REG - Mission Group PLC - INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2023
26/09/2023 07:00
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RNS Number : 5933N Mission Group PLC (The) 26 September 2023
26 September 2023
THE MISSION GROUP plc
("MISSION", "the Group")
INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2023
Resilient revenue growth despite challenging trading environment
MISSION Group plc (AIM: TMG), creator of Work That Counts(TM), comprising
a group of digital marketing and communications Agencies delivering real,
sustainable growth for its Clients, is pleased to announce interim results
for the six months ended 30 June 2023 ("the period" or "H1").
FINANCIAL HIGHLIGHTS
· Strong revenue performance across most segments combined with diligent cost
control delivered a robust headline operating profit outcome for the period,
despite a more difficult trading environment.
Six months ended 30 June 2023 2022 %
Revenue £41.8m £37.5m +11%
Headline Operating Profit* £2.0m £2.2m -11%
Headline Profit Before Tax* £1.0m £1.9m -46%
Reported Profit Before Tax £0.1m £1.5m -95%
Headline Earnings Per Share (pence)* 0.81 1.71 -53%
Headline Diluted Earnings Per Share * (pence) 0.81 1.70 -52%
· Net bank debt of £14.9m (30 June 2022: £7.1m, 31 December 2022: £11.4m),
driven predominantly by year on year changes in Client prepayment behaviour,
closely linked to the tightening within the US Tech sector.
· Bank debt leverage ratio closed at 1.7x (30 June 2022: 0.8x, 31 December 2022
1.2x).
· Interim dividend of 0.87p declared (2022: 0.83p), an increase of 5%.
*Headline results are calculated before start-up costs, acquisition
adjustments, goodwill and business impairment and restructuring costs.
BUSINESS HIGHLIGHTS
· H1 performance broadly in line with Board's expectations and achieved despite
considerable industry-wide headwinds.
· Revenue growth has been driven by strong progress across MISSION's Property,
Sports & Entertainment and Health & Wellness sectors.
· The Group has not been immune from the challenges in the US technology sector
and the reduced level of activity in this market in 2023 has impacted margins,
particularly in comparison to 2022.
· Sustained recovery across Agencies most impacted by the pandemic including
events and property.
· Major new Client win, UK Post Office, secured since period end on an
integrated basis, with work commencing in H2 2023.
· Further new business wins secured during H1 include: UK Space
Agency, Macmillan Coffee Morning, M1 Telecom, Goldman
Sachs, Jägermeister and Worldpay.
· Further progress against strategic areas of focus with new acquisitions and
organic investment made during the period in Data Science & Digital
Analytics and Growth Media.
· Recent Sports & Entertainment acquisitions have bedded in well.
OUTLOOK
· As in previous years, the Group expects the majority of its profit to be
generated in the second half of the year.
· Despite the continued, heightened level of global macro-economic uncertainty,
we currently remain on track to deliver against the Board's expectations.
Commenting on the results, Julian Hanson-Smith, Chair of The MISSION Group
plc, said:
"MISSION continues to report robust organic revenue growth from existing
Clients across all areas, despite the well-documented industry headwinds. The
recent announcement of a major new Client win, UK Post Office, reflects the
growing success of MISSION's integrated offering, and the benefits of the
recent investments we have made to expand our capabilities and services.
We continue to be mindful of wider macro-economic uncertainty impacting Client
spend, but still anticipate full year revenue growth across all the Group's
primary business sectors. Encouragingly, run rates from the US technology
sector are starting to return to 2022 levels. We remain confident that the
Group's strategy of deliberate investment in our people and capabilities will
underpin a good full year performance. The effects of higher operating and
interest costs are likely to have an impact on profit growth for the current
year which, as previously reported, we expect to be at the lower end of the
Board's original expectations but still ahead of last year's level.
ENQUIRIES:
James Clifton, Chief Executive Officer
Giles Lee, Chief Financial Officer
The MISSION Group plc 020 7462 1415
Simon Bridges/Andrew Potts/Harry Rees
Canaccord Genuity Limited (Nominated Adviser and Broker) 020 7523 8000
Kate Hoare / Alexander Clelland
HOUSTON (Financial PR and Investor Relations) 0204 529 0549
NOTES TO EDITORS
MISSION is a collective of Creative and MarTech Agencies led by entrepreneurs
who encourage an independent spirit. Employing over 1,000 people across 29
locations and 3 continents, the Group successfully combines its diverse
expertise to produce Work That Counts TM for our Clients, whatever their
ambitions. Creating real standout, sharing real innovation and delivering real
growth for some of the world's biggest brands. www.themission.co.uk
(https://eur03.safelinks.protection.outlook.com/?url=http%3A%2F%2Fwww.themission.co.uk%2F&data=04%7C01%7C%7C2e2f37c792c7415afaad08d947a9c473%7Cb7e4783d67604ed5b0c156d405b9349b%7C0%7C1%7C637619616734507818%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C2000&sdata=5duO%2FyhgYrmP5I17h1eW4mAaM4%2BhySTEObFl5Dz5R%2Fs%3D&reserved=0)
OVERVIEW
The sustained global macroeconomic and geo-political uncertainty coupled with
rising inflation and the cost-of-living crisis continued to impact trading
conditions across the Group's industry sectors and beyond. Against this
backdrop MISSION is encouraged to report overall revenue growth of 11 percent
to £41.8m (2022: £37.5m) for the period.
