REG - Ebiquity PLC - Final Results for the year ended 31 December 2021
30/03/2022 07:15
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RNS Number : 4879G Ebiquity PLC 30 March 2022
30 March 2022
Ebiquity plc
Final Audited Results for the year ended 31 December 2021
Delivering on the strategy: improved results with strong momentum
Ebiquity plc ("Ebiquity" or the "Group"), a leading global player in media
investment analysis serving the US$780 billion global advertising market of
which 64% is digital(1), announces its final audited results for the year
ended 31 December 2021.
Highlights(2)
Year ended 31 December 2021 2020 Change
£m £m £m
Revenue 63.1 55.9 7.2/13%
Underlying Operating Profit(2) 4.7 (0.3) 5.0
Underlying Profit/(Loss) before Tax(2) 4.1 (1.3) 5.4
Underlying Earnings/(Loss) per Share(2) 2.7p (1.9)p 4.6p
Statutory Operating Loss (5.1) (2.9) (2.2)
Statutory Loss before Tax (5.7) (3.9) (1.8)
Statutory Profit/(Loss) per Share (8.5)p (4.8)p (3.7)p
· Revenue up £7.2 million (13%) to £63.1 million (2020: £55.9
million) reflecting strong business momentum across all regions and business
segments
· Significant increase in revenue from higher margin Digital Media
Solutions to £3.7 million (2020: £1.0 million)
· Underlying operating profit up £5.0 million to £4.7 million (2020:
loss of £0.3 million),
· Underlying operating profit margin of 7.5%
· Underlying operating costs of £50.8 million (2020: £49.8 million),
a 2% increase reflecting disciplined cost management
· Underlying earnings per share of 2.7p (2020: loss per share of 1.9p)
· Statutory Loss before tax is after accruing £7.9 million towards the
deferred consideration for Digital Decisions BV, payable in 2023 (based on its
expected performance in 2021 and 2022)
· Underlying operating cash inflow of £13.2 million (2020: £7.3
million)
· Strong financial position at 31 December 2021 with net bank debt of
£4.8 million (2020: £7.8 million) comprising cash balances of £13.1 million
and bank debt of £17.9 million. The Company had undrawn bank facilities of a
further £5.0 million
· Loan facility increased in March 2022 to £30 million for a 3-year
term, extendable for 2 years
( )
(1 )Source eMarketer
(2 )Underlying operating profit is defined as the operating profit excluding
highlighted items. These include share-based payments, amortisation of
purchased intangibles and non-recurring items. Underlying profit before tax
and earnings per share are calculated based on the underlying operating
profit.
Outlook and current trading
· High single digit global advertising growth expected in 2022,
particularly in digital advertising which is expected to account for nearly
half of all advertising expenditure
· Ebiquity's Digital Media Solutions expected to continue strong
planned growth supported by product launches in 2021 and additional services
due in 2022
· Acquisition in January 2022 of Forde and Semple Media Works, the
leading Canadian media performance consultancy, which is being rebranded as
Ebiquity Canada, expanded reach in North America
· Trading in the current year has started in line with the Board's
expectations, with a healthy pipeline and continued good momentum
Nick Waters, Chief Executive Officer, said:
"I am pleased with our progress in 2021, both in terms of revenue growth and
importantly, a return to profit after a challenging 2020. We won new mandates
from major clients including Unilever, Stellantis, Daimler and Ferrero, and
managed 6 of the top 10 largest global and multi-national agency selection
processes by billings(3). In terms of geographic performance, Asia Pacific
grew the fastest, while North America regained momentum with strong growth.
Benefiting from the ever-increasing rise in digital advertising spend, Digital
Media Solutions exceeded our expectations, with strong revenue and margin
improvements.
Looking at 2022, we expect further good revenue growth as well as margin
enhancement. Our global market is not only massive, but also becoming
increasingly complex. The accelerating consumer adoption of digital channels
and focus on better management of consumer data in online advertising, and the
challenges of media price inflation, present advertisers with challenges that
Ebiquity, as the world leader in media investment analysis, is best placed to
solve.
This, combined with our dedicated focus on delivering our strategy, should
support further strong results in 2022."
(3) Source COMvergence
Details of presentations
The Executive Directors will be hosting a webcast presentation for analysts
and investors at 09:30 BST today. If you would like to register, please
contact phoebe.a.pugh@camarco.co.uk .
They will also be giving a presentation for investors via the Investor Meet
Company platform on 31 March 2022 at 15:00 BST. Investors can sign up to
Investor Meet Company for free and add to meet Ebiquity plc via:
https://www.investormeetcompany.com/ebiquity-plc/register-investor
(https://www.investormeetcompany.com/ebiquity-plc/register-investor) .
Investors who already follow Ebiquity plc on the Investor Meet Company
platform will automatically be invited.
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"). Upon the publication of this
announcement via a Regulatory Information Service this inside information is
now considered to be in the public domain.
The person responsible for arranging release of this announcement on behalf of
the Company is Alan Newman, Chief Financial Officer and Chief Operating
Officer of the Company.
Ebiquity plc +44 20 7650 9600
Nick Waters, CEO
Alan Newman, CFO & COO
Camarco
Ben Woodford +44 7990 653 341
Geoffrey Pelham-Lane +44 7733 124 226
Panmure Gordon (Financial Adviser, Nomad and Broker) +44 20 7886 2500
Alina Vaskina / Harriette Johnson / Dougie McLeod (Corporate Advisory)
Charles Leigh-Pemberton / Sam Elder (Corporate Broking)
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 US$55bn of media spend from 75 markets annually,
including trillions of digital media impressions. Our Contract Compliance
division, FirmDecisions, audits US$40bn of contract value annually.
As a result, over 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
(http://www.ebiquity.com)
Chair's Statement
2021 was a year of significant progress. Ebiquity has a clear and refreshed
strategy that is delivering results, including more product solutions for the
digital market and higher value, strategic client relationships accompanied by
further operating efficiencies.
In Nick Waters' first full year as Chief Executive, a great deal has been
achieved. He has put in place a strong and cohesive management team and
developed a coherent and focused strategy, supported by an enhanced
operational structure. As a result, we have seen a good recovery in the
underlying performance of the business with strong revenue growth and
improving operating margins. This is a noticeable achievement given the
challenges posed by the impact of Covid-19 in the previous year.
Ebiquity's central purpose is to help brand owners increase returns from their
media investments to improve business performance. We are world leaders in
what we do, counting over 70 of the world's top 100 advertisers as our
clients. What is becoming clear is that our proposition is increasingly
resonating in a vast media market that is becoming more complex and
challenging for brand managers everywhere. This is seen in two areas - our
ability to deepen relationships with existing clients through new products and
our ability to win new mandates on the strength of our offering.
At the heart of our refreshed strategy is the drive to develop new products
that can make a meaningful difference to the increasingly complex challenges
that our clients face. It is therefore very pleasing to see that Digital Media
Solutions has exceeded our expectations with strong revenue and margin growth
as a result of the new product suite that we have introduced. Given the
continuing growth in digital advertising which is dominated by mega brands
such as Amazon and Meta, we continue to see good growth opportunities in this
market for these solutions.
Our new geographically led organisational structure, which was put in place in
January 2021, is proving an effective platform to provide harmonised
end-to-end client solutions and increase opportunities for cross-selling. All
of our main regions - Asia Pacific, Continental Europe, the UK and North
America - performed well and we have strengthened the management teams in the
US and China with the appointment of two new Managing Directors. We will
continue to look at opportunities to expand our international presence to
support our clients' global needs and growth agendas.
While the group undoubtedly benefitted from the easing of Covid-19
restrictions in some markets towards the end of the year, it is also clear
that the transformation of the business that Nick and his team are
implementing has played a major part. The group's underperformance has been
addressed and we now have a clearer and simplified strategic focus which is
helping the business to gain momentum. Group revenue increased by 13%
representing a good recovery compared to a difficult 2020, underpinned by
notable new business wins, the appeal of our wider product offering and
improved performances from our all our geographies.
In my report to you last year I said that a key priority for the Board was to
set out our Environmental, Social and Governance ('ESG') agenda. I am pleased
to report that we have made good progress during the year. Early in 2021, two
members of the Executive Leadership team were tasked with leading our efforts
and in September 2021 we formalised and launched our ESG strategy across all
markets. Work is now underway to measure our environmental impacts and set
targets to reduce this over time. Diversity, Equality and Inclusion continues
to be a key area of focus where employees are supported in driving change
throughout the business. Our culture roadmap has also progressed well during
2021 as new values have been adopted and have begun to be embedded across the
organisation, particularly in employee appraisal, recognition and reward.
Throughout the year the Board has been fully engaged in the company's response
to the pandemic and our priority has been the wellbeing of our staff, ensuring
a safe working environment. On behalf of the Board, I would like to thank all
of our employees for their dedication and resolve during what has been a very
difficult time at both a personal and professional level.
