REG - M&C Saatchi PLC - M&C Saatchi – 2023 Interim Results
14/09/2023 07:15
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230914:nRSN3807Ma&default-theme=true
RNS Number : 3807M M&C Saatchi PLC 14 September 2023
M&C SAATCHI PLC
INTERIM RESULTS
SIX MONTHS ENDED
30 JUNE 2023
14 September 2023
M&C SAATCHI PLC
(the "Company")
Interim results for the six months
ended 30 June 2023
Strong double-digit growth in the Issues and Passions specialisms.
Good margin momentum going into second half with acceleration of new operating
model.
H1 Highlights
Financial
· Net revenue of £120.4million (H1 2022: £129.4million).
· Headline operating profit margin of 8.3% (H1 2022: 14.0%), with Q2 margin of
12%.
· Headline profit before tax of £8.8million (H1 2022: £16.0million), with
strong operating leverage mitigating the impact of lower revenue.
· Headline EPS of 4.47p (H1 2022: 6.37p).
· Net cash at 30 June 2023 of £15.4million (30 June 2022: £39.7million),
reflecting lower trading and the settling of put options.
Operational
· Strong double-digit net revenue growth in our Issues (+22% LFL) and Passions
(+10% LFL) specialisms, which now account for c.£40million (33%) of the
Group's net revenue, demonstrates the value of our ongoing diversification
away from traditional advertising. New clients include Unilever, Channel 4 and
JPMorgan, with new assignments from Diageo, Samsung and Pepsico.
· Good progress being made on the strategy set out at the Capital Markets Day,
with growth in our Fluency brand expanding our data capabilities, and put
option settlement creating more opportunities for growth and investment
returns.
· Along with the wider market, we have seen a significant slowdown in technology
client spend in our Media specialism and a slower pace of new business wins in
the Advertising division. However, 85% of the Company's full year revenue
forecast is now booked as at the end of August, marginally ahead of 84% for
the same time last year. Recovery is expected in the second half of the year.
· Enhanced, simplified leadership structure under a new Executive Chair
implemented, with investment focused on our specialisms, and new leadership
roles to drive creativity, execution, and efficiency.
· Global efficiency programme refocussed to accelerate quick wins, while
delivering the strategy for the longer term. As a result, we expect to deliver
annualised savings of £3.8million in FY2023 with an in-year impact of
£1.5million. We are targeting annualised savings of £10million by the end
of FY2024.
Current Trading and Outlook
· Revenue pacing marginally ahead of this time last year, with 85% of full year
expected revenue booked. Improving momentum in H2, with a small single digit
net revenue decline expected.
· Operating leverage in Advertising, combined with our global efficiency
programme, means that we are expecting improvement in Headline operating
margin in H2. Full year margin is expected to be in line with last year.
· In light of the continued challenging macro environment, we are taking a
cautious view overall on H2. In 2024, the Group should benefit from the global
efficiency programme and review of loss-making entities.
Unaudited Headline(1) Results
Six Months To 30 June 2023
2023 2022 Movement LFL(2)
£M £M
Net revenue(1) 120.4 129.4 (7%) (7%)
Operating profit 10.0 18.1 (45%) (48%)
Profit before taxation 8.8 16.0 (45%) (48%)
Earnings(3) 5.5 7.8 (30%) (12%)
Operating profit margin 8.3% 14.0% -5.7pts
EBITDA(4) 14.5 22.8 (36%)
Net cash(1) 15.4 39.7 (61%)
Unaudited Statutory Results
Six Months To 30 June 2023
2023 2022 Movement
£M £M
Revenue 216.7 221.7 (2%)
Net revenue(1) 120.4 129.4 (7%)
Operating (loss)/profit (3.6) 2.7 (231%)
(Loss)/profit before taxation (5.1) 0.3 (1759%)
Losses(3) (6.3) (4.0) (57%)
Operating (loss)/profit margin (3.0%) 2.1% -5.1pts
1 Refer to Notes for the definition of Headline net revenue and net cash.
(2) Like-for-like excluding the effect of the disposal of Clear Deutschland
GMBH in H1 2023 and retranslating 2022 figures to 2023 FX rates.
(3) Earnings and Losses are calculated after deducting tax and the share of
profits attributable to non-controlling interests.
(4) EBITDA is calculated excluding the income statement charges relating to
IFRS 16.
Moray MacLennan, Chief Executive Officer, said:
The diversification of our offering, combined with swift action on our cost
base, have ensured good momentum into the second half, despite a slower start
to 2023. Strong double-digit growth in Issues and Passions, in particular,
reflects our continued investment in our specialisms.
Zillah Byng-Thorne, Executive Chair, said:
The second half of the year is about growth, execution, and efficiency. Whilst
some economic headwinds are likely to continue, we are focused on what we can
control: continued connectivity of our business, elevating our highest-margin
businesses in resilient segments, underpinned by tight cost management.
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulation
(EU) No. 596/2014.
M&C Saatchi Half Year 2023 Results - Analyst Presentation
M&C Saatchi plc will host an in-person analyst presentation today at
9:00am at 36 Golden Square, London, W1F 9EE. The presentation will be followed
by a Q&A with Zillah Byng-Thorne, Executive Chair, Moray MacLennan, Chief
Executive Officer, and Bruce Marson, Chief Financial Officer.
Please email MCS@Brunswickgroup.com to register to attend. Dial-in details are
also available for those not able to attend in person.
For further information please call:
M&C Saatchi plc +44 (0)20-7543-4500
Zillah Byng-Thorne, Executive Chair
Moray MacLennan, Chief Executive Officer
Bruce Marson, Chief Financial Officer
Numis Securities Limited +44 (0)20-7260-1000
Nick Westlake, Iqra Amin
Liberum Limited +44 (0)20-3100-2000
Max Jones, Benjamin Cryer, Will King
Brunswick Group Limited +44 (0)207-404-5959
Andrew Porter, Kate Pope
SUMMARY OF RESULTS
Net revenue for H1 was £120.4million, down 7.0% compared to last year. Our
specialisms delivered £70.3million (+0.9% vs last year), compared to the
Advertising division at £50.1m, (-16.1% vs last year), reflecting the
delivery of our strategy set out at our Capital Markets Day earlier this year.
The specialisms were fueled by double digit revenue growth in the Issues
(+20.6%) and Passions (+11.0%) specialisms, underpinning their strong market
position. Along with the wider market, we experienced challenging trading
conditions in H1, particularly in those businesses with more exposure to a
technology client base or where there is more discretion around client spend
resulting in lead times for new projects widening. This had an impact on
revenues in our Media specialism (-30.1%) and the Advertising division
(-16.1%), although we saw a strong performance in our US advertising business
(+4.1%).
Headline operating costs decreased by 1% to £110.4million compared to H1 2022
(£111.3million) and decreased by 11% versus H2 2022 (£124.4million). The
nature of the business means that as some markets began to see revenue soften,
we were able to flex the variable cost base, with most of these actions
impacting Q2 onwards, while ensuring we continued to invest in our
specialisms. As a consequence, the Headline operating profit margin was 12% in
Q2, compared to 8.3% for H1 overall. This improvement in margins was also a
consequence of some of the early wins from the global efficiency programme
announced at our Capital Markets Day, with £0.5million of savings delivered
within the H1 results.
