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Ebiquity PLC

25 March 2021

EBIQUITY PLC

PRELIMINARY RESULTS FOR THE YEARED 31 DECEMBER 2020

25 March 2021

Ebiquity plc ("Ebiquity" or the "Group"), a world leader in media investment analysis, today announces its preliminary results for the year ended 31 December 2020. Ebiquity works with over 70 of the world's top 100 advertisers, served from 19 offices worldwide by some 520 staff.

Financial Highlights(1)

 
                                 2020     2019    Change 
                                           (2) 
                                 GBPm     GBPm     GBPm 
                               -------  -------  ------- 
 Revenue                          55.9     68.1   (12.2) 
                               -------  -------  ------- 
 Underlying Operating Profit 
  (1)                            (0.3)      5.6    (5.9) 
                               -------  -------  ------- 
 Underlying (Loss)/Profit 
  before Tax (1)                 (1.3)      4.7    (6.0) 
                               -------  -------  ------- 
 Underlying (Loss)/Earnings 
  per Share (1)                 (1.9)p     2.9p   (4.8)p 
                               -------  -------  ------- 
 Statutory Operating Loss        (2.9)    (4.8)      1.9 
                               -------  -------  ------- 
 Statutory Loss before Tax       (3.9)    (5.7)      1.8 
                               -------  -------  ------- 
 Statutory Loss per Share       (4.8)p   (9.6)p     4.8p 
                               -------  -------  ------- 
 

-- Second half revenue increased by 9% from first, although full year revenue fell by 18% compared to 2019

-- Project-related costs also reduced by 27%, enabling net revenue margin to rise to 89% (2019: 87%)

   --    Underlying operating costs reduced by 7% to GBP50.0m (2019: GBP53.7m) 

-- Financial position at 31 December 2020 remains strong: net bank debt of GBP7.8m (31 December 2019: GBP5.6m) with cash balances of GBP11.1m and undrawn bank facilities of GBP5.0m

   --    Underlying operating cash inflow of GBP7.3m 

Note 1: Underlying operating profit is defined as the operating profit excluding highlighted items. These include share-based payments, amortisation of purchased intangibles and non-recurring items. Underlying profit before tax and earnings per share are calculated based on the underlying operating profit.

Note 2: The 2019 financial statements have been re-stated as set out in Note 1 of the Group financial statements. This impacted revenue, underlying operating, profit before tax and earnings per share.

Operational Highlights

-- Nick Waters, former Executive Chair, UK & Ireland, Dentsu Aegis Network started as Group Chief Executive Officer on 1 July 2020 with the objective to simplify, clarify and focus the business on a growth trajectory

   --    New business wins including Daimler, Generali, Perfetti van Melle and Reckitt 

-- Digital Decisions - which monitors advertising spend through the digital supply chain - acquired in January 2020 - performing as planned, winning ten new clients

-- New Digital Innovation Centre set up in order to speed up development of digital product suite

-- Shared service media delivery centre in Spain continued to expand and deliver operational efficiencies

-- Six new operational KPIs to be introduced in future results statements to track delivery of key business objectives. These are:

o Number of clients buying two or more service lines

o Number of clients buying one or more products from the new digital portfolio

o Volume of digital advertising monitored - number of impressions

o Volume of digital advertising monitored - US$ of spend

o Number of countries served with new digital products

o % of revenue from digital services

Divisional highlights

Media : Media Management, Media Performance and Contract Compliance

   --    Revenue of GBP46.0m (2019: GBP54.0m), reduced by 15% 
   --    Operating profit of GBP6.8m (2019 GBP11.8m), reduced by 40% 

Analytics and Tech : Advanced Analytics, MarTech and AdTech

   --    Revenue of GBP9.9m (2019: GBP14.1m) LFL decline of 15% excluding Stratigent 
   --    Operating loss of GBP0.7m (2019: profit of GBP1.0m) 

Outlook

-- Industry dynamics are expected to encourage brand owners to review their channel and media investment strategies

-- Ebiquity's market position and capabilities should enable it to capitalise on positive market trends

-- New business won over the last year and renewals from existing clients - commissioning have already led to an encouraging start in the first quarter

-- Group's re-defined strategic focus make it well-positioned to deliver revenue growth and a return to profitability in the year ahead

Nick Waters, CEO of Ebiquity said:

"Ebiquity's results in 2020 clearly reflected the impact of the Covid-19 pandemic on global advertising spending and on our clients' demand for our services as they reduced their budgets. Our staff transitioned to working from home efficiently and continued to support our clients effectively. I thank all of them for their resilience and professionalism under challenging circumstances. As anticipated at the interim stage, our revenue increased in the second half of the year, compared to the first half. This reflected the macro-environment and more demand from existing clients, especially in automotive and FMCG as well as new business successes, helped by Accenture's exit from our market. This improved performance has continued into the start of this year and we except to deliver revenue growth and a return to profitability in 2021."

Details of presentation

Management will be hosting a webcast presentation for analysts and investors at 9:30am today. If you would like to register please contact guy.scarborough@instinctif.com .

Market abuse regulation

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/201 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR").

Enquiries

 
 Ebiquity plc 
  Nick Waters (CEO) 
  Alan Newman (CFO)                              020 7650 9600 
 Instinctif Partners 
  Matthew Smallwood                               07831 379 122 
  Guy Scarborough                                  07917 178 920 
 Panmure Gordon (Financial Adviser, NOMAD 
  & Broker) 
  Alina Vaskina / Sandy Clark (Corporate 
  Advisory) 
  Charles Leigh-Pemberton (Corporate Broking)    020 7886 2500 
 

About Ebiquity plc

Ebiquity plc (LSE AIM: EBQ) is a world leader in media investment analysis. It harnesses the power of data to provide independent, fact-based advice, enabling brand owners to perfect media investment decisions and improve business outcomes. Ebiquity is able to provide independent, unbiased advice and solutions to brands because we have no commercial interest in any part of the media supply chain.

We are a data-driven solutions company helping brand owners drive efficiency and effectiveness from their media spend, eliminating wastage and creating value. We provide analysis and solutions through five Service Lines: Media management, Media performance, Marketing effectiveness, Technology advisory, Contract compliance.

