REG - Ebiquity PLC - Interim Results
26/09/2024 07:00
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RNS Number : 7113F Ebiquity PLC 26 September 2024
Ebiquity plc
Interim Results for the six months ended 30 June 2024
H1 revenue impact but more positive revenue visibility into H2, strategic
delivery progressing well
Ebiquity plc ("Ebiquity" or the "Group"), a world leader in media investment
analysis, announces interim results for the six months ended 30 June 2024 ("H1
2024").
Group H1 2024 H1 2023 Change
£m £m £m %
Revenue 37.9 40.6 (2.7) (7%)
Adjusted Operating Profit(1) 2.3 6.0 (3.7) (61%)
Adjusted Operating Profit Margin (%)(1) 6.2% 14.7% (8.5%) (58%)
Adjusted Profit before Tax(1) 1.5 5.0 (3.5) (70%)
Adjusted Earnings per Share(1) 0.84p 2.94p (2.10p) (71%)
Statutory Operating Profit/(Loss) (0.1) 2.4 (2.5) NA
Statutory Proft/(Loss) before Tax (0.9) 1.4 (2.3) NA
Statutory Earnings/(Loss) per Share (0.86p) 0.44p (1.30p) NA
Net Debt 15.3 15.0 0.3 2%
Note 1: Throughout these interim results, management presents alternative
performance measures to explain further the movements in our business. These
are not statutory financial measures. Further information can be found in the
Alternative Performance Measures section below.
Operational update
Short-term loss of momentum as a result of market headwinds and
transformational actions
· The overall Group result reflects factors which differ
region-by-region
· Significant Regional Variances:
o North America: Revenue flat year-on-year with growth targets not met
due to client deferrals and some price competition, these headwinds were
partially offset by cost management
o UK & Ireland: Revenue down 7% on prior year due to ongoing budget cuts
by clients in Media and client consolidation. The 2023 level of Agency
Selection work did not recur in 2024 as was expected
o Continental Europe: 14% year-on-year decline in revenue is due to reduced
major Agency Selection and Management business in Germany compared with a very
strong H1 2023 and some price competition in France. This was partly offset
by strong a performance southern Europe, this performance is expected to
continue in H2
· Transformation: Good progress in transitioning core services to GMP365
and building sales and marketing capabilities. This will remain a continued
focus through 2025 with further adoption of technology enabled products and
processes following the 2024 completion of internal structural rationalisation
· Media Performance: A revenue decline of 6% in Ebiquity's largest
service line. However, H1 has also seen accelerated migration to the GMP
platform in H1 2024, with revenue from GMP-enabled services of £6.2 million
in the first half being more than double that of the equivalent period in 2023
· Media Management: Revenue declined by 27%, impacted most
significantly by a reduction in Agency Selection and Management
Current Trading and Outlook
· The Group suffered a weak H1, which reflected a continuation of poor
trading conditions from Q4 2023. In response, management has worked during
this period to develop a deep pipeline of revenue opportunities which will be
closed and delivered in H2 to make this very much a year of two halves
· The pressure from macro conditions on clients' businesses continues to
create some uncertainty in the advertising market but the Group's service
lines offer clients both immediate and longer-term ROI improvements which
mitigate these challenges
· The combination of the Group's new business wins, renewals and
upselling opportunities is expected to outweigh continuing market headwinds in
H2 leading to a mid-single-digit revenue growth for H2 vs H2 in the prior
year. With one quarter left to go, the Group has secured revenue
representing 88.5% of its full year expectations. The full year on a
constant currency basis should see revenue growth.
· The Group's cost base is largely exacerbating the profit impact of
revenue shortfalls. As revenue is expected to increase from early in H2, this
operational leverage means that it will convert to profit at higher marginal
rates. H2 Adjusted Operating Profit is expected to reach double-digit growth
over H2 2023
· Net debt as at 30 June 2024 was £15.3 million with cash balances of
£6.6 million and undrawn bank facilities of £8 million. The expectation is
that net debt, having increased somewhat during the third quarter, will return
to around the H1 level by year end.. The Group expects improved cash flow
especially in Q4 2024 and Q1 2025 and has sufficient liquidity and headroom
against its banking covenants.
Nick Waters, CEO, commented:
Following a challenging first half of the year, with a fixed cost base
compounded by competitive pressure felt in Continental Europe and the UK, we
believe we have turned the corner. A robust marketing and new business
programme through Q2 has started to bear fruit with new wins and expanded
assignments improving the outlook markedly for H2 where the Company will
benefit from operational leverage as it scales up. Whilst addressing the
external difficulties experienced in the first half we have continued to make
progress against our broader strategy to increase the use of technology in the
delivery of our core services to clients and to bring new products to market.
This, combined with a continued commitment to innovation, means the Company is
now well set up for success into 2025 and beyond.
Details of presentations
The Company will be hosting a webcast presentation for analysts and
institutional investors at 09:30 BST today. If you would like to register,
please contact alex.campbell@camarco.co.uk.
The Company will also be giving a presentation for investors via the Investor
Meet Company platform on 2 October 2024 at 13.45 BST. Investors can sign up to
Investor Meet Company for free and add to meet Ebiquity plc via:
https://www.investormeetcompany.com/ebiquity-plc/register-investor
(https://www.investormeetcompany.com/ebiquity-plc/register-investor) .
Investors who already follow Ebiquity plc on the Investor Meet Company
platform will automatically be invited.
Enquiries:
Ebiquity
Via Camarco
Nick Waters,
CEO
Camarco
Ben
Woodford
+44 (0)7990 653 341
Geoffrey Pelham-Lane
+44 (0)7733 124 226
Panmure Liberum (Financial Adviser, NOMAD &
Broker)
Edward Mansfield / Dougie McLeod (Corporate Advisory)
+44 (0)20 7886 2500
Mark Murphy / Sam Elder (Corporate Broking)
Chief Executive's Review
Continued progress
Despite a disappointing H1, Ebiquity has continued to make good strategic
progress during this period, preparing for improved delivery against our
objectives and strengthening financial performance during the remainder of the
year.
Following completion of the integration of Media Management Inc ("MMi") in the
US, we look forward to revenue growth accelerating again in North America as
the recent client prospecting drive is converted to new business. We are
also pleased to see an increased contribution from our portfolio of technology
enabled solutions providing strong revenue growth in H1 and a steadily
increasing share of our overall revenue across all regions.
In what have been particularly challenging market conditions since late 2023,
our performance during H1 has not met our original expectations, but we have
used the period to lay the foundations for growth, having expanded
relationships with clients, progressed our business transformation programme,
and continued to build scale in the US, the world's largest advertising
market.
Delivering the operating metrics
We continue to make progress against our operating metrics. The number of
clients buying Digital Media Solutions is up over 20% vs prior year, and the
number of clients buying two or more Service Lines is on track to match or
exceed 2023.
As we onboard clients the data lakes in our closed environments have expanded
significantly. We now have over US$50bn worth of media investment data from
114 countries within GMP365. The Media Data Vault now houses transaction
data from over US$22bn of media investment, representing more than 3.5
trillion impressions.
These data lakes provide us with the deepest and widest insight into media
markets globally in our sector and act as a strong moat against competition
seeking to offer directly comparable services. They also offer the
opportunity to train large language models on empirical data in a closed
environment from which to develop new valuable services for clients.
A highly dynamic market
The threat of inflation and high interest rates appears less acute than a year
ago, however the increased pressure on consumers, brand owners and marketing
budgets, which they heralded, remains.
Although Ebiquity cannot claim immunity from the pressure on marketing
budgets, such a volatile environment presents opportunities for us to help
brand owners navigate this uncertainty and ensure they are maximising returns
from their media investments.
