REG - Mission Group PLC - INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2024
24/09/2024 07:00
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RNS Number : 3213F Mission Group PLC (The) 24 September 2024
24 September 2024
THE MISSION GROUP plc
("MISSION", "the Group")
INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2024
Resilient organic revenue growth despite challenging trading environment
New business momentum underpins full year outlook, with trading in line with
revenue and headline operating profit expectations
MISSION Group plc (AIM: TMG), creator of Work That Counts(TM), comprising
a group of digital marketing and communications Agencies, is pleased
to announce its interim results for the six months ended 30 June 2024 ("the
period" or "H1").
FINANCIAL HIGHLIGHTS
· Resilient revenue performance across most segments combined with diligent cost
control delivered a robust headline operating profit outcome for the period,
despite an unpredictable trading environment.
Six months ended 30 June 2024 2023 % 2023 %
Continuing operations** All operations
Revenue £42.2m £41.4m +2% £41.8m +1%
Headline Operating Profit* £2.6m £2.5m +4% £2.0m +33%
Headline Profit Before Tax* £1.3m £1.6m -19% £1.0m +27%
Reported Profit Before Tax £0.0m £0.6m £0.1m -30%
Headline Earnings Per Share (pence)* 1.0 1.3 -23% 0.8 +22%
Headline Diluted Earnings Per Share * (pence) 1.0 1.3 -23% 0.8 +22%
· Net bank debt of £19.6m with £4.3m HMRC Time To Pay creditor repaid in full
during the period (31 December 2023 equivalent: £19.7m being £15.4m net bank
debt + £4.3m HMRC Time To Pay creditor).
· As a result of this, total debt*** reduced to £24.0m as at 30 June 2024
(£25.1m as at 31 December 2023).
· Successful refinancing of the Group's debt facilities with long standing
lender NatWest.
*Headline results are calculated before start-up costs, acquisition
adjustments, goodwill and business impairment, bank refinancing, equity
placing and restructuring costs.
** Continuing activities in 2023 exclude the results of the Group's 80%
interest in Pathfindr which was sold in December 2023.
*** Total debt includes net bank debt and outstanding acquisitions obligations
and any outstanding HMRC Time To Pay creditors.
BUSINESS HIGHLIGHTS
· H1 performance is in line with Board expectations, driven by organic revenue
growth across the Group, particularly MISSION's Property and Sports &
Entertainment Agencies.
· Notable new Client wins during the period include Mastercard, BNP Paribas,
FatFace, GoHenry, Okta, Popeyes, England Cricket Board, Guinness Homes,
Fonterra and McCarthy Stone.
· MISSION's global sports Agency, Influence Sports & Media, part of
Mongoose, will open an office in Saudi Arabia to support significant new
Client wins in the country. Mongoose has also been appointed as Global
Sponsorship sales Agency for Formula E and brokered Southampton F.C.'s
sponsorship with P&O Cruises.
· Bray Leino Events has won the contract for full operational service provision
of the UK Pavilion at the upcoming Osaka World Trade Expo (Expo 2025) in
Japan, comprising over 130 individual events, retail and hospitality.
· MISSION continues to make good progress against the Value Restoration Plan
with the vast majority of the approximately £5m of annualised projected
profit improvements already in place for the year. Planned cost savings and
operating efficiency improvements are in total H2 weighted, but tracking to
expectations for full delivery by the end of 2024.
· The Group continues to progress discussions on options to deleverage its
balance sheet. A further update will be provided when appropriate.
OUTLOOK
· Post period-end developments underpin confidence for full year outlook and
include significant additional Client wins comprising new, multinational US
Technology Clients, alongside household brands including Pizza Hut, Danske
Bank, Bensons for Beds and Bugatti.
· As in previous years, the Group expects the majority of its profit to be
generated in the second half of the year.
· The Board remains cautiously optimistic that the Group is on track to deliver
against full year revenue and headline operating profit expectations but is
mindful of the continued unpredictable trading environment.
David Morgan, MISSION's Non-Executive Chair, commented: "Despite an
unpredictable trading environment in the first half of the year, the Group has
remained firmly focussed on the delivery of profit targets, deleveraging and
strengthening the balance sheet.
"The creativity of our Agencies demonstrates our commitment to delivering work
that underpins real business growth and in July we were pleased to update the
market, reporting positive ongoing momentum across the Group as we entered the
second half of the year. These latest strategic new Client wins announced
today reflect the growing strength of MISSION's capabilities and underpin our
confidence in the long-term outlook. I'm particularly pleased to announce our
new office in Saudi Arabia to support our new Clients in the country, which
also positions us well for wider opportunities in the region.
"We look forward to announcing further new Client wins in due course."
ENQUIRIES:
Cat Davis - Group Marketing Director
E: cdavis@themission.co.uk (mailto:cdavis@themission.co.uk)
The MISSION Group
PLC
Via Houston
Simon Bridges / Andrew Potts / Harry Rees
E: missiongroup@cgf.com (mailto:missiongroup@cgf.com)
Canaccord Genuity Limited (Nominated Adviser and Broker)
020 7523 8000
Kate Hoare / Alexander Clelland / India Spencer
E: mission@houston.co.uk (mailto:mission@houston.co.uk)
Houston
PR
0204 529 0549
NOTES TO EDITORS
The MISSION Group Plc. is The Brand Performance Group.