Ebiquity's clients are served by more than 500 media specialists operating from 19 offices covering 80% of the global advertising market.

The Company has the most comprehensive, independent view of today's global media market, analysing $55bn of media spend from 75 markets annually, including trillions of digital media impressions. Our Contract Compliance division, FirmDecisions, audits $40bn of contract value annually.

As a result, more than 70 of the world's top 100 advertisers today choose Ebiquity as their trusted independent media advisor.

For further information, please visit: www.ebiquity.com

Chair's Statement

In a year that has been dominated by the Covid-19 pandemic and its unprecedented economic and societal impacts, Ebiquity has continued to deliver a high-quality service to clients, while ensuring a safe working environment for its staff. The impact of Covid-19 on our clients' activity caused a significant revenue decline in our business and led to an underlying loss, despite implementing immediate cost reduction measures. Against this difficult background, the Group has continued to progress through a period of transition and concluded the year with strong new leadership together with a clear and focussed growth strategy and enhanced operational structure.

From March 2020, our global teams moved efficiently to working from home and I wish to thank them for their exceptional resourcefulness and resilience in continuing to provide first class client support under the most challenging of conditions. By the end of the financial year, several offices including Hamburg, Shanghai, Singapore and Sydney had fully or partially re-opened, depending on local regulations. We look forward to embracing new ways of working as restrictions associated with the pandemic are lifted.

Importantly, and despite the challenging environment, the year continued to be one of significant transition for the Group, highlighted by the appointment of Nick Waters as CEO in July and the establishment of a strengthened and refreshed leadership team.

Following Nick's appointment, the Board and management launched a thorough operational review to refine the Group's strategy, update market priorities, drive revenue growth and improve operating margins. In November, we set out this refreshed strategy which aims to deliver product solutions for the digital market, develop higher value strategic client relationships and improve operating efficiencies.

As part of the extensive review process and to facilitate the development of higher value engagement with clients, the Group has implemented a new geographically-led organisational structure, as opposed to its previous practice-led format. The new operating model which took effect from January 2021, means that Ebiquity can offer harmonised end-to-end client solutions and is better placed to identify and take advantage of cross-selling opportunities. To measure the delivery of our strategic ambition, we will be establishing and reporting against a number of broader non-financial KPIs to monitor progress.

As reported at the interim stage, the Covid-19 pandemic led to a significant reduction in global advertising activity and spend, especially in the second and third quarters of 2020. The downturn in activity varied by sector and geography, with the most pronounced impact being seen in the automotive, travel, leisure and non-food retail industries.

The Group implemented cost management measures in response to maintain liquidity and protect the business while also preserving jobs. These included a hiring and pay freeze, temporary pay reductions for the Board and some senior managers, and the use of government support schemes in a number of countries. We also renegotiated the covenants on our banking facilities and have deferred the payment of dividends until economic and business conditions become more certain. As a result, the Group has maintained a robust financial position with good covenant headroom and low levels of gearing.

As also anticipated at the interim stage, the second half of the year saw an improved performance as Covid-19 restrictions began to ease in some markets and advertisers adjusted to the changed environment. Group revenue increased by 9% compared to the first half, driven by a return to activity by existing clients together with notable new business wins. These included some twenty former clients of Accenture following its withdrawal from media audit and management services in August 2020.

The impact of Covid-19 has accelerated the existing shift in consumers' media consumption towards digital channels and in their buying behaviour from physical retail to e-commerce. As a result, brand owners are even keener to ensure that their media investment strategies remain effective. This increases their need for informed, expert advice based on robust data and rigorous analysis. These trends should lead to renewed demand for our portfolio of services in 2021 and beyond as advertisers re-set their plans.

The Board acknowledges the increasing focus on Environmental, Social and Governance issues and the need for companies to demonstrate how they are addressing these important areas. We are at early stage in setting out our ESG agenda and building on our existing policies to enhance the role Ebiquity can play in supporting our global clients to meet their own targets. We will continue to engage with clients and investors on ESG and sustainability issues and develop plans for becoming a more sustainable business. We will set out our position and report our activities in this respect over the course of the next year.

Looking ahead, as the global economy begins to recover from the pandemic, we are confident that Ebiquity's new strategic focus together with its strong market position and solid financial platform, make it well-positioned to achieve its growth ambitions and deliver sustainable, long term shareholder value.

Rob Woodward

Chair

Chief Executive Officer's Review

Strategic Direction

Since my appointment as CEO in July 2020, we have undertaken a process to review Ebiquity's business and operations, and to develop our strategic plans with a view to returning the business to top line revenue growth and operating margin improvement.

The process was approached with the objective to simplify, clarify and focus the business. The resulting strategy is one of maintaining stability, evolution and change. It was first set out publicly at the Capital Markets Day held in November 2020.

Ebiquity's purpose, which underpins our strategy, is to remain the world leader in media investment analysis.

We harness the power of data to provide independent, fact-based advice, enabling brand owners to perfect media investment decisions and improve business outcomes. Our aim is to be a data-driven solutions company helping brand owners drive efficiency and effectiveness from their media spend, eliminating wastage and creating value.

In order to maintain momentum and ensure we deliver on our strategic targets, we will be establishing and reporting on a number of broader non-financial KPIs in future results statements as noted below. These measurements are tailored to our new operating model and specifically to driving digital growth and integration, cross-selling and high-value client development.

   --    Number of clients buying two or more service lines 
   --    Number of clients buying one or more products from the new digital portfolio 
   --    Volume of digital advertising monitored - number of impressions 
   --    Volume of digital advertising monitored - US$ of spend 
   --    Number of countries served with new digital products 
   --    % of revenue from digital services 

Ebiquity is able to provide independent, unbiased advice and solutions to brands because it has no commercial interest in any part of the media supply chain. Our independence is recognised and highly valued by our clients, which include the world's leading advertisers.

The global media advertising market is large scale with over US$500bn traded annually and with significant complexity for brand owners. Ebiquity's focus is in the media market, advising brand marketers how to navigate the market's complexity and to improve media investment decisions for better business outcomes.