Our role as a business intelligence partner for the global advertising
industry means that we are well placed to exploit changing industry dynamics
on behalf of clients. This includes transformative developments such as the
shift from linear free-to-air broadcasting to advertising funded video on
demand; and the implications of advertising delivered through Connected TV.
Retail Media has emerged quickly as a medium attracting very significant
advertising investment with brand owners re-allocating budgets from other
channels.
Developments such as these, and the continuous change in consumer usage of
social media and search platforms creates a difficult landscape for
advertisers to maintain and improve the efficiency and effectiveness of their
media investments - Enabling them to do so is Ebiquity's core expertise.
Driving Efficiency and Effectiveness
Against this background, our business transformation programme is progressing,
with a considerable focus on increasing the use of automation to create a more
efficient, scalable service and compelling experience for our clients.
Following the 2022 acquisition of MediaPath, we employ GMP365, a high-quality
data management platform licensed to us on terms which give effective
exclusivity in our industry, providing us with a base from which to drive
greater efficiency in the delivery of our services Group-wide.
The strategic intention is to transition the delivery of three core services
on to the GMP365 platform. We have also undertaken a fundamental change in
our operating model, from end-to-end work managed by in-market teams
developing and delivering customised products, to globally mutualised delivery
and data-management teams supporting in-market client facing teams with
globally consistent products. This has concentrated the focus of local teams
on winning business.
To effect these changes has required a re-design of the workflow processes for
each service, and changes to the roles, responsibilities and reporting lines
of approximately 60% of the Group's employees. It has also required
extensive training on use of the platform for a large portion of the
workforce, and considerable stakeholder management with agencies and
clients. Additionally the Group has been running dual processes to ensure
ongoing client service during the transition.
The planning and execution of this significant transformation over the last 12
months has drawn management time and attention to internal matters and a
reduced focus on client-facing and growth activities. We are now
substantially through that process and expect to have fully completed all
changes to the operating model by the end of the year. We believe this will
provide the strong foundations from which the Group can re-assert its
externally focused and client-oriented proposition, together with a scalable
operating model to drive profitable growth.
Despite the complexity of "lifting and shifting" a substantial element of the
workforce, with the consequent internal disruption and distractions this
brings, we have made good progress transitioning the delivery of two core
services on to the platform. Our initial priorities have been Agency
Selection processes (Media Management) and ValueTrack (Media Performance).
We conducted 35 Agency Selection processes on the platform in H1 this year
versus 31 last year, and this number continues to rise in H2. These
processes have however been somewhat smaller in scope than last year with an
aggregate of 130 client/country processes managed against 183 in the same
period of 2023.
We have made further progress with the ValueTrack product. 50 clients have
been activated in H1 across countries which equate, in aggregate, to 473
national implementations. This compares to 30 clients and 307
implementations for the same period last year. As we transition more
clients, and they become familiar with the output, we will start to reduce the
dual running of old and new processes paving the way for the cost reductions
which will secure the financial return on this investment.
The roll out of the third service, our new Benchmarking product, has commenced
but is progressing more slowly than anticipated. We are now working with 10
clients across 25 markets. Some platform modifications are required to meet
client needs in national markets before onboarding. These are underway with
first releases in September. The plan had been to complete the transition of
Benchmarking by the end of 2025. This is now likely to be extended by 12
months, with the full transformation plan now expected to take four years
rather than the initial three.
Building client partnership and coverage
With an extensive portfolio of large blue-chip clients our strategy is to
cross-sell and up-sell more products and services in more geographies. The
soft Q4 of last year continued into Q1 requiring a robust marketing and new
business drive against existing and prospective clients through Q2. These
efforts have started to bear fruit with increased scopes of work from major
clients and new logos added.
A leading global entertainment business extended our relationship from Europe
into their home US market for the first time in a winner-takes-all competitive
tender. Our US business has also increased assignments with a global spirits
brand and national insurance company, as well as adding a renowned new economy
brand as a new logo globally. We are encouraged that we have re-gained
competitiveness in the world's largest advertising market.
We have also started to see an improvement in Europe, winning a global remit
for a large European consumer products company. At the end of 2023 we had
particularly suffered from client budget cuts and reductions in scopes of work
in Italy, Germany and France. We are pleased with the strong recovery in
Italy which has successfully returned to growth. Our Germany business has
also stabilised and replaced revenue lost last year. Our French business has
found recovery more challenging, but difficulties in Media Management and
Media Performance has been counter-balanced by strong growth in the Marketing
Effectiveness unit.
International new business has gathered momentum in recent weeks with new wins
from global alcoholic beverages, confectionery, pharmaceutical, entertainment
and financial services clients that are all new to Ebiquity.
Further opportunities exist as we are currently engaged in 11 live
multinational RFPs. These include five major Middle Eastern brands as we
start to gain traction in that region. Our Asia Pacific management is
reporting "unprecedented" demand. These international new business
opportunities are supplemented with a range of national activity.
Product Innovation underpinned by unrivalled market intelligence
We have continued to progress product improvements and innovations.
The evolution of Digital Media Solutions into a Digital Governance service has
been well received in the marketplace with 20 additional clients on-boarded in
H1.
We have also redefined our Connected TV product into a Streaming TV product
which is delivering excellent value for the first wave of clients in the US
and has now been introduced in the UK. A new Retail Media product is now
live with its first clients.
A unique selling point of Ebiquity is the depth and scale of our pools of
media data. We have continued to build these data lakes with over US$ 20bn
of digital media transaction data in the Media Data Vault, and over US$ 50bn
of multi-media transaction data in GMP365. This provides the best
independent view of the media markets anywhere in the world. No competitor
is able to understand the market price dynamics of media across thousands of
channels and multiple audiences in over 100 markets worldwide. For
international and major national advertisers around the world Ebiquity is the
only Company that can help improve the efficiency of media investments using
such strong empirical evidence.
Artificial Intelligence
AI offers significant opportunities for Ebiquity to enhance operational
efficiency and to provide richer insights to our clients.
The media ecosystem is characterized by a plethora of naming conventions
across systems. In programmatic media, for example, there can be hundreds of
different names for the same Exchange. To generate the most accurate and
relevant insights for our clients, this type of data must be categorized and
harmonized - a complex and time-consuming task. To address this, we are
building AI applications that help categorize and harmonize data more rapidly
and at scale, allowing our consultants to focus on providing the best insights
and deliverables for our clients in a shorter timeframe
We are also exploring the use of AI-generated narratives to enrich reports and
accelerate the delivery of insights to our clients. Across all our AI
initiatives, we prioritize data security, such as ensuring no data retention
on external systems.
Outlook
Following a challenging first half of the year we believe we have turned the
corner. The effort put into a re-vitalised new business and marketing drive
is bearing fruit. A large number of new assignments has been won in Q2
leading to improving revenue in H2, with further new business opportunities
pending. The challenge has shifted from winning the business to delivering
secured revenue and converting live opportunities. There is a risk that some
of this new revenue will slip from 2024 into Q1 2025. The radical change to
the operating model has now been implemented and the turbulence created is
largely behind us. The re-designed organisation, with technology roll out
well advanced, and a commitment to innovation means the Company is now well
set for scalable growth into 2025 and beyond.
Finance review
The comparatives below show the organic performance of the Group. 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 in 2023.
Service Line H1 2024 H1 2023 Variance v PY
£m £m £m %
Media Performance 26.5 28.1 (1.6) (6%)
Media Management 3.9 5.3 (1.4) (27%)
Marketing Effectiveness 4.8 4.5 0.3 6%
Contract Compliance 2.8 2.7 0.1 3%
Total revenue from continuing operations 37.9 40.6 (2.8) (7%)
Revenue for the six months ended 30 June 2024 of £37.9 million was £2.8
million or 7% lower than the comparable period in 2023, with flat year-on-year
revenue in North America and a 7% decline in UK & Ireland and 14% decline
in Continental Europe as discussed above.