Overall Headline operating profit was £10.0million, a decline of £8.1million
versus last year. The global efficiency programme has been refocused into
quick wins and more structural savings. The quick wins have secured annualised
savings of £3.8million already, which is expected to have an impact of
£1.5million in FY2023. We are targeting further annualised savings of around
£6million by the end of FY2024, as a result of the centralisation of certain
back and middle office functions.
In H2, we expect continued strong momentum in the Issues and Passions
specialisms, and some recovery in the Media specialism and Advertising
division, supported by the typical seasonality of client campaigns.
On a statutory basis, the Company delivered a loss before tax of £5.1million
(2022: £0.3million profit), due to the decline in net revenue of £9.0million
that has been partially mitigated by statutory cost savings of £3.6million.
Net cash as at 30 June 2023 was £15.4million (£30.0million at 31 December
2022). During H1, we cash-settled £3.3milliion of put options and experienced
a negative working capital swing of £6.8million driven by lower trading
volumes and one-off adverse working capital timing at the end of June, much of
which we expect to reverse in H2. During H2 we expect to cash settle a
further £15.5million of put options, leaving us with a residual liability of
c.£12million at a 152p share price.
Market Dynamics
Market growth in the first half of 2023 slowed significantly, with clients
slower to commit budgets and generally spending less. While there are some
indications of the wider market beginning to recover in H2 2023 and beyond, we
are taking a cautious outlook for H2 until we see more data points. Beyond the
economic trends we see several key themes emerging:
· Generative AI - especially the diversity, scale, and rate of acceleration of
the application layer.
· Digital transformation - continuing at pace, and responsible for a large
proportion of the sector's growth.
· Complex marketing mix - channel and customer engagement platform fragmentation
resulting in client demand for simplification and consolidation.
· Automation at speed - increased speed, personalisation and customisation of
messaging across more channels as a result of tech (including Generative AI).
· Creativity as a competitive advantage - enabling differentiation, cut through
and improved ROI.
· Sustainability - albeit eclipsed in coverage by the economic headwinds and
cost of living crisis.
We have reflected these themes in our proposition and believe we are well
positioned to succeed due to our: broad diversified client base, geographic
breadth, and specialist capabilities in resilient, counter-cyclical segments:
public sector, issues-based marketing, passions and talent.
Strategy Update
During our Capital Markets Day, we outlined our strategy centred around
accelerating high-margin, digital-led growth, with three clear pillars:
· Building capabilities with a focus on data, tech and digital transformation.
· Developing new opportunities through M&A and partnerships; moving away
from start-ups.
· A new operating model that delivers significant cost savings and enhanced
productivity.
Delivery of this strategy is core to our ongoing success. In H1 we have made
good progress, with Fluency growing at scale and underpinning our data
capabilities. The settlement of the put options also means that only 10% of
earnings will be attributable to minorities by the end of 2023 (2022: 25%),
further simplifying our opportunities for growth and freeing up capital for
M&A moving forward. The initial benefit of our operating model work is
beginning to be seen in our business, and we expect to have completed our new
organisation design by the end of the year.
At the heart of our strategy is creativity and award-winning work. The recent
additions to our trophy cabinet are an endorsement of this, winning awards in
Data (Campaign's Start up Agency of the Year - M&C Saatchi Fluency) and
Consultancy (Consultant of the Year - Consulting Magazine). While winning,
Agency of The Year, Sports Industry Awards (M&C Saatchi Sport &
Entertainment) and Performance Marketing Agency of Year - Marketing
Interactive, highlight the peer recognition of our specialisms.
Our ongoing ability to deliver on this strategy is underpinned by a focus on
growth, execution and efficiency, and the key developments in each of these
areas is outlined below.
Growth Plans
Core to our strategy are our growth plans. As technology advances, creativity
is even more integral to our future growth than it has been in our past. Our
ability to stand out from the crowd, with award winning creative, is the
easiest way to win new clients, and while we have many fantastic creative
resources across the businesses, we had no one person representing our
creative agenda at the leadership table. As a result, we have embarked on a
search for a new Chief Creative Officer who will set the benchmark for our
work internally, while also playing a hands-on leadership role across our UK
Group.
We are focussing our investment and energy on growing our strategically
important businesses, whilst also undertaking a review of loss-making and
non-core entities. Where businesses do not have a clear route to profitability
within the next 18 months we will look to divest or close them, unless there
is a clear strategic imperative not to.
Replicating success is an easy way to accelerate growth and, as we have
examined our track record, it is evident that where we provide clients with
integrated solutions across regional advertising centres, we excel. As a
consequence, we have decided to organise around a regional first strategy. The
benefits of this include simplifying collaboration and ensuring more of our
revenue can become connected, harnessing the benefits of the wider group at
scale.
Justin Graham will lead this for us across the APAC region, while Marcus
Peffers will take on an extended remit to include Chief Executive Officer of
the UK Group. The increased focus on regional integration supports the drive
towards connected revenue, which now accounts for c.60% of net revenue, driven
by technology platforms, new capabilities and collaboration processes.
Execution
The effective execution of our strategy is critical to our success. To enable
this, we have made a number of changes to how we are organised and drive
performance. To improve alignment, clear accountabilities and ownership, we
have simplified our leadership structure from over 20 (the old ExCo) to a new
Executive Leadership Team of 13. This new team includes two newly created
roles including the Chief Creative Officer as referenced above and a Chief
Operating Officer who will support the execution and delivery of the global
efficiency programme. A new way of working, focussed on meeting cadences,
pipeline management and lead sharing has been introduced. This is in addition
to work that is underway for a new LTIP and incentive plan for the Executive
Leadership Team and senior leaders, to drive collaboration and
entrepreneurialism.
Efficiency
We have broadened and deepened the scope of our global efficiency programme
and refocussed it into two streams; quick wins and structural changes. Having
identified savings of just under £4million already, we are now targeting an
additional £6.2million of savings from the creation of shared service centres
and centralised procurement. This will bring the total annualised savings to
£10million by the end of 2024, and we expect the costs of change to be in the
range of 0.5-1x of the saving.
During the year we intend to merge our small advertising head office in Asia
with Australia, to increase resource and capability available to the APAC
region. While we have also reviewed the central group structure reducing the
absolute size of the team, with increased accountability for growth and
strategy being devolved to the regions and specialisms, in order for the Group
to focus on delivery of global efficiencies and effective capital allocation.
Headline Segmental Information (Like-for-Like) 1 (#_ftn1)
Specialisms
Net Revenue Net Revenue Operating Profit Operating Profit Operating Profit Margin Operating Profit Margin
H1 2023 H1 2022 Movement H1 2023 H1 2022 Movement H1 2023 H1 2022 Movement
£000 £000 £000 £000
Specialisms 70,158 70,250 0% 13,866 19,979 (31%) 19.8% 28.4% (8.6)pts
Advertising 50,091 59,465 (16%) 461 4,113 (89%) 0.9% 6.9% (6.0)pts
Group Central Costs - - - (4,353) (4,922) 12% - - -
Total 120,249 129,715 (7%) 9,974 19,170 (48%) 8.3% 14.8% (6.5)pts
Specialisms now represent 58% of the Group's net revenue (from 49% two years
ago). These specialisms contributed £70.3million of the Group's net revenue
(H1 2022: £70.3million, 54%), and £13.9million (139%) of the Group's
Headline operating profit (H1 2022: £20.0million, 104%). Net revenue
decreased by £0.1million (0%) compared to H1 2022, the revenue decline in
Media offsetting the strong growth in Issues and Passions.
