TIDMEBQ
RNS Number : 4094N
Ebiquity PLC
20 May 2020
EBIQUITY PLC
PRELIMINARY RESULTS FOR THE YEARED 31 DECEMBER 2019
Ebiquity plc ("Ebiquity" or the "Company"), a leading
independent marketing and media consultancy, today announces its
preliminary results for the 12 months ended 31 December 2019.
Ebiquity works with 70 of the world's top 100 advertisers served
from 18 offices and by 550 staff.
Headline Results(1)
2019 2018 Change
GBPm GBPm GBPm
------- ------- -------
Revenue 68.7 69.4 (0.6)
------- ------- -------
Underlying Operating
Profit (2) 6.2 6.3 (0.2)
------- ------- -------
Underlying Profit before
Tax (2) 5.3 5.2 0.1
------- ------- -------
Underlying Earnings
per Share (2) 3.6p 3.7p (0.1)p
------- ------- -------
Statutory Operating
Profit (4.2) (1.4) (2.8)
------- ------- -------
Statutory Profit before
Tax (5.1) (2.5) (2.6)
------- ------- -------
Statutory Earnings per
Share (8.8)p (6.4)p (2.4)p
------- ------- -------
Post year-end events: COVID-19 & new CEO
-- Business operations and service delivery maintained at normal
level during COVID-19 disruption with staff working remotely across
global network
-- Adverse global economic and media trends are impacting
revenue from some clients and sectors
-- Cost reduction measures being taken to protect business
including use of government support schemes in several
countries
-- Financial position at 30 April 2020 remains strong: net debt
of GBP6 m; cash balances of GBP13 m and undrawn bank facilities of
GBP5m
-- Successful banking covenant modification from July 2020 to
May 2021 (to a simple liquidity test).
-- Dividend payment deferred
-- Nick Waters, former Executive Chairman, UK & Ireland,
Dentsu Aegis Network appointed Group Chief Executive Officer, with
effect from 1 July 2020
2019 highlights
-- Underlying profit before tax increased to GBP5.3m (2018:
GBP5.2m) due to reduced interest charge as a result of GBP20m
repayment of the loan facility
-- Strong balance sheet: Net debt at 31 December 2019 reduced
significantly to GBP5.6m (31 December 2018: GBP27.5m) following
completion of AdIntel sale in January 2019
-- Improved operating cash flow conversion of 144% (2018: 138%)
-- Significant client wins include Amazon, Facebook, Nike, Verizon Wireless and Volvo
-- Impairment charge of GBP5.8m taken in relation 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
-- Revenue of GBP54.6m, increased by 1%
-- Contract Compliance revenue increased by 13%
-- Media Performance & Management revenue declined by 1%
-- Shared service media delivery centre in Spain expanding and
delivering operational efficiencies
Analytics and Tech : Advanced Analytics, MarTech and AdTech
-- Revenue declined 7% to GBP14.1m; excluding Stratigent increased by 11%
-- Operating profit reduced by 31% to GBP1.0m
-- Advanced Analytics practice expanded into France and USA
-- AdTech advisory practice increased revenue by 105%
Note 1: all figures in the table refer to continuing operations
following the disposal of the Advertising Intelligence business to
Nielsen Media Research which completed on 2 January 2019 .
Note 2: 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.
Alan Newman, Interim CEO of Ebiquity said:
"Ebiquity made good progress in 2019 and our results met the
Board's profit expectations, with our high potential consulting
practices growing strongly. Since the COVID-19 disruption began we
have maintained a high quality service to clients throughout and
are proud of all our staff who have responded with admirable
resilience and commitment to the challenges during this difficult
time.
The Company continues to have a strong liquidity position
supported by recent cash conservation measures. Trading in the
first quarter of 2020 was as expected. However, the reduction in
economic activity and marketing spend caused by COVID-19 has
affected our business as some clients and sectors have reduced
their service needs while others remain resilient. Our business in
2020 remains difficult to predict with confidence and we continue
to withhold guidance.
We will continue to monitor economic conditions closely and
adopt a prudent approach to our cost base as we and our clients
adapt to, and emerge from the global crisis. We believe that the
rapidly changing environment and increasing complexity in
advertising markets will reinforce clients' demand for transparency
and data-driven advice on maximising the returns from their media
spend.
Despite the uncertain outlook, we remain confident that our
market leadership and a management team strengthened by the newly
appointed CEO, Nick Waters, will enable the Group to develop the
business successfully through the remainder of this year and
beyond.
Enquiries:
Ebiquity plc
Alan Newman (Interim CEO &
CFO)
Mark Sanford (Company Secretary) 020 7650 9600
Instinctif Partners
Matthew Smallwood 07831 379 122
Guy Scarborough 07917 178 920
Numis Securities Limited
Nick Westlake (NOMAD)
Matt Lewis (Corporate Broker) 020 7260 1000
Chairman's Statement
COVID-19
Since the beginning of 2020, the outbreak of the COVID-19
pandemic has created an unprecedented and uncertain economic
environment for all businesses.
Our global business largely switched to remote working from
March 2020 onwards and has continued to deliver high quality
services to clients as usual throughout the period of the COVID-19
disruption. Maintaining the health and safety of all our staff has
been a priority and we are proud of the admirable resilience and
flexibility they have shown in responding to the challenges they
face during these difficult times. As of now, we are pleased that
units in some countries, such as China and Germany, are now
re-opening their offices.
Ebiquity plays a key role in providing clarity and transparency
to advertisers on their media spend but that means our business is
influenced by the macro trends in the advertising markets. The
unprecedented economic disruption caused by the reaction to
COVID-19 has led to significant reductions in current and forecast
global advertising spend which is affecting our business in the
current year. This impact varies considerably both between and
within sectors and geographies. Some clients, especially in the
automotive sector, in which Ebiquity has a strong presence, and in
travel, leisure and non-food retail, have reduced their service
requirements although many others have remained resilient. Clients
are also adjusting their plans frequently both upwards as well as
downwards as their business outlook evolves.
The Group has undertaken prudent cost reduction measures to
strengthen and protect the business in the current environment and
further to support our liquidity position. These include temporary
salary reductions for the Board and a number of senior managers and
staff and the use of Government job retention and support schemes
in various countries, including Australia, France, UK and USA. We
have modified the covenants on our banking facilities and deferred
part of the consideration payable for the previously announced
buy-out of the Italian minority. Although the Group is in a healthy
financial position with sufficient liquidity to manage the COVID-19
disruption, the Board has decided to defer the payment of dividends
until economic and business conditions are more certain.
Business Review
These results cover Ebiquity's first full year following the
sale of the Advertising Intelligence ("AdIntel") business to
Nielsen Media Research ("Nielsen") completed on 2 January 2019.
Ebiquity is now a more streamlined business that is focussed on
becoming the leading global independent media and marketing
consultancy, helping advertisers to measure, evaluate and maximise
returns from their marketing spend. The significant reduction in
net debt as a result of the sale strengthened the Group's financial
position giving it greater flexibility to invest in developing the
business organically, and build through selective acquisitions such
as that of Digital Decisions announced in January 2020.
In addition to the structural evolution of the business during
the past 15 months, there have been significant changes in the
Group's executive leadership. Alan Newman joined as Chief Financial
and Operating Officer at the start of 2019 and has strengthened the
Group's financial management controls and operational processes.
Towards the end of the year, Michael Karg stepped down as Chief
Executive Officer after nearly four years in that role and I would
like to record the Board's appreciation for his contribution to
Ebiquity over that time.
In April 2020, we announced the appointment of Nick Waters as
CEO with effect from 1 July 2020. Nick brings more than 20 years'
experience in senior executive roles at leading international
media, digital and advertising businesses, most recently at Dentsu
Aegis. I thank Alan for his strong leadership and commitment to the
business in the role of Interim CEO after Michael's departure,
particularly throughout the challenging environment caused by
COVID-19. Nick and Alan have highly complementary skills and
experience, which will significantly strengthen the executive
team.
As previously highlighted, 2019 was a year of transition. We are
therefore pleased to report that our underlying operating profit
for 2019 was in line with expectations at GBP6.2 million, largely
driven by tight cost control. Revenue performance, however, was not
as strong as anticipated earlier in the year. Group revenue, was 1%
lower than the prior year at GBP68.7 million, compared to GBP69.4
million, although excluding Stratigent, which was wound down in
September 2019, it grew by 2% on a like-for-like- basis. Revenue in
Media our largest segment, was up 1% year-on-year, due to Contract
Compliance which grew well. Although Analytics and Tech total
revenue reduced by 7%, Advanced Analytics and AdTech both recorded
strong growth so that excluding Stratigent, Analytics and Tech
revenue grew by 11%.
Good progress was made during the year towards realigning the
cost structure of the business with the revenue base without the
AdIntel business. The Group's total underlying costs reduced by 1%
to GBP62.6 million, from GBP63.0 million and there was a reduction
of 3% in the total year-end staff numbers. This was achieved
despite the Group having to bear continuing costs of the
transitional agreement to deliver support services to Nielsen post
the AdIntel sale. The Board and management team are pursuing
opportunities to deliver further efficiency gains across the
business while also maintaining investments to support growth in
high potential service areas, such as advanced analytics.
Through this transitional period, Ebiquity is in a strong
position as a leading independent, global consultancy, to satisfy
the growing demand from brand owners for specialist consulting
services to enable them to optimise their marketing expenditure.
Our advantages include our consultancy independence, excellent
client base and access to data that this provides, and the breadth
of our services which range from media performance reviews, media
management advice and contract compliance through to advanced
analytics and advertising technology consulting. This range is
unmatched by our competition at a global level as is our network of
media experts located in 15 of the main media markets in Europe,
North America, Asia and Australasia. The US market in particular,
where Ebiquity has traditionally under-performed as a business,
remains a key opportunity due both to its domestic scale and its
role as the base for many global advertisers.
Our long-held view that advertisers' need for transparency is
best met through independent advice has been reinforced by
Accenture's announcement of its withdrawal from media auditing and
management advisory services from September 2020, resulting from
its expansion into media buying and programmatic advertising
services. This is already providing opportunities for Ebiquity and
we have won contracts with a number of clients around the world
previously served by Accenture.
The priorities set by the Board for the CEO and the management
team are to re-establish revenue growth and to improve the Group's
operating margins over the medium term. In support of this, the
Group's strategy remains to increase the revenue share from
"forward-looking" advisory services which help brands to plan and
organise their media and marketing activities. We expect the new
CEO with his significant media and agency expertise to make a
significant contribution to the execution of this strategy as well
as to the Group's business development activities.
Ebiquity's performance in 2020 will depend in part on the
overall health of the global economy and advertising markets whose
outlook remains highly uncertain. We will continue to take a
prudent approach to cost management and incorporate lessons learned
from dealing with the COVID-19 crisis as well as pursuing planned
measures to streamline our processes and enhance our service
offering.
Looking ahead, the Board believes that Ebiquity's capabilities
and leading position in its market, together with a strengthened
management team under the new CEO, will enable it to meet the
challenges of the COVID-19 disruption and successfully achieve its
long-term goals as we emerge from the global crisis.
Rob Woodward
Chairman
Executive Review
Strategic Direction
With the digital revolution and resulting explosion of marketing
channels, the demand from brands for independent media and
marketing consulting services continues to grow. Ebiquity is in a
unique position to be their leading provider and adviser enabling
them to monitor, evaluate and maximise returns from their media
spend.
We have defined clearly our aim of becoming the lead adviser to
Chief Marketing Officers ("CMOs") who are increasingly called upon
to justify and explain with clarity the contribution that marketing
spend makes to the performance of their business.
There are few unbiased, expert-led, data driven consultancies in
our marketplace. It is clear that independent, conflict free, high
quality advice is increasingly valued by advertisers. Ebiquity's
offer, through our portfolio of specialised consultancy services,
matches advertisers' requirements and is unmatched by few, if any,
competitors operating at a global level.