Digital channels are the growth drivers of the media investment business, now accounting for more than 50% of all advertising spend. 70% of digital advertising (excluding search) is now traded programmatically. The impact of Covid-19 has been to accelerate existing market trends with consumers increasing the amount of time and activity online for shopping, working and entertainment. However, the digital and programmatic landscape has given rise to many well documented challenges for advertisers with brand safety, viewability, fraud, wastage, lack of transparency, attribution, efficiency and effectiveness all topics of frequent industry debate. As advertisers grapple with these challenges there is a need for high quality, independent advice, based on empirical evidence.

Digital initiatives / development

Digital Decisions, which was acquired as an early stage business in January 2020, has bolstered the Group's capabilities in investment analysis of digital media. Its Source Data Monitoring ("SDM") service provides brand owners with much needed visibility into the distribution of their digital advertising investment through their global media supply chains, down to individual websites. It is demonstrating significant value to users, regularly identifying how up to 30% of their digital advertising spend is being wasted and enabling them to course-correct and optimise for greater efficiency and effectiveness.

Digital Decisions has performed as expected and won contracts with existing Ebiquity clients (including Huawei, Mars and Nestlé) - demonstrating the potential to cross-sell into our existing client base - as well as other major brands, including Heineken and Reckitt. At the end of December 2020 ten clients were live on the SDM platform, with some US$500 million of digital media spend being tracked and optimised, and we are now on-boarding clients at an increasing rate.

To help develop and drive the product roadmap for our entire global business, Ruben Schreurs, the founder CEO of Digital Decisions, has been appointed to the new role of Group Chief Product Officer.

We are focussing efforts on building out the SDM platform, having proved its scalability. We also aim to make the Digital Decisions data services model a core building block for Ebiquity's enhanced digital media measurement service. This is being developed to meet clients' requests for a more comprehensive offering covering all aspects of digital media, including paid search and social media.

As part of this strategy, Digital Decisions has now been fully integrated into the Group and re-branded as the Digital Innovation Centre, launched publicly in February 2021 with a remit to develop new data-led productised service solutions. This dedicated central unit will develop, maintain, and deliver digital solutions for Ebiquity's global clients. Building on the existing Media Data Vault architecture the Group's new product initiatives include governance monitoring, commitments and productivity tracking, digital cost benchmarking, and digital media reviews.

Organisational structure

Ebiquity has demonstrated its ability to grow revenue when putting strategic focus on a core group of clients. To drive further development of this successful approach, Mark Gay, one of our senior client partners, has been appointed to the new role of Chief Client Officer. Under his remit and with enhanced Client Partner teams covering a larger proportion of our major clients across the network, we aim to grow further the number of higher value clients buying more than one of our services. This initiative includes the recent appointment of a former Accenture senior partner to focus on major European brand owners.

We have simplified our organisational structure to be able to provide integrated solutions and consultancy advice as well as developing higher value client relationships. The Group is transitioning from a matrix structure of practices and geographies to one that is mainly organised and managed on a geographic P&L basis. Our aim is to offer our main service lines to clients across the country, regional and global business structures.

We have recently appointed two new regional managing directors with Leela Nair moving up from Southeast Asia to lead the Asia Pacific region and Paul Williamson joining the Group as MD, North America following senior business development, trading and investment, and digital leadership roles at Dentsu Aegis and Publicis Groupe.

As announced at the interim stage, Federica Bowman has taken over the leadership of FirmDecisions, our market leading Contract Compliance practice, having successfully directed its digital media services. Although FirmDecisions was impacted this year by Covid-19 disruptions to its traditional physical audit model, it has worked with agencies to enable remote audits to be conducted. We therefore expect a return to growth in the near term.

A new role of Business Operations Director has also been established to develop and execute plans to achieve greater operational efficiency in order to enhance margins. Its objectives include further automation and standardisation of our service delivery processes supported by the expansion of the Scaled Delivery Centre established in 2019, which is taking on a broader remit as a Media Operations Centre.

To support the Group CEO in executing our strategy and deliver our plans, an Executive Leadership Team has been established comprising the Group's Chief Financial & Operating, People, Client and Product Officers along with the four regional managing directors and the CEO of FirmDecisions.

Ebiquity has a strong track record of publishing high-quality analysis and commentary on specific aspects of the global media industry. We maintained our position as a thought leader during 2020, publishing white papers on "The Rise and Rise of Influencer Marketing", "Digital Media Performance: the Power of Context", and "Deconstructing ROI: A New Framework for Driving Marketing Effectiveness in the Age of Media Fragmentation". We also published guides designed to respond specifically to the demands of a world impacted by Covid-19. These included: "The Ebiquity Guide to Virtual Pitching", "Advertising Through a Recession" and "2021: Emerging Perspectives in a Post Pandemic World".

With a clear focus on the provision of services in the media sector, a refreshed product offering for the digital market, and a simplified organisational structure we believe Ebiquity is well placed to capitalise on its strengths.

Performance in the Year

Ebiquity Group's business performance was materially impacted in 2020 by the global Covid-19 pandemic.

Group revenue in the year to 31 December 2020, fell by 18% to GBP55.9 million or 15% on a like-for-like basis, excluding the US analytics business, Stratigent, which was wound down in September 2019. The revenue decline was clearly due in large part to the impact of the Covid-19 pandemic on our clients' businesses and on their demand for media-related services. There was some recovery in the second half of the year as business conditions improved, with revenue up 9% against the first half.

The UK and Western European economies were among the worst affected by the pandemic. Consequent government measures to restrict movement and activities of their populations were among the most severe in the world. The UK media market was down 39% in Q2 according to the World Advertising Research Centre. The Group is heavily weighted to these geographies, with some 75% of revenue derived from the UK and Continental Europe and was therefore relatively more exposed to the downturn in these regions.

Many clients reacted in the first half by cancelling or postponing advertising campaigns and the work commissioned from Ebiquity. This effect was felt most strongly in the automotive, travel, leisure, and entertainment sectors. Automotive is Ebiquity's second largest vertical by revenue and so contributed materially to the revenue decline. Fast Moving Consumer Goods (FMCG) represents the Group's largest vertical by revenue and - with supermarkets declared essential retail by governments around the world - was among the least affected categories. This provided some cushion for Group revenue against declines in other sectors.