Revenue from Media Performance services declined by £1.6 million or 6%. This
is 60% of the overall year-on-year revenue shortfall for the Group. Within
this however, the period saw a more than doubling of revenue from GMP365
enabled services and continued growth in Digital Media Solutions as more
clients have migrated to these technology- enabled products. This progress is
expected to continue in H2. One unintended consequence of the slower
migration to these new services in UK and North America has been some dual
running of costs (supporting both the legacy and the new models) during 2024
to date.
Media Management services revenue declined by £1.4 million or 27% in H1 2024
owing to lighter activity market-wide and large processes managed by Ebiquity
last year not repeating.
Revenue from Marketing Effectiveness grew by £0.3 million (6%).
Adjusted operating profit (statutory operating profit excluding highlighted
items) from continuing operations decreased by £3.6m to £2.3 million (2023:
£6.0 million). The adjusted operating profit margin decreased to 6.2%
compared to 14.7% in the prior year. £2.8m of this shortfall was the impact
of lower revenues. H1 costs were also slightly higher than in H1 2023 due to
the dual running of both the legacy and the technology enabled delivery
models. Despite a reduction in highlighted items from £3.6m to £2.5m,
there was a resulting statutory operating loss of £0.1m, compared to a
statutory operating profit in the prior year of £2.4m.
Segmental Review of Performance
Revenue by geographical segment
Served revenue Change
H1 2024 £m H1 2023 £m £m %
UK & Ireland 14.6 14.2 0.4 3%
Continental Europe 10.8 14.4 (3.6) (25%)
North America 8.2 7.8 0.4 6%
APAC 4.2 4.3 (0.1) (2%)
Served revenue from continuing operations 37.9 40.6 (2.8) (7%)
This revenue segmentation will be the one used by the Group from 2024
onwards. It captures the region in which the work was sold. 2023 regional
revenue recognition was based on where the work was performed. It is not
practically possible to proforma adjust 2023 comparatives onto the new
basis. During this transition, a like-for-like comparison based on External
revenue (invoiced/accrued by the region) is shown below:
External Revenue by geographical segment
External Revenue Change
H1 2024 £m H1 2023 £m £m %
UK & Ireland 14.9 15.9 (1.1) (7)%
Continental Europe 11.2 13.0 (1.8) (14%)
North America 7.9 7.9 0.0 0%
APAC 3.9 3.8 0.1 2%
External Revenue from continuing operations 37.9 40.6 (2.8) (7%)
Adjusted Operating Profit by geographical segment
Adjusted Operating Profit Adjusted Operating profit margin
H1 2024 H1 2023 H1 2024 H1 2023
£m £m % %
UK & Ireland 1.3 3.7 9% 26%
Continental Europe 2.0 4.6 19% 32%
North America 1.1 1.0 13% 13%
APAC 0.6 0.4 15% 9%
Unallocated (2.7) (3.7) NA NA
Adjusted profit - continuing operations 2.3 6.0 6.2% 14.7%
Discontinued operations - (0.1) - (22%)
Adjusted profit - Total 2.3 5.9 6.2% 14.6%
The Group implemented a transformation program in UK&I and Continental
Europe in May 2023 and rolled this out to the whole Group in July 2023. The
transformation impacted the internal recharging within the Group - the result
being we do not have like-for-like reporting by region; only at Group level.
Pre-transformation, staff costs for delivery on projects by teams in other
markets were booked as intercompany partner costs at an agreed fee between the
markets. Post-transformation, staff costs for delivery teams are all
transferred to the centre then invoiced out of the centre at a mark-up to
markets based on time sheet recording and they are classified within staff
costs.
Highlighted items
Highlighted items comprise charges and credits which are highlighted in the
income statement, where separate disclosure is considered appropriate in
understanding the underlying performance of the business. These are used for
the calculation of certain Alternative Performance Measures.
30-Jun 30-Jun
2024 2023
£m £m
Amortisation and Impairment 1.6 1.6
Post-acquisition accruals and charges - 0.3
Professional charges relating to acquisitions and aborted acquisitions 0.1 0.7
Reorganisation 0.6 0.5
Share option charge 0.2 0.3
Subtotal before tax 2.5 3.4
Tax (credit) on highlighted items (0.2) (0.6)
Total highlighted items 2.3 2.8
Amortisation and Impairment:
· Amortisation of purchased intangibles decreased slightly in the
period to £1.6m (2023 £1.7m) as a result of the China customer relationship
becoming fully written down in January 2024. Purchased intangible assets
include customer relationships of acquired entities, owned software, and
MediaPath's GMP Licence asset.
· In H1 June 2023 there was a credit of £0.1m for the movement in
impairment of assets in Russia.
Post-acquisition accruals and charges:
· There were no such post-acquisition accruals and charges in H1 2024.
The £0.3m charge in the prior period was the final element of the contingent
consideration relating to the 2020 acquisition of Digital Decisions B.V.,
which was settled in May 2023.
Professional charges including acquisitions and aborted acquisitions:
· The Company refinanced the loan facility in April 2024, incurring
costs of £0.2m. Of this amount, £0.1m was a non-cash item being the
write-off of the previous facility arrangement fee.
· Acquisition related costs total £0.5m and relate to legal and
professional fees for an aborted transaction. No further costs are expected to
be incurred for this project.
· A £0.6m credit has been recognised upon the re-assessment of the MMi
earnout accrual.
Reorganisation:
· Costs of £0.7m were incurred as 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.
· Upon renewal the London office downsized to one floor. As part of
this renewal the newly agreed settlement amount for dilapidations became less
than the initial provision. This resulted in a credit of £0.1m being
recognised for the excess provision.
Finance costs
Net finance costs decreased slightly from £1.0 million at 30 June 2023 to
£0.8 million at 30 June 2024. This was predominantly driven by foreign
exchange movements.
Taxation
The projected adjusted effective tax rate for the 2024 full year is 24.9%,
which is lower than the 2023 full year adjusted effective tax rate of 26.6%,
this reduction is due to the difference in the projection of where the profits
are expected to be realised, which attract different tax rates around the
world. The projected highlighted effective tax rate for the 2024 full year
of 5.4% is a reduction on the 2023 full year rate of 7.2%, this is due to the
proportionally additional disallowable expenses in the current year.
Earnings per share
Adjusted basic earnings per share decreased from 2.94p at 30 June 2023 to
0.84p as at 30 June 2024. Additionally, adjusted diluted earnings per share
decreased from 2.86p in the prior period to 0.81p. There was a statutory loss
per share of 0.86p (2023: profit per share of 0.44p). Diluted earnings per
share also decreased to a loss of 0.86p (2023: profit per share of 0.43p).
Dividend
No dividend has been declared for the six months ended 30 June 2024 (2023:
£nil).
Statement of financial position and net assets
30 June 31 December
2024 2023
£m £m
Goodwill and intangible assets 47.2 49.2
Right of use asset 3.3 2.8
Other non-current assets 2.9 2.5
Net working capital(1) 10.7 8.4
Lease liability (4.1) (4.4)
Other non-current liabilities (1.4) (1.0)
Deferred consideration (MMi) (3.4) (4.0)
Net bank debt (15.3) (11.9)
Net assets 40.0 41.7
(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 30 June 2024 were £40.0 million, a decrease of £1.7 million
from 31 December 2023. The key driver for this is the increase in net bank
debt, which increased to £15.4 million. Loan borrowings remained the same as
at 31 December 2023, however, the cash balance decreased by £3.5 million.
This was a consequence of large one-off payments in highlighted items and
increased contractor costs.
