REG - LBG Media PLC - Unaudited Final Results
18/04/2024 07:00
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RNS Number : 1408L LBG Media PLC 18 April 2024
18 April 2024
LBG Media plc
("LBG Media", the "Company" or "Group")
Unaudited Final Results for the year ended 31 December 2023
Significant strategic progress and confidence in growth strategy with clear
line of sight to £200m revenue
LBG Media plc, the global digital entertainment business with a focus on young
adults, is pleased to report its unaudited results for the year ended 31
December 2023 ("FY23" or "the period") with financial performance moderately
ahead of December trading update. The Audited Final Results will be available
shortly.
Strategic and Operational Highlights
· Significant progress in the US market with step-change acquisition
of Betches Media, LLC ("Betches"), alongside our organic expansion.
· Improvements in our operating model in Australia & New Zealand
("ANZ") expected to drive improved profitability in 2024.
· Global audience(1) has grown by 24% year-on-year, to 452m, with a
US audience of 141m, including the acquisition of Betches.
· Video views(1) of 128bn are up 31% year-on-year, demonstrative of
our market leading levels of user engagement.
Betches Acquisition
· Betches is a US-based digital media brand established in 2011 by
three female co-founders with a focus on digital media content production for
women. Completed in October 2023, for initial cash consideration of £19.3m,
this marks a step-change addition and platform for US growth.
· Acquisition represents continued expansion into the US, the world's
largest advertising market, forms a key part of the Group's growth strategy
and a core component behind our clear line of sight to £200m of revenue.
· Performance and integration progressing well, with joint blue-chip
account wins between Betches and LBG with brands such as Peacock, White Castle
and Mars.
· Betches achieved proforma revenue of $17.2m in FY23, contributing
£2.3m to our FY23 revenue, with the broader expectation of much greater
contribution going forward as we progress our plans in the US market.
ANZ Operating Model
· Implemented positive changes to our operating model in ANZ in
response to year-on-year reduction in revenue and profitability, with changes
effective from January 2024.
· Announcement of a multi-year partnership with Val Morgan Digital,
the largest online media publisher for young adults in Australia, for the
delivery of direct revenue via a low-risk margin-share agreement. The
partnership template further serves as a blueprint for opportunities in new
regions.
· Additionally, we have centralised social and web operations into
our UK centre of excellence, providing a more efficient cost base for indirect
revenue.
· Results in an improved and more efficient operating model, already
reversing the reduction seen in profitability.
Unaudited financial Highlights
FY23 FY22 Change
(unaudited) (audited) %
(£m) (£m)
Revenue
- Direct 29.3 27.8 5.5%
- Indirect 37.1 33.6 10.4%
- Other 1.1 1.4 (25.1)%
Total Group Revenue 67.5 62.8 7.5%
Adjusted EBITDA(2) 17.4 15.7 10.8%
Adjusted EBITDA margin(2) 26% 25% +1ppts
Profit before tax 5.9 7.3 (18.9)%
Cash and cash equivalents(3) 15.8 29.3 (46.0)%
· Total Group Revenue of £67.5m (FY22: £62.8m) up 7.5%.
o Direct revenue increased by 5.5% to £29.3m (FY22: £27.8m) reflecting
higher activity levels with new and existing clients, and deeper blue-chip
advertiser relationships, with 75% of direct revenue from repeating
clients(4).
o Indirect revenue grew by 10.4% to £37.1m (FY22: £33.6m) supported by
increased video views and audience growth. Web and social provide
diversification and multiple channels for growth driven by investment in
people and technology.
· Adjusted EBITDA up 10.8%, to £17.4m (FY22: £15.7m), demonstrating
strong year-on-year growth, with a healthy 26% margin (FY22: 25%).
· Adjusting for a reduction in the year-on-year profit contribution
from Australia underlying adjusted EBITDA would have grown by over 30%,
demonstrating the strength of our core operations.
· The Group continues to be highly cash generative with cash
conversion(5) of 76% (FY22: 37%).
· Cash and cash equivalents at the period-end amounted to £15.8m
(HY23: £32.7m, FY22: £29.3m), primarily reflecting the acquisition of
Betches. Cash and cash equivalents as of 17 April were £22.0m.
CEO, Solly Solomou commented:
"Our revenue and EBITDA growth in 2023 demonstrates the Group's unique
position and resilience in the face of some really testing market conditions.
The strategic and operational progress we have made this year provides impetus
and puts us in a strong position to realise our ambitions.
"Our global audience has increased to 452m and we have significantly
strengthened our presence in the US, the world's largest advertising market,
organically and through the acquisition of Betches. The scale of our audience,
strength of our brands, and market leading engagement within our communities
truly sets us apart and our ability to provide real-time insight and analysis
to clients is a unique selling point.
"We have always believed in our responsibility for using our platforms and
original content creation capabilities to champion socially responsible
causes. Major campaigns in the year have included the 'Have A Word' campaign,
with the Mayor of London, calling on men to challenge misogyny and partnering
with The Prince's Trust to safeguard young people's careers, among other
initiatives with charities such as If U Care Share and World Vision.
"As one of the world's largest digital entertainment businesses, our
relationships with large blue-chip advertisers continue to deepen and grow,
with an increasing roster of brands working with us year-after-year. We
operate in the largest and fastest growing segment of the advertising market
and provide an unparalleled proposition for brands wanting to access young
adult audiences. Combined with ongoing expansion in the US market and our
diverse revenue model, we are confident in our position to create significant
value for shareholders in the years ahead."
Outlook
Our positive revenue momentum and platform for growth in the US leaves the
Group at a significant juncture in its evolution and provides a clear line of
sight to achieving £200m of revenue.
We have made a good start to 2024, entering our second quarter with positive
momentum, along with the incremental impact of Betches and the ANZ operating
model changes.
As with prior years, revenue will be affected by the seasonality in
advertising spend, with adjusted EBITDA weighted towards H2 given that
operating costs are relatively evenly spread across the year. Notwithstanding
that, the Group remains on track to deliver market expectations(6) for the
full year.
Analyst Presentation
LBG Media plc will be hosting an analyst presentation on 18 April 2024.
Attendance is by invitation only. A recording of the presentation will be
available on the LBG Media plc website at
www.lbgmedia.co.uk/results-reports-presentations/results-and-presentations
(http://www.lbgmedia.co.uk/results-reports-presentations/results-and-presentations)
following the event.
Notes
(1) Video Views and Global Audience exclude Pubity and Memezar. Video Views
are across Facebook, Snapchat, TikTok, X, YouTube and Web. Global Audience
reflects social followers, unique podcast listeners and average monthly
website users in the 12 months to December 2023. US audience reflects number
of followers across our social channels and average monthly website users.
(2) Adjusted EBITDA - earnings before interest, tax, depreciation, and
amortisation adjusted for share based payments (including employers NIC as
appropriate) and adjusting items. Adjusted EBITDA margin is adjusted EBITDA
divided by Group Revenue represented as a percentage.
(3) Reduction in cash and cash equivalents over FY23 of £13.5m primarily
reflects the acquisition of Betches, completed in October 2023. Acquisitions
in the year totalled £17.6m, net of cash acquired.
(4) 75% of 2023 Direct Revenue from clients that ran campaigns with us in the
prior two years.
(5) Cash conversion is cash generated from operations pre-tax, adjusted for
impact of cash adjusting items divided by adjusted EBITDA.
(6) External market consensus for the year ending 31 December 2024 is
currently: Revenue of £86.1m and adjusted EBITDA of £23.5m.
For further information please contact:
LBG Media plc investors@ladbiblegroup.com
Solly Solomou, Co-founder & CEO
Richard Jarvis, CFO
Fiona O'Nolan, Investor Relations
Matthew Lee, Investor Relations
Zeus (Nominated Adviser & Broker) Tel: +44 (0) 161 831 1512
Dan Bate / Nick Cowles (Investment Banking) www.zeuscapital.co.uk (http://www.zeuscapital.co.uk/)
Benjamin Robertson (Equity Capital Markets)
Peel Hunt LLP (Joint Broker) Tel: +44 (0) 207 418 8990
Neil Patel www.peelhunt.com
Paul Gillam
Kate Bannatyne
Media Enquiries Tel: +44 (0) 20 7466 5000
www.buchanancom (http://www.buchanancom) ms.co.uk
Buchanan
Richard Oldworth / Chris Lane / Toto Berger / Jack Devoy
Notes to editors
LBG Media is a global digital entertainment business with a focus on young
adults and a leading disrupter in the digital media and social publishing
sectors. The Group produces and distributes digital content across a range of
mediums including video, editorial, image, audio, and experience (virtual and
augmented reality). Since its inception in 2012, the Group has curated a
diverse collection of specialist brands using social media platforms
(primarily Facebook, Instagram, Snapchat, X, YouTube and TikTok) and has built
multiple websites to reach new audiences and drive engagement. Each brand is
dedicated to a distinct popular interest point (e.g. sport, gaming etc.),
which is designed to achieve broader engagement, increase relevance and
ultimately build a loyal community of followers.
The Group operates two core routes to market: Direct revenue, which is
principally generated from the provision of content marketing services to
corporates, brand owners, marketing agencies and other entities such as
government bodies and where the relationship with the client is held directly
by LBG Media; and Indirect revenue, which is generated via a third-party, such
as a social media platform or via a programmatic advertising exchange / online
marketplace, which holds the relationship with the brand owner or agency.
CHAIR'S STATEMENT
Looking back at 2023, the quality of our colleagues has shone through
significantly in what has been a difficult year for the global entertainment
and digital advertising markets.
It is a testament to our people that we have faced the challenges head on and
delivered a good financial performance, continued our growth and made
strategic progress. Our ability to generate extraordinary content that
resonates with over 450m people globally is the most significant reflection of
the quality of our people and the leadership of our management teams.
The loyalty of our clients is also replicated by our other stakeholders,
including our shareholders, who continue to support the business and the
vision of the executive team. Their belief in our operations, model, and
ability to effectively engage with our social and digital following is
something that the Board and I are really thankful for.
Progress Achieved in 2023
Our ongoing financial momentum is reflected in revenue and adjusted EBITDA
growth of 7.5% and 10.8% respectively, supported by the acquisition of Betches
that has turbocharged our position in the world's largest advertising market,
the US, and strengthened our senior leadership team with the addition of its
three co-founders. In addition, the successful changes to our operating model
in ANZ demonstrate the flexibility of our business model.