Delivering measurable, results-driven campaigns as the preferred creative
partner for real business growth. We offer top-tier agencies, strategic
specialisms and global reach delivering outstanding performance for brands. We
call it Work That Counts™ www.themission.co.uk
(http://www.themission.co.uk/)
The information contained within this announcement is deemed to constitute
inside information as stipulated under the Market Abuse (Amendment) (EU Exit)
Regulations 2019. Upon the publication of this announcement, this inside
information is now considered to be in the public domain.
OVERVIEW
MISSION has continued to make good progress in the first half of 2024 against
our key priorities. Whilst the wider trading environment has remained
unpredictable, with ongoing macro-economic uncertainty and the early timing of
the UK general election continuing to manifest general client caution
throughout the period, our entrepreneurial Agencies have remained focussed on
our plans to drive value creation for all our stakeholders.
Across the Group we have continued to leverage the investments made in
previous years to enhance and evolve MISSION's service offering and
capabilities. This underpinned success on several significant new business
mandates in the first half of the year and has generated encouraging new
business momentum as we enter H2.
The Group is encouraged to report like for like revenue growth of 2 percent to
£42.2m (2023: £41.4m) for the period. Headline operating profit of £2.6m
(2023: £2.0m reported, £2.5m from continuing operations), was driven by
revenue growth across the majority of Group segments, particularly the
Property and Sports & Entertainment segments, as well as profitable
recovery in the Technology and Mobility segment from last year's slowdown in
the US market.
Headline reported profit before tax of £1.3m (2023: £1.0m reported, £1.6m
from continuing operations) reflects the impact of both higher debt levels
when compared to last year (increase in interest of £0.2m) and also the full
period impact of notional interest charges against new property leases
(£0.1m).
Value Restoration Plan
Significant progress has been made on the Group's Value Restoration Plan
("VRP") announced on 17 January, 2024. The cost reduction elements of the
Value Restoration Plan ("VRP") of £3.6m have been successfully implemented
and the benefits are being realised across the year. These included £2m from
headcount reductions as reported at the full year 2023 results, supplemented
by further savings of £1.6m of central expenditure savings including staff
costs, property and recruitment charges. The planned operating efficiency
elements of the VRP of £1.2m are also tracking to expectations for delivery
by the end of 2024. The H1 2024 cost savings benefit from the VRP has been
c£1.6m, with the balance expected to benefit H2.
On 28 March 2024, the Group was pleased to announce the successful refinancing
of its previous debt facility with long-standing lender NatWest. The new
NatWest debt facility is a £20m Revolving Credit Facility, and a £9m
overdraft facility. On 1 July 2024, following continued disciplined cash
management, the Group and NatWest agreed to reduce the overdraft facility
limit to £7m. Alongside the refinancing the Group also continues to progress
discussions regarding options to deleverage its balance sheet. A further
update will be provided when appropriate.
Net bank debt stood at £19.6m as of 30 June 2024 (30 June 2023: £14.9m)
versus £15.4m on 31 December 2023. The increase in net debt reflects the
settlement of the HMRC Time To Pay debt of £4.3m as at 31 December 2023 which
was fully repaid in the period. It is important to note that given the second
half weighting of the Group's profits and a number of one-off expenses
incurred in the first half year relating to refinancing and defending the
unsolicited approach from Brave Bison, the Group would expect to see a
reduction in the net debt position in the second half of the financial year.
Total debt has been reduced by £1.1m over the period to stand at £24.0m on
30 June 2024 (30 June 2023: £20.0m) in comparison with £25.1m on 31 December
2023. This reduction has been achieved alongside the settlement of £1.1m of
outstanding acquisition obligations from prior years in the first half of the
year of which £0.6m were in cash) and the settlement of the £4.3m Time To
Pay creditor.
Performance and progress
MISSION has reported like for like revenue growth of 2%, guided by strong
performances across most Group segments, particularly in our Property and
Sports & Entertainment segments. As previously mentioned, the Group has
benefited from the continued recovery of the Technology and Mobility segment,
with profits improving by £0.4m on H1 2023. This partially offset the
lacklustre performance of the Group's Consumer & Lifestyle and Business
& Corporate segments for the period, where profitability was impacted by
the restrictions on Government spending in May and June as a result of the
earlier than expected timing of the UK general election. Our Health &
Wellness segment experienced a slower pick up in trading than forecast and
there was the timing impact of a contract in our Sports & Entertainment
segment that was secured after the end of H1.
Additional Client wins secured across the business throughout the period
include Okta, Popeyes, FatFace, GoHenry, Mastercard, BNP Paribas, England
Cricket Board, Guinness Homes, Fonterra and McCarthy Stone.
Since the period end, the Group has secured a number of notable new business
wins with the robust new business pipeline for H2 demonstrating encouraging
momentum despite broader macro-economic uncertainty and a challenging trading
environment.
Alongside a series of new high-quality Client wins with major US Technology
firms, the Group has been awarded a prestigious and significant Events
assignment for the UK Pavilion at EXPO2025 in Osaka, Japan. This is a full
operational services contract that will commence in 2024 and comprises of over
130 individual events, retail and hospitality that will be led by Bray Leino
Events.
MISSION's global sports Agency, Influence Sports & Media, part of
Mongoose, has also won a significant new Client in Saudi Arabia and will open
an office in Jeddah later this year to support the client and to leverage its
expertise to capitalise on opportunities across the region. Mongoose has also
been appointed as Global Sponsorship sales Agency for Formula E and brokered
Southampton F.C.'s shirt sponsorship with P&O Cruises.