Working capital
Working capital increased to £10.7 million, up from £8.4 million at 31
December 2023. The decrease in net trade debtors was somewhat offset by the
increase in accrued income. Accrued income is typically higher at interim
reporting compared to year-end, as the structure of client contracts can
result in billing upon project completion, which is often towards Q3 and Q4
for some clients. Debtor days has increased slightly from 69 days at 31
December 2023, to 72 days at 30 June 2024. 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
6 month 6 month
Period ending Period ending
30-Jun 30-Jun
2024 2023
£m £m
Statutory cash from operations 1.0 (2.8)
Add back:
Settlement of post-date Digital Decisions remuneration
- 6.4
Cash outflow from Discontinued Activities - 0.5
Highlighted items: cash items 1.6 0.6
Adjusted cash from operations 2.6 4.7
Adjusted operating profit 2.3 6.0
Cash Flow Conversion Ratio (as % of Adj OP) 111% 78%
Adjusted cash from operations represents the cash flows from operations
excluding the impact of highlighted items and discontinued businesses. The
adjusted net cash inflow from operations in the 6-month period was £2.6m
(2023: £4.7m), which represents a cash conversion ratio of 111% of adjusted
operating profit.
Equity
During the six months to 30 June 2024, the number of ordinary shares in issue
increased by 0.1 million to 140.5 million (2023: 140.4 million). The issuance
of ordinary shares related solely to the exercise of employee share options.
Net debt and banking facilities
6 month 6 month
period ending period ending
30-Jun 30-Jun
2024 2023
£m £m
Loans and borrowings (22.0) (25.0)
Prepaid loan fees 0.1 0.2
Less: Cash and cash equivalents net of bank overdrafts(1) 6.6 9.8
Net Cash/(Debt) (15.3) (15.0)
(1) Includes restricted cash of £0.9 million held in Ebiquity Russia (2023:
£0.9m).
Bank borrowings are held jointly with Barclays and NatWest. On 25 April 2024,
the revolving credit facility ('RCF') was extended for a further three-year
period to 24 April 2027, on more favourable terms. The amended facility is for
£30.0m, with no amortisation of the facility during the three-year period.
Quarterly covenants are applied, being interest cover >3.0x; adjusted
leverage <2.5x; and adjusted deferred consideration leverage <3.5x.
The Group does not expect to have any compliance issues based on current
projections.
The facility bears variable interest at the Barclays Bank SONIA rate plus
margin, ranging from 2.25% to 2.75%. The margin rate depends on the Group's
net debt to EBITDA ratio.
Net Debt increased from £12.0m at 31 December 2023 to £15.3m at 30 June
2024. This was the result of lower revenues as noted above but also some
one-time cash outflows during the period. These included professional fees,
reorganisation costs (as shown in Highlighted Items above) and property costs
as the Group rationalised its London office space. Cash flow naturally
improves in Q4 and Q1 as seasonal revenues are collected. Based on current
projections, no liquidity issues are anticipated.
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. Net revenue is a key
management incentive metric
Operating profit Excludes highlighted items A2
Adjusted operating profit Adjusted operating profit is reconciled to its statutory equivalents on the
face of the consolidated income statement. This is an important Group
performance measure used by the Board, and is also a key management incentive
metric.
Operating profit margin Excludes highlighted items A3
Adjusted operating margin Adjusted operating profit margin is calculated as the operating profit
excluding highlighted items divided by revenue.
Profit before tax Excludes highlighted items A4
Adjusted profit before tax Adjusted profit before tax is reconciled to its statutory equivalents on the
face of the consolidated income statement. This is an important Group
performance measure used by the Board, and allows for the consistent
comparison of year-on-year performance.
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. This measure is more
representative of the Group's tax payable position and its ongoing tax rate.
Adjusted profit after tax Profit after tax Excludes highlighted items A4
Adjusted profit after tax is reconciled to its statutory equivalents on the
face of the consolidated income statement. This is an important Group
performance measure used by the Board, and allows for the consistent
comparison of year-on-year performance.
Earnings per share Excludes highlighted items Note 4
Adjusted earnings per share Adjusted earnings per share is reconciled to statutory earnings per share in
note 4. This is an important Group performance measure, and allows for the
consistent comparison of year-on-year performance, particularly as it adjusts
for the non-recurring nature of highlighted items expenditure. Furthermore,
the Long Term Incentive Plan uses a target based on EPS growth over a three
year period.
Balance sheet measures
Net debt None Reconciliation of net debt Net debt comprises total loans and borrowings, including prepaid loan fees, A5
less cash and cash equivalents. This is an important Group performance measure
in assessment the strength of the balance sheet position, and is particularly
important for the loan facility, where the variance interest rate can move
depending of the Group's net debt to EBITDA ratio.
Cash flow measures
Cash flow from operations Cash movements relating to highlighted items excluded. Adjusted cash generated from operations is defined as the cash generated from A6
operations excluding the cash movements relating to the highlighted items.
Adjusted cash generated from operations This is an important Group performance measure, and allows for the consistent
comparison of year-on-year performance.
Operating cash flow conversion Cash movements relating to highlighted items excluded. A6
Adjusted operating cash flow conversion Adjusted operating cash flow conversion is the ratio of the adjusted cash
generated from operations divided by the adjusted operating profit, expressed
as a percentage. This is an important Group performance measure, and allows
for the consistent comparison of year-on-year performance.
A1: Reconciliation of net revenue
6 month 6 month period ending
period ending
30-Jun 30-Jun
2024 2023
£'000 £'000
Revenue 37,854 40,631
Project related costs (3,687) (3,739)
Net revenue 34,167 36,892
A2: Reconciliation of adjusted operating profit
6 month period ending 6 month period ending
30-Jun 30-Jun
2024 2023
£'000 £'000
Adjusted operating profit 2,341 5,967
Highlighted items (note 3) (2,470) (3,589)
Operating (loss)/profit (129) 2,378
A3: Reconciliation of operating profit margin
6 month 6 month
period ending period ending
30-Jun 30-Jun
2024 2023
£'000 £'000
Revenue 37,854 40,631
Adjusted operating profit A2 2,341 5,967
Adjusted operating profit margin 6.2% 14.7%
Highlighted items (2,470) (3,589)
Operating (loss)/profit A2 (129) 2,378
Operating profit margin (0.3%) 5.9%
A4: Reconciliation of adjusted profit before taxation and adjusted profit
after taxation
6 month period ending 6 month period ending
30-Jun 30-Jun
2024 2023
£'000 £'000
Adjusted Profit/(loss) before taxation from continuing operations 1,527 5,011
Highlighted items (2,470) (3,589)
Profit/(loss) before taxation from continuing operations (943) 1,422
Breakdown of taxation (charge)/credit - continuing operations
Before highlighted items (379) (1,418)
Highlighted items 152 572
Taxation charge (227) (846)
Net (loss)/profit from discontinued operations
Before highlighted items - (81)
Highlighted items - 248
Net (loss)/profit from discontinued operations - 167
Adjusted profit after tax 1,148 3,512
Highlighted items (2,318) (2,768)
Profit/(loss) after tax (1,170) 743