Betches was a step-change acquisition and one which represents meaningful
progress against our three strategic pillars. With its focus on US-based
millennial and Gen Z female audiences, it materially expands our footprint in
the US and appeal to global brands. The deal brings major new clients to the
portfolio, unlocks new capabilities and, with a significant portion of
Betches' revenue being long-term recurring direct partnerships, strengthens
that income stream. We're already seeing positive results with joint pitch
wins for brands such as White Castle, Mars and Peacock. The founders of
Betches are brilliant leaders and share in our vision and outlook. I speak for
everyone when I say we are thoroughly excited by what the future holds.
Another important step taken by the business in the year was the way it
carried out a strategic review of reducing profitability in ANZ and took
considerate but prompt action to implement a new operating model. The
changes, which completed in Q4, reflect a new, low-risk model and sees us
partner with Val Morgan Digital, the largest online media publisher in
Australia, who will represent our brand through a strategic five-year
commercial partnership for the delivery of direct revenue. The changes also
saw us centralise our social and web operations into our UK centre of
excellence, providing a more efficient cost base for indirect revenue from the
region. The steps were critical in ensuring we deploy our resources optimally
while maintaining a foundation for sustainable growth, and the learnings
represent a blueprint for opportunities in other regions.
While operating through challenging market conditions, our cash generative
nature is a significant strength, and we maintained a £15.8m cash position at
year-end. This enables us to rapidly deploy capital into new growth
initiatives as they arise, both organically and inorganically, and our
ambition in that regard remains undiminished.
Social Responsibility & Governance
Our position as a socially responsible organisation is founded on our ability
to engage with our audience, giving them a voice by building communities that
laugh, think and act. This is a fundamental enabler of our success, and we
will stay true to these core values in the years ahead.
Board and Management Changes
During the year, Arian Kalantari stepped down from the Board and I would like
to thank him for his contribution to LBG Media. With our excellent team, we
are grateful that his operational responsibilities have been seamlessly
distributed to the newly formed senior leadership team.
Tim Croston notified the Board of his intention to retire from a full-time
executive role and he formally stood down from the Board on 12 April 2023,
with Richard Jarvis joining the Board as CFO on 12 April 2023. I'd also like
to welcome Aleen Dreksler, Jordana Abraham and Samantha Sage, the Betches
co-founders, to the senior leadership team. We believe there is a very strong
cultural fit between the businesses and the strength of the combined
leadership across the organisations is already bearing early fruit.
At all levels of our business, the creative culture and talent is as strong as
it has ever been, and all 446 people bring unique perspective. A combination
of skills, ambition and focus on our strategic pillars will continue to
provide the fuel for our growth in the coming years.
Outlook
Our global digital entertainment business, which is focused on young adults
and operates in the biggest and fastest growing sectors of the advertising
market, presents a unique and highly differentiated proposition. We have an
audience that is growing at scale, and our brand recognition is deep-rooted
within our communities and drives our market-leading user engagement. The
insight and analysis we can provide our brands and partners is unmatched and
is a direct result of the profound understanding we have of our audience. The
combination of these factors provides the business a competitive edge, and our
diversified revenue model, with robust margins and high cash conversion, is a
significant attraction for investors.
The acquisition of Betches, combined with our existing footprint in the US,
has put LBG Media in a strong position to progress in the US market, where the
opportunity is substantial. Betches' highly complementary capabilities means
we finished 2023 with an even more diverse offering, and the Board remains
confident in the Group's ability to capitalise on the growing market in
digital advertising and create significant value for shareholders in the years
ahead.
Dave Wilson
Chair
17 April 2024
CHIEF EXECUTIVE'S REVIEW
2023 was another year of progress for LBG Media. Our global audience increased
to 452m, our video views reached a record 128bn, we continued with our US
expansion with the step-change acquisition of Betches and we demonstrated
flexibility in our operating model with the positive changes we made in
Australia and New Zealand.
Our market leading engagement and growth in global audience makes us even more
attractive for brands and agencies seeking to reach our highly engaged young
adult audience. The combination of our existing footprint in the US, and the
addition of Betches, provides us with an excellent foundation from which to
build market share in the largest advertising market in the world; and we are
already seeing the benefits, with multiple joint blue-chip account wins.
LBG Media has evolved into a global entertainment platform, able to create
content that is engaging and resonates with hundreds of millions of people
through a range of media. Our talent and dedication to our core mission, which
is to give young adults a voice by building communities that laugh, think and
act, ensures we remain true to our purpose and fuels our growth.
Market
The global advertising market continued to grow in 2023 and is now valued at
$889bn, with digital representing nearly 70% of that total, despite well
documented macroeconomic headwinds. Digital continues to outstrip traditional
forms of advertising, rising by 9.2% in 2023. The Group's pace of adoption and
innovation with changing forms of content, such as the shift to short-form
video in the second half of 2022, continue to align us with some of the
fastest and highest growth areas. We are well placed to experiment and take
advantage of the opportunities that technologies such as AI present and which
can benefit the industry. We estimate that across our core geographies, which
have significant levels of advertising spend, the opportunity for the Group is
substantial and, with our progression in the US market, we are well positioned
for future growth.
Financial Performance
The Group achieved 7.5% revenue growth in the year to £67.5m (FY22: £62.8m).
Adjusted EBITDA increased by 10.8% to £17.4m (FY22: £15.7m). £0.1m of
adjusted EBITDA was generated by Betches. This growth was understandably
impacted by the reduction in the year-on-year profit contribution from ANZ,
which is why we took decisive action in the fourth quarter of the year to
address this underperformance and implement a more effective operating model.
We incurred a total of £3.7m of costs which were adjusting items this year,
the majority of which relate to the combination of our acquisition activities
along with restructuring costs in ANZ and, as a result, profit before tax was
reduced at £5.9m (FY22: £7.3m).
Our advertiser relationships continue to grow, with direct revenue increasing
to £29.3m (FY22: £27.8m). This includes £2.3m of direct revenue
contribution from Betches, partially offset by the impact from a year-on-year
decline within our ANZ operations. During the year, the Group supported and
partnered with a growing list of global brands including The AA, Disney,
Jacamo, Ladbrokes, Nike, NOW, Samsung, Sky Betting & Gaming, VOXI by
Vodafone and Warner Bros. Our brief conversion continued to improve in the
year, reinforcing the strength of our proposition and quality of our
execution, something that is further evidenced by our repeat client revenue -
three-quarters of direct revenue achieved in the year came from clients who
have worked with us in the prior two years.
Indirect revenue in the year was up 10.4% to £37.1m (FY22: £33.6m) achieved
via a combination of an increase in monetised views on social media platforms,
as well as good growth from our owned and operated websites. We continue to
realise positive benefits within indirect from our investment in people and
technology, with web and social providing diversification and multiple
channels for growth. It is worth noting that indirect revenue was also
impacted by weaker performance in ANZ and the strong outturn comes despite
these challenges.
Strategic Progress
Key areas of progress in the year are summarised below:
Betches: The acquisition of Betches in October 2023 was a significant
milestone for the Group. The combined business now has a significantly
enlarged footprint and set of capabilities in the US, a market which forms a
core part of our growth ambitions. Integration between the businesses has been
progressing well and with its high-quality financial profile, the addition of
several new capabilities to the Group, including podcasts and newsletters, and
an excellent team, we remain thoroughly excited by the opportunities ahead.
ANZ Operating Model: In response to revenue and profitability challenges
experienced in the region, in Q4 2023 we announced a new and more efficient
operating model, effective from January 2024. This involved the centralisation
of social and web operations into our UK centre of excellence at a more
efficient cost base for indirect revenue, whilst we also leveraged a new
five-year strategic partnership model with the largest online media publisher
in Australia, Val Morgan Digital, for the delivery of direct revenue. The
changes unfortunately necessitated a number of redundancies in the region, but
that exercise was undertaken with the utmost care and professionalism,
including being able to transfer a number of the team to Val Morgan Digital.
Moving into 2024, the new model provides a foundation for sustainable growth
in the region, as well as a potential partnership blueprint that we could look
to adopt in new regions around the world.
Bolt-on Acquisitions: We have continued with the strategy of acquiring bolt-on
social media pages, and during FY23 acquired the social and web assets of
Lessons Learned in Life (LLIL) for £0.5m. For the right complementary assets,
this is a proven and successful strategy with assets typically achieving
payback in less than a year.
Manchester Studio: To enhance the Group's production capabilities, a
high-quality new Manchester studio was opened in November 2023. This facility
will enable the Group to produce more engaging, fresh, new content for
publications across our social media pages and websites, as well as developing
our podcast offering.
UNILAD Tech: In November 2023, the Group launched the UNILAD Tech website.
Leveraging the success of the UNILAD Tech social media pages, the new website
provides the Group with the opportunity to further monetise its audience
through programmatic advertising sales. The UNILAD Tech website becomes the
Group's seventh active website and collectively, the Group's editorial
websites reach over a third of UK adults each month, resulting in billions of
page views annually.
Social Responsibility & Recognition
We have always placed a great emphasis on having a positive impact by tackling
complex social issues. During the year LBG Media was the official media
partner for the Mayor of London's 'Have a Word' campaign, calling on men to
challenge misogyny and we were also directly engaged by The Prince's Trust to
carry out research into the careers of young adults.
We won multiple awards in the year for our excellent campaign work, most
notably our Tango Berry Peachy campaign, which won four separate awards at
Media Week, Digiday Content Marketing and Campaign Media. We have continued to
partner with excellent brands to deliver high quality, engaging content that
has driven strong audience engagement and this is reflected in both our growth
in global audience and video views.
Board Changes
Arian Kalantari resigned from the Board in July 2023. His operational
responsibilities were distributed among colleagues and will now be permanently
retained by those members of the Group's established and strong leadership
team. I would like to thank Arian for his support over the years, both in the
terms of the vital contribution to the founding of the business and the years
of success that have been achieved since. It has been a great pleasure to work
side-by-side with my good friend and I wish him all the best and look forward
to his continued support as a shareholder.
I would also like to thank Tim Croston for his hard work and dedication over
the past few years as our CFO.
Clear Line of Sight to Revenue Opportunity
The operational and strategic progress that we made last year, combined with a
strengthened senior leadership team, bringing a valuable range of experience,
capabilities and disciplines into the business, places us in an excellent
position to address the opportunities in front of us. The positive momentum in
our direct and indirect businesses, as well as our expansion in the US, where
the opportunity is substantial, provides a clear line of sight to achieving
£200m of revenue. Underpinning this opportunity is our high levels of cash
generation, giving the Group the ability to deploy capital to support our
organic growth and acquisitions.
2023 was a year of good progress and has positioned the Group to continue to
deliver profitable growth in the years ahead and we look forward to updating
shareholders on our progress.
