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Ebiquity PLC
25 March 2021
EBIQUITY PLC
PRELIMINARY RESULTS FOR THE YEARED 31 DECEMBER 2020
25 March 2021
Ebiquity plc ("Ebiquity" or the "Group"), a world leader in
media investment analysis, today announces its preliminary results
for the year ended 31 December 2020. Ebiquity works with over 70 of
the world's top 100 advertisers, served from 19 offices worldwide
by some 520 staff.
Financial Highlights(1)
2020 2019 Change
(2)
GBPm GBPm GBPm
------- ------- -------
Revenue 55.9 68.1 (12.2)
------- ------- -------
Underlying Operating Profit
(1) (0.3) 5.6 (5.9)
------- ------- -------
Underlying (Loss)/Profit
before Tax (1) (1.3) 4.7 (6.0)
------- ------- -------
Underlying (Loss)/Earnings
per Share (1) (1.9)p 2.9p (4.8)p
------- ------- -------
Statutory Operating Loss (2.9) (4.8) 1.9
------- ------- -------
Statutory Loss before Tax (3.9) (5.7) 1.8
------- ------- -------
Statutory Loss per Share (4.8)p (9.6)p 4.8p
------- ------- -------
-- Second half revenue increased by 9% from first, although full
year revenue fell by 18% compared to 2019
-- Project-related costs also reduced by 27%, enabling net
revenue margin to rise to 89% (2019: 87%)
-- Underlying operating costs reduced by 7% to GBP50.0m (2019: GBP53.7m)
-- Financial position at 31 December 2020 remains strong: net
bank debt of GBP7.8m (31 December 2019: GBP5.6m) with cash balances
of GBP11.1m and undrawn bank facilities of GBP5.0m
-- Underlying operating cash inflow of GBP7.3m
Note 1: Underlying operating profit is defined as the operating
profit excluding highlighted items. These include share-based
payments, amortisation of purchased intangibles and non-recurring
items. Underlying profit before tax and earnings per share are
calculated based on the underlying operating profit.
Note 2: The 2019 financial statements have been re-stated as set
out in Note 1 of the Group financial statements. This impacted
revenue, underlying operating, profit before tax and earnings per
share.
Operational Highlights
-- Nick Waters, former Executive Chair, UK & Ireland, Dentsu
Aegis Network started as Group Chief Executive Officer on 1 July
2020 with the objective to simplify, clarify and focus the business
on a growth trajectory
-- New business wins including Daimler, Generali, Perfetti van Melle and Reckitt
-- Digital Decisions - which monitors advertising spend through
the digital supply chain - acquired in January 2020 - performing as
planned, winning ten new clients
-- New Digital Innovation Centre set up in order to speed up
development of digital product suite
-- Shared service media delivery centre in Spain continued to
expand and deliver operational efficiencies
-- Six new operational KPIs to be introduced in future results
statements to track delivery of key business objectives. These
are:
o Number of clients buying two or more service lines
o Number of clients buying one or more products from the new
digital portfolio
o Volume of digital advertising monitored - number of
impressions
o Volume of digital advertising monitored - US$ of spend
o Number of countries served with new digital products
o % of revenue from digital services
Divisional highlights
Media : Media Management, Media Performance and Contract
Compliance
-- Revenue of GBP46.0m (2019: GBP54.0m), reduced by 15%
-- Operating profit of GBP6.8m (2019 GBP11.8m), reduced by 40%
Analytics and Tech : Advanced Analytics, MarTech and AdTech
-- Revenue of GBP9.9m (2019: GBP14.1m) LFL decline of 15% excluding Stratigent
-- Operating loss of GBP0.7m (2019: profit of GBP1.0m)
Outlook
-- Industry dynamics are expected to encourage brand owners to
review their channel and media investment strategies
-- Ebiquity's market position and capabilities should enable it
to capitalise on positive market trends
-- New business won over the last year and renewals from
existing clients - commissioning have already led to an encouraging
start in the first quarter
-- Group's re-defined strategic focus make it well-positioned to
deliver revenue growth and a return to profitability in the year
ahead
Nick Waters, CEO of Ebiquity said:
"Ebiquity's results in 2020 clearly reflected the impact of the
Covid-19 pandemic on global advertising spending and on our
clients' demand for our services as they reduced their budgets. Our
staff transitioned to working from home efficiently and continued
to support our clients effectively. I thank all of them for their
resilience and professionalism under challenging circumstances. As
anticipated at the interim stage, our revenue increased in the
second half of the year, compared to the first half. This reflected
the macro-environment and more demand from existing clients,
especially in automotive and FMCG as well as new business
successes, helped by Accenture's exit from our market. This
improved performance has continued into the start of this year and
we except to deliver revenue growth and a return to profitability
in 2021."
Details of presentation
Management will be hosting a webcast presentation for analysts
and investors at 9:30am today. If you would like to register please
contact guy.scarborough@instinctif.com .
Market abuse regulation
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/201 as it forms part of UK
domestic law by virtue of the European Union (Withdrawal) Act 2018
("MAR").
Enquiries
Ebiquity plc
Nick Waters (CEO)
Alan Newman (CFO) 020 7650 9600
Instinctif Partners
Matthew Smallwood 07831 379 122
Guy Scarborough 07917 178 920
Panmure Gordon (Financial Adviser, NOMAD
& Broker)
Alina Vaskina / Sandy Clark (Corporate
Advisory)
Charles Leigh-Pemberton (Corporate Broking) 020 7886 2500
About Ebiquity plc
Ebiquity plc (LSE AIM: EBQ) is a world leader in media
investment analysis. It harnesses the power of data to provide
independent, fact-based advice, enabling brand owners to perfect
media investment decisions and improve business outcomes. Ebiquity
is able to provide independent, unbiased advice and solutions to
brands because we have no commercial interest in any part of the
media supply chain.
We are a data-driven solutions company helping brand owners
drive efficiency and effectiveness from their media spend,
eliminating wastage and creating value. We provide analysis and
solutions through five Service Lines: Media management, Media
performance, Marketing effectiveness, Technology advisory, Contract
compliance.
Ebiquity's clients are served by more than 500 media specialists
operating from 19 offices covering 80% of the global advertising
market.
The Company has the most comprehensive, independent view of
today's global media market, analysing $55bn of media spend from 75
markets annually, including trillions of digital media impressions.
Our Contract Compliance division, FirmDecisions, audits $40bn of
contract value annually.
As a result, more than 70 of the world's top 100 advertisers
today choose Ebiquity as their trusted independent media
advisor.
For further information, please visit: www.ebiquity.com
Chair's Statement
In a year that has been dominated by the Covid-19 pandemic and
its unprecedented economic and societal impacts, Ebiquity has
continued to deliver a high-quality service to clients, while
ensuring a safe working environment for its staff. The impact of
Covid-19 on our clients' activity caused a significant revenue
decline in our business and led to an underlying loss, despite
implementing immediate cost reduction measures. Against this
difficult background, the Group has continued to progress through a
period of transition and concluded the year with strong new
leadership together with a clear and focussed growth strategy and
enhanced operational structure.
From March 2020, our global teams moved efficiently to working
from home and I wish to thank them for their exceptional
resourcefulness and resilience in continuing to provide first class
client support under the most challenging of conditions. By the end
of the financial year, several offices including Hamburg, Shanghai,
Singapore and Sydney had fully or partially re-opened, depending on
local regulations. We look forward to embracing new ways of working
as restrictions associated with the pandemic are lifted.
Importantly, and despite the challenging environment, the year
continued to be one of significant transition for the Group,
highlighted by the appointment of Nick Waters as CEO in July and
the establishment of a strengthened and refreshed leadership
team.
Following Nick's appointment, the Board and management launched
a thorough operational review to refine the Group's strategy,
update market priorities, drive revenue growth and improve
operating margins. In November, we set out this refreshed strategy
which aims to deliver product solutions for the digital market,
develop higher value strategic client relationships and improve
operating efficiencies.
As part of the extensive review process and to facilitate the
development of higher value engagement with clients, the Group has
implemented a new geographically-led organisational structure, as
opposed to its previous practice-led format. The new operating
model which took effect from January 2021, means that Ebiquity can
offer harmonised end-to-end client solutions and is better placed
to identify and take advantage of cross-selling opportunities. To
measure the delivery of our strategic ambition, we will be
establishing and reporting against a number of broader
non-financial KPIs to monitor progress.
As reported at the interim stage, the Covid-19 pandemic led to a
significant reduction in global advertising activity and spend,
especially in the second and third quarters of 2020. The downturn
in activity varied by sector and geography, with the most
pronounced impact being seen in the automotive, travel, leisure and
non-food retail industries.
The Group implemented cost management measures in response to
maintain liquidity and protect the business while also preserving
jobs. These included a hiring and pay freeze, temporary pay
reductions for the Board and some senior managers, and the use of
government support schemes in a number of countries. We also
renegotiated the covenants on our banking facilities and have
deferred the payment of dividends until economic and business
conditions become more certain. As a result, the Group has
maintained a robust financial position with good covenant headroom
and low levels of gearing.
As also anticipated at the interim stage, the second half of the
year saw an improved performance as Covid-19 restrictions began to
ease in some markets and advertisers adjusted to the changed
environment. Group revenue increased by 9% compared to the first
half, driven by a return to activity by existing clients together
with notable new business wins. These included some twenty former
clients of Accenture following its withdrawal from media audit and
management services in August 2020.
The impact of Covid-19 has accelerated the existing shift in
consumers' media consumption towards digital channels and in their
buying behaviour from physical retail to e-commerce. As a result,
brand owners are even keener to ensure that their media investment
strategies remain effective. This increases their need for
informed, expert advice based on robust data and rigorous analysis.
These trends should lead to renewed demand for our portfolio of
services in 2021 and beyond as advertisers re-set their plans.
The Board acknowledges the increasing focus on Environmental,
Social and Governance issues and the need for companies to
demonstrate how they are addressing these important areas. We are
at early stage in setting out our ESG agenda and building on our
existing policies to enhance the role Ebiquity can play in
supporting our global clients to meet their own targets. We will
continue to engage with clients and investors on ESG and
sustainability issues and develop plans for becoming a more
sustainable business. We will set out our position and report our
activities in this respect over the course of the next year.
Looking ahead, as the global economy begins to recover from the
pandemic, we are confident that Ebiquity's new strategic focus
together with its strong market position and solid financial
platform, make it well-positioned to achieve its growth ambitions
and deliver sustainable, long term shareholder value.
Rob Woodward
Chair
Chief Executive Officer's Review
Strategic Direction
Since my appointment as CEO in July 2020, we have undertaken a
process to review Ebiquity's business and operations, and to
develop our strategic plans with a view to returning the business
to top line revenue growth and operating margin improvement.
The process was approached with the objective to simplify,
clarify and focus the business. The resulting strategy is one of
maintaining stability, evolution and change. It was first set out
publicly at the Capital Markets Day held in November 2020.