Headline operating profit of £2.0m (2022: £2.2m), primarily reflected the
changes to margin mix relative to H1 2022, largely as a result of lower spend
in the US Technology sector in recent months. A reduced headline reported
profit before tax of £1.0m compared to 2022 (2022: £1.9m) is the result of
the higher interest charges resulting from significantly increased interest
rates as well as higher debt when compared to last year.
The strategic changes implemented across the business in recent years have
placed us in good stead to manage the current industry headwinds. We have seen
good underlying trading from our Agencies, reflecting our increasing exposure
to more robust sectors and geographies. This is further underpinned by the
benefits of the investments we have made in high-potential areas of our
markets to expand our capabilities and services.
Careful control of costs across the business has remained a priority. Talent
costs are one of the key variables for the Group and whilst wage inflation has
clearly been a challenge for the whole industry, we were quick to recognise
the potential impact this would have and have continued to manage this well,
investing ahead to improve our people proposition in a competitive market.
Net debt has increased in the last six months, to £14.9m (2022 £7.1m, 31
December 2022: £11.4m). This increase has been driven in particular by
increased working capital and specifically changes in Client prepayment
behaviour, again closely related to the general tightening within the US Tech
sector.
Performance and progress
The Group has reported good, organic growth of 6%, guided by strong
performances in our Property, Health & Wellness and Sports &
Entertainment segments and, whilst the wider new business landscape remains
challenging, opportunities have continued to present themselves. A number of
significant Client wins have been secured throughout the period including UK
Space Agency, Macmillan Coffee Morning, M1 Telecom, Goldman
Sachs, Jägermeister and Worldpay.
Furthermore, in August we were delighted to announce a major MISSION Group win
with
UK Post Office who will be working with four of our Agencies as part of a new
Group mandate. This win was following a competitive process and highlights
the strength of our integrated offering.
The Group has not been immune from the previously highlighted challenges in
the US technology sector and revenues from our Technology & Mobility
segment have reduced by 5% for the first half year on year, with margins also
being significantly impacted in the period. Nevertheless, there are
encouraging signs that the run-rate in this segment is returning to late-2022
levels, buoyed by new business successes such as Lumens.
In line with its stated strategy for growth, the Group continues to expand
its capabilities in new areas of opportunity. In H1, this included the
acquisition of Mezzo Labs, a global data science and digital analytics
consultancy, and the launch of Turbine, an integrated Growth Media agency
specialising in earned, owned and paid media for consumer brands. These,
alongside a solid start for our recent Influence Sports & Media and
Populate Social acquisitions contribute new revenue streams to the Group.
Since the period end we have been pleased to announce the further expansion of
Influence Sports, since MISSION acquired the business in December 2022 with
the opening of its first office in the US in New York.
FINANCIAL PERFORMANCE
Billings and Revenue
Turnover ("billings") for the six months ended 30 June 2023 increased by 14%
to £92.9m (2022: £81.2m) while operating income ("revenue") increased by 11%
to £41.8m (2022: £37.5m).
Profit, Margins and Earnings Per Share
The increased revenues demonstrate good progress, particularly in light of the
previously noted reductions in US technology income. Firm, but future-focussed
cost control alongside a continued commitment to sharing infrastructure
through the MISSION Made and Shared Services initiatives, has enabled the
Group to deliver an operating profit that is modestly behind the prior year
comparison.
Headline operating profits decreased by 11% to £2.0m (H1 2022: £2.2m).
Headline operating margins decreased to 4.7% (H1 2022: 5.9%).
Financing costs increased to £1.0m (H1 2022: £0.4m), reflecting both a
higher average level of debt in the period and a significant increase in
interest rates payable on the debt. Headline profit before tax decreased as a
result of this to £1.0m (H1 2022: £1.9m).
Adjustments to headline profits in the first half of 2023, at £0.9m, were
higher than the prior year comparable period (H1 2022: £0.3m). After these
adjustments, reported profit before tax was £0.1m (H1 2022: £1.5m).