Solly Solomou
Chief Executive
17 April 2024
Chief Financial Officer's Review
Revenue
FY23 FY22 Change
Unaudited Audited (%)
(£m) (£m)
Direct 29.3 27.8 5.5%
Indirect 37.1 33.6 10.4%
Other 1.1 1.4 (25.1)%
Revenue 67.5 62.8 7.5%
Group revenue increased 7.5% to £67.5m (FY22: £62.8m), with the acquisition
of Betches Media, LLC ("Betches") in October 2023 accounting for £2.3m of
this increase. Organic revenue growth was 4%, which is a solid result given
economic headwinds and challenges in ANZ.
Direct revenue grew 5.5% to £29.3m, reflecting progress across both new and
existing clients.
Indirect revenue, which is diversified across our social and web revenue
streams grew by 10.4% overall due primarily to the increases driven in both
our social video views and our web sessions. The increase in social video
views to 128bn (FY22: 98bn) reflected us embracing the shift to short-form
video in late 2022 and our capabilities in increasing the production of
engaging content across our platforms. This has continued to mitigate the
year-on-year pressure on social yields that accompanied that market shift.
Yields from advertising on our owned and operated web sites benefitted from
investment over the year on people and technology in this area.
Other revenue of £1.1m which represents minor revenue streams such as content
licencing was £0.4m lower than the prior year.
Operating expenses
Operating expenses excluding depreciation, amortisation, impairment,
share-based payment charges and adjusting items, amounted to £50.1m (FY22:
£47.6m). The increase of £2.5m includes £2.2m of costs from Betches that
were not in the prior year comparative.
Adjusted EBITDA
Adjusted EBITDA of £17.4m (FY22: £15.7m), represented 10.8% growth on the
prior year with a post-acquisition contribution of £0.1m from Betches).
Adjusted EBITDA is used for internal performance analysis to assess the
execution of our strategy and is a benchmark that has been used by management
and the investment community to assess the performance of the Group since IPO.
As such, management believe that this adjusted measure is an appropriate
measure to assess the performance of the Group. Note that using adjusted
EBITDA produces a materially different result to the most closely related GAAP
measure, being Profit Before Tax. It is therefore important to understand the
nature of items that constitute that difference, which are discussed below.
Depreciation & Impairment
Depreciation of £2.1m (FY22: £1.6m) was up 27.9%, mainly reflecting new IFRS16 property leases in the UK. Additionally, £0.3m (FY22: £nil) was incurred due to the impairment of lease assets associated with the closure of Australia offices, net of the release of dilapidation provisions.
Amortisation
Amortisation of £1.4m (FY22: £0.8m) was up 70.3% due to the impact of
intangible assets acquired through business combinations.
Share based payment charges:
Share based payment costs were £3.9m (FY22: £3.6m), up 8.5% due to the impact of new schemes in 2023.
Adjusting items
Adjusting items are other items that are not indicative of the underlying
performance of the business and are therefore adjusted to ensure consistency
between periods. These totalled £3.7m (FY22: £2.2m) within the year, with
the key items summarised as follows:
Business reorganisations - ANZ:
On 8 November 2023, the Group announced changes to the Group's operating model
within Australia and New Zealand. This change involved centralising the social
and web operations into the UK, as well as appointing a third-party partner,
Val Morgan Digital, to perform commercial operations in Australia. Significant
one-off costs, including redundancy for 60 people, were incurred and
categorised as adjusting items to better reflect the underlying performance of
the Group. These adjusting items total £1.4m and include £1.2m of staff
related costs and £0.2m of non-staff related costs.
Costs associated with business reorganisations - Non-ANZ:
Costs associated with team member reorganisations of £0.6m relates to exit
costs of personnel leaving the business due to reorganisations within our
operating divisions and Board. £0.4m of that cost relate to Board level
changes due to both the resignation of the CFO in April 2023 which led to some
dual CFO costs and the resignation of the COO in July 2023 who left the
business at that point. Due to the nature of these costs, management deem them
to be adjusting items in order to better reflect the underlying performance of
the Group. Exit costs outside of these circumstances are treated as operating
expenses.
One-off retention payment:
Recognising a set of unique circumstances of stabilising and retaining staff
following the large reorganisation in the last quarter of 2022 that was also
compounded by the cost-of-living crisis, the Group made a one-off payment to
employees to mitigate retention risks. This payment was fully repayable if
they chose to leave within the year. Due to the one-off nature of this payment
and to facilitate meaningful understanding of underlying performance and
comparison with prior and future years the cost of £0.6m has been considered
an adjusting item.
Acquisition related fees:
Acquisition related costs of £1.1m include legal, professional advisory and
other costs directly attributable to the acquisition of Betches in October
2023, and other acquisitions.
Tax settlement:
In the prior year the Group agreed to settled pre-IPO PAYE liability of £0.2m
which was treated as a one-off adjusting item. Following a settlement
agreement with HMRC in 2023, this liability was reduced by £0.1m and a credit
to adjusting items was made and, for consistency with prior year,
classification this has been shown as an adjusting item.
Total adjusting items in the prior year of £2.2m related to business
reorganisations (£1.6m), US set up costs (£0.6m), tax settlements (£0.3m)
and amounts recoverable from Bentley Harrington (£0.3m credit).
Net finance costs
Net finance costs increased by £0.3m to £0.5m (FY22: £0.2m). The movement
relates to an increase of £0.4m in finance costs mainly driven by the
unwinding of the discount on contingent consideration of £0.3m regarding
Betches, offset by an increase in finance income of £0.1m.
Share of JV
Share in joint ventures was £0.3m (FY22: £0.0m), representing our share in
the results of Pubity Group Ltd.
Profit before tax
Profit before tax decreased to £5.9m (FY22: £7.3m), due to the higher
adjusting items in the year. Betches accounts for £0.1m of profit before tax.
A reconciliation between adjusted EBITDA and Profit Before Tax can be found on
the Consolidated statement of comprehensive income.
Taxation
The tax charge for the year was £4.3m (FY22: £2.0m). Tax has increased due
to the UK becoming relatively more profitable, with higher losses generated in
Australia and New Zealand than in the prior year (see discussion of change in
ANZ operating model).
Key performance indicators ("KPIs")
The board monitors progress of the Group by reference to the following KPIs:
FY23 FY22 Change Change
Unaudited (£m) (£m) (%)
(£m)
Financial
Revenue 67.5 62.8 4.7 7.5%
Adjusted EBITDA 17.4 15.7 1.7 10.8%
Adjusted EBITDA margin (%) 26% 25% - 1% pts
Profit before tax 5.9 7.3 (1.4) (18.9)%
Profit before tax as a % of revenue 9% 12% - -
Non-Financial
Global audience (m)* 452 366 86 24%
Video views (bn)* 128 98 30 31%
Average number of employees 446 470 (24) (5)%
* Video Views and Global Audience exclude Pubity and Memezar. Video Views are
across Facebook, Snapchat, TikTok, X, YouTube and Web. Global Audience
reflects social followers, unique podcast listeners and average monthly
website users in the 12 months to December 2023.
Acquisitions
On 17 October 2023, the Group acquired the entire share capital of Betches for
a total consideration of £29.2m.
Betches is a US-based media brand founded by women and focused on digital
media content production and publication for women.
Consideration for the acquisition was entirely in cash, with no shares in the
Group issued to the sellers. The cash consideration is comprised of £19.3m
funded from existing cash resources, with up to a further US$30m cash
consideration payable in instalments (£23.5m at the closing balance sheet
rate), subject to Betches achieving certain revenue and EBITDA targets to
2026. The contingent consideration is payable in annual tranches from March
2024 up until March 2026.
Of the maximum contingent consideration of £23.5m (US$30.0m) payable to the
sellers, based upon revenue and EBITDA forecasts at the date of acquisition, a
total of £9.6m (US$12.0m) is management's best estimate of the amount payable
within a range of potential outcomes, after taking into account the time value
of money. At the year end, this is valued at £9.5m, after unwinding the
discount.
Unaudited balance sheet
Net assets grew to £65.2m (FY22: £61.2m) as a result of Group trading
performance.
Net current assets decreased to £29.0m (FY22: £43.8m), with the reduction
due primarily to the acquisition of Betches, offset by trading performance
(see cash flow section below).
Trade and other receivables grew to £28.8m (FY22: £20.4m). The majority of
the increase relates to a year-on-year rise in trade receivables of £7.6m,
which was attributable to delays in recovery of debtors from major media
agencies. The Group continues to trade with the major media agency groups and
social platforms and whilst the aging profile at the year end has worsened, we
are fully confident of their recoverability, which is reflected in the IFRS 9
assessment and supported by the receivables collected since the year end.
Trade and other payables increased to £8.9m (FY22: £4.3m). Trade payables
increased by £1.7m to £2.8m, with the increase due primarily to unpaid
acquisition costs at the year end.
Accruals increased by £1.3m to £3.2m, mainly relating to an increase in the
closing bonus provisions of £0.7m (FY22: £nil) and Betches accruals of
£0.8m (FY22: £nil). Other payables increased by £0.7m to £1.0m driven by a
£0.4m increase in cash-settled share based payment liabilities.
Contingent consideration of £9.5m in relation to the acquisition of Betches
is recorded at the year end.
Included in non-current assets are intangible assets of £39.8m (FY22:
£15.4m) with the increase related to the acquisition of Betches in October
2023, which gave rise to new intangible assets and goodwill totalling £25.8m.
Within the year the UK office space was renovated including the fit out of a
new Manchester studio at a cost of £0.2m. New lease agreements in London and
Manchester completed in the year, the value of these new lease additions under
IFRS16 is £2.7m.
Deferred tax liabilities increased by £0.4m in the year to £0.5m (FY22:
£0.1m).
Included within reserves movements in the year is a £1.1m currency
translation difference (FY22: £29k credit). The increase in the year relates
to foreign exchange movements on intercompany loans.
Unaudited cashflow and cash position
Cash at the year-end amounted to £15.8m (FY22: £29.3m). Net cash generated
from operations increased to £10.1m (FY22: £1.3m), with the prior year being
impacted by the settlement of IPO related liabilities and bonuses. Pre-tax
adjusted cash conversion was 76% (FY22: 37%).
Net cash outflows due to investing activities increased to £19.6m (FY22:
£2.2m), driven by the acquisition of Betches for £17.6m (initial cash
outlay, net of cash acquired).
Net cash outflows due to financing activities decreased by £0.6m to £0.9m
(FY22: £1.5m), driven by £0.5m of lease deposits received.
