REG - Ebiquity PLC - Final Results
07/05/2024 07:15
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RNS Number : 3487N Ebiquity PLC 07 May 2024
7 May 2024
Ebiquity plc
Final Results for the year ended 31 December 2023
Positive 2023 performance despite challenging conditions
Focus on continuing transformation in 2024
Ebiquity plc ("Ebiquity", the "Company" or the "Group"), a world leader in
media investment analysis, operating in the US$900 billion global advertising
market (source: eMarketer May 2023), announces its results for the year ended
31 December 2023.
Financial Highlights(2)
Year ended 31 December 2023 2022 Change
£m £m £m %
Revenue 80.2 75.1 5.1 6.8%
Adjusted Operating Profit(1) 12.0 9.2 2.8 31.1%
Adjusted Operating Profit Margin % 15.0% 12.2% - 2.8 pp
Adjusted Profit before Tax(1) 9.7 7.9 1.8 23.4%
Adjusted Diluted Earnings per Share(1) 5.3p 4.4p 0.9p 21.1%
Statutory Operating Loss (0.3) (6.0) 5.7 95.7%
Statutory Loss before Tax (2.6) (7.3) 4.7 64.7%
1. Adjusted numbers exclude highlighted items and are alternative
performance measures ('APMs') adopted by the Group. These non-GAAP measures
are considered useful in helping to explain the performance of the Group and
are consistent with how business performance is measured internally by the
Group. Further details of the APMs, including their reconciliation to
statutory numbers, are given below.
2 The prior year results have been re-presented to eliminate the
results of Digital Balance Australia Pty Limited which was sold in April 2023
and its results are accordingly presented within discontinued operations in
both 2023 and 2022.
Current year results include twelve months' contribution from MMi and
MediaPath which were acquired in April 2022.
· Revenue increased by £5.2 million to £80.2 million (+6.8%)
· Adjusted Operating Profit increased by £2.8 million to £12.0
million (+31.1%)
· Adjusted Operating Profit margin increased by 2.8 percentage points
to 15.0% (2022: 12.2%)
· Statutory Operating Loss reduced by £5.7m to £0.3m
· Net bank debt of £11.9 million with cash balances of £10.0 million
and undrawn bank facilities of £7.1 million
· Adjusted cash flow conversion of £14.7 million, being 122% of
adjusted operating profit (2022: £5.8 million, 65%)
Strong operational performance
· Continued revenue growth in North America following successful
acquisition in 2022
· Continued traction on efficiency driving GMP365 ("GMP")
transformation
· Continued expansion in relationships with clients despite challenging
market conditions
· Higher margin Digital Media Solutions revenue increased by 22% to
£7.8 million
Nick Waters, Chief Executive Officer, said:
"We delivered a solid performance in 2023, expanding relationships with
clients, progressing our business transformation programme
and continuing to build scale in the US, the world's largest advertising
market.
Despite the more challenging market conditions the business has shown great
resilience, increasing revenue and delivering a strong operating margin
performance at 15.0%, an improvement of 2.8 percentage points from 12.2% in
2022. This reflects the operating efficiencies we have achieved so far as part
of our transformation programme and cost management, as well as continuing
growth in our higher margin Digital Media Solutions business.
Our successful integration of MediaPath, based in Europe and MMi in the US,
both acquired in 2022, have helped to increase our global scale and client
offering. Our US business was the outstanding performer during the year,
increasing the scope of work from major clients including GM, Amgen and
J&J, as well as adding Pepsico, Intuit and JP Morgan Chase as new clients.
We are now twelve months into a business transformation programme. Our
priority has been to transition work onto the GMP platform, enabling us over
time to fundamentally change the processes through which our service is
delivered. Although the first year has proved both complex and challenging, we
are making progress with the platform now handling US$15 billion of media
transaction data. In addition, we are carrying out extensive work calibrating
a new benchmarking product through testing with several clients in multiple
markets and plan a measured rollout through 2024.
The outlook for the advertising industry appears slightly more positive for
2024 with our own survey of WFA members, as well as other independent studies,
indicating some confidence starting to return. We have started 2024 very
much as expected although we have seen some volatility in certain areas
underlining the continuing fragility in some markets. 2024 will be an
important year for our transformation, as we continue to enhance our use of
technology, change our operating model and improve our ways of working. This
will help further improve our client service, ensure greater efficiency and
increase our medium and long term profitability.
We look forward to making further profitable progress in 2024."
Details of presentations
The Executive Directors will host a webcast presentation for analysts at 09:30
BST today. If you would like to register to attend, please contact
phoebe.a.pugh@camarco.co.uk
They will also give a presentation via the Investor Meet Company platform on
Wednesday 8 May at 10:30 BST. The presentation is open to all existing and
potential shareholders. Questions can be submitted in advance via the Investor
Meet Company dashboard up until 09:00 BST on the day before the meeting or at
any time during the live presentation. Investors can sign up to Investor
Meet Company for free and add to meet Ebiquity plc via:
https://www.investormeetcompany.com/ebiquity-plc/register-investor
(https://www.investormeetcompany.com/ebiquity-plc/register-investor)
Investors who already follow Ebiquity plc on the Investor Meet Company
platform will automatically be invited.
Market abuse regulation
This announcement contains inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 as it forms part of UK domestic law by virtue of
the European Union (Withdrawal) Act 2018 ("UK MAR"). Upon the publication of
this announcement via a Regulatory Information Service this inside information
is now considered to be in the public domain.
The person responsible for arranging release of this announcement on behalf of
the Company is Julia Hubbard, Chief Financial Officer of the Company.
Enquiries:
Ebiquity plc Via Camarco
Nick Waters, CEO
Julia Hubbard, CFO
Camarco
Ben Woodford 07990 653 341
Geoffrey Pelham-Lane 07733 124 226
Panmure Gordon (Financial Adviser, NOMAD and Broker) 020 7886 2500
Dominic Morley / Dougie McLeod (Corporate Advisory)
Mark Murphy/ Sam Elder (Corporate Broking)
About Ebiquity plc
Ebiquity plc (LSE AIM: EBQ) is a world leader in media investment analysis.
It harnesses the power of data to provide independent, fact-based advice,
enabling brand owners to perfect media investment decisions and improve
business outcomes. Ebiquity is able to provide independent, unbiased advice
and solutions to brands because we have no commercial interest in any part of
the media supply chain.
We are a data-driven solutions company helping brand owners drive efficiency
and effectiveness from their media spend, eliminating wastage and creating
value. We provide analysis and solutions through four Service Lines: Media
management, Media performance, Marketing effectiveness and Contract
Compliance.
Ebiquity's clients are served by more than 600 media specialists, covering 80%
of the global advertising market.
The Company has the most comprehensive, independent view of today's global
media market, analysing over US$100bn of media spend and contract value from
over 122 countries annually, including trillions of digital media impressions.
As a result, over 70 of the world's top 100 advertisers today choose Ebiquity
as their trusted independent media advisor.
For further information, please visit: www.ebiquity.com
(https://nam02.safelinks.protection.outlook.com/?url=http%3A%2F%2Fwww.ebiquity.com%2F&data=05%7C02%7CAlex.Campbell%40camarco.co.uk%7C0e15c0fde76e40dc373508dc65c161ea%7C77a5f6209d7747dba0cd64c70948d532%7C1%7C0%7C638497128496797804%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C0%7C%7C%7C&sdata=7lki0WKQ7ZK7Rzq1xzLkwofijMob2oQpKtz9mcTh0lY%3D&reserved=0)
Chair's Statement
During 2023, we continued to show progress against the challenging political
and economic environment affecting our global clients. Our main focus has been
on implementing a programme to transform the business, which is already
delivering some initial operational efficiencies. As a result, the Group is
reporting a good performance with revenue growing by 7% to £80.2 million.
Despite the statutory loss, we delivered adjusted operating profit of £12.0
million and, importantly, a big improvement in adjusted Operating Profit
margin to 15.0%.
Our strategy is to refocus the business to a more globally distributed model
which can best meet the needs of our clients who increasingly require a
seamless service across multiple geographies. At the heart of the
transformation programme is our ability to transition clients onto the GMP
platform, fundamentally changing the processes by which work is delivered.
Although both a challenging and complex undertaking, we are making progress
with 49 Agency Selection Processes from 35 different client companies now
using the platform. In addition, clients are increasingly using it to buy
ValueTrack, a Media Performance service, which tracks progression of
advertisers' media pricing over time. We expect further benefits and
efficiencies as we continue to implement the programme over the next two
years.
I am also pleased to report that the acquisitions made over the last three
years are making a significant contribution to our results. During the year we
made a final payment of deferred consideration for Digital Decisions (which we
acquired in 2020) which totalled £16.1 million. It has been an outstanding
success, not only in terms of revenue and profit growth but also in driving
our Digital Media Solutions business which continues to perform well. Our
successful integration of MediaPath, based in Europe and MMi in the US, both
acquired in 2022, have also helped to increase our global scale and client
offering, with our US business the outstanding performer during the year. In
addition, we disposed of Digital Balance - a small, non-core asset in
Australia while the divestment of our Russian business remains subject to
Russian government approval.
As a leading global provider of media investment analysis, we maintain our
position through the quality and scale of our market intelligence and our
ability to innovate products that widen our appeal to clients. Expanding the
scope of work we do for clients remains a key area of focus for the management
team, helping to drive growth by identifying new media channels as they
emerge. For instance, we developed a programme in the US to address the
growing Advanced Television Market and also established a "CO2PM" metric to
give clients visibility on the worst polluting elements of their activity and
the opportunity to minimise these. Such innovations offer a real value
proposition for our clients, helping to differentiate Ebiquity in the market
and maintain our leadership position.
During the year we welcomed Julia Hubbard as Chief Financial Officer,
following the retirement of Alan Newman as Chief Financial Officer and Chief
Operating Officer. Alan had been with the Group since the beginning of 2019
and had acted as interim Chief Executive Officer from the end of 2019 to July
2020. We have recently announced another board change as Julie Baddeley,
who joined the board in 2014, stood down on 4 April as a non-executive
director and remuneration committee chair. On the same day, we welcomed Sue
Farr as a non-executive director. Sue has also taken on the role of
remuneration committee chair. On behalf of the Group, I should like to thank
Alan for his significant contribution during his tenure and wish him well for
his retirement and Julie for her valuable contribution during her time on the
board.
We continue to consider board composition and succession. Richard Nichols
has served on the board for many years and remained with us last year as we
transitioned to a new audit firm and welcomed a new CFO. We expect that
Richard will stand down from the board by the end of 2024, once we have found
a suitable individual to join the board as an independent non-executive
director and chair of the audit & risk committee.
We have made significant progress in our sustainability journey. During the
year we have worked with McGrady Clarke, a sustainability consultant, to
assess our climate related risks. The key ones have now been identified and
work will continue during 2024 to integrate these risks into our overall risk
management framework, along with impact assessments and mitigating actions.
We have also conducted more sophisticated measurement of our carbon footprint
and continue with our planned initiatives to reduce this. More details will
be found in our annual report.
On behalf of the Board, I would like to thank all of our employees for their
hard work and commitment, especially during a period of change and
transformation, which they continue to meet with resilience and creativity.
While the economic and political environment remains challenging there are
signs that the advertising market is improving. The market opportunity for
Ebiquity is huge and the management team is focused on delivering a more
globally distributed model that will help our clients continue to meet the
increasingly complex challenges they face in making advertising investment
decisions. 2024 has started very much as expected although we have seen some
volatility in certain areas underlining the continuing fragility in some
markets. Our focus on our transformation programme will also continue this
year with the objective of delivering better process efficiency, cutting edge
platform technology and wider product offerings to our clients, underpinning
the ability to grow the business and further improve margins.
The Board and I remain confident that Ebiquity is well placed to continue to
deliver growth and value for our shareholders.
Rob Woodward
Chair
Chief Executive Officer's Review
Unique market position
Ebiquity's purpose is simple. We exist to help brand owners increase returns
from their media investments and so improve business performance. We do this
by analysing billions of dollars of advertising spend globally, as well as
trillions of advertising impressions. Using this intelligence, we provide
independent, fact-based advice which enables brands to drive efficiency and
increase effectiveness. Our work helps to eliminate wasteful advertising spend
and to create value.
As a world leader in media investment analysis, we count over 70 of the
world's top 100 advertisers as our clients. We are entirely independent of
the media supply chain, which enables us to provide clients with objective,
unbiased advice. We do this through our global network of over 600 media
specialists based in 18 countries, which covers some 80% of the world's
advertising spend. We operate in a very large global advertising market, which
is forecast to be worth US$1 trillion in 2024 (Source: eMarketer). We analyse
c.US$100 billion of global media investment and contract value annually and
now have over 3 trillion digital media impressions in our Media Data Vault.
Profitable growth in a challenging advertising market
I am pleased with our performance and progress during the year where we have
expanded relationships with clients, progressed our business transformation
programme and continued to build scale in the US, the world's largest
advertising market.
Market conditions in 2023, though, were much more challenging and it has been
a difficult period for the advertising industry with many global brand owners
planning for the short term rather than the long term and, in some cases,
cutting budgets or deferring work as a result of prevailing market conditions
and trends.