Rejection of unsolicited, conditional proposal from Brave Bison plc
On 29 April 2024, the Board of MISSION received an unsolicited conditional
proposal regarding a possible offer by Brave Bison for the Group. This
proposal, together with a subsequent revised proposal, was unanimously
rejected following consultation with its financial adviser and certain
shareholders. Brave Bison confirmed on 9 June 2024 that it did not intend to
make an offer.
MISSION believes this was an opportunistic approach that significantly
undervalued the Group and its prospects, as well as being dilutive to its
shareholders and resulted in exceptional costs which ultimately further
impacted profitability and debt reduction. As previously announced, the Board
of MISSION is open to proposals that it believes would enhance shareholder
value and deliver benefits to MISSION's shareholders. The Board of MISSION did
not consider the proposals to meet those criteria. The Board of MISSION
remains confident in the Group's standalone prospects.
MISSION's focus remains firmly on deleveraging, restoring balance sheet
strength and delivering performance that achieves our profit targets,
demonstrates the creativity of our Agencies, and shows our commitment to
delivering work that underpins real business growth.
FINANCIAL PERFORMANCE
Billings and Revenue
Turnover ("billings") for the six months ended 30 June 2024 increased by 2% to
£94.4m (2023: £92.9m) while operating income ("revenue") increased by 1% to
£42.2m (2023: £41.8m).
Profit, Margins and Earnings Per Share
The increased revenues demonstrate good progress. 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 ahead of the prior year
comparison.
Headline operating profits increased by 4% to £2.6m (H1 2023: £2.0m
reported, £2.5m from continuing operations). Headline operating margins
increased to 6.2% (H1 2023: 4.7%, 6.1% from continuing operations). Continuing
activities in 2023 exclude the results of the Group's 80% interest in
Pathfindr which was sold in December 2023.
Financing costs increased to £1.5m (H1 2023: £1.0m), reflecting both a
higher average level of debt in the period and also the full period impact of
interest on new property leases. Financing costs for H2 are expected to remain
at similar levels to H1 reflecting the net debt position and the effect of the
accounting treatment of new property leases. Headline profit before tax
increased to £1.3m (H1 2023: £1.0m).
Adjustments to headline profits before tax in the first half of 2024, at
£1.2m, were higher than the prior year comparable period (H1 2023: £0.9m).
After these adjustments, reported profit before tax was £0.0m (H1 2023:
£0.1m).
The Group estimates an effective tax rate on headline profits before tax of
25% (H1 2023: 24%), resulting in an increase in headline earnings to £0.9m
for the six months (H1 2023: £0.8m) and reported profit after tax of £0.0m
(H1 2023: £0.0m). Fully diluted EPS decreased to a loss of 0.1 pence (H1
2023: 0.0 pence), while headline diluted EPS increased to 1.0 pence (H1 2023:
0.8 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 closed the half year
at 2.7x (30 June 2023: 1.7x, 31 December 2023: 2.0x). Whilst higher than prior
comparators, the ratio offers significant headroom against the facility limit
of 3.5x for the period.
The Board also monitors the ratio of total debt, including remaining
acquisition obligations, to EBITDA and this ratio has increased to 3.2x (30
June 2023: 2.2x, 31 December 2023: 2.7x). Again, there is significant headroom
against the facility limit of 4.0x for the period.
The headroom afforded by the covenant tests for the period ensures that the
Group will avoid the highest level of interest rates for the period.
The Group spent £nil on acquisitions during the period (2023 £0.3m) and a
total of £1.1m of acquisition obligations from prior years were settled in
the first half of the year of which £0.6m were in cash (30 June 2023: £0.4m
all of which were cash). After adjustments to estimated future contingent
consideration payments the total estimated acquisition liability at 30 June
2024 totalled £4.4m (30 June 2023: £5.1m). Of this £0.2m is due for payment
in the second half of 2024.
Capital expenditures have been strictly controlled and as such spend of £0.3m
is reduced on H1 2023 (£2.0m).
Trade and other receivables increased marginally against last year to £54.3m
(30 June 2023: £53.7m), while trade and other payables decreased slightly to
£51.2m (30 June 2023: £52.2m). These movements, alongside an increase in
stock of £0.5m and increased lease payables of £0.7m have driven the
increase in net working capital in comparison to June 2023.
Consequently, the Group's net bank debt on 30 June 2024 of £19.6m has
increased against the positions on both 30 June 2023 (£14.9m) and 31 December
2023 (£15.4m). However, the increase in net debt since the start of the new
financial year ultimately reflects the settlement of the HMRC Time To Pay
creditor which stood at £4.3m as at 31 December 2023 and has now been fully
repaid.
As a result, total debt (being net bank debt plus outstanding acquisition
obligations) closed at £24.0m (30 June 2023: £20.0m), down from £25.1m on
31 December 2023.
Dividend
The Board has made the decision to pause dividend payments alongside other
major capital allocations until balance sheet strength is restored and net
debt is reduced (2023: 0 pence per share). The Board will keep this decision
under regular review.
OUTLOOK
MISSION has a significant second-half weighting with respect to
profitability. Post period-end developments underpin confidence for full year
outlook and include significant additional Client wins. Revenue growth is
anticipated across all the Group's sectors with monthly run rates from the
Technology and Mobility segment being monitored carefully and continuing to
improve. The Board remains cautiously optimistic that the Group is on track to
deliver against full year revenue and headline operating profit expectations
but is mindful of the continued unpredictable trading environment.