As the pandemic developed, the Group made cost savings leading to a reduction of 7% in underlying operating expenses from the prior year. We prioritised the protection of jobs and made use of government payroll support schemes in Australia, China, France, UK and USA. We also suspended the annual pay review and the Board and senior executives took pay reductions for a period. These measures contributed to total savings in staff costs of 10% compared to 2019, although year-end staff numbers of 522 were just 1% below those at the 2019 year-end.

Despite the challenges of the year, there were some bright spots. Accenture's exit from the media assurance business enabled the Group to win new business among high-quality brand owners. These will deliver annualised revenues of GBP5 million, some of which will be fully recognised in 2021. Some of this revenue is from existing clients but much is from clients new to Ebiquity, such as American Express, Daimler and Reckitt.

The approach of establishing a team of client partners to focus on developing relationships and revenue among selected high value clients, also continued to prove its worth. Despite the challenging environment, we achieved 1% revenue growth from this core group of clients which include two from the automotive sector.

Revenue by Segment

 
                                  Revenue 
                       FY20   FY19   Variance 
                      -----  -----  ---------  ------ 
                       GBPm   GBPm     GBPm       % 
                      -----  -----  ---------  ------ 
 Media                 46.0   54.0      (8.0)   (15%) 
                      -----  -----  ---------  ------ 
 Analytics and Tech     9.9   14.1      (4.2)   (30%) 
                      -----  -----  ---------  ------ 
 Group                 55.9   68.1     (12.2)   (18%) 
                      -----  -----  ---------  ------ 
 

Media

Revenue in the Media segment which comprises Media Performance, Media Management and Contract Compliance services fell by 15% year-on-year. However, as anticipated at the interim stage, revenue grew by 10% in the second half compared to the first as client activity returned to some normality following the initial Covid-19 pandemic period when many clients had reduced their media-related expenditure. There was also a revenue benefit in the new business won from former Accenture clients following its exit from media performance and management services in August 2020. These new contracts included several global engagements as well as local work in France, Germany, Spain, UK and USA.

Revenue in UK & Ireland, our largest Media region, fell by 13% although the group serving large global clients experienced higher levels of activity in the second half and its revenue fell by only 6%. European revenue reduced by 15%, with Germany falling by 20% while some markets such as Russia and Spain increased or held their revenue static. In the USA, which like Germany has a large proportion of automotive clients, revenue fell by 23%. Asia Pacific revenue decreased by 11% overall, although Singapore increased, due to new business wins.

Our Media Performance services assist advertisers to monitor and evaluate their agencies' media buying performance. We harness the expert knowledge of our global network of media specialists, the most extensive of its kind, and our access to unique client media spend data pools to assess the value for money delivered, both in comparison to the market and to the client's specific objectives. This helps brand owners to obtain accountability and transparency over the performance of their chosen media supply partners, especially given the industry's complex purchasing arrangements. Major clients for this area include Ferrero, L'Oréal, General Motors, Jaguar Land Rover, Vodafone and VW Group.

Media Management services include advising clients in the selection of media agencies and setting of media buying objectives as well as in the organisation of media functions. We conduct many agency selections at global level and within individual markets. However, the number of agency reviews was much lower than usual in 2020 as the Covid-19 pandemic led to advertisers deferring decisions while their business and media plans were uncertain. Agency selection activity is expected to increase in 2021 as advertisers re-evaluate their longer-term media objectives. This is already being reflected in the number of new media management engagements secured in the first quarter of 2021.

During the year, we developed further the functionality and use of the key MediaSuite tools used to support further process and efficiency improvements. EbiquityConnect(TM) streamlines data ingestion from agencies, many of which have given positive feedback following the system's introduction. EbiquitySelect(TM) supports our agency selection work. EbiquitySync(TM) provides a standardised tool for benchmarking paid digital media spend and is now being integrated with the recently acquired Digital Decisions technology applications.

Our shared services media delivery centre in Spain which became operational in 2019, doubled the amount of work it undertakes for the network from the prior year, helping further to reduce media delivery costs.

Our Contract Compliance service (trading as "FirmDecisions") was impacted by the Covid-19 restrictions to on-site access to agencies which delayed a number of audits and its revenue fell by 52% compared to 2019. Although the team rapidly re-designed its approach to enable remote audits to be conducted, it took time to obtain full agency agreement to electronic provision of information. Its clients in the period included FCA Group, Mondelez and Nike. The new CEO's focus has been to streamline and automate the audit approach and achieve greater scale efficiencies and speed of delivery across the global network. These are important factors in maintaining FirmDecisions' position as the global leader in its field with increased competition being faced, notably from new entrants.

Analytics and Tech

Analytics and Tech total revenue of GBP9.9 million (2019: GBP14.1 million) fell by 30% in reported terms but by 21% on a like-for-like basis, excluding Stratigent whose operation ceased in September 2019. Advanced Analytics, the largest element, fell by 10%, AdTech by 29% and Digital Balance by 33%.

Our Advanced Analytics practice helps brands to plan and optimise their investment in media by applying advanced analytical techniques to attribute and forecast the impact of marketing investments on business outcomes (eg sales) and to optimise these investments. With a client base oriented to retail, travel and automotive its revenue was impacted by cancellations and deferrals in the first half. However, its offering is well suited to helping brands to re-plan their media investment strategy to reflect changed conditions and it recovered to an extent in the second half in response to these client needs.

Our AdTech practice helps brand owners to address the specific challenges of managing digital media and automated trading programmes by designing the data and technology ecosystem best suited to deliver their marketing strategy and optimise their digital media investments. Their solutions include the evaluation and planning of in-house alternatives and the selection of advertising technology partners. It has a number of continuous projects for several global clients, although delayed purchase approvals by one of these impacted its revenue in this period.

The MarTech practice now comprises a single unit, Digital Balance, in Australia, following the closure of Stratigent in the USA in September 2019. During the year, Digital Balance has been more closely integrated with the media practice to increase cross-selling of its services. However, although it won projects for global clients based in France and Germany, demand from its core Australian client base was affected by the pandemic.