Despite this backdrop our business showed great resilience with revenue
growing by 7% to £80.2 million with adjusted operating profit of £12.0
million. In addition, we delivered a strong adjusted operating margin
performance at 15.0%, an improvement of 2.8 percentage points from 12.2% in
2022, reflecting the operating efficiencies we have delivered as part of our
transformation programme and cost management, as well as a continuing growth
in our higher margin Digital Media Solutions business.
Operational metrics
Underpinning this year's performance are the major strides we have made
against the target operational metrics as shown in the table below:
Key Performance Indicator Baseline 2020 2021 actual 2022 2023
actual actual
No. of clients buying one or more products from the new digital portfolio 10 28 55 84
Volume of digital advertising monitored (trillions of impressions) 0.1 0.6 1.4 2.7
Value of digital advertising monitored (billions of spend US$) 0.5 3.0 6.6 14.1
No. of clients buying two or more Services Lines 58 76 97 101
% of revenue from digital services 25% 29% 32% 36%
Delivering a more efficient business
A key area of focus has been creating a more efficient business. We are now
twelve months into a business transformation programme with a considerable
focus on increasing the use of automation to create a more efficient service
and experience for our clients. Following the 2022 acquisition of MediaPath,
we have a high quality data management platform which is providing us with a
base from which to drive greater efficiency in the delivery of our Media
Management and Media Performance services.
Our priority has been to transition client work onto the GMP
platform, enabling us over time to fundamentally change the processes by
which work is delivered. This is a major, time intensive undertaking for the
business involving training staff, changing working practices, recalibrating
some of our products and processes, and engaging with our clients and the
agencies we work with on the benefits of the new approach.
The first twelve months has been a demanding and challenging period of the
project and although it is at a slower rate than anticipated we are making
progress. There is now US$15 billion worth of media transaction data on the
platform. In 2023 we managed 49 Agency Selection Processes from 35 different
client companies on GMP, and 59 clients now use it to buy ValueTrack, a Media
Performance service which tracks progression of advertisers' media pricing
over time. In addition, we are carrying out extensive work calibrating a new
benchmarking product through testing with several clients in multiple markets
and plan a measured rollout process through 2024.
Building client momentum
One of the key drivers of our growth is our ability to cross sell and up sell
more solutions to more clients in more geographies. Our universe of clients
buying two or more Service Lines continues to grow and pleasingly we have seen
the scope of work expanding from major clients including GM,
Amgen and J&J in the US; Danone and Ferrero with global projects; and
Disney, Beiersdorf, Perfetti and Jaguar Land Rover in Europe. We also saw a
number of encouraging wins in North America where we added Pepsico, Intuit and
JP Morgan Chase. In addition, we have significantly strengthened our business
in Asia adding Kung Shi Fu and Nestlé to our roster in China and expanding
the relationship with L'Oreal in Southeast Asia.
Developing a global presence
The successful integration of MMi in the US has accelerated growth in North
America with revenue up 33%, representing our strongest regional performance.
As a result of this acquisition in 2022, we now have a single management
structure in place, a unified team and a co-ordinated product portfolio
offering throughout the region. This has produced greater cross selling
opportunities and a more comprehensive product range which is proving
successful in attracting new clients.
The UK & Ireland showed a resilient performance in the domestic market and
gained momentum from the recovery, compared to the prior year, of business
from international clients managed from our global hub. In the rest of
Europe several larger clients reduced scope and fees in Q4 as their own
businesses came under pressure. Despite this, France and Spain delivered
good performances.
Our Asia Pacific business suffered from weakness in the Contract Compliance
division, and a quiet year in the Agency Selection market.
We continue to review strategic acquisition opportunities and during 2023
progressed with one opportunity which ultimately we did not pursue. Incurred
costs relating to this project are reflected in Highlighted items.
Product Innovation driving growth
Our ability to successfully integrate businesses into Ebiquity is reflected in
the deferred consideration we paid in May 2023, following the conclusion of
the earnout period for Digital Decisions, which was twice the sum expected at
the time of acquisition, following its strong performance and growth.
The business became our Digital Innovation Centre, making a significant
contribution to Group revenue and profit growth since it was acquired in
2020. Some of its resources are now being distributed in other areas of the
business as part of the transformation programme to spread digital knowledge
and skills more widely.
In addition, we have made strong progress selling Digital Media Solutions,
increasing the number of clients buying our products from 10 in 2021 to 84 in
2023. At the end of the year we had US$14.1 billion of Digital Media
Transaction data from 2.7 trillion digital impressions in our Media Data Vault
giving us unrivalled independent intelligence for our clients on the digital
media market.
Complementary to our market intelligence is our ability to innovate and
develop new product offerings. For instance, there are several major growth
areas that we have identified in media markets which currently have limited
governance. To address this gap we have developed an initial "pioneers
programme" in the US to address the booming Advanced Television market. We
see large sums of money flowing into this market with little governance. Our
new solution has identified clear value opportunities for advertisers. In
addition, we are also looking to develop a new product for Retail Media aiding
governance around media buying which is now in pilot phase. Such developments
underpin the growth potential of the Group and offer a real value proposition
for our clients.
Outlook
The outlook for the advertising industry appears slightly more positive for
2024 with our own survey of WFA members, as well as other independent studies,
indicating some confidence starting to return. We have started 2024 very much
as expected although we have seen some volatility in certain areas underlining
the continuing fragility in some markets. 2024 will be an important year for
our transformation, as we continue to enhance the use of technology, change
our operating model and improve our ways of working. This will help further
improve our client service, ensure greater efficiency and increase our medium
and long-term profitability.
Nick Waters
Chief Executive Officer
Chief Financial Officer Review
Summary Income Statement
2023 2022 Change
£m £m £m %
Revenue 80.2 75.1 5.1 6.8%
Project Related Costs (7.4) (7.2) (0.2) (1.9)%
Staff Costs (1) (48.5) (47.4) (1.1) (2.3)%
Other operating expenses (1) (12.3) (11.2) (1.1) (9.5)%
Adjusted Operating Profit (1) 12.0 9.2 2.8 31.1%
Net Finance Expense (2.3) (1.3) (1.0) 77.9%
Taxation (2.6) (2.0) (0.6) 27.3%
Adjusted Profit - Continuing Operations (1) 7.1 5.8 1.3 22.1%
Highlighted items (11.4) (13.3) 1.9 (14.6)%
Statutory Loss - Continuing Operations (1) (4.3) (7.5) 3.2 (43.2)%
1. Excluding Highlighted items. The commentary in this review focusses
largely on alternative performance measures ("APMs") adopted by the Group.
These non-GAAP measures are considered useful in helping to explain the
performance of the Group and are consistent with how business performance is
measured internally by the Group. Further details of the APMs, including
their reconciliation to statutory numbers, are given below.
Current year results include twelve months' contribution from the MMi and
MediaPath acquisitions which were completed in April 2022. These businesses
were fully integrated into Ebiquity by December 2022.
In April 2023, the Group disposed of Digital Balance Australia Pty Limited, a
very small, non-core Australian consultancy business. The results of this
business have been disclosed as Discontinued Operations and the 2022 results
have been re-presented accordingly.
Group revenues for the year ended 31 December 2023 increased by £5.1 million
(6.8%) to £80.2 million, from £75.1 million in 2022 with growth across all
Service Lines and driven, in particular, from the US and UK & Ireland
segments.
This revenue growth was partially offset by an increase of £2.4 million in
costs, resulting in an increase in Adjusted Operating Profit in 2023 of £2.8
million (31%) to £12.0 million (2022: £9.2 million). There was a
corresponding improvement in adjusted operating profit margin of 2.8
percentage points to 15.0% (2022: 12.2%). Of these costs:
- Project Related Costs (which comprise external partner and
production costs) and Staff Costs both increased by 2% Year on Year and,
together totalled an increase of £1.3 million
- Adjusted Other Operating expenses increased by £1.1 million to
£12.3 million (2022: £11.2 million) largely due to a £1.4 million swing in
Foreign Exchange during 2023. The Foreign Exchange charge was £0.5 million
in 2023 and a benefit of £0.8 million in 2022
Transformation status
Following the acquisition of MediaPath and MMi during April 2022, the Company
committed to identifying and implementing cost savings totalling £5 million
on an annualised basis by the end of 2025.
Three products have been transitioned to GMP to date - being Agency Selection,
ValueTrack and, towards the end of 2023, Benchmarking. These products amount
to around 60% of the Group's revenue. The key success metric of the
transformation is the proportion of transitioned products to the GMP
platform. In 2023, 20% of the total available product revenue (ie Agency
Selection, ValueTrack and Benchmarking) was delivered on the GMP platform.
Although this was twice as much as the prior year, it is still slower than we
had originally anticipated. Savings are dependent on the migration to the
more efficient technology platform GMP reaching a critical mass. As a
result, delivery efficiency savings are slower than originally planned due to
the 'dual running' of delivery teams for both legacy and GMP based products.
Cost savings are expected through firstly the reduction of Production costs,
in particular data and related expenses and secondly, headcount efficiency.
By the end of 2023, savings of around £1.0 million had been secured largely
through savings in data and related expenses within production costs.
Due largely to the slower GMP migration in 2023 however, staff efficiency
savings (after the impact of incremental GMP licence fees) are minimal. The
'dual running' of new and legacy product will reduce towards the end of 2024
and further beyond that period which will then enable the realisation of Staff
Cost Transformation savings.
Revenue by service line
Service Line 2023 2022 Variance
£m £m £m . %
Media Performance 53.6 50.3 3.3 7%
Media Management 9.9 8.9 1.0 11%
Marketing Effectiveness 9.0 8.3 0.7 8%
Contract Compliance 7.7 7.6 0.1 1%
Total revenue from continuing operations 80.2 75.1 5.1 7%
Media Performance, our largest service line, comprises Benchmarking and Circle
Audit services, our Digital Media Services offering and ValueTrack, all of
which provide greater transparency, governance, efficiency and accountability
of media investments.
Revenue from Media Performance services increased by £3.3 million or 7% to
£53.6 million (2022: £50.3 million), largely derived from technology enabled
products such as the portfolio of Digital Media Solutions and ValueTrack
services delivered utilising the more efficient Media Performance GMP platform
available following the acquisition of MediaPath. Our focus will be on
increasing the take up rates of such products as well as introducing new
services to further drive growth and profitability.
Media Management services enable advertisers to select the right media models,
partners, operations, processes and technology and largely comprise Agency
Selection services. Revenue grew by £1.0 million or 10% in 2023 to £9.9
million (2022: £8.9 million) largely due to an additional sizeable global
agency selection process. Whilst the growth in Media Management in 2023 has
been driven by Global Agency Selection, although less impactful, as noted
during the interim results, local agency selection work was impacted by a
temporary market slowdown following a covid led rebound in 2021 and 2022.
Increasingly, Agency Selection projects have been delivered using the GMP
platform, with around 45% delivered in that manner in 2023 (2022: 16%).
Marketing Effectiveness services provide detailed analysis to enable
advertisers to forecast and optimise investments to increase return on
advertising investment. Revenue from this service grew by £0.9 million and
benefited from two large three year contracts which were secured in the second
quarter of 2022.
Revenue by Geographical Segment
Revenue Change
2023 Re-presented 2022
£m £m £m %
UK & Ireland 31.2 26.3 4.9 19%
Continental Europe 23.6 26.4 (2.9) -11%
North America 16.8 12.7 4.1 33%
APAC 8.7 9.7 (1.0) -10%
Revenue from Continuing Operations 80.2 75.1 5.1 6.8%
Note that Geographical Segmental Revenue in 2022 was presented in that year's
published accounts showing externally billed revenue only. This has now been
re-presented to reflect the total revenue for those regions including
intercompany revenue adjustments.
Adjusted Operating Profit by Geographical Segment
Adjusted Operating Profit Adjusted Operating profit margin
2023 2022 2023 2022
£m £m % %
UK & Ireland 7.7 6.6 24.6% 25.3%
Continental Europe 7.5 6.3 32.0% 23.9%
North America 2.3 0.9 13.6% 7.2%
APAC 1.6 1.8 18.5% 18.9%
Operating profit from Regional Segments 19.1 15.7 23.8% 21.0%
Unallocated Costs (7.1) (6.6) NA NA
Adjusted Profit - Continuing Operations 12.0 9.2 15.0% 12.2%
North America delivered the highest regional revenue growth, increasing
revenue by £4.1 million or 33% to £16.8 million (2022: £12.7 million).
Whilst some of this growth resulted from the full year effect of the MMi
acquisition, completed in April 2022, the remaining growth was largely driven
by the Media Performance service line which incorporates the ValueTrack
product and higher margin Digital Media Services revenue. The scaling
benefits of a larger business together with increasing volumes of higher
margin Digital Media Services revenue delivered a 6.4 percentage point
increase in the 2023 adjusted operating margin to 13.6% (2022: 7.2%).
UK & Ireland revenue increased by 19% from the prior year to £31.2
million (2022: £26.3 million) while margin remained consistent at 25%.
Revenue growth in that region was driven from large global clients with
multiple service lines including Digital Media Services, together with a large
three year Marketing Effectiveness contract which was secured in the second
quarter of 2022 and delivered from the existing resource base.
Continental Europe revenue declined to £23.6 million (2022: £26.4 million).
Although recent market pressures experienced by some clients in the Italian
and German markets have resulted in budget cuts and a consequent decline in
revenue, Continental Europe's faster adoption of sales via the GMP platform
helped to improve margin by 8 percentage points to 32% (2022: 24%).