The Group estimates an effective tax rate on headline profits before tax of
24% (H1 2022: 22%), resulting in a decrease in headline earnings to £0.8m for
the six months (H1 2022: £1.5m) and reported profit after tax of £0.0m (H1
2022: £1.2m). Fully diluted EPS decreased to 0.00 pence (H1 2022: 1.37
pence), while headline diluted EPS decreased to 0.81 pence (H1 2022: 1.70
pence).
Balance Sheet and Cash Flow
The key balance sheet ratio measured and monitored by the Board is the ratio
of debt to headline EBITDA ("leverage ratio"). The Group started the year in a
strong financial position with a net bank debt leverage ratio of x1.2 and
closed the half year at x1.7 (30 June 2022: x0.8). The Board also monitors the
ratio of total debt, including remaining acquisition obligations, to EBITDA
and this ratio has increased to x2.2 (30 June 2022: x1.0, 31 December 2022:
x1.6) following the acquisitions made in the last 12 months.
The Group spent £0.3m on acquisitions during the period (2022 £nil) and a
total of £0.4m of acquisition obligations from prior years were settled in
the first half of the year, all of which were in cash (30 June 2022: £0.8m
all of which were cash). After adjustments to estimated future contingent
consideration payments the total estimated acquisition liability at 30 June
2023 totalled £5.1m (30 June 2022: £2.5m). Of this £1.0m is due for payment
in the second half of 2023.
Trade and other receivables increased against last year to £53.7m (30 June
2022: £51.6m). Trade and other payables remained stable at £52.2m (30 June
2022: £52.0m). The net change to working capital is primarily driven by a
significant reduction in Client prepayments resulting in a reduction in
deferred income of £6.2m relative to 30 June 2022. This change in behaviour
is once again linked to caution in the US Tech sector.
Consequently, the Group's net bank debt on 30 June 2023 of £14.9m has
increased against the positions on both 30 June 2022 (£7.1m) and 31 December
2022 (£11.4m). As a result, total debt (being net bank debt plus acquisition
obligations) closed at £20.0m (30 June 2022: £9.6m) as the Group completes
the investment in strategic areas of focus.
Dividend
As a reflection of this robust performance in the first half of the year, the
Directors have declared an interim dividend of 0.87 pence per ordinary share
(H1 2022: 0.83 pence), representing a 5% increase on the prior year. This will
be payable on 1 December 2023 to all shareholders on the register on 3
November 2023. The ex-dividend date is 2 November 2023.
MAKING POSITIVE CHANGE
Over the course of the period, we are pleased to have made further progress
against our Environmental, Social and Governance (ESG) commitments, outlined
in our manifesto 'Making Positive Change'. Traction against our social goals,
focused on building diverse and healthy teams and supporting the communities
we work within, has also been a key priority. This has seen positive movement
against our representation goals and impactful community support through pro
bono work, donations and volunteering.
Another important priority has been the clarification of our Environmental
journey, which has seen us benchmark and set our emissions reduction targets
in line with the Paris Climate Agreement and validate these targets via the
Science-Based Targets initiative (SBTi) Net-Zero Standard. We have targeted a
21% reduction in our Emissions by 2024 with a 42% reduction by 2029. We are
pleased to report that we are on track to meet these targets as a result of
our actions taken to date, with total emissions reduced by 40% since we began
reporting in 2019. We are also aiming to achieve ISO 14001 status for the
majority of our Agencies by end of 2023. We will be working with several
identified partners to ensure a faster transition in line with these goals as
part of our transition to net zero and to improve our measurement and
reporting.
OUTLOOK
MISSION has a significant second-half weighting with respect to
profitability. Revenue growth is anticipated across all the Group's sectors
with run rates from the US technology sector starting to return to 2022
levels. Whilst the Group remains on track to meet full-year guidance, as
highlighted in our trading update on 27 July 2023, profitability is likely to
be at the lower end of the Board's expectations albeit with profit before tax
still expected to exceed that of 2022 (£7.8m).