Operating Profit by Segment

 
                          Underlying Operating Profit       Operating profit 
                                                                 margin 
                        FY20     FY19       Variance         FY20      FY19 
                      -------  -------  ----------------  ---------  -------- 
                        GBPm     GBPm     GBPm      %         %          % 
                      -------  -------  -------  -------  ---------  -------- 
 
 Media                    6.8     11.2    (4.4)    (39%)        15%       21% 
                      -------  -------  -------  -------  ---------  -------- 
 Analytics and Tech     (0.7)      1.0    (1.7)     -          (7%)        7% 
                      -------  -------  -------  -------  ---------  -------- 
 Unallocated costs      (6.4)    (6.6)      0.2     3%            -         - 
                      -------  -------  -------  -------  ---------  -------- 
 Group                  (0.3)      5.6    (5.9)        -       (1%)        9% 
                      -------  -------  -------  -------  ---------  -------- 
 

The reduction in operating profitability compared to 2019, largely reflected the revenue performance, despite reductions of GBP3.8m achieved in operating expenses. The Media practice remained profitable although its margins fell from 21% to 15%. Analytics and Tech moved into a loss of GBP0.7m, due largely to the fall in revenue although it was also impacted by an expansion of the staff base in 2019 which had been made in anticipation of expected revenue growth in 2020.

ESG

At Ebiquity, we understand the importance of a clear approach to Environmental, Social and Governance ("ESG") matters. We are at an early stage in developing our policies and practices and now plan to establish appropriate baseline metrics and objectives against which we will report in future. We will continue to engage with investors and other stakeholders on ESG issues and ensure that the Board and management team review ways for Ebiquity to progress further towards becoming a more sustainable business.

Outlook

Although 2020 was an exceptionally difficult year for many businesses, including Ebiquity, the outlook for 2021 is more positive, and it is expected to be a year of recovery, albeit not immediately to the activity levels of 2019. There are early signs of economic activity, including advertising expenditure, returning to more normalised levels during 2021, although this depends on the success of vaccine programmes and other measures in continuing to reduce the global impact of Covid-19.

In addition to cautious optimism about market conditions, the Group aims to build on the progress seen in the second half of 2020. It expects to benefit from the new business won over the last year and from re-commissioning of some client projects deferred or cancelled in 2020. These factors have already led to an encouraging contract pipeline in the first quarter.

Covid-19 has had a pronounced effect on consumer behaviour, changing their media consumption patterns and accelerating the growth in online activity. These dynamics are expected to encourage brand owners to review their channel and media investment strategies to ensure they are effective and deliver return on investment. Ebiquity's data-driven, product solutions strategy means it is well-positioned to take advantage of these dynamics in response to demand for media investment analysis.

Notwithstanding this broader market uncertainty, the Group's re-defined strategic focus together with its strong market position and solid financial platform, make it well-positioned to deliver revenue growth and a return to profitability in the year ahead.

Financial Review

Group revenues for the year ended 31 December 2020 fell by GBP12.2 million or 18% to GBP55.9 million, from GBP68.1 million in 2019.

Reflecting the lower activity, project-related costs (which comprise external partner and production costs) fell by GBP2.4 million (27%) from GBP8.8 million to GBP6.4 million and the net revenue margin rose from 87% to 88%. Operating expenses were also reduced, by GBP3.8 million, (7%) to GBP50.0 million from GBP53.7 million. This only partially offset the revenue reduction and the Group recorded an underlying operating loss of GBP0.3 million in the year, compared to an underlying operating profit of GBP5.6 million and operating margin of 9% in 2019.

Net finance costs rose slightly from GBP0.9 million to GBP1.0 million, due to the increase in net debt. This and the operating loss led to an underlying loss before tax in the year of GBP1.3 million, compared to a profit of GBP4.7 million in 2019.

The statutory operating loss of GBP2.9 million (calculated after highlighted items) improved from the loss of GBP4.8 million in 2019, due largely to a significantly lower level of net highlighted costs which fell from GBP10.3 million to GBP2.5 million (as detailed below). This also led to a reduction in the statutory loss before tax to GBP3.9 million compared to GBP5.7 million in 2019.

Highlighted items

Highlighted items during the year included the following:

-- GBP1.9 million credit relating to share-based payments mainly arising from the lapse of options over 4.2 million shares originally awarded in May 2010.

   --    GBP1.1 million charge for amortisation of purchased intangibles (2019: GBP1.2 million) 

-- GBP0.8 million charge due to the impairment of goodwill in Digital Balance, the martech business based in Australia

-- GBP1.5 million charge relating to severance and re-organisation costs following re-structuring of management and staff roles in Australia, France, Germany, UK and USA as part of actions taken to improve business performance.

-- GBP0.8 million relating to currency revaluation of deferred consideration payments for Ireland and Italy

-- GBP0.2 million relating to professional costs incurred on acquisitions and bank facility negotiations.

Prior Year Adjustment

During the year, a misstatement was discovered in the balance sheet of Firm Decisions' US subsidiary as at 31 December 2019. This followed an internal review of balance sheet items by the Group Finance team as part of enhanced internal control procedures put in place by the Chief Financial and Operating Officer during the last year. The causes of this error were specific to the unit involved and related to the misstatement of accrued income and revenue balances for which process and system improvements have been made to avoid any recurrence. In accordance with FRS 102, the financial statements for 2019 have been re-stated to reflect this adjustment. The impact was a reduction of GBP600,000 in 2019 Group revenue, a reduction of GBP148,000 in retained earnings brought forward as at 1 January 2019 and a reduction of GBP748,000 in accrued income as at 31 December 2019.

Taxation

There was an underlying tax charge in the year of GBP0.03 million compared to GBP1.9 million in 2019. This reduced charge reflected the loss before tax incurred in the year.

There was a total tax credit including on highlighted items of GBP0.2 million compared to a charge of GBP1.5 million in 2019.

Earnings per share

The loss after tax led to an underlying loss per share of 1.9p, compared to earnings of 2.8p in 2019. There was a statutory diluted loss per share of 4.81p, an improvement of 4.74p, compared to the statutory diluted loss per share of 9.55p in 2019.

Dividend

Although our Group is in a healthy financial position and has bank borrowing facilities in place until 2023, the Board considers it prudent to conserve the Group's cash resources given the Group's performance in 2020 and the uncertainty created by the Covid-19 pandemic. It will therefore not be proposing the payment of a dividend in respect of 2020 at the forthcoming AGM and will defer any dividend recommendation until economic and business conditions are more certain.