Headline operating profit margins decreased to 19.8% from 28.4% in H1 2022,
due to the impact of the revenue decline in Media (which is high margin),
although this was partially mitigated in the Media specialism by headcount
reductions in the US and UK. In addition, the Issues, Passions and Consulting
specialisms have invested in staff to retain the best talent and added
headcount to drive future growth.
Advertising contributed £50.1million (42%) of the Group's net revenue (H1
2022: £59.5million, 46%) and £0.5 million (5%) of the Group's Headline
operating profit (H1 2022: £4.1million, 21%). Net revenue decreased by
£9.4million (16%) compared to H1 2022. Operating profit margins decreased to
0.9% from 6.9% in H1 2022, as cost saving measures lagged the decrease in
revenue.
· Specialisms
· Issues - driving critical global and social change, protecting the planet,
transforming lives for the better
A net revenue increase of £4.1million to £23.4million (+21.5%), driven by
ongoing growth of the security and defense business, continuing the momentum
from the prior year. New client assignments include WHO, Ofcom, and UNICEF.
· Passions - connecting brands direct to consumers through passions and
personalities
A net revenue increase of £1.6million to £17.1million (+10.3%), driven
mainly by the Sport and Entertainment business in the UK, which supported
clients such as Barclays to maximise their sponsorship of Wimbledon, and the
Sport and Entertainment business in Germany, which won new clients such as
Porsche.
· Consulting - transforming businesses by unlocking existing and new growth
opportunities
A net revenue decrease of £0.2million to £17.5million (-0.7%), with our CX
business in the US winning additional new projects and our small startup
consultancies starting to win more new business including McDonalds, Channel 4
and Nike. This was offset by a decline in our brand design business as clients
pause or defer new projects.
· Media - connecting brands with today's connected customers
A net revenue decrease of £5.6million to £12.1million (-31.9%), due to the
well-publicised downturn in the technology sector in the US and UK. A
restructuring programme has been undertaken to mitigate the full-year profit
impact of the lower revenues during H1 2023. However, we did pick up some
notable wins with Amazon, Sega and TickPick.
· Advertising - Blending marketing science with creativity through
earned, owned and paid-for content
A net revenue decrease of £9.4million to £50.1million (-15.8%). The
Advertising division includes a large number of businesses. We saw good
revenue growth in the US, driven primarily by increased activity with Meta;
Italy, driven by growth in its partnership with EY; Brazil, driven by
increased spend from clients (including BASF and Uber); and UAE, where we won
more work with new and existing clients. While our businesses in the UK,
Australia, Germany and China, suffered revenue declines year-on-year as a
consequence of the challenging market conditions.
Group Central Costs
Further to the global efficiency programme, central costs have reduced by
£0.5million to £4.4million (12%). This is driven primarily by a reduction in
external audit fees and executive bonuses.
Income Statement
· Statutory Profit Before Tax
Statutory loss before tax was £5.1m (2022: £0.3m profit). This loss was
primarily driven by non-trading items, such as the revaluations of put options
and equity investments. A full listing of these items is set out in Note 4.
· Taxation
The effective tax rate for H1 2023 has decreased to 23.7% (H1 2022: 29.1%).
This is mainly due to the takeover transaction costs in H1 2022, which were
treated as non-deductible for corporation tax provision purposes.
· Earnings
The Headline earnings decline was partially mitigated, as minority interests
were further reduced in H1 to 18% (from 32% in H1 2022).
Balance sheet and cashflow
· Cash and Borrowings
Operating cash inflow before movements in working capital was £4.2million,
which was lower than last year (£7.7million in H1 2022), but in line with the
lower profitability.
We invested £1.6million, similar to last year, buying replacement IT
equipment, fit-outs for new offices in Dubai and Berlin, and procuring new
software. We paid out £3.3million to settle put options and reduce our
minority interests (with more to come in H2). We also paid what was due on our
property leases (£4.4million), down from £4.9million last year.
Cash net of bank borrowings at 30 June 2023 is £15.4million, compared to
£30.0million of net cash at 31 December 2022 and £39.7million net cash at 30
June 2022.
· Working Capital Movement
Trade and other receivables decreased by £15.7million (11%) between 30 June
2022 and 30 June 2023, driven by the reduction in activity. Trade and other
payables decreased by £33.1million (19%) between 30 June 2022 and 30 June
2023, driven by the reduction in activity and lower levels of cost accruals.
Net working capital decreased by £6.8million since the beginning of the year.
This has been driven by lower trading volumes (which has reduced our ongoing
positive working capital position) and one-off timings on when suppliers have
been paid and clients have been billed in June (versus December). We expect
much of this to reverse in H2.
· Put Options
Based on the put option holders that have exercised in 2023, around 50% of the
remaining liability will be settled in H2 2023. This is expected to reduce
minority interests to 10% of Headline earnings in 2023, down from nearly 40%
in 2019. We expect the remaining liability at the end of the year to be around
£15m, and this will be settled over the next five years.
· Other Balance Sheet Movements
The other movements include the revaluation of unlisted equity investments
held in early-stage companies, reported as financial assets at fair value
through profit and loss. The revaluation of £1.9million of these companies is
excluded from Headline results.
Notes to Editors
Company
M&C Saatchi plc, a company incorporated and domiciled in England and Wales
with company number 05114893, listed on the AIM Market of the London Stock
Exchange plc.
Group
The Company and its subsidiaries.
Headline results
A self-defined alternative measure of profit that provides a different
perspective to the Statutory results. The Directors believe it provides a
better view of the underlying performance of the Company, because it excludes
a number of items that are not part of routine business income and expenses.
These Headline figures are a better way to measure and manage the business and
are used for internal performance management and reward. "Headline results" is
not a defined term in IFRS.
Headline results represent the underlying trading profitability of the Group
and excludes:
· Separately disclosed items that are one-off in nature and are not part of
running the business.
· Acquisition-related costs.
· Gains or losses generated by disposals of subsidiaries and associates.
· Fair value adjustments to unlisted equity investments, acquisition related
contingent consideration and put options.
· Dividends paid to IFRS 2 put option holders.
A reconciliation of Statutory to Headline results is presented in Note 4.
Operating profit margin
Operating profit margin refers to the percentage calculated through dividing
operating profit by net revenue.
Net cash
Net cash refers to cash and cash equivalents, less borrowings of the Group,
derived from the accounts in the balance sheet, excluding lease liabilities.
Net revenue
Net revenue is equal to revenue less project cost / direct cost. It is not an
IFRS defined term. It is, however, used as a key performance indicator by the
Group.