A5: Reconciliation of net debt
6 month 6 month
period ending period ending
30-Jun 30-Jun
2024 2023
£'000 £'000
Loans and borrowings (22,000) (25,000)
Prepaid loan fees 137 185
Less: Cash and cash equivalents 6,565 9,847
Net Debt (15,298) (14,969)
A6: Reconciliation of adjusted cashflow from operations
6 month 6 month period ending
period ending
30-Jun 30-Jun
2024 2023
£'000 £'000
Cash generated from operations 988 (2,836)
Add Back: cash outflow from discontinuing operations - 471
Eliminating cash movements for highlighted items:
Settlement of Digital Decisions post-date remuneration - 6,448
Transformation costs 603 678
Share option charges 84 34
Acquisition related costs 669 70
Taxation 265 (203)
Adjusted cash generated from operations 2,609 4,662
Adjusted operating profit - continuing operations 2,341 5,967
Adjusted operating cash flow conversion (%) 111% 78%
Interim Consolidated Income Statement
for the six months ended 30 June 2024
Unaudited 6 months ended Unaudited 6 months ended
30 June 2024 30 June 2023
Highlighted Highlighted
Adjusted items Statutory Adjusted items Statutory
results (note 3) results results (note 3) results
Note £'000 £'000 £'000 £'000 £'000 £'000
Revenue 2 37,854 - 37,854 40,631 - 40,631
Project-related costs (3,687) - (3,687) (3,739) - (3,739)
Net revenue 34,167 - 34,167 36,892 - 36,892
Staff costs (25,329) (682) (26,011) (24,529) (526) (25,055)
Other operating expenses (6,497) (1,788) (8,285) (6,396) (3,063) (9,459)
Operating profit/(loss) 2,341 (2,470) (129) 5,967 (3,589) 2,378
Finance income 47 - 47 36 - 36
Finance expenses (1,057) - (1,057) (1,013) - (1,013)
Foreign exchange 196 - 196 21 - 21
Net finance costs (814) - (814) (956) - (956)
Profit/(loss) before taxation 1,527 (2,470) (943) 5,011 (3,589) 1,422
Taxation (charge)/credit (379) 152 (227) (1,418) 572 (846)
Profit/(loss) for the period - continuing operations
1,148 (2,318) (1,170) 3,593 (3,017) 576
Profit/(loss) for the period - discontinued operations 5
- - - (81) 248 167
Profit/(loss) for the period 1,148 (2,318) (1,170) 3,512 (2,769) 743
Attributable to:
Equity holders of the parent 1,149 (2,318) (1,169) 3,470 (2,769) 701
Non-controlling interests (1) - (1) 42 - 42
1,148 (2,318) (1,170) 3,512 (2,769) 743
Earnings/(loss) per share-continuing operations
Basic 4 0.84p (0.86)p 2.94p 0.44p
Diluted 4 0.81p (0.86)p 2.86p 0.43p
(Loss)/earnings per share-
Discontinued operations
Basic 4 - - (0.07)p 0.14p
Diluted 4 - - (0.07)p 0.13p
Interim Consolidated Statement of Comprehensive Income
for the six months ended 30 June 2024
Unaudited
6months ended 30 June 2023
£'000
Unaudited
6months ended 30 June 2024
£'000
(Loss)/profit for the period (1,170) 743
Other comprehensive (expense):
Items that may be reclassified subsequently to profit or loss statement:
Exchange differences on translation of overseas subsidiaries (635) (1,465)
Total other comprehensive (expense) for the period (635) (1,465)
Total comprehensive (expense) for the period (1,805) (722)
Attributable to:
Equity holders of the parent (1,804) (764)
Non-controlling interests (1) 42
(1,805) (722)
Interim Consolidated Statement of Financial Position
as at 30 June
2024
Unaudited Audited
as at 30 June as at 31 December
2024 2023
Note £'000 £'000
Non-current assets
Goodwill 6 39,558 39,688
Other intangible assets 7 7,678 9,527
Property, plant and equipment 919 911
Right-of use-assets 3,346 2,756
Lease receivables 170 269
Deferred tax asset 1,825 1,274
Total non-current assets 53,496 54,425
Current assets
Trade and other receivables 28,573 29,761
Lease receivables 201 205
Corporation tax asset 1,077 723
Cash and cash equivalents 8 6,565 10,016
Total current assets 36,416 40,705
88,287
Total assets 89,912 95,130
Current liabilities
Trade and other payables (6,182) (9,247)
Accruals and contract liabilities 9 (11,259) (10,804)
Current tax liabilities (1,365) (1,774)
Provisions (332) (450)
Lease liabilities (1,138) (1,682)
Total current liabilities (20,276) (23,957)
Non-current liabilities
Financial liabilities 10 (25,291) (25,871)
Provisions (241) (80)
Lease liabilities (2,938) (2,678)
Deferred tax liability (1,207) (882)
Total non-current liabilities (29,677) (29,511)
Total liabilities (49,953) (53,468)
Total net assets 39,959 41,662
Equity
Ordinary shares 13 35,122 35,103
Share premium 15,552 15,552
Other reserves 3,439 4,074
Accumulated losses (14,506) (13,420)
Equity attributable to the owners of the parent 39,607 41,309
Non-controlling interests 352 353
Total equity 39,959 41,662
Interim Consolidated Statement of Changes in Equity
for the six months ended 30 June 2024
Non-controlling interests
Ordinary shares Share premium Other reserves Accumulated Losses Total
Total equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
31 December 2022 30,060 10,863 4,824 (9,787) 35,960 302 36,262
Profit for the period - - - 701 701 42 743
Other comprehensive expense - - (1,465) - (1,465) - (1,465)
Total comprehensive (expense)/income for the period (1,465) 701 (763) 42 (721)
- -
Shares issued for cash 4,983 4,689 - (46) 9,626 - 9,626
Share options charge 59 - - 273 332 - 332
30 June 2023 (unaudited) 35,102 15,552 3,359 (8,859) 45,154 344 45,498
(Loss)/profit for the period - - - (4,855) (4,855) 9 (4,846)
Other comprehensive income
- - 715 - 715 - 715
Total comprehensive income/(expense) for the period
- - 715 (4,855) (4,140) 9 (4,131)
Shares issued for cash - - - (1) (1) - (1)
Share options charge 1 - - 295 295 - 295
31 December 2023 35,103 15,552 4,074 (13,420) 41,309 353 41,662
Loss for the period - - - (1,169) (1,169) (1) (1,170)
Other comprehensive (expense)
- - (635) - (635) - (635)
Total comprehensive (expense) for the period - - (635) (1,169) (1,804) (1) (1,805)
Share options charge 19 - - 83 102 - 102
30 June 2024 (unaudited) 35,122 15,552 3,439 (14,506) 39,607 352 39,959
Interim Consolidated Cash Flow Statement
for the six months ended 30 June 2024
Unaudited Unaudited
6 months 6 months
ended ended
30 June 30 June
2024 2023
Note £'000s £'000s
Cash flows from operating activities
Cash generated/(used by) operations 12 988 (2,836)
Finance expenses paid (1,023) (741)
Finance income received 28 36
Income taxes paid (1,212) (536)
Net cash from operating activities (1,219) (4,077)
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired - 82
Disposals of subsidiaries - 502
Purchase of property, plant and equipment (297) (292)
Purchase of intangible assets (544) (437)
Net cash flow from investing activities (841) (145)
Cash flows from financing activities
Proceeds from issue of share capital (net of issue costs) 4 80
Proceeds from bank borrowings - 5,000
Repayment of bank borrowings - (1,500)
Bank loan fees paid (150) -
Payments of lease liabilities (1,195) (1,258)
Dividends paid to non-controlling interests - -
Net cash flow from financing activities (1,341) 2,322
Net (decrease) in cash, cash equivalents and bank overdrafts (3,401) (1,900)
Cash, cash equivalents and bank overdrafts at beginning of period 10,016 12,360
Effect of exchange rate changes on cash and cash equivalents (50) (613)
Cash, cash equivalents and bank 8 6,565 9,847
overdrafts at end of period
Notes to the interim financial statements for the six months ended 30 June
2024
1. Accounting Policies
Basis of preparation
The condensed consolidated interim financial statements for the six months
ended 30 June 2024 have been prepared in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'. These
interim financial statements should be read in conjunction with the Group's
Annual Report and Accounts for the year ended 31 December 2023, which have
been prepared in accordance with International Accounting Standards in
conformity with the requirements of the Companies Act 2006 ('IFRS') and the
applicable legal requirements of the Companies Act 2006.