During the year we welcomed Lara Izlan to the Board. Lara brings extensive
experience from across the media industry with a particular expertise in
digital advertising and marketing services, having held senior strategic and
commercial positions at leading media brands and we have already benefitted
from her contribution to our board discussions. After seven years on the
Board, Tom Alexander will be stepping down at the conclusion of this year's
AGM. With his international business experience and knowledge of consumer
brands, Tom has brought us valuable insights into how advertisers think and
operate, and I should like to thank him on behalf of the Board for his input
and commitment during his term of office.
Looking ahead, the opportunity for our business is enormous. The global market
is huge, digital advertising is developing fast, and the challenges our
clients are facing are increasingly complex. In January 2022, we announced the
acquisition of Forde and Semple, the leading Canadian media performance
consultancy which will enhance our reach in North America. The position of the
business and our strengthening balance sheet now enable the group to consider
further acquisitions while continuing to drive organic growth.
Ebiquity has a small operation in Russia, which in 2021 accounted for c.£1
million of revenue. Given the horrific developments in the Ukraine, the
operation is currently under review.
I firmly believe that Ebiquity, as the global leader in media investment
analysis with its strengthened management team and compelling offer, is very
well placed to deliver significant value for all our stakeholders.
Rob Woodward
Chair
Chief Executive Officer's Review
Purpose
Ebiquity's purpose is simple. We exist to help brand owners increase returns
from their media investments and so improve business performance. We do this
by analysing billions of dollars of advertising spend globally, as well as
trillions of advertising impressions. Using this intelligence, we provide
independent, fact-based advice which enables brands to drive efficiency and
increase effectiveness. Our work helps to eliminate wasteful advertising spend
and to create value.
We operate in a very large global advertising market, which is worth
~US$780bn(4). Of this, 64% is invested in digital channels, with approaching
half of all advertising spend now invested via Alphabet, Meta, and Amazon(4).
We employ over 500 specialists in 14 markets, which together represent
four-fifths of global advertising spend.
We are able to provide objective, unbiased advice to our clients because we
are entirely independent of the media supply chain. We offer no executional or
trading services, nor do we negotiate with media owners on behalf of
advertisers. As the world leader in media investment analysis, we count over
70 of the world's top 100 advertisers as our clients.
2021 performance
Group revenue in the year to 31 December 2021 grew by 13% to £63.1 million,
representing a strong recovery from the challenging prior year. This
contributed to a return to profitability for the full year, building on the
half year performance and delivery of underlying operating profit of £4.7
million, and an operating margin of 7.5%, as against a loss of £0.3 million
in 2020. This performance was also due to our tight management of operating
expenses which grew by only 2% to £50.8 million (2020: £49.8 million). Our
revenue growth was delivered with a slightly reduced staffing level,
reflecting our cost control and efficiency improvements achieved to date.
This performance reflected the rapid growth of revenue from our new digital
media solutions and the benefit of new business wins achieved over the last 18
months as well as the return of advertisers to more normal activity levels
during 2021. Our Media Management service in particular, benefitted from
pent-up demand from delayed agency selection processes held over from the
previous year.
Ebiquity performed exceptionally well winning major global agency selection
mandates from leading advertisers including Unilever, Stellantis, Daimler, and
Ferrero, as well as a significant number of national tenders from global
brands including L'Oréal and Nestle.
Ebiquity managed six of the top ten largest global and multi-national agency
selection processes by billings, including three of the top five, representing
US$8.4bn out of US$11.7bn under review(4). Most of this work was completed in
the first half of 2021.
Revenue recovered from most industry verticals, except for the still-troubled
travel and tourism sector. There was strong support from the FMCG category,
although automotive was relatively subdued, as manufacturers struggled with
supply chain issues and microchip shortages.
(4) COMvergence
All our regions and service lines achieved revenue growth as well as
profitability improvements, with Asia Pacific and global clients growing the
fastest. We saw a strong performance from Continental Europe, with North
America gaining momentum, and more moderate revenue growth but significant
profit increase in our large and mature UK business.
The group made good progress re-aligning itself for the digital-first needs of
clients. The new suite of productised Digital Media Solutions performed above
expectations, with its revenue increasing by 260% to £3.7m and delivering an
operating profit margin of 51%.
Our media contract compliance division, FirmDecisions, increased its revenue
by 31%, although its onsite audit operating model continued to be hindered,
especially during the first half of the year, by the ongoing closure of agency
offices due to the pandemic. We are expecting further recovery in this service
line in 2022.
Outlook
Following a strong recovery in 2021, we see further momentum in global
advertising markets in 2022. High, single-digit growth is forecast at c.9%,
although the consequences of the crisis in Ukraine may dampen this. Almost
two-thirds of all global advertising spend will be through digital channels,
with Alphabet, Meta, and Amazon expected to take more than 80% of the digital
total and approaching half of all advertising expenditure.
The pandemic changed consumer behaviour, accelerating digital adoption. We see
this as a permanent shift, and media investments will flow to the rapidly
growing Advanced TV channels and e-Retail platforms. Advertisers will need
increased support to understand how to make cost-effective use of these
channels.
We expect that the pandemic will not disrupt advertising markets significantly
in 2022 and the increasing demand for inventory will generate media price
inflation. This will vary widely, from c.2% in China to more than 20% in both
the US scatter market and for premium digital inventory as a whole.
Advertisers will seek independent advisors both to benchmark their own
performance against price inflation and to develop strategies to mitigate it.
The recent rulings by the Belgian and Dutch Data Protection authorities - that
the IAB Europe's "Transparency and Consent Framework" is unlawful and breaches
GDPR - raises major questions over the whole European online advertising
market. This follows earlier announcements from Google concerning the
deprecation of third-party marketing cookies and Apple's removal of "ID for
Advertising". Regulatory dynamics and the actions of tech platforms create
greater complexity for advertisers. They will need renewed guidance on how to
develop strategies that enable them to navigate and understand the
effectiveness of different approaches.
As all corporates look to improve their ESG credentials, there is increased
scrutiny of responsible media investment. This includes growing efforts to
eliminate spend with bad actors in the supply chain - actors who promote hate
content and disinformation, conduct fraudulent activities, or are in breach of
data privacy and consumer consent laws. Ebiquity offers products and services
to help brand owners address these challenges. We therefore see market
conditions as supportive for top-line revenue growth, digital sales
acceleration, and further margin improvement.
Delivering the growth strategy
In late 2020, we outlined a strategy to simplify, clarify and focus the
business.
We have defined ourselves as deep market specialists in the media vertical,
and as the world leader in media investment analysis which helps brand owners
eliminate waste and create value. We provide our services through five Service
Lines: Media Management, Media Performance, Marketing Effectiveness,
Technology Advisory, and Contract Compliance.
We have focused the strategy on three central elements of Clients, Product,
and Operating Efficiency, and have reorganised ourselves to manage the
business through four geographic regions - North America, UK & Ireland,
Continental Europe and Asia Pacific. Our objective is to increase our presence
in the world's largest and fastest-growing advertising markets of the US and
Asia. A set of operational metrics has been published, against which we will
report progress (see table on p 9 below).
Winning new client mandates
Ebiquity's primary target market comprises the world's top 100 advertisers.
Our strategy is to invest in quality client relationship management to better
develop the commercial opportunity. We aim to increase the proportion of our
clients that buy our full range of services across all their markets. We
established a Global Client Solutions Centre to support this strategy, and
identified a universe of 21 higher-value, strategic clients for focused
relationship development. Revenue growth from this universe significantly
exceeded expectations, enabling us to invest further in the talent capable of
managing and growing our business among more of the world's largest
advertisers. Over the last 18 months, we have added Global Client Partners in
the Netherlands, France, Germany and the US to provide dedicated relationship
management to brand owners headquartered in those markets.
We have increased the number of clients buying two or more Service Lines from
58 at the end of 2020 to 76 by the end of 2021, again exceeding our targets.
A client satisfaction survey conducted in September demonstrated a strong base
from which we will build. The strategy for 2022 is to continue with this
programme established over the last year.
Expanding our product offering
Ebiquity's product strategy is focused on the development and deployment of a
new suite of Digital Media Solutions. These are data-led, productised,
scalable, repeatable, and higher margin. To facilitate this, the Digital
Decisions business - originally acquired in January 2020 - has been repurposed
and now operates as Ebiquity's Digital Innovation Centre (DIC). Building on
the success of its original Source Data Monitoring product, the DIC has now
brought to market a total of seven Digital Media Solutions.
There remains a vast amount of wastage in advertisers' digital media
investments, running to tens of billions of dollars a year. Our product
solutions identify where our clients' digital media spend is being wasted. In
so doing, they enable advertisers to course-correct and so minimise wastage,
reinvest more effectively, and create value. We typically see 15 to 30% of
digital media spend being wasted which, when eliminated, creates millions of
dollars in value for our clients.
The rate at which we have onboarded clients and sold digital solutions has
exceeded our expectations. The number of clients buying these services rose
from 10 to 28 during 2021, accounting for over US$3bn of digital media
investment and 639 billion impressions, across 87 markets. This success
demonstrates the scalability of our platform and has rapidly built a global
data pool unmatched by any competitor. We have the broadest and deepest view
of the digital media market of any independent company.