Ebiquity's services map into all the key stages of our clients'
media lifecycle. These include:
-- Designing the media model, including internal and external structures
-- Managing and selecting partners, including media and creative
agencies and digital advertising services
-- Defining objectives, including partner goals and commitments
-- Evaluating outcomes
-- Optimising plans
-- Reviewing compliance with contractual obligations
Our primary differentiators are:
-- Our clear global leadership in providing core media
performance services. We are acknowledged by the World Federation
of Advertisers as the world's largest independent media advisers
and leader in Media benchmarking, agency management and contract
compliance
-- Our reach among top advertisers - serving 70 of the world's
top 100 advertisers through our 18 offices in the largest
advertising markets
-- O ur data - we have the largest global pool of advertising
spend data covering over $50 billion
-- O ur analytics - a market leading analytics capability and
platform. Its quality is reflected in a record five awards at the
Institute of Practitioners in Advertising (IPA) Effectiveness
Awards for our clients, including Direct Line Group, Lidl,
Weetabix, and Taylors of Harrogate.
We recognise that in order to maintain our leadership position
and keep growing our business we need to remain ahead of our
competitors in terms of innovation, skills and service quality. We
need in particular to reinforce our capabilities in being able to
provide "forward-looking" consulting analytics and advice as well
as in reporting and assessing historic media performance.
Accordingly, we are continuing to invest in growing our
analytics and advisory businesses. We are also enhancing our
infrastructure to allow us to handle our unique client data sets
more efficiently and help our core Media practice to generate high
quality analysis and insights upon which our clients can make
decisions. Our "MediaSuite" of automated applications covering data
ingestion, media agency selection and digital media benchmarking
contribute to this. Our Media Management service is also
innovating. For example, it recently launched an "Agency
Capabilities Review" to help advertisers to ensure the effective
management of their agency relationships. This was successfully
piloted with a global automotive group.
Keeping pace with developments in digital media is clearly vital
for our business. Its greater complexity and the growing range of
channels and intermediaries through which digital advertising money
passes require the ability rapidly to obtain and analyse data and
report on it to advertisers.
Our acquisition of Digital Decisions in January 2020 complements
and enhances our digital media performance offering. It provides a
digital media monitoring service (on an annual subscription basis),
primarily targeted at procurement and media heads of global brands
and provides them with regular oversight on their digital
advertising performance. Digital Decisions' technology applications
ingest data "from source" from agencies and provide recommendations
for actions to improve digital media performance. Their system is
designed to scale as a self-service solution and its relatively low
delivery costs should lead to high margins over time. Integration
with Ebiquity's platforms should also benefit our existing media
performance services.
We recognise that achieving higher revenue growth requires
strong relationships with current and potential clients and a clear
understanding of their needs so as to tailor our services. A
significant challenge is that only a small minority of the Group's
clients buy more than one of our services. At the beginning of
2019, we created a team of dedicated (UK based) client account
leaders to manage relationships with our key global clients. This
initiative, supported by detailed account plans, led to revenue
from the clients managed by this team growing by 18% during the
year. Much of this increase was generated by introducing Analytics,
Adtech and Media Management services into these clients in addition
to the traditional Media Performance services. We plan to expand
this programme to cover more clients and our non-UK offices as well
as to improve targeting and planning for all client accounts.
Communication and marketing of Ebiquity's services and thought
leadership on media developments is essential in strengthening our
market position and supporting our business growth. The appointment
of Debbie Morrison from ISBA, early in 2019, as Managing Director,
Global Partnerships & Events has helped to increase awareness
of Ebiquity among senior marketing professionals and to enhance our
programme of dedicated marketing events. This has included
establishing a Client Council made up of senior media executives
from leading global advertisers to provide advice on key advertiser
concerns and feedback on how our services address these.
We have also continued to communicate on key industry issues and
our innovations through the media, online channels and our own
publications. Early in 2019, "Tipping Point", a joint study by our
Media and Analytics practices was published. This explained that
TV's ability to provide mass audience reach is diminishing faster
than previously thought. This attracted many (positive and
negative) reactions in national and international media. It was
followed by "Mind the Gap" published in January 2020, which
combines Ebiquity's data and audience research to help identify how
advertisers can improve their use of online channels to reach their
target audiences. One of its data-backed conclusions on the
effectiveness (or lack of it) of Facebook advertising also
attracted much industry comment.
Performance in the Year
Group revenue in the year to 31 December 2019, fell by 1% to
GBP68.7million although it grew by 2% on a like-for-like basis,
excluding Stratigent, which was wound down in September 2019.
Our aim in 2019 was to stabilise and re-focus the business
following a year (2018) in which the Group's costs had grown ahead
of its revenue and its overall performance had been below
expectations. We succeeded in delivering an overall profit result
that was in line with expectations although our revenue base did
not grow in line with our original plans and the performance of our
business segments varied significantly.
Revenue
FY19 FY18 Variance
----- ----- --------- -----
GBPm GBPm GBPm %
----- ----- --------- -----
Media 54.6 54.2 0.4 1%
----- ----- --------- -----
Analytics and Tech 14.1 15.2 (1.0) (7%)
----- ----- --------- -----
Group 68.7 69.4 (0.6) (1%)
----- ----- --------- -----
Practice Growth Rates %
Media
------
Media Performance & Management (1%)
------
Contract Compliance 13%
------
Total Media 1%
------
Analytics & Tech
------
Advanced Analytics 5%
------
Ad Tech 105%
------
MarTech (39%)
------
Total Analytics & Tech (7%)
------
Media
Our Media segment, which accounted for 79% of our total revenue
and comprises Media Performance, Media Management and Contract
Compliance services, reported a modest increase in revenue to
GBP54.6 million (2018: GBP54.2 million). Within this, Contract
Compliance (branded as FirmDecisions) performed successfully with
revenue growth of 13% while revenue from Media Performance and
Management fell by 1% overall.
Our Media Performance practice, which remains our largest single
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.
This helps brand owners to obtain accountability and transparency
over the performance of their chosen media supply partners,
especially given the industry's complex purchasing arrangements.
Major clients for this practice include General Motors, L'Oreal and
Biersdorf.
The Media Management practice advises clients on topics such as
the management and selection of media agencies and setting of media
buying objectives as well as the organisation of media functions.
It conducts close to 100 agency selections annually, both at global
level and within individual markets for clients such as JLR,
McDonalds and Orange. 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. Media Management revenue, however, still depends to
an extent on the level of global media agency pitches occurring in
the market and there were fewer of these in 2019 than in the prior
year.
There were significant regional variations in business
performance across our network. UK & Ireland, our largest Media
region grew revenue by 2%, due mainly to its specialist
international group which manages multi-market projects for global
advertisers such as Fiat Chrysler Automobiles and PepsiCo and which
won a number of new projects. Within Continental Europe, Italy was
the best performer with 21% growth, supported by the launch of an
innovative social media measurement service and France grew by 2%,
with clients including L'Oreal and PSA, the automotive group.
Conversely, revenue fell in Germany (by 8%) and Russia (by 7%). New
country managers have been appointed in both units and their
performance improved in the second half.
The USA had a challenging year, but still managed to remain flat
on the prior year. It won some significant new Media Performance
clients (e.g. Verizon Wireless) but had fewer Media Management
opportunities than expected. There were also performance issues in
the US sales team which was previously shared with Stratigent and
which the new US MD, appointed in May, has focussed on resolving.
APAC revenue fell by 9% for the full year although it achieved
second-half growth following a 19% decline in the first half which
was due to lower demand from traditional higher spending sectors,
such as FMCG and retail. China returned to modest revenue growth in
the year, benefitting from a renewed focus on serving international
advertisers that require support in this expanding but challenging
media market.
One of our key aims is to improve quality of service and reduce
cost of delivery in Media through process improvements and
automation. During the year, our automation strategy focussed on
rolling out three key MediaSuite tools in which we have invested
significantly over recent years: 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) streamlines 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. Within digital
services, we have also been developing specialist methods for
assessing paid search and paid social media spend. Over the next
year, we will utilise the recently acquired Digital Decisions
technology applications further to automate both data ingestion and
reporting of results to clients for Media Performance work.
Our shared services media delivery centre ("SDC") in Spain is
enabling media data analysis work to be centralised and
standardised. This reduces delivery costs and frees up the time of
specialist consultants in local markets for higher value-added
activities. It became fully operational at the beginning of 2019
and the level of work taken on from the network increased steadily
through the year. The SDC is already beginning to yield clear cost
savings as well as quality benefits for the Media practice.
Contract Compliance (branded as "FirmDecisions") supports brands
by helping to ensure that agencies deliver services as
contractually agreed through reviews conducted by a team of
specialists. FirmDecisions is regarded as the global leader in this
market, publicly acknowledged by industry bodies as an expert in
the field. Its strong revenue growth reflects growing demand by
advertisers for its in-depth financial compliance services as a
means of ensuring transparency and accountability among their media
buying partners. Firm Decisions continued to extend its global
client list with recent additions including Amex, Microsoft and
Sanofi as well as expanding its local operations in markets such as
Dubai, Germany and India.
Analytics and Tech
Analytics and Tech total revenue fell by 7% in the year to
GBP14.1 million (2018: GBP15.2 million) but this decline was
entirely due to the MarTech practice, comprising Stratigent and
Digital Balance, whose revenue fell by 39%. In contrast, Advanced
Analytics, the largest element, grew by 5% and AdTech more than
doubled its revenue with growth of 105%.
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 and in recent projects, factory capacity.
Its methods include market mix modelling, brand equity modelling
and forecasting which are increasingly supported by automated
planning tools that it delivers to clients.
During the 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 for an automotive group. This practice is managed
globally from the UK where the largest part of its team of data
scientists and analytics specialists is located, supported by a
growing delivery capability based in Spain. Its operations expanded
to France during the year with the appointment of a well-regarded
senior analytics specialist, who will contribute both to sales and
delivery of projects. This has already led to winning a major
project for a leading European airline. However, as previously
reported, revenue in the year was impacted in the first half by an
unexpected, substantial reduction in demand from a UK retail
client. As anticipated, the practice recovered well in the second
half. One challenge is that our analytics practice is competing for
data analysis skills that are in high demand by large companies in
sectors such as digital platforms and financial services. To
address this, we have established a graduate trainee scheme to help
develop our own talent pool.
Our AdTech practice, which was established two years ago, 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.
The rapid growth of our AdTech practice since its launch in 2018,
reflects the demand for its specialist services as well as the
expertise of the team that we have assembled. During the year, its
major projects included in-housing of digital media buying for two
global brands and for a leading global energy group based in the
USA. The latter resulted from the appointment of a US AdTech lead
in mid-2019. We anticipate further growth in this important
market.
Our MarTech practice comprised two units at the start of 2019,
Digital Balance in Australia and Stratigent in the USA. Both of
these provided similar website 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 provides a range of consulting,
analytics and optimisation services across a variety of website
analytics platforms, including Google Analytics and Adobe. Until
the middle of 2019, Digital Balance had grown its client base and
revenue consistently since its acquisition by the Group in 2017. In
the first half, its revenue increased by 36% compared to the same
period in 2018. However, in the second half of 2019, several major
clients deferred or cancelled projects unexpectedly, which led to
full year revenue falling by 15% compared to prior year. A new
leadership team has been appointed and will be integrating Digital
Balance more fully with the Australian media practice through joint
digital products and cross-selling to Media clients.
In the USA, Stratigent's revenue had been declining over several
years, mainly due to its business having focussed on a software
application whose use has been reducing in the USA. It also faced
increasing price competition from independent and offshore
suppliers. Actions taken at the beginning of 2019 to re-position
the business and target new clients failed to yield sufficient new
revenue. With a loss projected for 2019 and a very uncertain longer
term outlook, the business was wound down with effect from
September 2019. This led to an impairment charge of GBP5.8 million
being recognised as a highlighted item. The Chicago office where
Stratigent and AdIntel USA had been based was subsequently closed
and a sub-tenant found for the remainder of the lease.
Operating Profit by Segment
Underlying Operating Profit Operating profit
margin
FY19 FY18 Variance FY19 FY18
------- ------- ---------------- --------- --------
GBPm GBPm GBPm % % %
------- ------- ------- ------- --------- --------
Media 11.8 12.1 (0.2) (2%) 22% 22%
------- ------- ------- ------- --------- --------
Analytics and Tech 1.0 1.4 (0.4) (31%) 7% 9%
------- ------- ------- ------- --------- --------
Unallocated costs (6.6) (7.1) 0.5 7% - -
------- ------- ------- ------- --------- --------
Group 6.2 6.3 (0.2) (3%) 9% 9%
------- ------- ------- ------- --------- --------
Group Operating Profit of GBP6.2 million was slightly lower than
in 2018 with a reduction of GBP0.6 million in that of the main
operating segments, offset by a GBP0.5 million reduction in
unallocated central costs. This partly reflects more costs being
borne directly by the operating segments. The reduction in Media
profits was largely due to the international media group and the
USA. Analytics and Tech's fall in operating profit was mainly due
to the losses arising in Stratigent and Digital Balance, both of
which achieved small profits in 2018.
