REG - Ebiquity PLC - Final Results <Origin Href="QuoteRef">EBQ.L</Origin> - Part 1
RNS Number : 4663TEbiquity PLC30 March 2016Ebiquity plc
Final Results for the period ended 31 December 2015
Continued growth and strong cash conversion
Ebiquity plc, the independent marketing performance specialists, announces final results for the 8 month period ended 31 December 2015. Ebiquity provides services to more than 1,100 clients across 85 countries, including over 80% of the top 100 global advertisers.
As previously announced, the Group has changed its financial year end to 31 December. As a consequence, this report shows audited results for the 8 months to 31 December 2015. Given the seasonal nature of the business, with revenues and profits weighted to the first half of the calendar year, to provide further context, we also show information on a calendar 12 month basis (unaudited), with commentary and analysis in comparison with the equivalent 12 months ended 31 December 2014.
FY2015 is the financial period from 1 May 2015 to 31 December 2015 (audited)
FY2014/15 is the financial year from 1 May 2014 to 30 April 2015 (audited)
CY2014 is the calendar year from 1 January 2014 to 31 December 2014 (unaudited)
CY2015 is the calendar year from 1 January 2015 to 31 December 2015 (unaudited)
Revenue growth and strong profit uplift over 2014 calendar year results
Revenue for the 12 months to December 2015 of 76.6m
o Revenue up 7.9% from 71.0m in CY2014 on a like for like basis
o Revenue up 3.7% from 73.9m in FY2014/15
o Revenue of 43.3m for the 8 months ended 31 December 2015
Underlying operating profit for the 12 months to December 2015 of 12.4m
o Underlying operating profit up 50.8% from 8.2m in CY2014 on a like for like basis
o Underlying operating profit up 5.8% from 11.7m in FY2014/15
o Underlying operating loss of 3,000 for the 8 months ended 31 December 2015
Underlying PBT for the 12 months to December 2015 of 11.2m
o Underlying PBT up 64.9% from 6.8m in CY2014
o Underlying PBT up 6.2% from 10.6m in FY2014/15
o Underlying loss before tax of 0.8m for the 8 months ended 31 December 2015.
Underlying diluted EPS for the 12 months to December 2015 up 63.4% to 10.8p (CY2014: 6.6p per share)
Intended dividend of 0.4p per share in respect of the 8 months to December 2015 (equivalent to an increase of 50% to 0.6p per share on an annualised basis (FY 2014/15: 0.4p per share)), to be paid following completion of share capital reduction
Strong demand for media and marketing analytics drives growth
Media Value Measurement ("MVM") revenue grew by 15.0% in CY2015 on a like for like1 constant currency2 basis compared to CY2014
Marketing Performance Optimization ("MPO") continued to deliver an outstanding performance, with revenue up 38.4% in CY2015 on a like for like constant currency basis, and now accounts for 13% of group revenue
Together MVM and MPO accounted for 67.8% of Group revenue in CY2015 (CY2014: 62.3%)
Within Market Intelligence ("MI") our Portfolio platform is now showing signs of improvement with revenues from our Portfolio platform up 0.4% on a like for like constant currency basis in CY2015, although a decline in project work means that the practice as a whole continues to underperform with MI revenue down 3.6% in CY2015 on a like for like constant currency basis.
We have fully impaired the goodwill, purchased intangible asset and related capitalised development costs in relation to the Reputation business resulting in a non-cash impairment charge of 4.4m in CY2015.
1Like for like means prior year results are adjusted to include the results of recent acquisitions as if they had been owned for the same period in the prior year.
2Constant currency is calculated by taking current year denominated results restated at last year's foreign exchange rates.
Michael Greenlees, Executive Director, commented:
"These results are very much as expected when we last reported to our shareholders in January of this year. They reflect a consistent and on-going demand for our services and a particularly strong performance from our MPO practice with new and larger assignments from our significant global clients."
Michael Karg, CEO, commented:
"During 2015 we continued to lay the foundations upon which we will build our future growth plans. There is clear evidence of the continuing demand for our products and services, and the increased level of visibility we have over 2016 revenues provides confidence about the year ahead. The demand for Marketing Performance Optimization continues to be buoyant and we are positioning ourselves to capitalise on this opportunity."
30 March 2016
Enquiries:
Ebiquity
020 7650 9600
Michael Greenlees, Executive Director
Michael Karg, CEO
Andrew Beach, CFOO
Instinctif Partners
020 7457 2020
Matthew Smallwood
Guy Scarborough
Numis Securities
020 7260 1000
Nick Westlake, Oliver Hardy (NOMAD)
Toby Adcock (Corporate Broker)
Chairman's Statement
Following our change in year end to 31 December, this report is for the 8 month period ended 31 December 2015. The first quarter of the calendar year is our busiest period for contract renewals and completing contracts reviewing media spend. Moving our year end from 30 April to 31 December allows the business to have earlier visibility of financial performance and thereby plan for the year ahead with more confidence.
The 8 month period to 31 December 2015 excludes our busiest period and this has a significant impact on the Group's reported performance. To provide more comparable information we therefore present performance on a calendar year basis. In the 12 months ended December 2015 we achieved revenue of 76.6m, a like for like increase of 7.9% over calendar year 2014, together with excellent profit growth. I am delighted to report this continued strong performance.
The market in which we operate is undergoing massive technological change and facing an increasingly complex relationship between advertisers and their marketing and media service providers. The impact of these changes will be profound both for our clients and our business. Clients increasingly seek to understand how to turn data into a competitive advantage and Ebiquity's capabilities and independence put us in a strong position to be at the centre of this change and thereby continue to grow our business.
As previously announced, Michael Karg succeeded Michael Greenlees as Company CEO at the beginning of 2016. I would like to thank Michael Greenlees on behalf of myself and the board for his extraordinary leadership and for ensuring a seamless handover to Michael Karg. Michael Greenlees joined the Board in April 2007 as a non-executive director and became Chief Executive in October 2007. In the eight years which followed, he has lead the transformation of Ebiquity into a leading marketing analytics specialist providing services to more than 1,100 clients across 85 countries and this roster includes over 80% of the top global advertisers.
We are delighted that Michael Karg has joined us to lead the business into the next phase of its development. Michael Karg was previously with Razorfish, the digital business transformation agency of Publicis Groupe, where he was most recently Chief Executive, International. Michael brings with him a clear understanding of the evolving landscape of the marketing industry, a genuinely international perspective and real passion for consumer analytics.
Finally I would like to thank our employees throughout the Group who make what we do possible by bringing their own personal expertise and efforts every day to create the collective capability of Ebiquity.
I look forward to 2016 with both excitement and great confidence for the future.
Michael Higgins
Chairman
29 March 2016
Strategic Report
Background
With the explosion in consumer choiceand the rapid growth of the digital landscape, the marketing industry hasnever been more complex.
The era ofmultichannel marketing has arrived, with itsopportunities and obstacles. Rarelyhas there been a more vibrant but challengingtime in the marketing industry, with unchartedterritory for everyone involved.
For advertisers in particular there has neverbeen more uncertainty. Ebiquity is well positioned to provide insightful, independent and data-driven solutions which help our clients manage their marketing investments, in this dynamic and complex market place.
Data management
Data management continues to be a major challenge in the age of digital marketing. Our surveyof senior marketing managers conducted in 2015 in partnership with the CMOCouncil identified the management and use of data as the number onepreoccupation of today's Chief MarketingOfficers, and this is set to become morepronounced in 2016.
Data provides a rich and important understanding of both consumer behaviour and the competitive landscape, and increasingly influences every aspect of a brand owner's productand marketing activity. Tracking customer journeys, capturing customerprofiles, and having the right analytics tools arecritical. This continues to be one of the key drivers of Ebiquity's Marketing Performance Optimization (MPO) practice and accounts for its dramatic and continuing growth story.
Data Management Platforms will increasinglydrive multiple channels, and brand ownerswill need more and better independent adviceand technology implementation to managecomplex, multichannel 'tech stacks'.
The increasing personalization of advertising that new media technology facilitates will continue to drive the growth in 'programmatic' delivery creating new and more complex issues for our clients as they wrestle with issues of both targeting and customer engagement.
The trending buzz phrase of late 2015was 'ad blocking', as people aim to shut outunwanted and intrusive messaging. Recentstudies report that 15 percent of consumers in theUS have now installed 'ad blockers' posing yet greater complexity for advertisers, who need the kind of impartial data-driven insights which are Ebiquity's speciality. Our investment in digital data analytics, and especially the acquisition of Stratigent in 2013, is proving to be a significant growth driver for our business.
Consumer engagement
Much online advertising continues to be wasted - poorly targeted and plagued by inefficiencies. This growing and dynamic market is overdue a complete reappraisal, one which must address the much- discussed butunresolved inefficiencies of poor viewability,mass fraud, and poor performance.
With an estimated 15-20 cents in each dollar spent actually reaching consumers,2016 should see many more advertisers drawingthe line at this massive wastage and aiming toreinvest in other more efficient marketing channels.