The product strategy for 2022 continues the programme of bringing more
solutions to market, building on the momentum of revenue growth and margin
enhancement.
Table 1: Operational Metrics
Key Performance Indicator Baseline 2020 2021 actual
# of clients buying one or more products from the new digital portfolio 10 28
Volume of digital advertising monitored (billions of impressions) 112 639
Value of digital advertising monitored (billions of spend US$) 0.48 3.03
# of countries served with new digital products 50 87
# of clients buying two or more Services Lines 58 76
% of revenue from digital services 25 29
Creating a more efficient business
In 2021, the Group focused its efforts on transferring more work from onshore
country teams to our near-shore Media Operations Centre. We can be satisfied
with progress, with the Centre supporting 15% more projects than the prior
year, thus improving our economies of scale.
Several projects have been initiated to further standardise and harmonise ways
of working across the group and facilitate greater automation. This is a high
priority for 2022, with the goal of realising further efficiency gains.
Reorganised for stronger regional performance
The group has moved to a new organisational structure, with the business
managed through four regions: North America, UK & Ireland, Continental
Europe, and Asia Pacific. FirmDecisions - the contract compliance division -
is the only remaining business unit managed vertically. All regions performed
well in 2021 in revenue and profit terms.
We recruited new Managing Directors in the US and China, the world's two
largest advertising markets where Ebiquity has historically been underweight.
With stronger leadership, we see the opportunity to penetrate these critical
markets better and so to scale our business. Paul Williamson (US) and Stewart
Li (China) both joined the group in January 2021 and made an immediate
positive impact.
The new business performance in both markets has been strong. In the US,
Ebiquity won new clients including a market-leading retailer and global
packaged goods advertiser, as well as additional assignments from West Coast
technology companies and automotive manufacturers. Our China business won
major domestic advertisers including Huawei and Meng Niu, as well as
international brands, LVMH and adidas®.
During the year, we launched media performance services organically in the
Indian market to add to our local contract compliance offering. This is under
the leadership of Sandeep Srivastava, a highly experienced specialist,
formerly with Accenture Media Management. India is one of the world's fastest
growing media markets, a strategically important one to many advertisers, and
extremely complex - all characteristics which support demand for Ebiquity's
services.
In January 2022, Ebiquity acquired Forde & Semple, Canada's leading media
investment analysis business. Forde & Semple was a long-time outsourced
partner, serving Ebiquity's international clients in the Canadian market. This
move now extends our direct relationship with those clients, gains us access
to the world's twelfth largest advertising market, and adds a roster of
blue-chip Canadian advertisers to our client list. The business will be fully
integrated within our North America region and rebranded as Ebiquity Canada.
Setting the agenda
Ebiquity has continued to lead our market in thought leadership, shaping
industry debate on major topics, introducing new themes, and responding to
market events.
We have published a series of white papers and held webinars on a series of
subject areas including Advanced TV, the deprecation of third-party cookies
and its impact on online targeting, responsible media, and trust in
advertising. Our joint report with Usercentrics, titled "The Current State of
3(rd) Party Cookies", identified the prevalence of breaches in GDPR consumer
consent in the online advertising market and the transfer of data outside the
EU. The paper added fuel to the debate around the targeting of online
advertising and the breach of regulations. Subsequently, both the Belgian and
Dutch Data Protection Authorities found IAB Europe's "Transparency and Consent
Framework" to be unlawful and in contravention of GDPR.
Environmental, Social and Governance
At Ebiquity, we understand the importance of a clear approach to 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.
Summary
The dynamics of the global media market are supportive for Ebiquity's
business.
The Group serves a very large market, with advertisers spending c.US$780bn to
promote their products and services to consumers. It is a highly complex
market, characterised by both a fragmentation of channel choice and an
ambiguity of what constitutes effectiveness.
Digital media, which now accounts for almost two-thirds of all global
advertising spend, is fraught with challenges. Huge amounts of fraud, unlawful
use of consumer data, and the removal of industry-standard targeting plague
the industry, resulting in tens of billions of dollars wasted investment.
These are issues which we see as embedded for the long term. Advertisers
therefore need independent expertise and advice to invest their budgets
responsibly and to improve effectiveness. Ebiquity is well placed to meet this
need.
Outlook
We believe that our refocussed strategy and the performance enhancements
achieved in the last year will enable us to make further progress this year in
line with our plans. The momentum achieved last year has continued across all
our geographies and services in the current financial year, supported by a
healthy sales pipeline and trading in the first quarter is in line with the
Board's expectations.
While the global economic environment and the recent outbreak of war in the
Ukraine create significant uncertainties, we believe that the dynamics of the
advertising market continue to offer opportunities for Ebiquity to develop its
business as planned.
Nick Waters
Chief Executive Officer
Performance Review
Revenue by Segment
Revenue
Segment
FY21 FY20 Variance
£m £m £m %
Media 52.8 46.0 6.8 15%
Analytics and Tech 10.3 9.9 0.4 4%
Group 63.1 55.9 7.2 13%
Media
Revenue in the Media segment which comprises Media Performance, Media
Management and Contract Compliance services increased by 15% from the prior
year to £52.8 million. This growth was driven by a number of factors. Revenue
from our digital media solutions continued to increase significantly, more
than trebling compared to 2020, the year in which Digital Decisions joined the
Group. Their core source data monitoring service was serving 28 clients by the
year end and the new services launched during the year (such as Digital Value
Index and Responsible Media Investment) also generated revenue in line with
our plans. Our other Media Performance services - which help clients to assess
and optimise their media buying performance - increased revenue by 4%. Revenue
from Media Management services, which includes agency selection advice,
increased by 68% reflecting the high level of tendering activity by
advertisers in the year, some of which was deferred from 2020 as a result of
the pandemic. Contract Compliance (branded as FirmDecisions) increased revenue
by 31% reflecting in part that agencies began to provide easier access to
their offices and data following the restrictions due to Covid-19 in 2020 and
the early part of 2021.
Geographically, all regions achieved good revenue growth. APAC was up by 23%,
including China where revenue increased by 27%, reflecting its new management
team's success in winning domestic market share. The US increased revenue by
15% and Continental Europe by 14%, with France growing by 25% and Italy by 20%
reflecting recent client wins in these markets (such as Stellantis and
Generali). UK and Ireland, our largest and most mature region grew revenue by
only 1% but more than doubled its profits. Our specialist unit responsible for
multi-market media projects increased revenue by 15% reflecting our focus on
increasing the value of major global accounts.
Analytics and Tech
Total revenue from Analytics and Tech increased by 4% to £10.3 million.
Within this, our Marketing Effectiveness service line grew by 13%. This
applies advanced analytics and data science techniques to help brands to plan
and optimise their media investment, especially in sectors such as telecoms,
automotive and financial services. Our Australian based MarTech business,
Digital Balance, increased revenue by 20% for its web optimisation services.
However, revenue in our AdTech service which helps brand owners to address the
challenges of managing digital media and automated trading programmes fell by
13% as a recently completed major project was not replaced in the short term.
Operating Profit by Segment
Underlying Operating Profit Operating profit margin
FY21 FY20 Variance FY21 FY20
£m £m £m % % %
Media 10.1 6.8 3.3 48% 19% 15%
Analytics and Tech 1.4 (0.7) 2.1 - 14% (7%)
Unallocated costs (6.7) (6.4) (0.3) 5% - -
Group 4.7 (0.3) (5.1) - 7% (1%)
Media increased underlying operating profit by 48% to £10.1m and its margin
to 19%, after falling to 15% in 2020. This reflected the overall increase in
revenue which was delivered while maintaining stable operating costs and staff
levels, as well as the growth in higher margin digital media solutions. It
also reflected the continued growth in the proportion of work undertaken by
our Madrid based Media Operations Centre which increased activity by 15%.
Analytics and Tech returned to profitability after being loss-making in 2020
with both the total profit of £1.4m and the margin of 14% now exceeding the
levels achieved in 2019 prior to the pandemic. This reflects the initiatives
undertaken, especially in the Analytics area, to reduce the cost of delivering
projects.
Unallocated costs, which comprise corporate and support costs, increased by
£0.3 million, largely due to the re-establishment of a bonus provision in the
year, whereas none was paid in 2020.
Financial Review
Group revenues for the year ended 31 December 2021 increased by £7.2 million
to £63.1 million, from £55.9 million in 2020.
The underlying operating profit (statutory operating profit excluding
highlighted items) of £4.7 million represented an improvement of £5.0
million from the prior year loss of £0.3 million. Project-related costs
(which comprise external partner and production costs) increased by 17% to
£7.5 million from £6.4 million, due to more projects in markets not served
directly by Ebiquity's own offices. However, total operating expenses,
including cost of sales and administrative expenses, increased by only 2% to
£50.8 million from £49.8 million, largely reflecting delivery of revenue
growth with stable levels of internal staff resources.