Outlook
In 2019, the Group made significant progress following the
AdIntel disposal that positions it well for the future. The
forthcoming closure of Accenture's media auditing practice
highlights the importance to clients of independence in our
business, and has led to significant new business wins.
However, in the current year, the COVID-19 pandemic is having an
adverse impact on our clients and our own business although this
varies between and within sectors and geographies. Business has
continued as usual for some clients while others have reduced their
service requirements for varying periods. Ebiquity's performance is
influenced by global economic and advertising conditions which
remain highly uncertain. Therefore, the outlook for our business in
2020 is difficult to predict with confidence and we continue to
withhold guidance.
We continue to monitor the trends in the market closely and to
maintain careful control over costs. We have strong liquidity
resulting from the sale of AdIntel, extension of our banking
facilities and the cost reduction measures already implemented. We
have also agreed modifications to our banking covenants from July
2020 to May 2021. The Board remains confident that, building on our
strategic position in the market and under the leadership of our
new CEO, Ebiquity is well-placed as we emerge from the crisis to
fulfil its potential as the leading independent media and marketing
consultancy operating on a global level.
Financial Review
Group revenues for the year ended 31 December 2019 fell by
GBP0.6 million or 1% to GBP68.7 million.
Underlying operating profit (statutory operating profit
excluding highlighted items) for 2019 was GBP6.2 million, a
decrease of GBP0.2 million or 3% from prior year. Project-related
costs (which comprise external partner and production costs)
increased by 0.5% from GBP8.8 million to GBP8.9million. Operating
expenses reduced by 1% to GBP53.7 million from GBP54.2 million. As
a result the operating margin remained in line with the prior year
at 9%.
Underlying profit before tax increased to GBP5.3 million in 2019
(2018: GBP5.2 million). Net finance costs were GBP0.9 million in
2019 compared with GBP1.2 million in 2018. The reduced cost
reflects lower average gross debt in 2019 compared with 2018.
There was a statutory operating loss (after highlighted items)
of GBP4.2 million compared to a loss of GBP1.4m in 2018.
Highlighted costs increased by GBP2.7 million as detailed below.
This led to a reported loss before tax of GBP5.1 million compared
to a loss of GBP2.5 million in 2018.
Highlighted items
Highlighted items before taxation for the continuing business
total GBP10.3 million in the year to December 2019, (2018: GBP7.7
million).
Highlighted items during the year included the following:
-- GBP1.2 million for purchased intangible asset amortisation (2018: GBP1.2 million)
-- GBP0.1 million for share --based payment expenses (2018: GBP0.2 million)
-- GBP1.3 million for severance and reorganisation costs
including Group management changes and the winding down of
Stratigent in the US (2018: GBP1.2 million)
-- GBP6.8 million relating to the impairment of goodwill and
intangibles of Stratigent and Digital Balance (2018: GBP2.6 million
impairment was recognised in relation to China)
-- GBP0.9 million on the adoption of IFRS 16 for the first time
relating to the capitalisation of onerous leases to the right of
use asset
-- GBP0.5 million relating to the relocation of the London office
-- GBP0.3 million costs incurred for the loan facility refinancing
-- GBP0.8 million credit in respect of adjustments to contingent
deferred consideration relating to Digital Balance.
Taxation
The underlying tax charge for the year for the continuing
operations in 2019 is GBP1.9 million (2018: GBP1.8 million). This
is due to an under-provision of tax recognised in the current year,
but relating to a prior year.
The total tax charge including on highlighted items was GBP1.5
million compared to GBP2.0 million in 2018.
Earnings per share
Underlying diluted earnings per share for 2019 was 3.6p (2018:
3.5p). There was a statutory diluted loss per share of 8.8p (2018:
diluted loss per share of 6.4p).
Dividend
Our Group is in a healthy financial position following the
AdIntel sale and extension of bank borrowing facilities to 2023.
However, in view of the uncertainty created by the COVID-19
outbreak and its impact on the global economy, the Board considers
it prudent to conserve the Group's cash resources during this time.
It will therefore not be proposing the payment of a dividend in
respect of 2019 at the forthcoming AGM, and will defer any dividend
recommendation until economic and business conditions are more
certain.
Equity
During 2019, 1,002,436 shares were issued upon the exercise of
employee share options. As a result, the number of shares in issue
increased to 80,115,626 (31 December 2018: 79,113,190).
Cash conversion
Year ended Year ended
31 December 31 December
2019 2018
GBP'000 GBP'000
------------------------------- -------- ------------
Reported cash from operations 5,657 4,435
Underlying cash from
operations 8,870 8,777
Underlying operating
profit/(loss) 6,167 6,342
Cash conversion 144% 138%
------------------------------- -------- ------------
Underlying cash from operations represents the cash flows from
operations excluding the impact of highlighted items. The
underlying net cash inflow from operations was GBP8.9 million
during 2019 (2018: GBP8.8 million).
Cash conversion was 144% in 2019 (2018: 138%) reflecting
continued improvements in the management of working capital.
Net debt and banking facilities
31 December 31 December
2019 2018
GBP'000 GBP'000
-------------- --------- ------------
Net cash 8,236 6,414
Bank debt(1) (14,000) (34,000)
Net debt(1) (5,764) (27,586)
-------------- --------- ------------
1. Bank debt in the statement of financial position includes
GBP0.2 million (2018: GBP0.1 million) 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.
At the beginning of the year, the Group repaid GBP20.0 million
of its borrowings on receipt of the proceeds from the AdIntel sale
which completed on 2 January 2019.
In September 2019, the Group refinanced its banking facilities
with Barclays and Royal Bank of Scotland. The new committed
facility comprises a revolving credit facility of GBP23.0 million,
of which GBP14.0 million was drawn on refinance, and GBP1.0 million
available as an overdraft. The facility has a maturity date of 20
September 2023.
During the year, the Group continued to trade within the limits
of its banking facilities and associated covenants. The covenants
applying on a quarterly basis until June 2020 are based on EBITDA
multiples as follows: interest cover > 4.0; adjusted leverage
< 2.5; and adjusted deferred consideration leverage < 3.0. In
response to the COVID-19 disruption, modified covenants have been
agreed with the lenders which will apply from July 2020 to May
2021. These will require the Group to maintain minimum liquidity of
at least GBP5 million at the end of every month during that period.
The covenants previously in force will apply again from June 2021
onwards.
Statement of financial position and net assets
A summary of the Group's balance sheet as at 31 December 2019
and 31 December 2018 is set out below:
31 December 31 December
2019 2018
GBP'000 GBP'000
------------------------------- -------- ------------
Goodwill and intangible
assets 35,172 43,251
Right of use asset(1) 8,339 -
Other non-current assets 3,549 2,149
Net asset held for sale(2) - 23,418
Net working capital 12,927 11,258
Other current liabilities (4,724) (2,251)
Lease liability(1) (9,590) -
Other non-current liabilities (1,423) (1,348)
Deferred consideration (14) (1,477)
Net debt (5,596) (27,486)
------------------------------- -------- ------------
Net assets 38,640 47,514
------------------------------- -------- ------------
1. A right of use asset and corresponding lease liability were
recognised in the year on adoption of IFRS 16 for the first
time.
2. The net asset held for sale in the prior year relates to net
assets of the AdIntel business, the sale of which completed on 2
January 2019.
Net assets as at 31 December 2019 decreased by GBP8.9 million to
GBP38.6 million (2018: GBP47.5 million). This principally reflects
a GBP5.8 million reduction in goodwill and intangible assets
through the impairment of goodwill in Stratigent, annual
amortisation on the intangibles of GBP1.2m and a GBP1.0 million
reduction on adopting IFRS 16 for the first time.
Post-balance sheet events
On 8 January 2020, the Group completed the purchase of Digital
Decisions B.V ('Digital Decisions'). The acquisition was for an
initial cash consideration of EUR700,000 (GBP597,000) with further
consideration payable in a mix of cash and Ebiquity plc shares. The
first deferred payment will be based on performance in the year to
31 December 2020 and the second payment will be based on the
average performance in the year to 31 December 2021 and the year to
31 December 2022.
On 3 February 2020, the Company announced that it will be
acquiring the outstanding 49% interest in its subsidiary Ebiquity
Italy Media Advisor S.r.l ('Ebiquity Italy') from its founders and
minority shareholders Arcangelo DiNieri and Maria Gabrielli. The
transaction will complete in May 2020. The total consideration of
EUR3.6 million is based on an average of Ebiquity Italy's profit
before tax and management charges for the years ending 31 December
2018 and 2019. Since the announcement date, the payment terms have
been amended. The consideration will now be paid in a combination
of cash and Ebiquity plc shares. At completion 25% of the total
consideration will be paid in Ebiquity plc shares and 5% in cash.
The remaining cash payments will be paid over the following nine
months.
Alan Newman
Interim Chief Executive Officer / Chief Financial and Operating
Officer
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
are:-
-- Net revenue
-- Like-for-like revenue growth
-- Underlying operating profit
-- Underlying operating margin
-- Underlying profit before tax
-- Underlying earnings per share
-- Underlying operating cash flow conversion
Net revenue is the result when project-related costs, comprising
external production costs, are deducted from revenue.
Underlying results are not intended to replace statutory results
but remove 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
their 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 the costs associated with
potential and completed acquisitions and disposals, adjustments to
the estimates of contingent consideration on acquired entities,
asset impairment charges, management restructuring and other
significant one-off items. Costs associated with acquisition
identification and early stage discussions with acquisition targets
are reported in underlying administrative expenses.
Further detail of highlighted items are set out within the
financial statements and the notes to the financial statements.