Ebiquity's purpose, which underpins our strategy, is to remain
the world leader in media investment analysis.
We harness the power of data to provide independent, fact-based
advice, enabling brand owners to perfect media investment decisions
and improve business outcomes. Our aim is to be a data-driven
solutions company helping brand owners drive efficiency and
effectiveness from their media spend, eliminating wastage and
creating value.
In order to maintain momentum and ensure we deliver on our
strategic targets, we will be establishing and reporting on a
number of broader non-financial KPIs in future results statements
as noted below. These measurements are tailored to our new
operating model and specifically to driving digital growth and
integration, cross-selling and high-value client development.
-- Number of clients buying two or more service lines
-- Number of clients buying one or more products from the new digital portfolio
-- Volume of digital advertising monitored - number of impressions
-- Volume of digital advertising monitored - US$ of spend
-- Number of countries served with new digital products
-- % of revenue from digital services
Ebiquity is able to provide independent, unbiased advice and
solutions to brands because it has no commercial interest in any
part of the media supply chain. Our independence is recognised and
highly valued by our clients, which include the world's leading
advertisers.
The global media advertising market is large scale with over
US$500bn traded annually and with significant complexity for brand
owners. Ebiquity's focus is in the media market, advising brand
marketers how to navigate the market's complexity and to improve
media investment decisions for better business outcomes.
Digital channels are the growth drivers of the media investment
business, now accounting for more than 50% of all advertising
spend. 70% of digital advertising (excluding search) is now traded
programmatically. The impact of Covid-19 has been to accelerate
existing market trends with consumers increasing the amount of time
and activity online for shopping, working and entertainment.
However, the digital and programmatic landscape has given rise to
many well documented challenges for advertisers with brand safety,
viewability, fraud, wastage, lack of transparency, attribution,
efficiency and effectiveness all topics of frequent industry
debate. As advertisers grapple with these challenges there is a
need for high quality, independent advice, based on empirical
evidence.
Digital initiatives / development
Digital Decisions, which was acquired as an early stage business
in January 2020, has bolstered the Group's capabilities in
investment analysis of digital media. Its Source Data Monitoring
("SDM") service provides brand owners with much needed visibility
into the distribution of their digital advertising investment
through their global media supply chains, down to individual
websites. It is demonstrating significant value to users, regularly
identifying how up to 30% of their digital advertising spend is
being wasted and enabling them to course-correct and optimise for
greater efficiency and effectiveness.
Digital Decisions has performed as expected and won contracts
with existing Ebiquity clients (including Huawei, Mars and Nestlé)
- demonstrating the potential to cross-sell into our existing
client base - as well as other major brands, including Heineken and
Reckitt. At the end of December 2020 ten clients were live on the
SDM platform, with some US$500 million of digital media spend being
tracked and optimised, and we are now on-boarding clients at an
increasing rate.
To help develop and drive the product roadmap for our entire
global business, Ruben Schreurs, the founder CEO of Digital
Decisions, has been appointed to the new role of Group Chief
Product Officer.
We are focussing efforts on building out the SDM platform,
having proved its scalability. We also aim to make the Digital
Decisions data services model a core building block for Ebiquity's
enhanced digital media measurement service. This is being developed
to meet clients' requests for a more comprehensive offering
covering all aspects of digital media, including paid search and
social media.
As part of this strategy, Digital Decisions has now been fully
integrated into the Group and re-branded as the Digital Innovation
Centre, launched publicly in February 2021 with a remit to develop
new data-led productised service solutions. This dedicated central
unit will develop, maintain, and deliver digital solutions for
Ebiquity's global clients. Building on the existing Media Data
Vault architecture the Group's new product initiatives include
governance monitoring, commitments and productivity tracking,
digital cost benchmarking, and digital media reviews.
Organisational structure
Ebiquity has demonstrated its ability to grow revenue when
putting strategic focus on a core group of clients. To drive
further development of this successful approach, Mark Gay, one of
our senior client partners, has been appointed to the new role of
Chief Client Officer. Under his remit and with enhanced Client
Partner teams covering a larger proportion of our major clients
across the network, we aim to grow further the number of higher
value clients buying more than one of our services. This initiative
includes the recent appointment of a former Accenture senior
partner to focus on major European brand owners.
We have simplified our organisational structure to be able to
provide integrated solutions and consultancy advice as well as
developing higher value client relationships. The Group is
transitioning from a matrix structure of practices and geographies
to one that is mainly organised and managed on a geographic P&L
basis. Our aim is to offer our main service lines to clients across
the country, regional and global business structures.
We have recently appointed two new regional managing directors
with Leela Nair moving up from Southeast Asia to lead the Asia
Pacific region and Paul Williamson joining the Group as MD, North
America following senior business development, trading and
investment, and digital leadership roles at Dentsu Aegis and
Publicis Groupe.
As announced at the interim stage, Federica Bowman has taken
over the leadership of FirmDecisions, our market leading Contract
Compliance practice, having successfully directed its digital media
services. Although FirmDecisions was impacted this year by Covid-19
disruptions to its traditional physical audit model, it has worked
with agencies to enable remote audits to be conducted. We therefore
expect a return to growth in the near term.
A new role of Business Operations Director has also been
established to develop and execute plans to achieve greater
operational efficiency in order to enhance margins. Its objectives
include further automation and standardisation of our service
delivery processes supported by the expansion of the Scaled
Delivery Centre established in 2019, which is taking on a broader
remit as a Media Operations Centre.
To support the Group CEO in executing our strategy and deliver
our plans, an Executive Leadership Team has been established
comprising the Group's Chief Financial & Operating, People,
Client and Product Officers along with the four regional managing
directors and the CEO of FirmDecisions.
Ebiquity has a strong track record of publishing high-quality
analysis and commentary on specific aspects of the global media
industry. We maintained our position as a thought leader during
2020, publishing white papers on "The Rise and Rise of Influencer
Marketing", "Digital Media Performance: the Power of Context", and
"Deconstructing ROI: A New Framework for Driving Marketing
Effectiveness in the Age of Media Fragmentation". We also published
guides designed to respond specifically to the demands of a world
impacted by Covid-19. These included: "The Ebiquity Guide to
Virtual Pitching", "Advertising Through a Recession" and "2021:
Emerging Perspectives in a Post Pandemic World".
With a clear focus on the provision of services in the media
sector, a refreshed product offering for the digital market, and a
simplified organisational structure we believe Ebiquity is well
placed to capitalise on its strengths.
Performance in the Year
Ebiquity Group's business performance was materially impacted in
2020 by the global Covid-19 pandemic.
Group revenue in the year to 31 December 2020, fell by 18% to
GBP55.9 million or 15% on a like-for-like basis, excluding the US
analytics business, Stratigent, which was wound down in September
2019. The revenue decline was clearly due in large part to the
impact of the Covid-19 pandemic on our clients' businesses and on
their demand for media-related services. There was some recovery in
the second half of the year as business conditions improved, with
revenue up 9% against the first half.
The UK and Western European economies were among the worst
affected by the pandemic. Consequent government measures to
restrict movement and activities of their populations were among
the most severe in the world. The UK media market was down 39% in
Q2 according to the World Advertising Research Centre. The Group is
heavily weighted to these geographies, with some 75% of revenue
derived from the UK and Continental Europe and was therefore
relatively more exposed to the downturn in these regions.
Many clients reacted in the first half by cancelling or
postponing advertising campaigns and the work commissioned from
Ebiquity. This effect was felt most strongly in the automotive,
travel, leisure, and entertainment sectors. Automotive is
Ebiquity's second largest vertical by revenue and so contributed
materially to the revenue decline. Fast Moving Consumer Goods
(FMCG) represents the Group's largest vertical by revenue and -
with supermarkets declared essential retail by governments around
the world - was among the least affected categories. This provided
some cushion for Group revenue against declines in other
sectors.
As the pandemic developed, the Group made cost savings leading
to a reduction of 7% in underlying operating expenses from the
prior year. We prioritised the protection of jobs and made use of
government payroll support schemes in Australia, China, France, UK
and USA. We also suspended the annual pay review and the Board and
senior executives took pay reductions for a period. These measures
contributed to total savings in staff costs of 10% compared to
2019, although year-end staff numbers of 522 were just 1% below
those at the 2019 year-end.
Despite the challenges of the year, there were some bright
spots. Accenture's exit from the media assurance business enabled
the Group to win new business among high-quality brand owners.
These will deliver annualised revenues of GBP5 million, some of
which will be fully recognised in 2021. Some of this revenue is
from existing clients but much is from clients new to Ebiquity,
such as American Express, Daimler and Reckitt.
The approach of establishing a team of client partners to focus
on developing relationships and revenue among selected high value
clients, also continued to prove its worth. Despite the challenging
environment, we achieved 1% revenue growth from this core group of
clients which include two from the automotive sector.
Revenue by Segment
Revenue
FY20 FY19 Variance
----- ----- --------- ------
GBPm GBPm GBPm %
----- ----- --------- ------
Media 46.0 54.0 (8.0) (15%)
----- ----- --------- ------
Analytics and Tech 9.9 14.1 (4.2) (30%)
----- ----- --------- ------
Group 55.9 68.1 (12.2) (18%)
----- ----- --------- ------
Media
Revenue in the Media segment which comprises Media Performance,
Media Management and Contract Compliance services fell by 15%
year-on-year. However, as anticipated at the interim stage, revenue
grew by 10% in the second half compared to the first as client
activity returned to some normality following the initial Covid-19
pandemic period when many clients had reduced their media-related
expenditure. There was also a revenue benefit in the new business
won from former Accenture clients following its exit from media
performance and management services in August 2020. These new
contracts included several global engagements as well as local work
in France, Germany, Spain, UK and USA.
Revenue in UK & Ireland, our largest Media region, fell by
13% although the group serving large global clients experienced
higher levels of activity in the second half and its revenue fell
by only 6%. European revenue reduced by 15%, with Germany falling
by 20% while some markets such as Russia and Spain increased or
held their revenue static. In the USA, which like Germany has a
large proportion of automotive clients, revenue fell by 23%. Asia
Pacific revenue decreased by 11% overall, although Singapore
increased, due to new business wins.
Our Media Performance services assist advertisers to monitor and
evaluate their agencies' media buying performance. We harness 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 area include Ferrero, L'Oréal, General
Motors, Jaguar Land Rover, Vodafone and VW Group.
Media Management services include advising clients in the
selection of media agencies and setting of media buying objectives
as well as in the organisation of media functions. We conduct many
agency selections at global level and within individual markets.
However, the number of agency reviews was much lower than usual in
2020 as the Covid-19 pandemic led to advertisers deferring
decisions while their business and media plans were uncertain.
Agency selection activity is expected to increase in 2021 as
advertisers re-evaluate their longer-term media objectives. This is
already being reflected in the number of new media management
engagements secured in the first quarter of 2021.