Condensed Consolidated Income Statement for the six months ended 30 June 2023
Six months to Six months to Year ended
30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
Note £'000 £'000 £'000
TURNOVER 2 92,908 81,226 182,685
Cost of sales (51,110) (43,712) (102,871)
2
OPERATING INCOME 41,798 37,514 79,814
Headline operating expenses (39,832) (35,297) (71,157)
HEADLINE OPERATING PROFIT
1,966 2,217 8,657
Start-up costs 3 (512) - (776)
Acquisition adjustments 4 (418) (346) (593)
Goodwill and business impairment 3 - - (5,257)
Restructuring costs 3 - - (402)
1,629
OPERATING PROFIT 1,036 1,871
Share of results of associates and joint ventures 160
75 75
1,789
PROFIT BEFORE INTEREST AND TAXATION
1,111 1,946
Net finance costs 5 (1,042) (432) (1,046)
PROFIT BEFORE TAXATION
69 1,514 743
Taxation 6 (35) (358) (707)
PROFIT FOR THE PERIOD 34 1,156 36
Attributable to:
Equity holders of the parent 3 1,250 9
Non-controlling interests 31 (94) 27
34 1,156 36
Basic earnings per share (pence) 7 0.00 1.38 0.01
Diluted earnings per share (pence) 7 0.00 1.37 0.01
Headline basic earnings per share (pence) 7
0.81 1.71 6.79
Headline diluted earnings per share (pence)
7 0.81 1.70 6.74
Condensed Consolidated Statement of Comprehensive Income for the six months
ended 30 June 2023
Six months to Six months to Year ended
30 June 30 June 31 December 2022
2023 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
PROFIT FOR THE PERIOD 34 1,156 36
Other comprehensive (loss) / income - items that may be reclassified
separately to profit or loss:
Exchange differences on translation of foreign operations (153) 189 (688)
TOTAL COMPREHENSIVE (LOSS) / INCOME FOR THE PERIOD
(119) 1,345 (652)
Attributable to:
Equity holders of the parent (159) 1,526 (601)
Non-controlling interests 40 (181) (51)
(119) 1,345 (652)
Condensed Consolidated Balance Sheet as at 30 June 2023
As at As at As at
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
Note £'000 £'000 £'000
FIXED ASSETS
Intangible assets 8 101,704 99,639 99,741
Property, plant and equipment 3,599 2,045 2,090
Right of use assets 9 19,033 8,746 9,536
Investments, associates and joint ventures
512 592 437
124,848 111,022 111,804
CURRENT ASSETS
Stock 2,400 2,457 2,185
Trade and other receivables 53,732 51,607 41,255
Corporation tax receivable 75 - -
Cash and short term deposits 5,096 7,847 6,153
61,303 61,911 49,593
CURRENT LIABILITIES
Trade and other payables (52,219) (51,993) (39,667)
Corporation tax payable - (819) (794)
Bank loans 10 (23) - (27)
Acquisition obligations 11 (1,873) (405) (1,371)
(54,115) (53,217) (41,859)
NET CURRENT ASSETS 7,188 8,694 7,734
TOTAL ASSETS LESS CURRENT LIABILITIES 132,036 119,716 119,538
NON CURRENT LIABILITIES
Bank loans 10 (19,960) (14,917) (17,488)
Lease liabilities 9 (18,226) (7,700) (8,481)
Acquisition obligations 11 (3,180) (2,120) (2,772)
Deferred tax liabilities (704) (412) (622)
(42,070) (25,149) (29,363)
NET ASSETS 89,966 94,567 90,175
CAPITAL AND RESERVES
Called up share capital 9,102 9,102 9,102
Share premium account 45,928 45,928 45,928
Own shares (983) (759) (994)
Share-based incentive reserve 1,069 944 1,010
Foreign currency translation reserve (772) 276 (610)
Retained earnings 35,531 38,998 35,558
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
89,875 94,489 89,994
Non-controlling interests 91 78 181
TOTAL EQUITY 89,966 94,567 90,175
Condensed Consolidated Cash Flow Statement for the six months ended 30 June
2023
Six months to Six months to Year ended
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Operating profit 1,036 1,871 1,629
Depreciation and amortisation charges 2,207 2,123 8,701
Movements in the fair value of contingent consideration
22 - (334)
(Profit) / loss on disposal of fixed assets (1) 10 10
Non cash charge for share options, growth shares and shares awarded, net of
awards settled in cash
40 26 73
(Increase) / decrease in receivables (12,109) (10,917) 149
Increase in stock (215) (345) (73)
Increase in payables 11,528 13,793 1,056
OPERATING CASH FLOW 2,508 6,561 11,211
Net finance costs (1,063) (412) (1,002)
Tax (paid) / refund (1,053) 40 (482)
Net cash inflow from operating activities 392 6,189 9,727
INVESTING ACTIVITIES
Proceeds on disposal of property, plant and equipment
5 - 64
Purchase of property, plant and equipment (2,021) (535) (1,092)
Investment in software development (3) (469) (1,852)
Acquisition of or investments in businesses (397) (100) (1,893)
Payment relating to acquisitions made in prior periods
(393) (790) (790)
Cash acquired with subsidiaries 71 84 271
Net cash outflow from investing activities (2,738) (1,810) (5,292)
FINANCING ACTIVITIES
Dividends paid - - (2,180)
Dividends paid to non-controlling interests (130) (13) (40)
Repayment of lease liabilities (913) (1,012) (1,935)
Increase in / (repayment of) bank loans 2,485 (1,500) 992