Cash conversion

 
                                    Year ended     Year ended 
                                   31 December    31 December 
                                          2020           2019 
-------------------------------  -------------  ------------- 
                                       GBP'000        GBP'000 
-------------------------------  -------------  ------------- 
 Reported cash from operations           5,827          5,657 
-------------------------------  -------------  ------------- 
 Underlying cash from 
  operations                             7,300          8,870 
-------------------------------  -------------  ------------- 
 Underlying operating 
  profit/loss                            (334)          6,167 
-------------------------------  -------------  ------------- 
 Cash conversion                             -           144% 
-------------------------------  -------------  ------------- 
 

Underlying cash from operations represents the cash flows from operations excluding the impact of highlighted items. The underlying net cash inflow from operations was GBP7.3 million during 2020 (2019: GBP8.9 million). This cash inflow reflecting continued tight management of working capital despite the challenging business environment.

Equity

During the year to 31 December 2020, 2,467,628 shares were issued. 2,437,628 of these were as partial settlement of the Italian minority buy-out and a further 30,000 upon the exercise of employee share options. As a result, the total share capital increased to 82,583,254 shares (31 December 2019: 80,115,626).

Net debt and banking facilities

 
                                          31 December   31 December 
                                                 2020          2019 
---------------------------------------  ------------  ------------ 
                                              GBP'000       GBP'000 
---------------------------------------  ------------  ------------ 
 Net cash                                      11,121         8,236 
 Bank debt                                   (19,000)      (14,000) 
 Loan fee prepayments                             120           168 
---------------------------------------  ------------  ------------ 
 Net bank debt                                (7,759)       (5,596) 
 US PPP Loan (1)                                (750)          ---- 
 Net Debt as in Statement of Financial 
  Position                                    (8,509)       (5,596) 
---------------------------------------  ------------  ------------ 
 

(1) This represents a loan received in May 2020 under the US Payroll Protection Programme. The qualifying conditions required for loan forgiveness have been met but at the year-end the providing bank had not opened the forgiveness application process. If the application is successful, this loan will be credited to the income statement in 2021 as a grant.

All bank borrowings are held jointly with Barclays and NatWest. On 20 September 2019, the Group entered into a new RCF facility agreement of GBP24.0 million with broadly similar terms to the previous one. The facility has a maturity period of four years, expiring in September 2023 with an option for the company to extend for one further year. The committed RCF facility at 31 December 2020 totalled GBP24.0 million, of which GBP19.0 million was drawn (2019: RCF of GBP25.0 million, of which GBP14.0 million was drawn). During the year, the Group drew down GBP5.0 million to cover working capital requirements that it anticipated might have arisen due to the Covid 19 pandemic. In the prior year, the drawn RCF facility of GBP14.0 million was included as a current liability since the facility was set to expire within one year.

The Group continued to trade throughout the year, within the limits of its banking facilities and associated covenants. The covenants applying on a quarterly basis until June 2020 were based on EBITDA multiples as follows: interest cover > 4.0; adjusted leverage < 2.5; and adjusted deferred consideration leverage < 3.0. In response to the Covid-19 disruption, modified covenants were agreed with the lenders in May 2020 which applied from July 2020 to 30 November 2021. These require the Group to maintain minimum liquidity of at least GBP5 million at the end of every month during that period. Minimum liquidity is defined as the aggregate amount of cash together with any available undrawn amount under the facility. Liquidity as at 31 December 2020 totalled GBP15.4 million. In March 2021, a further covenant amendment was agreed with the lenders. With effect from December 2021, the minimum liquidity covenant will increase to GBP7 million. In addition, with effect from September 2021 an adjusted leverage covenant will be re-introduced, initially at < 4.0, increasing to < 4.25 in December 2021 and to < 4.5 in March 2022, then reducing to < 3.5 in June 2022 and < 3.0 in September 2022. The original covenants which were in force until June 2020 will apply again from December 2022 onwards.

Statement of financial position and net assets

A summary of the Group's balance sheet as at 31 December 2020 and 31 December 2019 is set out below:

 
                                  31 December   31 December 
                                         2020          2019 
-------------------------------  ------------  ------------ 
                                      GBP'000       GBP'000 
-------------------------------  ------------  ------------ 
 Goodwill and intangible 
  assets                               34,698        35,172 
 Right of use asset                     6,237         8,339 
 Other non-current assets               3,387         3,549 
 Net working capital                    8,504        12,179 
 Other current liabilities            (1,953)       (4,724) 
 Lease liability                      (8,158)       (9,590) 
 Other non-current liabilities        (1,503)       (1,423) 
 Deferred consideration               (1,957)          (14) 
 Net debt                             (8,509)       (5,596) 
-------------------------------  ------------  ------------ 
 Net assets                            30,746        37,892 
-------------------------------  ------------  ------------ 
 

Net assets as at 31 December 2020 decreased by GBP7.1 million to GBP30.7 million (2019: GBP37.9 million).

Debtor days have remained consistent year on year at 58 days (2019: 62 days) due to continued strong cash collection in particular, at the end of the year.

Corporate Development Activities

On 8 January 2020, the Group completed the purchase of Digital Decisions B.V ('Digital Decisions'). The initial cash consideration paid was EUR700,000 (GBP597,000) with further contingent consideration payable in a mix of cash and Ebiquity plc shares. The first deferred contingent payment is based on profit performance in the year to 31 December 2020 and the second payment is based on the average profit performance for the two years ended 31 December 2022. Payment of the deferred contingent consideration is conditional upon the vendor remaining in Ebiquity's employment and is therefore deemed to be post-date remuneration in accordance with IFRS 3 (revised). No payment was earned in respect of the year ended 31 December 2020, since although Digital Decisions' revenue increased significantly, its profit did not reach the required threshold. Due to the integration of the Digital Decisions service with the Group's overall digital media products, the basis of the revenue included in the performance calculation for the two years ended 31 December 2022 was amended in January 2021 to include the contribution from all digital media products developed by the Digital Innovation Centre. The multiple applied in calculating the contingent consideration has been reduced from 8 times to 6 times the average of the relevant profits generated in 2021 and 2022.