Ebiquity expects to see brand owners demandingmuch greater transparency of performancein online advertising, with systematic andcontinuous tracking of audience delivery. We will launch a new online reporting tool this year to help our clients measure their performance in the most under-reported of channels.
Media agency reviews
During 2015 approximately $21 billion of media spend was reviewed by advertisers worldwide and Ebiquity managed approximately one third of those reviews on behalf of our clients. It is already clear from this trend that advertisers are asking ever more critical questions as it relates to their buying strategy and performance.
Datatransparency - and ultimately ownership - forms a key component of this analysis as advertisers demand greater clarity of where their money is going and greater objectivity in understanding their advertising effectiveness.
During 2016 the US Association of National Advertisers ('ANA') is due to report on the North American media trading market with specialist expertise being provided by Ebiquity. We believe that our appointment as an advisor to the ANA further demonstrates our leading position in the industry.
The future
2016 will be another year of change,and it won't be augmented reality, artificialintelligence, or the Internet of Things that keepadvertisers awake at night. As ever, it will be,'How do I navigate my way through this sea ofuncertainty to deliver better business results,now and into the future?' And they will look toa new breed of advisors to help them answerthis evergreen question.
Marketing continues to change dramatically as companies seek to achieve increased competitive advantage through a deeper understanding of their customers' purchasing behaviour, developing better targeted messages and by ensuring a better return on their investment in advertising and media.
Our financial year 2015 was one in which our unique position as an independent provider of critical insights, based on independent data analytics, began to show clear evidence of increasing client traction.
Research recently conducted by the CMO Council on behalf of Ebiquity has shown that seven out of ten global CMOs plan to appoint external consultancies to help them manage their consumer data, with almost eight in ten planning to work with external partners to automate and personalise their marketing programmes. It is this, together with the increasing drive for greater transparency and accountability in the media trading market that continues to drive our business forward.
Ebiquity now works with over 1,100 clients worldwide in over 85 countries from 21 offices, providing independent marketing analytics and insights across the marketing and media landscape.
Our strategy
Our vision is to be the most respected, independent marketing analytics partner for brands and businesses worldwide.
In doing so, we aim to help our clients:
Achieve greater insights into the marketing landscape
Make better informed decisions
Achieve the best return on their media and marketing investments
Continuously improve their business performance
Monitor competitors' advertising strategy and investments
Understand the value of their business and brand reputation
We achieve this as follows:
BUILD - data, analytics and software capabilities that will enable us to provide our clients with the insights that they need to achieve their objectives and improve their performance
GROW - our international footprint to ensure that we can serve the needs of our global clients in geographies that are important to them and in the process to provide a seamless global service.
INCREASE - our brand profile and reputation to help achieve a worldwide competitive advantage.
DEVELOP - the skills and talent of our people to enable them to help drive our business by providing our clients with significant added value.
Summary of results
The Group has changed its financial year end to 31 December. As a consequence, this report shows audited results for the 8 months to 31 December 2015. To provide further insight, we also show information on a calendar 12 month basis (unaudited), with commentary and analysis in comparison with the equivalent 12 months ended 31 December 2014.
FY2015 is the financial period from 1 May 2015 to 31 December 2015 (audited)
FY2014/15 is the financial year from 1 May 2014 to 30 April 2015 (audited)
CY2014 is the calendar year from 1 January 2014 to 31 December 2014 (unaudited)
CY2015 is the calendar year from 1 January 2015 to 31 December 2015 (unaudited)
On a statutory basis for the 8 months to 31 December 2015:
Revenue of 43.3m (FY 2014/15: 73.9m)
Underlying operating loss of 3,000 (FY2014/15: profit of 11.7m)
Underlying loss before tax of 0.8m (FY2014/15: profit of 10.6m)
Reported loss before tax of 7.4m (FY2014/15: profit of 4.7m)
Underlying cash from operations of 6.9m (FY2014/15: 10.3m)
Underlying diluted EPS of (0.43)p (FY 2014/15: 10.71p)
Intended dividend of 0.4p per share in respect of the 8 months to December 2015 (FY 2014/15: 0.4p per share), to be paid following completion of share capital reduction
On a 12 month calendar year to 31 December 2015 comparative basis:
Like for like revenue growth of 7.9%, with growth of 10.5% on a like for like1 constant currency2 basis
Like for like underlying operating profit growth of 50.8%, with growth of 64.3% on a constant currency basis
MVM like for like constant currency revenue growth of 15.0%
MPO like for like constant currency revenue growth of 38.4%
MI like for like constant currency revenue decline of 3.6%
MVM and MPO together account for 67.8% of revenue (CY2014: 62.3%)
Underlying diluted EPS of 10.8p up 63.4% (CY2014: 6.6p)
Intended dividend of 0.4p per share in respect of the 8 months to December 2015 equivalent to 0.6p per share on an annualised basis (FY 2014/15: 0.4p per share), to be paid following completion of share capital reduction
1Like for like means prior year results are adjusted to include the results of recent acquisitions as if they had been owned for the same period in the prior year.
2Constant currency is calculated by taking current year denominated results restated at last year's foreign exchange rates.
All results are reported before taking into account highlighted items, unless otherwise stated. These highlighted items include share based payment expenses, amortisation of purchased intangible assets, acquisition costs, restructuring and other non-recurring items.
Revenue
CY2015
Unaudited
'000sCY2014
Unaudited
'000s
FY2015
Audited
'000
FY2014/15
Audited
'000
Media Value Measurement
41,998
36,386
20,409
40,046
Marketing Performance Optimization
9,936
6,661
6,899
8,060
Market Intelligence
24,650
26,059
16,002
25,768
Total Revenue
76,584
69,106
43,310
73,874
Underlying operating profit/(loss)
Media Value Measurement
12,057
7,950
(81)
11,224
Marketing Performance Optimization
2,802
2,196
1,874
2,905
Market Intelligence
3,668
3,452
2,070
3,447
Central costs
(6,116)
(5,636)
(3,866)
(5,847)
Total underlying operating profit/(loss)
12,411
7,962
(3)
11,729
Highlighted items
(8,768)
(7,815)
(6,656)
(5,913)
Reported operating profit/(loss)
3,643
147
(6,659)
5,816
Net finance costs
(1,199)
(1,164)
(800)
(1,171)
Share of profit of associates
18
10
13
12
Reported profit/(loss) before tax
2,462
(1,007)
(7,446)
4,657
Underlying profit/(loss) before tax
11,230
6,808
(790)
10,570
On a 12 month calendar year basis, the table below sets out our revenue growth by segment:
MVM
MPO
MI
TOTAL
Reported revenue growth
15.4%
49.2%
(5.4)%
10.8%
Constant currency revenue growth
20.1%
44.4%
(3.6)%
13.5%
Like for like revenue growth at constant currency
15.0%
38.4%
(3.6)%
10.5%
The table below sets out our results on a reported and constant currency basis on a calendar 12 month basis:
CY2015
Unaudited (constant currency)
'000sCY2015
Unaudited (as reported)
'000
CY2014
Unaudited
(as reported)
'000
Revenue
78,424
76,584
69,106
Underlying operating profit
13,079
12,411
7,962
Underlying operating profit margin %
16.7%
16.2%
11.5%
The strong revenue and profit growth in CY2015 are helped by a strong first quarter of 2015, which was noted in the Company's Annual Report for the year to April 2015. For reporting purposes this quarter is not included within the results for the 2014 calendar year and this, together with an uncharacteristic slower start in the first quarter of CY2014, dampened the results for the 2014 calendar year.
In CY2015, at constant currency rates revenue has grown by 13.5% from CY2014 and underlying operating profit by 64.3% from CY2014 with a resulting increase in underlying operating margin from 11.5% to 16.7% between CY2014 and CY2015.
The reported results reflect the continued impact of foreign exchange on our recent performance (the average rate of the Euro moved from 1: 1.2404 in CY2014 to 1: 1.3771 in CY2015 which offset the movement in the average rate of the US Dollar from 1: $1.6476 in CY2014 to 1: $1.5283 in CY2015).
We continued to enjoy strong growth from both MPO and MVM, with like for like constant currency growth at 38.4% and 15.0% respectively on a 12 month calendar year basis. Within MI, revenues from our Portfolio platform stabilised showing like for like constant currency growth of 0.4% on a 12 month calendar year basis. However, a decline in project work resulted in an overall like for like constant currency revenue decline of 3.6% for the MI segment as a whole on a 12 month calendar year basis.
The underlying operating profit margin increased significantly from CY2014 to CY2015 from 11.5% to 16.2% and 16.7% on a constant currency basis as costs increased by only 5% on a reported basis and 7% on a constant currency basis between CY2014 and CY2015.