Richard Jarvis
Chief Financial Officer
17 April 2024
UNAUDITED Consolidated statement of comprehensive income
Unaudited Audited
Year ended Year ended
31 December 2023 31 December 2022
£'000 £'000
Revenue 67,510 62,809
Net operating expenses (61,423) (55,810)
(Increase)/decrease in expected credit losses of trade receivables (22) 467
Operating profit 6,065 7,466
Analysed as:
Adjusted EBITDA1 17,368 15,682
Depreciation (2,088) (1,633)
Amortisation (1,369) (804)
Impairment2 (318) -
Share based payments charge (3,853) (3,552)
Adjusting items (3,675) (2,227)
Operating profit 6,065 7,466
Finance income 106 18
Finance costs (565) (161)
Net finance costs (459) (143)
Share of post-tax profits of equity accounted joint venture 331 -
Profit before taxation 5,937 7,323
Income tax expense (4,271) (1,976)
Profit for the financial year attributable to equity holders of the company 1,666 5,347
Currency translation differences (1,082) 29
Profit and total comprehensive income for the financial year attributable to 584 5,376
equity holders of the company
Basic earnings per share (pence) 0.8 2.6
Diluted earnings per share (pence) 0.8 2.5
1 Adjusted EBITDA, which is defined as profit before net finance
costs, tax, depreciation, amortisation, impairment, share based payment charge
and adjusting items is a non-GAAP metric used by management and is not an IFRS
disclosure.
2 Impairment is stated net of the release of dilapidation provision of
£242k against property, plant and equipment, impaired, of £560k.
unaudited Consolidated statement of financial position
As at As at
31 December 2023 31 December 2022
(unaudited) (audited)
£'000 £'000
Assets
Non-current assets
Goodwill and other intangible assets 39,782 15,436
Property, plant and equipment 5,982 3,670
Investments in equity-accounted joint ventures 690 359
Other receivables 198 592
Deferred tax asset 24 260
Total non-current assets 46,676 20,317
Current assets
Trade and other receivables 28,765 20,370
Current tax asset 62 378
Inventory 27 -
Cash and cash equivalents 15,800 29,268
Total current assets 44,654 50,016
Total assets 91,330 70,333
Equity
Called up share capital 207 206
Share premium reserve 28,993 28,993
Accumulated exchange differences (1,053) 29
Retained earnings 37,006 31,998
Total equity 65,153 61,226
Liabilities
Non-current liabilities
Non-current lease liability 2,975 1,960
Provisions 446 540
Non-current contingent consideration 6,523 -
Deferred tax liability 556 394
Total non-current liabilities 10,500 2,894
Current liabilities
Current lease liability 2,507 1,282
Trade and other payables 8,906 4,295
Current contingent consideration 3,016 -
Current tax liabilities 1,248 636
Total current liabilities 15,677 6,213
Total liabilities 26,177 9,107
Total equity and liabilities 91,330 70,333
Unaudited Consolidated statement of cash flows
Year ended Year ended
31 December 2023 31 December 2022
(unaudited) (audited)
£'000 £'000
Net cash flow from operating activities
Profit for the financial year 1,666 5,347
Income tax 4,271 1,976
Net interest expense 459 143
Share of post-tax profits of equity accounted joint venture (331) -
Operating profit 6,065 7,466
Depreciation charge 2,088 1,633
Amortisation of intangible assets 1,369 804
Impairment 318 -
Share based payments 3,853 3,552
Loss/(gain) on disposal of property, plant and equipment (30) 21
Increase in trade and other receivables (4,151) (5,210)
Increase/(decrease) in trade and other payables 588 (6,971)
Cash generated from operations 10,100 1,295
Tax paid (2,898) (2,693)
Net cash generated from/(used in) operating activities 7,202 (1,398)
Cash flows from investing activities
Purchase of intangible assets (1,045) (1,675)
Purchase of property, plant and equipment (954) (544)
Stamp duty paid (26) -
Acquisition of subsidiary, net of cash acquired (17,580) -
Net cash used in investing activities (19,605) (2,219)
Cash flows from financing activities
Lease payments (1,323) (1,227)
Lease deposits paid (23) (105)
Lease deposits received 544 -
Proceeds from share issue 1 -
Interest paid (142) (121)
Net cash used in financing activities (943) (1,453)
Net decrease in cash and cash equivalents (13,346) (5,070)
Cash and cash equivalents at the beginning of the year 29,268 34,338
Effect of exchange rates on cash and cash equivalents (122) -
Cash and cash equivalents at the end of the year 15,800 29,268
Unaudited Consolidated statement of changes in equity
Share capital Share premium Accumulated exchange differences £'000 Retained earnings Total equity
£'000 £'000 £'000 £'000
Balance as at 1 January 2022 (audited) 206 28,993 - 23,082 52,281
Profit for the financial year - - - 5,347 5,347
Currency translation differences - - 29 - 29
Total comprehensive income for the year - - 29 5,347 5,376
Share based payments - - - 3,552 3,552
Deferred tax on share options - - - 17 17
Total transactions with owners, recognised directly in equity - - - 3,569 3,569
Balance as at 31 December 2022 and 1 January 2023 (audited) 206 28,993 29 31,998 61,226
Profit for the financial year - - - 1,666 1,666
Currency translation differences - - (1,082) - (1,082)
Total comprehensive income for the year - - (1,082) 1,666 584
Issue of shares in the year 1 - - - 1
Share based payments - - - 3,853 3,853
Equity settled share options switched to cash settled share options - - - (494) (494)
Deferred tax on share options - - - (17) (17)
Total transactions with owners, recognised directly in equity 1 - - 3,342 3,343
Balance as at 31 December 2023 (unaudited) 207 28,993 (1,053) 37,006 65,153
Notes to the Unaudited consolidated financial statements
1. General information
The principal activity of LBG Media plc ('the Company') is that of a holding
company and the principal activity of the Company and its subsidiaries ('the
Group') is that of an online media publisher. The Company was incorporated on
20 October 2021 and is a public company limited by shares registered in
England and Wales. The registered office of the Company is 20 Dale Street,
Manchester, M1 1EZ. The Company registration number is 13693251.
2. Basis of preparation
The preliminary results for the year ended 31 December 2023 are unaudited. The
financial information set out in this announcement does not constitute the
Group's financial statements for the year ended 31 December 2023 as defined by
Section 434 of the Companies Act.
This financial information has been prepared in accordance with international
accounting standards in conformity with the requirements of the Companies Act
2006. It has been prepared on the historical cost basis, except for those
items which are measured at fair value.
This financial information should be read in conjunction with the financial
statements of LBG Media plc for the year ended 31 December 2022 (the "Prior
year financial statements"), which are available from the Registrar of
Companies. The Prior year financial statements which were prepared in
accordance with UK adopted international accounting standards (UK IFRS) and
the applicable legal requirements of the Companies Act 2006. The auditors, BDO
LLP, reported on those accounts and their report was unqualified, did not
contain an emphasis of matter paragraph and did not contain any statement
under Section 498 (2) or (3) of the
Companies Act 2006.
The Group's financial statements for the year ended 31 December 2023 will be
finalised on the basis of the financial information presented by the Directors
in these preliminary results and will be delivered to the Registrar of
Companies following the Annual General Meeting of LBG Media plc.
3. Going concern
The Group generated profit after tax of £1.7m during the year ended 31
December 2023 (FY22: £5.3m) and, at that date, the Group's total assets
exceeded its total liabilities by £65.2m (FY22: £61.2m) and it had net
current assets of £29.0m (FY22: £43.8m). Cash generated from operations in
the year was £10.1m (FY22: £1.3m).
The financial statements for the Group and Parent Company have been prepared
on a going concern basis. Under a worst-case scenario considered, which is
severe and considered highly unlikely, the Group remains liquid for a period
of 12 months from the date of reporting and the Directors therefore believe,
at the time of approving the financial statements that the Group is well
placed to manage its business risks successfully and remains a going concern.
The key facts and assumptions in reaching this determination are summarised
below.
The financial position remains robust with cash of £15.8m available to the
Group and no debt (excluding IFRS 16 lease liabilities) and therefore no bank
covenants in place. Our base case scenario has been prepared using a budget
that considers both the challenges and opportunities faced by the business.
Due to the strength of the Group's balance sheet and market outlook, the
Directors believe there is no material uncertainty around going concern. To
this end a reverse stress test scenario has also been modelled, whereby 60% of
budgeted revenue from April 2024 was removed within the Group up to June 2025
with no change to costs assumptions in response, resulted in cash reducing to
nil in March 2025.
4. Revenue
The trading operations of the Group are in the online media publishing
industry and are all continuing. All assets of the Group reside in the UK with
the exception of £1,311k of property, plant and equipment held in the United
States (2022: £15k), £63k held in Australia (2022: £904k) and £59k held in
Ireland (2022: £44k).
Analysis of revenue
The Group's revenue and operating profit relate entirely to its principal
activity. Note that gross margin is not assessed separately for the revenue
streams below.
The analysis of revenue by stream is:
Unaudited Audited
2023 2022
£'000 £'000
Direct 29,349 27,806
Indirect 37,111 33,601
Other 1,050 1,402
67,510 62,809
The geographical analysis of revenue by customer location is:
Unaudited Audited
2023 2022
£'000 £'000
United Kingdom 24,230 23,579
Ireland 26,379 25,485
Australia 4,206 4,476
US 9,571 7,102
Rest of the World 3,124 2,167
67,510 62,809
Major customers
In 2023 there was 1 major customer that individually accounted for at least
10% of total revenue (2022: 2) (Customer A: 34%) (2022: Customer A: 33% and
Customer B: 11%). The total revenues relating to this customer in 2023 was
£23,203k (2022: total revenues relating to both customers amounted
to £27,623k).
5. Net operating expenses
Unaudited Audited
2023 2022
£'000 £'000
Employee benefit expense 32,093 28,344
Amortisation 1,369 804
Depreciation 2,088 1,633
Impairment 318 -
Auditor's remuneration 275 217
Legal and professional 1,721 1,513
Media costs 5,841 7,391
Production costs 5,285 4,646
Travel and expenses 1,366 1,648
Establishment costs 6,481 5,658
Foreign currency (gain) / loss (110) 898
Adjusting items 3,675 2,227
Other expenses 1,021 831
Total net operating expenses 61,423 55,810
Auditor's remuneration in 2023 includes £260k (2022: £180k) for the audit of
the Group (£15k for the audit of the Company; 2022: £10k); and £nil (2022:
£37k) for half year audit.