Net finance costs were £0.6 million in 2021, which was £21k lower than the
prior year, due mainly to a reduction of lease liabilities in line with the
expiry of lease terms.
The statutory operating loss of £5.1 million (2020: £2.9 million) is
calculated after highlighted items including the accrual for the post-date
renumeration relating to the acquisition of Digital Decisions BV, as detailed
below.
Highlighted items
Highlighted items after tax in the period totalled a charge of £9.3 million
(2020: £2.4 million) and include the following:
· £7.9 million charge to accrue for post-date remuneration payable in
2023 relating to Digital Decisions BV, acquired in January 2020
· £0.5 million charge relating to share-based payments
· £1.1 million charge for amortisation of purchased intangibles (2020:
£1.1 million)
· £0.3 million charge for professional costs relating to acquisition
and bank facility agreements
· £0.4 million tax credit on highlighted items.
The contingent consideration relating to Digital Decisions BV is being
accounted for as post-date remuneration as payment is dependent upon the
principal vendor remaining in employment with the group. This will be payable
in 2023 and the amount due will be calculated as six times the average profit
generated in the two years ended 31 December 2022, from digital media
solutions developed by the Digital Innovation Centre, less the initial
consideration of £700,000 paid in January 2020. The current estimate of the
deferred consideration payable is £12.5 million. The accrual in the 2021
accounts represents two-thirds of the total payable (less the discount to fair
value) as it is being made at the end of the second of the three years between
the acquisition and the end of the earn-out period. The deferred consideration
is payable in a mixture of cash and/or Ebiquity shares which the company will
determine at the time of payment, having regard to its overall capital
structure, debt facilities and the vendor's option to request that a certain
proportion be paid in cash.
Taxation
There was an underlying tax charge in the year of £1.7 million compared to
£0.03 million in 2020. This increase reflects the profit before tax in the
year. There was a total tax credit included in highlighted items of £0.5
million compared to a credit of £0.2 million in 2020.
Earnings per share
There was an underlying basic earnings per share of 2.72p compared to a loss
per share of 1.92p in the prior year. There was a statutory basic loss per
share of 8.51p (2020: 4.81p) due in part to the highlighted items of £9.8
million including post-date remuneration for Digital Decisions BV.
Dividend
No dividend has been declared or recommended for the twelve months ended 31
December 2021 (2020: £nil).
Cash conversion
Year ended Year ended
31 December 31 December
2021 2020
£'000 £'000
Reported cash from operations 11,800 5,827
Underlying cash from operations 13,201 7,300
Underlying operating profit/loss 4,737 (334)
Underlying cash from operations represents the cash flows from operations
excluding the impact of highlighted items. The underlying net cash inflow from
operations was £13.2 million during 2021 (2020: £7.3 million). This cash
inflow includes an underlying working capital reduction of £4.8 million
(2020: increase of £8.5 million).
Equity
During the year to 31 December 2021, 145,636 shares were issued following the
exercise of share options. As a result, the total share capital increased to
82,728,890 shares (31 December 2020: 82,583,254).
Net debt and banking facilities
31 December 31 December
2021 2020
£'000 £'000
Net cash 13,134 11,121
Bank debt (18,000) (19,000)
Loan fee prepayments 99 120
Net bank debt (4,767) (7,759)
US PPP Loan(1) - (750)
Net Debt as in Statement of Financial Position (4,767) (8,509)
( )
(1 )This represents a loan received under the US Paycheck Protection Program.
Loan forgiveness was granted in August 2021 and the loan was therefore
credited to the income statement in 2021.
All bank borrowings are held jointly with Barclays and NatWest. The RCF
facility agreement in place during the year totalled £24.0 million and had a
maturity period of four years, expiring in September 2023 with an option for
the company to extend for one further year. As at 31 December 2021, £18.0
million was drawn from the facility (2020: £19.0 million). During the year,
the group continued to trade within the limits of its banking facilities and
associated covenants as agreed with the lenders in May 2020. These required
the group to maintain minimum liquidity of at least £5.0 million, increasing
to £7.0 million from September 2021, at the end of every month during that
period. From September 2021, an interest cover covenant was re-introduced at
> 4.0 and in December 2021 an adjusted leverage covenant was re-introduced,
initially at < 4.0, increasing to < 4.25 and again to < 4.5 in March
2022.
Since the year end, on 24 March 2022, a new facility has been agreed with the
lenders increasing the total available to £30 million, initially for a period
of 3 years, extendable for up to a further two years. Under this agreement,
annual reductions in the facility of £1.25 million will apply from June 2023.
The quarterly covenants to be applied from June 2022 onwards will be: interest
cover > 4.0x; adjusted leverage <2.5x and adjusted deferred
consideration leverage < 3.5x. There will be no minimum lending covenant.
Statement of financial position and net assets
A summary of the Group's balance sheet as at 31 December 2021 and 31 December
2020 is set out below:
31 December 31 December
2021 2020
£'000 £'000
Goodwill and intangible assets 32,700 34,698
Right of use asset 4,542 6,237
Other non-current assets 3,055 3,387
Net working capital 4,126 8,504
Other current liabilities (764) (1,953)
Lease liability (6,390) (8,158)
Other non-current liabilities (1,576) (1,503)
Digital Decisions post-date remuneration (7,922) -
Deferred consideration - (1,957)
Net debt (4,767) (8,509)
Net assets 23,004 30,746
Trade receivables fell by £1.2 million to £14.4 million although debtor days
increased to 61 days from 58 days as at 31 December 2020, largely due to high
levels of invoicing in Q4 2021.
Net assets as at 31 December 2021 decreased by £7.7 million to £23.0 million
(2020: £30.7 million) reflecting the statutory loss which arose largely due
to the accrual made for the Digital Decisions post-date remuneration.
Corporate Development Activities
There were no corporate development activities during the year.
Events after the reporting period
On 29 January 2022, the Company agreed to acquire Forde and Semple Media
Works, the leading media performance consultancy in Canada, for a total
consideration of CAD$1.3 million (£0.8 million), of which CAD$1.2 million
(£0.7 million) was paid on completion and CAD$0.1 million (£0.06 million)
was deferred for one year. Forde and Semple had revenues of CAD$1.1m in the
financial year ended 31 January 2021 and net assets of CAD$0.4 million (£0.2
million) on completion.
On 29 March 2022, the Group entered into an agreement to acquire Media
Management, LLC ("MML"), a US-based media audit specialist, for an initial
consideration of US $8.0 million (£6.1 million) with a deferred consideration
element payable in 2025. 84% of the initial consideration (US$6.7
million/£5.1 million) will be payable in cash on completion and 16% (US$1.3
million /£1.0 million), will be payable in cash and applied by the vendors to
subscribe for Ebiquity ordinary shares and calculated by reference to the
middle market quotations (rounded down to the nearest whole number) for the
Ordinary Shares as shown by the AIM Appendix of the Daily Official List of the
London Stock Exchange for the five Business Days prior to the date of this
Announcement (the "MML Shares"). The deferred consideration will be based on
1.0 times adjusted earnings before interest and tax of the combined Ebiquity
US and MML businesses reported for 2024, which is expected to be at least
£3.0 million. 80% of this will be payable directly in cash to the vendors and
20% will be applied by the vendors to subscribe for Ebiquity ordinary shares
(the "Earn-Out Shares", and together with the MML Shares, the "New Shares").
The New Shares will be subject to an 18-month lock-in and ongoing orderly
market restrictions pursuant to which they may not, save in limited
circumstances, deal or otherwise dispose of any such interests in the New
Shares other than through Panmure Gordon (or such other broker appointed by
the Company from time to time). Completion is conditional upon the admission
of the MML Shares to trading on AIM.
Auditors
An audit tender was conducted during the year by the Audit and Risk Committee.
This resulted in the selection of Deloitte LLP to become the group's auditors
for the year ending 31 December 2022 onwards. Following ten years in the role,
PricewaterhouseCoopers LLP will retire at the conclusion of the forthcoming
Annual General Meeting. A resolution will be proposed at that meeting to
appoint Deloitte LLP in their place.
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 as defined in the
Annual Report are:-
· Net revenue
· Like-for-like revenue growth
· Underlying operating profit;
· Underlying operating margin;
· Underlying profit before tax;
· Underlying effective rate of tax;
· Underlying earnings per share;
· Underlying cash from operations; and
· Underlying operating cash flow conversion.
Net revenue is the result when project-related costs, comprising external
production costs, are deducted from revenue.
Underlying results are not intended to replace statutory results but remove
the impact of highlighted items in order to provide a better understanding of
the underlying performance of the business. The above APMs are consistent with
how business performance is measured internally by the Group.
Underlying profit is not recognised under IFRS and may not be comparable with
underlying profit measures used by other companies.
Highlighted items comprise non-cash charges and non-recurring items which are
highlighted in the consolidated income statement as their separate disclosure
is considered by the Directors to be relevant in understanding the underlying
performance of the business. The non-cash charges include share option charges
and amortisation of purchased intangibles.