During the year, we developed further the functionality and use
of the key MediaSuite tools used to support further process and
efficiency improvements. EbiquityConnect(TM) streamlines data
ingestion from agencies, many of which have given positive feedback
following the system's introduction. EbiquitySelect(TM) supports
our agency selection work. EbiquitySync(TM) provides a standardised
tool for benchmarking paid digital media spend and is now being
integrated with the recently acquired Digital Decisions technology
applications.
Our shared services media delivery centre in Spain which became
operational in 2019, doubled the amount of work it undertakes for
the network from the prior year, helping further to reduce media
delivery costs.
Our Contract Compliance service (trading as "FirmDecisions") was
impacted by the Covid-19 restrictions to on-site access to agencies
which delayed a number of audits and its revenue fell by 52%
compared to 2019. Although the team rapidly re-designed its
approach to enable remote audits to be conducted, it took time to
obtain full agency agreement to electronic provision of
information. Its clients in the period included FCA Group, Mondelez
and Nike. The new CEO's focus has been to streamline and automate
the audit approach and achieve greater scale efficiencies and speed
of delivery across the global network. These are important factors
in maintaining FirmDecisions' position as the global leader in its
field with increased competition being faced, notably from new
entrants.
Analytics and Tech
Analytics and Tech total revenue of GBP9.9 million (2019:
GBP14.1 million) fell by 30% in reported terms but by 21% on a
like-for-like basis, excluding Stratigent whose operation ceased in
September 2019. Advanced Analytics, the largest element, fell by
10%, AdTech by 29% and Digital Balance by 33%.
Our Advanced Analytics practice helps brands to plan and
optimise their investment in media by applying advanced analytical
techniques to attribute and forecast the impact of marketing
investments on business outcomes (eg sales) and to optimise these
investments. With a client base oriented to retail, travel and
automotive its revenue was impacted by cancellations and deferrals
in the first half. However, its offering is well suited to helping
brands to re-plan their media investment strategy to reflect
changed conditions and it recovered to an extent in the second half
in response to these client needs.
Our AdTech practice 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-house alternatives and the selection of
advertising technology partners. It has a number of continuous
projects for several global clients, although delayed purchase
approvals by one of these impacted its revenue in this period.
The MarTech practice now comprises a single unit, Digital
Balance, in Australia, following the closure of Stratigent in the
USA in September 2019. During the year, Digital Balance has been
more closely integrated with the media practice to increase
cross-selling of its services. However, although it won projects
for global clients based in France and Germany, demand from its
core Australian client base was affected by the pandemic.
Operating Profit by Segment
Underlying Operating Profit Operating profit
margin
FY20 FY19 Variance FY20 FY19
------- ------- ---------------- --------- --------
GBPm GBPm GBPm % % %
------- ------- ------- ------- --------- --------
Media 6.8 11.2 (4.4) (39%) 15% 21%
------- ------- ------- ------- --------- --------
Analytics and Tech (0.7) 1.0 (1.7) - (7%) 7%
------- ------- ------- ------- --------- --------
Unallocated costs (6.4) (6.6) 0.2 3% - -
------- ------- ------- ------- --------- --------
Group (0.3) 5.6 (5.9) - (1%) 9%
------- ------- ------- ------- --------- --------
The reduction in operating profitability compared to 2019,
largely reflected the revenue performance, despite reductions of
GBP3.8m achieved in operating expenses. The Media practice remained
profitable although its margins fell from 21% to 15%. Analytics and
Tech moved into a loss of GBP0.7m, due largely to the fall in
revenue although it was also impacted by an expansion of the staff
base in 2019 which had been made in anticipation of expected
revenue growth in 2020.
ESG
At Ebiquity, we understand the importance of a clear approach to
Environmental, Social and Governance ("ESG") matters. We are at an
early stage in developing our policies and practices and now plan
to establish appropriate baseline metrics and objectives against
which we will report in future. We will continue to engage with
investors and other stakeholders on ESG issues and ensure that the
Board and management team review ways for Ebiquity to progress
further towards becoming a more sustainable business.
Outlook
Although 2020 was an exceptionally difficult year for many
businesses, including Ebiquity, the outlook for 2021 is more
positive, and it is expected to be a year of recovery, albeit not
immediately to the activity levels of 2019. There are early signs
of economic activity, including advertising expenditure, returning
to more normalised levels during 2021, although this depends on the
success of vaccine programmes and other measures in continuing to
reduce the global impact of Covid-19.
In addition to cautious optimism about market conditions, the
Group aims to build on the progress seen in the second half of
2020. It expects to benefit from the new business won over the last
year and from re-commissioning of some client projects deferred or
cancelled in 2020. These factors have already led to an encouraging
contract pipeline in the first quarter.
Covid-19 has had a pronounced effect on consumer behaviour,
changing their media consumption patterns and accelerating the
growth in online activity. These dynamics are expected to encourage
brand owners to review their channel and media investment
strategies to ensure they are effective and deliver return on
investment. Ebiquity's data-driven, product solutions strategy
means it is well-positioned to take advantage of these dynamics in
response to demand for media investment analysis.
Notwithstanding this broader market uncertainty, the Group's
re-defined strategic focus together with its strong market position
and solid financial platform, make it well-positioned to deliver
revenue growth and a return to profitability in the year ahead.
Financial Review
Group revenues for the year ended 31 December 2020 fell by
GBP12.2 million or 18% to GBP55.9 million, from GBP68.1 million in
2019.
Reflecting the lower activity, project-related costs (which
comprise external partner and production costs) fell by GBP2.4
million (27%) from GBP8.8 million to GBP6.4 million and the net
revenue margin rose from 87% to 88%. Operating expenses were also
reduced, by GBP3.8 million, (7%) to GBP50.0 million from GBP53.7
million. This only partially offset the revenue reduction and the
Group recorded an underlying operating loss of GBP0.3 million in
the year, compared to an underlying operating profit of GBP5.6
million and operating margin of 9% in 2019.
Net finance costs rose slightly from GBP0.9 million to GBP1.0
million, due to the increase in net debt. This and the operating
loss led to an underlying loss before tax in the year of GBP1.3
million, compared to a profit of GBP4.7 million in 2019.
The statutory operating loss of GBP2.9 million (calculated after
highlighted items) improved from the loss of GBP4.8 million in
2019, due largely to a significantly lower level of net highlighted
costs which fell from GBP10.3 million to GBP2.5 million (as
detailed below). This also led to a reduction in the statutory loss
before tax to GBP3.9 million compared to GBP5.7 million in
2019.
Highlighted items
Highlighted items during the year included the following:
-- GBP1.9 million credit relating to share-based payments mainly
arising from the lapse of options over 4.2 million shares
originally awarded in May 2010.
-- GBP1.1 million charge for amortisation of purchased intangibles (2019: GBP1.2 million)
-- GBP0.8 million charge due to the impairment of goodwill in
Digital Balance, the martech business based in Australia
-- GBP1.5 million charge relating to severance and
re-organisation costs following re-structuring of management and
staff roles in Australia, France, Germany, UK and USA as part of
actions taken to improve business performance.
-- GBP0.8 million relating to currency revaluation of deferred
consideration payments for Ireland and Italy
-- GBP0.2 million relating to professional costs incurred on
acquisitions and bank facility negotiations.
Prior Year Adjustment
During the year, a misstatement was discovered in the balance
sheet of Firm Decisions' US subsidiary as at 31 December 2019. This
followed an internal review of balance sheet items by the Group
Finance team as part of enhanced internal control procedures put in
place by the Chief Financial and Operating Officer during the last
year. The causes of this error were specific to the unit involved
and related to the misstatement of accrued income and revenue
balances for which process and system improvements have been made
to avoid any recurrence. In accordance with FRS 102, the financial
statements for 2019 have been re-stated to reflect this adjustment.
The impact was a reduction of GBP600,000 in 2019 Group revenue, a
reduction of GBP148,000 in retained earnings brought forward as at
1 January 2019 and a reduction of GBP748,000 in accrued income as
at 31 December 2019.
Taxation
There was an underlying tax charge in the year of GBP0.03
million compared to GBP1.9 million in 2019. This reduced charge
reflected the loss before tax incurred in the year.
There was a total tax credit including on highlighted items of
GBP0.2 million compared to a charge of GBP1.5 million in 2019.
Earnings per share
The loss after tax led to an underlying loss per share of 1.9p,
compared to earnings of 2.8p in 2019. There was a statutory diluted
loss per share of 4.81p, an improvement of 4.74p, compared to the
statutory diluted loss per share of 9.55p in 2019.
Dividend
Although our Group is in a healthy financial position and has
bank borrowing facilities in place until 2023, the Board considers
it prudent to conserve the Group's cash resources given the Group's
performance in 2020 and the uncertainty created by the Covid-19
pandemic. It will therefore not be proposing the payment of a
dividend in respect of 2020 at the forthcoming AGM and will defer
any dividend recommendation until economic and business conditions
are more certain.
Cash conversion
Year ended Year ended
31 December 31 December
2020 2019
------------------------------- ------------- -------------
GBP'000 GBP'000
------------------------------- ------------- -------------
Reported cash from operations 5,827 5,657
------------------------------- ------------- -------------
Underlying cash from
operations 7,300 8,870
------------------------------- ------------- -------------
Underlying operating
profit/loss (334) 6,167
------------------------------- ------------- -------------
Cash conversion - 144%
------------------------------- ------------- -------------
Underlying cash from operations represents the cash flows from
operations excluding the impact of highlighted items. The
underlying net cash inflow from operations was GBP7.3 million
during 2020 (2019: GBP8.9 million). This cash inflow reflecting
continued tight management of working capital despite the
challenging business environment.
Equity
During the year to 31 December 2020, 2,467,628 shares were
issued. 2,437,628 of these were as partial settlement of the
Italian minority buy-out and a further 30,000 upon the exercise of
employee share options. As a result, the total share capital
increased to 82,583,254 shares (31 December 2019: 80,115,626).
Net debt and banking facilities
31 December 31 December
2020 2019
--------------------------------------- ------------ ------------
GBP'000 GBP'000
--------------------------------------- ------------ ------------
Net cash 11,121 8,236
Bank debt (19,000) (14,000)
Loan fee prepayments 120 168
--------------------------------------- ------------ ------------
Net bank debt (7,759) (5,596)
US PPP Loan (1) (750) ----
Net Debt as in Statement of Financial
Position (8,509) (5,596)
--------------------------------------- ------------ ------------
(1) This represents a loan received in May 2020 under the US
Payroll Protection Programme. The qualifying conditions required
for loan forgiveness have been met but at the year-end the
providing bank had not opened the forgiveness application process.
If the application is successful, this loan will be credited to the
income statement in 2021 as a grant.
All bank borrowings are held jointly with Barclays and NatWest.
On 20 September 2019, the Group entered into a new RCF facility
agreement of GBP24.0 million with broadly similar terms to the
previous one. The facility has a maturity period of four years,
expiring in September 2023 with an option for the company to extend
for one further year. The committed RCF facility at 31 December
2020 totalled GBP24.0 million, of which GBP19.0 million was drawn
(2019: RCF of GBP25.0 million, of which GBP14.0 million was drawn).