A breakdown of adjusting items is provided below:
Unaudited Unaudited Audited Audited
2023 Gross 2023 2022 2022
£'000 Tax Impact Gross Tax Impact
£'000 £'000 £'000
Costs associated with business reorganisations - ANZ 1,371 406 - -
Acquisition related fees 1,141 331 - -
One-off retention payment in 2023 621 158 - -
Costs associated with business reorganisations - Non-ANZ 609 152 1,571 298
US Setup costs - - 626 205
Amounts recoverable from Bentley Harrington - - (335) (64)
Tax (credits)/settlements (67) (17) 365 69
Total adjusting items 3,675 1,030 2,227 509
The blended tax rates for each adjusting item differ due to the costs being
incurred within different jurisdictions, thus incurring tax at differing
rates.
Costs associated with business reorganisations - ANZ
On 8 November 2023, the Group announced changes to the Group's operating model
within ANZ to address declining profitability. This change involved
centralising the Social and Web operations into the UK, as well as appointing
a third-party partner, Val Morgan Digital, to perform commercial operations in
Australia and New Zealand. Significant costs were incurred, mainly the
termination costs of the local team members that didn't transfer to Val Morgan
Digital and it is appropriate to categorise these costs as adjusting items to
better reflect the underlying performance of the Group.
These adjusting items total £1,371k and include £1,210k of staff related
costs and £161k of non-staff related costs. Of the total cost of £1,371k,
£964k was paid within 2023, with the remaining balance of £407k being
accrued at the year end date.
Acquisition related fees
Acquisition related costs of £1,141k include legal, professional advisor and
other costs directly attributable to the acquisition of Betches Media, LLC in
October 2023, and other target acquisitions. Of the total cost of £1,141k
within the current year, £828k was paid within 2023, with the remaining
balance of £313k being accrued at the year end date.
One-off retention payment in 2023
Recognising a set of unique circumstances of stabilising and retaining staff
following the large reorganisation in the last quarter of 2022 that was also
compounded by the cost-of-living crisis, the Group made a payment of £710k to
employees to mitigate retention risks. This payment was fully repayable if
they chose to leave within the year, £89k was recovered in the year as a
result of leavers. Due to the one-off nature of this payment and to facilitate
meaningful understanding of underlying performance and comparison with prior
and future years this has been considered an adjusting item. The cost of
£621k was recognised in full within the year and there is no outstanding
liability at the year end.
Costs associated with business reorganisations - Non-ANZ
Costs associated with team member reorganisations of £609k relate to exit
costs of personnel leaving the business due to reorganisations within our
operating divisions and Board. £397k of that cost relate to Board level
changes due both the resignation of the CFO in April 2023 which led to
some dual CFO costs and the resignation of the COO in July 2023 who left the
business at that point. The remaining £212k relates to the exit costs of
senior team members. Due to the nature of these costs, management deem them to
be adjusting items in order to better reflect the underlying performance of
the Group. Exit costs outside of these circumstances are treated as operating
expense.
Of the total cost of £609k within the current year, £457k was paid within
2023, with the remaining balance of £152k being accrued at the year end date.
In the prior year, the cost of £1,571k was paid within 2022, with £nil
accrued at the year end.
US Setup costs
The Group opened its first office in New York in the second half of 2022.
Costs of the initial setup of the US business were classified as adjusting
items within the prior year. These costs totalled £626k and related to the
cost of US employees engaged with the setup of the new business (including
their travel and accommodation costs), the incremental costs of employees
seconded to the US business, as well as legal and advisory fees. Initial setup
activities included rebranding of UNILAD to target the US market, sourcing
premises and staff recruitment. As all of these costs were incurred prior to
any US revenue being earned by the Company management deemed it appropriate to
classify these costs as adjusting items as they were not indicative of the
underlying performance of the business. Given the US is revenue generating in
2023, there are no adjusting items in the year.
Amounts recoverable from Bentley Harrington
At the end of 2020 a receivable of £1,180k was recorded as an asset. This
relates to amounts due from Bentley Harrington Limited - a company in
administration. In October 2018, the group had acquired a loan from a creditor
of Bentley Harrington Limited of £5,000k. The receivable at the end of 2020
was in relation to this loan. In 2021, £1,204k was received from the
administrators of Bentley Harrington Limited, being £24k more than the amount
included as receivable at 31 December 2020. Consistent with prior years, the
£24k difference was then recorded as an adjusting item (as the receipt was in
relation to transactions outside the normal course of business). Within 2022 a
further receipt of £335k was received relating to statutory interest not
accrued at the end of 2021. Again, this was recognised as an adjusting item in
the prior year.
Tax (credits)/settlements
In the prior year, the Group agreed to settle a PAYE liability on behalf of
two employees, totalling £224k. As this was a one-off settlement, it was
classified as an adjusting item. In the year, following a settlement agreement
with HMRC this liability was reduced by £67k and the revised liability of
£157k was paid in full. Consistent with prior year, as this was a one-off
settlement, this has been classified as an adjusting item.
In the prior year, the Group also recorded a tax liability of £141k in
relation to historic underpaid state payroll taxes in Australia. This was
identified following a change in tax advisor and a subsequent review of tax
positions. As the quantum of the liability was not indicative of the future
state payroll tax charge, this cost was classified as an adjusting item.
6. Earnings per share
There is no difference between profit as disclosed within the statement of
comprehensive income and earnings used within the earnings per share
calculation for the reporting periods.
Basic earnings per share calculation:
2023 2022
Earnings per share from continuing operations
Earnings, £'000 1,666 5,347
Number of shares, number 206,542,642 205,714,289
Earnings per share, pence 0.8 2.6
Diluted earnings per share calculation:
2023 2022
Diluted earnings per share from continuing operations
Earnings, £'000 1,666 5,347
Number of shares, number 217,710,005 211,879,344
Diluted earnings per share, pence 0.8 2.5
Reconciliation from weighted average number of shares used in basic earnings
per share to diluted earnings per share:
2023 2022
Number of shares in issue at the start of the period 205,714,289 205,714,289
Effect of shares issued in period 828,353 -
Weighted average number of shares used in basic earnings per share 206,542,642 205,714,289
Employee share options 11,167,363 6,165,055
Weighted average number of shares used in diluted earnings per share 217,710,005 211,879,344
7. Goodwill and other intangible assets
Trademarks Software Relationships Brand Content library Goodwill Social Media Pages Total
and licences
£'000 £'000 £'000 £'000 £'000 £'000 £'000
£'000
Cost
At 1 January 2022 28 639 1,300 4,626 300 10,094 - 16,987
Additions - 544 - 57 - - 1,074 1,675
Exchange adjustments - - - 11 - - - 11
At 31 December 2022 28 1,183 1,300 4,694 300 10,094 1,074 18,673
Additions - 524 - - - - 521 1,045
Acquired through business combinations - - 3,850 6,744 - 15,197 - 25,791
Exchange adjustments - - (164) (294) - (646) (21) (1,125)
At 31 December 2023 28 1,707 4,986 11,144 300 24,645 1,574 44,384
Accumulated amortisation
At 1 January 2022 21 236 420 1,454 298 - - 2,429
Charge for the year 6 122 129 493 - - 54 804
Exchange adjustments - 1 1 2 - - - 4
At 31 December 2022 27 359 550 1,949 298 - 54 3,237
Charge for the year - 266 225 642 2 - 234 1,369
Exchange adjustments - - - (2) - - (2) (4)
At 31 December 2023 27 625 775 2,589 300 - 286 4,602
Net book value
At 1 January 2022 7 403 880 3,172 2 10,094 - 14,558
At 31 December 2022 1 824 750 2,745 2 10,094 1,020 15,436
At 31 December 2023 1 1,082 4,211 8,555 - 24,645 1,288 39,782
Goodwill relates to two acquisitions. The first was Bentley Harrington
(trading as "UNILAD") which was acquired in 2018 (£10,094k), the second is
Betches which was acquired in 2023 (£15,197k). See note 11 for details of the
Betches Media, LLC acquisition.
Brand and relationships intangible assets relate partly to those acquired in
the year following the Betches acquisition (total of £10,594k). The remaining
position in this category relate to assets acquired from Bentley Harrington in
2018, net of amortisation to date.
With regard to social media pages, in 2022, the Group acquired the social
media accounts, the social media content, the IP records, the third party
rights, the records and all intellectual property rights connected to such
assets for total consideration of £1.1m from Creation Stage Ltd. The core
social media accounts acquired were branded "Go Animals", and have been
subsequently rebranded by the Group as "Furry Tails". In 2023, the Group
acquired the social media accounts, the social media content, the IP records,
the third party rights, the records and all intellectual property rights
connected to such assets for total consideration of CA$700k (£521k) from
Lessons Learned in Life Inc.
During the year, £nil (2022: £nil) of fully written down assets were
disposed of. Within the year, £1,045k (net of business combinations) of the
additions were paid for (2022: £1,675k).
The individually material intangible assets at the year end are
summarised below:
Intangible asset name Asset category Net book value at the year end £000 Remaining amortisation period (years) Description
Betches - Brand Brand 6,325 10 The Betches brand was acquired in the year as part of the acquisition of
Betches Media LLC - see note 27.
Betches - Content partner relationships Content partner relationships 3,592 8 The Betches content partner relationships were acquired in the year as part of
the acquisition of Betches Media LLC - see note 27.
UNILAD - Brand Brand 2,112 5 The UNILAD brand was acquired from Bentley Harrington in 2018.
Go Animals social media pages Social media pages 904 9 The Go Animals social media pages were acquired in 2022.
UNILAD - Content partner relationships Content partner relationships 610 5 The UNILAD content partner relationships were acquired from Bentley Harrington
in 2018.
Order Management System (OMS) Software 476 4 The OMS was completed in June 2023 and serves as the Group's order management
system, which is a step change in the way the Group manages the sales process.
Lessons Learned In Life social media pages Social media pages 360 2 The Lessons Learned In Life social media pages were acquired in 2023.
The Group is required to test, on an annual basis, whether goodwill has
suffered any impairment. The recoverable amount is determined based on value
in use calculations. The use of this method requires the estimation of future
cash flows and the determination of a discount rate in order to calculate the
present value of the cash flows.
Performance of the Group is monitored at a Group level and, because of this,
the Group has been considered the only cash generating unit (CGU) in prior
periods. However, following the acquisition of Betches in October 2023, and
given its performance is managed largely independently of the legacy LBG Media
Group, Betches will be considered a separate CGU.
The value in use assessment for both CGUs are based upon five-year cashflows
taken into perpetuity.