Purchase of own shares held in EBT - (262) (497)
Net cash inflow / (outflow) from financing activities
1,442 (2,787) (3,660)
(Decrease) / increase in cash/equivalents (904) 1,592 775
Exchange differences on translation of foreign subsidiaries
(153) 189 (688)
Cash and cash equivalents at beginning of period 6,153 6,066 6,066
Cash and cash equivalents at end of period 5,096 7,847 6,153
Condensed Consolidated Statement of Changes in Equity for the six months ended
30 June 2023
Total attributable to equity holders of parent
Share-based incentive reserve Foreign currency translation reserve £'000
£'000 £'000 Non-controlling interest
Share Share premium Own shares Retained earnings £'000 Total equity
capital £'000 £'000 £'000 £'000
£'000
At 1 January 2022 9,102 45,928 (518) 868 - 37,820 93,200 272 93,472
Profit for period - - - - - 1,250 1,250 (94) 1,156
Exchange differences on translation of foreign operations
- - - - 276 - 276 (87) 189
Total comprehensive income for period
- - - - 276 1,250 1,526 (181) 1,345
Share option charge - - - 17 - - 17 - 17
Growth share charge - - - 59 - - 59 - 59
Own shares purchased by EBT - - (262) - - - (262) - (262)
Shares awarded and sold from own shares - - 21 - - (72) (51) - (51)
Dividend paid - - - - - - - (13) (13)
At 30 June 2022 9,102 45,928 (759) 944 276 38,998 94,489 78 94,567
Loss for period - - - - - (1,241) (1,241) 121 (1,120)
Exchange differences on translation of foreign operations
- - - - (886) - (886) 9 (877)
Total comprehensive income for period
- - - - (886) (1,241) (2,127) 130 (1,997)
Share option charge - - - 16 - - 16 - 16
Growth share charge - - - 50 - - 50 - 50
Own shares purchased by EBT - - (235) - - - (235) - (235)
Shares awarded and sold from own shares - - - - - (19) (19) - (19)
Dividend paid - - - - - (2,180) (2,180) (27) (2,207)
At 31 December 2022 9,102 45,928 (994) 1,010 (610) 35,558 89,994 181 90,175
Profit for period - - - - - 3 3 31 34
Exchange differences on translation of foreign operations
- - - - (162) - (162) 9 (153)
Total comprehensive income for period
- - - - (162) 3 (159) 40 (119)
Growth share charge - - - 59 - - 59 - 59
Shares awarded and sold from own shares - - 11 - - (30) (19) - (19)
Dividend paid - - - - - - - (130) (130)
At 30 June 2023 9,102 45,928 (983) 1,069 (772) 35,531 89,875 91 89,966
Notes to the unaudited Interim Report for the six months ended 30 June 2023
1. Accounting Policies
Basis of preparation
The condensed consolidated interim financial statements for the six months
ended 30 June 2023 have been prepared in accordance with the IAS 34 "Interim
Financial Reporting" and the Group's accounting policies.
The Group's accounting policies are in accordance with International Financial
Reporting Standards as adopted by the United Kingdom and are set out in the
Group's Annual Report and Accounts 2022 on pages 59-63. These are consistent
with the accounting policies which the Group expects to adopt in its 2023
Annual Report. The Group has not early-adopted any Standard, Interpretation or
Amendment that has been issued but is not yet effective.
The information relating to the six months ended 30 June 2023 and 30 June 2022
is unaudited and does not constitute statutory financial statements as defined
in Section 434 of the Companies Act 2006. The comparative figures for the year
ended 31 December 2022 have been extracted from the Group's Annual Report and
Accounts 2022, on which the auditors gave an unqualified opinion and did not
include a statement under section 498 (2) or (3) of the Companies Act 2006.
The Group Annual Report and Accounts for the year ended 31 December 2022 have
been filed with the Registrar of Companies.
Going concern
The Directors have considered the financial projections of the Group,
including cash flow forecasts, the availability of committed bank facilities
(including the option to increase the facility by £5.0m and the temporary
increase in the overdraft limit to £6.0m until the end of the year) and the
headroom against covenant tests for the coming 12 months. They are satisfied
that the Group has adequate resources for the foreseeable future and that it
is appropriate to continue to adopt the going concern basis in preparing these
interim financial statements.
Accounting estimates and judgements
The Group makes estimates and judgements concerning the future and the
resulting estimates may, by definition, vary from the actual results. The
Directors considered the critical accounting estimates and judgements used in
the interim financial statements and concluded that the main areas of
judgement are:
· Potential impairment of goodwill;
· Contingent payments in respect of acquisitions;
· Revenue recognition policies in respect of contracts which
straddle the period end;
· Valuation of intangible assets on acquisitions; and
· Intangible development costs.