Condensed Consolidated Income Statement for the six months ended 30 June 2024
Continuing operations Discontinued operations Continuing operations Year ended Discontinued operations
Six months to Six months to Total Year ended Total
Six months to Six months to Year ended
30 June 30 June 30 June 30 June 2023 31 December 2023 31 December 2023 31 December 2023
2024* 2023 2023
Unaudited Unaudited Unaudited Unaudited Audited Audited Audited
Note £'000 £'000 £'000 £'000 £'000 £'000 £'000
TURNOVER 2 94,392 92,480 428 92,908 195,450 438 195,888
Cost of sales (52,160) (51,032) (78) (51,110) (109,130) (208) (109,338)
2
OPERATING INCOME 42,232 41,448 350 41,798 86,320 230 86,550
Headline operating expenses (39,608) (38,925) (907) (39,832) (79,840) (1,668) (81,508)
HEADLINE OPERATING PROFIT / (LOSS)
2,624 2,523 (557) 1,966 6,480 (1,438) 5,042
Start-up costs 3 (86) (512) - (512) (1,818) - (1,818)
Acquisition adjustments 4 (626) (418) - (418) (1,652) - (1,652)
Bank refinancing and equity raise costs (242) - - - (475) - (475)
Goodwill, business and intangible impairment 3 - - - - (10,409) - (10,409)
Restructuring costs 3 (203) - - - (715) - (715)
Profit on sale of Pathfindr - - - - - 308 308
OPERATING PROFIT / (LOSS) 1,467 1,593 (557) 1,036 (8,589) (1,130) (9,719)
Share of results of associates and joint ventures
75 75 - 75 150 - 150
PROFIT / (LOSS) BEFORE INTEREST AND TAXATION
1,542 1,668 (557) 1,111 (8,439) (1,130) (9,569)
Net finance costs 5 (1,494) (1,042) - (1,042) (2,472) - (2,472)
PROFIT / (LOSS) BEFORE TAXATION
48 626 (557) 69 (10,911) (1,130) (12,041)
Taxation 6 (86) (166) 131 (35) (225) 387 162
(LOSS) / PROFIT FOR THE PERIOD (38) 460 (426) 34 (11,136) (743) (11,879)
Attributable to:
Equity holders of the parent (88) 429 (426) 3 (11,283) (743) (12,026)
Non-controlling interests 50 31 - 31 147 - 147
(38) 460 (426) 34 (11,136) (743) (11,879)
Basic earnings per share (pence) 7 (0.1) 0.5 (0.5) 0.0 (12.6) (0.8) (13.4)
Diluted earnings per share (pence) 7 (0.1) 0.5 (0.5) 0.0 (12.6) (0.8) (13.4)
Headline basic earnings per share (pence) 7
1.0 1.3 (0.5) 0.8 3.1 (1.2) 1.9
Headline diluted earnings per share (pence)
7 1.0 1.3 (0.5) 0.8 3.1 (1.2) 1.9
*All results for 2024 relate to continuing operations
Condensed Consolidated Statement of Comprehensive Income for the six months
ended 30 June 2024
Continuing operations Discontinued operations Continuing operations Year ended Discontinued operations
Six months to Six months to Total Year ended Total
Six months to Six months to Year ended
30 June 30 June 30 June 30 June 2023 31 December 2023 31 December 2023 31 December 2023
2024 2023 2023
Unaudited Unaudited Unaudited Unaudited Audited Audited Audited
£'000 £'000 £'000 £'000 £'000 £'000 £'000
(LOSS) / PROFIT FOR THE PERIOD (38) 460 (426) 34 (11,136) (743) (11,879)
Other comprehensive income - items that may be reclassified separately to
profit or loss:
Exchange differences on translation of foreign operations (93) (153) - (153) (271) - (271)
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
(131) 307 (426) (119) (11,407) (743) (12,150)
Attributable to:
Equity holders of the parent (181) 267 (426) (159) (11,561) (743) (12,304)
Non-controlling interests 50 40 - 40 154 - 154
(131) 307 (426) (119) (11,407) (743) (12,150)
Condensed Consolidated Balance Sheet as at 30 June 2024
As at As at As at
30 June 2024 30 June 2023 31 December 2023
Unaudited Unaudited Audited
Note £'000 £'000 £'000
FIXED ASSETS
Intangible assets 8 90,223 101,704 90,628
Property, plant and equipment 2,951 3,599 3,209
Right of use assets 9 15,534 19,033 16,432
Investments, associates and joint ventures
662 512 587
109,370 124,848 110,856
CURRENT ASSETS
Stock 2,928 2,400 2,981
Trade and other receivables 54,280 53,732 44,676
Corporation tax receivable 856 75 447
Cash and short term deposits 226 5,096 4,632
58,290 61,303 52,736
CURRENT LIABILITIES
Trade and other payables (51,207) (52,219) (45,388)
Bank loans 10 (21) (23) (21)
Acquisition obligations 11 (3,508) (1,873) (1,745)
(54,736) (54,115) (47,154)
NET CURRENT ASSETS 3,554 7,188 5,582
TOTAL ASSETS LESS CURRENT LIABILITIES 112,924 132,036 116,438
NON CURRENT LIABILITIES
Bank loans 10 (19,833) (19,960) (19,973)
Lease liabilities 9 (15,047) (18,226) (15,768)
Acquisition obligations 11 (890) (3,180) (3,720)
Deferred tax liabilities (433) (704) (524)
(36,203) (42,070) (39,985)
NET ASSETS 76,721 89,966 76,453
CAPITAL AND RESERVES
Called up share capital 9,224 9,102 9,102
Share premium account 46,081 45,928 45,928
Own shares (217) (983) (942)
Share-based incentive reserve 1,107 1,069 1,107
Foreign currency translation reserve (981) (772) (888)
Retained earnings 21,380 35,531 21,967
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
76,594 89,875 76,274
Non-controlling interests 127 91 179
TOTAL EQUITY 76,721 89,966 76,453