The key assumptions used in the value in use assessment for the LBG Media
Group are detailed below:
· a long-term growth rate of 2.0% (2022: 2.0%) for the period beyond
which detailed budgets and forecasts do not exist, based on macroeconomic
projections for the geographies in which the entity operates; and
· a post-tax discount rate of 12.0% (2022: 14.0%) based upon the
risk-free rate for government bonds adjusted for a risk premium to reflect the
increased risk of investing in equities and investing in the Group's specific
sector and regions.
The key assumptions used in the value in use assessment for Betches Media, LLC
are detailed below:
· a long-term growth rate of 2.1% for the period beyond which detailed
budgets and forecasts do not exist, based on macroeconomic projections for the
geographies in which the entity operates; and
· a post-tax discount rate of 13.9% based upon the risk-free rate for
government bonds adjusted for a risk premium to reflect the increased risk of
investing in equities and investing in the entity's specific sector
and regions.
Management has applied sensitivities to the key assumptions, including
discount rates and growth rates, and believes that there are no reasonably
possible scenarios which would result in an impairment of goodwill.
The table above highlights the sensitivity in the value in use following small
changes in key assumptions. However, given the acquisition of Betches was
recent (acquired on 17 October 2023) these sensitivities were known at the
date of acquisition and were factored into the purchase price of the business.
Discount rate Long term growth rate
Change in value in use (£'000s)
Change in value in use (£'000s)
LBG Media CGU
Used in value in use model: 12.0% 2.0%
Value in use: 177,866 177,866
1% increase 161,782 166,199
1% decrease 197,509 192,092
Betches Media, LLC CGU
Used in value in use model: 13.9% 2.1%
Value in use: 35,143 35,143
1% increase 32,289 37,405
1% decrease 38,438 33,156
8. Investments in equity-accounted joint ventures
The Group has a 30% (2022: 30%) interest in joint venture, Pubity Group Ltd,
an online media publisher, incorporated and operating in the United Kingdom.
Pubity Group's registered office is 20 Dale Street, Manchester, M1 1EZ.
The contractual arrangement provides the Group with only the rights to the net
assets of the joint arrangement, with the rights to the assets and obligation
for liabilities of the joint arrangement resting primarily with Pubity Group
Ltd. Under IFRS 11, this joint arrangement is classified as a joint venture
and has been included in the consolidated financial statements using the
equity method.
Pubity Group Ltd operates in the same market as the Group and therefore its
business risks remain consistent with that of the Group.
Summarised financial information in relation to the joint venture is
presented later in this note.
In 2023, additions in the year relates to the Group's share of total
comprehensive income of £331k (2022: £nil).
Name Country of Proportion of
incorporation ownership
and principal interest held as at
place of business 31 December 2023
Pubity Group Ltd United Kingdom 30%
Summarised financial information (Pubity Group Ltd) 2023 2022
£'000 £'000
As at 31 December
Current assets 2,174 510
Non-current assets 6 4
Current liabilities (657) (93)
Net assets (100%) 1,523 421
Group share of net assets (30%) 457 126
Period ended 31 December
Revenue 3,240 899
Profit from continuing operations 1,103 -
Total comprehensive income (100%) 1,103 -
Group share of total comprehensive income (30%) 331 -
Carrying amount of investment £'000
Brought forward as at 1 January 2022 359
Group share of total comprehensive income -
Brought forward as at 1 January 2023 359
Group share of total comprehensive income 331
Carried forward as at 31 December 2023 690
9. Cash and cash equivalents
Unaudited Audited
2023 2022
£'000 £'000
Cash and cash equivalents
Cash at bank and in hand 15,800 29,268
15,800 29,268
In these currencies
UK Pound 10,123 15,544
United States Dollar 4,162 12,543
Australian Dollar 291 327
Euro 1,207 838
New Zealand Dollar 17 16
15,800 29,268
10. Share based payments
The Group operates a number of Share Option Schemes under which Executive
Directors, Non-Executive Directors, managers and team members of the Group
are granted options over shares. The Group did not enter into any share-based
payment transactions with other parties other than employees during the
current or prior period. The charge recognised from equity-settled share-based
payments in respect of employee services received during the year is
£3,822k (2022: £3,552k). The charge recognised from cash-settled share-based
payments in respect of employee services received during the year is £31k
(2022: £nil).
Share Incentive Plans (Equity-settled)
In the year ended 31 December 2022, the Group introduced Share Incentive Plan
(SIP) awards. These awards are subject to continued employment,
and vest after three years. After the third anniversary of the award date
employees can elect to sell or transfer the awards.
Number of ordinary shares
Scheme Fair value per award At 01 January 2022 Granted Forfeited Exercised At 31 Granted Forfeited Exercised At 31
December 2022 and 01 January 2023
December
(£)
2023
UK SIP 1.94 - 738,660 (227,280) - 511,380 - (119,322) - 392,058
Australia SIP 1.60 - 78,584 (7,144) - 71,440 - (14,288) - 57,152
Ireland SIP 1.60 - 13,668 - - 13,668 - - - 13,668
- 830,912 (234,424) - 596,488 - (133,610) - 462,878
At 31 December 2023, none of the options were exercisable (2022: nil).
The inputs to the share valuation model utilised at the grant of the option is
shown in the table below. The volatility assumption, measured at the standard
deviation of expected share price returns, is based upon a statistical
analysis of daily share prices for comparable listed media businesses over the
three-year 'Pre-covid-19' period, being the three years prior to 1 January
2020. It is considered that volatility levels during covid-19 will not be
representative of likely volatility over the vesting period, hence
Pre-covid-19 volatility levels are considered more appropriate.
The options have been valued using the Monte-Carlo method and using the
following assumptions:
UK SIP Australia SIP Ireland SIP
Number of awards granted 738,660 78,584 13,668
Grant date 19/01/22 26/05/22 26/05/22
Vesting date 19/01/25 26/05/25 26/05/25
Contractual life (days) 1,096 1,096 1,096
Exercise price (£) - - -
Share price at grant date (£) 1.94 1.60 1.60
Annual risk free rate (%) - - -
Annual expected dividend growth rate (%) - - -
Volatility (%) 40% 40% 40%
Fair value per award (£) 1.94 1.60 1.60
Save as you Earn (SAYE) Schemes (Equity-settled)
The Group operates saving-related share option plans, under which employees
save on a monthly basis, over a three-year period, towards the purchase of
shares at a fixed price determined when the option is granted. All employees
were offered the opportunity to join the SAYE schemes. This price is set at a
20% discount to the average closing price for a share on the five dealing days
prior to the grant date. The option must be exercised within six months of
maturity of the savings contract, otherwise it lapses.
Number of ordinary shares
Scheme Fair value per award (£) At 01 January 2022 Granted Forfeited Exercised At 31 Granted Forfeited Exercised At 31
December 2022 and 01 January 2023
December
2023
2022 SAYE 0.58 - 568,032 (147,709) - 420,323 - (191,132) - 229,191
2023 SAYE 0.40 - - - - - 355,350 (26,269) - 329,081
- 568,032 (147,709) - 420,323 355,350 (217,401) - 558,272
At 31 December 2023, none of the options were exercisable (2022: nil).
The inputs to the share valuation model utilised at the grant of the option is
shown in the table below. The volatility assumption for the 2023 SAYE scheme
is based on the median daily share price volatility for a group of peer
companies over a historical period prior to the date of grant with length
commensurate with the expected life assumption of 3.05 years. For the 2022
SAYE scheme this was based on the historical 3.1 year volatility of the
constituents of the FTSE AIM Media super sector as of the date of grant.
The options have been valued using the Black-Scholes method and using the
following assumptions:
2022 SAYE 2023 SAYE
Number of awards granted 568,032 355,350
Grant date 24/05/22 14/06/23
Vesting date 30/06/25 30/06/26
Contractual life (days) 1,133 1,112
Exercise price (£) 1.34 0.81
Share price at grant date (£) 0.58 0.97
Annual risk free rate (%) 1.47% 4.76%
Annual expected dividend growth rate (%) - -
Volatility (%) 40% 43%
Fair value per award (£) 0.58 0.40
Non-Executive Director Awards (Equity-settled)
Awards were granted to certain Non-Executive Directors prior to, but
conditional on, Admission which vest on the second anniversary of Admission
subject to continued employment and no further performance conditions. The
scheme vesting period was reached on 15 December 2023 and the options were
exercised in full in January 2024.
Number of ordinary shares
Scheme Fair value per award (£) At 01 January 2022 Granted Forfeited Exercised At 31 Granted Forfeited Exercised At 31
December 2022 and 01 January 2023
December
2023
Non-Executive Director Awards 1.75 2,459,098 - - - 2,459,098 - - - 2,459,098
2,459,098 - - - 2,459,098 - - - 2,459,098
At 31 December 2023, 2,459,098 options were exercisable (2022: nil).
The inputs to the share valuation model utilised at the grant of the option is
shown in the table below. The volatility assumption, measured at the standard
deviation of expected share price returns, is based upon a statistical
analysis of daily share prices for comparable listed media businesses over the
three-year 'Pre-covid-19' period, being the three years prior to 1 January
2020. It is considered that volatility levels during covid-19 will not be
representative of likely volatility over the vesting period, hence
Pre-covid-19 volatility levels are considered more appropriate.
The options have been valued using the Monte-Carlo method and using the
following assumptions:
Non-Executive Director Awards
Number of awards granted 2,459,098
Grant date 15/12/21
Vesting date 15/12/23
Contractual life (days) 730
Exercise price (£) -
Share price at grant date (£) 1.75
Annual risk free rate (%) -
Annual expected dividend growth rate (%) -
Volatility (%) 40%
Fair value per award (£) 1.75
The Company only share based remuneration expense in the year, relating to the
above Non-Executive Director remuneration scheme only was £2,341k (2022:
£2,490k).
Executive Director Awards (Equity-settled)
The Long Term Incentive Plan awards for the Executive Directors were granted
on 23 December 2021, and vest subject to revenue and Adjusted EBITDA margin
performance conditions ('base'). The Long Term Incentive Plan awards are also
subject to a multiplier based on absolute TSR performance ('stretch'). The
overall award was granted as a combination of nil cost options over LBG Media
plc shares and an award of A shares in LBG Holdco Limited, in respect of the
base and stretch amounts respectively. The A shares in LBG Holdco Limited will
convert to LBG Media plc shares on exercise. Within 2023, for two outgoing
former Directors the vesting period has been shortened to their leave dates in
2024. Similarly, the number of shares that vest has been pro-rated downwards
to align with the shortened tenure.