Revenue
Revenue comprises the total of all gross amounts billed, or billable to
clients in respect of commission-based, fee-based and any other income where
we act as principal and our share of income where we act as an agent. The
difference between Billings and Revenue is represented by costs incurred on
behalf of clients with whom we operate as an agent, and timing differences
where invoicing occurs in advance or in arrears of the related revenue being
recognised.
EBITDA
EBITDA is earnings before depreciation, amortisation, finance expense and
taxation, and excludes any charges relating to IFRS 16. It is not an IFRS
defined term. It is, however, used as a key performance indicator by the
Group.
Billings
Billings comprise all gross amounts billed, or billable to clients in respect
of commission-based and fee-based income, whether acting as agent or
principal, together with the total of other fees earned, in addition to those
instances where the Group has made payments on behalf of customers to third
parties. It is stated exclusive of VAT and sales taxes.
Minority interests and non-controlling interests
Within the Group, there are a number of subsidiary companies and partnerships
in which employees hold a direct interest in the equity of those companies.
These employees are referred to as minority shareholders. Of these subsidiary
companies and partnerships, most account for the shareholding of their
minority shareholders as a management incentive (through the award of
conditional shares) and are 100% consolidated in the Group's financial
statements. The remaining four subsidiary companies (including one without a
put option) account for their minority shareholders as non-controlling
interests, a defined IFRS term, with their share of the Group's profits being
shown separately on the Income Statement.
Unaudited Consolidated Income Statement
Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December 2022
Note £000 £000 £000
Billings 250,448 262,208 597,520
Revenue 216,672 221,699 462,533
Project cost / direct cost (96,281) (92,305) (191,393)
Net revenue 120,391 129,394 271,140
Staff costs (99,030) (94,401) (198,765)
Depreciation (4,458) (4,543) (9,326)
Amortisation (397) (454) (1,060)
Impairment charges (426) - (564)
Other operating charges (17,731) (27,712) (49,474)
Other (losses)/gains (1,922) 452 (1,403)
Operating (loss)/profit (3,573) 2,736 10,548
Share of results of associates and joint ventures (14) - (10)
Gain on disposal of subsidiaries 304 - -
Finance income 874 70 391
Finance costs (2,650) (2,501) (5,506)
(Loss)/profit before taxation (5,059) 305 5,423
Taxation (1,223) (4,294) (5,178)
(Loss)/profit for the period (6,282) (3,989) 245
Attributable to:
Equity shareholders of the Group (6,376) (4,137) 90
Non-controlling interests 94 148 155
(Loss)/profit for the period (6,282) (3,989) 245
(Loss)/Earnings per share
Basic (pence) 4 (5.22)p (3.38p) 0.07p
Diluted (pence) 4 (5.22)p (3.38p) 0.07p
Headline results
Net revenue 120,391 129,394 271,140
Operating profit 4 9,980 18,079 35,388
Profit before tax 4 8,848 16,041 31,833
Profit after tax attributable to equity shareholders of the Group 4 5,462 7,790 18,105
EBITDA 14,524 22,774 45,168
Unaudited Consolidated Statement of Comprehensive Income
Six months ended 30 June 2023 Six months ended Year ended
30 June 2022 31 December 2022
£000 £000 £000
(Loss)/profit for the period (6,282) (3,989) 245
Other comprehensive income/(loss)
Exchange differences on translating foreign operations before tax (3,657) 3,988 4,785
Other comprehensive income/(loss) for the period net of tax (3,657) 3,988 4,785
Total comprehensive (loss)/income for the period (9,939) (1) 5,030
Total comprehensive (loss)/income attributable to:
Equity shareholders of the Group (10,033) (41) 4,875
Non-controlling interests 94 40 155
Total comprehensive (loss)/income for the period (9,939) (1) 5,030
Unaudited Consolidated Balance Sheet
Six months ended Six months ended Year ended
30 June 2023 30 June 2022 31 December 2022
£000 £000 £000
Non-current assets
Intangible assets 39,812 41,785 41,968
Investments in associates and JVs 177 200 191
Plant and equipment 7,793 6,287 8,310
Right-of-use assets 39,191 42,297 43,992
Other non-current assets 1,290 1,283 1,107
Deferred tax assets 5,878 7,105 5,131
Financial assets at fair value through profit or loss 10,796 15,515 11,986
Deferred and contingent consideration 738 - 914
105,675 114,472 113,599
Current assets
Trade and other receivables 130,054 145,803 132,067
Current tax assets 5,274 1,587 3,909
Cash and cash equivalents 27,393 56,429 41,492
162,721 203,819 177,468
Current liabilities
Trade and other payables (142,649) (173,954) (155,547)
Provisions (487) (917) (1,056)
Current tax liabilities (2,551) (2,215) (481)
Borrowings (157) (6,913) (4,430)
Lease liabilities (6,003) (6,139) (6,448)
Deferred and contingent consideration - (1,250) -
Minority shareholder put option liabilities (21,578) (26,953) (18,419)
(173,425) (218,341) (186,381)
Net current (liabilities) / assets (10,704) (14,522) (8,913)
Total assets less current liabilities 94,971 99,950 104,686
Non-current liabilities
Deferred tax liabilities (1,939) (902) (1,245)
Corporation tax liabilities - - (856)
Borrowings (11,795) (9,795) (6,802)
Lease liabilities (45,890) (48,371) (49,122)
Minority shareholder put option liabilities (5,075) (5,296) (4,429)
Other non-current liabilities (3,566) (3,322) (4,046)
(68,265) (67,686) (66,500)
Total net assets 26,706 32,264 38,186
Unaudited Consolidated balance sheet (continued)
Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended
31 December 2022
£000 £000 £000
Equity
Share capital 1,227 1,227 1,227
Share premium 50,327 50,327 50,327
Merger reserve 37,554 37,554 37,554
Treasury reserve (550) (550) (550)
Minority interests put option reserve (2,506) (6,615) (2,896)
Non-controlling interests acquired (33,251) (29,190) (32,984)
Foreign exchange reserve 2,981 5,841 6,638
Accumulated loss (29,092) (26,564) (21,303)
Equity attributable to shareholders of the Group 26,690 32,030 38,013
Non-controlling interests 16 234 173
Total equity 26,706 32,264 38,186
Unaudited Consolidated Statement of Changes in Equity
Share capital Share premium Merger reserve Treasury reserve MI put option reserve Non-controlling interests acquired Foreign exchange reserves Retained earnings/ (accumulated losses) Subtotal Non-controlling interests in equity Total
£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000
At 31 December 2022 1,227 50,327 37,554 (550) (2,896) (32,984) 6,638 (21,303) 38,013 173 38,186
Share option charge - - - - - - - 491 491 - 491
Exercise of Minority Interest put options - - - - 390 (267) - - 123 (123) -
Disposal of subsidiaries - - - - - - - (69) (69) - (69)
Dividends - - - - - - - (1,834) (1,834) (128) (1,962)
Total transactions with owners - - - - 390 (267) - (1,412) (1,289) (251) (1,540)
Total (loss)/profit for the period - - - - - - - (6,376) (6,376) 94 (6,282)
Total other comprehensive loss for the period - - - - - - (3,657) - (3,657) - (3,657)
At 30 June 2023 1,227 50,327 37,554 (550) (2,506) (33,251) 2,981 (29,092) 26,690 16 26,706
Share capital Share premium Merger reserve Treasury reserve MI put option reserve Non-controlling interests acquired Foreign exchange reserves Retained earnings/ (accumulated losses) Subtotal Non-controlling interests in equity Total
£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000