Condensed Consolidated Cash Flow Statement for the six months ended 30 June
2024
Continuing operations Discontinued operations Continuing operations Year ended Discontinued operations
Six months to Six months to Total Year ended Total
Six months to Six months to Year ended
30 June 30 June 30 June 30 June 2023 31 December 2023 31 December 2023 31 December 2023
2024 2023 2023
Unaudited Unaudited Unaudited Unaudited Audited Audited Audited
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Operating profit / (loss) 1,467 1,593 (557) 1,036 (8,589) (1,130) (9,719)
Depreciation, amortisation and impairment charges
2,346 2,192 15 2,207 15,343 31 15,374
Increase in the fair value of contingent consideration
48 22 - 22 434 - 434
Profit on sale of Pathfindr Ltd - - - - - (308) (308)
(Profit) / loss on disposal of property, plant and equipment and software and
intellectual property
- (1) - (1) 94 - 94
Non-cash charge for share options, growth shares and shares awarded, net of
awards settled in cash
- 40 - 40 79 - 79
Increase in receivables (9,604) (11,735) (374) (12,109) (2,945) (67) (3,012)
Decrease / (increase) in stock 53 (172) (43) (215) (1,125) (43) (1,168)
Increase / (decrease) in payables 5,313 10,731 797 11,528 5,803 (1,277) 4,526
OPERATING CASH FLOWS (377) 2,670 (162) 2,508 9,094 (2,794) 6,300
Net finance costs paid (1,628) (1,063) - (1,063) (2,471) - (2,471)
Tax paid (586) (1,141) 88 (1,053) (2,411) 637 (1,774)
Net cash inflow / (outflow) from operating activities (2,591) 466 (74) 392 4,212 (2,157) 2,055
INVESTING ACTIVITIES
Proceeds on disposal of property, plant and equipment
7 5 - 5 2 - 2
Purchase of property, plant and equipment
(297) (2,020) (1) (2,021) (2,340) (3) (2,343)
Investment in software and product development
(8) (3) - (3) (111) - (111)
Acquisitions of, or investments in, businesses
- (397) - (397) (397) - (397)
Payment relating to acquisitions made in prior years
(614) (393) - (393) (393) - (393)
Cash acquired with subsidiaries - 71 - 71 71 - 71
Proceeds on disposal of Pathfindr - - - - - 1,050 1,050
Costs of disposal of Pathfindr - - - - - (187) (187)
Net cash (outflow) / inflow from investing activities (912) (2,737) (1) (2,738) (3,168) 860 (2,308)
FINANCING ACTIVITIES
Dividends paid - - - - (1,495) - (1,495)
Dividends paid to non-controlling interests (102) (130) - (130) (156) - (156)
Payment of lease liabilities (698) (913) - (913) (1,820) - (1,820)
(Repayment of) / increase in bank loans (10) 2,485 - 2,485 2,474 - 2,474
Net cash (outflow) / inflow from financing activities (810) 1,442 - 1,442 (997) - (997)
(Decrease) / increase in cash and cash equivalents (4,313) (829) (75) (904) 47 (1,297) (1,250)
Exchange differences on translation of foreign subsidiaries
(93) (153) (271)
Cash and cash equivalents at beginning of year
4,632 6,153 6,153
Cash and cash equivalents at end of year
226 5,096 4,632
Condensed Consolidated Statement of Changes in Equity for the six months ended
30 June 2024
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 2023 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 (loss) / 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
(Loss) / profit for period - - - - - (12,029) (12,029) 116 (11,913)
Exchange differences on translation of foreign operations
- - - - (116) - (116) (2) (118)
Total comprehensive (loss) / income for period
- - - - (116) (12,029) (12,145) 114 (12,031)
Share option charge - - - 17 - - 17 - 17
Growth share charge - - - 21 - - 21 - 21
Shares awarded and sold from own shares - - 41 - - (40) 1 - 1
Dividend paid - - - - - (1,495) (1,495) (26) (1,521)
At 31 December 2023 9,102 45,928 (942) 1,107 (888) 21,967 76,274 179 76,453
(Loss) / profit for period - - - - - (88) (88) 50 (38)
Exchange differences on translation of foreign operations
- - - - (93) - (93) - (93)
Total comprehensive (loss) / income for period
- - - - (93) (88) (181) 50 (131)
New shares issued 122 153 - - - - 275 - 275
Shares awarded and sold from own shares - - 725 - - (499) 226 - 226
Dividend paid - - - - - - - (102) (102)
At 30 June 2024 9,224 46,081 (217) 1,107 (981) 21,380 76,594 127 76,721
Notes to the unaudited Interim Report for the six months ended 30 June 2024
1. Accounting Policies
Basis of preparation
The condensed consolidated interim financial statements for the six months
ended 30 June 2024 have been prepared in accordance with 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 2023 on pages 68-72. These are consistent
with the accounting policies which the Group expects to adopt in its 2024
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 2024 and 30 June 2023
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 2023 have been extracted from the Group's Annual Report and
Accounts 2023, 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 2023 have
been filed with the Registrar of Companies.