On 3 February 2020, the Company agreed to acquire the outstanding 49% interest in its subsidiary Ebiquity Italy Media Advisor S.r.l ('Ebiquity Italy') from the founders and minority shareholders, Arcangelo DiNieri and Maria Gabrielli. The transaction completed on 28 May 2020, following the approval of the Group's audited accounts. The total consideration of GBP3.1 million was based on an average of Ebiquity Italy's profit before tax and management charges for the years ending 31 December 2018 and 2019. The consideration is being paid in a combination of cash and Ebiquity plc shares. At completion, 25% of the total consideration was settled by the issue of 2,437,628 Ebiquity plc shares and 5% in cash. The remaining cash payments totalling GBP2.3m were made between August 2020 and March 2021.

On 24 December 2020, the Group acquired a further 24.95% of the share capital of its subsidiaries Ebiquity Russia Limited and Ebiquity Russia OOO from Vladimir Rass, the former CEO, for a total payment of US$517,000 (GBP405,000). The Group now holds 75.05% of the share capital of each of these companies.

Alan Newman

Chief Financial and Operating Officer

Alternative Performance Measures

In these results we refer to "underlying" and "statutory" results, as well as other non-GAAP alternative performance measures.

Alternative Performance Measures (APMs) used by the Group are:-

   --    Net revenue 
   --    Like-for-like revenue growth 
   --    Underlying operating profit 
   --    Underlying operating margin 
   --    Underlying profit before tax 
   --    Underlying earnings per share 
   --    Underlying operating cash flow conversion 

Net revenue is the result when project-related costs, comprising external production costs, are deducted from revenue.

Underlying results are not intended to replace statutory results but remove the impact of highlighted items in order to provide a better understanding of the underlying performance of the business. The above APMs are consistent with how business performance is measured internally by the Group.

Underlying profit is not recognised under IFRS and may not be comparable with underlying profit measures used by other companies.

Highlighted items comprise non-cash charges and non-recurring items which are highlighted in the consolidated income statement as their separate disclosure is considered by the Directors to be relevant in understanding the underlying performance of the business. The non-cash charges include share option charges and amortisation of purchased intangibles.

The non-recurring items include the costs associated with potential and completed acquisitions and disposals, adjustments to the estimates of contingent consideration on acquired entities, asset impairment charges, management restructuring and other significant one-off items. Costs associated with acquisition identification and early stage discussions with acquisition targets are reported in underlying administrative expenses.

Further details of highlighted items are set out within the financial statements and the notes to the financial statements.

Consolidated income statement

for the year ended 31 December 2020

 
                                                                                 Restated (1) 
                                       Year ended 31 December               Year ended 31 December 
                                                 2020                                 2019 
                                 -----------------------------------  ----------------------------------- 
                                      Before  Highlighted                  Before  Highlighted 
                                 highlighted        items             highlighted        items 
                                       items     (note 3)      Total        items     (note 3)      Total 
                           Note      GBP'000      GBP'000    GBP'000      GBP'000      GBP'000    GBP'000 
-------------------------  ----  -----------  -----------  ---------  -----------  -----------  --------- 
Revenue                       2       55,907            -     55,907       68,133            -     68,133 
Project-related 
 costs                               (6,436)            -    (6,436)      (8,857)            -    (8,857) 
-------------------------  ----  -----------  -----------  ---------  -----------  -----------  --------- 
Net revenue                           49,471            -     49,471       59,276            -     59,276 
Cost of sales                       (24,784)            -   (24,784)     (27,355)            -   (27,355) 
-------------------------  ----  -----------  -----------  ---------  -----------  -----------  --------- 
Gross profit                          24,687            -     24,687       31,921            -     31,921 
Administrative 
 expenses                           (25,172)      (2,541)   (27,713)     (26,354)     (10,330)   (36,684) 
 Other operating 
  income                                 151            -        151            -            -          - 
-------------------------  ----  -----------  -----------  ---------  -----------  -----------  --------- 
Operating (loss)/profit                (334)      (2,541)    (2,875)        5,567     (10,330)    (4,763) 
Finance income                            39            -         39            9            -          9 
Finance expenses                       (914)            -      (914)        (907)            -      (907) 
Foreign exchange                       (137)            -      (137)            -            -          - 
-------------------------  ----  -----------  -----------  ---------  -----------  -----------  --------- 
Net finance costs                    (1,012)            -    (1,012)        (898)            -      (898) 
-------------------------  ----  -----------  -----------  ---------  -----------  -----------  --------- 
(loss)/profit 
 before taxation 
 from continuing 
 operations                          (1,346)      (2,541)    (3,887)        4,669     (10,330)    (5,661) 
Taxation (charge)/credit 
- continuing operations       4         (26)          176        150      (1,931)          454    (1,477) 
-------------------------  ----  -----------  -----------  ---------  -----------  -----------  --------- 
(Loss)/profit 
 for the year 
- continuing operations              (1,372)      (2,365)    (3,737)        2,738      (9,876)    (7,138) 
-------------------------  ----  -----------  -----------  ---------  -----------  -----------  --------- 
Net profit/(loss) 
 from 
discontinued operations       5            -          220        220            -      (1,018)    (1,018) 
-------------------------  ----  -----------  -----------  ---------  -----------  -----------  --------- 
(Loss)/Profit 
 for the year                        (1,372)      (2,145)    (3,517)        2,738     (10,894)    (8,156) 
-------------------------  ----  -----------  -----------  ---------  -----------  -----------  --------- 
Attributable to: 
Equity holders 
 of the parent                       (1,569)      (2,134)    (3,703)        2,275     (10,882)    (8,607) 
Non -- controlling 
 interests                               197         (11)        186          463         (12)        451 
-------------------------  ----  -----------  -----------  ---------  -----------  -----------  --------- 
                                     (1,372)      (2,145)    (3,517)        2,738     (10,894)    (8,156) 
-------------------------  ----  -----------  -----------  ---------  -----------  -----------  --------- 
Earnings per share 
 - continuing operations 
Basic                         6                              (4.81)p                              (9.55)p 
Diluted                       6                              (4.81)p                              (9.55)p 
-------------------------  ----  -----------  -----------  ---------  -----------  -----------  --------- 
Earnings per share 
 - discontinued 
 operations 
Basic                         6                                0.27p                              (1.28)p 
Diluted                       6                                0.27p                              (1.28)p 
-------------------------  ----  -----------  -----------  ---------  -----------  -----------  --------- 
 

(1) Refer to note 1 for further details.