Highlighted items total 8.8m in CY2015, (CY2014: 7.8m) and 6.7m in the 8 months to December 2015. Highlighted items in CY2015 includea non-cash charge of 4.4m in respect of the full impairment of the goodwill, purchased intangible asset and related capitalised development costs of the Reputation business. This business, formerly Echo Research Group, was acquired in 2011. Over the last four years we have integrated the business fully into our Market Intelligence Practice; the technologies and methodologies which were represented by the goodwill, purchased intangibles and related capitalised development costs have been replaced, integrated or superseded and the client relationships have in many cases evolved into more integrated contracts. We are no longer able to support the original carrying value and believe that full impairment reflects the evolution of this part of our business in line with our longer-term corporate strategy. Additionally, highlighted items comprise 2.0m of purchased intangible asset amortisation, 0.9m of share based payment expenses, 0.1m credit in respect of adjustments to the fair value of deferred consideration as a result of revised expectations of performance from recent acquisitions combined with the impact of discounting deferred consideration. Other items included within highlighted items are office relocation costs (0.4m), professional fees in relation to acquisitions (0.5m), the costs of management restructuring (0.5m) and the cost of the CEO transition (0.2m).
Net finance costs were 1.2m in CY2015 (CY2014: 1.2m). Net finance costs were 0.8m for the 8 months ended 31 December 2015.
Underlying profit before tax is 11.2m for CY2015 (CY2014: 6.8m) as a result of the stronger operating performance in 2015. Reported profit before tax is 2.5m for CY2015 (CY2014: loss 1.0m) as a result of the increase in underlying operating profit offset by higher highlighted items.
MVM - Media Value Measurement (55% of total revenue) - 12 month calendar year comparative basis
CY2015
Unaudited
'000sCY2014
Unaudited
'000s
FY2015
Audited
'000
FY2014/15
Audited
'000
Revenue
41,998
36,386
20,409
40,046
Underlying Operating Profit
12,057
7,950
(81)
11,224
UnderlyingOperatingProfitmargin%
28.7%
21.8%
(0.4)%
28.0%
During 2015 approximately $21 billion of media spend was under review by advertisers worldwide and Ebiquity managed approximately one third of that on behalf of its clients. This has seen an unprecedented level of activity within this practice during the last year with high levels of client engagement. As a result much of our auditing and benchmarking work was delayed resulting in a slow final quarter in 2015.
MVM experienced a very strong first quarter to CY2015 which more than offset a slower final quarter. The strong start to CY2015 enabled the practice to grow by 15% on a like for like constant currency basis. This revenue growth combined with close control of our costs, has led to an increase in reported underlying operating profit margin to 28.7% in CY2015 compared with 21.8% in CY2014.
MPO - Marketing Performance Optimization (13% of total revenue) 12 month calendar year comparative basis
CY2015
Unaudited
'000sCY2014
Unaudited
'000s
FY2015
Audited
'000
FY2014/15
Audited
'000
Revenue
9,936
6,661
6,899
8,060
Underlying Operating Profit
2,802
2,196
1,874
2,905
Underlying Operating Profit margin %
28.2%
33.0%
27.2%
36.0%
The growing importance of data continues to drive MPO which again represents our fastest growing practice with demand both in Europe and the US. MPO now accounts for 13% of Group revenues and provides significant opportunity for further growth. Revenue grew by 49.2% between CY2014 and CY2015 and by 38.4% on a like for like constant currency basis. We continue to invest in MPO to enable our growth to be sustainable over the longer term. This investment resulted in an expected decline in operating margin from 33.0% in CY2014 to 28.2% in CY2015.
MI - Market Intelligence (32% of total revenue) - 12 month calendar year comparative basis
CY2015
Unaudited
'000sCY2014
Unaudited
'000s
FY2015
Audited
'000
FY2014/15
Audited
'000
Revenue
24,650
26,059
16,002
25,768
Underlying Operating Profit
3,668
3,452
2,070
3,447
Underlying Operating Profit margin %
14.9%
13.2%
12.9%
13.4%
Revenues from our Portfolio platform stabilised, showing like for like constant currency growth of 0.4% growth on a 12 month calendar year basis. However, MI's overall performance in CY2015 was negatively impacted by a slowdown in project work meaning that revenue for the MI practice was down 3.6% on a like for like constant currency basis in CY2015. The change in revenue profile combined with ongoing cost efficiencies within our data centres has positively impacted underlying operating profit margins which increased to 14.9% in CY2015 (CY2014:13.2%).
2016 will see the full launch of our new Portfolio platform which will provide a better user experience, integrated spend modules and better digital media monitoring.
Central costs
CY2015
Unaudited
'000sCY2014
Unaudited
'000s
FY2015
Audited
'000
FY2014/15
Audited
'000
Central costs
(6,116)
(5,636)
(3,866)
(5,847)
Central costs include central salaries (Board, Finance, IT, Marketing and HR), legal and advisory costs and property costs. Central costs have increased by 0.5m or 8.5% between CY2014 and CY2015 due to increased staff costs and related recruitment, training and travel costs.
Taxation
The total taxcreditfor the 8 months ended December 2015 is 1.3m (FY 2014/15 charge: 0.5m) representing a current tax credit of 0.1m (FY2014/15: charge of 1.1m)and a deferred tax credit of 1.2m (FY2014/15: 0.6m).
On a statutory reported basis, the tax credit on underlying profits for the year is 0.6m (FY2014/15: charge of 1.7m), representing a current tax charge of nil (FY2014/15: 1.5m) and a deferred tax credit of 0.6m (FY2014/15: charge of 0.2m). This is an effective tax rate on underlying profits of (72.9)% (FY2014/15: 16.0%).The effective tax rate is lowered by0.4m of over provisions from the prior year and the recognition of deferred tax assets on losses carried forward.
On a calendar year comparative basis, the underlying effective rate of tax for CY2015 is 22.2% (CY2014 20%).
Dividend
It is the Board's intention to pay a dividend of 0.4 pence per share for the 8 months ended 31 December 2015, (FY2014/15: 0.4 pence per share). This would represent an increase in dividend per share on a pro-rata basis and would also represent the continuation of a progressive dividend policy which commenced with our maiden dividend paid in October 2015. This dividend cannot be recommended as a conventional final dividend at the Company's AGM on 11 May 2016 as a result of the write down of the Company's investment in its Reputation business which has resulted in the Company (at the Ebiquity plc level, not at the Group level) having negative distributable reserves.
The Company does have sufficient share premium available to eliminate these negative reserves and to enable it to pay this dividend. Share premium is not distributable. However, the Company intends, conditional on the approval of its shareholders and the confirmation of the Court, to reduce its share premium to create distributable reserves. Accordingly, the Company shall propose at its AGM a resolution to reduce its share premium in order to create such reserves.
Assuming that shareholders pass this resolution and that the Court subsequently confirms the reduction of share premium (and subject to the discharge of any undertaking or other form of creditor protection that the Court may require), the Company intends to make payment of the dividend of 0.4 pence per share described above as an interim dividend during 2016. The Company shall make further announcements regarding the expected date of payment of this dividend.
Equity
During the 8 months to December 2015, 390,034 shares were issued upon the exercise of employee share options. As a result our share capital increased to 77,161,688 ordinary shares (30 April 2015: 76,771,654).
Earnings per share
Underlying diluted earnings per share was 10.8p in CY2015 (CY2014: 6.6p), being an increase of 63.4%, reflecting the increase in operating profit between CY2015 and CY2014. Underlying earnings per share for FY2014/15 was 10.7p.
Cash conversion
12 months to December 2015
'000s8monthsto December 2015
'000
12 months to April
2015
'000
Reported cash from operations
11,515
5,028
7,927
Underlying cash from operations
13,673
6,889
10,345
Underlying operating profit/(loss)
12,411
(3)
11,729
Cash conversion
110.2%
n/a
88.2%
Underlying cash from operations represents the cash flows from operations excluding the impact of highlighted items. The underlying net cash inflow from operations has improved significantly to 13.7m in CY2015 (FY2014/15: 10.3m).
After highlighted items are considered, reported net cash inflow from operations for CY2015 was 11.5m to (FY2014/15: 8.0m).
Cash conversion has improved considerably in CY2015 due to both the continued focus on working capital management and the change in year end to 31 December. The strong underlying cash from operations in the 8 months to 31 December 2015 reflects the seasonality of revenue and billing.
Net debt and banking facilities
31 December 2015
'000s31 December 2014
'000s
30 April
2015
'000
Net Cash
6,364
3,838
7,884
Bank debt1
(35,250)
(35,401)
(34,576)
Net debt1
(28,886)
(31,563)
(26,692)
1 Bank debt on the Balance Sheet at 31 December 2015 is shown net of 0.2m (April 2015: 0.3m, December 2014: 0.3m) of loan
arrangement fees that have been paid and which are amortised over the life of the facility. The bank debt stated above excludes these costs.
All bank borrowings are held jointly with Barclays and Royal Bank of Scotland ('RBS'). The committed facility, totalling 40,000,000, comprises a term loan of 10,000,000 (of which 6,250,000 remains outstanding at 31 December 2015 (30 April 2015: 8,125,000)), and a revolving credit facility of 30,000,000, (of which 29,000,000 was drawn down at 31 December 2015 (30 April 2015: 26,451,000).
During the period the Group continued to trade within all of its banking facilities and associated covenants. Net debt to EBITDA was 2.04 for the 12 months ended December 2015.
