,770 2,212,770 2,212,770
----------------------------- ---------- ------------ ---------- ---------- ------------ ----------
- diluted 80,631,982 - 80,631,982 80,556,754 80,556,754 80,556,754
----------------------------- ---------- ------------ ---------- ---------- ------------ ----------
Basic earnings per share (6.17)p (1.58)p (7.75)p 0.69p (0.64)p 0.05p
Diluted earnings per share (6.17)p (1.58)p (7.75)p 0.69p (0.64)p 0.05p
Underlying basic earnings
per share 2.62p - 2.62p 2.43p 0.42p 2.85p
Underlying diluted earnings
per share 2.58p - 2.58p 2.36p 0.41p 2.77p
----------------------------- ---------- ------------ ---------- ---------- ------------ ----------
1 Highlighted items (see note 3), stated net of their total tax
and non-controlling interest impact.
2 Basic earnings per share is calculated by dividing profit
attributable to shareholders by the basic average number of
shares
3 Diluted earnings per share is calculated by dividing profit
attributable to shareholders by the basic average number of shares
and also including the dilutive impact of share options
4 Underling basic earnings per share is calculated by dividing
underlying profit attributable to shareholders by the basic average
number of shares
5 Underlying diluted earnings per share is calculated by
dividing underlying profit attributable to shareholders by the
basic average number of shares and also including the dilutive
impact of share options
6. Discontinued operations
On 12 February 2018, the Group agreed to dispose of the AdIntel
business to Nielsen Media Research Limited, a subsidiary of Nielsen
Holdings plc for gross consideration of GBP26,000,000. This
disposal was completed on 2 January 2019. In the financial
statements for the year ended 31 December 2018 AdIntel was reported
within discontinued operations.
On 19 March 2018, the Group entered into an agreement to sell
the business assets of its Reputation division to Echo Research
Holdings Limited. Completion took place on 31 March 2018. In the
financial statements for the year ending 31 December 2018
Reputation was reported within discontinued operations.
Financial information relating to the discontinued operations
for the period to the date of disposal is set out below. For
further information about the discontinued operations please refer
to note 8 in the group's annual financial statements for the year
ended 31 December 2018.
The financial performance and cash flow information presented
below reflects the AdIntel results for the 6 months ended 30 June
2018 and the profit on disposal recognised in 2019 on the sale
completing on 2 January 2019 and the Reputation results for the 3
months to 31 March 2018 and the profit on disposal recognised in
2018.
The table below summarises the income statement for the
discontinued business units for both the current and the prior
period:
Unaudited 6 months ended Unaudited 6 months ended
30 June 2019 30 June 2018
AdIntel Reputation Total AdIntel Reputation Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ------- ---------- ------- ------- ---------- -------
Revenue - - - 9,926 184 10,110
Cost of sales - - - (6,107) (199) (6,306)
----------------------------- ------- ---------- ------- ------- ---------- -------
Gross profit - - - 3,819 (15) 3,804
Administrative expenses - - - (3,188) (104) (3,292)
Operating profit - - - 631 (119) 512
Highlighted items 1,194 36 1,230 (1,112) 80 (1,032)
Profit before tax 1,194 36 1,230 (481) (39) (520)
Tax(1) (2,480) - (2,480) 6 - 6
----------------------------- ------- ---------- ------- ------- ---------- -------
Net result from discontinued
operations (1,286) 36 (1,250) (475) (39) (514)
----------------------------- ------- ---------- ------- ------- ---------- -------
(1) This represents the current best estimate of the
multi-jurisdiction tax charge arising as a result of the disposal
of the AdIntel business. The finalised charge will be incorporated
within the Group's 2019 annual results announcement.