The non-recurring items include the costs associated with potential and
completed acquisitions and disposals, adjustments to the estimates of
contingent consideration on acquired entities, asset impairment charges,
management restructuring and other significant one-off items. Costs associated
with acquisition identification and early stage discussions with acquisition
targets are reported in underlying administrative expenses.
Further detail of highlighted items are set out within the financial
statements and the notes to the financial statements.
Consolidated income statement
for the year ended 31 December 2021
Year ended 31 December 2021 Year ended 31 December 2020
Note Before Highlighted Total Before Highlighted Total
highlighted items £'000 highlighted items £'000
items (note 3) items (note 3)
£'000 £'000 £'000 £'000
Revenue 2 63,091 - 63,091 55,907 - 55,907
Project-related costs (7,525) - (7,525) (6,436) - (6,436)
Net revenue 55,566 - 55,566 49,471 - 49,471
Cost of sales (25,127) - (25,127) (24,784) - (24,784)
Gross profit 30,439 - 30,439 24,687 - 24,687
Administrative expenses (25,855) (9,815) (35,670) (25,172) (2,541) (27,713)
Other operating income 153 - 153 151 - 151
Operating (loss)/profit 4,737 (9,815) (5,078) (334) (2,541) (2,875)
Finance income 20 - 20 39 - 39
Finance expenses (882) - (882) (914) - (914)
Foreign exchange 229 - 229 (137) - (137)
Net finance costs (633) - (633) (1,012) - (1,012)
Profit/(loss) before taxation from continuing operations 4,104 (9,815) (5,711) (1,346) (2,541) (3,887)
Taxation (charge)/credit - continuing operations 4 (1,737) 531 (1,206) (26) 176 150
Profit/(loss) for the year - continuing operations 2,367 (9,284) (6,917) (1,372) (2,365) (3,737)
Net profit/(loss) from discontinued operations 5 - - - - 220 220
Profit/(loss) for the year 2,367 (9,284) (6,917) (1,372) (2,145) (3,517)
Attributable to:
Equity holders of the parent 2,250 (9,282) (7,032) (1,569) (2,134) (3,703)
Non‑controlling interests 117 (2) 115 197 (11) 186
2,367 (9,284) (6,917) (1,372) (2,145) (3,517)
Earnings per share - continuing operations
Basic 6 (8.51)p (4.81)p
Diluted 6 (8.51)p (4.81)p
Earnings per share - discontinued operations
Basic 6 - 0.27p
Diluted 6 - 0.27p
Consolidated statement of comprehensive income
for the year ended 31 December 2021
Year ended Year ended
31 December 31 December
2021 2020
£'000 £'000
Loss for the year (6,917) (3,517)
Other comprehensive income/(expense):
Items that will not be reclassified subsequently to profit or loss
Exchange differences on translation of overseas subsidiaries (889) 1,033
Total other comprehensive income/(expense) for the year (889) 1,033
Total comprehensive expense for the year (7,806) (2,484)
Attributable to:
Equity holders of the parent (7,921) (2,670)
Non‑controlling interests 115 186
(7,806) (2,484)
Consolidated statement of financial position
as at 31 December 2021
Note 31 December 31 December
2021 2020
£'000 £'000
Non‑current assets
Goodwill 7 28,172 28,563
Other intangible assets 8 4,528 6,135
Property, plant and equipment 1,512 1,962
Right-of-use assets 9 4,542 6,237
Lease receivables 9 155 280
Deferred tax asset 1,388 1,145
Total non‑current assets 40,297 44,322
Current assets
Trade and other receivables 21,934 24,318
Lease receivables 9 146 171
Cash and cash equivalents 13,134 11,121
Total current assets 35,214 35,610
Total assets 75,511 79,932
Current liabilities
Trade and other payables (6,525) (6,096)
Accruals and contract liabilities (19,350) (9,890)
Financial liabilities 10 59 (1,912)
Current tax liabilities 4 (374) (1,703)
Provisions - -
Lease liabilities 9 (2,566) (2,338)
Deferred tax liability (390) (250)
Total current liabilities (29,146) (22,189)
Non‑current liabilities
Financial liabilities (17,960) (19,675)
Provisions (493) (412)
Lease liabilities 9 (3,825) (5,820)
Deferred tax liability (1,083) (1,090)
Total non‑current liabilities (23,361) (26,997)
Total liabilities (52,507) (49,186)
Total net assets 23,004 30,746
Equity
Ordinary shares 20,682 20,646
Share premium 255 255
Other reserves 4,572 5,461
Retained earnings (2,774) 3,942
Equity attributable to the owners of the parent 22,735 30,304
Non‑controlling interests 269 442
Total equity 23,004 30,746
Consolidated statement of changes in equity
for the year ended 31 December 2021
Note Ordinary shares Share Other reserves(2) Retained earnings Equity attributable to owners of Non‑ controlling interests Total
£'000 premium £'000 £'000 the parent £'000 Equity
£'000 £'000 £'000
31 December 2019 (as restated) 20,029 46 4,428 12,210 36,713 1,179 37,892
(Loss)/profit for the year 2020 (as reported) - - - (3,703) (3,703) 186 (3,517)
Other comprehensive expense - - 1,033 - 1,033 - 1,033
Total comprehensive (expense)/income 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 11 - - - - - (144) (144)
31 December 2020 20,646 255 5,461 3,942 30,304 442 30,746
(Loss)/profit for the year 2021 - - - (7,032) (7,032) 115 (6,917)
Other comprehensive income - - (889) - (889) - (889)
Total comprehensive income/(expense) for the year - - (889) (7,032) (7,921) 115 (7,806)
Shares issued for cash 36 - - (3) 33 - 33
Share options charge 3 - - - 319 319 - 319
Dividends paid to non-controlling interests - - - - - (288) (288)
31 December 2021 20,682 255 4,572 (2,774) 22,735 269 23,004
(2)Includes a credit of £3,667,000 (31 December 2020: £3,667,000) in the
merger reserve, a gain of £2,395,000 (31 December 2020: 3,272,000) recognised
in the translation reserve and is partially offset by a debit balance of
£1,478,000 (31 December 2020: £1,478,000) in the ESOP reserve..
Consolidated statement of cash flows
for the year ended 31 December 2021
Note Year ended Year ended
31 December 31 December
2021 2020
£'000 £'000
Cash flows from operating activities
Cash generated from operations 12 11,800 5,827
Finance expenses paid (626) (563)
Finance income received 7 13
Income taxes paid (2,492) (2,285)
Net cash generated by operating activities 8,689 2,992
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired - (597)
Disposal of subsidiaries - 18
Payments to acquire
non-controlling interest 10 (1,291) (1,539)
Payments in respect of
contingent consideration 10 (680) -
Purchase of property, plant and equipment (217) (87)
Purchase of intangible assets 8 (1,230)
Net cash (used in)/generated by investing activities (3,037) (3,435)
Cash flows from financing activities
Proceeds from issue of share capital (net of issue costs) 34 -
Proceeds from bank borrowings 10 - 5,000
Repayment of bank borrowings 10 (1,000) -
Proceeds from government borrowings 10 - 806
Bank loan fees paid (36) (21)
Repayment of lease liabilities 9 (2,108) (2,130)
Dilapidations payments - (300)
Dividends paid to shareholders 11 - -
Dividends paid to non‑controlling interests (157) (144)
Net cash flow generated by/(used in) financing activities (3,267) 3,211
Net increase in cash, cash equivalents and bank overdrafts 2,385 2,768
Cash, cash equivalents and bank overdraft at beginning of year 11,121 8,236
Effects of exchange rate changes on cash and cash equivalents (372) 117
Group cash and cash equivalents at the end of the year 13,134 11,121
Notes to the consolidated financial statements
for the year ended 31 December 2021
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
UK-adopted international accounting standards ('IFRS') and the applicable
legal requirements of the Companies Act 2006.
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 19 to the financial statements. As
at 31 December 2021, the Group had cash balances of £13,134,000 and undrawn
bank facilities available of £5,000,000 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.
During the year, the Group continued to trade within the limits of its banking
facilities and associated covenants. Modified covenants were agreed with the
lenders with effect from July 2020. These require the Group to maintain
minimum liquidity of at least £5 million, increasing to £7 million from
September 2021, at the end of every month during that period. From September
2021, an interest cover covenant was re-introduced at > 4.0 and an adjusted
leverage covenant also re-introduced, initially at < 4.0, increasing to
< 4.25 in December 2021 and again to < 4.5 in March 2022, then reducing
to < 3.5 in June 2022.
Since the year-end, this facility has been increased and extended under an
agreement dated 24 March 2022. This facility will provide a total available of
£30 million, initially for a period of 3 years to March 2025 and extendable
for up to a further two years. Under this agreement, annual reductions of
£1.25 million will apply from June 2023. The quarterly covenants to be
applied from June 2022 onwards will be: interest cover > 4.0x; adjusted
leverage <2.5x and adjusted deferred consideration leverage < 3.5x.