Consolidated income statement
for the year ended 31 December 2019
Year ended
Year ended 31 December 2018
31 December 2019 as restated (Note 1)
----------------------------------- -----------------------------------
Before Highlighted Before Highlighted
highlighted items highlighted items
items (note 3) Total items (note 3) Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
Revenue 2 68,733 - 68,733 69,368 - 69,368
Project-related costs (8,857) - (8,857) (8,813) - (8,813)
-------------------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
Net revenue 59,876 - 59,876 60,555 - 60,555
Cost of sales (27,355) - (27,355) (28,787) - (28,787)
-------------------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
Gross profit 32,521 - 32,521 31,768 - 31,768
Administrative expenses (26,354) (10,330) (36,684) (25,426) (7,695) (33,121)
-------------------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
Operating profit/(loss) 6,167 (10,330) (4,163) 6,342 (7,695) (1,353)
Finance income 9 - 9 25 - 25
Finance expenses (907) - (907) (1,176) - (1,176)
-------------------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
Net finance costs (898) - (898) (1,151) - (1,151)
-------------------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
Profit/(loss) before taxation from
continuing operations 5,269 (10,330) (5,061) 5,191 (7,695) (2,504)
Taxation (charge)/credit - continuing
operations 4 (1,931) 454 (1,477) (1,778) (207) (1,985)
-------------------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
Profit/(loss) for the year -
continuing operations 3,338 (9,876) (6,538) 3,413 (7,902) (4,489)
-------------------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
Net (loss)/profit from discontinued
operations 5 - (1,018) (1,018) 644 (1,489) (845)
-------------------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
Profit/(loss) for the year 3,338 (10,894) (7,556) 4,057 (9,391) (5,334)
-------------------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
Attributable to:
Equity holders of the parent 2,875 (10,882) (8,007) 3,568 (9,374) (5,806)
Non -- controlling interests 463 (12) 451 489 (17) 472
-------------------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
3,338 (10,894) (7,556) 4,057 (9,391) (5,334)
-------------------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
Earnings per share - continuing
operations
Basic 6 (8.79)p (6.35)p
Diluted 6 (8.79)p (6.35)p
-------------------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
Earnings per share - discontinued
operations
Basic 6 (1.28)p (1.05)p
Diluted 6 (1.28)p (1.05)p
-------------------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
Consolidated statement of comprehensive income
for the year ended 31 December 2019
Year ended Year ended
31 December 31 December
2019 2018
GBP'000 GBP'000
------------------------------------------------------------------- ----------- -----------
(Loss) for the year (7,556) (5,334)
Other comprehensive (expense)/income:
Items that will not be reclassified subsequently to profit or loss
Exchange differences on translation of overseas subsidiaries (716) 267
------------------------------------------------------------------- ----------- -----------
Total other comprehensive (expense)/income for the year (716) 267
------------------------------------------------------------------- ----------- -----------
Total comprehensive expense for the year (8,272) (5,067)
------------------------------------------------------------------- ----------- -----------
Attributable to:
Equity holders of the parent (8,723) (5,539)
Non -- controlling interests 451 472
------------------------------------------------------------------- ----------- -----------
(8,272) (5,067)
------------------------------------------------------------------- ----------- -----------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2019
31 December 31 December
2019 2018
Note GBP'000 GBP'000
------------------------------------------------ ---- ----------- -----------
Non -- current assets
Goodwill 7 28,409 34,774
Other intangible assets 8 6,763 8,477
Property, plant and equipment 2,563 1,170
Right-of-use assets 9 8,339 -
Deferred tax asset 986 979
------------------------------------------------ ---- ----------- -----------
Total non -- current assets 47,060 45,400
------------------------------------------------ ---- ----------- -----------
Current assets
Trade and other receivables 27,586 29,408
Assets held for sale 10 - 27,734
Cash and cash equivalents 8,236 8,793
------------------------------------------------ ---- ----------- -----------
Total current assets 35,822 65,935
------------------------------------------------ ---- ----------- -----------
Total assets 82,882 111,335
------------------------------------------------ ---- ----------- -----------
Current liabilities
Trade and other payables (5,575) (7,510)
Liabilities held for sale 10 - (4,316)
Accruals and contract liabilities (9,084) (10,640)
Financial liabilities 11 22 (2,822)
Current tax liabilities 4 (4,152) (1,358)
Provisions (300) (570)
Lease liabilities 9 (1,834) -
Deferred tax liability (272) (323)
------------------------------------------------ ---- ----------- -----------
Total current liabilities (21,195) (27,539)
------------------------------------------------ ---- ----------- -----------
Non -- current liabilities
Financial liabilities 11 (13,868) (34,934)
Provisions (387) (67)
Lease liabilities 9 (7,756) -
Deferred tax liability (1,036) (1,281)
------------------------------------------------ ---- ----------- -----------
Total non -- current liabilities (23,047) (36,282)
------------------------------------------------ ---- ----------- -----------
Total liabilities (44,242) (63,821)
------------------------------------------------ ---- ----------- -----------
Total net assets 38,640 47,514
------------------------------------------------ ---- ----------- -----------
Equity
Ordinary shares 20,029 19,778
Share premium 46 44
Other reserves 4,428 5,144
Retained earnings 12,958 21,556
------------------------------------------------ ---- ----------- -----------
Equity attributable to the owners of the parent 37,461 44,522
Non -- controlling interests 1,179 992
------------------------------------------------ ---- ----------- -----------
Total equity 38,640 47,514
------------------------------------------------ ---- ----------- -----------
Consolidated statement of changes in equity
for the year ended 31 December 2019
Equity
attributable
to owners Non- controlling
Ordinary Share Other Retained of the Total
shares premium reserves(1) earnings parent interests equity
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- ---- ---------- ------- ----------- ---------- ------------- ------------------ ---------
31 December 2017 19,549 21 4,877 27,495 51,942 1,040 52,982
(Loss)/profit
for the year - - - (5,806) (5,806) 472 (5,334)
Other comprehensive
income - - 267 - 267 - 267
-------------------- ---- ---------- ------- ----------- ---------- ------------- ------------------ ---------
Total comprehensive
income/(expense)
for the year - - 267 (5,806) (5,539) 472 (5,067)
Shares issued
for cash 229 23 - - 252 - 252
Share options
charge 3 - - - 394 394 - 394
Dividends paid
to shareholders 12 - - - (527) (527) - (527)
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 year - - - (8,007) (8,007) 451 (7,556)
Other comprehensive
expense - - (716) - (716) - (716)
-------------------- ---- ---------- ------- ----------- ---------- ------------- ------------------ ---------
Total comprehensive
(expense)/income
for the year - - (716) (8,007) (8,723) 451 (8,272)
-------------------- ---- ---------- ------- ----------- ---------- ------------- ------------------ ---------
Shares issued
for cash 251 2 - - 253 - 253
Share options
charge 3 - - - 195 195 - 195
Acquisition of
minority interest - - - (252) (252) (83) (335)
Dividends paid
to shareholders 12 - - - (534) (534) - (534)
Dividends paid
to non-controlling
interests - - - - - (181) (181)
-------------------- ---- ---------- ------- ----------- ---------- ------------- ------------------ ---------
31 December 2019 20,029 46 4,428 12,958 37,461 1,179 38,640
-------------------- ---- ---------- ------- ----------- ---------- ------------- ------------------ ---------
1. Includes a credit of GBP3,667,000 (31 December 2018:
GBP3,667,000) in the merger reserve, a gain of GBP2,239,000 (31
December 2018: GBP2,955,000) recognised in the translation reserve,
and is partially offset by a debit balance of GBP1,478,000 (31
December 2018: GBP1,478,000) in the ESOP reserve.
Consolidated statement of cash flows
for the year ended 31 December 2019
Year ended Year ended
31 December 31 December
2019 2018
Note GBP'000 GBP'000
--------------------------------------------------------------- ---- ----------- -----------
Cash flows from operating activities
Cash generated from operations 13 5,657 7,631
Finance expenses paid (727) (1,093)
Finance income received 9 25
Income taxes paid (1,345) (1,952)
--------------------------------------------------------------- ---- ----------- -----------
Net cash generated from operating activities 3,594 4,611
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired - -
Disposal of subsidiaries 5 24,845 -
Payments to acquire non-controlling interest 11 (335) -
Payments in respect of contingent consideration 11 (648) (858)
Purchase of property, plant and equipment (2,024) (643)
Purchase of intangible assets 8 (1,211) (1,141)
--------------------------------------------------------------- ---- ----------- -----------
Net cash generated by/(used in) investing activities 20,627 (2,642)
Cash flows from financing activities
Proceeds from issue of share capital (net of issue costs) 253 252
Proceeds from bank borrowings 11 - 2,000
Repayment of bank borrowings 11 (20,000) (1,250)
Bank loan fees paid (204) (70)
Repayment of lease liabilities 9 (1,192) -
Dividends paid to shareholders 12 (534) (527)
Dividends paid to non -- controlling interests (518) (190)
Capital repayment of finance leases - (4)
--------------------------------------------------------------- ---- ----------- -----------
Net cash flow (used in)/generated by financing activities (22,195) 211
--------------------------------------------------------------- ---- ----------- -----------
Net increase in cash, cash equivalents and bank overdrafts 2,026 2,180
Cash, cash equivalents and bank overdraft at beginning of year 6,414 4,325
Effects of exchange rate changes on cash and cash equivalents (204) (91)
--------------------------------------------------------------- ---- ----------- -----------
Group cash and cash equivalents at the end of the year 8,236 6,414
--------------------------------------------------------------- ---- ----------- -----------
Notes to the consolidated financial statements
for the year ended 31 December 2019
1. Accounting policies
General information
Ebiquity plc (the 'Company') and its subsidiaries (together, the
'Group') exists to help brands optimise return on investment from
their marketing spend, working with many of the world's leading
advertisers to improve marketing outcomes and enhance business
performance. The Group has 18 offices.
The Company is a public limited company, which is listed on the
London Stock Exchange's AIM and is incorporated and domiciled in
the UK. The address of its registered office is Chapter House, 16
Brunswick Place, London N1 6DZ.
Basis of preparation
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards,
International Accounting Standards and IFRS IC Interpretations
(collectively 'IFRSs') issued by the International Accounting
Standards Board ('IASB') as adopted by the European Union ('Adopted
IFRSs') and with those parts of the Companies Act 2006 applicable
to companies preparing their financial statements under Adopted
IFRSs.
The consolidated financial statements have been prepared on a
going concern basis. The Group meets its day-to-day working capital
requirements through its cash reserves and borrowings, described in
note 11. As at 31 December 2019, the Group had cash balances of
GBP8,236,000 and undrawn bank facilities available of
GBP10,000,000, and was cash generative and within its banking
covenants.
In assessing the going concern of the Group, the Directors have
considered the Group's forecasts and projections, taking account of
reasonably possible changes in trading performance and the Group's
cash flows, liquidity and bank facilities.
In accordance with the guidance issued by the Financial
Reporting Council, the Directors have given specific consideration
to the potential impact of the COVID-19 pandemic on the global
economy, business environment in which the Group operates and its
business in particular. As at the date of this annual report this
impact remained highly uncertain and difficult to predict. The
Directors have accordingly considered a range of scenarios relating
to the impact of COVID-19 which they believe are plausible in the
context of the Group's clients, services and operations and
assessed their impact on the Group's cash flows and liquidity for a
period of 12 months from the date of approval of these financial
statements. In this assessment, the Directors had regard to the
potential reduction in receipts from clients that may arise from
the COVID-19 disruption and to options that may be available to the
Group to mitigate any resulting negative impact on its cash flows
and liquidity. These include: (i) drawdown of all available
borrowing facilities; (ii) reductions in its operating and capital
expenditure and (iii) benefit of measures taken by Governments and
central banks in the countries in which the Group operates to
assist businesses and employees, directly or indirectly to meet
their financial obligations and maintain their business operations
during the period of the pandemic.
As a result of these scenarios, the Directors consider that the
Group will have sufficient liquidity within its existing bank
facilities, totalling GBP24,000,000, to meet its obligations during
the next 12 months.
The Directors consulted with the lenders, Barclays and Royal
Bank of Scotland, to negotiate covenant waivers where required in
order to negate the risk of any future covenant breaches. The
existing covenants remain in place for the 12 months to March 2020
and June 2020. The March 2020 covenants have already been achieved,
and there are no concerns over meeting the June 2020 covenants;
revenue would have to reduce by 21% between May and June 2020
compared to the latest prudent expectations for a breach to
result.
Agreement in principle has been reached with the lenders to
replace the existing covenants for September 2020, December 2020
and March 2021 with a monthly liquidity test that will be in place
between July 2020 and May 2021. This is subject to the agreement of
legal documentation with the lenders which is not yet in place, but
which the Directors are confident will be shortly. Under the
Directors' base case scenario, there are no forecast covenant
breaches. The Directors downside scenario indicates that the
covenant test at May 2021 is the most sensitive but is not
breached. If revised expectations for this period were to worsen
then the Directors would take the appropriate action ahead of time
to mitigate the likelihood of a breach.
The covenants revert to the existing measures as at June 2021,
which under the current base case scenario would be breached and
would need to be waived. The Directors are confident, based on the
support of the lenders, that waivers would be granted, however
there is a risk that this may not occur. This, and the risk that
legal documentation is not agreed to replace the existing covenants
for September 2020 to May 2021, represent a material uncertainty
that casts significant doubt on the Group's ability to continue to
operate as a going concern. The financial statements do not include
the adjustments that would result if the Group and Company were
unable to continue as a going concern.
The financial statements have been prepared under the historical
cost convention, as modified by the revaluation of financial assets
and financial liabilities at fair value through profit or loss.
The consolidated financial statements are presented in pounds
sterling and rounded to the nearest thousand.
The principal accounting policies adopted in these consolidated
financial statements are set out below. These policies have been
consistently applied to all periods presented, unless otherwise
stated.