Statement of financial position and net assets
Net current assets as at 31 December 2015 increased by 4.4m to 5.6m (FY2014/15: 10.0m) and total net assets decreased by 6.3m to 42.4m (FY2014/15: 48.7m) primarily as a result of the impairment of goodwill and purchased intangible assets of the Reputation business combined with the impact of operating performance over the 8 months to 31 December 2015.
Goodwill as at 31 December 2015 was 54.8m (30 April 2015: 58.1m) with the decrease due the impairment of the goodwill of the Reputation business which resulted in a decrease in goodwill of 3.1m. Management undertakes anannualimpairment review ofgoodwill. Management have performedadditional sensitivity analysis of the underlying assumptions and believe that the results of this analysiscurrently support the remaining goodwill carrying value.
Deferred contingent consideration has decreased by 4.1m since 30 April 2015, due to the settlement of deferred consideration. At 31 December 2015 the remaining deferred consideration is estimated to be 4.9m which relates to our three most recent acquisitions, 3.4m of which is forecast to be settled in the next 12 months.
Outlook
During 2015 we continued to lay the foundations upon which we will build our future growth plans. There is clear evidence of the continuing demand for our products and services, and the increased level of visibility we have over 2016 revenues provides confidence about the year ahead. The demand for Marketing Performance Optimization continues to be buoyant and we are positioning ourselves to capitalise on this opportunity.
By order of the Board
Michael Karg Andrew Beach
Chief Executive Officer Chief Financial and Operating Officer
29 March 2016
Consolidated Income Statement for the 8 month period ended 31 December 2015
8 month period ended
31 December 2015
Year ended 30 April 2015
Before
Highlighted
Before
Highlighted
highlighted
items
highlighted
items
items
(note 3)
Total
items
(note 3)
Total
Note
'000
'000
'000
'000
'000
'000
Revenue
2
43,310
-
43,310
73,874
-
73,874
Cost of sales
(22,514)
-
(22,514)
(32,383)
-
(32,383)
Gross profit
20,796
-
20,796
41,491
-
41,491
Administrative expenses
(20,799)
(6,656)
(27,455)
(29,762)
(5,913)
(35,675)
Operating (loss)/profit
(3)
(6,656)
(6,659)
11,729
(5,913)
5,816
Finance income
13
-
13
8
-
8
Finance expenses
(813)
-
(813)
(1,179)
-
(1,179)
Net finance costs
(800)
-
(800)
(1,171)
-
(1,171)
Share of profit of associates
13
-
13
12
-
12
(Loss)/profit before taxation
(790)
(6,656)
(7,446)
10,570
(5,913)
4,657
Taxation credit/(charge)
4
576
756
1,332
(1,693)
1,155
(538)
(Loss)/profit for the period/year
(214)
(5,900)
(6,114)
8,877
(4,758)
4,119
Attributable to:
Equity holders of the parent
(336)
(5,885)
(6,221)
8,346
(4,723)
3,623
Non-controlling interests
122
(15)
107
531
(35)
496
(214)
(5,900)
(6,114)
8,877
(4,758)
4,119
Earnings per share
Basic
5
(8.08)p
4.78p
Diluted
5
(8.08)p
4.65p
Consolidated Statement of Comprehensive Income for the 8 month period ended 31 December 2015
8 month period ended
31 December
2015
Year ended
30 April
2015
'000
'000
(Loss)/profit for the period/year
(6,114)
4,119
Other comprehensive (expense)/income:
Items that will not be reclassified subsequently to profit or loss
Exchange differences on translation of overseas subsidiaries
(116)
350
Movement in valuation of hedging instruments
-
52
Total other comprehensive (expense)/income for the period/year
(116)
402
Total comprehensive (expense)/income for the period/year
(6,230)
4,521
Attributable to:
Equity holders of the parent
(6,337)
4,025
Non-controlling interests
107
496
(6,230)
4,521
Consolidated Statement of Financial Position as at 31 December 2015
Company number: 03967525
31 December
2015
30 April
2015
Note
'000
'000
Non-current assets
Goodwill
6
54,827
58,096
Other intangible assets
7
13,527
15,178
Property, plant and equipment
2,928
3,194
Investment in associates
45
32
Deferred tax asset
2,267
1,408
Total non-current assets
73,594
77,908
Current assets
Trade and other receivables
24,318
29,879
Cash and cash equivalents
8,755
9,295
Total current assets
33,073
39,174
Total assets
106,667
117,082
Current liabilities
Trade and other payables
(6,566)
(7,489)
Accruals and deferred income
(12,340)
(11,510)
Financial liabilities
8
(8,227)
(8,761)
Current tax liabilities
(251)
(1,280)
Provisions
(89)
(121)
Total current liabilities
(27,473)
(29,161)
Non-current liabilities
Financial liabilities
8
(34,055)
(35,957)
Provisions
(486)
(485)
Deferred tax liability
(2,244)
(2,821)
Total non-current liabilities
(36,785)
(39,263)
Total liabilities
(64,258)
(68,424)
Total net assets
42,409
48,658
Equity
Ordinary shares
19,290
19,193
Share premium
11,764
11,657
Other reserves
656
772
Retained earnings
9,891
16,012
Equity attributable to the owners of the parent
41,601
47,634
Non-controlling interests
808
1,024
Total equity
42,409
48,658
Consolidated Statement of Changes in Equity for the 8 month period ended 31 December 2015
Note
Ordinary shares
Share premium
Other reserves
Retained earnings
Total
Non-controlling interests
Total equity
'000
'000
'000
'000
'000
'000
'000
1 May 2014
18,873
10,750
367
13,810
43,800
717
44,517
Profit for the year
-
-
-
3,623
3,623
496
4,119
Other comprehensive income
-
-
402
-
402
-
402
Total comprehensive income for the year
-
-
402
3,623
4,025
496
4,521
Shares issued for cash
79
110
3
(3)
189
-
189
Acquisition of non-controlling interest
241
797
-
(2,563)
(1,525)
113
(1,412)
Share options charge
3
-
-
-
1,215
1,215
-
1,215
Deferred tax on share options
-
-
-
(70)
(70)
-
(70)
Dividends paid to non-controlling interests
-
-
-
-
-
(302)
(302)
30 April 2015
19,193
11,657
772
16,012
47,634
1,024
48,658
(Loss)/profit for the period
-
-
-
(6,221)
(6,221)
107
(6,114)
Other comprehensive expense
-
-
(116)
-
(116)
-
(116)
Total comprehensive (expense)/income for the period
-
-
(116)
(6,221)
(6,337)
107
(6,230)
Shares issued for cash
97
107
-
-
204
-
204
Acquisition of non-controlling interest
-
-
-
(23)
(23)
(20)
(43)
Share options charge
3
-
-
-
228
228
-
228
Deferred tax on share options
-
-
-
186
186
-
186
Dividends paid to shareholders
9
-
-
-
(291)
(291)
-
(291)
Dividends paid to non-controlling interests
-
-
-
-
-
(303)
(303)
31 December 2015
19,290
11,764
656
9,891
41,601
808
42,409
Consolidated Cash Flow Statement for the 8 month period ended 31 December 2015
8 month period ended
Year ended
Note
31 December 2015
30 April
2015
'000
'000
Cash flows from operating activities
Cash generated from operations
10
5,028
7,927
Finance expenses paid
(601)
(1,242)
Finance income received
13
8
Income taxes paid
(892)
(1,618)
Net cash generated from operating activities
3,548
5,075
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired
(3,002)
(5,248)
Proceeds from disposal of investments
-
68
Net purchase of property, plant and equipment
(502)
(1,464)
Net purchase of intangible assets
7
(826)
(1,664)
Net cash used in investing activities
(4,330)
(8,308)
Cash flows from financing activities
Proceeds from issue of share capital (net of issue costs)
205
252
Proceeds from bank borrowings
2,578
36,703
Repayment of bank borrowings
(1,982)
(31,107)
Bank loan fees paid
-
(360)
Interest rate swap closure
-
(29)
Acquisition of interest in a subsidiary from non-controlling interests
(1,105)
(282)
Dividends paid to shareholders
(291)
-
Dividends paid to non-controlling interests
(195)
(259)
Capital repayment of finance leases
(4)
(197)
Net cash flow (used in)/generated from financing activities
(794)
4,721
Net (decrease)/increase in cash, cash equivalents and bank overdrafts
(1,576)
1,488
Cash, cash equivalents and bank overdraft at beginning of period/year
7,884
6,521
Effect of unrealised foreign exchange losses
56
(125)
Cash, cash equivalents and bank overdraft at
end of period/year
6,364
7,884
Notes to the Consolidated Financial Statements for the 8 month period ended 31 December 2015
1. Accounting policies
General information
Ebiquity plc ('the Company') and its subsidiaries (together, 'the Group') provide independent data-driven insights to the global media and marketing community. The Group has 21 offices across 14 countries.
The Company is a public limited company, which is listed on the London Stock Exchange's AIM Market and is incorporated and domiciled in the UK.
Basis of preparation
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and IFRS IC Interpretations (collectively IFRSs) issued by the International Accounting Standards Board (IASB) as adopted by European Union (Adopted IFRSs) and with those parts of the Companies Act 2006 applicable to companies preparing their financial statements under Adopted IFRSs.
The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.