Below is a table summarising the cash flows from continued and
discontinued operations:
Unaudited Unaudited
6 months 6 months
ended 30 ended 30
June June
2019 2018
GBP'000 GBP'000
------------------------------------------------------ --------- ---------
Cash (used)/generated from operations - continuing
operations (2,644) 4,040
Cash generated from operations - discontinued
operations - 937
------------------------------------------------------- --------- ---------
Total cash (used)/generated from operations (2,644) 4,977
Cash generated/(used) in investment activities
- continuing operations (1,530) (1,027)
Cash used in investment activities - discontinued
operations 26,000 (135)
------------------------------------------------------- --------- ---------
Total cash generated/(used) in investment
activities 24,470 (1,162)
Cash (used)/generated by financing activities
- continuing operations (21,277) 916
Cash generated by financing activities - discontinued - -
operations
------------------------------------------------------ --------- ---------
Total cash (used)/generated by financing activities (21,277) 916
Net increase in cash and cash equivalents
- continuing operations (25,951) 3,929
Net increase in cash and cash equivalents
- discontinued operations 26,000 802
------------------------------------------------------- --------- ---------
Net increase in cash and cash equivalents 549 4,731
Below is a table summarising the details of the sale of the
divisions:
Unaudited 6 months ended Unaudited 6 months
30 June 2019 ended 30 June 2018
AdIntel Reputation Total AdIntel Reputation Total
-------- ------- ---------- -------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- -------- ---------- -------- ------- ---------- -------
Cash received or receivable: - - -
Cash 26,000 36 26,036 - - -
Decease of consideration (808) - (808) - - -
Total disposal consideration 25,192 36 25,228 - - -
Carrying amount of net
assets/(liabilities) sold 23,672 - 23,672 - (79) (79)
Costs to sell - current
year 25 - 25 - - -
Reclassification of foreign
currency translation reserve 301 - 301 - - -
-------- ---------- -------- ------- ---------- -------
Total 23,998 - 23,998 - (79) (79)
Gain/(loss) on sale before
income tax 1,194 36 1,230 - 79 79
Income tax charge on gain/(loss) (2,480) - (2,480) - (15) (15)
-------- ---------- -------- ------- ---------- -------
(Loss)/gain on sale after
income tax (1,286) 36 (1,250) - 64 64
Costs to sell - prior year (3,176) - (3,176) - - -
-------- ---------- -------- ------- ---------- -------
(Loss)/gain on sale after
income tax - total (4,462) 36 (4,426) 64 64
7. Goodwill
GBP'000
Cost
At 1 January 2019 37,381
Foreign exchange differences 13
At 30 June 2019 37,394
===================
Accumulated impairment
At 1 January 2019 (2,607)
Impairment (5,082)
Foreign exchange differences (13)
-------------------
At 30 June 2019 (7,702)
===================
Net book value
At 30 June 2019 29,692
-------------------
At 31 December 2018 34,774
===================
An impairment of GBP5,082,000 was recognised in relation to
goodwill held in Stratigent LLC so that the carrying value was
written down in full due to the winding down of the activities of
this operation.
8. Other intangible assets
Capitalised Computer software Purchased Total
development intangible intangible assets
costs assets
GBP'000s GBP'000s GBP'000s GBP'000s
Cost
At 1 January 2019 3,258 2,675 16,541 22,474
Additions 642 4 - 646
Foreign exchange 2 - 1 3
At 30 June 2019 3,902 2,679 16,542 23,123
============= ================== ============ ===================
Amortisation
At 1 January 2019 (1,258) (1,606) (11,133) (13,997)
Impairment (161) - (607) (768)
Charge for the period (221) (235) (620) (1,076)
Foreign exchange 3 (1) (5) (3)
At 30 June 2019 (1,637) (1,842) (12,365) (15,844)
============= ================== ============ ===================
Net book value
At 30 June 2019 2,265 837 4,177 7,279
============= ================== ============ ===================
At 31 December 2018 2,000 1,069 5,408 8,477
============= ================== ============ ===================
The capitalised development costs are internally generated
intangible assets related to bespoke computer software and
technology developed by the Group's internal software development
team. Of the net book value of capitalised development costs
GBP2,014,000 remains in development at 30 June 2019. An impairment
of GBP161,000 was recognised in relation to capitalised development
costs held in Stratigent LLC so that the carrying value was written
down in full due to the winding down of the activities of this
operation.
Purchased intangible assets consist principally of customer
relationships with a typical useful life of 10 years. Amortisation
for purchased intangible assets is included in highlighted items.
An impairment of GBP607,000 was recognised in relation to purchased
intangibles held in Stratigent LLC so that the carrying value was
written down in full due to the winding down of the activities of
this operation.
Amortisation is charged within administrative expenses so as to
write off the cost of the intangible assets over their estimated
useful lives. The amortisation of purchased intangible assets is
included as a highlighted administrative expense.