On 13 February 2018, the Group agreed to sell its Advertising
Intelligence ('AdIntel') business to Nielsen Media Research Limited
('Nielsen'), a subsidiary of Nielsen Holdings plc; the transaction
was approved as at 31 December 2018 and completion took place on 2
January 2019. On 19 March 2018, the Group entered into an agreement
to sell the business assets of its Reputation division; completion
took place on 31 March 2018. Collectively, these divisions formed
the Intel segment. Accordingly, the profit on disposal arising in
the current year and the results in the comparative year of this
segment have been presented within discontinued operations in the
income statement. The assets and liabilities of the AdIntel
business were reported as held for sale in the statement of
financial position in the comparative year.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries). Control is achieved where the Company has the
power to govern the financial and operating policies of an investee
entity so as to obtain benefits from its activities. The results of
each subsidiary are included from the date that control is
transferred to the Group until the date that control ceases.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used in
line with those used by the Group. All intra -- group transactions,
balances, income and expenses are eliminated on consolidation.
Non -- controlling interests represent the portion of the
results and net assets in subsidiaries that is not held by the
Group.
Revenue recognition
Revenue from providing services is recognised in the accounting
period in which the services are rendered. For fixed-price
contracts, revenue is recognised based on the actual service
provided to the end of the reporting period as a proportion of the
total services to be provided because the customer receives and
uses the benefits simultaneously. This is determined based on the
actual labour hours spent relative to the total expected labour
hours.
Estimates of revenues, costs or extent of progress toward
completion are revised if circumstances change. Any resulting
increases or decreases in estimated revenues or costs are reflected
in profit or loss in the period in which the circumstances that
give rise to the revision become known by management.
In the case of fixed-price contracts, the customer pays the
fixed amount based on a payment schedule. If the services rendered
by the Company exceed the payment, a contract asset is recognised.
If the payments exceed the services rendered, a contract liability
is recognised.
Critical accounting estimates and judgements
In preparing the consolidated financial statements, the
Directors have made certain estimates and judgements relating to
the reporting of results of operations and the financial position
of the Group. Actual results may significantly differ from those
estimates, often as a result of the need to make assumptions about
matters which are uncertain. The estimates and judgements discussed
below are considered by the Directors to be those that have a
critical accounting impact to the Group's financial statements.
Critical accounting estimates include the terminal growth rate
used in impairment assessments, inputs to share option accounting
fair value models and amounts to capitalise as intangible assets.
These estimates are reached with reference to historical
experience, supporting detailed analysis and, in the case of
impairment assessments and share option accounting, external
economic factors.
Critical accounting judgements include the treatment of events
after the reporting period as adjusting or non-adjusting and the
determination of segments for segmental reporting, based on the
reports reviewed by the Executive Directors that are used to make
strategic decisions. These judgements are determined at a Board
level based on the status of strategic initiatives of the
Group.
Carrying value of goodwill and other intangible assets
Impairment testing requires management to estimate the value --
in -- use of the cash -- generating units to which goodwill and
other intangible assets have been allocated. The value -- in-use
calculation requires estimation of future cash flows expected to
arise from the cash -- generating unit and the application of a
suitable discount rate in order to calculate present value. The
sensitivity around the selection of particular assumptions
including growth forecasts and the pre -- tax discount rate used in
management's cash flow projections could significantly affect the
Group's impairment evaluation and therefore the Group's reported
assets and results. Further details, including a sensitivity
analysis, are included in notes 10 and 11 to the consolidated
financial statements.
Contingent consideration
The Group has recorded liabilities for contingent consideration
on acquisitions made in the current and prior periods. The
calculation of the contingent consideration liability requires
judgements to be made regarding the forecast future performance of
these businesses for the earn -- out period. Any changes to the
fair value of the contingent consideration after the measurement
period are recognised in the income statement within administrative
expenses as a highlighted item.
Taxation
The Group is subject to income taxes in all the territories in
which it operates, and judgement and estimates of future
profitability are required to determine the Group's deferred tax
position. If the final tax outcome is different to that assumed,
resulting changes will be reflected in the income statement, unless
the tax relates to an item charged to equity, in which case the
changes in the tax estimates will also be reflected in equity. The
Group believes that its accruals for tax liabilities are adequate
for all open audit years based on its assessment of many factors
including past experience and interpretations of tax law. This
assessment relies on estimates and assumptions and may involve a
series of complex judgements about future events. To the extent
that the final tax outcome of these matters is different than the
amounts recorded, such differences will impact income tax expense
in the period in which such determination is made.
Provisions
The Group provides for certain costs of reorganisation that has
occurred due to the Group's acquisition and disposal activity. When
the final amount payable is uncertain, these are classified as
provisions. These provisions are based on the best estimates of
management.
Adoption of new standards and interpretations
On 1 January 2019, the Group adopted the following amendments
which are effective for accounting periods beginning on or after 1
January 2019. 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.
On adoption of IFRS 16, the Group recognised lease liabilities
in relation to leases which had previously been classified as
'operating leases' under the principles of IAS 17 'Leases'. These
liabilities were measured at the present value of the remaining
lease payments, discounted using the lessee's incremental borrowing
rate as of 1 January 2019. The weighted average lessee's
incremental borrowing rate applied to the lease liabilities on 1
January 2019 was 3.17%.
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.
Reconciliation of operating lease commitments as at 31 December
2018 to lease liabilities recognised as at 1 January 2019:
Total
GBP'000
--------
Operating lease commitments disclosed
as at 31 December 2018 8,351
Discounted using the lessee's incremental borrowing rate
of 3.2% at the date of initial application 8,095
(Less): short-term leases not recognised
as a liability (554)
(Less): leases part of the AdIntel
sale (1,429)
Add: contracts reassessed as lease
contracts 56
(Less): change in lease term (417)
Lease liabilities recognised as
at 1 January 2019 5,751
--------
Of which are:
Current lease liabilities 969
Non-current lease liabilities 4,782
--------
5,751
--------
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:
Statement
Income statement of financial Cash flow
position statement
debit/(credit) debit/(credit) inflow/(outflow)
---------------------------- -------------------- --------------- -----------------
Operating lease rentals (1,437) - -
Depreciation charge 1,595 (1,595) -
Interest expense 253 (253) -
Highlighted items 462 - -
Right-of-use assets - 10,576 -
Impairment of right-of-use - (642) -
assets
Lease liabilities - (9,337) -
Accruals - 952 -
Other debtors - (574) -
Deferred tax asset (152) 152 -
Cash flows from operating
activities - - 1,192
Cash flows from financing
activities - - (1,192)
---------------------------- -------------------- --------------- -----------------
Total impact 721 (721) -
---------------------------- -------------------- --------------- -----------------
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
then recognises 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 an 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 to the local
functional currency are subjected to periodic 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.
Presentational change in income statement
During the year, the Group changed its accounting policy with
respect to the classification of costs previously included within
cost of sales. Cost of sales historically comprised external
production costs, direct salary, commission and freelancer costs.
The Group now records external production costs within a new cost
line named project-related costs. On project-related costs being
deducted from revenue, the result is net revenue. Direct salary,
commission and freelancer costs remain to be recorded within costs
of sales which is deducted from net revenue to get to gross
profit.
The Group believes that this revised classification is more
appropriate for the continuing consultancy-based business. The
impact of this voluntary change in accounting policy is purely
presentational. There is no change to gross profit or operating
profit in the consolidated financial statements and there are no
further impacts in the consolidated financial statements.
The comparative income statement, for the year ended 31 December
2018, has been restated to reflect the change in accounting policy
as detailed above.
The change reflects a reclassification of external production
costs of GBP8,813,000 to project-related costs, with net revenue of
GBP60,555,000 resulting. Sales commission, direct salary costs and
freelancer costs of GBP28,787,000 are then included within cost of
sales, with gross profit of GBP31,768,000 resulting. This is no
change from the gross profit reported in the 2018 financial
statements. Administrative expenses remain unchanged and therefore
the resulting underlying operating profit remains at
GBP6,342,000.
The impact of the change in accounting policy is shown in the
table below:
Year ended 31 Dec 2018 Impact of
Year ended 31 Dec 2018 (reclassified) reclassification
------------------------------------- ------------------------------------- -----------------
Before Highlighted Total Before Highlighted Total Total
highlighted items highlighted items
items items
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 69,368 - 69,368 69,368 - 69,368 -
Project-related
costs - - - (8,813) - (8,813) (8,813)
------------------ ------------ ------------ --------- ------------ ------------ --------- -----------------
Net revenue - - - 60,555 - 60,555 60,555
Cost of sales (37,600) - (37,600) (28,787) - (28,787) 8,813
------------------ ------------ ------------ --------- ------------ ------------ --------- -----------------
Gross profit 31,768 - 31,768 31,768 - 31,768 -
Administrative
expenses (25,426) (7,695) (33,121) (25,426) (7,695) (33,121) -
------------------ ------------ ------------ --------- ------------ ------------ --------- -----------------
Operating profit 6,342 (7,695) (1,353) 6,342 (7,695) (1,353) -
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.
Certain operating segments have been aggregated to form three
reportable segments: Media, Analytics & Tech and Discontinued
operations:
-- Media includes our Media Performance, Media Management and Contract Compliance services;
-- Analytics & Tech consists of our Advanced Analytics, MarTech and AdTech services; and
-- Discontinued operations comprise Intel, the advertising
monitoring service, and the Reputation management and research
services.
The Executive Directors are the Group's chief operating decision
-- maker. They assess the performance of the operating segments
based on operating profit before highlighted items. This
measurement basis excludes the effects of non -- recurring
expenditure from the operating segments such as restructuring costs
and purchased intangible amortisation. The measure also excludes
the effects of equity -- settled share -- based payments. 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 year ended 31 December 2019 is as
follows:
Year ended 31 December 2019
Analytics & Reportable Discontinued
Media Tech segments Unallocated operations Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------ ------- ----------- ---------- ----------- ------------ -------
Revenue 54,585 14,148 68,733 - - 68,733
Operating profit/(loss) before highlighted items 11,845 966 12,811 (6,644) - 6,167
Total assets 69,382 11,581 80,963 1,919 - 82,882
------------------------------------------------ ------- ----------- ---------- ----------- ------------ -------
Unsatisfied long-term contracts
The following table shows unsatisfied performance obligations
results from long-term contracts:
Year ended Year ended
31 December 31 December
2019 2018
GBP'000 GBP'000
------------------------------------------------------------------------- ----------- -----------
Aggregate amount of the transaction price allocated to long-term
contracts that are partially or fully unsatisfied as at 31 December 2019 304 2,152
------------------------------------------------------------------------- ----------- -----------
It is expected that 97% of the transaction price allocated to
the unsatisfied contracts as of 31 December 2019 will be recognised
during the next reporting period (31 December 2018: 68%); the
remaining 3% will be recognised in the 2021 financial year (31
December 2018: 32% to be recognised in 2020).
Significant changes in contract assets and liabilities
Contract assets have increased from GBP8,003,000 to GBP9,366,000
and contract liabilities have increased from GBP3,979,000 to
GBP4,635,000 from 31 December 2018 to 31 December 2019.
Year ended 31 December 2018
Analytics & Reportable Discontinued
Media Tech segments Unallocated operations Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------ ------- ----------- ---------- ----------- ------------ -------
Revenue 54,179 15,189 69,368 - 20,260 89,628
Operating profit/(loss) before highlighted items 12,073 1,401 13,474 (7,129) 988 7,333
Total assets 60,832 14,176 75,008 8,593 27,734 111,335
------------------------------------------------ ------- ----------- ---------- ----------- ------------ -------
A reconciliation of segment operating profit before highlighted
items to total profit before tax is provided below:
Year ended Year ended
31 December 31 December
2019 2018
GBP'000 GBP'000
------------------------------------------------------------- ----------- -----------
Reportable segment operating profit before highlighted items 12,811 13,474
Unallocated costs(1) :
Staff costs (3,428) (4,794)
Property costs (1,513) (322)
Exchange rate movements (208) 121
Other administrative expenses (1,495) (2,137)
------------------------------------------------------------- ----------- -----------
Operating profit before highlighted items 6,167 6,342
Highlighted items (note 3) (10,330) (7,695)
------------------------------------------------------------- ----------- -----------
Operating loss (4,163) (1,353)
Net finance costs (898) (1,151)
------------------------------------------------------------- ----------- -----------
(Loss) before tax (5,061) (2,504)
------------------------------------------------------------- ----------- -----------
(1.) Unallocated costs comprise central costs that are not
considered attributable to the segments.