At 31 December 2021 1,227 50,327 37,554 (550) (6,615) (29,190) 1,853 (22,122) 32,484 373 32,857
Share option charge - - - - - - - 1,229 1,229 - 1,229
Amount paid on settlement of LTIP - - - - - - - (500) (500) - (500)
Exercise of Minority Interest put options - - - - 3,719 (3,794) - - (75) 75 -
Dividends - - - - - - - - - (430) (430)
Total transactions with owners - - - - 3,719 (3,794) - 729 654 (355) 299
Total profit for the period - - - - - - - 90 90 155 245
Total other comprehensive income for the period - - - - - - 4,785 - 4,785 - 4,785
At 31 December 2022 1,227 50,327 37,554 (550) (2,896) (32,984) 6,638 (21,303) 38,013 173 38,186
Unaudited Consolidated Cashflow Statement and Analysis of Net Cash
Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended
31 December 2022
£000 £000 £000
Operating profit/(loss) (3,573) 2,736 10,548
Adjustments for:
Depreciation of plant and equipment 1,250 1,263 2,480
Depreciation of right-of-use assets 3,208 3,280 6,846
Impairment of right-of-use assets 463 - -
Loss on sale of plant and equipment 22 - 165
Loss on sale of software intangibles 1 - 175
Revaluation of financial assets at FVTPL 1,922 (452) 1,403
Revaluation of contingent consideration - 266 266
Amortisation of acquired intangible assets 296 302 597
Impairment of goodwill and other intangibles - - 556
Impairment and amortisation of capitalised software intangible assets 101 152 635
Exercise of share-based payment schemes with cash - - (500)
Equity settled share-based payment expenses 491 195 1,229
Operating cash before movements in working capital 4,181 7,742 24,400
Decrease/(Increase) in trade and other receivables 2,486 (16,684) (4,187)
(Decrease)/Increase in trade and other payables (8,683) 26,225 9,104
(Decrease)/Increase in provisions (569) (276) (137)
Cash generated from operations (2,585) 17,007 29,180
Tax paid (1,812) (4,412) (6,712)
Net cash (used in)/from operating activities (4,397) 12,595 22,468
Investing activities
Disposal of subsidiary (net of cost disposed of) (44) - -
Proceeds from sale of unlisted investments - 138 918
Purchase of plant and equipment (1,402) (1,181) (4,383)
Purchase of capitalised software (212) (220) (1,192)
Interest received 302 70 391
Net cash (used in)/generated from investing activities (1,356) (1,193) (4,266)
Net cash (used in)/from operating and investing activities (5,753) 11,402 18,202
Six months ended Six months ended 30 June 2022 Year ended
30 June 2023 31 December 2022
£000 £000 £000
Net cash (used in)/from operating and investing activities (5,753) 11,402 18,202
Financing activities
Dividends paid to non-controlling interests (128) (287) (430)
Cash consideration for non-controlling interests acquired (3,264) (1,729) (12,104)
Payment of deferred consideration - - (1,250)
Payment of lease liabilities (3,051) (3,454) (7,307)
Proceeds from bank loans 5,000 - -
Repayment of bank loans (106) (10,000) (13,410)
Interest paid (821) (619) (1,200)
Interest paid on lease liabilities (1,474) (1,489) (2,970)
Net cash used in financing activities (3,844) (17,578) (38,671)
Net (decrease)/ increase in cash and cash equivalents (9,597) (6,176) (20,469)
Effect of exchange rate fluctuations on cash held (285) 1,031 2,711
Cash and cash equivalents at the beginning of the year 37,221 54,979 54,979
Total cash and cash equivalents at the end of period 27,339 49,834 37,221
Cash and cash equivalents 27,393 56,429 41,492
Bank overdrafts 2 (#_ftn2) (54) (6,595) (4,271)
Total cash and cash equivalents at the end of period 27,339 49,834 37,221
Bank loans and borrowings (11,898) (10,113) (7,212)
Net cash 15,441 39,721 30,009
Notes to the Unaudited Consolidated Interim Financial Statements
1. General information
The Company is a public limited company incorporated and domiciled in the UK.
The address of its registered office and the Company is 36 Golden Square,
London W1F 9EE.
The Company is listed on the AIM market of the London Stock Exchange.
This consolidated half-yearly financial information was approved for issue on
13 September 2023.
The comparative financial information for the year ended 31 December 2022 in
these interim financial statements does not constitute statutory accounts for
that year.
The statutory accounts for the year ended 31 December 2022 have been delivered
to the Registrar of Companies. The auditors' report on those accounts was
unqualified, did not draw attention to any matters by way of emphasis, and did
not contain a statement under 498(2) or 498(3) of the Companies Act 2006.
2. Basis of preparation
This consolidated half-yearly financial information for the six months ended
30 June 2023 has been prepared on the going concern basis, in accordance with
the AIM Rules for companies. The interim financial statements do not include
all of the information required in annual financial statements in accordance
with IFRS and should be read in conjunction with the consolidated financial
statements for the year ended 31 December 2022.
3. Use of judgements and estimates
In the course of preparing the interim financial statements, management
necessarily makes judgements and estimates that can have a significant impact
on the interim financial statements. These estimates and judgements are
continually evaluated based on historical experience and other factors,
including expectations of future events that are believed to be reasonable
under the circumstances.
Significant accounting judgements
Management has considered the following judgements, which have the most
significant effect in terms of the amounts recognised, and their presentation,
in the interim financial statements. These are the same accounting estimates
and judgements the Group has applied in its financial statements for the year
ended 31 December 2022:
· Non-controlling interests put option accounting - IFRS 2 or IFRS 9
The key judgement is whether the awards are given beneficially as a result of
employment, which can be determined where there is an explicit service
condition, where the award is given to an existing employee, where the
employee is being paid below market value or where there are other indicators
that the award is a reward for employment. In such cases, the awards are
accounted for as a share-based payment in exchange for employment services
under IFRS 2.
Otherwise, where the holder held shares prior to the Group acquiring the
subsidiary, or gained the equity to start a subsidiary using their unique
skills, and there are no indicators it should be accounted for under IFRS 2,
then the award is accounted for under IFRS 9.
· Impairment - assessment of CGUs and assessment of indicators of
impairment
Impairment reviews are undertaken annually, or more frequently if events or
changes in circumstances indicate a potential impairment. Assets with finite
lives are reviewed for indicators of impairment (an impairment "trigger") and
judgement is applied in determining whether such a trigger has occurred.
External and internal factors are monitored by management, including a)
adverse changes in the economic or political situation of the geographic
locale in which the underlying entity operates, b) heightened risk of client
loss or chance of client gain, and c) internal reporting suggesting that an
entity's future economic performance is better or worse than previously
expected. Where management have concluded that such an indication of
impairment exists, then the recoverable amount of the asset is assessed.