During the year, the Group drew down GBP5.0 million to cover
working capital requirements that it anticipated might have arisen
due to the Covid 19 pandemic. In the prior year, the drawn RCF
facility of GBP14.0 million was included as a current liability
since the facility was set to expire within one year.
The Group continued to trade throughout the year, within the
limits of its banking facilities and associated covenants. The
covenants applying on a quarterly basis until June 2020 were 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 were agreed with the lenders in May 2020 which applied
from July 2020 to 30 November 2021. These require the Group to
maintain minimum liquidity of at least GBP5 million at the end of
every month during that period. Minimum liquidity is defined as the
aggregate amount of cash together with any available undrawn amount
under the facility. Liquidity as at 31 December 2020 totalled
GBP15.4 million. In March 2021, a further covenant amendment was
agreed with the lenders. With effect from December 2021, the
minimum liquidity covenant will increase to GBP7 million. In
addition, with effect from September 2021 an adjusted leverage
covenant will be re-introduced, initially at < 4.0, increasing
to < 4.25 in December 2021 and to < 4.5 in March 2022, then
reducing to < 3.5 in June 2022 and < 3.0 in September 2022.
The original covenants which were in force until June 2020 will
apply again from December 2022 onwards.
Statement of financial position and net assets
A summary of the Group's balance sheet as at 31 December 2020
and 31 December 2019 is set out below:
31 December 31 December
2020 2019
------------------------------- ------------ ------------
GBP'000 GBP'000
------------------------------- ------------ ------------
Goodwill and intangible
assets 34,698 35,172
Right of use asset 6,237 8,339
Other non-current assets 3,387 3,549
Net working capital 8,504 12,179
Other current liabilities (1,953) (4,724)
Lease liability (8,158) (9,590)
Other non-current liabilities (1,503) (1,423)
Deferred consideration (1,957) (14)
Net debt (8,509) (5,596)
------------------------------- ------------ ------------
Net assets 30,746 37,892
------------------------------- ------------ ------------
Net assets as at 31 December 2020 decreased by GBP7.1 million to
GBP30.7 million (2019: GBP37.9 million).
Debtor days have remained consistent year on year at 58 days
(2019: 62 days) due to continued strong cash collection in
particular, at the end of the year.
Corporate Development Activities
On 8 January 2020, the Group completed the purchase of Digital
Decisions B.V ('Digital Decisions'). The initial cash consideration
paid was EUR700,000 (GBP597,000) with further contingent
consideration payable in a mix of cash and Ebiquity plc shares. The
first deferred contingent payment is based on profit performance in
the year to 31 December 2020 and the second payment is based on the
average profit performance for the two years ended 31 December
2022. Payment of the deferred contingent consideration is
conditional upon the vendor remaining in Ebiquity's employment and
is therefore deemed to be post-date remuneration in accordance with
IFRS 3 (revised). No payment was earned in respect of the year
ended 31 December 2020, since although Digital Decisions' revenue
increased significantly, its profit did not reach the required
threshold. Due to the integration of the Digital Decisions service
with the Group's overall digital media products, the basis of the
revenue included in the performance calculation for the two years
ended 31 December 2022 was amended in January 2021 to include the
contribution from all digital media products developed by the
Digital Innovation Centre. The multiple applied in calculating the
contingent consideration has been reduced from 8 times to 6 times
the average of the relevant profits generated in 2021 and 2022.
On 3 February 2020, the Company agreed to acquire the
outstanding 49% interest in its subsidiary Ebiquity Italy Media
Advisor S.r.l ('Ebiquity Italy') from the founders and minority
shareholders, Arcangelo DiNieri and Maria Gabrielli. The
transaction completed on 28 May 2020, following the approval of the
Group's audited accounts. The total consideration of GBP3.1 million
was based on an average of Ebiquity Italy's profit before tax and
management charges for the years ending 31 December 2018 and 2019.
The consideration is being paid in a combination of cash and
Ebiquity plc shares. At completion, 25% of the total consideration
was settled by the issue of 2,437,628 Ebiquity plc shares and 5% in
cash. The remaining cash payments totalling GBP2.3m were made
between August 2020 and March 2021.
On 24 December 2020, the Group acquired a further 24.95% of the
share capital of its subsidiaries Ebiquity Russia Limited and
Ebiquity Russia OOO from Vladimir Rass, the former CEO, for a total
payment of US$517,000 (GBP405,000). The Group now holds 75.05% of
the share capital of each of these companies.
Alan Newman
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 details 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 2020
Restated (1)
Year ended 31 December Year ended 31 December
2020 2019
----------------------------------- -----------------------------------
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 55,907 - 55,907 68,133 - 68,133
Project-related
costs (6,436) - (6,436) (8,857) - (8,857)
------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
Net revenue 49,471 - 49,471 59,276 - 59,276
Cost of sales (24,784) - (24,784) (27,355) - (27,355)
------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
Gross profit 24,687 - 24,687 31,921 - 31,921
Administrative
expenses (25,172) (2,541) (27,713) (26,354) (10,330) (36,684)
Other operating
income 151 - 151 - - -
------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
Operating (loss)/profit (334) (2,541) (2,875) 5,567 (10,330) (4,763)
Finance income 39 - 39 9 - 9
Finance expenses (914) - (914) (907) - (907)
Foreign exchange (137) - (137) - - -
------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
Net finance costs (1,012) - (1,012) (898) - (898)
------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
(loss)/profit
before taxation
from continuing
operations (1,346) (2,541) (3,887) 4,669 (10,330) (5,661)
Taxation (charge)/credit
- continuing operations 4 (26) 176 150 (1,931) 454 (1,477)
------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
(Loss)/profit
for the year
- continuing operations (1,372) (2,365) (3,737) 2,738 (9,876) (7,138)
------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
Net profit/(loss)
from
discontinued operations 5 - 220 220 - (1,018) (1,018)
------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
(Loss)/Profit
for the year (1,372) (2,145) (3,517) 2,738 (10,894) (8,156)
------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
Attributable to:
Equity holders
of the parent (1,569) (2,134) (3,703) 2,275 (10,882) (8,607)
Non -- controlling
interests 197 (11) 186 463 (12) 451
------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
(1,372) (2,145) (3,517) 2,738 (10,894) (8,156)
------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
Earnings per share
- continuing operations
Basic 6 (4.81)p (9.55)p
Diluted 6 (4.81)p (9.55)p
------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
Earnings per share
- discontinued
operations
Basic 6 0.27p (1.28)p
Diluted 6 0.27p (1.28)p
------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
(1) Refer to note 1 for further details.
Consolidated statement of comprehensive income
for the year ended 31 December 2020
Restated
(1)
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
------------------------------------------------------------------- ----------- -----------
Loss for the year (3,517) (8,156)
Other comprehensive income/(expense):
Items that will not be reclassified subsequently to profit or loss
Exchange differences on translation of overseas subsidiaries 1,033 (716)
------------------------------------------------------------------- ----------- -----------
Total other comprehensive income/(expense) for the year 1,033 (716)
------------------------------------------------------------------- ----------- -----------
Total comprehensive expense for the year (2,484) (8,872)
------------------------------------------------------------------- ----------- -----------
Attributable to:
Equity holders of the parent (2,670) (9,323)
Non -- controlling interests 186 451
------------------------------------------------------------------- ----------- -----------
(2,484) (8,872)
------------------------------------------------------------------- ----------- -----------
(1) Refer to note 1 for further details.
Consolidated statement of financial position
as at 31 December 2020
Restated Restated
(1) (1)
31 December 31 December 31 December
2020 2019 2018
Note GBP'000 GBP'000 GBP'000
---------------------------------- ---- ----------- ----------- -----------
Non -- current assets
Goodwill 7 28,563 28,409 34,774
Other intangible assets 8 6,135 6,763 8,477
Property, plant and equipment 1,962 2,563 1,170
Right-of-use assets 9 6,237 8,339 -
Lease receivables 9 280 - -
Deferred tax asset 1,145 986 979
---------------------------------- ---- ----------- ----------- -----------
Total non -- current assets 44,322 47,060 45,400
---------------------------------- ---- ----------- ----------- -----------
Current assets
Trade and other receivables 24,318 26,838 29,260
Assets held for sale - - 27,734
Lease receivables 9 171 - -
Cash and cash equivalents 11,121 8,236 8,793
---------------------------------- ---- ----------- ----------- -----------
Total current assets 35,610 35,074 65,787
---------------------------------- ---- ----------- ----------- -----------
Total assets 79,932 82,134 111,187
---------------------------------- ---- ----------- ----------- -----------
Current liabilities
Trade and other payables (6,096) (5,575) (7,510)
Liabilities held for sale - - (4,316)
Accruals and contract liabilities (9,890) (9,084) (10,640)
Financial liabilities 10 (1,912) 22 (2,822)
Current tax liabilities 4 (1,703) (4,152) (1,358)
Provisions - (300) (570)
Lease liabilities 9 (2,338) (1,834) -
Deferred tax liability (250) (272) (323)
---------------------------------- ---- ----------- ----------- -----------
Total current liabilities (22,189) (21,195) (27,539)
---------------------------------- ---- ----------- ----------- -----------
Non -- current liabilities
Financial liabilities 10 (19,675) (13,868) (34,934)
Provisions (412) (387) (67)
Lease liabilities 9 (5,820) (7,756) -
Deferred tax liability (1,090) (1,036) (1,281)
---------------------------------- ---- ----------- ----------- -----------
Total non -- current liabilities (26,997) (23,047) (36,282)
---------------------------------- ---- ----------- ----------- -----------
Total liabilities (49,186) (44,242) (63,821)
---------------------------------- ---- ----------- ----------- -----------
Total net assets 30,746 37,892 47,366
---------------------------------- ---- ----------- ----------- -----------
Equity
Ordinary shares 20,646 20,029 19,778
Share premium 255 46 44
Other reserves 5,461 4,428 5,144
Retained earnings 3,942 12,210 21,408
---------------------------------- ---- ----------- ----------- -----------
Equity attributable to the owners
of the parent 30,304 36,713 46,374
Non -- controlling interests 442 1,179 992
---------------------------------- ---- ----------- ----------- -----------
Total equity 30,746 37,892 47,366
---------------------------------- ---- ----------- ----------- -----------
(1) Refer to note 1 for further details.