There will be no minimum liquidity covenant from June 2022.
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. The Directors have prepared a model to forecast
covenant compliance and liquidity to 31 December 2023 that includes a base
case and scenarios to form a severe but plausible downside case.
For the purposes of this model, the terms of the new facility including its
covenant tests have been applied with effect from the quarter ending 30 June
2022.
The base case projection and the sensitivity analysis shows that the Group
will remain within its covenants and that there is adequate headroom against
each covenant.
The base case assumes growth in revenue and EBITDA based on the Group's budget
for the year ending 31 December 2022 and management projections for the year
ending 31 December 2023. The severe but plausible case assumes a downside
adjustment to revenue of 6.5% with no reductions in operating costs. Under
both of these cases, there is headroom on covenant compliance throughout the
going concern period.
The effect of the proposed acquisition of Media Management Inc, conditionally
agreed on 29 March 2022, has also been considered in the model, based on
management projections for the 18 months ending 31 December 2023 and on a
severe but plausible case which assumes a downside revenue adjustment of 5%
with only a 1% reduction in operating costs. Under both of these cases, there
is headroom on covenant compliance throughout the going concern period.
The Directors consider that the Group and Company will have sufficient
liquidity within existing bank facilities, totalling £30 million, 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.
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'.
The revenue and profits recognised in any period are based on the delivery of
performance obligations and an assessment of when control is transferred to
the customer. Revenue is recognised either when the performance obligation in
the contract has been performed (so 'point-in-time' recognition) or 'overtime'
as control of the performance obligation is transferred to the customer.
IFRS 15 provides a single, principles based five-step model to be applied to
all sales contracts as outlined below:
· 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; and
· 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.
Deferred and accrued income
The Group's customer contracts include a diverse range of payment schedules
which are often agreed at the inception of the contracts
under which it receives payments throughout the term of the arrangement.
Payments for goods and services transferred at a point in time may be at the
delivery date, in arrears or part payment in advance.
Where payments made to date are greater than the revenue recognised up to the
reporting date, the Group recognises a deferred income "contract liability"
for this difference. Where payments made are less than the revenue recognised
up to the reporting date, the Group recognises an accrued income "contract
asset" for this difference.
Finance income and expenses
Finance income and expense represents interest receivable and payable. Finance
income and expense is recognised on an accruals basis, based on the interest
rate applicable to each bank or loan account.
Foreign currencies
For the purposes of the consolidated financial statements, the results and
financial position of each Group company are expressed in pounds sterling,
which is the functional currency of the Company, and the presentation currency
for the consolidated financial statements.
In preparing the financial statements of the individual companies,
transactions in currencies other than the entity's functional currency
(foreign currencies) are recorded at the rates of exchange prevailing on the
dates of transactions. At each year-end date, monetary assets and liabilities
that are denominated in foreign currencies are retranslated at the rates
prevailing on the year‑end date.
For the purpose of presenting consolidated financial statements, the assets
and liabilities of the Group's foreign operations are translated at exchange
rates prevailing on the year‑end date. Income and expense items are
translated at the average exchange rate for the period, which approximates to
the rate applicable at the dates of the transactions.
The exchange differences arising from the retranslation of the year‑end
amounts of foreign subsidiaries and the difference on translation of the
results of those subsidiaries into the presentational currency of the Group
are recognised in the translation reserve. All other exchange differences are
dealt with through the consolidated income statement.
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 tax expense included in the consolidated income statement comprises
current and deferred tax. Current tax is the expected tax payable on the
taxable income for the period, using tax rates enacted or substantively
enacted by the year-end date.
The Group is subject to corporate taxes in a number of different jurisdictions
and judgement is required in determining the appropriate provision for
transactions where the ultimate tax determination is uncertain. In such
circumstances, the Group recognises liabilities for anticipated taxes based on
the best information available and where the anticipated liability is both
probable and estimable. Where the final outcome of such matters differs from
the amount recorded, any differences may impact the income tax and deferred
tax provisions in the period in which the final determination is made.
Tax is recognised in the consolidated income statement except to the extent
that it relates to items recognised directly in equity or other comprehensive
income, in which case it is recognised in equity.
Using the liability method, deferred tax is provided on all temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and their tax bases, except for differences
arising on:
· the initial recognition of goodwill;
· the initial recognition of an asset or liability in a transaction which
is not a business combination and at the time of the transaction affects
neither accounting nor taxable profit; and
· investments in subsidiaries and jointly controlled entities where the
Group is able to control the timing of the reversal of the difference and it
is probable that the difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it
is probable that taxable profit will be available against which the difference
can be utilised. The recognition of deferred tax assets is reviewed at each
year‑end date.
The amount of the asset or liability is determined using tax rates that have
been enacted or substantively enacted by the year‑end date and are expected
to apply when the deferred tax liabilities/assets are settled/recovered.
Deferred tax assets and liabilities are offset when the Group has a legally
enforceable right to offset current tax assets and liabilities and the
deferred tax assets and liabilities relate to taxes levied by the same tax
authority on either:
· the same taxable Group company; or
· different Group entities which intend either to settle current tax
assets and liabilities on a net basis, or to realise the assets and settle
the liabilities simultaneously, in each future period in which significant
amounts of deferred tax assets or liabilities are expected to be settled or
recovered.
Taxation has been allocated to the discontinued operation by taking each
element in turn and attributing the appropriate portion accordingly. This
includes the allocation of adjustments to profit before tax to determine the
profits chargeable to corporation tax and then applying the taxation charge
from each jurisdiction respectively. For deferred taxation, each asset and
liability was reviewed and the AdIntel related items were carved out from the
Group items.
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 2021:
· Interest Rate Benchmark Reform - amendments to IFRS 9, IAS 9 and
IFRS 7 and IFRS as issued in August 2020. In accordance with the transition
provisions, the amendments have been adopted retrospectively to hedging
relationships and financial instruments.
· Covid-19-related Rent Concessions - amendments to IFRS 16
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.
For financial instruments measured using amortised cost measurement (that is,
financial instruments classified as amortised cost and debt financial assets
classified as FVOCI), changes to the basis for determining the contractual
cash flows required by interest rate benchmark reform are reflected by
adjusting their effective interest rate. No immediate gain or loss is
recognised. A similar practical expedient exists for lease liabilities.
The amendments have no material impact on the Group's financial instruments.
Comparative amounts have not been restated, and there was no impact on the
current period opening reserves amounts on adoption.
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:
· Property, Plant and Equipment: Proceeds before intended use -
amendments to IAS 16
· Onerous Contracts Cost of Fulfilling a Contract - amendments to IAS
37
· Annual Improvements to IFRS Standards 2018-2020 Cycle effective on
or after 1 January 2022.
· Classification of Liabilities as Current or Non-current -Amendments
to IAS 1 1 January 2023 (deferred from 1 January 2022)
· Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS
Practice Statement 2 effective on or after 1 January 2023
· Definition of Accounting Estimates- Amendments to IAS 8 effective
on or after 1 January 2023
· Deferred Tax related to Assets and Liabilities arising from a
Single Transaction - Amendments to IAS 12 effective on or after 1 January 2023
· Sale or contribution of assets between an investor and its
associate or joint venture -Amendments to IFRS 10 and IAS 28 effective on or
after 1 January 2023
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 2021
Media Analytics &Tech Reportable segments £'000 Unallocated £'000 Total
£'000 £'000 £'000
Revenue 52,841 10,250 63,091 - 63,091
Operating profit/(loss) before highlighted items 10,083 1,391 11,474 (6,737) 4,737
Total assets 62,829 9,799 72,628 2,883 75,511
Unsatisfied long-term contracts
The following table shows unsatisfied performance obligations results from
long-term contracts:
Year ended Year ended
31 December 2021
31 December 2020
£'000 £'000
Aggregate amount of the transaction price allocated to long-term contracts 1,070 866
that are partially or fully unsatisfied as at 31 December 2021
It is expected that 95% of the transaction price allocated to the unsatisfied
contracts as of 31 December 2021 will be recognised during the next reporting
period (31 December 2020: 94%); the remaining 5% will be recognised in the
2022 financial year (31 December 2020: 6% to be recognised in 2021).
Significant changes in contract assets and liabilities
Contract assets have decreased from £6,563,000 to £5,172,000 and contract
liabilities have increased from £4,498,000 to £5,307,000 from 31 December
2020 to 31 December 2021. The reduced contract assets is a result of clients
paying more in advance, this is reflected in increase in contract liabilities
Year ended/As at 31 December 2020
Media Analytics & Tech Reportable segments Unallocated £'000 Total
£'000 £'000 £'000 £'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
A reconciliation of segment operating profit before highlighted items to total
profit before tax is provided below:
Year ended Year ended
31 December 2021
31 December 2020
£'000 £'000
Reportable segment operating profit before highlighted items 11,474 6,078
Unallocated (costs)/income(1):
Staff costs (3,805) (3,480)
Property costs (1,457) (1,595)
Exchange rate movements (22) 181
Other administrative expenses (1,453) (1,518)
Operating (loss)/profit before highlighted items 4,737 (334)
Highlighted items (note 3) (9,815) (2,541)
Operating loss (5,078) (2,875)
Net finance costs (633) (1,012)
Loss before tax (5,711) (3,887)
(1)Unallocated (costs)/income comprise central costs that are not considered
attributable to the segments.