For the interim financial statements, management have concluded that no such
indication of impairment exists.
Significant estimates and assumptions
The areas of the Group's interim financial statements subject to key
assumptions and other significant sources of estimation uncertainty at the
reporting date that have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities are described below. The
Group has based its assumptions and estimates on information available when
the interim financial statements were prepared.
· Deferred tax assets
The Group assesses the future availability of carried forward losses and other
tax attributes by reference to jurisdiction-specific rules around carry
forward and utilisation and it assesses whether it is probable that future
taxable profits will be available against which the attribute can be utilised.
· Fair value measurement of financial instruments
The Group holds certain financial instruments which are recorded on the
balance sheet at fair value at the point of recognition and remeasured at the
end of each reporting period. At the period end these relate to:
(i) equity investments at FVTPL in non-listed limited companies; and
(ii) certain contingent consideration.
No formal market exists to trade these financial instruments and, therefore,
their fair value is measured by the most appropriate valuation techniques
available, which vary based on the nature of the instruments. The inputs to
the valuation models are taken from observable markets where possible, but
where this is not feasible, judgement is required to establish fair values.
· Share-based incentive arrangements
Share-based incentives are valued at the date of the grant, using stochastic
Monte Carlo pricing models with non-market vesting conditions. Typically, the
value of these awards is directly related to the performance of a particular
entity of the Group in which the employee holds a minority interest, the
Company's share price (market vesting condition) and the future profitability
of the Group (non-market vesting condition). For elements that are based on
market vesting conditions, the key inputs to the pricing model are risk-free
interest rates, share price volatility and expected future performance of the
entity to which the award relates. Management apply judgement to these inputs,
using various sources of information, including the Company's share price,
experience of past performance and published data on risk-free interest rates
(government gilts). For elements that are based on non-market vesting
conditions, periodic reassessment of the future profitability of the Group is
made and the accounting charge is adjusted.
4. Headline results
Headline results - Six Months Ended 30 June 2023
Statutory results Separately disclosed items 3 (#_ftn3) Amortisation of acquired intangibles 4 (#_ftn4) FVTPL investments under IFRS 9 5 (#_ftn5) Gain/loss on disposal of subsidiaries Impairment of non-current assets Dividends paid to put holders Put option accounting Headline results
£000 £000 £000 £000 £000 £000 £000 £000 £000
Net revenue 120,391 - - - - - - - 120,391
Staff costs (99,030) 954 - - - - 3,668 6,156 (88,252)
Depreciation (4,458) - - - - - - - (4,458)
Amortisation (397) - 296 - - - - - (101)
Impairment charges 6 (#_ftn6) (426) - - - - 463 - - 37
Other operating charges (17,731) 423 - (329) - - - - (17,637)
Other (losses)/gains (1,922) - - 1,922 - - - - -
Operating profit (3,573) 1,377 296 1,593 - 463 3,668 6,156 9,980
Share of result of and gain on disposal of associates and joint ventures (14) - - - - - - - (14)
Gain/(loss) on disposal of subsidiaries 7 (#_ftn7) 304 - - - (304) - - - -
Finance income 874 - - - - - - - 874
Finance expense (2,650) - - 365 - - - 293 (1,992)
Profit before taxation (5,059) 1,377 296 1,958 (304) 463 3,668 6,449 8,848
Taxation (1,223) (363) (72) (514) - - - - (2,172)
(Loss)/profit for the year (6,282) 1,014 224 1,444 (304) 463 3,668 6,449 6,676
Non-controlling interests (94) - - - - - (1,120) - (1,214)
(Loss)/profit attributable to equity holders of the Group (6,376) 1,014 224 1,444 (304) 463 2,548 6,449 5,462
Headline results - Six Months Ended 30 June 2022
Statutory results Separately disclosed items 8 (#_ftn8) Amortisation of acquired intangibles 9 (#_ftn9) FVTPL investments under IFRS 9 Revaluation of contingent consideration Dividends paid to IFRS 2 put holders Put option accounting Headline results
£000 £000 £000 £000 £000 £000 £000 £000
Net revenue 129,394 - - - - - - 129,394
Staff costs (94,401) 903 - - - 4,635 953 (87,910)
Depreciation (4,543) - - - - - - (4,543)
Amortisation (454) - 302 - - - - (152)
Other operating charges (27,712) 8,345 - 391 266 - - (18,710)
Other gains/ losses 452 - - (452) - - - -
Operating profit 2,736 9,248 302 (61) 266 4,635 953 18,079
Finance income 70 - - - - - - 70
Finance expense (2,501) - - - - - 393 (2,108)
Profit before taxation 305 9,248 302 (61) 266 4,635 1,346 16,041
Taxation (4,294) (298) (88) 18 - - - (4,662)
(Loss)/profit for the year (3,989) 8,950 214 (43) 266 4,635 1,346 11,379
Non-controlling interests (148) - - - - (3,441) - (3,589)
(Loss)/profit attributable to equity holders of the Group (4,137) 8,950 214 (43) 266 1,194 1,346 7,790
Headline results - Year Ended 31 December 2022
Separately disclosed items Amortisation of acquired intangibles Impairment of non-current assets FVTPL investments under IFRS 9 Revaluation of contingent Dividends paid to IFRS2 put holders Put option accounting Headline results
consideration
Statutory results
£000 £000 £000 £000 £000 £000 £000 £000 £000
Net revenue 271,140 - - - - - - - 271,140
Staff costs (198,765) 3,412 - - - - 7,811 1,119 (186,423)
Depreciation (9,326) - - - - - - - (9,326)
Amortisation (1,060) - 597 - - - - - (463)
Impairments (564) - - 564 - - - - -
Other operating charges (49,474) 9,940 - - (272) 266 - - (39,540)
Other losses (1,403) - - - 1,403 - - - -
Operating Profit 10,548 13,352 597 564 1,131 266 7,811 1,119 35,388
Share of results of associates and JV (10) - - - - - - - (10)
Finance income 391 - - - - - - - 391
Finance expense (5,506) - - - 456 - - 1,114 (3,936)
Profit before taxation 5,423 13,352 597 564 1,587 266 7,811 2,233 31,833
Taxation (5,178) (1,982) (174) - (409) - - (47) (7,790)
Profit for the year 245 11,370 423 564 1,178 266 7,811 2,186 24,043
Non-controlling interests (155) - - - - - (5,783) - (5,938)
Profit attributable to equity holders of the Group 90 11,370 423 564 1,178 266 2,028 2,186 18,105
5. Earnings per share
Earnings per share - Six Months Ended 30 June 2023
Basic and diluted earnings per share are calculated by dividing appropriate
earnings metrics by the weighted average number of the Company's ordinary
shares in issue during the year.
Diluted earnings per share is calculated by adjusting the weighted average
number of the Company's shares in issue on the assumption of conversion of all
potentially dilutive ordinary shares. The dilutive effect of unvested
outstanding put options is calculated based on the number that would vest had
the balance sheet date been the vesting date. Since the Company made a
statutory loss no diluted earnings per share is calculated.