Asia Pacific is currently the Group's smallest market. Revenue in 2023 was
10% or £1 million lower than 2022 while operating margin reduced by 0.4
percentage points to 18.5% (2022: 18.9%). The revenue reduction is largely
explained by the market for local Agency Selection being lower during 2023
together with the impact of China RMB foreign exchange depreciation.
Unallocated costs, which comprise corporate and support costs, increased by
£0.5 million largely due to the impact of unallocated foreign exchange
movements realised on debtor and creditor balances which moved to a loss of
£0.2 million in 2023 compared to a gain of £0.5 million in 2022.
Highlighted items
Highlighted items comprise charges and credits which are highlighted in the
income statement because separate disclosure is considered relevant in
understanding the underlying performance of the business. These are used for
the calculation of certain Alternative Performance Measures. Highlighted items
after tax in the year totalled a charge of £11.2 million (2022: £13.4
million) and include the following:
2023 2022
£m £m
Amortisation and Impairment 6.3 3.0
Post-acquisition accruals and charges 2.1 7.9
Professional charges relating to acquisitions and aborted acquisitions 1.8 1.9
Reorganisation 1.3 1.9
Share option (credit)/charge 0.6 0.5
Subtotal before tax 12.1 15.2
Tax (credit)/charge on highlighted items (0.9) (1.8)
Total 11.2 13.4
Amortisation and Impairment:
· Amortisation of purchased intangibles increased to £3.4 million due
to full year impact of the prior year acquisitions whose intangible assets
have been included at fair value. The charge in the year relating to
MediaPath and MMi was £3.0 million.
· The impairment charge of £2.9 million relates to the write down of
goodwill held in the China, Italy and Russia CGUs to £nil. The impairment
was calculated with reference to the value in use compared to the net book
value.
Post-acquisition accruals and charges:
· Revaluation of earn out accruals of £1.8m relates to the
reassessment of the earn out of the deferred consideration payable relating to
the MMi acquisition in 2022.
· £0.3 million charge for post date remuneration settled in May 2023
relates to the acquisition of Digital Decisions BV, acquired in January 2020
(2022: £7.9 million)
Professional charges including acquisitions and aborted acquisitions:
· The acquisition related costs of £1.8 million relate to professional
fees and incurred project costs and largely related to an aborted
acquisition. £1.0 million of these fees were settled after the Balance
sheet date
Reorganisation:
· Costs of £1.3 million were incurred as a part of the ongoing process
to transform and integrate the product portfolio, optimise the use of newly
acquired technologies, move from a regional to a global delivery model
together with transforming the finance operations.
· As part of this transformation an additional cost of £0.6 million
was incurred in relation to severance
· The Group has reviewed its property lease portfolio and has
identified surplus offices which have been vacated. The New York office was
vacated in 2022 and its lease liabilities treated as an onerous lease in that
year. Following the sublease of this office in July 2023, a credit of (£0.4
million) was released to the onerous lease provision, reflecting the benefit
of this income stream
· In April 2023 the Group disposed of Digital Balance Australia Pty
Limited. A credit, net of tax of (£0.2 million) was incurred in relation to
this disposal
Finance costs
Net finance costs increased to £2.3 million in 2023 from £1.3 million in
2022 driven largely by the higher interest rates in 2023 and increased bank
borrowings from May 2023 following the settlement of the £6.5 million cash
element of the Digital Decisions post date remuneration.
Taxation
The adjusted effective tax rate of 26.6% is 0.8 percentage points higher than
the prior year (2022: 25.8%) largely due to the impact of UK corporation tax
rates which increased to 25% from 19%. There was a corresponding increase of
£0.6 million in the adjusted tax charge to £2.6 million (2022: £2.0
million).
Profit/Loss for the Year from continuing operations
The adjusted profit for the year increased by £1.3 million or 22.0% to £7.1
million (2022: £5.8 million). This increase in adjusted profit, together
with a reduction in Highlighted items of £2.0 million (2023: £11.3 million;
2022: £13.3 million) resulted in a reduction in statutory loss of £3.2
million to £4.3 million (2022: £7.5 million).
Earnings per share
Adjusted profit after taxation increased by 22% to £7.1 million (2022: £5.8
million), resulting in an increase in adjusted diluted earnings per share to
5.33p at 31 December 2023, from 4.41p in the prior period. The statutory basic
loss per share improved from 6.92p in the prior period to 3.36p at 31 December
2023.
Dividend
No dividend has been declared or recommended for either of the twelve months
ended 31 December 2023 or 2022.
Statement of financial position and net assets
A non-statutory summary of the Group's balance sheet as at 31 December 2023
and 31 December 2022 is set out below:
31 December 31 December
2023 2022
£'000 £'000
Goodwill and intangible assets 49,215 55,868
Right of use asset 2,756 3,308
Other non-current assets 2,455 3,488
Net working capital(1) 8,414 9,350
Lease liability (4,360) (5,983)
Other non-current liabilities (838) (2,659)
Digital Decisions post date remuneration - (15,787)
Deferred consideration (MMi) (3,996) (2,183)
Net bank debt (11,984) (9,140)
Net assets 41,662 36,262
(1)Net working capital comprises trade and other receivables, lease
receivables, trade and other payables, accruals, provisions and contract
liabilities (less the Digital Decisions post date remuneration) and current
tax assets and liabilities.
Net assets
Net assets at 31 December 2023 were £41.7 million, an increase of £5.4
million from 31 December 2022. This is largely driven by the non-cash element
of the Digital Decisions post date remuneration settlement which totalled
£9.7 million and partially offset by the £2.9 million goodwill impairment to
the China, Italy and Russian subsidiaries together with the reassessment of
the deferred consideration for MMi of £1.8 million.
Working capital
Working capital decreased to £8.4 million, down from £9.4 million at 31
December 2022. Debtor days increased slightly from 67 to 69. Debtor days can
fluctuate year-on-year depending on the billing profile of customers, with
some European customers having extended credit terms.
Adjusted Cash conversion
Year ended Year ended
31 December 31 December
2023 2022
£m £m
Statutory cash from operations 11.5 3.8
Add back:
Settlement of Digital Decisions post date remuneration 6.4 -
Cash outflow from Discontinued Activities 0.6 0.1
Highlighted items: cash items 2.5 2.0
Adjusted cash from operations 14.7 5.9
Adjusted operating profit/(loss) 12.0 9.2
Cash Flow Conversion Ratio (as % of Adj OP) 122% 65%
Adjusted cash from operations represents the cash flows from operations
excluding the impact of Highlighted items. The adjusted net cash inflow from
operations during 2023 was £14.7 million (2022: £5.9 million) which
represents a cash conversion ratio of 122% of adjusted operating profit.
Equity
During the year, the issued share capital increased by 17% to 140,411,766
shares (2022: 120,241,181 shares) due to the issue of 19,929,502 shares in
settlement of the post date remuneration for the Digital Decisions BV
acquisition and 241,083 shares issued following the exercise of share options.
Net debt and banking facilities
31 December 31 December
2023 2022
£'000 £'000
Net cash(1) 10,016 12,360
Bank debt (22,000) (21,500)
Net Bank Debt (11,984) (9,140)
1 Includes restricted cash of £0.9 million held in Ebiquity Russia (2022:
£1.0 million)
Bank borrowings are held jointly with Barclays and NatWest. The revolving
credit facility ('RCF') as at 31 December 2023 ran for a period of three years
to March 2025. On 25 April 2024, the facility was extended for a further
three year period to 24 April 2027 on more favourable terms. The amended
facility is for £30.0 million with no amortisation of the facility during the
three year period.
Quarterly covenants will be applied from June 2024 onwards, being interest
cover >3.0x; adjusted leverage <2.5x; and adjusted deferred
consideration leverage <3.5x.
The facility will bear variable interest Barclays Bank SONIA rate plus a
margin ranging from 2.25% to 2.75%, depending on the Group's net debt to
EBITDA ratio.
Julia Hubbard
Chief Financial Officer
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2023
31 December 2023 31 December 2022
Re-presented (1)
Adjusted results Highlighted items Statutory results Adjusted results Highlighted items Statutory results
£'000 (note 3) £'000 £'000 (note 3) £'000
£'000 £'000
Note
Revenue 2 80,196 80,196 75,055 75,055
Project-related costs (7,355) - (7,355) (7,219) - (7,219)
Net revenue 72,841 - 72,841 67,836 - 67,836
Staff costs(1) (48,526) (1,800) (50,326) (47,439) (584) (48,023)
Other operating expenses(1) (12,300) (10,472) (22,772) (11,235) (14,542) (25,777)
Operating profit/(loss) 12,015 (12,272) (257) 9,162 (15,126) (5,964)
Finance income 85 - 85 80 - 80
Finance expenses (2,230) - (2,230) (1,427) - (1,427)
Foreign exchange (164) - (164) 50 - 50
Net finance costs (2,309) - (2,309) (1,297) - (1,297)
Profit/(loss) before taxation 9,706 (12,272) (2,566) 7,865 (15,126) (7,261)
Taxation (charge)/credit 4 (2,582) 884 (1,698) (2,028) 1,788 (240)
Profit/(loss) for the period - continuing operations
7,124 (11,388) (4,264) 5,837 (13,338) (7,501)
Net (loss)/profit from discontinued operations
(28) 189 161 70 (31) 39
Profit/(loss) for the period 7,096 (11,199) (4,103) 5,907 (13,369) (7,462)
Attributable to:
Equity holders of the parent 7,045 (11,199) (4,154) 5,874 (13,369) (7,495)
Non-controlling interests 51 - 51 33 - 33
7,096 (11,199) (4,103) 5,907 (13,369) (7,462)
Earnings/(loss) per share - continuing operations
Basic 6 5.50p (3.36)p 5.33p (6.92)p
Diluted 6 5.34p (3.36)p 4.41p (6.92)p
(Loss)/earnings per share - discontinued operations
Basic 6 (0.02)p 0.13p 0.06p 0.04p
Diluted 6 (0.02)p 0.13p 0.05p 0.04p
(1) The prior year results have been re-presented to eliminate the results of
Digital Balance Australia Pty Limited. Its results have instead been
presented within discontinued operations in both 2023 and 2022, as it was sold
in April 2023.
The notes below are an integral part of these financial statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2023
Year ended Year ended
31 December 31 December
2023 2022
£'000 £'000
Loss for the year (4,103) (7,462)
Other comprehensive (expense)/income:
Items that will not be reclassified subsequently to profit or loss
Exchange differences on translation of overseas subsidiaries (750) 252
Total other comprehensive (expense)/income for the year (750) 252
Total comprehensive expense for the year (4,853) (7,210)
Attributable to:
Equity holders of the parent (4,904) (7,243)
Non‑controlling interests 51 33
(4,853) (7,210)
The notes are an integral part of these financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December 2023
Note 31 December 31 December
2023 2022
£'000 £'000
Non‑current assets
Goodwill 7 39,688 43,091
Other intangible assets 8 9,527 12,776
Property, plant and equipment 911 1,289
Right-of-use assets 9 2,756 3,308
Lease receivables 9 269 -
Deferred tax assets 1,274 2,199
Total non-current assets 54,425 62,663
Current assets
Trade and other receivables 10 29,761 33,163
Lease receivables 9 205 141
Corporation tax asset 4 723 845
Cash and cash equivalents 10,016 12,360
Total current assets 40,705 46,509
Total assets 95,130 109,172
Current liabilities
Trade and other payables 11 (9,247) (10,049)
Accruals and contract liabilities 12 (10,804) (29,399)
Financial liabilities 13 - (61)
Current tax liabilities 4 (1,774) (1,121)
Provisions (450) (17)
Lease liabilities 9 (1,682) (1,328)
Total current liabilities (23,957) (41,975)
Non-current liabilities
Financial liabilities 13 (25,871) (23,357)
Provisions (80) (446)
Lease liabilities 9 (2,678) (4,654)
Deferred tax liability (882) (2,478)
Total non-current liabilities (29,511) (30,935)
Total liabilities (53,468) (72,910)
Total net assets 41,662 36,262
Equity
Ordinary shares 35,103 30,060
Share premium 15,552 10,863
Other reserves 4,074 4,824
Accumulated losses (13,420) (9,787)
Equity attributable to the owners of the parent 41,309 35,960
Non-controlling interests 353 302
Total equity 41,662 36,262
The notes are an integral part of these financial statements. The financial
statements were approved and authorised for issue by the Board of Directors on
6 May 2024 and were signed on its behalf by:
Julia Hubbard
Chief Financial Officer
Ebiquity plc. Registered No. 03967525
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2023
1.
( ) Equity attributable to owners of the parent £'000
Ordinary Share Other Retained Non‑controlling interests
shares premium reserves(1) earnings £'000 Total equity
Note £'000 £'000 £'000 £'000 £'000
31 December 2021 20,682 255 4,572 (2,774) 22,735 269 23,004
(Loss)/profit for the year 2022 - - - (7,495) (7,495) 33 (7,462)
Other comprehensive income - - 252 - 252 - 252
Total comprehensive income/(expense) for the year - - 252 (7,495) (7,243) 33 (7,210)
Shares issued for cash 9,240 10,608 - (39) 19,809 - 19,809
Share options charge 3 138 - - 521 659 - 659
Acquisitions - - - - - - -
Dividends paid to non-controlling interests - - - - - - -
31 December 2022 30,060 10,863 4,824 (9,787) 35,960 302 36,262
(Loss)/profit for the year 2023 - - - (4,154) (4,154) 51 (4,103)
Other comprehensive expense
- - (750) - (750) - (750)
Total comprehensive (expense)/income for the year - -
(750) (4,154) (4,904) 51 (4,853)
Shares issued for cash 4,983 4,689 - (47) 9,625 - 9,625
Share options charge 3 60 - - 568 628 - 628
Dividends paid to non-controlling interests - - - - - - -
31 December 2023 35,103 15,552 4,074 (13,420) 41,309 353 41,662
1. Includes a credit of £3,667,000 (31 December 2022: £3,667,000) in the
merger reserve, a gain of £1,830,000 (31 December 2022: £2,635,000)
recognised in the translation reserve, partially offset by a debit balance of
£1,478,000 (31 December 2022: £1,478,000) in the ESOP reserve.