The condensed consolidated interim financial statements have been prepared on
a going concern basis. Whilst the Group has incurred a statutory loss for the
6 months to 30 June 2024, the Group continued to have sufficient headroom on
all its covenants and projects that this will continue for the foreseeable
future. The Group meets its day-to-day working capital requirements through
its cash reserves and borrowings, described in notes 8 and 10. As at 30 June
2024, the Group had cash balances of £6,565,000, (including restricted cash
of £941,000) and undrawn bank facilities available of £8,000,000.
In assessing the going concern status of the Group and Company, the Directors
have considered the Group's forecasts and projections, taking account of
reasonably possible changes in trading performance and the Group's cash flows,
liquidity, and bank facilities. The Directors have prepared a model to
forecast covenant compliance and liquidity to 31 December 2025 that includes a
base case and scenarios to form a severe but plausible downside case.
The base case assumes growth in revenue and EBITDA based on the Group's
reforecast 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 2%
reduction in operating costs. Under this scenario, management is satisfied of
covenant compliance throughout the going concern period.
The Directors consider that the Group and Company will have sufficient
liquidity within existing bank facilities, to meet its obligations during the
next 12 months and hence consider it appropriate to prepare the condensed
consolidated interim financial statements on a going concern basis.
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. In view
of the uncertainty regarding this operation, an impairment provision was made
in the previous year-end against the value of its assets in the Group balance
sheet. Its cash balances are also deemed to be restricted cash and totalled
£0.9m at the end of the period. Details are provided in notes 3 and 8.
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. Details of the APMs and their
calculations are set in the relevant section above.
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 acquisition related costs.
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 period ended 30 June 2024 are as follows:
Revenue
Note that the below table shows served revenue for both periods. Served
revenue comprises external revenue of each segment plus intercompany revenue
less intercompany partner costs.
--- Served revenue Change
H1 2024 £m H1 2023 £m £m %
UK & Ireland 14.6 14.2 0.4 3%
Continental Europe 10.8 14.4 (3.6) (25)%
North America 8.2 7.8 0.4 6%
APAC 4.2 4.3 (0.1) (2)%
Served revenue from continuing operations 37.9 40.6 (2.8) (7)%
This revenue segmentation will be the one used by the Group from 2024
onwards. It captures the region in which the work was sold. 2023 regional
revenue recognition was based on where the work was performed. It is not
practically possible to proforma adjust 2023 comparatives onto the new
basis. During this transition, a like-for-like comparison based on External
revenue (invoiced/accrued by the region) is shown below:
External Revenue by geographical segment
--- Served revenue Change
H1 2024 £m H1 2023 £m £m %
UK & Ireland 14.9 15.9 (1.1) (7)%
Continental Europe 11.2 13.0 (1.8) (14%)
North America 7.9 7.9 0.0 0%
APAC 3.9 3.8 0.1 2%
External Revenue from continuing operations 37.9 40.6 (2.8) (7%)
Adjusted operating Profit and Operating Margin
Adjusted Operating Profit Adjusted Operating profit margin
H1 2024 H1 2023 H1 2024 H1 2023
£m £m % %
UK & Ireland 1.3 3.7 9% 26%
Continental Europe 2.0 4.6 19% 32%
North America 1.1 1.0 13% 13%
APAC 0.6 0.4 15% 9%
Unallocated (2.7) (3.7) - -
Adjusted Profit - continuing operations 2.3 6.0 6% 15%
Discontinued operations - (0.1) - -
Adjusted profit - Total 2.3 5.9 6% 15%
The Group implemented a transformation program in UK&I and CE Europe in
May 2023 and rolled this out to the whole Group in July 2023. The
transformation impacted the internal recharging within the Group - the result
being we do not have like-for-like reporting by region; only at Group level.
Pre-transformation, staff costs for delivery on projects by teams in other
markets were booked as intercompany partner costs at an agreed fee between the
markets. Post-transformation, staff costs for delivery teams are all
transferred to the centre then invoiced out of the centre at a mark-up to
markets based on time sheet recording and they are classified within staff
costs.
A reconciliation of segment adjusted operating profit to total (loss)/profit
before tax is provided
below:
Re-presented Unaudited
Unaudited 6 months
6 months ended
ended 30 June 2023 (1)
30 June 2024
£'000 £'000
Reportable segment adjusted operating profit 5,083 9,607
Unallocated (costs)/income:
Central staff costs (2,086) (2,032)
Delivery staff costs (2) 913 (283)
Property costs (503) (356)
Exchange rate movements (26) (266)
Other administrative expenses (1,040) (703)
Adjusted operating profit 2,341 5,967
Highlighted items (note 3) (2,470) (3,589)
Operating (loss)/profit (129) 2,378
Net finance costs (814) (956)
(Loss)/profit before tax - continuing operations (943) 1,422
Profit before tax - discontinued operations (note 5) - 175
(Loss)/profit before tax - Total (943) 1,597
(1) Note that the staff costs line of this reconciliation has been broken out
into two lines this year with the comparative re-presented accordingly. This
indicates that the year-on-year movement is derived from the delivery staff
costs which arise from the transformation recharges in place.
(2) The local regions recharge relevant costs to the centre where a
calculation is performed, and then the regions are now being charged back a
marked up amount which gives rise to a profit in the centre. This eliminates
at Group level.
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 reconciliations please see the Alternative Performance
Measures section above. Cash items are defined as items for which a cash
transaction has occurred in the period. All other items are defined as non
cash.
Unaudited Re-presented
6 months Unaudited
ended 6 months
30 June 2024 ended
30 June 2023 (1)
£'000 £'000
Share option charge 182 307
Amortisation of purchased intangibles 1,603 1,701
Impairment of goodwill and current assets - (53)
Post-date remuneration for Digital Decisions - 333
Dilapidations provision release (114) -
Revaluation of earn out accruals (596) 217
Acquisition related costs 713 406
Transformation costs 682 678
Total highlighted items before tax 2,470 3,589
Taxation (credit) (152) (572)
Total highlighted items - continuing operations 2,318 3,017
Highlighted items - discontinued operations - (248)
Total highlighted items 2,318 2,769
(1) Note that in the prior year interim statement there was one line for
acquisition, integration and strategic costs which totalled £623,000. This
year, this line has been broken out into two lines; revaluation of earn out
accruals and acquisition related costs, with the comparative re-presented
accordingly.
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 30 June 2024, a charge of £182,000 (30 June
2023: £307,000) was recorded.
The amortisation charge for purchased intangible assets decreased slightly in
the period to £1,603,000 (30 June 2023: £1,701,000) due to certain
intangible assets becoming fully amortised in January 2024. These assets
include customer relationships of acquired entities, owned software (MMi's
Circle Audit system) and MediaPath's GMP licence asset.
There was no impairment for goodwill and intangible assets in the 6 months to
30 June 2024 (30 June 2023: credit of £53,000). The credit in the prior
period reflected an adjustment against the Group's share (75%) in Ebiquity
Russia OOO's total asset excluding cash due to the planned divestment of the
Group's majority stake for a nominal value.
In the prior period to 30 June 2023 a final accrual of £333,000 was made for
the final element of the contingent consideration of the 2020 acquisition of
Digital Decisions B.V., which was settled in May 2023. There is no such
equivalent charge in the period to 30 June 2024.
In the current period there is a credit of £114,000 arising on the
dilapidations settlement being agreed upon for the London property, this
credit represents the excess amount that the provision was over and above the
final settled amount.
Revaluation to earn out accruals of a credit of £596,000 (30 June 2023:
charge of £217,000) 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 £713,000 (30 June 2023: £406,000) relate to the
legal and professional fees associated with corporate transactions, whether
successful or unsuccessful.
The remaining costs of £682,000 (30 June 2023: 678,000) 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 Media Path in April 2022.