Going concern
The Directors, after making appropriate enquiries, have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its consolidated financial statements.
The Group holds bank borrowings which are subject to quarterly covenant tests. The Directors have a reasonable expectation that the covenants will be met for the foreseeable future. Further information on the Group's borrowings is given in note 18.
Significant accounting policies
The principal accounting policies adopted in these consolidated financial statements are set out below. These policies have been consistently applied to all periods/years presented, unless otherwise stated.
Changes in accounting policies
There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial period beginning on or after 1 May 2015 that have had a material impact on the Group.
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.
Business combinations
Acquisition method of accounting
The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities assumed, and equity instruments issued by the Group in exchange for control of the acquiree. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value at the acquisition date. All costs directly attributable to the business combination are recorded as incurred in the Income Statement within highlighted items.
Where the consideration for the acquisition includes a contingent deferred consideration arrangement, this is measured at fair value at the acquisition date. Any subsequent changes to the fair value of the contingent deferred consideration are adjusted against the cost of the acquisition if they occur within the measurement period and only if the changes relate to conditions existing at the acquisition date. Any subsequent changes to the fair value of the contingent deferred consideration after the measurement period are recognised in the Income Statement within administrative expenses as a highlighted item. The carrying value of contingent deferred consideration at the Balance Sheet date represents management's best estimate of the future payment at that date, based on historical results and future forecasts.
The interest of non-controlling shareholders in the acquiree is initially measured at the non-controlling interest's proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.
Investments in associates
An associate is an entity over which the Group is in a position to exercise significant influence, but not control or joint control, through participation in the financial and operating policy decisions of the investee generally accompanying a shareholding of between 25% and 50% of the voting rights. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.
The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting. Investments in associates are carried in the statement of financial position at cost as adjusted by post-acquisition changes in the Group's share of the net assets of the associate, less any impairment in the value of individual investments. Losses of an associate in excess of the Group's interest in that associate (which includes any long-term interests that, in substance, form part of the Group's net investment in the associate) are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.
Any excess of the cost of acquisition over the Group's share of the fair values of the identifiable net assets of the associate at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment annually.
Where a group company transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group's interest in the relevant associate. Losses may provide evidence of an impairment of the asset transferred in which case appropriate provision is made for impairment.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group's interest in the fair value of the identifiable assets and liabilities of a subsidiary. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment at least annually. Any impairment is recognised immediately in the Income Statement and is not subsequently reversed.
For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided in the normal course of business, net of discounts, VAT and other sales related taxes. Income is recognised evenly over the period of the contract for our Market Intelligence businesses, and in accordance with the stage of completion of the contract activity for our Media Value Measurement and Marketing Performance Optimization businesses. The stage of completion is determined relative to the total number of hours expected to complete the work or provision of services. Where recorded revenue exceeds amounts invoiced to clients, the excess is classified as accrued income and where recorded revenue is less than amounts invoiced to clients, the difference is classified as deferred income.
Where services are performed by an indeterminate number of acts over a specific period, revenue is recognised on a straight-line basis over the specific period unless there is evidence that some other method better represents the stage of completion.
If the outcome of a contract cannot be estimated reliably, the contract revenue is recognised to the extent of contract costs incurred that it is probable would be recoverable. Costs are recognised as an expense in the period in which they are incurred.
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 Income Statement.
Highlighted items
Highlighted items comprise non-cash charges and non-recurring items which are highlighted in the 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 their subsequent integration into the Group, adjustments to the estimates of deferred consideration on acquired entities, asset impairment charges 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.
Taxation
The tax expense included in the 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 anumber of different jurisdictions and judgement isrequired in determining the appropriate provisionfor transactions where the ultimate taxdetermination is uncertain. In such circumstances,the Group recognises liabilities for anticipated taxesbased on the best information available and wherethe anticipated liability is both probable andestimable. Where the finaloutcome of such matters differs from the amountrecorded, any differences may impact the incometax and deferred tax provisions in the period inwhich 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, 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 or 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.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.
Depreciation is charged so as to write off the cost or valuation of assets over their estimated useful lives and is recognised in the Income Statement within administrative expenses. The rates generally applicable are:
Motor vehicles
25% per annum reducing balance
Fixtures, fittings and equipment
7% to 20% per annum straight-line; or
25% per annum reducing balance
Computer equipment
25% to 40% straight-line
Short leasehold land and buildings improvements
Over the shorter of the life or the estimated useful life of the lease
Other intangible assets
Internally generated intangible assets - development expenditure
Internally generated intangible assets relate to bespoke computer software and technology developed by the Group's internal software development team.
An internally generated intangible asset arising from the Group's development expenditure is recognised only if all of the following conditions are met:
It is technically feasible to develop the asset so that it will be available for use or sale;
Adequate resources are available to complete the development and to use or sell the asset;
There is an intention to complete the asset for use or sale;
The Group is able to use or sell the intangible asset;
It is probable that the asset created will generate future economic benefits; and
The development cost of the asset can be measured reliably.
Internally generated intangible assets are amortised on a straight-line basis over their useful lives. Amortisation commences when the asset is available for use and useful lives range from 1 to 5 years. The amortisation expense is included within administrative expenses. Where an internally generated intangible asset cannot be recognised, development expenditure is recognised as an expense in the period in which it is incurred.
Purchased intangible assets
Externally acquired intangible assets are initially recognised at cost and subsequently amortised on a straight-line basis over their useful economic lives, which vary from 3 to 10 years. The amortisation expense is included as a highlighted item within the administrative expenses line in the Income Statement. Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other contractual/legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques. The significant intangibles recognised by the Group are customer relationships.
Computer software
Purchased computer software intangible assets are amortised on a straight-line basis over their useful lives which vary from 2 to 5 years.
Impairment
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.If any such condition exists, the recoverable amount of the asset is estimated in order to determine the extent, if any, of the impairment loss. Where the asset does not generate cash flows that are independent from other assets, estimates are made of the cash flows of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value, less costs to sell, and value in use. In assessing value in use, estimated future cash flows are discounted to their present value using a discount rate appropriate to the specific asset or cash-generating unit.
If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying value of the asset or cash-generating unit is reduced to its recoverable amount. Impairment losses are recognised immediately in highlighted items in the Income Statement.
In respect of assets other than goodwill, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if the impairment loss had been recognised.
Financial instruments
Financial assets and financial liabilities are recognised in the Group's Statement of Financial Position when the Group becomes a party to the contractual provisions of the instrument.
Financial assets
The Group classifies its financial assets as 'loans and receivables'. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers (trade receivables), but also incorporate other types of contractual monetary asset. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.
Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables, which are reported net, such provisions are recorded in a separate allowance account with the loss being recognised within administrative expenses in the Income Statement. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.
Financial liabilities
Financial liabilities are initially recognised at fair value. Interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the Statement of Financial Position. 'Finance expense' in this context includes initial transaction costs as well as any interest or coupon payable while the liability is outstanding.
Interest rate swaps are carried at fair value with changes in fair value being reflected in the Statement of Comprehensive Income, and are classified within other financial liabilities.
Bank borrowings
Interest bearing borrowings are initially recognised at fair value net of transaction costs incurred and subsequently measured at amortised cost. Finance charges are recognised in the Income Statement over the period of the borrowings using the effective interest method.
Loan fees relating to the bank borrowings are capitalised against the loan and amortised over the period of the borrowings to which they relate.
The revolving credit facility is considered to be a long term loan.
Derivative financial instruments
The Group uses derivative financial instruments to reduce its exposure to foreign exchange and interest rate movements. The Group does not hold or issue derivative financial instruments for financial trading purposes but derivatives that do not qualify for hedge accounting are accounted for at fair value through the Income Statement. Derivative financial instruments are initially recognised at fair value at the contract date and continue to be stated at fair value at the balance sheet date with gains and losses on revaluation being recognised immediately in the Income Statement.
Cash flow hedges were used to hedge against fluctuations in future cash flows on the Group's debt funding due to movements in interest rates. When a cash flow hedge is employed and hedge accounting applied, the effective portion of the change in the fair value of the hedging instrument is recognised directly in equity (hedging reserve) until the gain or loss on the hedged item is realised. Any ineffective portion is always recognised in the Income Statement.
The fair value of derivatives is determined by reference to market values for similar instruments.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and short term deposits. Bank overdrafts are an integral part of the Group's cash management and are included as a component of cash and cash equivalents for the purpose of the Cash Flow Statement. Cash and cash equivalents and bank overdrafts are offset when there is a legally enforceable right to offset.
Share capital
Ordinary shares are classified as equity.
Provisions
Provisions, including provisions for onerous lease costs, are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle that obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.
Provisions are measured at the Directors' best estimate of the expenditure required to settle the obligation at the year end date. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate which reflects current market assessments of the time value of money and, where appropriate, the risks specific to the obligations.
Employee Share Ownership Plan (ESOP)
As the Company is deemed to have control of its ESOP trust, it is treated as a subsidiary and consolidated for the purposes of the Group financial statements. The ESOP's assets (other than investments in the Company's shares), liabilities, income and expenses are included on a line-by-line basis in the Group financial statements. The ESOP's investment in the Company's shares is deducted from shareholders' equity in the Group Statement of Financial Position as if they were treasury shares, except that profits on the sale of ESOP shares are not credited to the share premium account.