Number of ordinary shares
Scheme Weighted average fair value per award (£) At 01 January 2022 Granted Forfeited Exercised At 31 Granted Forfeited Exercised At 31
December 2022 and 01 January 2023
December
2023
Executive Director Awards 1.45 1,189,280 - (289,284) - 899,996 - (111,002) - 788,994
1,189,280 - (289,284) - 899,996 - (111,002) - 788,994
At 31 December 2023, none of the options were exercisable (2022: nil).
The inputs to the share valuation model utilised at the grant of the option is
shown in the table below. The volatility assumption, measured at the standard
deviation of expected share price returns, is based upon a statistical
analysis of daily share prices for comparable listed media businesses over the
three-year 'Pre-covid-19' period, being the three years prior to 1 January
2020. It is considered that volatility levels during covid-19 will not be
representative of likely volatility over the vesting period, hence
Pre-covid-19 volatility levels are considered more appropriate.
The options have been valued using the Monte-Carlo method and using the
following assumptions:
Executive Director Awards
Number of awards granted 1,189,280
Grant date 22/12/21
Vesting date 31/12/24
Contractual life (days) 1,105
Exercise price (£) -
Share price at grant date (£) 1.94
Annual risk free rate (%) 0.68%
Annual expected dividend growth rate (%) -
Volatility (%) 40%
Weighted average fair value per award (£) 1.45
LADbible Incentive Plan Awards (Equity-settled)
The Group operates incentive plans for senior employees subject to revenue
performance conditions and an Adjusted EBITDA margin underpin. Vesting is
contingent upon continued employment. In May 2023 the LADbible Incentive Plan
awards were forfeited in return for the Group A awards which mirrored the
terms of the original awards with additional market based performance
conditions, including top-up awards. The top-up options will only vest if the
series of performance conditions are fully met, at which point the quantity of
options vesting will represent those equivalent to a fixed maximum value to
the option-holder. The scheme was changed in order to better align with the
Group's objectives.
Number of ordinary shares
Scheme Fair value per award (£) At 01 January 2022 Granted Forfeited Exercised At 31 Granted Forfeited Exercised At 31
December 2022 and 01 January 2023
December
2023
LADbible Incentive Plan 1.94 - 576,053 (111,051) - 465,002 - (441,699) - 23,303
LTIP Group A - Base Award 1.94 - - - - - 359,084 (88,479) - 270,605
LTIP Group A - Top-up 0.28 - - - - - 1,726,632 (397,236) - 1,329,396
LTIP Group D - Base Award 0.35 - - - - - 187,949 - - 187,949
LTIP Group D - Top-up 0.33 - - - - - 554,907 - - 554,907
- 576,053 (111,051) - 465,002 2,828,572 (927,414) - 2,366,160
At 31 December 2023, none of the options were exercisable (2022: nil).
The inputs to the share valuation model utilised at the grant of the option is
shown in the table below.
The volatility assumption of 40%, measured at the standard deviation of
expected share price returns, is based upon a statistical analysis of daily
share prices for comparable listed media businesses over the three-year
'Pre-covid-19' period, being the three years prior to 1 January 2020. It is
considered that volatility levels during covid-19 will not be representative
of likely volatility over the vesting period, hence Pre-covid-19 volatility
levels are considered more appropriate.
The volatility assumption of 44% is based on the median daily share price
volatility for a group of peer companies over a historical period prior to the
date of grant with length commensurate with the remaining projection period of
2.66 years.
The options have been valued using the Monte-Carlo method and using the
following assumptions:
LADbible Incentive Plan LTIP Group A - Base Award LTIP Group A - Top-up LTIP Group D - Base Award LTIP Group D - Top-up
Number of awards granted 576,053 359,084 1,726,632 187,949 554,907
Grant date 13/01/22 13/01/22 4/05/23 4/05/23 4/05/23
Vesting date 12/01/25 12/01/25 31/12/25 12/01/25 31/12/25
Contractual life (days) 1,095 1,095 973 620 973
Exercise price (£) - - - - -
Hurdle share price for top-up (£) - - 1.75 - 1.75
Share price at grant date (£) 1.94 1.94* 1.00 1.00 1.00
Annual risk free rate (%) - - 3.76% 3.76% 3.76%
Annual expected dividend growth rate (%) - - - - -
Volatility (%) 40% 40% 44% 44% 44%
Fair value per award (£) 1.94 1.94 0.28 0.35 0.33
* These awards were treated as a modification and the fair value of these
replacement awards is reflective of the incremental fair value to be
recognised on modification.
Long Term Incentive Plan (LTIP) Awards (Equity-settled)
The Group operates long term incentive plans for senior employees subject to
revenue performance conditions and an Adjusted EBITDA margin underpin. Vesting
is contingent upon continued employment. In May 2023 the LTIP Senior Manager
awards were forfeited in return for the Group B awards which mirrored the
terms of the original awards with additional market-based performance
conditions, including top-up awards, and removal of the Total Shareholder
Return (TSR) multiplier. The top-up options will only vest if the series of
performance conditions are fully met, at which point the quantity of options
vesting will represent those equivalent to a fixed maximum value to the
option-holder. The scheme was changed in order to better align with the
Group's objectives.
Further awards were granted within 2023 to senior employees, subject to
revenue and market performance conditions and an Adjusted EBITDA
margin underpin.
Number of ordinary shares
Scheme Fair value per award (£) At 01 January 2022 Granted Forfeited Exercised At 31 Granted Forfeited Exercised At 31
December 2022 and 01 January 2023
December
2023
LTIP Senior Managers 1.29 - 836,424 (302,141) - 534,283 - (534,283) - -
LTIP Group B - Base Award 1.29 - - - - - 267,141 (95,661) - 171,480
LTIP Group B - Top-up 0.27 - - - - - 2,279,286 (622,196) - 1,657,090
LTIP Group C - Base Award 0.35 - - - - - 62,678 - - 62,678
LTIP Group C - Top-up 0.25 - - - - - 1,080,179 - - 1,080,179
LTIP Group E - Base Award 0.42 - - - - - 478,468 - - 478,468
LTIP Group E - Top-up 0.78 - - - - - 92,961 - - 92,961
LTIP Group F 0.45 - - - - - 550,239 - - 550,239
- 836,424 (302,141) - 534,283 4,810,952 (1,252,140) - 4,093,095
At 31 December 2023, none of the options were exercisable (2022: nil).
The inputs to the share valuation model utilised at the grant of the option is
shown in the table below.
The volatility assumption of 40%, measured at the standard deviation of
expected share price returns, is based upon a statistical analysis of daily
share prices for comparable listed media businesses over the three-year
'Pre-covid-19' period, being the three years prior to 1 January 2020. It is
considered that volatility levels during covid-19 will not be representative
of likely volatility over the vesting period, hence Pre-covid-19 volatility
levels are considered more appropriate.
The volatility assumption of 44% is based on the median daily share price
volatility for a group of peer companies over a historical period prior to the
date of grant with length commensurate with the remaining projection period of
2.66 years.
The options have been valued using the Monte-Carlo method and using the
following assumptions:
LTIP Senior Managers LTIP Group B - Base Award LTIP Group B - Top-up LTIP Group C - Base Award LTIP Group C - Top-up LTIP Group E - Base Award LTIP Group E - Top-up LTIP Group F
Number of awards granted 836,424 267,141 2,279,286 62,678 1,080,179 478,468 92,961 550,239
Grant date 12/01/22 12/01/22 4/05/23 4/05/23 4/05/23 4/05/23 4/05/23 4/05/23
Vesting date 12/01/25 12/01/25 31/12/25 12/01/25 12/01/25 31/12/25 31/12/25 31/12/25
Contractual life (days) 1,096 1,096 973 620 620 973 973 973
Exercise price (£) - - - - - - - -
Hurdle share price for top-up (£) - - 1.75 - 1.75 - 1.75 -
Share price at grant date (£) 1.94 1.94* 1.00 1.00 1.00 1.00 1.00 1.00
Annual risk free rate (%) - - 3.76% 3.76% 3.76% 3.76% 3.76% 3.76%
Annual expected dividend growth rate (%) - - - - - - - -
Volatility (%) 40% 40% 44% 44% 44% 44% 44% 44%
Fair value per award (£) 1.29 1.29 0.27 0.35 0.25 0.42 0.78 0.45
* These awards were treated as a modification and the fair value of these
replacement awards is reflective of the incremental fair value to be
recognised on modification.
Key Management Personnel Award (Cash-settled)
Awards were granted to a member of Key Management Personnel (KMP) under the
Long Term Incentive Plan on 15 December 2021 (Date of Admission) which vest on
17 September 2022, with no employment conditions attached. Awards were granted
to a member of KMP which vested immediately on 15 December 2021, with no
performance conditions attached.
Following an election made by the Group to settle liabilities in relation to
this scheme in cash (rather than shares), this scheme has been reassessed as a
cash-settled share scheme in the year. The cash-settled share based payment
liability at the end of 2023 is £375k (£nil).
Number of ordinary shares
Scheme Fair value per award (£) At 01 January 2022 Granted Forfeited Exercised At 31 Granted Forfeited Exercised At 31
December 2022 and 01 January 2023
December
2023
Key Management Personnel Award 1.75 789,865 - - - 789,865 - - (351,000) 438,865
789,865 - - - 789,865 - - (351,000) 438,865
At 31 December 2023, 438,865 options were exercisable (2022: 789,865).
The inputs to the share valuation model utilised at the grant of the option is
shown in the table below. The volatility assumption, measured at the standard
deviation of expected share price returns, is based upon a statistical
analysis of daily share prices for comparable listed media businesses over the
three-year 'Pre-covid-19' period, being the three years prior to 1 January
2020. It is considered that volatility levels during covid-19 will not be
representative of likely volatility over the vesting period, hence
Pre-covid-19 volatility levels are considered more appropriate.
The options have been valued using the Monte-Carlo method and using the
following assumptions:
Key Management Personnel Award
Number of awards granted 789,865
Grant date 15/12/21
Vesting date 17/09/22
Contractual life (days) 92
Exercise price (£) -
Share price at grant date (£) 1.75
Annual risk free rate (%) -
Annual expected dividend growth rate (%) -
Volatility (%) 40%
Fair value per award (£) 1.75
11. Called up share capital
Ordinary shares of £0.001 each 2023 2023 2022 2022
Number £ Number £
At 1 January 205,714,289 205,714 205,714,289 205,714
Issued during the year 906,353 907 - -
At 31 December 206,620,642 206,621 205,714,289 205,714
Between February and August 2023, the Company issued 198,000 shares, in
tranches of 9,000 shares, following the exercise of options granted under the
Company's Key Management Personnel Award. For further details on the dates of
these share issues, refer to Companies House.