A reconciliation of segment total assets to total consolidated
assets is provided below:
31 December 31 December
2019 2018
GBP'000 GBP'000
------------------------------------- ----------- -----------
Total assets for reportable segments 80,963 102,742
Unallocated amounts:
Property, plant and equipment - 448
Other intangible assets 642 815
Other receivables 868 1,654
Cash and cash equivalents 332 5,034
Deferred tax asset 77 642
------------------------------------- ----------- -----------
Total assets 82,882 111,335
------------------------------------- ----------- -----------
The table below presents revenue and non -- current assets by
geographical location:
Year ended Year ended
31 December 2019 31 December 2018
--------------------------- ---------------------------
Revenue by Revenue by
location of Non -- current location of Non -- current
customers assets customers assets
GBP'000 GBP'000 GBP'000 GBP'000
-------------------- ----------- -------------- ----------- --------------
United Kingdom 33,176 27,802 26,009 44,078
Rest of Europe 18,783 7,402 33,113 9,221
North America 8,951 3,416 18,345 6,820
Rest of world 7,823 7,454 12,161 12,116
-------------------- ----------- -------------- ----------- --------------
68,733 46,074 89,628 72,235
Deferred tax assets - 986 - 1,019
-------------------- ----------- -------------- ----------- --------------
Total 68,733 47,060 89,628 73,254
-------------------- ----------- -------------- ----------- --------------
No single customer (or group of related customers) contributes
10% or more of revenue.
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.
Year ended Year ended
31 December 2019 31 December 2018
----------------------------- -----------------------------
Cash Non -- cash Total Cash Non -- cash Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------------- ------- ----------- ------- ------- ----------- -------
Administrative expenses
Share option (credit)/charge (78) 195 117 (127) 350 223
Amortisation of purchased intangibles - 1,169 1,169 - 1,240 1,240
Impairment of goodwill - 6,751 6,751 - 2,607 2,607
Severance and reorganisation costs 1,333 - 1,333 826 331 1,157
Acquisition, integration and strategic costs 998 (38) 960 2,050 419 2,469
-------------------------------------------------------- ------- ----------- ------- ------- ----------- -------
Total highlighted items before tax 2,253 8,077 10,330 2,749 4,947 7,696
Taxation (credit)/charge (536) 82 (454) (242) 448 206
-------------------------------------------------------- ------- ----------- ------- ------- ----------- -------
Total highlighted items after tax - continuing
operations 1,717 8,159 9,876 2,507 5,395 7,902
-------------------------------------------------------- ------- ----------- ------- ------- ----------- -------
Highlighted items - discontinued operations 2,521 (1,503) 1,018 982 507 1,489
-------------------------------------------------------- ------- ----------- ------- ------- ----------- -------
Total highlighted items 4,238 6,656 10,894 3,489 5,902 9,391
-------------------------------------------------------- ------- ----------- ------- ------- ----------- -------
Amortisation of purchased intangibles relates to acquisitions
made in the current financial year of GBPnil and to acquisitions
made in prior years of GBP1,169,000 (31 December 2018: GBPnil in
the current financial year and GBP1,240,000 in prior years).
Separate disclosure is considered relevant because amortisation of
purchased intangibles has no correlation to underlying
profitability of the Group.
In the current year, a non-cash IFRS 2 charge of GBP195,000 (31
December 2018: GBP350,000) was recorded. Separate disclosure is
considered relevant to isolate charges and credits which are
subject to volatility as a result of non-trading factors.
Impairment of goodwill and intangibles of GBP6,751,000 (2018:
GBP2,607,000) has been recognised in the year. GBP5,844,000 is in
relation to the impairment of goodwill, purchased intangibles and
internally generated intangibles held in Stratigent LLC. The
impairment was determined with reference to the 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. A further impairment of GBP907,000 was recognised
in relation to the goodwill held in Digital Balance Australia Pty
Limited; the impairment was determined, and is equal to, the
downward revision of the contingent consideration payable.
Total severance and reorganisation costs of GBP1,333,000 (31
December 2018: GBP1,157,000) were recognised during the year,
relating to severances in the UK, the US and Germany as part of
management restructuring in those countries. Separate disclosure is
considered relevant as these charges are non-recurring and not
reflective of the underlying operating costs of the business.
Total acquisition, integration and strategic costs of GBP960,000
(31 December 2018: GBP2,469,000) were recognised during the year,
primarily consisting of GBP641,000 being the recognition of, and
movement in the year of, impairment to the right-of-use assets
recognised in relation to the London, Chicago, Sydney, and Hamburg
office leases in accordance with IFRS 16. A further GBP501,000 was
incurred in relation to one-off costs associated with the
relocation to the new London premises and GBP262,000 was incurred
in relation to office costs incurred on vacated office space in
Hamburg, Sydney, and Chicago. GBP257,000 was then incurred in
relation to the refinancing of the loan facility. Costs of
GBP78,000 were also recognised in relation to the acquisition of
Digital Decisions B.V, which completed on 8 January 2020; see note
16 for further details. Partially offsetting this is the adjustment
to the fair value of contingent consideration amounting to a credit
of GBP779,000, predominantly arising in relation to the downward
revision of the amounts payable in relation to the Digital Balance
Australia Pty Limited acquisition. Separate
disclosure is considered relevant as these charges are
non-recurring and not reflective of the underlying operating costs
of the business.
Current tax arising on the highlighted items is included as a
cash item, while deferred tax on highlighted items is included as a
non-cash item. Refer to note 4 for more detail.
Highlighted items on discontinued operations in the current year
comprise the profits on disposal of the AdIntel and the Reputation
business respectively of GBP1,408,000 and GBP36,000 and the tax
charge arising thereon of GBP2,462,000.
As at 31 December 2019, GBP1,526,000 of the GBP2,254,000 cash
highlighted items had been settled (31 December 2018: GBP1,043,000
of the GBP2,749,000 cash highlighted items had been settled).
4. Taxation charge/(credit)
Year ended Year ended
31 December 2019 31 December 2018
--------------------------------- ---------------------------------
Before Before
highlighted Highlighted highlighted Highlighted
items items Total items items Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------ ----------- ----------- ------- ----------- ----------- -------
UK tax
Current year 298 (383) (85) 795 (148) 647
Adjustment in respect of prior year 494 - 494 148 - 148
------------------------------------------------ ----------- ----------- ------- ----------- ----------- -------
792 (383) 409 943 (148) 795
Foreign tax
Current year 1,404 (153) 1,251 806 (94) 712
Adjustment in respect of prior year 120 - 120 170 - 170
------------------------------------------------ ----------- ----------- ------- ----------- ----------- -------
1,524 (153) 1,371 976 (94) 882
------------------------------------------------ ----------- ----------- ------- ----------- ----------- -------
Total current tax 2,316 (536) 1,780 1,919 (242) 1,677
------------------------------------------------ ----------- ----------- ------- ----------- ----------- -------
Deferred tax
Origination and reversal of temporary
differences (295) 82 (213) 86 449 535
Adjustment in respect of prior year (90) - (90) (227) - (227)
------------------------------------------------ ----------- ----------- ------- ----------- ----------- -------
Total tax charge/(credit) 1,931 (454) 1,477 1,778 207 1,985
------------------------------------------------ ----------- ----------- ------- ----------- ----------- -------
The difference between tax as charged in the financial
statements and tax at the nominal rate is explained below:
Year ended Year ended
31 December 31 December
2019 2018
GBP'000 GBP'000
----------------------------------------------------- ----------- -----------
Loss before tax (5,061) (2,501)
----------------------------------------------------- ----------- -----------
Corporation tax at 19.00% (31 December 2018: 19.00%) (962) (475)
Non -- deductible taxable expenses 1,139 1,602
Overseas tax rate differential 361 204
Overseas losses not recognised 149 563
Losses utilised not previously recognised 266 -
Adjustment in respect of prior years 524 91
----------------------------------------------------- ----------- -----------
Total tax charge 1,477 1,985
----------------------------------------------------- ----------- -----------
Following the Budget on 11 March 2020, the corporation tax rate
effective from 1 April 2020 and 1 April 2021 will remain at 19%.
This supersedes the announcement on 6 September 2016 which detailed
a reduction to 17% from 1 April 2020.
The table below shows a reconciliation of the current tax
liability for each year end:
GBP'000
-------------------------------------------------- -------
At 1 January 2018 1,598
Corporation tax payments (2,287)
Corporation tax refunds 334
Under-provision in relation to prior years 321
Provision for the year ended 31 December 2018 1,344
Foreign exchange 48
At 31 December 2018 1,358
Corporation tax payments (1,499)
Corporation tax refunds 151
Under-provision in relation to prior years 614
Provision for the year ended 31 December 2019 (1) 3,629
Foreign exchange (101)
At 31 December 2019 4,152
-------------------------------------------------- -------
1. The provision for the current year includes GBP2,462,000 in
relation to the discontinued operation.
5. Discontinued operations
On 12 February 2018, the Group agreed to dispose of the AdIntel
business to Nielsen for gross consideration of GBP26,000,000. This
disposal was completed on 2 January 2019. The gross consideration
was dependent upon a working capital target position at the date of
completion. The working capital acquired by Nielsen was below this
target and a resulting repayment was made to Nielsen of
GBP1,155,000 on 31 October 2019; net consideration was therefore
GBP24,845,000. The results of this division have been presented
within discontinued operations as appropriate.
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. The
consideration payable was dependent upon the revenue performance of
the business during the 12 months following completion. The
consideration resulting was GBP36,000, half of which was paid in
the year and the balance is payable in June 2020. The results of
this division have been presented within discontinued operations as
appropriate.
The financial performance and cash flow information presented
below reflects the AdIntel results for the year ended 31 December
2018 and the profit on disposal recognised in 2019 on the sale
completing on 2 January 2019, and the Reputation results for the
three months to 31 March 2018, the profit on disposal recognised in
2018 and the contingent consideration recognised in 2019.
The table below summarises the income statement for the
discontinued business units for both the current and the prior
year:
Year ended Year ended
31 December 2019 31 December 2018
---------------------------- ------------------------------
AdIntel Reputation Total AdIntel Reputation Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- ------- ---------- ------- -------- ---------- --------
Revenue - - - 20,074 186 20,260
Cost of sales - - - (11,999) (203) (12,202)
---------------------------------------- ------- ---------- ------- -------- ---------- --------
Gross profit - - - 8,075 (17) 8,058
Administrative expenses - - - (6,681) (92) (6,773)
Impairment of asset held for sale - - - (297) - (297)
---------------------------------------- ------- ---------- ------- -------- ---------- --------
Operating profit/(loss) - - - 1,097 (109) 988
Highlighted items (1,408) (36) (1,444) (1,879) 34 (1,845)
---------------------------------------- ------- ---------- ------- -------- ---------- --------
(Loss) before tax (1,408) (36) (1,444) (782) (75) (857)
Tax 2,455 7 2,462 12 - 12
---------------------------------------- ------- ---------- ------- -------- ---------- --------
Net result from discontinued operations 1,047 (29) 1,018 (770) (75) (845)
---------------------------------------- ------- ---------- ------- -------- ---------- --------
Below is a table summarising the cash flows from discontinued
operations:
Year ended Year ended
31 December 31 December
2019 2018
GBP'000 GBP'000
---------------------------------------------------------------------------- ----------- -----------
Cash generated from operations - continuing operations 3,594 1,999
Cash generated from operations - discontinued operations - 2,612
---------------------------------------------------------------------------- ----------- -----------
Total cash generated from operations 3,594 4,611
---------------------------------------------------------------------------- ----------- -----------
Cash used in investment activities - continuing operations (4,218) (2,461)
Cash generated by/(used in) investment activities - discontinued operations 24,845 (181)
---------------------------------------------------------------------------- ----------- -----------
Total cash generated by/(used in) investment activities 20,627 (2,642)
---------------------------------------------------------------------------- ----------- -----------
Cash (used in)/generated by financing activities - continuing operations (22,195) 211
Cash generated by financing activities - discontinued operations - -
---------------------------------------------------------------------------- ----------- -----------
Total cash (used in)/generated by financing activities (22,195) 211
---------------------------------------------------------------------------- ----------- -----------
Net decrease in cash and cash equivalents - continuing operations (22,819) (251)
Net increase in cash and cash equivalents - discontinued operations 24,845 2,431
---------------------------------------------------------------------------- ----------- -----------
Net increase in cash and cash equivalents 2,026 2,180
---------------------------------------------------------------------------- ----------- -----------
Below is a table summarising the details of the sale of the
divisions:
Year ended Year ended
31 December 2019 31 December 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 - - -
Decrease of consideration (1,155) - (1,155) - - -
Total disposal consideration 24,845 36 24,881 - - -
Carrying amount of net
assets/(liabilities) sold
(note 10) 23,060 - 23,060 - (34) (34)
Costs to sell - current
year 95 - 95 - - -
Reclassification of foreign
currency translation reserve 282 - 282 - - -
--------- ---------- ---------- ------- ---------- -------
Total 23,437 - 23,437 - (34) (34)
Gain on sale before income
tax 1,408 36 1,444 - 34 34
Income tax charge on gain (2,455) (7) (2,462)(1) - (11) (11)
--------- ---------- ---------- ------- ---------- -------
(Loss)/gain on sale after
income tax (1,047) 29 (1,018) - 23 23
Costs to sell - prior year (3,176) - (3,176) - - -
--------- ---------- ---------- ------- ---------- -------
(Loss)/gain on sale after
income tax - total (4,223) 29 (4,194) - 23 23
--------- ---------- ---------- ------- ---------- -------
1. The income tax charge on the gain on disposal is
GBP2,462,000, and exceeds the gain on sale of GBP1,444,000 due
primarily to the difference between accounting base costs and tax
base costs for the assets sold. Certain goodwill and intangible
balances recognised for accounting purposes do not have base costs
for corporation tax purposes, therefore these items are not able to
shield the gain from a tax perspective.