The transformation project had originally been planned as a three year
transformation programme, is now scheduled to run to the end of 2026, 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 will
continue to grow through 2025 and 2026.
4. Earnings per share
The calculation of basic and diluted earnings per share is based on the
following data:
Unaudited 6 months ended Unaudited 6 months ended
30 June 2024 30 June 2023
Continuing Discontinued Total Continuing Discontinued Total
£'000 £'000 £'000 £'000 £'000 £'000
Earnings for the purpose of basic earnings per share, being net (loss)/profit
attributable to equity holders of the parent
(1,169) - (1,169) 534 167 701
Adjustments: -
Impact of highlighted items (net of tax) (1) 2,318 - 2,318 3,015 (248) 2,768
Earnings for the purpose of adjusted earnings per share
1,149 - 1,149 3,549 (81) 3,469
Number of shares:
The weighted average number of shares during the period
- basic 136,545,726 136,545,726 120,801,928 120,801,928 120,801,928
- dilutive effect of share options 4,553,276 4,553,276 3,450,356 3,450,356 3,450,356
- diluted 141,099,002 141,099,002 124,252,284 124,252,284 124,252,284
Basic (loss)/earnings per share (0.86) (0.86) 0.44p 0.14p 0.58p
Diluted (loss)/earnings per share (0.86) (0.86) 0.43p 0.13p 0.56p
Adjusted basic earnings/(loss) per share 0.84 0.84 2.94p (0.07)p 2.87p
Adjusted diluted earnings/(loss) per share (2)
0.81 0.81 2.86p (0.07)p 2.79p
(1) Highlighted items (see note 3), stated net of their total tax and
non-controlling interest impact.
5. Discontinued Operations
During the prior period, the Group agreed to dispose of its marketing
analytics subsidiary Digital Balance Australia Pty Limited to Spinach
Advertising Pty Limited for gross consideration of A$850,000 (£454,000). The
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. The results of this division have been presented
within discontinued operations as appropriate.
The table below summarises the income statement for the discontinued business
unit for both the current and the prior period:
6 months ended 6 months
ended
30 June 2024 30 June 2023
£'000 £'000
Revenue - 113
Project-related costs - -
Net Revenue - 113
Staff costs - (100)
Other operating expenses - (37)
Operating (loss) - (24)
Finance income - -
Finance expenses - (4)
Net finance costs - (4)
(Loss) before highlighted items - (28)
Highlighted items - 203
Profit before tax - 175
Tax - (8)
Net profit from discontinued operations - 167
Below is a table summarising the cash flows from continued and discontinued
operations:
Period ended Period ended
30 June 2024 30 June 2023
£'000 £'000
Net cash from operating activities - continuing operations (1,219) (3,606)
Net cash from operating activities - discontinued operations - (471)
Total net cash from operating activities (1,219) (4,077)
Net cash used in investment activities - continuing operations (841) (647)
Net cash generated from investment activities - discontinued operations
- 502
Total net cash used in investment activities (841) (145)
Net cash generated by financing activities - continuing operations (1,341) 2,322
Net cash generated by financing activities - discontinued operations - -
Total net cash generated by financing activities (1,341) 2,322
Net decrease in cash and cash equivalents - continuing operations (3,401) (1,931)
Net increase in cash and cash equivalents - discontinued operations - 31
Net decrease in cash and cash equivalents (3,401) (1,900)
Below is a table summarising the details of the sale of the subsidiary:
Period ended Period ended
30 June 2024 30 June 2023
£'000 £'000
Cash received or receivable:
Cash - 502
Decease of consideration - -
Total disposal consideration - 502
Carrying amount of net assets sold - 30
Costs to sell - current year - 259
Total - 289
Gain on sale before income tax - 213
Income tax charge on gain - (8)
Gain on sale after income tax - 205
6. Goodwill
£'000
Cost
At 1 January 2024 50,197
Foreign exchange differences (195)
At 30 June 2024 50,002
Accumulated impairment
At 1 January 2024 (10,509)
Foreign exchange differences 65
At 30 June 2024 (10,444)
Net book value
At 30 June 2024 39,558
At 31 December 2023 39,688
The Group tests goodwill for impairment annually, as well as whenever there is
an indication of potential impairment. With H1 2024 Group performance coming
in below budget, management has deemed it appropriate and necessary to test
for the potential impairment of goodwill as at 30 June 2024.
Goodwill is allocated to the Group's cash generating units ('CGUs') in order
to carry out tests of impairment. In the 30 June 2024 period, the Group has
altered its approach to monitoring goodwill to align with the way in which the
business is managed. Where the Group is managed on a regional basis, the 13
underlying CGUs have been aggregated into 4 Regional CGUs: North America,
United Kingdom, Europe, and APAC.
The impairment test involves comparing the carrying value of the regional CGU
to which the goodwill has been allocated to the recoverable amount. The
recoverable amount of all regional 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. As at 30 June 2024 the Group has not
recognised an impairment charge, with the value in use for all Regional CGUs
exceeding the carrying value.
Value in use calculations
The key assumptions used in management's value in use calculations are
budgeted operating profit, pre‑tax discount rates and long-term growth
rates.
Budgeted operating profit assumptions
To calculate future expected cash flows, management has taken the earnings
before interest, tax, depreciation and amortisation ('EBITDA') for each of the
Regional CGUs for the 2024 financial year as per the Board approved 2024 6+6
forecast. For the 2025 and 2026 financial periods, the forecast EBITDA is
based on management's plans and market expectations. The projected 2026
balances are subsequently 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 Beta and a
smaller quoted company premium. The three-year pre-tax cash flow forecasts
have been discounted at the following rates:
Regional CGU Adjusted pre-tax discount rate
North America 13.47%
United Kingdom 14.38%
APAC 13.97%
Europe 13.42%
Growth rate assumptions
For cash flows beyond the three-year period, a growth rate of 2.0% (2023:
2.0%) has been assumed for all regional CGUs. This rate is based on factors
such as economists' estimates of long-term economic growth in the markets in
which the Group operates.
Sensitivity analysis
The Group's calculations of value in use for the regional 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 key
assumptions to cause the carrying value of any regional CGU to exceed its
value in use. In the goodwill impairment model we identified the APAC region
as having the lowest headroom at £0.9 million. Below we have demonstrated the
percentage point change in each key assumption that would result in the
carrying value exceeding value in use for the APAC regional CGU:
APAC Regional CGU
Current % % point change leading to impairment
2025 / 2026
Projected net revenue growth 5% / 5% (2%) / (2%)
Pre-tax discount rate 13.97% 3.35%
7. Other intangible assets
Capitalised Computer software Purchased Total
development intangible intangible assets
costs assets (1)
£'000s £'000s £'000s £'000s
Cost
At 1 January 2024 11,100 2,563 26,625 40,288
Additions 595 1 - 596
Impairment - - - -
Disposals - - - -
Foreign exchange (3) (10) (117) (130)
At 30 June 2024 11,692 2,554 26,508 40,754
Amortisation
At 1 January 2024 (7,471) (2,513) (20,777) (30,761)
Charge for the period (2) (822) (11) (1,603) (2,436)
Impairment - - - -
Disposals - - - -
Foreign exchange - 9 112 121
At 30 June 2024 (8,293) (2,515) (22,268) (33,076)
Net book value
At 30 June 2024 3,399 39 4,240 7,678
At 31 December 2023 3,629 50 5,848 9,527
( )
(1) Purchased intangible assets consist principally of customer relationships
with a typical useful life of three to 10 years.
(2 ) Amortisation is charged within administrative expenses to write off the
cost of the intangible assets over their estimated useful lives. The
amortisation of purchased intangible assets is included as a highlighted
administrative expense.