Statutory Headline
2023 2023
(Loss)/profit attributable to equity shareholders of the Group (£000) (6,376) 5,462
Basic earnings per share
Weighted average number of shares (thousands) 122,257 122,257
Basic (loss)/earnings per share (5.22)p 4.47p
Diluted earnings per share
Weighted average number of shares (thousands) as above 122,257 122,257
Diluted (loss)/earnings per share (5.22)p 4.47p
Earnings per share - Six Months Ended 30 June 2022
Statutory Headline
2022 2022
Profit attributable to equity shareholders of the Group (£000) (4,137) 7,790
Basic earnings per share
Weighted average number of shares (thousands) 122,257 122,257
Basic (loss)/earnings per share (3.38)p 6.37p
Diluted earnings per share
Weighted average number of shares (thousands) as above 122,257 122,257
Diluted (loss)/earnings per share (3.38)p 6.37p
Earnings per share - Year Ended 31 December 2022
Statutory Headline
2022 2022
Year ended 31 December 2022
Profit attributable to equity shareholders of the Group (£000) 90 18,105
Basic earnings per share
Weighted average number of shares (thousands) 122,257 122,257
Basic EPS 0.07p 14.81p
Diluted earnings per share
Weighted average number of shares (thousands) as above 122,257 122,257
Add
- LTIP 905 905
- Put options 11,302 11,302
Total 134,464 134,464
Diluted EPS 0.07p 13.47p
Excluding the put options (payable in cash) (11,302) (11,302)
Weighted average numbers of shares (thousands) including dilutive shares 123,162 123,162
Diluted EPS - excluding items we intend and are able to pay in cash 0.07p 14.70p
6. Separately disclosed items
Separately disclosed items include one-off, non-recurring revenues or
expenses. These are shown separately and are excluded from Headline profit to
provide a better understanding of the underlying results of the Group.
30 June 2023
Separately disclosed items for the six months ended 30 June 2023 comprise the
following:
Operating costs Staff costs Taxation Total
£000 £000 £000 £000
Global efficiency programme 421 106 (132) 395
Local strategic review and restructuring 2 848 (231) 619
Total separately disclosed items 423 954 (363) 1,014
`
In H2 2022, the Group commenced a global efficiency programme, with the
assistance of PricewaterhouseCoopers LLP. The professional and legal fees and
staff costs incurred in relation to this project were classified as
non-Headline (£527k).
In addition, within nine of the agencies in the Group, a strategic review has
been commenced which has resulted in staff redundancy costs in the period. The
strategic review and restructuring costs are treated as separately disclosed
items only when a role has been permanently eliminated from the business
(there should be no intention for the role to be replaced in the next 12
months). There are £848k of redundancy costs included within non-Headline
strategic review and restructuring, and £150k of redundancy costs are
included within the Headline staff costs.
30 June 2022
Separately disclosed items for the six months ended 30 June 2022 comprise the
following:
Operating costs Staff costs Taxation Total
£000 £000 £000 £000
Takeover transaction costs 8,645 903 (298) 9,250
Other (300) - - (300)
Total separately disclosed items 8,345 903 (298) 8,950
During 2022, the Company was subject to two competing offers to acquire the
entire issued share capital of the Company. Managing the Company's response to
these two offers resulted in significant external advisory costs and a
refocusing of several key internal personnel away from the day-to-day running
of the business.
Other separately disclosed items relate to the release of the provision
associated with the Financial Conduct Authority investigation, which is now
closed with
31 December 2022
Separately disclosed items for the year ended 31 December 2022 comprise the
following:
Operating costs Staff costs Taxation Total
£000 £000 £000 £000
Takeover transaction costs 9,210 1,623 (1,294) 9,539
Strategic review and restructuring 992 1,789 (688) 2,093
Other (262) - - (262)
Total separately disclosed items 9,940 3,412 (1,982) 11,370
In H2 2022, the Company incurred incremental bonus costs paid to several key
individuals of £594k to reflect the significant additional workload they had
to undertake in defence of the takeover bids.
The Group commenced a global efficiency programme, with the assistance of
PricewaterhouseCoopers LLP. The professional fees incurred in relation to this
project have been classified as non-Headline (£922k). In addition, within
three of the agencies in the Group, a strategic review commenced which
resulted in staff redundancy costs in the year (£1,789k).
7. Segmental information
The Group's operating segments are aligned to those business units that are
regularly evaluated by the chief operating decision maker ("CODM"), namely,
the Board, in making strategic decisions, assessing performance and allocating
resources.
We primarily assess the Group's performance by division, namely Advertising,
Specialisms and Group Central Costs. The segmental information is reconciled
to the Headline results in Note 4.
Segmental Information by Division 10 (#_ftn10)
Advertising Specialisms Group Central Costs Total
Six Months Ended 30 June 2023 £000 £000 £000 £000
Net revenue 50,092 70,299 - 120,391
Operating profit/(loss) 464 13,869 (4,353) 9,980
Operating profit margin 0.9% 19.7% - 8.3%
Profit/(loss) before tax 153 11,146 (2,451) 8,848
Advertising Specialisms Group Central Costs Total
(restated)[ (#_ftn11) 11] (#_ftn11) (restated)
Six Months Ended 30 June 2022 £000 £000 £000 £000
Net revenue 59,658 69,736 - 129,394
Operating profit/(loss) 3,259 19,742 (4,922) 18,079
Operating profit margin 5.5% 28.3% - 14.0%
Profit/(loss) before tax 2,671 18,477 (5,108) 16,041
Advertising Specialisms Group Central Costs Total
Year Ended 31 December 2022 £000 £000 £000 £000
Net revenue 124,300 146,840 - 271,140
Operating profit/(loss) 11,728 35,015 (11,355) 35,388
Operating profit margin 9% 24% - 13%
Profit/(loss) before tax 9,928 31,604 (9,699) 31,833
Segmental Information by Geography
UK Europe Middle East and Africa Asia Australia Americas Group Central Costs Total
Six Months Ended 30 June 2023 £000 £000 £000 £000 £000 £000 £000 £000
Net revenue 46,642 6,957 10,940 10,750 22,613 22,489 - 120,391
Operating profit/(loss) 8,713 247 1,030 1,105 1,541 1,697 (4,353) 9,980
Operating profit margin 18.7% 3.6% 9.4% 10.3% 6.8% 7.5% - 8.3%
Profit/(loss) before tax 7,674 171 928 1,056 1,015 455 (2,451) 8,848
UK Europe Middle East and Africa Asia Australia Americas Group Central Costs Total
Six Months Ended 30 June 2022 £000 £000 £000 £000 £000 £000 £000 £000
Net revenue 49,126 7,644 10,900 12,310 25,726 23,688 - 129,394
Operating profit/(loss) 11,232 715 912 4,185 2,091 3,866 (4,922) 18,079
Operating profit margin 22.9% 9.4% 8.4% 34.0% 8.1% 16.3% - 14.0%
Profit/(loss) before tax 11,550 684 767 4,146 1,686 2,316 (5,108) 16,041
UK Europe Middle East and Africa Asia Australia Americas Group Central Costs Total
Year Ended 31 December 2022 £000 £000 £000 £000 £000 £000 £000 £000
Net revenue 98,241 15,316 23,368 26,154 52,855 55,206 - 271,140
Operating profit/(loss) 19,528 1,852 2,625 6,951 5,817 9,970 (11,355) 35,388
Operating profit margin 19% 12% 11% 29% 11% 18% - 13%
Profit/(loss) before tax 17,416 1,832 2,345 6,757 4,904 8,278 (9,699) 31,833
8. Net finance income / (expense)
Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended
31 December 2022
£000 £000 £000
Bank interest receivable 189 66 331
Other interest receivable 682 - 55
Sublease finance income 3 4 5
Finance income 874 70 391
Bank interest payable (788) (508) (1,200)
Amortisation of loan costs (95) (111) (222)
Interest on lease liabilities (1,474) (1,489) (2,970)
Amortisation adjustment to minority shareholder put option liabilities (293) (393) (1,114)
Finance expense (2,650) (2,501) (5,506)
Net finance expense (1,776) (2,431) (5,115)
9. Taxation
Income tax expenses are recognised based on management's estimate of the
average annual income tax rate expected for the full financial year.