6. Earnings per share
The calculation of the basic and diluted earnings per share is
based on the following data:
Year ended Year ended
31 December 2019 31 December 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 attributable to
equity
holders of the parent (6,989) (1,018) (8,007) (4,985) (822) (5,806)
Adjustments:
Impact of highlighted items (net
of tax)(1) 9,864 1,018 10,882 7,887 1,485 9,371
-------------------------------- ------------- ------------ ------------- ------------ ------------ ------------
Earnings for the purpose of
underlying earnings per share 2,875 - 2,875 2,902 663 3,565
Number of shares:
Weighted average number of
shares during the year
- basic 79,490,174 79,490,174 79,490,174 78,557,977 78,557,977 78,557,977
- dilutive effect of share
options 1,155,106 1,155,106 1,155,106 4,176,597 4,176,597 4,176,597
-------------------------------- ------------- ------------ ------------- ------------ ------------ ------------
- diluted 80,645,280 80,645,280 80,645,280 82,734,574 82,734,574 82,734,574
-------------------------------- ------------- ------------ ------------- ------------ ------------ ------------
Basic earnings per share (8.79)p (1.28)p (10.07)p (6.35)p (1.05)p (7.40)p
Diluted earnings per share (8.79)p (1.28)p (10.07)p (6.35)p (1.05)p (7.40)p
Underlying basic earnings per
share 3.62p 0.00p 3.62p 3.70p 0.84p 4.54p
Underlying diluted earnings per
share 3.57p 0.00p 3.57p 3.51p 0.80p 4.31p
-------------------------------- ------------- ------------ ------------- ------------ ------------ ------------
(1.) Highlighted items attributable to equity holders of the
parent (see note 3), stated net of their total tax impact.
7. Goodwill
GBP'000
---------------------------------------------------------- -----------
Cost
At 1 January 2018 62,446
Additions(1) 140
Reclassification of available-for-sale asset(2) (22,299)
Foreign exchange differences 223
---------------------------------------------------------- -----------
At 31 December 2018 40,510
Disposals(3) (3,129)
Foreign exchange differences (632)
---------------------------------------------------------- -----------
At 31 December 2019 36,749
---------------------------------------------------------- -----------
Accumulated impairment
At 1 January 2018 (3,129)
Impairment(4) (2,607)
---------------------------------------------------------- -----------
At 31 December 2018 (5,736)
Impairment(5) (5,989)
Disposals(3) 3,129
Foreign exchange differences 256
---------------------------------------------------------- -----------
At 31 December 2019 (8,340)
---------------------------------------------------------- -----------
Net book value
At 31 December 2019 28,409
---------------------------------------------------------- -----------
At 31 December 2018 34,774
(1) . GBP140,000 of goodwill was recognised following the
revaluation of contingent consideration payable for the
acquisition of Digital Balance Australia Pty Limited.
(2.) Goodwill in relation to the Intel segment of GBP22,299,000
was reclassified to assets held for sale in the prior year
statement of financial position. Refer to note 10 for more
details.
(3) . The disposal in the year relates to the write off
of the goodwill cost and accumulated amortisation in relation
to the Reputation division which was sold in the prior year.
(4.) An impairment of GBP2,607,000 was recognised in relation
to goodwill held in China Media (Shanghai) Management Consulting
Company Limited so that the carrying value was adjusted
to be in line with the value-in-use.
(5.) An impairment of GBP5,082,000 was recognised in relation
to goodwill held in Stratigent LLC so that the carrying
value was adjusted down to GBPnil on the decision being
taken to wind down this division. A further impairment of
GBP907,000 was recognised for goodwill held in Digital Balance
which equates to the downward revision of the contingent
consideration payable.
Goodwill has been allocated to the following segments:
Year ended Year ended
31 December 31 December
2019 2018
GBP'000 GBP'000
----------------- ----------- -----------
Media 25,905 26,294
Analytics & Tech 2,504 8,480
----------------- ----------- -----------
28,409 34,774
----------------- ----------- -----------
The Group tests goodwill annually for impairment or more
frequently if there are indications that goodwill may be
potentially impaired. Goodwill is allocated to the Group's cash --
generating units ('CGUs') in order to carry out impairment tests.
The Group's remaining carrying value of goodwill by CGU at 31
December was as follows:
Year ended Year ended
31 December 31 December
2019 2018
Cash -- generating unit Reporting segment GBP'000 GBP'000
--------------------------- ----------------------- ----------- -----------
Media UK and International Media 9,241 9,263
Analytics USA Analytics & Tech - 5,057
China Media 2,150 2,242
Media Germany Media 4,319 4,327
Media Value Group Media/Analytics & Tech 3,042 3,197
FirmDecisions Media 2,981 2,981
Media Australia Media 2,289 2,369
Effectiveness Analytics & Tech 1,678 1,678
Digital Balance Analytics & Tech 826 1,745
Media America Media 604 604
Media France Media 560 572
Media Italy Media 382 402
Russia Media 337 337
--------------------------- ----------------------- ----------- -----------
28,409 34,774
--------------------------------------------------- ----------- -----------
The impairment test involves comparing the carrying value of the
CGU to which the goodwill has been allocated to the recoverable
amount. The recoverable amount of all CGUs has been determined
based on value-in-use calculations.
Under IFRS, an impairment charge is required for goodwill when
the carrying amount exceeds the recoverable amount, defined as the
higher of fair value less costs to sell and value-in-use.
An impairment of GBP5,082,000 of goodwill was recognised in the
year ended 31 December 2019 in relation to the Analytics USA CGU in
order to write down the carrying value in full due to the winding
down of the activities of this operation, and a further impairment
of GBP907,000 was recognised to write down the carrying value of
the goodwill in the Digital Balance CGU in line with the downward
revision of the contingent consideration (year ended 31 December
2018: GBP2,607,000 determined with reference to the calculated
value-in-use of the China CGU of GBP3,265,000 compared to the
carrying value of goodwill of GBP5,872,000).
Value-in-use calculations
The key assumptions used in management's value-in-use
calculations are budgeted operating profit, pre -- tax discount
rate and the long -- term growth rate.
Budgeted operating profit assumptions
To calculate future expected cash flows, management has taken
the Board-approved budgeted operating profit ('EBIT') for each of
the CGUs for the 2020 financial year.
For the 2021 and 2022 financial years, the forecast EBIT is as
per management and market expectations. The forecast 2022 balances
are taken to perpetuity in the model. The forecast for 2021 and
2022 uses certain assumptions to forecast revenue and operating
costs within the Group's operating segments beyond the 2020
budget.
Discount rate assumptions
The Directors estimate discount rates using rates that reflect
current market assessments of the time value of money and risk
specific to the CGUs. The three-year pre-tax cash flow forecasts
have been discounted at between 7.0% and 12.0% (31 December 2018:
between 7.0% and 12.1%).
Growth rate assumptions
Cash flows beyond the three-year period are extrapolated at a
rate of 2.25% (31 December 2018: 2.25%), which does not exceed the
long-term average growth rate in any of the markets in which the
Group operates.
The excess of the value-in-use to the goodwill carrying values
for each CGU gives the level of headroom in each CGU. The estimated
recoverable amounts of the Group's operations in all CGUs
significantly exceed their carrying values, with the exception of
the China and Media America CGUs.
Sensitivity analysis
The Group's calculations of value-in-use for its respective CGUs
are sensitive to a number of key assumptions. Other than disclosed
below, management does not consider a reasonable possible change,
in isolation, of any of the key assumptions to cause the carrying
value of any CGU to exceed its value-in-use. The considerations
underpinning why management believes no impairment is required in
respect of China and Media America are as follows, specifically
what change in key assumptions would result in an impairment:
China Media America
--------------------------- -----------------------------
% change leading
% change leading
Current % to impairment(1) Current % to impairment(1)
------------------------- --------- ---------------- --------- ------------------
Budgeted revenue growth 8% (1)% to 7% 17%-19% (8)% to 9%-11%
Budgeted cost growth 5% +1% to 6% 0%-3% +4% to 4%-7%
Pre -- tax discount rate 12% +2% to 14% 11% +28% to 39%
------------------------- --------- ---------------- --------- ------------------
(1.) These changes have been applied to 2021 and 2022 projected
information.
8. Other intangible assets
Capitalised Purchased Total
development Computer intangible intangible
costs software assets(1) assets
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------- ----------- -------- ---------- ----------
Cost
At 31 January 2018 5,530 3,472 25,333 34,335
Additions 1,084 57 - 1,141
Reallocation 29 17 - 46
Reclassification of available-for-sale asset(2) (3,361) (894) (7,543) (11,798)
Foreign exchange differences (24) 23 91 90
------------------------------------------------- ----------- -------- ---------- ----------
At 31 December 2018 3,258 2,675 17,881 23,814
Additions 1,203 13 - 1,216
Reallocation 10 - - 10
Disposals (388) (139) (1,402) (1,929)
Foreign exchange differences (49) (24) (314) (387)
------------------------------------------------- ----------- -------- ---------- ----------
At 31 December 2019 4,034 2,525 16,165 22,724
------------------------------------------------- ----------- -------- ---------- ----------
Amortisation and impairment
------------------------------------------------- ----------- -------- ---------- ----------
At 31 January 2018 (1,949) (1,896) (17,367) (21,212)
Charge for the year - continuing operations(3) (326) (428) (1,240) (1,994)
Charge for the year - discontinued operations(3) (590) (85) (617) (1,292)
Impairment(4) (125) - - (125)
Reallocation - (46) - (46)
Reclassification of available-for-sale asset(2) 1,726 894 6,801 9,421
Foreign exchange differences 6 (45) (50) (89)
------------------------------------------------- ----------- -------- ---------- ----------
At 31 December 2018 (1,258) (1,606) (12,473) (15,337)
Charge for the year(3) (464) (409) (1,169) (2,042)
Impairment(4) (155) - (607) (762)
Reallocation (10) - - (10)
Disposals 388 134 1,402 1,924
Foreign exchange differences 28 28 210 266
------------------------------------------------- ----------- -------- ---------- ----------
At 31 December 2019 (1,471) (1,853) (12,637) (15,961)
------------------------------------------------- ----------- -------- ---------- ----------
Net book value
At 31 December 2019(5) 2,563 672 3,528 6,763
------------------------------------------------- ----------- -------- ---------- ----------
At 31 December 2018 2,000 1,069 5,408 8,477
------------------------------------------------- ----------- -------- ---------- ----------
1. Purchased intangible assets consist principally of customer
relationships with a typical useful life of eight to 10 years.
2. Intangibles in relation to the Intel segment of GBP2,377,000
were reclassified to assets held for sale in the prior year
statement of financial position. Refer to note 10 for more
details.
3. 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.