The notes are an integral part of these financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2023
31 December 2023 31 December 2022
Note £'000 £'000
Cash flows from operating activities
Cash generated from operations 15 11,525 3,812
Post date remuneration paid (6,448) -
Finance expenses paid (1,765) (830)
Finance income received 61 62
Income taxes paid (1,621) (1,871)
Net cash generated by operating activities 1,752 1,173
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired 21 (17,020)
Disposal of subsidiaries 16 353 -
Purchase of property, plant and equipment (355) (274)
Purchase of intangible assets 8 (1,591) (175)
Net cash used in investing activities (1,572) (17,469)
Cash flows from financing activities
Proceeds from issue of share capital
(net of issue costs) 13 14,374
Proceeds from bank borrowings 13 5,000 4,500
Repayment of bank borrowings 13 (4,500) (1,000)
Bank loan fees paid 13 - (300)
Repayment of lease liabilities 9 (2,529) (2,616)
Dividends paid to non‑controlling interests - -
Net cash flow (used in)/generated by financing activities (2,016) 14,958
Net decrease in cash, cash equivalents and bank overdrafts (1,836) (1,338)
Cash, cash equivalents and bank
overdraft at beginning of year 12,360 13,134
Effects of exchange rate changes
on cash and cash equivalents (508) 564
Group cash and cash equivalents at the end of the year 10,016 12,360
The notes are an integral part of these financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2023
1. Accounting policies
General information
Ebiquity plc (the 'Company') and its subsidiaries (together, the 'Group')
exists to help brands optimise return on investment from their marketing
spend, working with many of the world's leading advertisers to improve
marketing outcomes and enhance business performance. The Group has 22 offices
located in 18 countries across Europe, Asia and North America.
The Company is a public limited company, which is listed on the London Stock
Exchange's AIM and is limited by shares. The Company is incorporated and
domiciled in the UK. The address of its registered office is Chapter House, 16
Brunswick Place, London N1 6DZ.
Basis of preparation
The consolidated financial statements have been prepared in accordance with
UK-adopted international accounting standards ('IFRS') in conformity with the
requirements of the Companies Act 2006 and the applicable legal requirements
of the Companies Act 2006.
Alternative Performance Measures ('APMs')
In the reporting of financial information, the Directors have adopted various
alternative performance measures ('APMs'). The Group includes these non-GAAP
measures as they consider them to be useful to the readers of the financial
statements to help understand the performance of the Group. The Group's
measures may not be calculated in the same way as similarly titled measures
reported by other companies and therefore should be considered in addition to
IFRS measures. The APMs are consistent with how business performance is
measured internally by the Group. Details of the APMs and their calculation
are set out below.
Highlighted items
Highlighted items comprise charges and credits which are highlighted in the
consolidated income statement as separate disclosure is considered by the
Directors to be relevant in understanding the adjusted performance of the
business. These may be income or cost items. Further details are included in
note 3.
Non‑cash highlighted items, which do not represent cash transactions in the
year, include share option charges, amortisation of purchased intangibles,
movements in tax and onerous lease provisions. Other items include the costs
associated with potential acquisitions (where formal discussion is
undertaken), completed acquisitions and disposals and their subsequent
integration into the Group, adjustments to the estimates of contingent
consideration on acquired entities, asset impairment charges and restructuring
costs. Transformation costs have also been incurred as part of a planned
transformation and integration programme.
Going concern
The financial statements have been prepared on a going concern basis. The
Group meets its day to day working capital requirements through its cash
reserves and borrowings, described in note 13 to the financial statements. As
at 31 December 2023, the Group had cash balances of 10,016,000 (including
restricted cash of £861,000) and undrawn bank facilities available of
£7,063,000 and was cash generative and within its banking covenants.
Since the year end, this facility has been extended under an agreement dated
25 April 2024. The facility will provide a total available of £30 million
for a period of three years to 24 April 2027. The quarterly covenants to be
applied from March 2024 onwards will be: interest cover >3.0x (reduced from
the current level of interest cover <4.0x, contingent upon the Group
delivering a revised financial model within 30 days of the effective date of
the amendment and restatement, in form and substance satisfactory to the
Agent); adjusted leverage <2.5x and adjusted deferred consideration
leverage <3.5x. Details of the facility terms and covenants applying are
set out in note 13 below.
In assessing the going concern status of the Group and Company, the Directors
have considered the Group's forecasts and projections, taking account of
reasonably possible changes in trading performance and the Group's cash flows,
liquidity and bank facilities. The Directors have prepared a model to
forecast covenant compliance and liquidity for the next 12 months that
includes a base case and scenarios to form a severe but plausible downside
case. For the purposes of this model, the terms of the new facility, including
its covenant tests, have been applied with effect from the quarter ending 31
March 2024.
The base case assumes growth in revenue and EBITDA based on the Group's budget
for the year ended 31 December 2024 and management projections for the year
ended 31 December 2025. The severe but plausible case assumes a downside
adjustment to revenue of 10% throughout the period with only a 3% reduction in
operating costs. Under this, management is satisfied of covenant compliance
through the going concern period.
The Directors consider that the Group and Company will have sufficient
liquidity within existing bank facilities, totalling £30 million, to meet
their obligations during the next 12 months and hence consider it appropriate
to prepare the financial statements on a going concern basis.
Russian operation
Following the Russian invasion of Ukraine, the Group has been reviewing the
future of its subsidiary in Russia (Ebiquity Russia OOO) and has been in
negotiations with a view to divesting its 75.01% shareholding in it. Although
this subsidiary remains part of the Group for these financial statements,
given the uncertainty regarding this operation, an impairment provision of
£495,000 has been made against the value of its assets in the Group balance
sheet. Its cash balances are also deemed to be restricted cash. Details are
provided in note 3.
The financial statements have been prepared under the historical cost
convention, as modified by the revaluation of financial assets and financial
liabilities at fair value through profit or loss.
The consolidated financial statements are presented in pounds sterling and
rounded to the nearest thousand.
The principal accounting policies adopted in these consolidated financial
statements are set out below. These policies have been consistently applied to
all periods presented, unless otherwise stated.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries). Control
is achieved where the Company has the power to govern the financial and
operating policies of an investee entity so as to obtain benefits from its
activities. The results of each subsidiary are included from the date that
control is transferred to the Group until the date that control ceases.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used in line with those used by
the Group. All intra‑group transactions, balances, income and expenses are
eliminated on consolidation.
Non‑controlling interests represent the portion of the results and net
assets in subsidiaries that is not held by the Group.
Business combinations and goodwill
The Group applies the acquisition method to account for business combinations.
The cost of the acquisition is measured as 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 are
recognised initially at their fair value at the acquisition date. Goodwill is
initially measured at cost, being the excess of the aggregate of the
consideration transferred over the fair value of net identifiable assets
acquired and liabilities assumed. The determination of the fair values of
acquired assets and liabilities is based on judgement, and the Directors have
12 months from the date of the business combination to finalise the allocation
of the purchase price.
Goodwill is allocated to each of the Group's cash‑generating units expected
to benefit from the synergies of the combination. Following initial
recognition, goodwill is measured at cost less any accumulated impairment
losses. Goodwill is reviewed for impairment at least annually or whenever
there is evidence that it may be required. Any impairment is recognised
immediately in the income statement and is not subsequently reversed.
Goodwill arising on the acquisition of the Group's interest in an associate,
being the excess of the cost of acquisition over the Group's share of the fair
values of the identifiable net assets of the associate, is included within the
carrying amount of the investment. The non‑controlling shareholders'
interest 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.
Where transactions with non‑controlling parties do not result in a change in
control, the difference between the fair value of the consideration paid or
received and the amount by which the non‑controlling interest is adjusted,
is recognised in equity.
Where the consideration for the acquisition includes a contingent
consideration arrangement, this is measured at fair value at the acquisition
date. Any subsequent changes to the fair value of the contingent 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 consideration after the measurement period are recognised in the
income statement within other operating expenses as a highlighted item. The
carrying value of contingent consideration at the statement of financial
position date represents management's best estimate of the future payment at
that date, based on historical results and future forecasts.
All costs directly attributable to the business combination are expensed as
incurred and recorded in the income statement within highlighted items.
Revenue recognition
Revenue is recognised in accordance with IFRS 15 'Revenue from Contracts with
Customers'. Net revenue is the revenue after deducting external production
costs as shown in the income statement.
Revenue from providing services is recognised in the accounting period in
which the services are rendered. The revenue and profits recognised in the
period are based on the delivery of performance obligations and an assessment
of when control is transferred to the customer. Revenue is recognised either
when the performance obligation in the contract has been performed (thus a
'point in time' recognition) or over the time period during which control of
the performance obligation is transferred to the customer.
For fixed-price contracts, which represent the majority of cases, revenue is
recognised based on the actual service provided during the reporting period,
calculated as an appropriate proportion of the total services to be provided
under the contract. This reflects the fact that the customer receives and uses
the benefits of the service simultaneously. The output method is used to
measure progress of performance obligations depending on the nature of the
specific contract and project arrangements. Where appropriate, revenue may be
recognised evenly in line with the value delivered to the client, based on
assignment of amounts to the project milestones set out in the contract.
Estimates of revenues, costs or extent of progress toward completion are
revised if circumstances change. Any resulting increases or decreases in
estimated revenues or costs are reflected in profit or loss in the period in
which the circumstances that give rise to the revision become known by
management.
In the case of fixed-price contracts, the customer is billed for the fixed
amounts based on a billing schedule agreed as part of the contract.
Deferred and accrued income
The Group's customer contracts include a diverse range of payment schedules
which are often agreed at the inception of the contracts under which it
receives payments throughout the term of the arrangement. Payments for goods
and services transferred at a point in time may be at the delivery date, in
arrears or part payment in advance.
Where payments made to date are greater than the revenue recognised up to the
reporting date, the Group recognises a deferred income 'contract liability'
for this difference. Where payments made are less than the revenue recognised
up to the reporting date, the Group recognises an accrued income 'contract
asset' for this difference.
Project-related costs
Project-related costs comprise fees payable to external sub-contractors
('partners') who may undertake services in markets where the Group does not
have its own operations; costs of third party data (eg audience measurement
data) used in projects; and, other out-of-pocket expenses (eg billable travel)
directly incurred in performance of services.
Staff costs
Staff costs comprise salaries payable to staff, employer social taxes,
healthcare, pension and other benefits, holiday pay, variable bonus expense
and freelancer costs.
Other operating expenses
Other operating expenses comprise all other costs incurred in operating the
business, including sales and marketing, property, IT, non-client travel,
audit, legal and professional, staff recruitment and training, depreciation
and amortisation.
Finance income and expenses
Finance income and expense represents interest receivable and payable. Finance
income and expense is recognised on an accruals basis, based on the interest
rate applicable to each bank or loan account.
Foreign currencies
For the purposes of the consolidated financial statements, the results and
financial position of each Group company are expressed in pounds sterling,
which is the functional currency of the Company, and the presentation currency
for the consolidated financial statements.
In preparing the financial statements of the individual companies,
transactions in currencies other than the entity's functional currency
(foreign currencies) are recorded at the rates of exchange prevailing on the
dates of transactions. At each year end date, monetary assets and liabilities
that are denominated in foreign currencies are retranslated at the rates
prevailing on the year end date.
For the purpose of presenting consolidated financial statements, the assets
and liabilities of the Group's foreign operations are translated at exchange
rates prevailing on the year end date. Income and expense items are translated
at the average exchange rate for the period, which approximates to the rate
applicable at the dates of the transactions.
The exchange differences arising from the retranslation of the year end
amounts of foreign subsidiaries and the difference on translation of the
results of those subsidiaries into the presentational currency of the Group
are recognised in the translation reserve. All other exchange differences are
dealt with through the consolidated income statement.
Taxation
The tax expense included in the consolidated income statement comprises
current and deferred tax. Current tax is the expected tax payable on the
taxable income for the year, using tax rates enacted or substantively enacted
by the year end date.
The Group is subject to corporate taxes in a number of different jurisdictions
and judgement is required in determining the appropriate provision for
transactions where the ultimate tax determination is uncertain. In such
circumstances, the Group recognises liabilities for anticipated taxes based on
the best information available and where the anticipated liability is both
probable and estimable. Where the final outcome of such matters differs from
the amount recorded, any differences may impact the income tax and deferred
tax provisions in the year in which the final determination is made.
Tax is recognised in the consolidated income statement except to the extent
that it relates to items recognised directly in equity or other comprehensive
income, in which case it is recognised in equity.