8. Cash, cash equivalents, bank overdrafts and restricted cash
Cash, cash equivalents, and bank overdrafts include the following for the
purposes of the cash flow statement:
30 June 31 December
2024 2023
£'000 £'000
Cash and cash equivalents 5,624 9,155
Restricted cash (1) 941 861
Cash, cash equivalents and bank overdrafts 6,565 10,016
(1) Cash and cash equivalents of £941,000 (31 December 2023 - £861,000) are
held in Ebiquity Russia OOO with restrictions on remittances to certain
countries. These balances may not be readily available to the wider Group
but can be used to meet Ebiquity Russia OOO's obligations within Russia as
they fall due.
9. Accruals and Contract liabilities
30 June 31 December
2024 2023
£'000 £'000
Accruals 4,944 4,319
Contract liabilities 6,315 6,485
Accruals and Contract liabilities 11,259 10,804
10. Financial liabilities
30 June 31 December
2024 2023
£'000 £'000
Current
Loan Fees (1) - -
Deferred contingent consideration (2) - -
- -
Non-Current
Bank borrowings 22,000 22,000
Loan Fees (1) (137) (125)
Deferred contingent consideration (2) 3,428 3,996
25,291 25,871
Total financial liabilities 25,291 25,871
(1) Loan fees were payable on amending the banking facility and are being
recognised in the income statement on a straight-line basis to the maturity
date of the facility, this being April 2027
(2) Deferred contingent consideration relates to the acquisition of MMi and is
payable in 2025.
Bank Deferred contingent Consideration
borrowings
Total
£'000 £'000 £'000
At 1 January 2024 21,875 3,996 25,871
Paid - - -
Unwinding of discount - 215 215
Charged to income statement (12) - (12)
Change in estimate (1) - (816) (816)
Foreign exchange recognised in the income statement -
5 5
Foreign exchange recognised in the translation reserve -
28 28
At 30 June 2024 21,863 3,428 25,291
(1) The change in estimate in the table above represents the reassessment of
the expected deferred contingent consideration to be based upon the latest
forecast information available. This resulted in a reduction to the expected
amount payable in 2025 of £816,000.
All bank borrowings are held jointly with Barclays and NatWest. During the
period the facility has been extended under an agreement dated 25 April
2024. The revolving credit facility ('RCF') as at 30 June 2024 runs for a
period of three years to April 2027, with a total commitment of £30.0
million, with £1.0 million of this available as an overdraft for working
capital purposes. £22.0 million had been drawn as at 30 June 2024 (31
December 2023: £22.0 million). The drawings are 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 from April 2024 are;
interest cover 3.0x; adjusted leverage <2.5x; and adjusted deferred
consideration leverage <3.5x.
Loan arrangement fees accrued in the period of £137,000 (31 December 2023:
£125,000) 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 2.25% to 2.75%, depending on the Group's net debt to EBITDA
ratio.
The undrawn amount of the revolving credit facility is liable to a fee of 40%
of the prevailing margin. The Group may elect to prepay all or part of the
outstanding loan subject to a break fee, by giving five business days' notice.
All amounts owing to the bank are guaranteed by way of fixed and floating
charges over the current and future assets of the Group. As such, a composite
guarantee has been given by all significant subsidiary companies in the UK,
USA, Australia, Germany, Denmark and Sweden.
11. Dividends
No dividend was paid in respect of the year ending 31 December 2023. No
dividend is being declared for the six months ended 30 June 2024. Dividends
were paid to non-controlling interests as shown in the consolidated statement
of changes in equity.
12. Cash generated from operations
Unaudited Unaudited
6 months ended 6 months
30 June ended
2024 30 June
2023
£'000 £'000
(Loss)/profit before taxation (943) 1,422
Adjustments for:
Depreciation 900 1,109
Amortisation (note 7) 2,436 2,293
Settlement of post-date remuneration - (6,448)
Loan fees written off 100 -
Unrealised foreign exchange gain 11 45
Impairment of goodwill & Intangibles - (53)
Share option charges 98 273
Finance income (47) (36)
Finance expenses 1,057 1,009
Contingent consideration revaluations (601) 550
3,011 164
Decrease in trade and other receivables 527 2,982
(Decrease) in trade and other payables (including accruals and contract
liabilities)
(2,592) (5,546)
Movement in provisions 42 35
Cash generated from operations - continuing operations 988 (2,365)
Cash generated from operations - discontinued operations - (471)
Cash generated from operations 988 (2,836)
13. Share Capital
Nominal
Number value
of shares £'000
Allotted, called up, and fully paid
At 31 December 2022 - ordinary shares of 25p 120,241,181 30,060
Shares issued 19,929,502 4,982
Share options exercised 241,083 61
At 31 December 2023 - ordinary shares of 25p 140,411,766 35,103
Share options exercised 75,356 19
At 30 June 2024 - ordinary shares of 25p 140,487,122 35,122
As at 30 June 2024, the Company's issued share capital consisted of
140,487,122 Ordinary Shares, carrying one vote each. The Company's Employee
Benefit Trust holds 3,879,703 issued ordinary shares to satisfy awards under
the Company's share option scheme and the trustee has agreed not to vote the
ordinary shares held by it. As such, 3,879,703 Ordinary Shares are treated as
not carrying voting rights. Therefore, the total voting rights in the Company
as at that date were 136,602,419.
During the prior period, 19,929,502 shares were issued to the previous owners
of Digital Decisions BV as partial settlement of the post-date remuneration.
14. Related party transactions
The Group has a related party relationship with its subsidiaries and key
management personnel, including Directors and Executive Committee members.
Transactions between the Company and its subsidiaries, or between
subsidiaries, have been eliminated on consolidation and are not disclosed in
this note.
Transactions with companies related to key management personnel
During the period the Group entered into trading transactions with GMP Systems
AB. In the period the Group incurred development fees, which were capitalised
to Research and Development intangibles assets amounting to £143,000 (30 June
2023: £nil). The Group also incurred subscription fees for GMP 365, which
were expensed to the profit and loss account, to the amount of £679,000 (30
June 2023: £384,000). GMP Systems AB is a related party through the Group's
Chief Delivery Officer, Susanne Elias.
INDEPENDENT REVIEW REPORT TO EBIQUITY PLC
Conclusion
We have been engaged by the Company to review the condensed set of financial
statements in the interim results announcement for the for six months ended 30
June 2024 which comprises the income statement, the balance sheet, the
statement of changes in equity, the cash flow statement and related notes 1 to
14.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the interim results
announcement for the six months ended 30 June 2024 is not prepared, in all
material respects, in accordance with United Kingdom adopted International
Accounting Standard 34 and the AIM Rules of the London Stock Exchange.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" issued by the Financial Reporting
Council for use in the United Kingdom (ISRE (UK) 2410). A review of interim
financial information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with United Kingdom adopted international accounting
standards. The condensed set of financial statements included in this interim
results announcement has been prepared in accordance with United Kingdom
adopted International Accounting Standard 34, "Interim Financial Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This Conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410; however future events or conditions may cause the entity to
cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the interim results announcement
for the six months in accordance with the AIM rules of the London Stock
Exchange.
In preparing the interim results, the directors are responsible for assessing
the Group's ability to continue as a going concern, disclosing as applicable,
matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Company or to
cease operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the interim results announcement, we are responsible for
expressing to the Company a conclusion on the condensed set of financial
statements in the half-yearly financial report. Our Conclusion, including our
Conclusion Relating to Going Concern, are based on procedures that are less
extensive than audit procedures, as described in the Basis for Conclusion
paragraph of this report.
Use of our report
This report is made solely to the Company in accordance with ISRE (UK) 2410.
Our work has been undertaken so that we might state to the Company those
matters we are required to state to it in an independent review report and for
no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company, for our review work,
for this report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
25 September 2024
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