4. An impairment charge of GBP762,000 has been recognised for
the year ended 31 December 2019 (year ended 31 December 2018:
GBP125,000) following management's review of the carrying value of
other intangible assets.
5. Of the net book value of capitalised development costs,
GBP1,557,000 remains in development at 31 December 2019.
9. Right-of-use assets and lease liabilities
Right-of-use assets:
Buildings Equipment Vehicles Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ---------- ---------- --------- --------
Cost
------------------------------------ ---------- ---------- --------- --------
At 31 December 2018 - - - -
Assets recognised on adoption of
IFRS 16 on 1 January 2019 5,208 178 41 5,427
Additions 5,109 22 18 5,149
------------------------------------ ---------- ---------- --------- --------
At 31 December 2019 10,317 200 59 10,576
------------------------------------ ---------- ---------- --------- --------
Accumulated depreciation
At 31 December 2018 - - - -
Charge for the year (1,568) (15) (13) (1,596)
Impairment for the year (641) - - (641)
------------------------------------ ---------- ---------- --------- --------
At 31 December 2019 (2,209) (15) (13) (2,237)
------------------------------------ ---------- ---------- --------- --------
Net book value
At 31 December 2019 8,108 185 46 8,339
------------------------------------ ---------- ---------- --------- --------
At 31 December 2018 - - - -
------------------------------------ ---------- ---------- --------- --------
Lease liabilities:
Buildings Equipment Vehicles Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ---------- ---------- --------- --------
Cost
------------------------------------ ---------- ---------- --------- --------
At 31 December 2018 - - - -
Liabilities recognised on adoption
of IFRS 16 on 1 January 2019 5,533 178 41 5,752
Additions 4,739 22 18 4,779
Cash payments in the year (1,139) (36) (19) (1,194)
Interest charge in the year 247 5 1 253
------------------------------------ ---------- ---------- --------- --------
At 31 December 2019 9,380 169 41 9,590
------------------------------------ ---------- ---------- --------- --------
Current 1,771 46 17 1,834
Non-current 7,609 123 24 7,756
------------------------------------ ---------- ---------- --------- --------
The present value of the minimum lease payments
are as follows:
Minimum lease payments
-------------------------------
31 December 31 December
2019 2018
GBP'000 GBP'000
------------------------------------------------ ----------------- ------------
Amounts due:
Within one year 2,116 -
Between one and two years 2,307 -
Between two and three years 2,115 -
Between three and four years 1,896 -
Between four and five years 893 -
Later than five years 1,083 -
------------------------------------------------ ----------------- ------------
10,410 -
------------------------------------------------ ----------------- ------------
10. 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 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 I 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. The gross consideration
was dependent upon a working capital target position at the date of
completion. The working capital acquired by Nielsen was below this
target and a resulting repayment was made to Nielsen of
GBP1,155,000 on 31 October 2019; net consideration was therefore
GBP24,845,000.
Under the terms of the disposal, the Group will provide certain
services to Nielsen to facilitate the acquisition and integration
of the AdIntel business. These services include the provision of
office space, financial administration and IT support for a period
of up to 18 months post completion.
In accordance with IFRS 5, the AdIntel business was treated as
an asset held for sale as at 31 December 2018 since, at this date,
the sale was deemed to be probable, and the disposal of AdIntel
will signal a complete exit from this service line.
The net assets of the AdIntel business, which have been
presented net on the Group balance sheet, are shown below:
31 2 31
December 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 - 414 412
Deferred tax asset - 40 40
Total non -- current assets - 25,126 25,122
Current assets
---------------------------------- --------- -------- ---------
Trade and other receivables - 2,854 2,612
Cash and cash equivalents - - -
---------------------------------- --------- -------- ---------
Total current assets - 2,854 2,612
---------------------------------- --------- -------- ---------
Total assets - 27,980 27,734
---------------------------------- --------- -------- ---------
Current liabilities
Trade and other payables - (1,058) (796)
Accruals and contract liabilities - (3,283) (2,940)
Current tax liabilities - (86) (86)
Total current liabilities - (4,427) (3,822)
Non-current liabilities
Deferred tax liabilities - (413) (413)
Provisions - (80) (81)
---------------------------------- --------- -------- ---------
Total non-current liabilities - (493) (494)
---------------------------------- --------- -------- ---------
Total liabilities - (4,920) (4,316)
---------------------------------- --------- -------- ---------
Total net assets - 23,060 23,418
---------------------------------- --------- -------- ---------
11. Financial liabilities
31 December 31 December
2019 2018
GBP'000 GBP'000
---------------------------- ----------- -----------
Current
Bank overdraft - 2,379
Loan fees(1) (36) (65)
Contingent consideration 14 508
---------------------------- ----------- -----------
(22) 2,822
---------------------------- ----------- -----------
Non -- current
Bank borrowings 14,000 34,000
Loan fees(1) (132) (35)
Contingent consideration - 969
---------------------------- ----------- -----------
13,868 34,934
---------------------------- ----------- -----------
Total financial liabilities 13,846 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 August
2024.
Bank Bank Finance lease Contingent
overdrafts borrowings liabilities consideration Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------- ---------- ---------- ------------- ------------- --------
At 1 January 2018 407 33,161 4 2,094 35,666
Recognised on acquisition - - - 148 148
Paid - (70) - (858) (928)
Charged to the income statement - 59 - 238 297
Discounting charged to the income statement - - - (78) (78)
Borrowings 1,972 2,000 - - 3,972
Repayments - (1,250) (4) - (1,254)
Foreign exchange released to the income statement - - - (67) (67)
-------------------------------------------------- ---------- ---------- ------------- ------------- --------
At 31 December 2018 2,379 33,900 - 1,477 37,756
Recognised on revaluation - - - 336 336
Paid - (180) - (983) (1,163)
Charged to the income statement - 112 - (989) (877)
Discounting charged to the income statement - - - 218 218
Repayments (2,379) (20,000) - - (22,379)
Foreign exchange released to the income statement - - - (45) (45)
-------------------------------------------------- ---------- ---------- ------------- ------------- --------
At 31 December 2019 - 13,832 - 14 13,846
-------------------------------------------------- ---------- ---------- ------------- ------------- --------
A currency analysis for the bank borrowings is shown below:
31 December 31 December
2019 2018
GBP'000 GBP'000
---------------------- ----------- -----------
Pounds sterling 13,832 33,900
---------------------- ----------- -----------
Total bank borrowings 13,832 33,900
---------------------- ----------- -----------
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 GBP24,000,000, comprises a revolving credit
facility ('RCF') of GBP23,000,000 (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.
Loan arrangement fees of GBP168,000 (31 December 2018:
GBP100,000) are offset against the term loan, and are being
amortised over the period of the loan. GBP36,000 of loan
arrangement fees have been included within creditors due within one
year and the balancing GBP132,000 has been included within
creditors due after more than one year.
The facility bears variable interest of LIBOR plus a margin of
2.25%. 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. 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 bank 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, US, Germany and Australia.
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 June 2020.
12. Dividends
31 December 31 December
2019 2018
GBP'000 GBP'000
-------------------------------------- ----------- -----------
Dividend in respect of the prior year 534 527
-------------------------------------- ----------- -----------
Total dividend paid 534 527
-------------------------------------- ----------- -----------
A dividend of GBP534,000 was paid during the current financial
year (31 December 2018: GBP527,000). Dividends were paid to
non-controlling interests as shown in the consolidated statement of
changes in equity.
13. Cash generated from operations
31 December 31 December
2019 2018
GBP'000 GBP'000
--------------------------------------------------------- ----------- -----------
(Loss) before taxation (5,061) (2,504)
Adjustments for:
Depreciation 2,163 665
Amortisation (note 8) 2,042 1,994
Loan fees written off 58 -
Gain on disposal 5 -
Impairment of right-of-use assets (note 9) 641 -
Impairment of goodwill (note 7) 5,989 2,732
Impairment of intangibles (note 8) 761 -
Unrealised foreign exchange loss 47 320
Share option charges (note 3) 195 350
Finance income (9) (25)
Finance expenses 907 1,176
Contingent consideration revaluations (note 3) (779) 94
--------------------------------------------------------- ----------- -----------
6,959 4,802
Decrease/(increase) in trade and other receivables 1,536 (2,138)
(Decrease)/increase in trade and other payables (2,838) 1,447
Movement in provisions - 324
--------------------------------------------------------- ----------- -----------
Cash generated from operations - continuing operations 5,657 4,435
Cash generated from operations - discontinued operations - 3,196
--------------------------------------------------------- ----------- -----------
Cash generated from operations 5,657 7,631
--------------------------------------------------------- ----------- -----------
14. Acquisitions
Ebiquity Germany GmbH
On 11 June 2019, the Group acquired the outstanding 5.97%
interest in its subsidiary undertaking, Ebiquity Germany GmbH, from
the minority shareholder for cash consideration of EUR380,000
(GBP336,000), payable in equal instalments in June 2019 and October
2019.
15. Disposals
On 12 February 2018, the Group agreed to dispose of the AdIntel
business to 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 I 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. The gross consideration
was dependent upon a working capital target position at the date of
completion. The working capital acquired by Nielsen was below this
target and a resulting repayment was made to Nielsen of
GBP1,155,000 on 31 October 2019, resulting in net consideration of
GBP24,845,000.
On 19 March 2018, the Group entered into an agreement to sell
the business assets of its Reputation division to Echo Research
Holdings Limited; a profit of GBP34,000 was recognised on disposal.
This is the remaining part of the Group's Intel segment in addition
to the AdIntel business. Completion took place on 31 March 2018.
The consideration payable was GBP36,000, which was determined with
reference to the revenue performance of the business during the 12
months following completion.
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 focused. 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. As at 31 December 2019, the division
has one employee and is continuing to fulfil its contractual
requirements with its remaining clients.
16. Events after the reporting period
On 8 January 2020, the Group completed the purchase of Digital
Decisions B.V ('Digital Decisions'). The acquisition was for an
initial cash consideration of EUR700,000 (GBP597,000) with further
consideration payable in a mix of cash and Ebiquity plc shares. The
first deferred payment will be based on performance in the year to
31 December 2020 and the second payment will be based on the
average performance in the year to 31 December 2021 and the year to
31 December 2022.
On 3 February 2020, the Company announced that it will be
acquiring the outstanding 49% interest in its subsidiary Ebiquity
Italy Media Advisor S.r.l ('Ebiquity Italy') from its founders and
minority shareholders Arcangelo DiNieri and Maria Gabrielli. The
transaction will complete in May 2020. The total consideration of
EUR3.6 million is based on an average of Ebiquity Italy's profit
before tax and management charges for the years ending 31 December
2018 and 2019. Since the announcement date, the payment terms have
been amended. The consideration will now be paid in a combination
of cash and Ebiquity plc shares. At completion 25% of the total
consideration will be paid in Ebiquity plc shares and 5% in cash.
The remaining cash payments will be paid over the following nine
months.
The Company continues to closely monitor the COVID-19 pandemic
and its impact on our staff, clients and operations. Our primary
focus is ensuring the safety and well-being of our employees and we
have successfully implemented a remote working policy for all of
our offices globally, although our staff in China have now returned
to their offices.
The COVID-19 disruption is affecting our clients' businesses and
their service requirements, although the extent and timing of its
impact over the coming months remains uncertain.
The Company is undertaking prudent cost reduction measures in
order to protect the business and preserve cash in the current
environment. This includes a 20% salary reduction taken by the
senior management team and Board, a deferral of the annual pay
review and temporary freeze on recruitment. The Group is also
utilising, to the extent necessary, the different government
schemes put in place to support businesses in many of the countries
in which it operates. To date, these include the selected
furloughing of staff in the UK and France, and receipt of funds
from the US Payroll Protection Program and various government
subsidies and support schemes in APAC.
No adjustments have been made to the financial statements in
respect of this.
17. Financial Information
The financial information included in this report does not
amount to full financial statements within the meaning of Section
434 of Companies Act 2006. The financial information has been
extracted from the Group's Annual Report and financial statements
for the period ended 31 December 2019, on which an unqualified
report has been made by the Company's auditors,
PricewaterhouseCoopers LLP. Financial statements for the period
ended 31 December 2019 have been delivered to the Registrar of
Companies; the report of the auditors on those accounts was
unqualified and did not contain a statement under Section 498 of
the Companies Act 2006.
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
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