Going concern
The Directors have considered the financial projections and cash flow
projections for the Group alongside the availability of renewed committed bank
facilities of £20m (expiring 5 April 2026), an overdraft facility of £7m
(which will reduce to £3m in the event there is a deleveraging event -
further information in Note 31 to the 2023 year end financial statements), and
the headroom afforded against the covenant tests for the coming 12 months. The
Directors have also considered and understood the mitigating actions that
would be required in the event of reduced revenue profiles and any
consequential difficulties with covenant compliance. Such potential mitigating
actions would include a review of headcount, particularly in the areas
impacted by any downturn. Furthermore the Group have considered actions that
can be taken should increased headroom be required. This would most likely be
the disposal of non-core or high value agency assets. Against these scenarios,
the Group has adequate headroom against the facilities described above. This
leads the Directors to become satisfied that, taking account of reasonably
possible changes in trading performance, it is appropriate to adopt the going
concern basis in preparing the 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 2024 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Turnover 35,569 12,784 1,948 16,015 4,023 16,629 7,424 - 94,392
Operating income 10,219 9,117 1,659 7,477 3,327 7,339 3,094 - 42,232
Headline operating profit
995 653 (2) 995 371 640 (1,028) - 2,624
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
Continuing operations 34,725 12,874 2,165 14,973 4,032 17,494 6,217 - 92,480
Discontinued operations - - - - - - - 428 428
Total Group 34,725 12,874 2,165 14,973 4,032 17,494 6,217 428 92,908
Operating income
Continuing operations 10,127 9,180 2,032 6,821 3,000 7,849 2,439 - 41,448
Discontinued operations - - - - - - - 350 350
Total Group 10,127 9,180 2,032 6,821 3,000 7,849 2,439 350 41,798
Headline operating profit / (loss)
Continuing operations 1,350 868 216 585 357 273 (1,126) - 2,523
Discontinued operations - - - - - - - (557) (557)
Total Group 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
Year to 31 December 2023 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Turnover
Continuing operations 67,215 26,128 4,438 30,983 10,373 40,876 15,437 - 195,450
Discontinued operations - - - - - - - 438 438
Total Group 67,215 26,128 4,438 30,983 10,373 40,876 15,437 438 195,888
Operating income
Continuing operations 20,785 18,195 3,949 15,038 6,675 15,084 6,594 - 86,320
Discontinued operations - - - - - - - 230 230
Total Group 20,785 18,195 3,949 15,038 6,675 15,084 6,594 230 86,550
Headline operating profit / (loss)
Continuing operations 2,831 1,322 712 2,303 1,368 165 (2,221) - 6,480
Discontinued operations - - - - - - - (1,438) (1,438)
Total Group 2,831 1,322 712 2,303 1,368 165 (2,221) (1,438) 5,042
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
2024 2023 2023
Unaudited Unaudited Audited
£'000 £'000 £'000
UK 37,905 35,828 75,278
USA 3,083 4,203 7,688
Asia 1,130 1,643 3,340
Rest of Europe 114 124 244
42,232 41,798 86,550
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.
Six months to Six months to Year ended
30 June 30 June 31 December
2024 2023 2023
Unaudited Unaudited Audited
£'000
£'000 £'000
PBT PAT PBT PAT PBT PAT
£'000 £'000 £'000 £'000 £'000 £'000
From continuing operations
Headline profit 1,264 948 1,556 1,185 4,158 2,953
Acquisition-related items (Note 4) (626) (492) (418) (341) (1,652) (1,453)
Bank refinancing and equity raise costs (301) (226) - - (475) (356)
Restructuring costs (203) (203) - - (715) (536)
Start-up costs (86) (65) (512) (384) (1,818) (1,363)
Goodwill, business and intangible impairment - - - - (10,409) (10,381)
Reported profit / (loss) 48 (38) 626 460 (10,911) (11,136)
From discontinued operations
Headline profit - - (557) (426) (1,438) (1,098)
Profit on sale of Pathfindr - - - - 308 355
Reported loss - - (557) (426) (1,130) (743)
From continuing and discontinued operations
Headline profit 1,264 948 999 759 2,720 1,855
Acquisition-related items (Note 4) (626) (492) (418) (341) (1,652) (1,453)
Bank refinancing and equity raise costs (301) (226) - - (475) (356)
Restructuring costs (203) (203) - - (715) (536)
Start-up costs (86) (65) (512) (384) (1,818) (1,363)
Goodwill, business and intangible impairment - - - - (10,409) (10,381)
Profit on sale of Pathfindr - - - - 308 355
Reported profit / (loss) 48 (38) 69 34 (12,041) (11,879)
Bank refinancing and equity raise costs in 2023 consisted of various
professional fees incurred in connection with the bank refinancing, and other
related costs associated with this process. Costs in 2024 consist of further
such expenses, accelerated bank debt arrangement fees (see note 5) and fees
from various consulting and legal firms advising and assisting in the Board's
consideration of an equity issue.