Using the liability method, deferred tax is provided on all temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and their tax bases, except for differences
arising on:
· the initial recognition of goodwill;
· the initial recognition of an asset or liability in a transaction
which is not a business combination and at the time of the transaction affects
neither accounting nor taxable profit; and
· investments in subsidiaries and jointly controlled entities where
the Group is able to control the timing of the reversal of the difference and
it is probable that the difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it
is probable that taxable profit will be available against which the difference
can be utilised. The recognition of deferred tax assets is reviewed at each
year end date.
The amount of the asset or liability is determined using tax rates that have
been enacted or substantively enacted by the year end date and are expected to
apply when the deferred tax liabilities/assets are settled/recovered.
Deferred tax assets and liabilities are offset when the Group has a legally
enforceable right to offset current tax assets and liabilities and the
deferred tax assets and liabilities relate to taxes levied by the same tax
authority on either:
· the same taxable Group company; or
· different Group entities which intend either to settle current tax
assets and liabilities on a net basis, or to realise the assets and settle the
liabilities simultaneously, in each future period in which significant amounts
of deferred tax assets or liabilities are expected to be settled or recovered.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation
and any recognised impairment loss.
Depreciation is charged so as to write off the cost of assets over their
estimated useful economic lives. The rates applied are as follows:
Motor vehicles Eight years straight line
Fixtures, fittings and equipment Three to nine years straight line
Computer equipment Two to four years straight line
Right-of-use assets - leasehold improvements Period of the lease
Other intangible assets
Internally generated intangible assets - capitalised development costs
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 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 two to five years. The amortisation
expense is included within other operating 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 three to 10 years. The amortisation expense is
included as a highlighted item in the income statement.
Intangible assets recognised on business combinations are recorded at fair
value at the acquisition date using appropriate valuation techniques where
they are separable from the acquired entity or give rise to other
contractual/legal rights. The significant intangibles recognised by the Group
include customer relationships, intellectual property, brand names and
software.
Computer software
Purchased computer software intangible assets are amortised on a straight line
basis over their useful lives, which vary from three to five years.
Impairment
Assets that have an indefinite useful life are not subject to amortisation and
are tested annually for impairment.
For the purpose of impairment testing, goodwill is grouped at the lowest
levels for which there are separately identifiable cash flows, known as
cash‑generating units. 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.
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 pre‑tax 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 no impairment loss had
been recognised.
Leases
The Group has various lease arrangements for buildings, cars and IT equipment.
Lease terms are negotiated on an individual basis locally. This results in a
wide range of different terms and conditions. At the inception of a lease
contract, the Group assesses whether the contract conveys the right to control
the use of an identified asset for a certain period in exchange for a
consideration, in which case it is identified as a lease. The Group then
recognises a right-of-use asset and a corresponding lease liability at the
lease commencement date. Lease related assets and liabilities are measured on
a present value basis. Lease related assets and liabilities are subjected to
remeasurement when either terms are modified or lease assumptions have
changed. Such an event results in the lease liability being remeasured to
reflect the measurement of the present value of the remaining lease payments,
discounted using the discount rate at the time of the change. The lease assets
are adjusted to reflect the change in the remeasured liabilities.
Right-of-use assets
Right-of-use assets include the net present value of the following components:
· the initial measurement of the lease liability;
· lease payments made before the commencement date of the lease;
· initial direct costs; and
· costs to restore.
The right-of-use assets are reduced for lease incentives relating to the
lease. The right‑of‑use assets are depreciated on a straight line basis
over the duration of the contract. In the event that the lease contract
becomes onerous, the right-of-use asset is impaired for the part which has
become onerous.
Lease liabilities
Lease liabilities include the net present value of the following components:
· fixed payments excluding lease incentive receivables;
· future contractually agreed fixed increases; and
· payments related to renewals or early termination, in case options
to renew or for early termination are reasonably certain to be exercised.
The lease payments are discounted using the interest rate implicit in the
lease. If such rate cannot be determined, the lessee's incremental borrowing
rate is used, being the rate that the lessee would have to pay to borrow the
funds necessary to obtain an asset of similar value, in a similar economic
environment, with similar terms and conditions. The discount rate that is used
to calculate the present value reflects the interest rate applicable to the
lease at inception of the contract. Lease contracts entered into in a currency
different to the local functional currency are subjected to periodic foreign
currency revaluations which are recognised in the income statement in net
finance costs.
The lease liabilities are subsequently increased by the interest costs on the
lease liabilities and decreased by lease payments made.
Where a lease is not captured by IFRS 16 'Leases', 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.
Subleases
The Group acts as a lessor where premises have been sublet to an external
third party. Accordingly, the right-of-use asset has been derecognised and
instead a lease receivable recognised determined with reference to the net
present value of the future lease payments receivable from the tenant. Finance
income is then recognised over the lease term.
Onerous leases
When an office space is considered surplus to requirements it is vacated and
marketed, an onerous lease provision is recognised to reflect the impairment
of the right-of-use asset for the remaining period of the lease. Charges or
credits relating to the provision are treated as highlighted items. Details
of onerous lease provisions established in the year are given in note 3.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and short term deposits. Cash
and cash equivalents and bank overdrafts are offset when there is a legally
enforceable right to offset. Restricted cash is included in cash and cash
equivalent but identified separately. Where cash balances are not available
for general use by the Group, for example due to legal restrictions, they are
identified and disclosed as restricted cash.
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.
For financial instruments measured using amortised cost measurement (that is,
financial instruments classified as amortised cost and debt financial assets
classified as FVOCI), changes to the basis for determining the contractual
cash flows required by interest rate benchmark reform are reflected by
adjusting their effective interest rate. No immediate gain or loss is
recognised. A similar practical expedient exists for lease liabilities.
The amendments have no material impact on the Group's financial instruments.
Comparative amounts have not been restated, and there was no impact on the
current period opening reserves amounts on adoption.
Financial assets
They arise principally through the provision of goods and services to
customers (trade receivables), but also incorporate other types of contractual
monetary assets. 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 other operating expenses. 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
Borrowings consisting of interest‑bearing secured and unsecured loans and
overdrafts are initially recognised at fair value net of directly attributable
transaction costs incurred and subsequently measured at amortised cost using
the effective interest method. The difference between the proceeds received
net of transaction costs and the redemption amount is amortised over the
period of the borrowings to which they relate. The revolving credit facility
is considered to be a long term loan.
Trade and other payables are initially recognised at their nominal value,
which is usually the original invoiced amount.
Share capital
Equity instruments issued by the Group are recorded at the amount of the
proceeds received, net of direct issuance costs.
Employee Benefit Trusts ('EBTs')
As the Company is deemed to have control of its EBTs, these are treated as
subsidiaries and consolidated for the purposes of the Group financial
statements. The EBTs' 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 EBTs' investment in the Company's shares
is deducted from shareholders' equity in the Group statement of financial
position as if they were treasury shares.
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 with a corresponding increase recognised in retained
earnings. Fair value is measured using an appropriate valuation model. 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. 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, 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.
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.
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.
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.
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 judgements and key sources of estimation uncertainty
In preparing the consolidated financial statements, the Directors have made
critical accounting judgements in applying the Group's accounting policies.
This year, the key judgement related to the identification of acquired
intangible assets.
The Directors have also made critical accounting estimates due to the need to
make assumptions about matters which are often uncertain. Actual results may
significantly differ from those estimates. These estimates include
determination of contingent consideration and the inputs used in impairment
assessments. They are arrived at with reference to historical experience,
supporting detailed analysis and, in the case of impairment assessments and
share option accounting, external economic factors.
Revenue recognition
Revenue from the provision of contracts is recognised as a performance
obligation satisfied over time. Revenue is recognised based on stage of
completion of the contract. Determination of the stage of completion
requires the use of estimates for the revenue recognised for every open
contract incurred up to the balance sheet date.
Deferred tax assets on losses
Determining certain income tax provisions involves judgement on the future
performance of the business. The management review the forecast future
performance and tax provisions are set up accordingly. Deferred tax assets
are recognised for tax losses not yet used. As those deferred tax assets can
only be recognised to the extent that it is probable that future taxable
profit will be available against which the unused tax credits can be utilised,
management's judgement is required to assess the probability of future taxable
profits. Projections have prepared for 2024-2026 based upon management's
plans and market expectations to support the deferred tax assets recognised.
Contingent consideration
The Group has recorded liabilities for contingent consideration on
acquisitions made in the current and prior periods. The calculation of the
contingent consideration liability requires estimates to be made regarding the
forecast future performance of these businesses for the earn out period. See
note 3 for details.
Any changes to the fair value of the contingent consideration after the
measurement period are recognised in the income statement as a highlighted
item.
Carrying value of goodwill and other intangible assets
Impairment testing requires management to estimate the value in use of the
cash generating units to which goodwill and other intangible assets have been
allocated. The value in use calculation requires estimation of future cash
flows expected to arise from the cash generating unit and the application of a
suitable discount rate in order to calculate present value. The sensitivity
around the selection of particular assumptions, including growth forecasts and
the pre‑tax discount rate used in management's cash flow projections, could
significantly affect the Group's impairment evaluation and therefore the
Group's reported assets and results.
Further details, including a sensitivity analysis, are included in note 7.
Adoption of new standards and interpretations
The Group has applied the following standards and amendments for the first
time for the annual reporting period commencing 1 January 2023:
· Amendments to IAS 12 relating to Deferred tax related to assets and
liabilities arising from a single transaction;
· Amendments to IAS 1 Presentation of Financial Instruments,
classification of liabilities as current or non-current; and
· Amendments to IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors: Definition of Accounting Estimates.
The amendments listed above did not have any impact on the amounts recognised
in prior periods and are not expected to significantly affect the current or
future periods.
The following new standards have been published that are mandatory to the
Group's future accounting periods, but have not been adopted early in these
financial statements:
· Non-current Liabilities with Covenants - Amendments to IAS 1 and
Classification of Liabilities as Current or Non-current - Amendments to IAS 1,
effective on or after 1 January 2024
· Lease Liability in a Sale and Leaseback - Amendments to IFRS 16,
effective on or after 1 January 2024
· Supplier Finance Arrangements - Amendments to IAS 7 and IFRS 7,
effective on or after 1 January 2024
· IFRS S1 General Requirements for Disclosure of
Sustainability-related Financial Information, and IFRS S2 Climate-related
disclosures, effective on or after 1 January 2024. The implementation of these
standards are subject to local regulation.
The adoption of the standards listed above is not expected to significantly
affect future periods.
2. Segmental reporting
In accordance with IFRS 8, the Executive Directors have identified the
operating segments based on the reports they review as the chief operating
decision maker ('CODM') to make strategic decisions, assess performance and
allocate resources. The definition of these segments is the regional
operations.
Certain operating segments have been aggregated to form four reportable
segments: UK & Ireland ('UK&I'), Continental Europe, North America
and Asia Pacific ('APAC').
The Group's chief operating decision makers assess the performance of the
operating segments based on revenue and adjusted operating profit. 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 recurring expenditure
recorded to highlighted items such as equity‑settled share‑based payments,
purchased intangible amortisation and transformation related costs. 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 years ended 31 December 2023 and 31 December 2022 are
as follows:
Note that the below table shows served revenue for both years. Served
revenue comprises external revenue of each segment plus intercompany revenue
less intercompany partner costs.
Served revenue Change
Year ended 31 December 2023 Re-presented Year ended 31 December 2022 (1)
£'000 £'000 £'000 %
UK & Ireland 31,179 26,262 4,917 19%
Continental Europe 23,551 26,461 (2,910) -11%
North America 16,793 12,662 4,131 33%
APAC 8,673 9,670 (998) -10%
Served revenue from continuing operations 80,196 75,055 5,141 7%
Served revenue from discontinued operations 111 918 (807) -88%
Served revenue - Total 80,307 75,973 4,334 6%
(1) The 2022 Segmental revenue has been re-presented to include the impact of
intercompany revenues and costs. This is to provide a clearer understanding of
the margin performance of each segment. 2022 has also been re-presented to
separate out Digital Decisions Australia Pty Limited, which was disposed of
during the year and which has therefore been reclassified as a discontinued
operation. See note 5 for further details.
The table below represents revenue by Service Line:
Re-presented
Year ended Year ended
31 December 31 December
2023 2022 (1)
£'000 £'000
Media Performance 53,635 50,281
Media Management 9,846 8,884
Marketing Effectiveness 9,047 8,265
Contract Compliance 7,668 7,625
Total revenue from continuing operations 80,196 75,055
Total revenue from discontinuing operations 111 918
Total revenue 80,307 75,973
(1) 2022 has been re-presented to separate out Digital Decisions Australia Pty
Limited, which was disposed of during the year and which has therefore been
reclassified as a discontinued operation. See below for further details.
Adjusted operating profit Adjusted operating profit margin
Year ended 31 December 2023 Re-presented Year ended 31 December 2022 (1) 2023 2022
£'000 £'000 % %
UK & Ireland 7,679 6,552 25% 25%
Continental Europe 7,527 6,449 32% 24%
North America 2,288 913 14% 7%
APAC 1,583 1,835 18% 19%
Unallocated (7,062) (6,587) NA NA
Adjusted profit - continuing operations 12,015 9,162 15% 12%
Adjusted profit - discontinued operations (24) 108 -22% 12%
Adjusted profit - Total 11,991 9,270 15% 12%
(1) 2022 has been re-presented to separate out Digital Decisions Australia Pty
Limited, which was disposed of during the year and which has therefore been
reclassified as a discontinued operation. See note 5 for further details.