A reconciliation of segment total assets to total consolidated assets is
provided below:
31 December 2021 31 December 2020
£'000 £'000
Total assets for reportable segments 72,628 77,497
Unallocated amounts:
Other intangible assets 187 388
Other receivables 964 1,291
Cash and cash equivalents 1,147 420
Deferred tax asset 585 336
Total assets 75,511 79,932
The table below presents revenue and non‑current assets by geographical
location:
No single customer (or group of related customers) contributes 10% or more of
revenue.
Year ended/As at 31 December 2021 Year ended/As at 31 December 2020
Revenue by location of customers £'000 Non‑current assets Revenue by location of customers £'000 Non‑current assets
£'000 £'000
United Kingdom 31,532 19,922 29,083 21,684
Rest of Europe 18,102 10,797 15,999 12,424
North America 5,565 2,342 4,671 2,721
Rest of world 7,892 5,848 6,154 6,348
63,091 38,909 55,907 43,177
Deferred tax assets - 1,188 - 1,145
Total 63,091 40,297 55,907 44,322
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 31 December 2021 Year ended 31 December 2020
Cash Non‑cash £'000 Total Cash Non‑cash Total
£'000 £'000 £'000 £'000 £'000
Administrative expenses
Share option charge/(credit) 140 319 459 (61) (1,845) (1,906)
Amortisation of purchased intangibles - 1,065 1,065 - 1,122 1,122
Impairment of goodwill - 0 - - 817 817
Severance and reorganisation costs 87 0 87 1,194 315 1,509
Acquisition, integration and strategic/(income) 308 7,896 8204 809 190 999
Total highlighted items before tax 535 9,280 9,815 1,942 599 2,541
Taxation (credit)/charge (64) (467) (531) (289) 113 (176)
Total highlighted items after tax - continuing operations 471 8,813 9,284 1,653 712 2,365
Highlighted items - discontinued operations - - - (220) - (220)
Total highlighted items 471 8,813 9,284 1,433 712 2,145
Share option charges include the non-cash IFRS 2 charge of £319,000 (31
December 2020: credit of £1,845,000) along with the cash element in relation
to the exercising of share options, a charge of £140,000 (31 December 2020:
credit of £61,000). The IFRS 2 credit arose in the prior period predominantly
due to the lapse of 4,200,000 options awarded under the Executive Incentive
Plan in 2010 as the current share price was below the exercise price.
Amortisation of purchased intangibles relates to acquisitions made in the
current financial year of £nil and to acquisitions made in prior years of
£1,065,000 (31 December 2020: £nil in the current financial year and
£1,122,000 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 £nil (31 December 2020: £817,000)
has been recognised in the year. The impairment in the prior year 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 £87,000 (31 December 2020:
£1,509,000) were recognised during the year, relating to severances in the UK
as part of management restructure. 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 £8,204,000 (31 December
2020: £999,000) were recognised during the year. These predominantly relate
to an accrual for post-date remuneration of £7,922,000 (31 December 2020:
£nil) payable in 2023, relating to the acquisition of Digital Decisions B.V.
in 2020. Costs of £112,000 (31 December 2020: £56,000) were also recognised
in relation to acquisitions. A £110,000 severance cost was incurred relating
to the previous directors of Ebiquity Italy Media Advisor S.r.l.
A further £44,000 (31 December 2020: £80,000) was incurred in relation to
financing restructuring. In addition, £15,000 (31 December 2020: £791,000)
was incurred relating to the upward revision of the amounts payable on prior
year acquisitions and adjustment to the fair value of contingent consideration
to the latest prevailing exchange rates.
In the prior year, costs of £72,000 were recognised in relation to the
Chicago sublease arrangement. 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.
As at 31 December 2021, £397,000 of the £535,000 cash highlighted items had
been settled (31 December 2020: £1,314,000 of the £1,942,000 cash
highlighted items had been settled).
4. Taxation charge/(credit)
Year ended 31 December 2021 Year ended 31 December 2020
Before highlighted items Highlighted items Total Before highlighted items Highlighted items Total
£'000 £'000 £'000 £'000 £'000 £'000
UK tax
Current year (30) (42) (72) (20) (82) (102)
Adjustment in respect of prior years 52 - 52 (309) - (309)
22 (42) (20) (329) (82) (411)
Foreign tax
Current year 1,363 (22) 1,341 686 (207) 479
Adjustment in respect of prior years (9) - (9) (77) - (78)
1,354 (23) 1,332 609 (207) 401
Total current tax 1,376 (64) 1,312 280 (289) (10)
Deferred tax
Origination and reversal of temporary differences 376 (467) (91) (186) 113 (73)
Adjustment in respect of prior years (15) - (15) (68) - (67)
Total tax charge/(credit) 1,737 (531) 1,206 26 (176) (150)
The difference between tax as charged in the financial statements and tax at
the nominal rate is explained below:
Year ended Year ended
31 December 2021
31 December 2020
£'000 £'000
Loss before tax (5,711) (3,887)
Corporation tax at 19.00% (31 December 2020: 19.00%) (1,085) (739)
Non‑deductible taxable expenses 3,598 1,605
Overseas tax rate differential 354 117
Overseas (gains)/losses not recognised (1,340) (460)
Losses utilised not previously recognised (349) 1
Adjustment in respect of prior years 28 (674)
Total tax (credit)/charge 1,206 (150)
Following the Budget on 31(st) March 2021, the corporation tax rate effective
from 1 April 2021 and 1 April 2022 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%, this was substantially enacted on 10 June 2021.
The table below shows a reconciliation of the current tax liability for each
year end:
£'000
At 1 January 2020 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 (10)
Foreign exchange 91
At 31 December 2020 1,703
Corporation tax payments (2,616)
Corporation tax refunds 124
Withholding tax (47)
Under‑provision in relation to prior years 43
Provision for the year ended 31 December 2021 1,269
Foreign exchange (97)
At 31 December 2021 379
5. Discontinued operations
No operations were discontinued in the year to 31 December 2021
6. Earnings per share
The calculation of the basic and diluted earnings per share is based on the
following data:
Year ended 31 December 2021 Restated Year ended 31 December 2020
Continuing £'000 Discontinued £'000 Total Continuing £'000 Discontinued £'000 Total
£'000 £'000
Earnings for the purpose of basic earnings per share, being net (loss)/profit (7,032) - (7,032) (3,923) 220 (3,703)
attributable to equity holders of the parent
Adjustments:
Impact of highlighted items (net of tax)(1) 9,284 - 9,284 2,354 (220) 2,134
Earnings for the purpose of underlying earnings per share 2,252 - 2,252 (1,569) - (1,569)
Number of shares:
Weighted average number of shares during the year
- basic 82,627,526 - 82,627,526 81,571,242 81,571,242 81,571,242
- dilutive effect of share options 2,483,339 - 2,483,339 528,254 528,254 528,254
- diluted 85,110,865 - 85,110,865 82,099,496 82,099,496 82,099,496
Basic earnings per share (8.51)p - (8.51)p (4.81)p 0.27p (4.54)p
Diluted earnings per share (8.51)p - (8.51)p (4.81)p 0.27p (4.54)p
Underlying basic earnings per share 2.72p - 2.72p (1.92)p - (1.92)p
Underlying diluted earnings per share 2.67p - 2.67p (1.92)p - (1.92)p
(1.)Highlighted items attributable to equity holders of the parent (see note
3), stated net of their total tax impact.
7. Goodwill
£'000
Cost
At 1 January 2020 36,749
Acquisitions 484
Foreign exchange differences 518
At 31 December 2020 37,751
Acquisitions -
Foreign exchange differences (447)
At 31 December 2021 37,304
Accumulated impairment
At 1 January 2020 (8,340)
Impairment (817)
Foreign exchange differences (31)
At 31 December 2020 (9,188)
Impairment -
Foreign exchange differences 56
At 31 December 2021 (9,132)
Net book value
At 31 December 2021 28,172
At 31 December 2020 28,563
Goodwill has been allocated to the following segments:
31 December 2021 31 December 2020
£'000
£'000
Media 26,464 26,855
Analytics & Tech 1,708 1,708
28,172 28,563
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:
Cash‑generating unit Reporting segment 31 December 2021 31 December 2020
£'000
£'000
Media UK and International Media 9,232 9,261
Digital Decisions Media 477 507
Media Germany Media 4,316 4,327
Media Value Group Media/Analytics & Tech 2,994 3,187
FirmDecisions Media 2,981 2,981
Media Australia Media 2,304 2,422
China Media 2,287 2,256
Effectiveness Analytics & Tech 1,678 1,678
Digital Balance1 Analytics & Tech 30 30
Media America Media 604 604
Media France Media 556 571
Media Italy Media 376 401
Russia Media 337 337
28,172 28,563
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.