2. Segmental Information
Business segmentation
For management purposes the Board monitors the performance of its individual
agencies and groups them into service segments based on the sectors in which
they operate. Each reportable segment therefore includes a number of agencies
with similar characteristics.
The Board assesses the performance of each segment by looking at turnover,
operating income and headline operating profit. The headline operating profit
shown below is after the reallocation to the agencies of certain head office
costs relating to the Shared Services function. These costs include a
significant portion of the total operating costs which are now centrally
managed.
The Board does not review the assets and liabilities of the Group on a
segmental basis. A segmental breakdown of assets and liabilities is therefore
not disclosed.
Business & Corporate Consumer & Lifestyle Health & Wellness Property Sports & Entertainment Technology & Mobility MISSION Advantage & Central Investments Total
Six months to 30 June 2023 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Turnover 34,725 12,874 2,165 14,973 4,032 17,494 6,217 428 92,908
Operating income 10,127 9,180 2,032 6,821 3,000 7,849 2,439 350 41,798
Headline operating profit
1,350 868 216 585 357 273 (1,126) (557) 1,966
Business & Corporate Consumer & Lifestyle Health & Wellness Property Sports & Entertainment Technology & Mobility MISSION Advantage & Central Investments Total
Six months to 30 June 2022 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Turnover 31,523 12,373 1,710 12,341 2,371 16,569 4,157 182 81,226
Operating income 10,121 9,296 1,512 5,941 1,432 8,236 857 119 37,514
Headline operating profit
936 900 138 270 245 1,222 (836) (658) 2,217
Business & Corporate Consumer & Lifestyle Health & Wellness Property Sports & Entertainment Technology & Mobility MISSION Advantage & Central Investments Total
Year to 31 December 2023 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Turnover 62,134 24,880 4,694 26,505 6,040 48,527 9,544 361 182,685
Operating income 20,637 18,243 3,891 13,353 3,352 17,295 2,786 257 79,814
Headline operating profit
2,459 1,182 953 1,895 654 3,369 (1,720) (135) 8,657
Geographical segmentation
The following table provides an analysis of the Group's operating income by
region of activity:
Six months to Six months to Year ended
30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
UK 35,828 32,124 67,766
USA 4,203 4,144 9,156
Asia 1,643 1,148 2,667
Rest of Europe 124 98 225
41,798 37,514 79,814
3. Reconciliation of Headline Profit to Reported Profit
The Board believes that headline profits, which eliminate certain amounts from
the reported figures, provide a better understanding of the underlying trading
of the Group. The adjustments to reported profits generally fall into three
categories: acquisition-related items, exceptional restructuring costs and
start-up costs.
Six months to Six months to Year ended
30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
PBT PAT PBT PAT PBT PAT
£'000 £'000 £'000 £'000 £'000 £'000
Headline profit 999 759 1,860 1,451 7,771 6,130
Goodwill and business impairment - - - - (5,257) (4,697)
Acquisition-related items (Note 4) (418) (341) (346) (295) (593) (443)
Restructuring costs - - - - (402) (325)
Start-up costs (512) (384) - - (776) (629)
Reported profit 69 34 1,514 1,156 743 36
Goodwill and business impairment costs in 2022 related to the impairment of
Splash goodwill and the impairment of Pathfindr fixed assets and stock,
following a review of the valuation of these cash generating units and assets,
and the loss on disposal of the Fenturi investment in associate and write-off
of intercompany balance.
Restructuring costs in 2022 comprised the costs associated with the major
fundamental restructuring of the Splash business.
Start-up costs derive from organically started businesses or loss-making
businesses acquired and comprise the trading losses of such entities until the
earlier of two years from commencement or when they show evidence of becoming
sustainably profitable. Start-up costs in 2022 related to the trading losses
of the new Livity youth-marketing offer as well as costs associated with the
early-stage foundation of performance marketing and data science capabilities.
Start-up costs in 2023 relate to Livity and the launch of Turbine, an
integrated Growth Media agency, specialising in owned, earned and paid media
for consumer facing brands.
4. Acquisition Adjustments
Six months to Six months to Year ended
30 June 30 June 31 December 2022
2023 2022 Audited
Unaudited Unaudited
£'000 £'000 £'000
Amortisation of intangible assets
recognised on acquisitions (259) (259) (519)
Movement in fair value of contingent consideration
(22) - 334
Acquisition transaction costs expensed (137) (87) (408)
(418) (346) (593)
The movement in fair value of contingent consideration relates to a revision
in the estimate payable to vendors of businesses acquired in prior years.
Acquisition transaction costs relate to professional fees associated with the
acquisitions.