9. Assets and liabilities held for sale
In 2017, the Board concluded that the most probable route to
realising future economic benefit through its AdIntel business was
through a sale rather than continuing to operate it as part of the
larger Group. Accordingly, it commenced a sale process to see if
this business could be sold at an acceptable price.
On 12 February 2018, the Group agreed to dispose of the AdIntel
business to Nielsen Media Research Limited, a subsidiary of Nielsen
Holdings plc (together "Nielsen") for gross consideration of
GBP26,000,000. This transaction was subject to certain conditions,
including approval from the Competition and Markets Authority
("CMA") who immediately commenced a Phase 1 examination. This led
to a Phase II examination that was not concluded until November
2018. This disposal to Nielsen was completed on 2 January 2019.
In accordance with IFRS 5, the AdIntel business was treated as
an asset held for sale as at 31 December 2018 since the sale was
deemed to be probable, and the disposal of AdIntel signalled a
complete exit from this service line. Accordingly it was also
treated as a discontinued operation.
The net assets of the AdIntel business are shown below:
30 2 31
June January December
2019 2019 2018
GBP'000 GBP'000 GBP'000
---------------------------------- ------- -------- ---------
Non--current assets
Goodwill - 22,295 22,293
Other intangible assets - 2,377 2,377
Property, plant and equipment - 415 412
Deferred tax asset - 40 40
Total non--current assets - 25,127 25,122
Current assets
---------------------------------- ------- -------- ---------
Trade and other receivables - 2,964 2,612
Cash and cash equivalents - -
---------------------------------- ------- -------- ---------
Total current assets - 2,964 2,612
---------------------------------- ------- -------- ---------
Total assets - 28,091 27,734
---------------------------------- ------- -------- ---------
Current liabilities
Trade and other payables - (801) (796)
Accruals and contract liabilities - (3,038) (2,940)
Current tax liabilities - (86) (86)
Total current liabilities - (3,925) (3,822)
Non-current liabilities
Deferred tax liabilities - (413) (413)
Provisions - (81) (81)
---------------------------------- ------- -------- ---------
Total non-current liabilities - (494) (494)
---------------------------------- ------- -------- ---------
Total liabilities - (4,419) (4,316)
---------------------------------- ------- -------- ---------
Total net assets - 23,672 23,418
---------------------------------- ------- -------- ---------
The table above shows the net assets of the AdIntel business as
reported on 31 December 2018 as well as at the point the sale
completed on 2 January 2019.
10. Cash, cash equivalents and bank overdrafts
Cash, cash equivalents and bank overdrafts include the following
for the purposes of the cash flow statement:
30 June 31 December
2019 2018
GBP'000 GBP'000
Cash and cash equivalents 6,974 8,793
Bank overdraft (note 11) - (2,379)
Cash, cash equivalents and bank
overdrafts 6,974 6,414
======== ============
11. Financial liabilities
30 June 31 December
2019 2018
GBP'000 GBP'000
Current
Bank overdraft - 2,379
Bank borrowings 14,000 -
Loan fees(1) (70) (65)
Contingent consideration 558 508
------------- ---------------------------
14,488 2,822
Non-current
Bank borrowings - 34,000
Loan fees - (35)
Contingent consideration 316 969
------------- ---------------------------
316 34,934
Total financial liabilities 14,804 37,756
============= ===========================
(1) Loan fees were payable on amending the banking facility
and are being recognised in the income statement on a straight-line
basis to the maturity date of the facility, this being 30 June
2020.
Bank Bank Contingent
overdrafts borrowings consideration Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- -------------- ------------- -------------- -----------
At 1 January 2019 2,379 33,900 1,477 37,756
Additions - - 376 376
Paid - - (746) (746)
Charged/(credited)
to the income statement - 30 (219) (189)
Discounting charged
to the income statement - - 1 1
Repayments (2,379) (20,000) (22,379)
Foreign exchange
released to the
income statement - - (15) (15)
At 30 June 2019 - 13,930 874 14,804
================================= ============== ============= ============== ===========
All bank borrowings as at 30 June 2019 are held jointly with
Barclays and Royal Bank of Scotland ('RBS'). The committed
facility, totalling GBP35,000,000, comprises a term loan of
GBP10,000,000 (of which GBPnil remains outstanding at 30 June 2019)
(31 December 2018: GBPnil), and a revolving credit facility ('RCF')
of GBP25,000,000, reduced by GBP10,000,000 from GBP35,000,000 in
the period, (of which GBP14,000,000 was drawn down at 30 June 2019)
(31 December 2018: GBP34,000,000). There is currently GBP1,000,000
available as an overdraft for working capital purposes. The term
loan had a maturity of 30 September 2018 and was fully repaid on
this date, and the RCF has a maturity date of 30 June 2020,
therefore it has been reclassified to current liabilities as at 30
June 2019. The GBP10,000,000 term loan was being repaid on a
quarterly basis to maturity, and the drawn RCF and any further
drawings under the RCF are repayable on maturity of the facility.