Restructuring costs in 2023 consisted of costs of closing down the April Six
Singapore office, and redundancy, PILON and TUPE related costs associated with
restructuring and right sizing of various business units in the last quarter
of the year following the downgraded full year profit expectation announced to
the market. Restructuring costs in 2024 consist of costs of closing down the
MISSION China office.
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 2023 related to Livity, the launch
of Turbine, an integrated Growth Media agency, specialising in owned, earned
and paid media for consumer facing brands, the trading losses of BLS China
launched in 2023, as well as costs associated with the early-stage foundation
of performance marketing and data science capabilities. Start-up costs in 2024
consist of the launch of the US office of the Influence business.
In 2023, goodwill, business and intangible impairment costs related to the
impairment of Story UK Ltd, Story Agency Ltd, Krow Agency Ltd and Krow
Communications Ltd goodwill and the write off of the Mission Brand Bonding
Index intangible asset.
4. Acquisition Adjustments
Six months to Six months to Year ended
30 June 30 June 31 December 2023
2024 2023 Audited
Unaudited Unaudited
£'000 £'000 £'000
Amortisation of intangible assets
recognised on acquisitions (382) (259) (942)
Movement in fair value of contingent consideration
(48) (22) (434)
Acquisition transaction costs expensed (196) (137) (276)
(626) (418) (1,652)
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 in connection with
acquisitions made or contemplated, including reverse acquisitions.
5. Net Finance Costs
Six months to Six months to Year ended
30 June 30 June 31 December 2023
2024 2023
Unaudited Unaudited Audited
£'000 £'000 £'000
Net interest on bank loans, overdrafts and deposits
(988) (742) (1,795)
Amortisation of bank debt arrangement fees
(21) (23) (45)
Interest expense on leases liabilities (425) (277) (632)
Headline net finance costs (1,434) (1,042) (2,472)
Accelerated amortisation of debt arrangement fees (60) - -
Net finance costs (1,494) (1,042) (2,472)
The increase in net interest on bank loans, overdrafts and deposits in the
period is driven primarily by an increase in the interest rate payable on the
bank debt following general increases in interest rates by the BOE and higher
margins payable on the new revolving credit facility entered into on 27 March
2024.
The increase in interest expense on lease liabilities in the period is the
result of the general increase in interest rates and increase in Right of Use
Assets and Lease Liabilities following the entering into of new leases, most
notably the new London office.
Following the reduction in full year profit expectations announced to the
market last year, the Group agreed a new revolving credit facility on 27 March
2024 and incurred additional bank debt arrangement fees that are being
amortised over the period of the new facility. In addition, the remaining
unamortised bank debt arrangement fees relating to the replaced facility were
fully written off during the period. These additional bank debt arrangement
fees, over and above what would have been amortised had the Group not
refinanced, amounting to £60,000, have been classified as a headline
adjustment.
6. Taxation
The taxation charge for the period ended 30 June 2024 has been based on an
estimated effective tax rate on headline profit on ordinary activities of 25%
(30 June 2023: 24%).
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
2024 2023 2023
Unaudited Unaudited Audited
£'000 £'000 £'000
Earnings
Reported profit for the period
From continuing operations
Attributable to:
Equity holders of the parent (88) 429 (11,283)
Non-controlling interests 50 31 147
(38) 460 (11,136)
From discontinued operations
Attributable to:
Equity holders of the parent - (426) (743)
Non-controlling interests - - -
- (426) (743)
From continuing and discontinued operations
Attributable to:
Equity holders of the parent (88) 3 (12,026)
Non-controlling interests 50 31 147
(38) 34 (11,879)
Headline earnings (Note 3)
From continuing operations
Attributable to:
Equity holders of the parent 898 1,154 2,806
Non-controlling interests 50 31 147
948 1,185 2,953
From discontinued operations
Attributable to:
Equity holders of the parent - (426) (1,098)
Non-controlling interests - - -
- (426) (1,098)
From continuing and discontinued operations
Attributable to:
Equity holders of the parent 898 728 1,708
Non-controlling interests 50 31 147
948 759 1,855
Number of shares
Weighted average number of Ordinary shares for the purpose of basic earnings
per share
90,357,314 89,531,712 89,549,143
Dilutive effect of securities:
Employee share options 248,391 370,183 341,144
Weighted average number of Ordinary shares for the purpose of diluted earnings
per share
90,605,705 89,901,895 89,890,287
Reported basis:
From continuing operations
Basic earnings per share (pence) (0.1) 0.5 (12.6)
Diluted earnings per share (pence) (0.1) 0.5 (12.6)
From discontinued operations
Basic earnings per share (pence) - (0.5) (0.8)
Diluted earnings per share (pence) - (0.5) (0.8)
From continuing and discontinued operations
Basic earnings per share (pence) (0.1) 0.0 (13.4)
Diluted earnings per share (pence) (0.1) 0.0 (13.4)
Headline basis:
From continuing operations
Basic earnings per share (pence) 1.0 1.3 3.1
Diluted earnings per share (pence) 1.0 1.3 3.1
From discontinued operations
Basic earnings per share (pence) - (0.5) (1.2)
Diluted earnings per share (pence) - (0.5) (1.2)
From continuing and discontinued operations
Basic earnings per share (pence) 1.0 0.8 1.9
Diluted earnings per share (pence) 1.0 0.8 1.9
Basic earnings per share includes shares to be issued subject only to time as
if they had been issued at the beginning of the period.