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
2022 financial year.
For the 2023 and 2024 financial years, the forecast EBIT is as per management
and market expectations. The forecast 2024 balances are taken to perpetuity in
the model. The forecast for 2023 and 2024 uses certain assumptions to forecast
revenue and operating costs within the Group's operating segments beyond the
2022 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 13% (31 December 2020: between 10.0% and 11%).
Growth rate assumptions
Cash flows beyond the three‑year period are extrapolated at a rate of 2.00%
(31 December 2020: 2.00%) 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, Media America and FirmDecisions are as follows,
specifically what change in key assumptions would result in an impairment:
China Media America FirmDecisions
Current % (2022/2023/2024) % change leading to impairment Current % (2022/2023/2024) % change leading to impairment Current % (2022/2023/2024) % change leading to impairment
Budgeted revenue growth 17%/10%/5% (5)%/(5)%/(7)% 45%/25%/15% (9)%/(13)%/(13)% 31%/7%/5% (6)%/(7)%/(8)%
Budgeted cost growth 10%/5%/5% 6%/5%/7% 35%/7%/5% 11%/13%/14% 6%/5%/2% 7%/8%/8%
Pre‑tax discount rate 11%/11%/11% 3% 12%/12%/12% 18% 12%/12%/12% 15%
8. Other intangible assets
Capitalised development costs £'000 Computer software Purchased intangible assets(1) Total intangible assets
£'000 ( )£'000 £'000
Cost
At 1 January 2020 4,034 2,525 16,165 22,724
Additions 1,226 4 - 1,230
Acquisitions - - 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
Additions 970 13 - 983
Acquisitions - - - -
Disposals (902) - - (902)
Foreign exchange differences (60) (34) (318) (412)
At 31 December 2021 4,899 2,521 16,263 23,683
Amortisation and impairment(3)
At 1 January 2020 (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)
Charge for the year(2) (1,218) (211) (1,065) (2,494)
Disposals 902 - - 902
Foreign exchange differences 39 33 244 316
At 31 December 2021 (2,022) (2,325) (14,808) (19,155)
Net book value
At 31 December 2021 2,877 196 1,455 4,528
At 31 December 2020(4) 3,146 395 2,594 6,135
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 2020: £nil following management's review of the carrying
value of other intangible assets).
4. Of the net book value of capitalised development costs, £2,165,000
remains in development at 31 December 2021.
9. Right-of-use assets and lease liabilities
Buildings Equipment £'000 Vehicles Total
£'000 £'000 £'000
Cost
At 1 January 2020 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
Additions 474 - - 474
Disposals (210) - - (210)
Foreign exchange (167) (33) 13 (187)
At 31 December 2021 9,886 196 166 10,248
Accumulated depreciation
At 1 January 2020 (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)
Charge for the year (1,865) (42) (47) (1,954)
Disposals 96 - - 96
Foreign exchange 65 24 (3) 86
At 31 December 2021 (5,509) (117) (80) (5,706)
Net book value
At 31 December 2021 4,377 79 86 4,542
At 31 December 2020 5,984 130 123 6,237
Lease liabilities
Buildings Equipment £'000 Vehicles Total
£'000 £'000 £'000
Cost
At 1 January 2020 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
Additions 412 - - 412
Cash payments in the year (2,180) (49) (45) (2,274)
Interest charge in the year 216 3 3 222
Foreign exchange (95) (41) 9 (127)
At 31 December 2021 6,211 87 93 6,391
Current 2,486 43 37 2,566
Non-current 3,725 44 56 3,825
The present value of the minimum lease payments are as follows:
Minimum lease payments
31 December 2021 31 December 2020
£'000 £'000
Amounts due:
Within one year 2,722 2,556
Between one and two years 2,038 2,219
Between two and three years 913 1,946
Between three and four years 597 917
Between four and five years 446 609
Later than five years - 454
6,716 8,701
Lease receivables
31 December 2021 31 December 2020
£'000 £'000
Lease receivables 301 451
Current 146 171
Non-current 155 280
In the prior 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 2021 31 December 2020
£'000 £'000
Current
Loan fees(1) (59) (45)
Contingent consideration - 1,957
(59) 1,912
Non‑current
Bank borrowings 18,000 19,000
Government borrowings - 750
Loan fees(1) (40) (75)
17,960 19,675
Total financial liabilities 17,901 21,587
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 overdrafts £'000 Bank borrowings £'000 Government borrowings £'000 Contingent consideration £'000 Total
£'000
At 1 January 2020 - 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
Paid - (1,036) - (1,971) (3,007)
Charged to the income statement - 57 (723) 41 (625)
Discounting charged to the income statement - - - 45 45
Borrowings - - - - -
Foreign exchange recognised in the translation reserve - - (27) - (27)
Foreign exchange released to the income statement - - - (72) (72)
At 31 December 2021 - 17,901 - - 17,901
A currency analysis for the bank borrowings is shown below:
31 December 2021 £'000 31 December 2020 £'000
Pounds sterling 17,901 18,880
Total bank borrowings 17,901 18,880
All bank borrowings are held jointly with Barclays and NatWest. The committed
facility as at 31 December 2021, totalled £24,000,000, comprises a revolving
credit facility ('RCF') of £23,000,000 (of which £18,000,000 was drawn as at
31 December 2021 (31 December 2020: £19,000,000)) and £1,000,000 available
as an overdraft for working capital purposes. The RCF had a maturity date of
20 September 2023.
Since the year-end, the facility has been increased and extended under an
agreement dated 24 March 2022. This increased the total available to £30
million, initially for a period of 3 years to March 2025 and extendable for up
to a further two years.
Early repayments will begin from June 2023 onwards at a rate of £1.25 million
per annum. Apart from this, 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 £99,000 (31 December 2020: £120,000) are offset
against the term loan and are being amortised over the period of the loan.
£59,000 of loan arrangement fees have been included within creditors due
within one year and the balancing £40,000 have been included within creditors
due after more than one year.
The facility bears variable interest of SONIA plus a margin of 2.5%. The
margin rate is able to be lowered each quarter end depending on the Group's
net debt to EBITDA ratio.
The undrawn amount of the revolving credit facility is liable to a fee of 40%
of the prevailing margin. The Group may elect to prepay all or part of the
outstanding loan subject to a break fee, by giving five business days' notice.
All amounts owing to the bank are guaranteed by way of fixed and floating
charges over the current and future assets of the Group. As such, a composite
guarantee has been given by all significant subsidiary companies in the UK,
US, Germany and Australia.
Contingent consideration represents additional amounts that are expected to be
payable for acquisitions made by the Group and is held at fair value at the
statement of financial position date. All amounts were fully paid in April
2021.
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. Taken in aggregate, these guidelines indicate
that the contingent payments to the seller (who remains an employee)
constitute post-date remuneration and they are therefore being accounted for
as such.
11. Dividends
No dividends were paid during the current financial year (2020: £nil).
Dividends were paid to non‑controlling interests as shown in the
consolidated statement of changes in equity.
12. Cash generated from operations
Year ended Year ended
31 December 2021
31 December 2020
£'000 £'000
(Loss) before taxation (5,711) (3,887)
Adjustments for:
Depreciation 2,609 2,761
Amortisation 2,495 2,087
(Gain)/loss on disposal 3 (3)
Impairment of right-of-use assets - 24
Impairment of goodwill - 817
Unrealised foreign exchange loss 70 35
Share option (credits)/charges 319 (1,845)
Finance income (20) (39)
Finance expenses 882 915
US PPP release (720) -
Contingent consideration revaluations 7,397 791
7,324 1,656
Decrease in trade and other receivables 2,250 2,457
Increase/(decrease) in trade and other payables 2,226 1,714
Movement in provisions - -
Cash generated from operations 11,800 5,827
13. Acquisitions
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 €700,000 (£597,000) with further consideration payable in a mix of cash
and Ebiquity plc shares. The first deferred payment was based on performance
in the year to 31 December 2020, for which the threshold was not met and there
was no payment.
The second will be based on the average performance for the two years ended 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 solutions 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.
As discussed in note 10, the deferred payments constitute post-date
remuneration and therefore will be accrued according to the period they
relate.
Digital Decisions contributed £3.7 million to revenue and £1.9 million
profit before tax for the year ended 31 December 2021. An accrual for
post-date remuneration of £7,922,000 (31 December 2020: £nil) was made
during the year ended 31 December 2021 and has 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 €3,648,000
(£3,086,000) was payable in a combination of cash and Ebiquity plc shares.
All the consideration payments were paid by 1 March 2021.
14. Disposals
There were no disposals in the year.
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 2021, on which an
unqualified report has been made by the Company's auditors,
PricewaterhouseCoopers LLP. Financial statements for the period ended 31
December 2021 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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