Total assets Change
31 December 2023 Re-presented 31 December 2022 (1)
£'000 £'000 £'000 %
UK & Ireland 27,096 32,963 (5,293) -16%
Continental Europe 38,377 43,604 (4,723) -11%
North America 20,532 17,757 2,992 17%
APAC 7,890 11,218 (1,200) -11%
Unallocated 1,235 2,937 (1,703) -58%
Total assets from continuing operations 95,130 108,479 (9,927) -9%
Total assets from discontinued operations - 693 (693) -100%
Total assets 95,130 109,172 (10,620) -10%
(1) 2022 has been re-presented to separate out Digital Decisions Australia Pty
Limited, which was disposed of during the year and which has therefore been
reclassified as a discontinued operation. See note 5 for further details.
A reconciliation of segment adjusted operating profit to total profit before
tax is provided below:
Re-presented
Year ended Year ended
31 December 31 December
2023 2022 (2)
£'000 £'000
Reportable segment adjusted operating profit 19,076 15,749
Unallocated (costs)/income(1):
Staff costs (3) (3,742) (3,816)
Property costs (1,102) (949)
Exchange rate movements (233) 541
Other operating expenses (1,984) (2,363)
Adjusted Operating profit 12,015 9,162
Highlighted items (note 3) (12,272) (15,126)
Operating loss (257) (5,964)
Net finance costs (2,309) (1,297)
Loss before tax - continuing operations (2,566) (7,261)
Profit before tax - discontinued operations 230 61
Loss before tax - continuing operations (2,336) (7,200)
(1) Unallocated (costs)/income comprise central costs that are not considered
attributable to the segments.
(2) 2022 has been re-presented to separate out Digital Decisions Australia Pty
Limited, which was disposed of during the year and which has
therefore been reclassified as a discontinued operation. See note 5 for
further details.
(3) These are head office staff costs.
Unsatisfied long term contracts
The following table shows unsatisfied performance obligations results from
long term contracts:
31 December 31 December
2023 2022
£'000 £'000
Aggregate amount of the transaction price allocated to long term contracts
that are partially or fully unsatisfied as at 31 December 2023:
Within one year 19,222 21,573
Within more than one year 1,104 1,580
Significant changes in contract assets and liabilities
Contract assets have increased from £6,464,000 to £7,384,000 and contract
liabilities have reduced from £8,083,000 to £6,535,000 from 31 December 2022
to 31 December 2023. This movement reflects the timing of open projects at
the year end which vary year on year.
A reconciliation of segment total assets to total consolidated assets is
provided below:
Re-presented
31 December 31 December
2023 2022 (1)
£'000 £'000
Total assets for reportable segments 93,895 105,541
Unallocated amounts:
Property, plant and equipment (2) (3)
Other intangible assets 21 3
Other receivables 902 1,596
Cash and cash equivalents 314 543
Deferred tax asset - 799
Total assets from continuing operations 95,130 108,479
Total assets from discontinuing operations - 693
Total assets 95,130 109,172
(1) 2022 has been re-presented to separate out Digital Decisions Australia Pty
Limited, which was disposed of during the year and which has therefore been
reclassified as a discontinued operation. See note 5 for further details.
( )
The table below presents non‑current assets by geographical location:
Re-presented
31 December 31 December
2023 2022 (1)
Non-current Non-current
assets assets
£'000 £'000
UK & Ireland 15,526 16,511
Continental Europe 23,797 26,709
North America 11,039 11,538
Asia Pacific 2,799 5,295
53,151 60,053
Deferred tax assets 1,274 2,199
Total non-current assets from continuing operations 54,425 62,252
Total non-current assets from discontinued operations - 411
Total non-current assets 54,425 62,663
(1) 2022 has been re-presented to separate out Digital Decisions Australia Pty
Limited, which was disposed of during the year and which has therefore been
reclassified as a discontinued operation. See note 5 for further details.
( )
No single customer (or group of related customers) contributes 10% or more of
revenue.
3. Highlighted items
Highlighted items comprise charges and credits which are highlighted in the
income statement because separate disclosure is considered relevant in
understanding the underlying performance of the business. These are used for
the calculation of certain Alternative Performance Measures. For further
information and reconciliation please see below. Cash items are defined as
items for which a cash transaction has occurred in the year. All other items
are defined as non cash.
Re-presented
31 December 31 December
2023 2022 (1)
Total Total
£'000 £'000
Other operating expenses
Share option charge 579 553
Amortisation of purchased intangibles 3,394 2,697
Post date remuneration for Digital Decisions 333 7,866
Impairment of goodwill and current assets 2,863 262
Severance and reorganisation costs 599 584
Onerous lease provision movement (407) 1,272
Revaluation of earn out accruals 1,813 -
Acquisition related costs 1,754 1,892
Transformation costs 1,344 -
Total highlighted items before tax 12,272 15,126
Taxation (credit) (884) (1,788)
Total highlighted items - continuing operations 11,388 13,338
Highlighted items - discontinued operations (189) 31
Total highlighted items 11,199 13,369
(1) 2022 has been re-presented to separate out Digital Decisions Australia Pty
Limited, which was disposed of during the year and which has
therefore been reclassified as a discontinued operation. See note 5 for
further details.
The share option charge reflects the expense for the period arising from the
cost of share options granted at fair value, recognised over the vesting
period. For the period ended 31 December 2023, a charge of £579,000 (2022:
£553,000) was recorded.
The amortisation charge for purchased intangible assets increased in the year
to £3,394,000 (2022: £2,697,000) due to the full year impact of the prior
year addition of intangible assets through the acquisitions of MMi and
MediaPath. These assets include customer relationships of acquired entities,
owned software (MMi's Circle Audit system) and MediaPath's GMP licence asset.
A final accrual of £333,000 (2022: £7,866,000) was made for post date
remuneration which was settled in May 2023 relating to the acquisition of
Digital Decisions BV in 2020. The total amount paid was £16.1 million.
An impairment charge of £2,884,000 (2022: £78,000) has been made to write
down the goodwill balances in China, Italy and Russia to £nil. See note 7 for
further details. The remaining credit adjustment of £21,000 (2022: a
charge of £184,000) is an adjustment against the Group's share (75%) in
Ebiquity Russia OOO's total assets excluding cash due to the planned
divestment of the Group's majority stake for a nominal value.
Total severance and reorganisation costs of £599,000 (31 December 2022:
£584,000) were recognised during the year, relating to nine senior roles
across the Group which were eliminated during the year.
Onerous lease provision costs in the year totalled £(407,000) (2022:
£1,272,000). During 2023 the New York office was sublet with a brokers' fee
of £32,000 incurred. The agreement commenced in August 2023 and runs
through to April 2026. The lease receivable for the New York office,
representing the present value of the minimum lease payments calculated as
£(509,000), has also been recognised within highlighted items as a credit.
The Chicago office was vacated in 2019 and sublet until September 2023, when
the break clause on the head lease (which runs until 2026) can be exercised.
The break clause has now been exercised and the professional fees incurred on
doing so were £70,000.
Revaluation to earn out accruals of £1,813,000 represents the adjustment to
the calculated deferred consideration payable relating to the 2022 acquisition
of Media Management LLC. The earn out is due to be settled in 2025 and is
based upon the 2024 operating profit achieved of the combined North America
business.
Acquisition related costs of £1,754,000 (2022: £1,892,000) relate to the
legal and professional fees associated with acquisitions.
The remaining costs of £1,344,000 within the continuing business are
transformation costs. As previously communicated, the Group is in the process
of undertaking a transformation and integration programme to firstly,
rationalise its product portfolio and optimise the use of newly acquired
technologies and secondly, move from a regional to a global delivery model. In
addition, the integration, alignment and streamlining of delivery and planning
methodologies throughout the organisation are in progress. This follows the
acquisition of MMi and MediaPath in April 2022.
Significant workstreams are underway to support this transformation. Whilst
these workstreams involve a large number of the employees throughout the
organisation, there are a number of core individuals who are fundamental in
delivering specific workstreams. These individuals have largely been taken out
of their regional delivery and management roles to focus on the transformation
workstreams and will return to a newly created role within the new global
specialisms that they have been responsible for implementing. The costs
highlighted are therefore not "one-off" in nature, though the workstreams are.
We have determined to separate through highlighted items the proportionate
costs of individuals who are spending the majority of their time on these
transformation workstreams and in 2023, this was 10 employees with a total
cost of £1,008,000. We have also enlisted the help of contractors for the
transformation project, with their costs in 2023 amounting to £159,000. In
addition, training and events costs to brief and educate employees of their
new roles within the new global specialisms totalled £177,000. These
transformation costs, in total £1,344,000, have been classified as
highlighted items.
As previously communicated, this has been planned as a transformation
programme scheduled to run to the end of 2025, with the majority of costs
incurred in 2023 and 2024. Savings are expected to commence during the second
half of 2024 and operating efficiency savings totalling £5 million on an
annualised basis are expected to be delivered by the end of 2025.
The total tax credit of £884,000 (2022: credit of £1,788,000) comprises a
current tax credit of £307,000 (2022: a credit of £883,000) and a deferred
tax credit of £577,000 (2022: a credit of £905,000). Refer to note 4 for
more detail.
The costs within discontinued operations represents the highlighted items
after tax for the disposal of the Digital Balance Australia Pty Limited.
Included within this balance is the profit on disposal of £268,000,
amortisation of intangibles of £10,000 (2022: £42,000) and tax on the profit
on disposal of £69,000 (2022: credit of £11,000 on the movement in the
deferred tax on intangibles).
4. Taxation charge/(credit)
Year ended 31 December 2023 Re-presented Year ended 31 December 2022 (1)
Before Before highlighted items £'000
highlighted items Highlighted items £'000 Highlighted items £'000
£'000 Total £'000 Total £'000
UK tax
Current year 178 1,015 1,193 114 (101) 13
Adjustment in respect of prior years 386 - 386
(92) - (92)
86 1,015 1,101 500 (101) 399
Foreign tax
Current year 2,735 (1,322) 1,413 1,973 (295) 1,678
Adjustment in respect of prior years (33) (487) (520)
(17) - (17)
2,718 (1,322) 1,396 1,940 (782) 1,158
Total current tax 2,804 (307) 2,497 2,440 (883) 1,557
Deferred tax
Origination and reversal of temporary differences
(459) (77) (536) (380) (916) (1,296)
Adjustment in respect of prior years
237 (500) (263) - - -
Total tax charge/(credit) - continuing operations 2,582 (884) 1,698 2,028 (1,788) 240
Total tax charge - discontinued operations - 69 69 - - -
Total tax charge/(credit) 2,582 (815) 1,767 2,028 (1,788) 240
(1) 2022 has been re-presented to separate out Digital Decisions Australia Pty
Limited, which was disposed of during the year and which has therefore been
reclassified as a discontinued operation. See note 5 for further details.
The difference between tax as charged/(credited) in the financial statements
and tax at the nominal rate is explained below:
Year ended Year ended
31 December 31 December
2023 2022
£'000 £'000
Loss before tax (2,566) (7,201)
Corporation tax at 23.5% (31 December 2022: 19.0%) (603) (1,368)
Non deductible taxable expenses 2,968 1,570
Deferred tax not previously recognised (411) -
Overseas tax rate differential 73 549
Overseas losses not recognised 44 97
Losses utilised not previously recognised - (453)
Adjustment in respect of prior years (373) (134)
Total tax charge - continuing operations 1,698 261
Total tax charge - discontinued operations 69 -
Total tax charge 1,767 261
Following the Finance Act 2021 (enacted on 10 June 2021), the UK corporation
tax rate effective from 1 April 2023 increased to 25% from 19%.
The table below shows a reconciliation of the current tax liability for each
year end:
£'000
At 31 December 2021 374
Corporation tax payments (2,183)
Corporation tax refunds 314
Withholding tax (39)
Under‑provision in relation to prior years (134)
Provision for the year ended 31 December 2022 1,691
Foreign exchange and other 266
At 31 December 2022 290
Corporation tax payments (2,198)
Corporation tax refunds 577
Withholding tax -
Under‑provision in relation to prior years (110)
Provision for the year ended 31 December 2023 2,526
At 31 December 2023(1) 1,085
1. Tax liability excludes £35,000 recoverable withholding tax (2022:
£12,000).
5. Discontinued operations
During the period, the Group agreed to dispose of its marketing analytics
subsidiary Digital Decisions Australia Pty Limited to Spinach Advertising Pty
Limited for gross consideration of A$850,000 (£454,000). This disposal was
completed on 6 April 2023. A$750,000 (£401,000) of the consideration was
payable upfront with the residual A$100,000 (£53,000) payable in February
2024. A profit on disposal of £268,000 was recognised on disposal. The
results of this division have been presented within discontinued operations as
appropriate.