5. Net Finance Costs
Six months to Six months to Year ended
30 June 30 June 31 December 2022
2023 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Net interest on bank loans, overdrafts and deposits
(742) (235) (656)
Amortisation of bank debt arrangement fees
(23) (24) (48)
Interest expense on leases liabilities (277) (173) (342)
Net finance costs (1,042) (432) (1,046)
The increase in net interest on bank loans, overdrafts and deposits in the
period is driven by an increase in the interest rate payable on the bank debt
following general increases in interest rates by the BOE, and an increase in
the average level of bank debt, caused predominantly by a large client
changing their payment terms, whereby they have moved from paying significant
amounts of media in advance, to paying for their media month by month. Mezzo
acquisition consideration payments and payments associated with the new London
lease and office fitout also contributed to the increased level of bank debt.
The increase in interest expense on lease liabilities in the period is the
result of the increase in Right of Use Assets and Lease Liabilities following
the entering into of new leases, most notably the new London office.
6. Taxation
The taxation charge for the period ended 30 June 2023 has been based on an
estimated effective tax rate on headline profit on ordinary activities of 24%
(30 June 2022: 22%).
7. Earnings Per Share
The calculation of the basic and diluted earnings per share is based on the
following data, determined in accordance with the provisions of IAS 33:
"Earnings per Share".
Six months to Six months to Year to
30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Earnings
Reported profit for the year
Attributable to:
Equity holders of the parent 3 1,250 9
Non-controlling interests 31 (94) 27
34 1,156 36
Headline earnings (Note 3)
Attributable to:
Equity holders of the parent 728 1,545 6,103
Non-controlling interests 31 (94) 27
759 1,451 6,130
Number of shares
Weighted average number of Ordinary shares for the purpose of basic earnings
per share
89,531,712 90,310,055 89,906,999
Dilutive effect of securities:
Employee share options 370,183 662,043 617,992
Weighted average number of Ordinary shares for the purpose of diluted earnings
per share
89,901,895 90,972,098 90,524,991
Reported basis:
Basic earnings per share (pence) 0.00 1.38 0.01
Diluted earnings per share (pence) 0.00 1.37 0.01
Headline basis:
Basic earnings per share (pence) 0.81 1.71 6.79
Diluted earnings per share (pence) 0.81 1.70 6.74
A reconciliation of the profit after tax on a reported basis and the headline
basis is given in Note 3.
8. Intangible Assets
30 June 30 June 31 December 2022
2023 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Goodwill 98,123 95,412 96,213
Other intangible assets 3,581 4,227 3,528
101,704 99,639 99,741
Goodwill
Six months to 30 June Six months to 30 June Year ended 31 December 2022
2023 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Cost
At 1 January 102,486 98,877 98,877
Recognised on acquisition of subsidiary 1,910 808 3,609
At 30 June / 31 December 104,396 99,685 102,486
Impairment adjustment
At 1 January 6,273 4,273 4,273
Impairment during the period - - 2,000
At 30 June / 31 December 6,273 4,273 6,273
Net book value 98,123 95,412 96,213
The increase in goodwill during the period relates to the acquisition of Mezzo
Labs Ltd.
In accordance with the Group's accounting policies, an annual impairment test
is applied to the carrying value of goodwill, unless there is an indication
that one of the cash generating units has become impaired during the year, in
which case an impairment test is applied to the relevant asset. The next
impairment test will be undertaken at 31 December 2023. In 2022, as a result
of the performance and restructuring of the operations of Bray Leino Splash
Pte Ltd, the Directors considered it prudent to impair £2.0m of goodwill
relating to this CGU.
Other Intangible Assets
Six months to Six months to Year ended
30 June 30 June 31 December 2022
2023 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Cost
At 1 January 11,575 11,940 11,940
Additions 522 469 2,616
Transfers to PPE - - (103)
Disposals - - (3)
Impairment - - (2,875)
At 30 June / 31 December 12,097 12,409 11,575
Amortisation and impairment
At 1 January 8,047 7,570 7,570
Charge for the period 469 612 856
Transfers to PPE - - (100)
Disposals - - (2)
Impairment - - (277)
At 30 June / 31 December 8,516 8,182 8,047
Net book value 3,581 4,227 3,528
Other intangible assets consist of Client relationships, trade names, and
software and product development costs.
9. Right of Use Assets and Lease Liabilities
The Group leases several assets, the overwhelming majority of which are the
office premises from which it operates. Under IFRS 16, the Group recognises
Right of Use Assets and Lease Liabilities in relation to these leases. Assets
and liabilities reduce over the period of the lease and increase when a lease
is renewed, or a new lease entered into. The increase in Right of Use Assets
and Lease Liabilities in the period relates to the entering into of new
leases, most notably the new long term London office lease.