Share-based payments
Where equity-settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the Income Statement over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity investments expected to vest at each year end date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. A charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition.
Where there are modifications to share-based payments that are beneficial to the employee then as well as continuing to recognise the original share-based payment charge, the incremental fair value of the modified share options as identified at the date of the modification is also charged to the Income Statement over the remaining vesting period. Where the Group cancels share options and identifies replacement options this arrangement is also accounted for as a modification.
The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity in the parent entity financial statements.
Retirement benefits
For defined contribution pension schemes, the Group pays contributions to privately administered pension plans on a voluntary basis. The Group has no further payment obligations once the contributions have been paid. Contributions are charged to the Income Statement in the year to which they relate.
Leases
Where substantially all of the risks and rewards incidental to ownership of a leased asset have been transferred to the Group (a 'finance lease'), the asset is treated as if it had been purchased outright. The amount initially recognised as an asset is the lower of the fair value of the leased property and the present value of the minimum lease payments payable over the term of the lease. The corresponding lease commitment is shown as a liability. Lease payments are analysed between capital and interest. The interest element is charged to the Income Statement over the period of the lease and is calculated so that it represents a constant proportion of the lease liability. The capital element reduces the balance owed to the lessor.
Where substantially all of the risks and rewards incidental to ownership are retained by the lessor (an 'operating lease'), the total rentals payable under the lease are charged to the Income Statement on a straight-line basis over the lease term. The aggregate benefit of lease incentives is recognised as a reduction of the rental expense over the lease term on a straight-line basis. The land and buildings elements of property leases are considered separately for the purposes of lease classification.
Dividend distribution
Dividend distribution to the Company's shareholders is recognised as a liability in the Group's financial statements in the period in which the dividends are approved by the Company's shareholders.
Critical accounting estimates and judgements
The Group makes estimates and judgements concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Revenue recognition
The Group is required to make an estimate of the project completion levels in respect of contracts which straddle the year end for revenue recognition purposes. This involves a level of judgement and therefore differences may arise between the actual and estimated result.
Carrying value of goodwill and other intangible assets
Determining whether goodwill and other intangibles should be capitalised, the amortisation period appropriate to intangible assets and whether or not these assets are impaired requires estimation of the value in use of the cash-generating units to which the goodwill and other intangible assets has been allocated. The value in use calculation requires the entity to estimate future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Details regarding the goodwill and other intangible assets carrying value and assumptions used in carrying out the impairment reviews are provided in notes 9 and 10.
Income taxes
The Group is subject to income taxes in all the territories in which it operates, and judgement and estimates of future profitability are required to determine the Group's deferred tax position. If the final tax outcome is different to that assumed, resulting changes will be reflected in the Income Statement, unless the tax relates to an item charged to equity in which case the changes in the tax estimates will also be reflected in equity. The Group believes that its accruals for tax liabilities are adequate for all open audit years based on its assessment of many factors including past experience and interpretations of tax law. This assessment relies on estimates and assumptions and may involve a series of complex judgements about future events. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact income tax expense in the period in which such determination is made.
Contingent deferred consideration
The Group has recorded liabilities for deferred consideration on acquisitions made in the current and prior periods. The calculation of the deferred 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 deferred consideration after the measurement period are recognised in the Income Statement within administrative expenses as a highlighted item.
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
No new standards and changes came into effect during the period beginning 1 May 2015.
Certain new standards, amendments to new standards and interpretations have been published that are mandatory to the Group's future accounting periods but have not been adopted early in these financial statements. These are set out below:
Amendments to IAS 16 'Property, plant and equipment' and IAS 38 'Intangible assets' (effective on or after 1 January 2016). This amendment provides clarification of acceptable methods of depreciation and amortisation. The Group will apply these amendments from 1 January 2016.
IFRS 15, 'Revenue from Contracts with Customers' (effective on or after 1 January 2018). This standard establishes a single comprehensive framework for revenue recognition to determine when to recognise revenue and how much revenue to recognise. This standard replaces the previous revenue standards IAS 18 'Revenue' and IAS 11 'Construction Contracts'. The Group will apply IFRS 15 from 1 January 2018.
IFRS 9, 'Financial Instruments' (effective on or after 1 January 2018). This standard addresses the classification, measurement and derecognition of financial assets and financial liabilities and introduces new rules for hedge accounting. In July 2014, the IASB made further changes to the classification and measurement rules and also introduced a new impairment model. These latest amendments now complete the new financial instruments standard. The Group will apply IFRS 9 from 1 January 2018.
IFRS 16, 'Leases' (effective on or after 1 January 2019). This standard replaces IAS 17 'Leases' and sets out the principles for the recognition, measurement, presentation and disclosure of leases for both the lessee and the lessor. IFRS 16 eliminates the two lease classifications that IAS 17 has (operating and finance leases) for the lessee, and instead all leases will have the same classification. The Group will apply IFRS 9 from 1 January 2019.
The Directors do not expect that the adoption of the Standards and amendments listed above will have a material impact on the financial statements of the Group in future periods, although the detailed impact has not yet been quantified.
2. Segmental reporting
In accordance with IFRS 8 the Group's operating segments are based on the reports reviewed by the Executive Directors that are used to make strategic decisions.
Certain operating segments have been aggregated to form three reportable segments, Media Value Measurement, Market Intelligence and Marketing Performance Optimization:
Media Value Measurement includes our media benchmarking, financial compliance and associated services.
Market Intelligence includes our advertising monitoring, reputation management and research/insight services.
Marketing Performance Optimization consists of our marketing effectiveness and multi-channel analytics 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 8 month period ended 31 December 2015 is as follows:
8 month period ended 31 December 2015
Media Value Measurement
Market Intelligence
Marketing Performance Optimization
Reportable Segments
Unallocated
Total
'000
'000
'000
'000
'000
'000
Revenue
20,409
16,002
6,899
43,310
-
43,310
Operating (loss)/profit before highlighted items
(81)
2,070
1,874
3,863
(3,866)
(3)
Total assets
53,011
29,398
10,640
93,049
13,618
106,667
Other segment information
Capital expenditure - property, plant and equipment
26
-
12
38
512
550
Capital expenditure - intangible assets
77
-
-
77
750
827
Total
103
-
12
115
1,262
1,377
Year ended 30 April 2015
Media Value Measurement
Market Intelligence
Marketing Performance Optimization
Reportable Segments
Unallocated
Total
'000
'000
'000
'000
'000
'000
Revenue
40,046
25,768
8,060
73,874
-
73,874
Operating profit/(loss) before highlighted items
11,224
3,447
2,905
17,576
(5,847)
11,729
Total assets
59,432
40,104
9,580
109,116
7,966
117,082
Other segment information
Capital expenditure - property, plant and equipment
743
146
20
909
585
1,494
Capital expenditure - intangible assets
1,936
757
-
2,693
539
3,232
Capital expenditure - goodwill
2,790
-
-
2,790
-
2,790
Total
5,469
903
20
6,392
1,124
7,516
A reconciliation of segment operating (loss)/profit before highlighted items to total profit before tax is provided below:
8 month period ended
31 December 2015
Year ended
30 April
2015
'000
'000
Reportable segment operating profit before highlighted items
3,863
17,576
Unallocated costs:
Staff costs
(3,281)
(4,773)
Property costs
(260)
(404)
Exchange rate movements
31
(179)
Other administrative expenses
(356)
(491)
Operating (loss)/profit before highlighted items
(3)
11,729
Highlighted items (note 3)
(6,656)
(5,913)
Operating (loss)/profit
(6,659)
5,816
Net finance costs
(800)
(1,171)
Share of profit of associates
13
12
(Loss)/profit before tax
(7,446)
4,657
Unallocated costs comprise central costs that are not considered attributable to the segments.
A reconciliation of segment total assets to total consolidated assets is provided below:
31 December 2015
30 April
2015
'000
'000
Total assets for reportable segments
93,049
109,116
Unallocated amounts:
Property, plant and equipment
2,278
1,450
Other intangible assets
2,853
954
Other receivables
2,892
985
Cash and cash equivalents
3,478
3,309
Deferred tax asset
2,113
1,236
Investments in associates
4
32
Total assets
106,667
117,082
The table below presents revenue and non-current assets by geographical location:
8 month period ended
31 December 2015
Year ended
30 April 2015
Revenue by location of customers
Non-current assets
Revenue by location of customers
Non-current assets
'000
'000
'000
'000
United Kingdom
13,142
46,955
23,864
51,152
Rest of Europe
14,786
7,957
23,726
8,356
North America
10,376
6,297
17,227
6,185
Rest of world
5,006
10,118
9,057
10,807
43,310
71,327
73,874
76,500
Deferred tax assets
-
2,267
-
1,408
Total
43,310
73,594
73,874
77,908
No single customer (or group of related customers) contributes 10% or more of revenue.