The facility may be used for contingent consideration payments on
past acquisitions, to fund future potential acquisitions, and for
general working capital requirements.
Loan arrangement fees of GBP70,000 (31 December 2018:
GBP100,000) are offset against the term loan, and are being
amortised over the period of the loan.
The facility bears variable interest of LIBOR plus a margin of
2.00%. The margin rate is able to be lowered each quarter end
depending on the Group's net debt to EBITDA ratio.
The undrawn amount of the revolving credit facility is liable to
a fee of 40% of the prevailing margin, which is set depending on
the Group's net debt to EBITDA ratio, as referred to above. The
Group may elect to prepay all or part of the outstanding loan
subject to a break fee, by giving five business days' notice.
All amounts owing to the banks are guaranteed by way of fixed
and floating charges over the current and future assets of the
Group. As such, a composite guarantee has been given by all
significant subsidiary companies in the UK, USA and Germany.
The outstanding bank borrowings of GBP14,000,000 were repaid in
full on 20 September 2019 and on the same day the Group drew down
GBP14,000,000 against the new facility (see note 15). Therefore
there are no going concern implications of the bank borrowings
being payable within one year as at 30 June 2019 as on refinance,
on 20 September 2019, the borrowings will be considered non-current
once more.
Contingent consideration represents additional amounts that are
expected to be payable for acquisitions made by the Group and is
held at fair value at the Statement of Financial Position date. All
amounts are expected to be fully paid by April 2021.
12. Fair value measurement
All of the Group's financial assets and liabilities are measured
at amortised cost, with the exception of the contingent
consideration payable, which is held at fair value through profit
and loss.
The following table provides an analysis of financial
instruments that are measured subsequent to initial recognition at
fair value, grouped into Levels 1 to 3 based on the degree to which
the fair value is observable:
-- Level 1 fair value measurements are those derived from quoted
prices in active markets for identical assets or liabilities;
-- Level 2 fair value measurements are those derived from inputs
other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or
indirectly; and
-- Level 3 fair value measurements are those derived from
valuation techniques that include inputs for the asset or liability
that are not based on observable market data.
Level 1 Level Level Total
2 3
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- --------- --------- -------- --------
At 30 June 2019
Financial liabilities
Contingent consideration - - 874 874
-------------------------- --------- --------- -------- --------
- - 874 874
--------- ------------------------------------ -------- --------
At 31 December 2018
Financial liabilities
Contingent consideration - - 1,477 1,477
-------------------------- --------- --------- -------- --------
- - 1,477 1,477
--------- ------------------------------------ -------- --------
The fair value of the contingent consideration of GBP874,000 (31
December 2018: GBP1,477,000), was estimated by applying the income
approach. The fair value estimates are based on a discount rate of
3.3% forecast EBIT of FMC Ireland and Digital Balance Australia.
This is a level 3 fair value measurement. The key assumptions in
calculating the contingent consideration payable are the EBIT of
the businesses acquired and the discount rate.
Refer to Note 11 for a reconciliation of movements during the
period.
The following table summarises the quantitative information
about the significant unobservable inputs used in level 3 fair
value measurements:
Description Fair value Relationship of unobservable
at 30 June Unobservable Range of inputs to fair value
2019 GBP'000 inputs(1) inputs
---------------- --------------- --------------- ----------------- -------------------------------
A change in the discount
rate by 1 percent
Risk adjusted would increase/decrease
Contingent discount the fair value by
consideration 874 rate 3.3% GBP0.01m
Expected Ebiquity If expected revenues
EBIT Marsh Limited; were 10% higher,
GBP207,000 the fair value would
- GBP300,000 increase by GBP0.1m
Expected Digital Balance; If expected revenues
EBIT GBP300,000 were 10% higher,
- GBP415,000 the fair value would
increase by GBP0.4m
(1) There were no significant inter-relationships between
unobservable inputs that materially affect fair values.