Consolidated statement of changes in equity
for the year ended 31 December 2020
Equity
Attributable
to owners
Ordinary Share Other Retained of Non-controlling Total
Reserves
shares premium (2) earnings the parent interests equity
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ---- -------- ------- -------- --------- ------------ --------------- ---------
31 December 2018 (as
reported) 19,778 44 5,144 21,556 46,522 992 47,514
Impact of restatement
at 31 December 2018 - - - (148) (148) - (148)
------------------------------ ---- -------- ------- -------- --------- ------------ --------------- ---------
31 December 2018 (as
restated) (1) 19,778 44 5,144 21,408 46,374 992 47,366
(Loss)/profit for
the year 2019 (as
reported) - - - (8,007) (8,007) 451 (7,556)
Adjustment for 2019 - - - (600) (600) - (600)
------------------------------ ---- -------- ------- -------- --------- ------------ --------------- ---------
(Loss)/profit for
the year 2019 (as
restated) (1) - - - (8,607) (8,607) 451 (8,156)
Other comprehensive
expense - - (716) - (716) - (716)
Total comprehensive
(expense)/income for
the year - - (716) (8,607) (9,323) 451 (8,872)
Shares issued for
cash 251 2 - - 253 - 253
Share options charge 3 - - - 195 195 - 195
Acquisition of non-controlling
interest - - - (252) (252) (83) (335)
Dividends paid to
shareholders 11 - - - (534) (534) - (534)
Dividends paid to
non-controlling interests - - - - - (181) (181)
------------------------------ ---- -------- ------- -------- --------- ------------ --------------- ---------
31 December 2019 (as
restated) (1) 20,029 46 4,428 12,210 36,713 1,179 37,892
(Loss)/profit for
the year 2020 - - - (3,703) (3,703) 186 (3,517)
Other comprehensive
income - - 1,033 - 1,033 - 1,033
------------------------------ ---- -------- ------- -------- --------- ------------ --------------- ---------
Total comprehensive
income/(expense) for
the year - - 1,033 (3,703) (2,670) 186 (2,484)
Shares issued for
cash 8 - - (8) - - -
Share options credit 3 - - - (1,845) (1,845) - (1,845)
Acquisition of non-controlling
interest 609 209 - (2,712) (1,894) (779) (2,673)
Dividends paid to - - - - - - -
non-controlling interests - - - - - (144) (144)
------------------------------ ---- -------- ------- -------- --------- ------------ --------------- ---------
31 December 2020 20,646 255 5,461 3,942 30,304 442 30,746
------------------------------ ---- -------- ------- -------- --------- ------------ --------------- ---------
(1.) Refer to note 1 for further details.
(2) .Includes a credit of GBP3,667,000 (31 December 2019:
GBP3,667,000) in the merger reserve, a gain of GBP3,272,000 (31
December 2019: GBP2,239,000) recognised in the translation reserve,
and is partially offset by a debit balance of GBP1,478,000 (31
December 2019: GBP1,478,000) in the ESOP reserve. Refer to note 23
for further details.
Consolidated statement of cash flows
for the year ended 31 December 2020
Year ended Year ended
31 December 31 December
2020 2019
Note GBP'000 GBP'000
--------------------------------------------------------------- ---- ----------- -----------
Cash flows from operating activities
Cash generated from operations 12 5,827 5,657
Finance expenses paid (563) (727)
Finance income received 13 9
Income taxes paid (2,285) (1,345)
--------------------------------------------------------------- ---- ----------- -----------
Net cash generated by operating activities 2,992 3,594
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired (597) -
Disposal of subsidiaries 5 18 24,845
Payments to acquire non-controlling interest 10 (1,539) (335)
Payments in respect of contingent consideration 10 - (648)
Purchase of property, plant and equipment (87) (2,024)
Purchase of intangible assets 8 (1,230) (1,211)
--------------------------------------------------------------- ---- ----------- -----------
Net cash (used in)/generated by investing activities (3,435) 20,627
Cash flows from financing activities
Proceeds from issue of share capital (net of issue costs) - 253
Proceeds from bank borrowings 10 5,000 -
Repayment of bank borrowings 10 - (20,000)
Proceeds from government borrowings 10 806 -
Bank loan fees paid (21) (204)
Repayment of lease liabilities 9 (2,130) (1,192)
Dilapidations payments (300) -
Dividends paid to shareholders 11 - (534)
Dividends paid to non -- controlling interests (144) (518)
Capital repayment of finance leases - -
--------------------------------------------------------------- ---- ----------- -----------
Net cash flow generated by/(used in) financing activities 3,211 (22,195)
--------------------------------------------------------------- ---- ----------- -----------
Net increase in cash, cash equivalents and bank overdrafts 2,768 2,026
Cash, cash equivalents and bank overdraft at beginning of year 8,236 6,414
Effects of exchange rate changes on cash and cash equivalents 117 (204)
--------------------------------------------------------------- ---- ----------- -----------
Group cash and cash equivalents at the end of the year 11,121 8,236
--------------------------------------------------------------- ---- ----------- -----------
Notes to the consolidated financial statements
for the year ended 31 December 2020
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 19 offices.
The Company is a public limited company, which is listed on the
London Stock Exchange's Alternative Investment Market and is
limited by shares. The Company 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 accounting standards in conformity
with the requirements of the Companies Act 2006 ('IFRS') and the
applicable legal requirements of the Companies Act 2006.
Prior year restatement
During the year, a misstatement was discovered in the balance
sheet of subsidiary Firm Decisions ASJP LLC as at 31 December 2019.
This followed an internal review of balance sheet items by the
Group Finance team as part of enhanced internal control procedures
put in place by the Chief Financial Officer during the last year.
The causes of this error were specific to the unit involved and
related to the misstatement of accrued income and revenue balances
for which process and system improvements have been made to avoid
any recurrence. In accordance with IAS 8, the financial statements
for 2019 have been restated to reflect this adjustment. The impact
was a reduction of GBP600,000 in 2019 Group revenue, a reduction of
GBP148,000 in retained earnings brought forward as at 1 January
2019, and a reduction of GBP748,000 in accrued income as at 31
December 2019.
2018 2018 2018 2019 2019 2019
Reported Adjustment Restated Reported Adjustment Restated
GBP '000 GBP '000 GBP '000 GBP '000 GBP '000 GBP '000
--------------------------------------------- -------- ---------- -------- -------- ---------- --------
Consolidated income statement
Revenue 69,368 (56) 69,312 68,733 (600) 68,133
Consolidated statement of financial position
Trade and other receivables 29,408 (148) 29,260 27,586 (748) 26,838
Retained earnings 21,556 (148) 21,408 12,958 (748) 12,210
--------------------------------------------- -------- ---------- -------- -------- ---------- --------
Going concern
The 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 10 to
the financial statements. As at 31 December 2020, the Group had
cash balances of GBP11,121,000 and undrawn bank facilities
available of GBP5,000,000 and was cash generative and within its
banking covenants.
The lenders, Barclays and NatWest Bank, have agreed to covenant
waivers and modifications where required in order to negate the
risk of any future covenant breaches.
The existing covenants remained in place for the 12 months to
March 2020 and June 2020 and were achieved. In response to the
disruption caused by the Covid-19 pandemic, modified covenants were
agreed with the lenders in May 2020 which applied from July 2020 to
30 November 2021. These require the Group to maintain minimum
liquidity of at least GBP5 million at the end of every month during
that period. In March 2021, a further covenant amendment was agreed
with the lenders. With effect from September 2021, the minimum
liquidity covenant will increase to GBP7.0 million and will be in
place until June 2022. In addition, with effect from September 2021
an interest cover covenant will be reintroduced at > 4.0 and an
adjusted leverage covenant will also be reintroduced initially at
< 4.0, increasing to < 4.25 in December 2021 and to < 4.5
in March 2022, then reducing to < 3.5 in June 2022. The original
covenants which were in force until June 2020 will apply again from
September 2022 onwards.
In assessing the going concern status of the Group and Company,
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. Specifically, the Directors have prepared a model to
forecast covenant compliance and liquidity to 31 December 2022 that
includes a base case and scenarios to form a severe but plausible
downside case.
The base case assumes growth in revenue and EBITDA when compared
to the outturn of FY20 and assumes that trading will recover to
2019 levels by 31 December 2022. The severe but plausible case
assumes a downside adjustment to revenue of 7%, offset by
mitigating factors within the control of the Directors. Under both
of these cases, there is headroom on covenant compliance and
liquidity throughout the going concern period.
The Directors have also considered a scenario that leads to a
breach in covenants; a form of reverse stress test. Actual trading
in FY21 and the proportion of secured revenue at this time, is
ahead of last year and whilst there is inherent uncertainty in
trading for the second half of FY21 and into FY22, trading levels
would need to significantly reduce to a level that is consistent
with FY20 for there to be a breach in covenants. This scenario is
not deemed plausible by the Directors.
In addition, the downside assumptions that are applied to the
base case are different from those modelled at the half year. The
Directors are satisfied that based on the current trading
performance of the Group and Company, the proven ability of the
Group and Company to work remotely and still serve clients during
the pandemic and the current vaccine roll outs, the prior downside
assumptions are no longer plausible.
The Directors consider that the Group and Company will have
sufficient liquidity within existing bank facilities, totalling
GBP24,000,000 to meet its obligations during the next 12 months and
hence consider it appropriate to prepare the financial statements
on a going concern basis.
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, profit on disposal arising in the
prior year has been presented within discontinued operations in the
income statement.
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 is recognised in accordance with IFRS 15 'Revenue from
Contracts with Customers'. Under IFRS 15 an entity should recognise
revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods and
services. This core principle is delivered in a five-step
model:
-- Identify the contract(s) with a customer
-- Identify the performance obligation(s) in the contract
-- Determine the transaction price
-- Allocate the transaction price to the performance obligations in the contract
-- Recognise revenue when (or as) the entity satisfies a performance obligation.
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.
Highlighted items
Highlighted items comprise non -- cash charges and non --
recurring items which are highlighted in the consolidated income
statement as separate disclosure is considered by the Directors to
be relevant in understanding the underlying performance of the
business. The non -- cash charges include share option charges and
amortisation of purchased intangibles.
The non -- recurring items include the costs associated with
potential acquisitions (where formal discussion is undertaken),
completed acquisitions and disposals, and their subsequent
integration into/separation from the Group, adjustments to the
estimates of contingent consideration on acquired entities, asset
impairment charges, management restructuring and other significant
one -- off items. Costs associated with ongoing market landscaping,
acquisition identification and early stage discussions with
acquisition targets are reported in underlying administrative
expenses.
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 7 and 8 to the 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
The Group has applied the following standards and amendments for
the first time for the annual reporting period commencing 1 January
2020:
-- Definition of Material - amendments to IAS 1 and IAS 8
-- Definition of a Business - amendments to IFRS 3
-- Interest Rate Benchmark Reform - amendments to IFRS 9, IAS 9 and IFRS 7
-- Revised Conceptual Framework for Financial Reporting
The amendments listed above did not have any impact on the
amounts recognised in prior periods and are not expected to
significantly affect the current or future periods.
The following new standard has been published that is mandatory
to the Group's future accounting periods but has not been adopted
early in these financial statements:
-- Annual Improvements to IFRS Standards 2018-2020 Cycle effective on or after 1 January 2022.
The adoption of the standard listing above is not expected to
significantly affect future periods.