3. Highlighted items
Highlighted items comprise non-cash charges and non-recurring items which are highlighted in the Income Statement because separate disclosure is considered relevant in understanding the underlying performance of the business.
8 month period ended
31 December 2015
Year ended
30 April 2015
Cash
Non-cash
Total
Cash
Non-cash
Total
'000
'000
'000
'000
'000
'000
Administrative Expenses
Recurring:
Share option charge
203
228
431
140
1,215
1,355
Amortisation of purchased intangibles
-
1,327
1,327
-
2,030
2,030
203
1,555
1,758
140
3,245
3,385
Non-recurring:
Acquisition and integration costs
533
-
533
1,730
-
1,730
Impairment costs
-
4,365
4,365
-
-
-
Refinancing costs
-
-
-
404
-
404
Property costs
-
-
-
394
-
394
533
4,365
4,898
2,528
-
2,528
Total highlighted items before tax
736
5,920
6,656
2,668
3,245
5,913
Taxation credit
(128)
(628)
(756)
(309)
(846)
(1,155)
Total highlighted items after tax
608
5,292
5,900
2,359
2,399
4,758
Amortisation of purchased intangibles of 1,327,000 relates to acquisitions made in prior years.
Share option charges include the non-cash IFRS 2 charge (228,000), along with the cash element in relation to the exercising of share options (203,000).
Acquisition costs represent professional fees incurred in relation to acquisitions (167,000) and adjustments to the fair value of deferred consideration (a credit of 230,000; April 2015: 548,000 debit) resulting primarily from a downward revision of deferred consideration in relation to one acquisition and discounting all deferred consideration balances to net present value, partially offset by the related foreign exchange impacts (198,000). Integration costs include certain one-off costs incurred whilst integrating the acquisitions made in the prior financial years including severance costs arising from the restructure of senior management following these acquisitions (151,000). Also included are fees in relation to the appointment and ongoing transition costs in relation to the new Group CEO (247,000).
The impairment costs include 3,129,000 goodwill impairment, 559,000 purchased intangible assets impairment, 214,000 capitalised development costs impairment and 463,000 pre-acquisition adjustments in relation to the Reputation business.
We are fully impairing the goodwill, purchased intangible asset and related capitalised development costs in relation to the Reputation business. This business, formerly Echo Research Group, was acquired in 2011. Over the last four years we have integrated the business fully into our Market Intelligence Practice; the technologies and methodologies which were represented by the goodwill and purchased intangibles have been replaced, integrated or superseded and the client relationships have in many cases evolved into more integrated contracts. We are no longer able to support the original carrying value and believe that full impairment reflects the evolution of this part of our business in line with our longer-term corporate strategy.
Current tax arising on the highlighted items is included as a cash item, while deferred tax on highlighted items is included as a non-cash item. Refer to note 7 for more detail.
Deferred consideration adjustments, within acquisition and integration costs, are included as a cash item.
As at 31 December 2015, 442,000 of the 736,000 cash highlighted items had been settled.
4. Taxation (credit)/charge
8 month period ended
31 December 2015
Year ended 30 April 2015
Before highlighted items
Highlighted items
Total
Before highlighted items
Highlighted items
Total
'000
'000
'000
'000
'000
'000
UK tax
Current period/year
194
(128)
66
570
(298)
272
Adjustment in respect of prior year
(236)
-
(236)
(798)
-
(798)
(42)
(128)
(170)
(228)
(298)
(526)
Foreign tax
Current year
248
-
248
2,079
(11)
2,068
Adjustment in respect of prior year
(160)
-
(160)
(399)
-
(399)
88
-
88
1,680
(11)
1,669
Total current tax
46
(128)
(82)
1,452
(309)
1,143
Deferred tax
Origination and reversal of temporary differences
(622)
(628)
(1,250)
241
(846)
(605)
Total tax (credit)/charge
(576)
(756)
(1,332)
1,693
(1,155)
538
The difference between tax as (credited)/charged in the financial statements and tax at the nominal rate is explained below:
8 month
period ended
31 December 2015
Year ended
30 April 2015
'000
'000
(Loss)/profit before tax
(7,446)
4,657
Corporation tax at 20.0% (30 April 2015: 20.9%)
(1,489)
974
Non-deductible taxable expenses/income
943
460
Overseas tax rate differential
24
617
Losses not relieved against other Group entities
832
38
Utilisation of previously unrecognised tax losses now recouped to reduce current tax expense
(80)
(115)
Adjustment in respect of prior years
(396)
(1,197)
Effect of change in deferred tax rate
(265)
-
Deferred tax
(985)
(605)
Other
84
366
Total tax (credit)/charge
(1,332)
538
The applicable tax rate has decreased from 20.9% to 20.0% due to the reduction of the UK Corporation Tax rate to 20.0% in April 2015.
A further rate reduction to 19% effective from 1 April 2017 and then to 18% from 1 April 2020 was substantively enacted on 28 October 2015 and therefore any relevant deferred tax balances have been measured at these rates.
5. Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
8 month
period ended
31 December 2015
Year ended
30 April 2015
'000
'000
Earnings for the purpose of basic earnings per share being net profit attributable to equity holders of the parent
(6,221)
3,623
Adjustments:
Impact of highlighted items (net of tax) 1
5,885
4,723
Earnings for the purpose of underlying earnings per share
(336)
8,346
Number of shares:
Weighted average number of shares during the period
- Basic
76,976,240
75,820,669
- Dilutive effect of share options
1,993,033
2,084,430
- Diluted
78,969,273
77,905,099
Basic earnings per share
(8.08)p
4.78p
Diluted earnings per share
(8.08)p
4.65p
Underlying basic earnings per share
(0.44)p
11.01p
Underlying diluted earnings per share
(0.43)p
10.71p
1. Highlighted items attributable to equity holders of the parent (see note 3), stated net of their total tax impact.
2. It is assumed that all contingent deferred consideration will be settled in cash, therefore there is no dilutive effect.
6. Goodwill
'000
Cost
At 1 May 2014
55,121
Adjustments in respect of a pre-acquisition period
3
Acquisitions
2,787
Foreign exchange differences
185
At 30 April 2015
58,096
Adjustments in respect of a pre-acquisition period
(177)
Foreign exchange differences
37
At 31 December 2015
57,956
Accumulated impairment
At 1 May 2014
-
At 30 April 2015
-
Impairment
(3,129)
At 31 December 2015
(3,129)
Net book value
At 31 December 2015
54,827
At 30 April 2015
58,096
At 1 May 2014
55,121
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.
Goodwill has been allocated to the following segments:
8 month period ended
31 December 2015
Year ended
30 April 2015
'000
'000
Media Value Measurement
26,886
27,337
Market Intelligence
21,904
24,886
Marketing Performance Optimization
6,037
5,873
54,827
58,096
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 CGU's has determined based on value in use calculations.
The goodwill impairment charge of 3,129,000 (30 April 2015: nil) relates to the full impairment of the goodwill in relation to the Reputation CGU, included in the Market Intelligence segment. This business, formerly Echo Research Group, was acquired in 2011. Over the last four years we have integrated the business fully into our Market Intelligence Practice; the technologies and methodologies which were represented by the goodwill have been replaced, integrated or superseded and the client relationships have in many cases evolved into more integrated contracts. We are no longer able to support the original carrying value and believe that full impairment reflects the evolution of this part of our business in line with our longer-term corporate strategy.
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 value in use calculations are based on assumptions regarding the discount rates, and revenue and cost growth rates. The Directors prepare a three year pre-tax cash flow forecast based on the following financial year's budget as approved by the Board, with revenue and cost forecasts for the following 2 years adjusted by segment and geography. The forecast takes account of actual results from previous years combined with management expectations of market developments.
The Directors estimate discount rates using rates that reflect current market assessments of the time value of money and risk specific to the cash-generating units. The three-year pre-tax cash flow forecasts have been discounted at between 8.2% and 9.7% (30 April 2015: 9.5%).
Cash flows beyond the three year period are extrapolated at a rate of 2.25% (30 April 2015: 2.0%), 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.
Sensitivity analysis
Sensitivity analysis has been performed on the value in use calculation by changing the key assumptions applicable to each CGU.
The following sensitivities have been applied to the value in use assumptions:-
Increase in pre-tax discount rates by 5%
Decrease in future cash flows by 10%
As a result of applying these sensitivities no CGUs have a value in use below recoverable value.
A specific sensitivity analysis was applied to each of the following CGUs, which reside in the MI segment, have a combined carrying value of 21.1 million and are the most sensitive CGUs, to identify the size of any change in assumption required to indicate an impairment of goodwill:
Adjustment to discount rate
Adjustment to future cash flows
Advertising UK, US and International
+7.4pp
-46.0pp
Advertising Germany
+8.6pp
-59.0pp
The Directors consider that the result of the above sensitivity analysis means that there is no further impairment of goodwill.