The table below summarises the income statement for the discontinued business
for both the current and the prior year:
Year ended Year ended
31 December 31 December
2023 2022
£'000 £'000
Revenue 111 918
Project-related costs - -
Net revenue 111 918
Staff costs (97) (526)
Other operating expenses (38) (284)
Operating (loss)/profit (24) 108
Finance income - 5
Finance expenses (4) (10)
Net finance costs (4) (5)
(Loss)/profit before highlighted items (28) 103
Highlighted items 258 (42)
Profit before tax 230 61
Tax (69) (22)
Net profit from discontinued operations 161 39
Below is a table summarising the cash flows from continuing and discontinued
operations:
Year ended Year ended
31 December 31 December
2023 2022
£'000 £'000
Cash generated from operations - continuing operations 2,390 1,334
Cash used in operations - discontinued operations (638) (161)
Total cash generated from operations 1,752 1,173
Cash used in investment activities - continuing operations (1,925) (17,469)
Cash generated by investment activities - discontinued operations 353 -
Total cash used in investment activities (1,572) (17,469)
Cash (used in)/generated by financing activities - continuing operations (2,016) 14,958
Cash generated by financing activities - discontinued operations - -
Total cash (used in)/generated by financing activities (2,016) 14,958
Net decrease in cash and cash equivalents - continuing operations (1,551) (1,177)
Net decrease in cash and cash equivalents - discontinued operations (285) (161)
Net decrease in cash and cash equivalents (1,836) (1,338)
Below is a table summarising the details of the sale of the discontinued
operation:
Year ended Year ended
31 December 31 December
2023 2022
£'000 £'000
Cash received or receivable:
Cash 454 -
Decrease of consideration - -
Total disposal consideration 454 -
Carrying amount of net assets sold (85) -
Costs to sell - current year (101) -
Total (186) -
Gain on sale before income tax 268 -
Income tax charge on gain (69) -
Gain on sale after income tax 199 -
6. Earnings per share
The calculation of the basic and diluted earnings per share is based on the
following data:
Re-presented
Year ended 31 December 2023 Year ended 31 December 2022 (2)
Continuing £'000 Discontinued £'000 Total Continuing £'000 Discontinued £'000 Total
£'000 £'000
Earnings for the purpose of basic earnings per share, being net (loss)/profit (4,315) 161 (4,154) (7,534) 39 (7,495)
attributable to equity holders of the parent
Adjustments:
Impact of highlighted items (net of tax)(1) 11,388 (189) (11,199) 13,338 31 13,369
Earnings for the purpose of underlying earnings per share 7,073 (28) 7,045 5,804 70 5,874
Number of shares:
Weighted average number of shares during the year
- basic 128,569,723 128,569,723 128,569,723 108,951,516 108,951,516 108,951,516
- dilutive effect of share options 4,182,333 4,182,333 4,182,333 22,771,365 22,771,365 22,771,365
- diluted 132,752,056 132,752,056 132,752,056 131,722,881 131,722,881 131,722,881
Basic (loss)/earnings per share (3.36) 0.13 (3.23) (6.92) 0.04 (6.88)
Diluted (loss)/ earnings per share (3.36) 0.13 (3.23) (6.92) 0.04 (6.88)
Underlying basic earnings per share 5.50 (0.02) 5.48 5.33 0.06 5.39
Underlying diluted earnings per share 5.34 (0.02) 5.32 4.41 0.05 4.46
(1) Highlighted items attributable to equity holders of the parent (see note
3), stated net of their total tax impact.
(2.) 2022 has been re-presented to separate out Digital Decisions Australia
Pty Limited, which was disposed of during the year and which has therefore
been reclassified as a discontinued operation. See note 5 for further details.
7. Goodwill
£'000
Cost
At 1 January 2022 37,304
Acquisitions 14,561
Foreign exchange differences 1,100
At 31 December 2022 52,965
Acquisitions (143)
Disposals (1,752)
Foreign exchange differences (873)
At 31 December 2023 50,197
Accumulated impairment
At 1 January 2022 (9,132)
Impairment (78)
Foreign exchange differences (664)
At 31 December 2022 (9,874)
Impairment (2,884)
Disposals 1,722
Foreign exchange differences 527
At 31 December 2023 (10,509)
Net book value
At 31 December 2023 39,688
At 31 December 2022 43,091
The Group tests goodwill annually for impairment, or more frequently if there
are indications that goodwill may be potentially impaired. Goodwill is
allocated to the Group's cash‑generating units ('CGUs') in order to carry
out impairment tests. The Group's remaining carrying value of goodwill by CGU
at 31 December was as follows:
Cash generating unit Reporting segment 31 December 31 December
2023 2022
£'000 £'000
Media UK and International UK and Ireland 12,120 9,257
Effectiveness UK and Ireland 1,678 1,678
Digital Decisions (1) Europe - 502
Germany Europe 5,030 4,325
Media Value Group (Iberia) Europe 3,552 3,157
France Europe 916 569
Italy Europe 417 397
Central and Eastern Europe Europe - 260
MediaPath Network Europe 1,216 7,608
North America (including MMi and Canada) North America 9,258 7,557
Australia APAC 2,516 2,413
China APAC - 2,358
Digital Balance APAC - 30
FirmDecisions Included in all segments 2,985 2,981
39,688 43,091
(1) The goodwill of Digital Decisions has been allocated out since its revenue
now sits in the local markets, and therefore, this entity now operates as a
cost centre. The goodwill was allocated in line with where the revenue is now
projected to be recognised.
The impairment test involves comparing the carrying value of the CGU to which
the goodwill has been allocated to the recoverable amount. The recoverable
amount of all CGUs has been determined based on value in use calculations.
Under IFRS, an impairment charge is required for goodwill when the carrying
amount exceeds the recoverable amount, defined as the higher of fair value
less costs to sell and value in use.
An impairment of £2,884,000 of goodwill was recognised in the year ended 31
December 2023 in relation to the China, Central and Eastern Europe and Italy
CGUs . Both China and Central and Eastern Europe were written down in full,
whilst the Italy CGU was partially impaired. This was determined on reviewing
the value in use for each of these CGUs in turn and comparing it to the
calculated carrying values. In each of these three cases the goodwill
carrying value was in excess of the calculated values in use.
Value in use calculations
The key assumptions used in management's value in use calculations are
budgeted operating profit, pre‑tax discount rate and the long term growth
rate.
Budgeted operating profit assumptions
To calculate future expected cash flows, management has taken the Board
approved budgeted earnings before interest, tax, depreciation and amortisation
('EBITDA') for each of the CGUs for the 2024 financial year. For the 2025 and
2026 financial years, the forecast EBITDA is based on management's plans and
market expectations. The forecast 2026 balances are taken to perpetuity in the
model. The forecasts for 2025 and 2026 use certain assumptions to forecast
revenue and operating costs within the Group's operating segments.
Discount rate assumptions
The Directors estimate discount rates using rates that reflect current market
assessments of the time value of money and risk specific to the CGUs. The
factors considered in calculating the discount rate include the risk-free rate
(based on government bond yields), the equity risk premium, the Group's Beta
and a smaller quoted company premium. The three year pre-tax cash flow
forecasts have been discounted at 15.0% for China, 13.9% for the US and at
13.7% for all other markets (31 December 2022: 13.0%).
Growth rate assumptions
For cash flows beyond the three year period, a growth rate of 2.0% (2022:
2.0%) has been assumed for all CGUs. This rate is based on factors such as
economists' estimates of long term economic growth in the markets in which the
Group operates.
The excess of the value in use to the goodwill carrying values for each CGU
gives the level of headroom in each CGU. The estimated recoverable amounts of
the Group's operations in all CGUs significantly exceed their carrying values,
except for the FirmDecisions CGU.
Sensitivity analysis
The Group's calculations of value in use for its respective CGUs are sensitive
to a number of key assumptions. Other than disclosed below, management does
not consider a reasonable possible change, in isolation, of any of the key
assumptions to cause the carrying value of any CGU to exceed its value in use.
The considerations underpinning why management believes no impairment is
required in respect of FirmDecisions are supported by the below, the table
below shows the % point change in each key assumption that would result in an
impairment demonstrating adequate headroom. The headroom for FirmDecisions is
£2.1 million.
FirmDecisions Italy
Current % % point change leading to impairment Current % % point change leading to impairment
2024/2025/2026 2024/2025/2026
Budgeted revenue growth 22% / 5% / 5% (3)% / (3)% / (4)% 1% / 5% / 5% (4%) / (2%) / (3%)
Budgeted cost growth 17% / 5% / 5% 4% / 4% / 4% (3%) / 5% / 5% 3% / 2% / 2%
Pre‑tax discount rate 13.7% 6% 13.7% 2%
8. Other intangible assets
Capitalised development costs Computer software Purchased intangible assets (1) Total intangible assets
£'000 £'000 £'000 £'000
Cost
At 1 January 2022 4,899 2,521 16,263 23,683
Additions 276 11 - 287
Acquisitions 4,260 - 10,689 14,949
Disposals - (30) - (30)
Foreign exchange differences 54 29 445 528
At 31 December 2022 9,489 2,531 27,397 39,417
Additions 1,685 45 - 1,730
Impairment - 3 - 3
Disposals - - (420) (420)
Foreign exchange differences (74) (16) (352) (442)
At 31 December 2023 11,100 2,563 26,625 40,288
Amortisation and impairment(2)
At 1 January 2022 (2,022) (2,325) (14,808) (19,155)
Charge for the year - continuing operations(3) (1,089) (195) (2,697) (3,981)
Charge for the year - discontinued operations (4) - - (42) (42)
Acquisitions (3,041) - - (3,041)
Impairment - 14 - 14
Disposals - 31 - 31
Foreign exchange differences (35) (27) (404) (466)
At 31 December 2022 (6,187) (2,502) (17,952) (26,641)
Charge for the year - continuing operations (3) (1,344) (25) (3,394) (4,763)
Charge for the year - discontinued operations (4) - - (10) (10)
Impairment - (1) - (1)
Disposals - - 248 248
Foreign exchange differences 60 15 331 406
At 31 December 2023 (7,471) (2,513) (20,777) (30,761)
Net book value
At 31 December 2023 3,629 50 5,848 9,527
At 31 December 2022 3,302 29 9,445 12,777
(1)Purchased intangible assets consist principally of customer relationships
with a typical useful life of three to ten years, acquired software and the
GMP licence asset.
(2) The impairment adjustment in the year relates to the revision to the
impairment of Ebiquity Russia OOO's assets.
(3)Amortisation is charged within other operating 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
expense.
(4)The charge for the year for Digital Balance Australia Pty Limited has been
split out from the charge for the year for the continuing operation.
9. Right-of-use assets and lease liabilities
Right-of-use assets
Buildings Equipment Vehicles Total
£'000 £'000 £'000 £'000
Cost
At 1 January 2022 9,886 196 166 10,248
Additions 2,358 - - 2,358
Impairment for the year (4,044) - - (4,044)
Foreign exchange 472 9 8 489
At 31 December 2022 8,672 205 174 9,051
Additions 921 58 96 1,075
Reallocation (11) 10 1 -
Disposals (1,352) (156) (62) (1,570)
Foreign exchange (157) (4) (3) (164)
At 31 December 2023 8,073 113 206 8,392
Accumulated depreciation
At 1 January 2022 (5,509) (117) (80) (5,706)
Charge for the year (1,998) (42) (39) (2,079)
Impairment for the year 2,303 - - 2,303
Foreign exchange (252) (5) (4) (261)
At 31 December 2022 (5,456) (164) (123) (5,743)
Charge for the year (1,438) (52) (54) (1,544)
Reallocation 10 (9) (1) -
Disposals 1,257 156 62 1,475
Impairment for the year 101 - - 101
Foreign exchange 71 2 2 80
At 31 December 2023 (5,455) (67) (114) (5,636)
Net book value
At 31 December 2023 2,618 46 92 2,756
At 31 December 2022 3,216 41 51 3,308
Lease liabilities
Buildings Equipment Vehicles Total
£'000 £'000 £'000 £'000
Cost
At 1 January 2022 6,211 87 93 6,391
Additions 1,842 - - 1,842
Cash payments in the year (2,717) (47) (40) (2,804)
Interest charge in the year 219 2 2 223
Foreign exchange 322 4 5 331
At 31 December 2022 5,877 46 60 5,983
Additions 921 58 96 1,075
Reallocations 6 - (6) -
Cash payments in the year (2,582) (60) (61) (2,703)
Interest charge in the year 173 3 5 181
Foreign exchange (171) (2) (3) (176)
At 31 December 2023 4,224 45 91 4,360
Current 1,630 17 35 1,682
Non-current 2,594 28 56 2,678
The future value of the minimum lease payments are as follows:
Minimum lease payments
31 December 31 December
2023 2022
£'000 £'000
Amounts due:
Within one year 1,688 2,580
Between one and two years 968 1,258
Between two and three years 635 774
Between three and four years 131 653
Between four and five years 137 -
Later than five years 802 -
4,361 5,265
Lease receivables
31 December 31 December
2023 2022
£'000 £'000
Lease receivables 474 141
Current 205 141
Non-current 269 -
In 2019 a sublease was entered into relating to the Chicago office, which had
been vacated. Accordingly, the right-of-use asset was derecognised and a lease
receivable was recognised, being the equivalent of the remaining lease
receivables over the lease term. The amount due within one year is presented
within current assets and the amount due after one year is presented within
non-current assets. The sublease expired in September 2023 at the same time as
the head lease to which it relates.
Following the pandemic, the New York office, situated at William Street, is no
longer being occupied and is being marketed. An onerous lease provision was
established in the prior year for the remaining period of the lease until June
2025. This resulted in a charge of £1,357,000 in the year for the impairment
of the right-of-use asset. During 2023 a sublease was entered into relating
to the New York office, accordingly a lease receivable was recognised, being
the equivalent of the lease receivables over the lease term which runs through
to April 2026. The amount due within one year is presented within current
assets and the amount due after one year is presented within non-current
assets.