The main level 3 inputs used by the group in measuring the fair
value of financial instruments are derived and evaluated as
follows:
-- Discount rates: these are determined with reference to the
external rate of borrowing which is consistent with prior
periods.
Changes in level 3 fair values are analysed at the end of each
reporting period. During the period a debit of GBP1,000 (December
2018: credit of GBP78,000) was recognised in the income statement
on discounting the contingent consideration.
13. Cash generated from operations
Unaudited Unaudited
6 months 6 months ended
ended 30 June
30 June 2018
2019
GBP'000 GBP'000
(Loss)/profit before taxation (4,209) 2,228
Adjustments for:
Depreciation 901 373
Amortisation (note 8) 1,076 1,012
Impairment of goodwill & intangibles 5,850 -
Recognition of onerous lease provision 296 -
Unrealised foreign exchange gain (284) (93)
Share option charges 102 307
Finance income (6) (19)
Finance expenses 456 625
Contingent consideration revaluations (159) 195
---------- ----------------
4,023 4,628
Increase in trade and other receivables (1,529) (2,775)
Decrease/(increase) in trade and other
payables (including accruals and contract
liabilities) (4,012) 2,904
Movement in provisions - 1
---------- ----------------
Cash (used in)/generated from operations
- continuing operations (1,518) 4,758
Cash generated from operations - discontinued
operations - 1,452
---------- ----------------
Cash (used in)/generated from operations (1,518) 6,210
14. Acquisitions
On 11 June 2019, the Group acquired the outstanding 5.97%
interest in its subsidiary undertaking, Ebiquity GmbH Limited, from
the minority shareholder for cash consideration of EUR380,000
(GBP336,000). As at 30 June 2019, EUR180,000 (GBP168,000) was
settled, with a further EUR180,000 (GBP168,000) payable on 31
October 2019.
15. Events subsequent to reporting date
On 20 September 2019, the Group refinanced its banking
facilities with Barclays and Royal Bank of Scotland and on 20
September 2019 drew down on these new facilities. The new committed
facility, totalling GBP25,000,000, comprises a revolving credit
facility ('RCF') of GBP24,000,000 (of which GBP14,000,000 was drawn
on refinance) and GBP1,000,000 available as an overdraft for
working capital purposes. The RCF has a maturity date of 20
September 2023. The drawn RCF and any further drawings under the
RCF are repayable on maturity of the facility. The facility may be
used for deferred consideration payments on past acquisitions, to
fund future potential acquisitions, and for general working capital
requirements.
On 21 August 2019 it was decided to wind down the activities of
Stratigent LLC, the Chicago based marketing technology business
which has been trading at a loss due to significantly reduced
demand in the US market for the software technology on which its
skills were focussed. This was the result of a wider review of
opportunities for further efficiency gains across the business as
well as examining investment areas to ensure these fit with the
Group's strategic priorities.
INDEPENDENT REVIEW REPORT TO EBIQUITY PLC
Report on the consolidated interim financial statements
Our conclusion
We have reviewed Ebiquity plc's condensed consolidated interim
financial statements (the "interim financial statements") in the
interim report of Ebiquity plc for the 6 month period ended 30 June
2019. Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the AIM Rules for
Companies.
What we have reviewed
The interim financial statements comprise:
-- the consolidated statement of financial position as at 30 June 2019;
-- the consolidated income statement and consolidated statement
of comprehensive income for the period then ended;
-- the consolidated cash flow statement for the period then ended;
-- the consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the interim report
have been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the
European Union and the AIM Rules for Companies.
As disclosed in note 1 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The interim report, including the interim financial statements,
is the responsibility of, and has been approved by, the directors.
The directors are responsible for preparing the interim report in
accordance with the AIM Rules for Companies which require that the
financial information must be presented and prepared in a form
consistent with that which will be adopted in the company's annual
financial statements.
Our responsibility is to express a conclusion on the interim
financial statements in the interim report based on our review.
This report, including the conclusion, has been prepared for and
only for the company for the purpose of complying with the AIM
Rules for Companies and for no other purpose. We do not, in giving
this conclusion, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by our prior
consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the interim
report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
25 September 2019
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR MMGZLMKVGLZZ
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