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 two
reportable segments: Media and Analytics & Tech:
-- Media includes our Media Performance, Media Management and Contract Compliance services; and
-- Analytics & Tech consists of our Advanced Analytics, MarTech and AdTech 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 2020 is as
follows:
Year ended/As at 31 December 2020
Analytics
& Reportable
Media Tech segments Unallocated Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------- ------- --------- ---------- ----------- -------
Revenue 46,042 9,865 55,907 - 55,907
Operating profit/(loss) before highlighted items 6,770 (692) 6,078 (6,412) (334)
Total assets 67,659 9,838 77,497 2,435 79,932
------------------------------------------------- ------- --------- ---------- ----------- -------
Unsatisfied long-term contracts
The following table shows unsatisfied performance obligations
results from long-term contracts:
Year ended Year ended
31 December 31 December
2020 2019
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 2020 866 304
-------------------------------------------------------------------------------------------- ----------- -----------
It is expected that 94% of the transaction price allocated to
the unsatisfied contracts as of 31 December 2020 will be recognised
during the next reporting period (31 December 2019: 97%); the
remaining 6% will be recognised in the 2022 financial year (31
December 2019: 3% to be recognised in 2021).
Significant changes in contract assets and liabilities
Contract assets have decreased from GBP8,618,000 to GBP6,563,000
and contract liabilities have decreased from GBP4,635,000 to
GBP4,498,000 from 31 December 2019 to 31 December 2020. The reduced
contract assets is a result of the reduction in revenue year on
year.
Year ended/As at 31 December 2019
Restated
----------------------------------------------------
Analytics
& Reportable
Media Tech segments Unallocated Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------- ------- --------- ---------- ----------- -------
Revenue 53,985 14,148 68,133 - 68,133
Operating profit/(loss) before highlighted items 11,245 966 12,211 (6,644) 5,567
Total assets 68,634 11,581 80,215 1,919 82,134
------------------------------------------------- ------- --------- ---------- ----------- -------
A reconciliation of segment operating profit before highlighted
items to total profit before tax is provided below:
Restated
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
------------------------------------------------------------- ----------- -----------
Reportable segment operating profit before highlighted items 6,078 12,211
Unallocated (costs)/income(1) :
Staff costs (3,480) (3,428)
Property costs (1,595) (1,513)
Exchange rate movements 181 (208)
Other administrative expenses (1,518) (1,495)
------------------------------------------------------------- ----------- -----------
Operating (loss)/profit before highlighted items (334) 5,567
Highlighted items (note 3) (2,541) (10,330)
------------------------------------------------------------- ----------- -----------
Operating loss (2,875) (4,763)
Net finance costs (2) (1,012) (898)
------------------------------------------------------------- ----------- -----------
Loss before tax (3,887) (5,661)
------------------------------------------------------------- ----------- -----------
(1.) Unallocated (costs)/income comprise central costs that are
not considered attributable to the segments.
Net finance costs in the current year include GBP137,000
relating to foreign exchange movements on intercompany loan
balances. Previously this was included as an administrative
expense, however it was considered appropriate to reclassify this
in the current year in accordance with IAS 12.
A reconciliation of segment total assets to total consolidated
assets is provided below:
Restated
31 December 31 December
2020 2019
GBP'000 GBP'000
------------------------------------- ----------- -----------
Total assets for reportable segments 77,497 80,215
Unallocated amounts:
Other intangible assets 388 642
Other receivables 1,291 868
Cash and cash equivalents 420 332
Deferred tax asset 336 77
------------------------------------- ----------- -----------
Total assets 79,932 82,134
------------------------------------- ----------- -----------
The table below presents revenue and non -- current assets by
geographical location:
Restated
Year ended/As at Year ended/As at
31 December 2020 31 December 2019
------------------- -------------------
Revenue Revenue
by by
location Non -- location Non --
of current of current
customers assets customers assets
GBP'000 GBP'000 GBP'000 GBP'000
-------------------- --------- -------- --------- --------
United Kingdom 29,083 21,684 33,176 27,802
Rest of Europe 15,999 12,424 18,783 7,402
North America 4,671 2,721 8,351 3,416
Rest of world 6,154 6,348 7,823 7,454
-------------------- --------- -------- --------- --------
55,907 43,177 68,133 46,074
Deferred tax assets - 1,145 - 986
-------------------- --------- -------- --------- --------
Total 55,907 44,322 68,133 47,060
-------------------- --------- -------- --------- --------
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 2020 31 December 2019
------------------------- -------------------------
Non -- Non --
Cash cash Total Cash cash Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------ ------- ------- ------- ------- ------- -------
Administrative expenses
Share option (credit)/charge (61) (1,845) (1,906) (78) 195 117
Amortisation of purchased intangibles - 1,122 1,122 - 1,169 1,169
Impairment of goodwill - 817 817 - 6,751 6,751
Severance and reorganisation costs 1,194 315 1,509 1,333 - 1,333
Acquisition, integration and strategic costs/(income) 809 190 999 998 (38) 960
------------------------------------------------------ ------- ------- ------- ------- ------- -------
Total highlighted items before tax 1,942 599 2,541 2,253 8,077 10,330
Taxation (credit)/charge (289) 113 (176) (536) 82 (454)
------------------------------------------------------ ------- ------- ------- ------- ------- -------
Total highlighted items after tax
- continuing operations 1,653 712 2,365 1,717 8,159 9,876
Highlighted items - discontinued operations (220) - (220) 2,521 (1,503) 1,018
------------------------------------------------------ ------- ------- ------- ------- ------- -------
Total highlighted items 1,433 712 2,145 4,238 6,656 10,894
------------------------------------------------------ ------- ------- ------- ------- ------- -------
In the current year, a non -- cash IFRS 2 credit of GBP1,845,000
(31 December 2019: charge of GBP195,000) was recorded. Separate
disclosure is considered relevant to isolate charges and credits
which are subject to volatility as a result of non-trading
factors.
Amortisation of purchased intangibles relates to acquisitions
made in the current financial year of GBPnil and to acquisitions
made in prior years of GBP1,122,000 (31 December 2019: GBPnil in
the current financial year and GBP1,169,000 in prior years).
Separate disclosure is considered relevant because amortisation of
purchased intangibles has no correlation to underlying
profitability of the Group.
Impairment of goodwill and intangibles of GBP817,000 (2019:
GBP6,751,000) has been recognised in the year. This is in relation
to the impairment of goodwill in Digital Balance Australia Pty
Limited. The impairment was determined by the excess of the
carrying value of goodwill and purchased intangibles over and above
the calculated value-in-use.
Total severance and reorganisation costs of GBP1,509,000 (31
December 2019: GBP1,333,000) were recognised during the year,
relating to severances in the UK, the US, Germany, Australia and
France 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 GBP999,000
(31 December 2019: GBP960,000) were recognised during the year,
predominantly relating to the adjustment to the fair value of
contingent consideration by GBP791,000 predominantly arising in
relation to the upward revision of the amounts payable in relation
to the Ebiquity Marsh Limited acquisition in line with the latest
actuals. GBP80,000 was incurred in relation to the loan covenant
amendments. Costs of GBP72,000 have been recognised in relation to
the Chicago sublease arrangement. Costs of GBP56,000 were also
recognised in relation to the acquisitions of Digital Decisions
B.V. and the minority buyout in Ebiquity Italy Media Advisor
S.r.l., Ebiquity Russia Limited and Ebiquity Russia OOO which
completed in the year; see note 13 for further details. 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 overprovision of prior year tax on the profit on
disposal of the AdIntel business of GBP220,000 due to information
now known. Highlighted items on discontinued operations in the
prior 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 2020, GBP1,314,000 of the GBP1,942,000 cash
highlighted items had been settled (31 December 2019: GBP1,526,000
of the GBP2,254,000 cash highlighted items had been settled).
4. Taxation charge/(credit)
Year ended Year ended
31 December 2020 31 December 2019
--------------------------------- ---------------------------------
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 (20) (82) (102) 298 (383) (85)
Adjustment in respect of prior years (309) - (309) 494 - 494
------------------------------------- ----------- ----------- ------- ----------- ----------- -------
(329) (82) (411) 792 (383) 409
Foreign tax
Current year 686 (207) 479 1,404 (153) 1,251
Adjustment in respect of prior years (78) - (78) 120 - 120
------------------------------------- ----------- ----------- ------- ----------- ----------- -------
608 (207) 401 1,524 (153) 1,371
------------------------------------- ----------- ----------- ------- ----------- ----------- -------
Total current tax 279 (289) (10) 2,316 (536) 1,780
------------------------------------- ----------- ----------- ------- ----------- ----------- -------
Deferred tax
Origination and reversal of
temporary differences (186) 113 (73) (295) 82 (213)
Adjustment in respect of prior years (67) - (67) (90) - (90)
------------------------------------- ----------- ----------- ------- ----------- ----------- -------
Total tax charge/(credit) 26 (176) (150) 1,931 (454) 1,477
------------------------------------- ----------- ----------- ------- ----------- ----------- -------
The difference between tax as charged in the financial
statements and tax at the nominal rate is explained below:
Restated
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
----------------------------------------------------- ----------- -----------
Loss before tax (3,887) (5,661)
----------------------------------------------------- ----------- -----------
Corporation tax at 19.00% (31 December 2019: 19.00%) (739) (1,076)
Non -- deductible taxable expenses 1,605 1,253
Overseas tax rate differential 117 361
Overseas(gains)/losses not recognised (460) 149
Losses utilised not previously recognised 1 266
Adjustment in respect of prior years (674) 524
----------------------------------------------------- ----------- -----------
Total tax (credit)/charge (150) 1,477
----------------------------------------------------- ----------- -----------
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 Budget 2021 detailed an
increase in the corporation tax from 1 April 2023 to 25%, however
this has not yet been substantively enacted.
The table below shows a reconciliation of the current tax
liability for each year end:
GBP'000
------------------------------------------------- -------
At 1 January 2019 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
Corporation tax payments (2,476)
Corporation tax refunds 191
Withholding tax (25)
Under -- provision in relation to prior years (220)
Provision for the year ended 31 December 2020(1) (10)
Foreign exchange 91
------------------------------------------------- -------
At 31 December 2020 1,703
------------------------------------------------- -------
(1) The provision for the current year includes an overprovision
of tax relating to the prior year of GBP220,000 in relation to the
discontinued operation (31 December 2019: a tax charge of
GBP2,462,000 in relation to the discontinued operation on the
profit on disposal).
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 prior year and the balance was paid in the current year. The
results of this division have been presented within discontinued
operations as appropriate.