The permitted short term exemption has been taken for certain leases in the
Group where the lease is for a period of less than one year.
10. Trade and other receivables
31 December 31 December
2023 2022
£'000 £'000
Trade and other receivables due within one year
Net trade receivables 19,815 23,332
Other receivables 1,238 2,177
Prepayments 1,324 1,190
Contract assets 7,384 6,464
29,761 33,163
Contract assets are assets from performance obligations that have been
satisfied but not yet billed.
Trade and other receivables represents management's best estimate of the
amount expected to be recovered by the Group through the completion accounts
and expected loss model. The provision for receivables impairment is
determined using an expected credit loss model by reference to historical bad
debt rates. No further disclosure is made due to the immaterial level of the
provision for impairment of receivables.
The Group considers there to be no material difference between the fair value
of trade and other receivables and their carrying amount in the balance sheet.
11. Trade and other payables
31 December 31 December
2023 2022
£'000 £'000
Trade payables 5,791 6,171
Other taxation and social security 2,266 2,949
Deferred tax - current 141 276
Other payables 1,049 653
9,247 10,049
The Directors consider that the carrying amounts of trade and other payables
are reasonable approximations of their fair value.
12. Accruals and contract liabilities
31 December
2023 31 December
£'000 2022
£'000
Accruals 4,319 5,526
Post date remuneration(1) - 15,790
Contract liabilities(2) 6,485 8,083
Total accruals and contract liabilities 10,804 29,399
(1)Post date remuneration relates to the acquisition of Digital Decisions BV
payable in May 2023. See note 3.
(2)Contract liabilities are amounts invoiced in advance from customers prior
to satisfaction of performance obligations.
13. Financial liabilities
31 December 31 December
2023 2022
£'000 £'000
Current
Deferred consideration(2) - 61
- 61
Non‑current
Bank borrowings 22,000 21,500
Loan fees(1) (125) (265)
Contingent consideration(2) 3,996 2,122
25,871 23,357
Total financial liabilities 25,871 23,418
(1) Loan fees were payable on amending the banking facility and are being
recognised in the income statement on a straight line basis until the
maturity date of the facility in September 2025. Non-current loan fees
includes current fees.
(2) Contingent consideration relates to the acquisition of MMi and is payable
in 2025. The increase in the year is due to the contingent
consideration being revised to now being based upon the 2024 Budgeted
operating profit of the North America business.
Bank Contingent consideration
borrowings £'000 Total
£'000 £'000
At 1 January 2022 17,901 - 17,901
Paid (1,300) - (1,300)
Recognised on acquisition - 2,183 2,183
Charged to the income statement 134 - 134
Borrowings 4,500 - 4,500
At 31 December 2022 21,235 2,183 23,418
Paid (4,500) (60) (4,560)
Charged to the income statement 140 1,274 1,414
Borrowings 5,000 - 5,000
Discounting charged to the income statement - 524 524
Foreign exchange released to the income statement - 13 13
Foreign exchange recognised in the translation reserve - 62 62
At 31 December 2023 21,875 3,996 25,871
A currency analysis for the bank borrowings is shown below:
31 December 31 December
2023 2022
£'000 £'000
Pound sterling 21,875 21,235
Total bank borrowings 21,875 21,235
All bank borrowings are held jointly with Barclays and NatWest. The revolving
credit facility ('RCF') as at 31 December 2023 runs for a period of three
years to March 2025, extendable for up to a further two years with a total
commitment of £30.0 million. £22.0 million had been drawn as at 31 December
2023 (2022: £21.5 million). Under this agreement, annual reductions in the
facility of £1.25 million applied from June 2023, meaning the available
facility as at 31 December 2023 was a total of £29.1 million (reduced from
£30.0 million). The remainder of any drawings is repayable on the 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. The quarterly covenants applied up to and including
December 2023 are; interest cover >4.0x; adjusted leverage <2.5x; and
adjusted deferred consideration leverage <3.5x.
Loan arrangement fees accrued in the period of £125,000 (2022: £265,000) are
offset against the term loan and are being amortised over the period of the
loan.
The facility bears variable interest at Barclays Bank SONIA rate plus a margin
ranging from 2.60% to 3.00%, depending on the Group's net debt to EBITDA
ratio.
The undrawn amount of the revolving credit facility is liable to a fee of 40%
of the prevailing margin. The Group may elect to prepay all or part of the
outstanding loan subject to a break fee, by giving five business days' notice.
Since the year end the facility has been extended under an agreement dated 25
April 2024. The revised facility is for £30.0 million, for a period of
three years to 24 April 2027. There are no annual reductions in the
facility.
The quarterly covenants to be applied from March 2024 onwards will be:
interest cover >3.0x (reduced from the current level of interest cover
<4.0x, contingent upon the Group delivering a revised financial model
within 30 days of the effective date of the amendment and restatement, in form
and substance satisfactory to the Agent); adjusted leverage <2.5x and
adjusted deferred consideration leverage <3.5x.
The facility will bear variable interest Barclays Bank SONIA rate plus a
margin ranging from 2.25% to 2.75%, depending on the Group's adjusted deferred
consideration leverage ratio. During the first six months of the facility,
the margin is fixed at 2.50%.
All amounts owing to the bank are guaranteed by way of fixed and floating
charges over the current and future assets of the Group. As such, a composite
guarantee has been given by all significant subsidiary companies in the UK,
US, Australia, Germany, Denmark and Sweden.
14. Dividends
No dividends were paid or declared during the current and prior financial
years. Dividends were paid to non‑controlling interests as shown in the
consolidated statement of changes in equity.
15. Cash generated from operations
Re-presented
Year ended Year ended
31 December 31 December
2023 2022
£'000 £'000
Loss before taxation (2,566) (7,261)
Adjustments for:
Depreciation 2,164 2,768
Amortisation (note 8) 4,763 3,981
Loss on disposal - 5
Impairment of goodwill and current assets (note 3) 2,863 257
Unrealised foreign exchange loss/(gain) 34 (70)
Onerous lease provision (released)/booked (509) 1,271
Write-off of credit balances in receivables (106) -
Share option charges 568 521
Finance income (85) (80)
Finance expenses 2,230 1,427
Contingent consideration revaluations 2,361 7,866
11,716 10,685
Decrease/(increase) in trade and other receivables 3,474 (8,848)
(Decrease)/increase in trade and other payables (3,090) 2,165
Movement in provisions 63 (29)
Cash generated from operations - continuing operations 12,163 3,973
Cash generated from operations - discontinued operations (638) (161)
Cash generated from operations 11,525 3,812
16. Disposals
During the period, the Group agreed to dispose of its marketing analytics
subsidiary, Digital Decisions Australia Pty Limited, to Spinach Advertising
for gross consideration of A$850,000 (£454,000). This disposal was
completed on 6 April 2023. A$750,000 of the consideration was payable
upfront with the residual A$100,000 payable in February 2024. Professional
costs incurred relating to the sale totalled A$189,000 (£101,000) resulting
in a net cash inflow of A$661,000 (£353,000). A profit on disposal of
£268,000 was recognised on disposal. The results of this division have been
presented within discontinued operations as appropriate.
17. Financial Information
The financial information included in this report does not amount to full
financial statements within the meaning of Section 434 of Companies Act 2006.
The financial information has been extracted from the Group's Annual Report
and financial statements for the period ended 31 December 2023, on which an
unqualified report has been made by the Company's auditors, Deloitte LLP.
Financial statements for the period ended 31 December 2022 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.
Alternative performance measures
In these results we refer to 'adjusted' and 'reported' results, as well as
other non-GAAP alternative performance measures.
Further details of highlighted items are set out within the financial
statements and the notes to the financial statements.
In the reporting of financial information, the Directors have adopted various
alternative performance measures ('APMs'). The Group includes these non-GAAP
measures as they consider them to be both useful and necessary to the readers
of the financial statements to help understand the performance of the Group.
The Group's measures may not be calculated in the same way as similarly titled
measures reported by other companies and therefore should be considered in
addition to IFRS measures. The APMs are consistent with how business
performance is measured internally by the Group.
Alternative Performance Measures used by the Group are detailed in the table
below:
APM Relevant IFRS measure Adjustments to reconcile to IFRS measure Definition and purpose Reference
Profit and loss measures
Net revenue Revenue Excludes project related costs as shown in the consolidated income statement Net revenue is the revenue after deducting external production costs and is A1
reconciled on the face of the income statement.
Served revenue Revenue Includes revenue from discontinued operations Served revenue is the total revenue in the period including revenue from A2
discontinued operations. On the face of the income statement the performance
of discontinued operations is disclosed separately in the 'Net (Loss)/profit
from discontinued operations' line.
Adjusted operating profit Operating profit Excludes exceptional items Adjusted operating profit is reconciled to its statutory equivalents on the A3
face of the consolidated income
Adjusted operating margin Operating profit margin Excludes exceptional items Adjusted operating profit margin is calculated as the operating profit A4
excluding highlighted items divided by revenue.
Adjusted profit before tax Profit before tax Excludes exceptional items Adjusted profit before tax is reconciled to its statutory equivalents on the A5
face of the consolidated income
Adjusted effective rate of tax Effective rate of tax Adjusted effective tax rate is calculated by comparing the current and
deferred tax charge for the current year, excluding prior year provision
movements to the adjusted profit before taxation.
Adjusted profit after tax Profit after tax Excludes exceptional items Adjusted profit after tax is reconciled to its statutory equivalents on the A5
face of the consolidated income
Adjusted earnings per share Earnings per share Excludes exceptional items Adjusted earnings per share is reconciled to statutory earnings per share in Note 9
note 9.
Balance sheet measures
Net debt None Reconciliation of net debt Net debt comprises total loans and borrowings, including prepaid loan fees, A6
less cash and cash equivalents.
Cash flow measures
Adjusted cash generated from operations Cash flow from operations Cash movements relating to highlighted items excluded. Adjusted cash generated from operations is defined as the cash generated from A7
operations excluding the cash movements relating to the highlighted items.
Adjusted operating cash flow conversion Operating cash flow conversion Cash movements relating to highlighted items excluded. Adjusted operating cash flow conversion is the ratio of the adjusted cash A7
generated from operations divided by the adjusted operating profit, expressed
as a percentage.
A1: Reconciliation of net revenue
Year ended Year ended
31-Dec 31-Dec
2023 2022
£'000 £'000
Revenue 80,196 75,055
Project related costs (7,355) (7,219)
Net revenue 72,841 67,836
A2: Reconciliation of served revenue
Year ended Year ended
31-Dec 31-Dec
2023 2022
£'000 £'000
Revenue 80,196 75,055
Intercompany revenue 10,622 15,730
Intercompany partner costs (10,622) (15,730)
Revenue from discontinued operations 111 918
Served revenue 80,307 75,973
A3: Reconciliation of adjusted operating profit
Year ended Year ended
31-Dec 31-Dec
2023 2022
£'000 £'000
Adjusted operating profit 12,015 9,162
Highlighted items (12,272) (15,126)
Operating profit/(loss) (257) (5,964)
A4: Reconciliation of operating profit margin
Year ended Year ended
31-Dec 31-Dec
2023 2022
£'000 £'000
Revenue 80,196 75,055
Adjusted operating profit 12,015 9,162
Adjusted operating profit margin 15.0% 12.2%
Highlighted items (12,272) (15,126)
Operating profit/(loss) (257) (5,964)
Operating profit margin (0.3)% -7.9%
A5: Reconciliation of adjusted profit before taxation and adjusted profit
after taxation
Year ended Year ended
31-Dec 31-Dec
2023 2022
£'000 £'000
Adjusted profit before taxation from continuing operations 9,706 7,865
Highlighted items (12,272) (15,126)
Profit/(loss) before taxation from continuing operations (257) (7,261)
Breakdown of taxation (charge)/credit - continuing operations
Before highlighted items (2,582) (2,028)
Highlighted items 884 1,788
Taxation charge (1,698) (240)
Net (loss)/profit from discontinued operations
Before highlighted items (28) 70
Highlighted items 189 (31)
Net profit from discontinued operations 161 39
Adjusted profit after tax 7,096 5,907
Highlighted items (11,199) (13,369)
Loss after tax (4,103) (7,462)
A6: Reconciliation of net debt
Year ended Year ended
31-Dec 31-Dec
2023 2022
£'000 £'000
Loans and borrowings (22,000) (21,500)
Prepaid loan fees 125 265
Less: cash and cash equivalents 10,016 12,360
Net Debt (11,859) (8,875)
A7: Reconciliation of adjusted cashflow from operations
Year ended Year ended
31-Dec 31-Dec
2023 2022
£'000 £'000
Cash generated from operations 5,077 3,812
Add back: cash outflow from discontinuing operations 638 161
Eliminating cash movements for highlighted items:
Severance 363 584
Post date remuneration charges 333 -
Settlement of post date remuneration 6,448 -
Onerous lease provision booked 102 289
Transformation costs 1,322 -
Share option charges 11 28
Revaluation of earn out accruals 1,813 -
Acquisition related costs (1,144) 1,942
Taxation (307) (883)
Adjusted cash generated from operations 14,655 5,933
Adjusted operating profit - continuing operations 12,015 9,162
Adjusted operating cash flow conversion (%) 122% 65%
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