The estimated effective Headline annual tax rate used for H1 2023 is 23.7% (H1
2022: 29.1%; Full Year 2022: 24.5%).
We expect smaller variations in future statutory tax rates due to lower
amounts of significant non-deductible items such as share-based payments (put
option charges) and dividends that are payable to minority shareholders that
are defined as a staff cost.
10. Dividends
The Board believes that the Group has significant growth potential.
Accordingly, the Board believes that the Group would be best served, and this
potential realised, from investing annual profits back into the business and
into new growth initiatives.
However, the Board recognises the importance of dividends within the Company's
capital allocation policy, alongside the settlement of put options and
investment in growth initiatives. The Board therefore decided to resume the
payment of dividends in 2023 and intends to adopt a progressive dividend
policy in the future.
The Company did not pay a dividend to its shareholders in 2022. Given the full
year financial performance in 2022, the Board declared a final dividend of 1.5
pence per ordinary share for the financial year ended 31 December 2022, which
was paid in July 2023.
Due to the weighting of profits to H2, the Board does not recommend an interim
dividend for the year ending 31 December 2023 (2022: nil).
11. Share-based payments
In 2021, the Board made the decision that all put options would be settled in
cash. However, the optionality remains to issue shares in the Company to
settle put options in the future, should circumstances warrant.
Total future expected put option liabilities at 30 June 2023
Potentially payable
At 152p Paid Payable 2024 2025 2026 2027 2028 Total
H1 2023 H2 2023
£000 £000 £000 £000 £000 £000 £000 £000
IFRS9 put option schemes* 785 1,929 19 - 1,983 - - 3,931
IFRS2 put option schemes** 2,493 13,573 6,057 1,594 953 882 542 23,601
Total 3,278 15,502 6,076 1,594 2,936 882 542 27,532
* At 30 June 2023 IFRS9 put option schemes includes a £566k fair value
discount for time.
** At 30 June 2023 94% of IFRS2 put option schemes by value were vested. The
balance sheet liability at 30 June 2023 is £22,250k.
Put option holders are not required to exercise their put options at the first
opportunity. Many do not and prefer to remain shareholders in the subsidiary
companies they manage. As a result, some put option holders may not exercise
their put options on the dates estimated in the table above. If the Company in
the future decides to settle these put options with the Company's shares, then
the amount of Company shares that will be provided is equal to the liability
divided by the Company's share price at the date of settlement.
Effect of a change in share price
The same data from the table above is presented in the table below, but in this analysis the potential payments are based on a range of different potential future share prices.
Put option schemes
Potentially payable
Future share price of Company Paid Payable 2024 2025 2026 2027 2028 Total payable
H1 2023 H2 2023
£000 £000 £000 £000 £000 £000 £000 £000
140.0p 3,278 15,502 5,585 1,460 2,861 813 499 26,720
152.0p 3,278 15,502 6,076 1,594 2,936 882 542 27,532
175.0p 3,278 15,502 7,019 1,852 3,080 1,016 624 29,093
200.0p 3,278 15,579 7,943 2,032 3,316 1,161 713 30,744
225.0p 3,278 15,830 8,794 2,139 3,730 1,306 802 32,601
The Board has issued LTIPs to certain key individuals, which at a share price
of 152.0p would generate a maximum potential payable of £4.6million, assuming
all awards are held to their vesting date and fully vest. LTIPs are accounted
for as equity-settled, and thus do not create a balance sheet liability.
12. Events after the balance sheet date
Moray MacLennan informed the Company of his intention to retire from his role
of Chief Executive Officer of the Company. The Company and Mr MacLennan agreed
that this change will take effect as of 30 September 2023. Until a new Chief
Executive Officer joins the Company, which is expected to be within the next
12 months, Zillah Byng-Thorne, currently Non-Executive Chair, is acting as
Executive Chair of the Company effective 1 September 2023.
As a result of settling put option arrangements, the Company paid out
£11.5million to put options holders in July 2023.
The Directors are not aware of any other events since 30 June 2023 that have
had, or may have, a significant impact on the Group's operations, the results
of those operations, or the state of affairs of the Group in future years.
1 (#_ftnref1) Like-for-like excluding the effect of the disposal of Clear
Deutschland GMBH in H1 2023 and retranslating 2022 figures to 2023 FX rates.
Additionally, 2022 comparators have been restated in respect of agencies which
changed from Advertising to Specialisms in H2 2022
2 (#_ftnref2) These overdrafts are legally offset against balances held in
the UK; however, they have not been netted off in accordance with the
requirements of IAS32.42.
3 (#_ftnref3) Refer to Note 6
4 (#_ftnref4) Amortisation of intangible assets acquired in business
combinations (including goodwill and acquired intangibles but excluding
software).
5 (#_ftnref5) Financial assets at fair value through profit and loss (FVTPL)
relates to assets held in the Saatchinvest portfolio and by the Australian
business.
6 (#_ftnref6) The headline impairment is net positive due to the unwinding
of a historic impairment balance of film assets held by the Australian
business.
7 (#_ftnref7) Gain mainly relates to the reversal of put option liability
relating to Clear Deutschland GMBH.
8 (#_ftnref8) Refer to Note 6
9 (#_ftnref9) Amortisation of intangible assets acquired in business
combinations (including goodwill and acquired intangibles but excluding
software).
10 (#_ftnref10) The segmental reporting reflects Headline results
11 (#_ftnref11) The disclosure has been restated to reclassify entities who
changed from Advertising to Specialisms during H2 2022, and to recalculate the
allocation of local central costs in line with the method applied in H2 2022
and H1 2023.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR LJMBTMTBBTMJRecent news on M&C Saatchi
See all newsREG - M&C Saatchi PLC - Director and PDMR Shareholding
AnnouncementREG - M&C Saatchi PLC - Holding(s) in Company
AnnouncementREG - M&C Saatchi PLC - Publication of audited ARA and Notice of AGM
AnnouncementREG - M&C Saatchi PLC - Appointment of joint Global CCOs
AnnouncementREG - M&C Saatchi PLC - Full Year Results
Announcement