708,353 shares were issued in relation to the UK Share Incentive Plan within
2022. The Directors have not corrected the prior year for this share issue on
the basis of it not being material, including the impact it would have to EPS.
These shares have been included within the amount issued during the year
in 2023.
Post year end, on 3 January 2024, the Company issued 2,459,098 new ordinary
shares with a nominal value of £0.001 each. This share issue was following
the exercise of options granted under the Company's Long Term Incentive Plan
(Non-Executive Director Awards).
12. Subsequent events
On 26 January 2024 LADbible US Inc. completed the bolt-on asset acquisition of
social media accounts from Creative Expansions, Inc. for a total value of
£354k ($450k).
13. Acquisitions
On 17 October 2023, the Group acquired the entire share capital of Betches
Media, LLC ('Betches') for total consideration of £29,175k ($35,593k).
Betches is a US-based media brand founded by women and focused on digital
media content production and publication for women.
The primary reasons for the acquisition are as follows:
· Acquisition of a complementary, high growth US digital publisher with a
focus on millennial and Gen Z women.
· Step-change addition to the Group, in line with stated M&A
ambitions, materially expanding its reach and footprint in the US, the
world's largest advertising market. Significant additional revenue and
Adjusted EBITDA contribution.
· Major new brands added to the portfolio, new capabilities unlocked and
improved revenue diversification.
· Expansion of both LBG Media's existing 100m US following as well as its
overall audience of women.
· Clear potential for cross-selling opportunities.
Consideration for the acquisition was entirely in cash, with no shares in the
Group issued to the sellers. The cash consideration is comprised of £19,541k
($23,840k) funded from existing cash resources, with up to a further $30,000k
cash consideration payable in instalments (£23,548k at the closing balance
sheet rate), subject to Betches achieving certain revenue and EBITDA targets
to 2026. The contingent consideration is payable in annual traches from March
2024 up until March 2026. Note that of the cash consideration of £19,541k,
£248k remains unpaid at the year end and will be settled in H1 2024. See
further narrative on contingent consideration at the foot of this note.
Of the maximum contingent consideration of $30,000k (£23,548k) payable to the
sellers, based upon revenue and EBITDA forecasts at the date of acquisition, a
total of £9,634k ($11,753k) is management's best estimate of the amount
payable within a range of potential outcomes. The fair value of total
consideration at the date of acquisition is therefore £29,175k.
The book and fair value of the assets acquired are noted within the table
below. Acquisition fair value adjustments of £10,594k were recorded. These
adjustments relate to the recognition of "brand" (£6,744k) and "content
partnership relationships" (£3,850k) intangible assets. After these fair
value adjustments, goodwill of £15,197k has been recorded. The goodwill and
intangible assets are deductible for tax purposes. The goodwill recognised is
attributed to intangible assets that cannot be individually separated and
reliably measured from Betches due to their nature. These items include the
capability for synergies from bringing the businesses together, alongside the
value of its workforce, combining propositions and capabilities that will help
the business achieve accelerated consolidated growth from
cross-sell opportunities.
Note that the book and fair value of trade receivables at acquisition are the
same. Based upon a review of the trade receivables, due to the nature of the
customer base, there are no concerns regarding recoverability.
Fair value recognised
on acquisition
£'000s
Net assets
Non-current assets
Content partnership relationships 3,850
Brand 6,744
Fixed assets 261
Right of use asset 1,143
Current assets
Cash 1,713
Security deposits 63
Accounts receivable 3,915
Inventory 31
Prepayments 380
Contract asset 422
Current liabilities
Accounts payable (97)
Accruals (998)
Provisions (7)
Other payables (39)
Transaction costs payable (2,285)
Lease liability (239)
Non-current liabilities
Lease liability (879)
Total identifiable net assets at fair value 13,978
Goodwill arising on acquisition 15,197
Total purchase consideration transferred 29,175
Purchase consideration:
Cash 19,293
Amounts unpaid 248
Contingent consideration 9,634
Total purchase consideration 29,175
Fair value recognised
on acquisition
£'000s
Analysis of cash flows on acquisition:
Net cash acquired with the subsidiary 1,713
Cash paid (19,293)
Acquisition of subsidiaries, net of cash acquired (included in cash flows from (17,580)
investing activities)
Transaction costs of the acquisition (included within cash flows from (799)
operating activities)
Net cash outflow (18,379)
Cash consideration per the RNS on 18 October 23 was noted as being $24,000k
(£19,673k). The difference between this and that noted as the initial cash
payment of $23,537k (£19,293k) are adjustments in line with the acquisition
agreement for working capital movements, cash reflected on acquisition,
sell-side transaction expenses and bonus accruals, totalling $463k (£380k).
Further as a result of the finalisation of the completion accounts an
additional £238k remains unpaid. This will be paid in H1 2024 in line with
the first earn out payment.
The only difference between the IFRS book value of net assets and the book
value of assets reflected in the Betches financial statements relate to the
recognition of an IFRS 16 right of use asset (£1,143k) and lease liability
(£1,118k) for the Betches head office lease in New York.
The Group incurred buy side transaction costs of £1,078k. These were all
expensed to the income statement as 'Adjusting Items'. £313k of these costs
remain unpaid at year end.
Since the acquisition, Betches has contributed £2,262k of revenue and £73k
of profit before tax to the Group. If Betches had been acquired on 1 January
2023, then it would have contributed £13,807k of revenue and £821k of profit
before tax to the Group.
14. Contingent consideration
The Group has adopted the following fair value hierarchy in relation to its
financial instruments that are carried in the balance sheet at the fair values
at the year-end (being solely contingent consideration):
1) Quoted prices (unadjusted) in active markets for identical assets or
liabilities (level 1)
2) Inputs other than quoted prices included within level 1 that are observable
for the asset or liability, either directly (that is, as prices) or indirectly
(that is, derived from prices) (level 2)
3) Inputs for the asset or liability that are not based on observable market
data (unobservable inputs) (level 3)
The following table sets out the fair value of all financial assets and
liabilities that are measured at fair value:
2023 2022
Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
£'000s £'000s £'000s £'000s £'000s £'000s
Liabilities measured at fair value
Contingent consideration - - 9,539 - - -
Total - - 9,539 - - -
Contingent consideration is included in Level 3 of the fair value hierarchy.
The provision for contingent consideration is in respect of the Betches Media,
LLC acquisition in October 2023, further details of which can be found above.
The fair value is determined considering the expected payments, discounted to
present value using a risk adjusted discount rate.
The significant unobservable inputs are the financial performance forecasts
for the Year 1 (2023), Year 2 (2024), Year 3 (2025) and Year 4 (2026)
twelve-month periods and the risk adjusted discount rate of 17.6%.
The estimated fair value could increase or decrease if Revenue or EBITDA was
higher or lower. This is because the potential earnout payments are split into
two tranches.
The first element of contingent consideration (Earnout 1) is based upon
Betches Media, LLC revenue performance in 2023, 2024 and 2025 respectively.
Contingent consideration of up to $15 million is payable under Earnout 1 in
three tranches in 2024, 2025 and 2026 respectively.
The second element of contingent consideration (Earnout 2) is based upon
Betches Media, LLC meeting a minimum EBITDA hurdle in 2023, 2024, 2025 and
2026. Contingent consideration of up to $15 million is payable under Earnout 2
in four tranches in 2024, 2025, 2026 and 2027 respectively.
At the acquisition date the discounted fair value of the contingent
consideration was estimated at £9,634k having been determined from
management's estimates of the range of outcomes and their respective
likelihoods. At 31 December 2023, the value of the contingent consideration
after partial unwinding of the discounting was £9,539k. Adjustments to the
fair value of the contingent consideration are made in the Consolidated
Statement of Comprehensive Income under IFRS 3 Business Combinations.
Further, the estimated fair value would increase or decrease if the risk
adjusted discount rate was higher or lower.
A reasonably possible change to one of these significant unobservable inputs,
holding the other inputs constant, would have the following effects:
Effect of change in assumption on income statement Increase Decrease
£'000s £'000s
Revenue movement by £500k - -
EBITDA movement by £500k 928 -
Risk adjusted discount rate change by 1.0% 79 85
Note that moving revenue up or down does not impact the fair value because
without meeting the EBITDA hurdle, tranche 2 payments will not be made.
However, if the EBITDA hurdle was met, then the earn out 2 payments would be
material.
For example, if revenue was $25m (£15.7m) in each of the years 2024, 2025 and
2026 and the EBITDA hurdle was met, then the additional earnout payments would
be £0.8m per annum.
A reconciliation from the opening to closing contingent consideration balance
can be found below:
2023 2022
£'000 £'000
At 1 January - -
Recognition on the acquisition of subsidiary undertakings 9,634 -
Unwinding of discount 314 -
Exchange adjustments (409) -
At 31 December 9,539 -
Analysed as:
Amounts falling due within 12 months 3,016 -
Amounts falling due after one year 6,523 -
At 31 December 9,539 -
15. Cautionary Statement
Certain statements included or incorporated by reference within this
announcement may constitute "forward-looking statements" in respect of the
Group's operations, performance, prospects and/or financial condition.
Forward-looking statements are sometimes, but not always, identified by their
use of a date in the future or such words and words of similar meaning as
"anticipates", "aims", "due", "could", "may", "will", "should", "expects",
"believes", "intends", "plans", "potential", "targets", "goal" or "estimates".
By their nature, forward looking statements involve a number of risks,
uncertainties and assumptions and actual results or events may differ
materially from those expressed or implied by those statements. Accordingly,
no assurance can be given that any particular expectation will be met, and
reliance should not be placed on any forward-looking statement. Additionally,
forward-looking statements regarding past trends or activities should not be
taken as a representation that such trends or activities will continue in the
future. No responsibility or obligation is accepted to update or revise any
forward-looking statement resulting from new information, future events or
otherwise. Nothing in this announcement should be construed as a profit
forecast. This announcement does not constitute or form part of any offer or
invitation to sell, or any solicitation of any offer to purchase any shares or
other securities in the Company, nor shall it or any part of it or the fact of
its distribution form the basis of, or be relied on in connection with, any
contract or commitment or investment decisions relating thereto, nor does it
constitute a recommendation regarding the shares or other securities of the
Company. Past performance cannot be relied upon as a guide to future
performance and persons needing advice should consult an independent financial
adviser. Statements in this announcement reflect the knowledge and information
available at the time of its preparation. Liability arising from anything in
this announcement shall be governed by English law. Nothing in this
announcement shall exclude any liability under applicable laws that cannot be
excluded in accordance with such laws.
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