10. Bank Loans and Net Bank Debt
30 June 30 June 31 December 2022
2023 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Bank loan outstanding 20,060 15,000 17,575
Adjustment to amortised cost (77) (83) (60)
Carrying value of loan outstanding 19,983 14,917 17,515
Less: Cash and short term deposits (5,096) (7,847) (6,153)
Net bank debt 14,887 7,070 11,362
The borrowings are repayable as follows:
Less than one year 23 - 27
In one to two years 21 15,000 17,521
In two to three years 20,016 - 22
In three to four years - - 5
20,060 15,000 17,575
Adjustment to amortised cost (77) (83) (60)
19,983 14,917 17,515
Less: Amount due for settlement within 12
months (shown under current liabilities) (23) - (27)
Amount due for settlement after 12 months 19,960 14,917 17,488
At 30 June 2023, the Group's committed bank facilities comprised a revolving
credit facility of £20.0m, with an option to increase the facility by £5.0m.
On 8 March 2023 the Group exercised the option to extend by one year, the
facility now expiring on 5 April 2025. Interest on the facility is based on
SONIA (sterling overnight index average) plus a margin of between 1.50% and
2.25% depending on the Group's debt leverage ratio, payable in cash on loan
rollover dates.
In addition to its committed facilities, the Group has available an overdraft
facility of up to £6.0m with interest payable by reference to National
Westminster Bank plc Base Rate plus 2.25%. This overdraft limit of £6.0m is a
temporary increase until 31 December 2023, after which the limit will return
to £3.0m.
Included in the above is £60,000 of bank loans owing by Populate Social Ltd,
one of the companies acquired in 2022. These borrowings are repayable over a
three year period.
11. Acquisitions
11.1 Acquisition Obligations
The terms of an acquisition may provide that the value of the purchase
consideration, which may be payable in cash or shares or other securities at a
future date, depends on uncertain future events such as the future performance
of the acquired company. The Directors estimate that the liability for
payments that may be due is as follows:
Cash Shares Total
£'000 £'000 £'000
30 June 2023 1,873 - 1,873
Less than one year
Between one and two years 2,281 - 2,281
In more than two but less than three years 899 - 899
5,053 - 5,053
A reconciliation of acquisition obligations during the period is as follows:
Cash Shares Total
£'000 £'000 £'000
At 31 December 2022 4,143 - 4,143
Obligations settled in the period (393) - (393)
Adjustments to estimates of obligations 22 - 22
New acquisitions 1,281 - 1,281
At 30 June 2023 5,053 - 5,053
11.2 Acquisition of Mezzo Labs Ltd
On 13 February 2023, the Group acquired the entire issued share capital of
Mezzo Labs Ltd ("Mezzo"). Mezzo is a leading provider of innovative data
services with over 16 years' experience in data strategy and architecture, web
analytics, CX analytics, marketing automation, insights generation, data
science, Conversion Rate Optimisation (CRO) and personalisation. Headquartered
in London, the company also has operations in Singapore. The fair value of
the consideration given for the acquisition was £1,678,000, comprising
initial cash consideration and deferred contingent consideration. The deferred
contingent consideration is to be satisfied by the issue of new ordinary
shares up to a maximum of 40% at MISSION's discretion, with the balance
payable in cash. Costs relating to the acquisition amounted to £81,000 and
were expensed.
Maximum contingent consideration of £4,000,000 is dependent on Mezzo
achieving a profit target over the period 1 January 2023 to 31 December 2024.
The Group has provided for contingent consideration of £1,281,000 to date.
The fair value of the net identifiable liabilities acquired was £584,000
resulting in goodwill and previously unrecognised other intangible assets of
£2,262,000. Goodwill arises on consolidation and is not tax-deductible.
Management carried out a review to assess whether any other intangible assets
were acquired as part of the transaction. Management concluded that both a
brand name and customer relationships were acquired and attributed a value to
each of these by applying commonly accepted valuation methodologies. The
goodwill arising on the acquisition is attributable to the anticipated
profitability of Mezzo.
Book Fair value adjustments Fair
value value
£'000 £'000 £'000
Net assets acquired:
Intangible assets 49 - 49
Fixed assets 19 - 19
Trade and other receivables 368 - 368
Cash and cash equivalents 71 - 71
Trade and other payables (1,078) - (1,078)
Deferred tax (13) - (13)
(584) - (584)
Other intangibles recognised at acquisition - 470 470
Deferred tax adjustment - (118) (118)
(584) 352 (232)
Goodwill 1,910
Total consideration 1,678
Satisfied by:
Cash 397
Deferred contingent consideration 1,281
1,678
Mezzo contributed turnover of £860,000, operating income of £822,000 and
headline operating profit of £59,000 to the results of the Group for the six
month period ended 30 June 2023.
12. Post balance sheet events
There have been no material post balance sheet events.
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