7. Other intangible assets
Capitalised
development costs
Computer software
Purchased
intangible
assets
Total
intangible
assets
'000
'000
'000
'000
Cost
At 1 May 2014
1,948
1,696
21,856
25,500
Additions
1,057
615
-
1,672
Acquisitions
-
1
1,559
1,560
Disposals
-
(21)
-
(21)
Foreign exchange
(8)
(97)
(156)
(261)
At 30 April 2015
2,997
2,194
23,259
28,450
Additions
652
175
-
827
Disposals
-
(13)
-
(13)
Foreign exchange
(11)
27
40
56
At31December2015
3,638
2,383
23,299
29,320
Amortisation and impairment
At 1 May 2014
(855)
(1,022)
(9,197)
(11,074)
Charge for the year
(281)
(204)
(2,030)
(2,515)
Disposals
-
21
-
21
Foreign exchange
-
85
211
296
At 30 April 2015
(1,136)
(1,120)
(11,016)
(13,272)
Charge for the period
(194)
(190)
(1,327)
(1,711)
Disposals
-
12
-
12
Impairment
(214)
-
(559)
(773)
Foreign exchange
-
(22)
(27)
(49)
At 31 December 2015
(1,544)
(1,320)
(12,929)
(15,793)
Net book value
At 31 December 2015
2,094
1,063
10,370
13,527
At 30 April 2015
1,861
1,074
12,243
15,178
At 1 May 2014
1,093
674
12,659
14,426
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.
Purchased intangible assets consist principally of customer relationships with a typical useful life of 10 years.
The capitalised development costs impairment charge of 214,000 and the purchased intangible assets impairment charge of 559,000 (30 April 2015: nil), which relates to the full impairment of the purchased intangibles, is in relation to the Reputation CGU which is included in the Market Intelligence segment. This business, formerly Echo Research Group, was acquired in 2011. Over the last four years we have integrated the business fully into our Market Intelligence Practice; the technologies and methodologies which were represented by the purchased intangibles and related capitalised development costs have been replaced, integrated or superseded and the client relationships have in many cases evolved into more integrated contracts. We are no longer able to support the original carrying value and believe that full impairment reflects the evolution of this part of our business in line with our longer-term corporate strategy.
Under IFRS, an impairment charge is required for indefinite-lived assets when the carrying amount exceeds the recoverable amount, defined as the higher of fair value less costs to sell and value in use.
8. Financial liabilities
31 December 2015
30 April 2015
'000
'000
Current
Bank overdraft
2,391
1,411
Bank borrowings
2,410
2,411
Finance lease liabilities
4
4
Contingent deferred consideration
3,422
4,935
8,227
8,761
Non-current
Bank borrowings
32,615
31,880
Finance lease liabilities
9
13
Contingent deferred consideration
1,431
4,064
34,055
35,957
Total financial liabilities
42,282
44,718
Bank overdrafts
'000
Bank borrowings
'000
Finance lease liabilities
'000
Interest rate swaps
'000
Contingent deferred consideration
'000
Total
'000
At 1 May 2014
-
29,178
214
52
8,663
38,107
Recognised on acquisition
-
-
-
-
4,773
4,773
Additions
1,411
(360)
-
-
-
1,051
Utilised
-
-
(197)
-
(5,156)
(5,353)
Charged to the Income Statement
-
219
-
-
279
498
Charged to reserves
-
-
-
(52)
-
(52)
Borrowings
-
36,703
-
-
-
36,703
Repayments
-
(31,107)
-
-
-
(31,107)
Foreign exchange released to the Income Statement
-
(342)
-
-
269
(73)
Foreign exchange released to reserves
-
-
-
-
171
171
At 30 April 2015
1,411
34,291
17
-
8,999
44,718
Additions
980
-
-
-
-
980
Utilised
-
-
(4)
-
(4,063)
(4,067)
Charged to the Income Statement
-
60
-
-
(82)
(22)
Discounting charged to the Income Statement
-
-
-
-
(148)
(148)
Discounting charged to the Statement of Financial Position
-
-
-
-
(49)
(49)
Borrowings
-
2,578
-
-
-
2,578
Repayments
-
(1,982)
-
-
-
(1,982)
Foreign exchange released to the Income Statement
-
78
-
-
198
276
Foreign exchange released to reserves
-
-
-
-
(2)
(2)
At 31 December 2015
2,391
35,025
13
-
4,853
42,282
A currency analysis for the bank borrowings is shown below:
31 December 2015
'000
30 April 2015
'000
Pounds Sterling
32,096
31,440
Euros
2,929
2,851
Total bank borrowings
35,025
34,291
All bank borrowings are held jointly with Barclays and Royal Bank of Scotland ('RBS'). The committed facility, totalling 40,000,000, comprises a term loan of 10,000,000 (of which 6,250,000 remains outstanding at 31 December 2015 (April 2015: 8,125,000)), and a revolving credit facility ("RCF") of 30,000,000, (of which 29,000,000 was drawn down at 31 December 2015 (April 2015: 26,451,000). Both the term loan and the RCF have a maturity date of 2 July 2018. The 10,000,000 term loan is being repaid on a quarterly basis to maturity, and the drawn RCF and any further drawings under the RCF are repayable on maturity of the facility. The facility may be used for deferred consideration payments on past acquisitions, to fund future potential acquisitions, and for general working capital requirements.
Loan arrangement fees of 225,000 (April 2015: 285,000) are offset against the term loan, and are being amortised over the period of the loan.
The facility bears variable interest of LIBOR plus a margin of 2.50%. 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 5 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, USA and Germany.
Contingent deferred consideration represents additional amounts that are expected to be payable for acquisitions made by the Group and is held at fair value at the Statement of Financial Position date. All amounts are expected to be fully paid by August 2017.
All finance lease liabilities fall due within five years. The minimum lease payments and present value of the finance leases are as follows:
Minimum lease payments
31 December 2015
30 April
2015
'000
'000
Amounts due:
Within one year
6
6
Between one and five years
12
18
18
24
Less: finance charges allocated to future periods
(5)
(7)
Present value of lease obligations
13
17
The minimum lease payments approximate the present value of minimum lease payments.
9. Dividends
A dividend of 291,000 (0.4p per share) was paid during the current financial period (30 April 2015: nil). A dividend of 0.4p per share in respect of the period ended 31 December 2015 is intended to be paid following completion of a share capital reduction. These financial statements do not reflect this intended dividend payable.
Dividends were paid to Non-Controlling Interests as shown in the Consolidated Statement of Changes in Equity.
10. Cash generated from operations
8 month
period ended
Year
ended
31 December 2015
30 April 2015
'000
'000
(Loss)/profit before taxation
(7,446)
4,657
Adjustments for:
Depreciation
770
1,249
Amortisation (note 7)
1,711
2,515
Impairment of goodwill
3,129
-
Impairment of intangible assets
773
-
Finance costs - loan fees written off
-
131
Interest rate swap closure
-
29
Loss/(profit) on disposal
18
(1)
Unrealised foreign exchange loss
(95)
208
Share option charges (note 3)
228
1,215
Finance income
(13)
(8)
Finance expenses
813
1,179
Share of profit of associates
(13)
(12)
Contingent deferred consideration revaluations
(32)
548
(157)
11,710
Decrease/(increase) in trade and other receivables
5,549
(2,270)
Decrease in trade and other payables
(333)
(1,040)
Movement in provisions
(31)
(473)
Cash generated from operations
5,028
7,927
11. Acquisitions
TRANSACTIONS WITH NON CONTROLLING INTERESTS
On 15 December 2015, the Group acquired the remaining 35% in its subsidiary undertaking, Fairbrother Iberica and Partners SL, from the minority shareholder for cash consideration of 60,000 (43,000). Subsequently Fairbrother Iberica and Partners SL was liquidated and its business and assets were transferred to Media Value SL.
12. Events after the reporting period
On 11 March 2016 the Group acquired the outstanding 50% interest in its Irish media audit associate, Fairbrother Marsh Company Limited (FMC). The 50% interest in FMC was acquired for an initial cash consideration of 150,000. The maximum total consideration is up to 2m, payable in cash, depending on the performance of the FMC business during the period ending 31 December 2020.
Subsequent to the period end, the Group agreed to increase the total cap on consideration payable on the Stratigent LLC ('Stratigent') acquisition. The Group acquired Stratigent on 19 August 2013. Stratigent's management held a 7% economic interest in Stratigent which was acquired by the Group for a total consideration to be determined by the financial performance of Stratigent over the three financial years ending 30 April 2016 and capped at $1.5m. Stratigent's financial performance over the first two financial years resulted in consideration of $1.1m being paid to Stratigent's management. In order to ensure that management remains incentivised to continue to drive and generate the financial performance achieved over the first two financial years, the Group agreed to increase the total cap on consideration payable to management. Accordingly, in March 2016, the cap on consideration was increased by an amount of $1.5m, with any excess over and above the existing cap on consideration payable 25% in cash and 75% in new ordinary shares in Ebiquity plc (capped at 600,000 new shares). This has been treated as a non-adjusting event since no constructive obligation existed at the period end.
13. 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 2015, on which an unqualified report has been made by the Company's auditors, PricewaterhouseCoopers LLP.
Financial statements for the period ended 31 December 2015 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. The 31 December 2015 statutory accounts are expected to be published on 15 April 2016.
This information is provided by RNSThe company news service from the London Stock ExchangeENDFR FKLLLQXFLBBQ
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