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 2023
2024 2023
Unaudited Unaudited Audited
£'000 £'000 £'000
Goodwill 87,975 98,123 87,857
Other intangible assets 2,248 3,581 2,771
90,223 101,704 90,628
Goodwill
Six months to 30 June Six months to 30 June Year ended 31 December 2023
2024 2023
Unaudited Unaudited Audited
£'000 £'000 £'000
Cost
At 1 January 104,426 102,486 102,486
Recognised on acquisition of subsidiary - 1,910 1,920
Adjustment to consideration / net assets acquired 118 - 20
At 30 June / 31 December 104,544 104,396 104,426
Impairment adjustment
At 1 January 16,569 6,273 6,273
Impairment during the period - - 10,296
At 30 June / 31 December 16,569 6,273 16,569
Net book value 87,975 98,123 87,857
The increase in goodwill during the period relates to an adjustment to the net
assets acquired 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 2024. In 2023, as a result
of the performance and restructuring of the operations of Story Agency Ltd,
Story UK Ltd, Krow Agency Ltd and Krow Communications Ltd, and having
calculated the net present value of projected cash flows derived from these
operations, goodwill relating to these CGUs was impaired by £10,296,000.
Other Intangible Assets
Six months to Six months to Year ended
30 June 30 June 31 December 2023
2024 2023
Unaudited Unaudited Audited
£'000 £'000 £'000
Cost
At 1 January 11,797 11,575 11,575
Additions 8 522 629
Transfer from property, plant and equipment 14 - -
Disposals (10) - (407)
At 30 June / 31 December 11,809 12,097 11,797
Amortisation and impairment
At 1 January 9,026 8,047 8,047
Charge for the period 532 469 1,295
Transfer from property, plant and equipment 13 - -
Disposals (10) - (316)
At 30 June / 31 December 9,561 8,516 9,026
Net book value 2,248 3,581 2,771
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 including property, office equipment, computer
equipment and motor vehicles. 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.
Property Office equipment, computer equipment and motor vehicles Total
£'000 £'000 £'000
Cost
At 1 January 2023 15,168 2,399 17,567
Additions 10,481 227 10,708
Disposals (790) (243) (1,033)
At 30 June 2023 24,859 2,383 27,242
Additions - 25 25
Disposals (1,975) - (1,975)
At 31 December 2023 22,884 2,408 25,292
Additions 66 303 369
Disposals (1,365) (769) (2,134)
At 30 June 2024 21,585 1,942 23,527
Depreciation
At 1 January 2023 6,164 1,867 8,031
Charge for the period 1,039 172 1,211
Disposals (790) (243) (1,033)
At 30 June 2023 6,413 1,796 8,209
Charge for the period 1,220 181 1,401
Disposals (750) - (750)
At 31 December 2023 6,883 1,977 8,860
Charge for the period 1,116 151 1,267
Disposals (1,365) (769) (2,134)
At 30 June 2024 6,634 1,359 7,993
Net book value at 30 June 2023 18,446 587 19,033
Net book value at 31 December 2023 16,001 431 16,432
Net book value at 30 June 2024 14,951 583 15,534
Obligations under leases are due as follows:
30 June 30 June 31 December 2023
2024 2023
Unaudited Unaudited Audited
£'000 £'000 £'000
In one year or less (shown in trade and other payables) 2,375 1,632 1,983
In more than one year 15,047 18,226 15,768
17,422 19,858 17,751
10. Bank Loans and Net Bank Debt
30 June 30 June 31 December 2023
2024 2023
Unaudited Unaudited Audited
£'000 £'000 £'000
Bank loan outstanding 20,039 20,060 20,049
Adjustment to amortised cost (185) (77) (55)
Carrying value of loan outstanding 19,854 19,983 19,994
Less: Cash and short term deposits (226) (5,096) (4,632)
Net bank debt 19,628 14,887 15,362
The borrowings are repayable as follows:
Less than one year 21 23 21
In one to two years 20,018 21 20,023
In two to three years - 20,016 5
20,039 20,060 20,049
Adjustment to amortised cost (185) (77) (55)
19,854 19,983 19,994
Less: Amount due for settlement within 12
months (shown under current liabilities) (21) (23) (21)
Amount due for settlement after 12 months 19,833 19,960 19,973
At 30 June 2024, the Group's committed bank facilities comprised a revolving
credit facility of £20.0m, expiring on 5 April 2026. Interest on the facility
is based on SONIA (sterling overnight index average) plus a margin of between
2.25% and 4.90% depending on the Group's debt leverage ratio, payable in cash
on loan rollover dates.
In addition to its committed facilities, the Group had available an overdraft
facility of up to £9.0m until 30 June 2024, reducing to £7.0m from 1 July
2024, with interest payable by reference to National Westminster Bank plc Base
Rate plus 2.25%.
Included in the above is £39,000 of bank loans owing by Populate Social Ltd,
one of the companies acquired in 2022. These borrowings are repayable over a
two year period.
11. Acquisitions 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 2024 3,473 35 3,508
Less than one year
Between one and two years 890 - 890
4,363 35 4,398
A reconciliation of acquisition obligations during the period is as follows:
Cash Shares Total
£'000 £'000 £'000
At 31 December 2023 5,465 - 5,465
Adjustments to estimates of obligations (488) 536 48
Obligations settled in the period (614) (501) (1,115)
At 30 June 2024 4,363 35 4,398
During the period certain acquisition obligations previously expected to be
settled in cash were actually settled in shares.
12. Post balance sheet events
There have been no material post balance sheet events.
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