The financial performance and cash flow information presented
below for Intel reflects the overprovision of tax on the AdIntel
sale in the year ended 31 December 2020, whilst the comparative
information shows the profit on disposal and tax charge thereon
recognised in 2019 on the sale completing on 2 January 2019. The
financial performance and cash flow information presented below for
Reputation reflects the contingent consideration receivable
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 2020 31 December 2019
---------------------------- ----------------------------
AdIntel Reputation Total AdIntel Reputation Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------- ------- ---------- ------- ------- ---------- -------
Revenue - - - - - -
Cost of sales - - - - - -
----------------------------------------------- ------- ---------- ------- ------- ---------- -------
Gross result - - - - - -
Administrative expenses - - - - - -
Impairment of asset held for sale - - - - - -
----------------------------------------------- ------- ---------- ------- ------- ---------- -------
Operating result - - - - - -
Highlighted items - - - (1,408) (36) (1,444)
----------------------------------------------- ------- ---------- ------- ------- ---------- -------
(Loss) before tax - - - (1,408) (36) (1,444)
Tax (220) - (220) 2,455 7 2,462
----------------------------------------------- ------- ---------- ------- ------- ---------- -------
Net profit/(loss) from discontinued operations 220 - 220 (1,047) 29 (1,018)
----------------------------------------------- ------- ---------- ------- ------- ---------- -------
Below is a table summarising the cash flows from continuing and
discontinued operations:
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
----------------------------------------------------------------------------- ----------- -----------
Cash generated from operations - continuing operations 2,992 3,594
Cash generated from operations - discontinued operations - -
----------------------------------------------------------------------------- ----------- -----------
Total cash generated from operations 2,992 3,594
----------------------------------------------------------------------------- ----------- -----------
Cash used in investment activities - continuing operations (3,453) (4,218)
Cash generated by/(used in) investment activities - discontinued operations 18 24,845
----------------------------------------------------------------------------- ----------- -----------
Total cash (used in)/generated by investment activities (3,435) 20,627
----------------------------------------------------------------------------- ----------- -----------
Cash generated by/(used in) financing activities - continuing operations 3,211 (22,195)
Cash generated by financing activities - discontinued operations - -
----------------------------------------------------------------------------- ----------- -----------
Total cash generated by/(used in) financing activities 3,211 (22,195)
----------------------------------------------------------------------------- ----------- -----------
Net increase/(decrease) in cash and cash equivalents - continuing operations 2,750 (22,819)
Net increase in cash and cash equivalents - discontinued operations 18 24,845
----------------------------------------------------------------------------- ----------- -----------
Net increase in cash and cash equivalents 2,768 2,026
----------------------------------------------------------------------------- ----------- -----------
Below is a table summarising the details of the sale of the
divisions:
Year ended Year ended
31 December 2020 31 December 2019
---------------------------- ----------------------------
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 sold - - - 23,060 - 23,060
Costs to sell - current year - - - 95 - 95
Reclassification of foreign
currency translation reserve - - - 282 - 282
--------------------------------------------- ------- ---------- ------- ------- ---------- -------
Total - - - 23,437 - 23,437
--------------------------------------------- ------- ---------- ------- ------- ---------- -------
Gain on sale before income tax - - - 1,408 36 1,444
Income tax credit/(charge) on gain (1) 220 - 220 (2,455) (7) (2,462)
--------------------------------------------- ------- ---------- ------- ------- ---------- -------
Gain/(loss) on sale after income tax 220 - 220 (1,047) 29 (1,018)
Costs to sell - prior year - - - (3,176) - (3,176)
--------------------------------------------- ------- ---------- ------- ------- ---------- -------
Gain/(loss) on sale after income tax - total 220 - 220 (4,223) 29 (4,194)
--------------------------------------------- ------- ---------- ------- ------- ---------- -------
(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:
Restated
Year ended Year ended
31 December 2020 31 December 2019
------------------------------------ --------------------------------------
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 (loss)/profit
attributable to equity holders of the
parent (3,923) 220 (3,703) (7,589) (1,018) (8,607)
Adjustments:
Impact of highlighted items (net of
tax)(1) 2,354 (220) 2,134 9,864 1,018 10,882
---------------------------------------- ---------- ------------ ---------- ----------- ------------ -----------
Earnings for the purpose of underlying
earnings per share (1,569) - (1,569) 2,275 - 2,275
Number of shares:
Weighted average number
of shares during the year
- basic 81,571,242 81,571,242 81,571,242 79,490,174 79,490,174 79,490,174
- dilutive effect of share options 528,254 528,254 528,254 1,155,106 1,155,106 1,155,106
---------------------------------------- ---------- ------------ ---------- ----------- ------------ -----------
- diluted 82,099,496 82,099,496 82,099,496 80,645,280 80,645,280 80,645,280
---------------------------------------- ---------- ------------ ---------- ----------- ------------ -----------
Basic earnings per share (4.81)p 0.27p (4.54)p (9.55)p (1.28)p (10.83)p
Diluted earnings per share (4.81)p 0.27p (4.54)p (9.55)p (1.28)p (10.83)p
Underlying basic earnings per share (1.92)p - (1.92)p 2.86p - 2.86p
Underlying diluted earnings per share (1.92)p - (1.92)p 2.82p - 2.82p
---------------------------------------- ---------- ------------ ---------- ----------- ------------ -----------
(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 2019 40,510
Disposals (1) (3,129)
Foreign exchange differences (632)
----------------------------- -------
At 31 December 2019 36,749
Acquisitions (2) 484
Foreign exchange differences 518
----------------------------- -------
At 31 December 2020 37,751
----------------------------- -------
Accumulated impairment
At 1 January 2019 (5,736)
Impairment (3) (5,989)
Disposals (1) 3,129
Foreign exchange differences 256
----------------------------- -------
At 31 December 2019 (8,340)
Impairment (4) (817)
Foreign exchange differences (31)
----------------------------- -------
At 31 December 2020 (9,188)
----------------------------- -------
Net book value
At 31 December 2020 28,563
----------------------------- -------
At 31 December 2019 28,409
----------------------------- -------
(1.) The disposal in the prior 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.
(2.) Goodwill of GBP484,000 has been recognised on the
acquisition of Digital Decisions BV in the year.
(3.) An impairment of GBP5,082,000 was recognised in the prior
year 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.
(4.) An impairment of GBP817,000 has been recognised in the
current year relating to the goodwill held in Digital Balance
Australia Pty Limited so that the carrying value is in line with
the value-in-use.
Goodwill has been allocated to the following segments:
31 December 31 December
2020 2019
GBP'000 GBP'000
----------------- ----------- -----------
Media 26,855 25,905
Analytics & Tech 1,708 2,504
----------------- ----------- -----------
28,563 28,409
----------------- ----------- -----------
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:
31 December 31 December
2020 2019
Cash -- generating unit Reporting segment GBP'000 GBP'000
--------------------------- ----------------------- ----------- -----------
Media UK and International Media 9,262 9,241
Media Germany Media 4,327 4,319
Media Value Group Media/Analytics & Tech 3,187 3,042
FirmDecisions Media 2,981 2,981
Media Australia Media 2,422 2,289
China Media 2,256 2,150
Effectiveness Analytics & Tech 1,678 1,678
Media America Media 604 604
Media France Media 571 560
Digital Decisions Media 507 -
Media Italy Media 401 382
Russia Media 337 337
Digital Balance Analytics & Tech 30 826
28,563 28,409
--------------------------------------------------- ----------- -----------
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 GBP817,000 has been recognised in the year
ended 31 December 2020 in relation to Digital Balance Australia Pty
Limited, in order to write down the goodwill carrying value in line
with the value-in-use.
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 2021 financial year.
For the 2022 and 2023 financial years, the forecast EBIT is as
per management and market expectations. The forecast 2023 balances
are taken to perpetuity in the model. The forecast for 2022 and
2023 uses certain assumptions to forecast revenue and operating
costs within the Group's operating segments beyond the 2021
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 10% and 11% (31 December 2019:
between 7.0% and 12.0%).
Growth rate assumptions
Cash flows beyond the three -- year period are extrapolated at a
rate of 2.00% (31 December 2019: 2.25%) for all CGUs with the
exception of China where a rate of 2.60% has been applied, 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
------------------------------- -------------------------------
Current % % change leading Current % % change leading
to impairment to impairment
(2022 / 2023) (1) (2022 / 2023) (1)
------------------------- ------------- ---------------- ------------- ----------------
(3)% to 12%
Budgeted revenue growth 15% / 10% / 7% 15% / 15% (2)% to 13%
Budgeted cost growth 2% / 2% +3% to 5% 2% / 2% +2% to 4%
Pre -- tax discount rate 10% /10% +3% to 13% 10% / 10% +3% to 13%
------------------------- ------------- ---------------- ------------- ----------------
(1.) These changes have been applied to 2022 and 2023 projected
information.
8. Other intangible assets
Capitalised Purchased Total
development Computer intangible intangible
Assets
costs software (1) assets
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ----------- -------- ---------- ----------
Cost
At 1 January 2019 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
Additions 1,226 4 - 1,230
Acquisitions (5) - - 70 70
Disposals (460) (10) - (470)
Foreign exchange differences 91 23 346 460
----------------------------- ----------- -------- ---------- ----------
At 31 December 2020 4,891 2,542 16,581 24,014
----------------------------- ----------- -------- ---------- ----------
Amortisation and impairment
At 1 January 2019 (1,258) (1,606) (12,473) (15,337)
Charge for the year (2) (464) (409) (1,169) (2,042)
Impairment (3) (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)
Charge for the year (2) (685) (280) (1,122) (2,087)
Disposals 460 10 - 470
Foreign exchange differences (49) (24) (228) (301)
----------------------------- ----------- -------- ---------- ----------
At 31 December 2020 (1,745) (2,147) (13,987) (17,879)
----------------------------- ----------- -------- ---------- ----------
Net book value
At 31 December 2020 (4) 3,146 395 2,594 6,135
----------------------------- ----------- -------- ---------- ----------
At 31 December 2019 2,563 672 3,528 6,763
----------------------------- ----------- -------- ---------- ----------
(1) .Purchased intangible assets consist principally of customer
relationships with a typical useful life of eight to 10 years.
(2) .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.
(3) .No impairment charge has been recognised in the current
year (year ended 31 December 2019: GBP762,000 following
management's review of the carrying value of other intangible
assets).
(4) .Of the net book value of capitalised development costs,
GBP1,982,000 remains in development at 31 December 2020.
(5) .As asset of GBP70,000 was recognised on the acquisition of
Digital Decisions B.V. in the year.
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 1 January 2019 - - - -
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
Additions 568 22 115 705
Disposals (331) (10) (12) (353)
Allocations 324 - - 324
Reclassification to lease receivables (1,113) - - (1,113)
Foreign exchange 24 17 (9) 32
-------------------------------------------------------- --------------- ---------------- ---------------- -------
At 31 December 2020 9,789 229 153 10,171
-------------------------------------------------------- --------------- ---------------- ---------------- -------
Accumulated depreciation
At 1 January 2019 - - - -
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)
Charge for the year (1,942) (50) (34) (2,026)
Disposals 136 10 12 158
Allocations (324) - - (324)
Reclassification to lease receivables 558 - - 558
Impairment for the year (24) - - (24)
Foreign exchange - (44) 5 (39)
-------------------------------------------------------- --------------- ---------------- ---------------- -------
At 31 December 2020 (3,805) (99) (30) (3,934)
-------------------------------------------------------- --------------- ---------------- ---------------- -------
Net book value
At 31 December 2020 5,984 130 123 6,237
-------------------------------------------------------- --------------- ---------------- ---------------- -------
At 31 December 2019 8,108 185 46 8,339
-------------------------------------------------------- --------------- ---------------- ---------------- -------
Lease liabilities
Buildings Equipment Vehicles Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------ --------------- ----------------- ----------------- -------
Cost
At 1 January 2019 - - - -
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
Additions 568 22 115 705
Disposals (131) - - (131)
Cash payments in the year (2,192) (58) (19) (2,269)
Interest charge in the year 277 6 1 284
Foreign exchange (44) 35 (12) (21)
------------------------------------------------------ --------------- ----------------- ----------------- -------
At 31 December 2020 7,858 174 126 8,158
------------------------------------------------------ --------------- ----------------- ----------------- -------
Current 2,215 76 47 2,338
Non-current 5,643 98 79 5,820
------------------------------------------------------ --------------- ----------------- ----------------- -------
The present value of the minimum lease payments are as
follows:
Minimum lease payments
-----------------------------
31 December 31 December
2020 2019
GBP'000 GBP'000
----------------------------- ---------------- -----------
Amounts due:
Within one year 2,556 2,116
Between one and two years 2,219 2,307
Between two and three years 1,946 2,115
Between three and four years 917 1,896
Between four and five years 609 893
Later than five years 454 1,083
----------------------------- ---------------- -----------
8,701 10,410
----------------------------- ---------------- -----------
Lease receivables
31 December 31 December
2020 2019
GBP'000 GBP'000
Lease receivables 451 -
------------------ ----------- -----------
Current 171 -
Non-current 280 -
------------------ ----------- -----------
During the year a sublease arrangement was entered into relating
to the Chicago office lease. Accordingly, the right-of-use asset
was derecognised and instead a lease receivable was recognised,
being the equivalent of the remaining lease receivables over the
lease term. The amount due within one year is presented within
current assets and the amount due after one year is presented
within non-current assets. The sublease arrangement expires in
September 2023.
10. Financial liabilities
31 December 31 December
2020 2019
GBP'000 GBP'000
---------------------------- ----------- -----------
Current
Bank overdraft - -
Loan fees(1) (45) (36)
Contingent consideration 1,957 14
---------------------------- ----------- -----------
1,912 (22)
---------------------------- ----------- -----------
Non -- current
Bank borrowings 19,000 14,000
Government borrowings 750 -
Loan fees(1) (75) (132)
19,675 13,868
---------------------------- ----------- -----------
Total financial liabilities 21,587 13,846
---------------------------- ----------- -----------
(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 September
2023.
Bank Bank Government Contingent
overdrafts borrowings borrowings consideration Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------- ---------- ---------- ---------- ------------- ---------
At 1 January 2019 2,379 33,900 - 1,477 37,756
Recognised on acquisition - - - 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
Recognised on revaluation - - - 3,086 3,086
Paid - - - (1,934) (1,934)
Charged to the income statement - 48 - 625 673
Discounting charged to the income statement - - - (44) (44)
Borrowings - 5,000 750 - 5,750
Foreign exchange released to the income statement - - - 210 210
-------------------------------------------------- ---------- ---------- ---------- ------------- ---------
At 31 December 2020 - 18,880 750 1,957 21,587
-------------------------------------------------- ---------- ---------- ---------- ------------- ---------
A currency analysis for the bank borrowings is shown below:
31 December 31 December
2020 2019
GBP'000 GBP'000
---------------------- ----------- -----------
Pounds sterling 18,880 13,832
---------------------- ----------- -----------
Total bank borrowings 18,880 13,832
---------------------- ----------- -----------
All bank borrowings are held jointly with Barclays and NatWest.
The committed facility, totalling GBP24,000,000, comprises a
revolving credit facility ('RCF') of GBP23,000,000 (of which
GBP19,000,000 was drawn as at 31 December 2020 (31 December 2019:
GBP14,000,000)) 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 GBP120,000 (31 December 2019:
GBP168,000) are offset against the term loan and are being
amortised over the period of the loan. GBP45,000 of loan
arrangement fees have been included within creditors due within one
year and the balancing GBP75,000 have 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.
Government borrowings represent an amount received as a part of
the US Paycheck Protection Programme. Loan forgiveness will be
applied for in relation to this balance when the lenders open the
application process. If this application is successful, this
balance will be treated as a grant rather than a loan and will be
released to the income statement. If the application is
unsuccessful then this balance will continue to be treated as a
loan, will incur interest at 1% and will be repayable within two
years.
Contingent consideration represents additional amounts that are
expected to be payable for acquisitions made by the Group and is
held at fair value at the statement of financial position date. All
amounts are expected to be fully paid by April 2021.
Contingent consideration has been recognised in the period in
relation to the minority buyout of Ebiquity Italy Media Advisor
S.r.l. The consideration payable in relation to the minority buyout
of Ebiquity Italy was contingent upon the performance for the years
ending 31 December 2018 to 31 December 2019.
It has been determined that the deferred payments in relation to
the acquisition of Digital Decisions B.V. ('Digital Decisions')
should be treated as post-date remuneration. IFRS 3 (revised)
provides guidance for situations where contingent consideration may
be considered to be remuneration for post-acquisition employment.
We have reviewed these guidelines and assessed the indicators in
IFRS 3. Taken in aggregate, these indicate that the payments to the
seller (who remains an employee) do indeed constitute post-date
remuneration but should be treated as such. As a result, instead of
the contingent consideration being recognised in full as at 31
December 2020 within financial liabilities, only any amount payable
in relation to 2020 is to be provided for, within accruals and
contract liabilities. The calculated amount owed relating to 2020
is GBPnil.
11. Dividends
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
-------------------------------------- ----------- -----------
Dividend in respect of the prior year - 534
-------------------------------------- ----------- -----------
Total dividend paid - 534
-------------------------------------- ----------- -----------
No dividends were paid during the current financial year (2019:
GBP534,000). Dividends were paid to non -- controlling interests as
shown in the consolidated statement of changes in equity.
12. Cash generated from operations
Restated
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
------------------------------------------------ ----------- -----------
(Loss) before taxation (3,887) (5,661)
Adjustments for:
Depreciation 2,761 2,163
Amortisation (note 8) 2,087 2,042
Loan fees written off - 58
(Gain)/loss on disposal (3) 5
Impairment of right-of-use assets (note 9) 24 641
Impairment of goodwill (note 7) 817 5,989
Impairment of intangibles (note 8) - 761
Unrealised foreign exchange loss 35 47
Share option (credits)/charges (note 3) (1,845) 195
Finance income (39) (9)
Finance expenses 915 907
Contingent consideration revaluations (note 3) 791 (779)
------------------------------------------------ ----------- -----------
1,656 6,359
Decrease in trade and other receivables 2,457 2,136
Increase/(decrease) in trade and other payables 1,714 (2,838)
Movement in provisions - -
------------------------------------------------ ----------- -----------
Cash generated from operations 5,827 5,657
------------------------------------------------ ----------- -----------
13. 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).
Digital Decisions B.V.
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 will be based on the average
performance for the two years ended to 31 December 2022.
Due to the integration of the Digital Decisions service with the
Group's overall digital media products, the basis of the revenue
included in the performance calculation for the two years ended 31
December 2022 was amended to include the contribution from all
digital media products developed by the Digital Innovation Centre.
The multiple applied in calculating the contingent consideration
was reduced from 8 times to 6 times the average of the relevant
profits generated in 2021 and 2022.
The fair value of the purchase consideration for the acquisition
of Digital Decisions is as follows:
GBP'000
Cash 597
------ -------
As discussed in note 10, the deferred payments constitute
post-date remuneration and therefore will be accrued in accordance
to the period they relate. The amount owing for the first deferred
payment in relation to the performance for the year ending 31
December 2020 has been determined as GBPnil, therefore no accrual
is required as at 31 December 2020.
The carrying value and the provisional fair value of the net
assets recognised at the date of acquisition are as follows:
Carrying Fair value Fair value
value adjustment GBP'000
GBP'000 GBP'000
(1)
------------------------------------- --------- ------------ -----------
Brands - 70 70
Property, plant and equipment 16 - 16
Trade and other receivables 127 - 127
Cash and cash equivalents 10 - 10
Trade and other payables (97) - (97)
Deferred tax liabilities - (13) (13)
-------------------------------------- --------- ------------ -----------
Net assets acquired 56 57 113
Goodwill arising on acquisition (2) 484
-------------------------------------- --------- ------------ -----------
Purchase consideration recognised
on acquisition 597
-------------------------------------- --------- ------------ -----------
(1) The fair value adjustments relate to the finalisation of the
allocation of the purchase consideration accounting for intangible
assets (brands) and deferred tax liabilities.
(2) The goodwill recognised of GBP484,000 is attributable to the
assembled workforce, expected synergies and other intangible
assets, which do not qualify for separate recognition. None of the
goodwill arising from the acquisition is expected to be tax
deductible.
Digital Decisions contributed GBP429,000 to revenue and a loss
of GBP56,000 to loss before tax for the period between the date of
acquisition and the year ended 31 December 2020.
Acquisition-related costs of GBP37,000 were incurred during the
year ended 31 December 2020 and have been recognised within
highlighted items. Refer to note 3 for further details.
Ebiquity Italy Media Advisor S.r.l.
On 3 February 2020, the Group agreed to acquire the remaining
49% interest in its subsidiary, Ebiquity Italy Media Advisor S.r.l.
('Ebiquity Italy'), from the founders and minority shareholders
Arcangelo DiNieri and Maria Gabrielli. The transaction completed on
28 May 2020, following the approval of the Group's audited
financial statements. The total consideration of EUR3,648,000
(GBP3,086,000) was based on an average of Ebiquity Italy's profit
before tax and management charges for the years ending 31 December
2018 and 2019.
The consideration is being paid in a combination of cash and
Ebiquity plc shares. At completion, 25% of the total consideration
was settled by the issue of 2,437,628 Ebiquity plc shares and 5% in
cash. As at 31 December 2020 EUR1,427,000 (GBP1,303,000) remains
outstanding. All contingent consideration payments were paid by 1
March 2021.
Ebiquity Russia Limited / Ebiquity Russia OOO
On 24 December 2020, the Group acquired a further 24.95% in its
subsidiary undertakings, Ebiquity Russia Limited and Ebiquity
Russia OOO (collectively, 'Ebiquity Russia'), from its minority
shareholder Vladimir Rass. The total consideration of $517,000
(GBP405,000) is based on a multiple of Ebiquity Russia's profit
before tax and management charges for the year ending 31 December
2020 and was paid in full on completion on 24 December 2020. The
Group now holds 75.05% of the share capital of each of these
companies.
14. Disposals
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 2020, all
contractual requirements with remaining clients have been
fulfilled.
15. 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 2020, on which an unqualified
report has been made by the Company's auditors,
PricewaterhouseCoopers LLP. Financial statements for the period
ended 31 December 2020 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.
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