Consolidated statement of comprehensive income

for the year ended 31 December 2020

 
                                                                                     Restated 
                                                                                          (1) 
                                                                      Year ended   Year ended 
                                                                     31 December  31 December 
                                                                            2020         2019 
                                                                         GBP'000      GBP'000 
-------------------------------------------------------------------  -----------  ----------- 
Loss for the year                                                        (3,517)      (8,156) 
Other comprehensive income/(expense): 
Items that will not be reclassified subsequently to profit or loss 
Exchange differences on translation of overseas subsidiaries               1,033        (716) 
-------------------------------------------------------------------  -----------  ----------- 
Total other comprehensive income/(expense) for the year                    1,033        (716) 
-------------------------------------------------------------------  -----------  ----------- 
Total comprehensive expense for the year                                 (2,484)      (8,872) 
-------------------------------------------------------------------  -----------  ----------- 
Attributable to: 
Equity holders of the parent                                             (2,670)      (9,323) 
Non -- controlling interests                                                 186          451 
-------------------------------------------------------------------  -----------  ----------- 
                                                                         (2,484)      (8,872) 
-------------------------------------------------------------------  -----------  ----------- 
 

(1) Refer to note 1 for further details.

Consolidated statement of financial position

as at 31 December 2020

 
                                                          Restated     Restated 
                                                               (1)          (1) 
                                          31 December  31 December  31 December 
                                                 2020         2019         2018 
                                    Note      GBP'000      GBP'000      GBP'000 
----------------------------------  ----  -----------  -----------  ----------- 
Non -- current assets 
Goodwill                               7       28,563       28,409       34,774 
Other intangible assets                8        6,135        6,763        8,477 
Property, plant and equipment                   1,962        2,563        1,170 
Right-of-use assets                    9        6,237        8,339            - 
Lease receivables                      9          280            -            - 
Deferred tax asset                              1,145          986          979 
----------------------------------  ----  -----------  -----------  ----------- 
Total non -- current assets                    44,322       47,060       45,400 
----------------------------------  ----  -----------  -----------  ----------- 
Current assets 
Trade and other receivables                    24,318       26,838       29,260 
Assets held for sale                                -            -       27,734 
Lease receivables                      9          171            -            - 
Cash and cash equivalents                      11,121        8,236        8,793 
----------------------------------  ----  -----------  -----------  ----------- 
Total current assets                           35,610       35,074       65,787 
----------------------------------  ----  -----------  -----------  ----------- 
Total assets                                   79,932       82,134      111,187 
----------------------------------  ----  -----------  -----------  ----------- 
Current liabilities 
Trade and other payables                      (6,096)      (5,575)      (7,510) 
Liabilities held for sale                           -            -      (4,316) 
Accruals and contract liabilities             (9,890)      (9,084)     (10,640) 
Financial liabilities                 10      (1,912)           22      (2,822) 
Current tax liabilities                4      (1,703)      (4,152)      (1,358) 
Provisions                                          -        (300)        (570) 
Lease liabilities                      9      (2,338)      (1,834)            - 
Deferred tax liability                          (250)        (272)        (323) 
----------------------------------  ----  -----------  -----------  ----------- 
Total current liabilities                    (22,189)     (21,195)     (27,539) 
----------------------------------  ----  -----------  -----------  ----------- 
Non -- current liabilities 
Financial liabilities                 10     (19,675)     (13,868)     (34,934) 
Provisions                                      (412)        (387)         (67) 
Lease liabilities                      9      (5,820)      (7,756)            - 
Deferred tax liability                        (1,090)      (1,036)      (1,281) 
----------------------------------  ----  -----------  -----------  ----------- 
Total non -- current liabilities             (26,997)     (23,047)     (36,282) 
----------------------------------  ----  -----------  -----------  ----------- 
Total liabilities                            (49,186)     (44,242)     (63,821) 
----------------------------------  ----  -----------  -----------  ----------- 
Total net assets                               30,746       37,892       47,366 
----------------------------------  ----  -----------  -----------  ----------- 
Equity 
Ordinary shares                                20,646       20,029       19,778 
Share premium                                     255           46           44 
Other reserves                                  5,461        4,428        5,144 
Retained earnings                               3,942       12,210       21,408 
----------------------------------  ----  -----------  -----------  ----------- 
Equity attributable to the owners 
 of the parent                                 30,304       36,713       46,374 
Non -- controlling interests                      442        1,179          992 
----------------------------------  ----  -----------  -----------  ----------- 
Total equity                                   30,746       37,892       47,366 
----------------------------------  ----  -----------  -----------  ----------- 
 

(1) Refer to note 1 for further details.

Consolidated statement of changes in equity

for the year ended 31 December 2020

 
 
                                                                                    Equity 
                                                                              Attributable 
                                                                                 to owners 
                                      Ordinary    Share     Other   Retained            of  Non-controlling      Total 
                                                         Reserves 
                                        shares  premium       (2)   earnings    the parent        interests     equity 
                                Note   GBP'000  GBP'000   GBP'000    GBP'000       GBP'000          GBP'000    GBP'000 
------------------------------  ----  --------  -------  --------  ---------  ------------  ---------------  --------- 
31 December 2018 (as 
 reported)                              19,778       44     5,144     21,556        46,522              992     47,514 
Impact of restatement 
 at 31 December 2018                         -        -         -      (148)         (148)                -      (148) 
------------------------------  ----  --------  -------  --------  ---------  ------------  ---------------  --------- 
31 December 2018 (as 
 restated) (1)                          19,778       44     5,144     21,408        46,374              992     47,366 
(Loss)/profit for 
 the year 2019 (as 
 reported)                                   -        -         -    (8,007)       (8,007)              451    (7,556) 
Adjustment for 2019                          -        -         -      (600)         (600)                -      (600) 
------------------------------  ----  --------  -------  --------  ---------  ------------  ---------------  --------- 
(Loss)/profit for 
 the year 2019 (as 
 restated) (1)                               -        -         -    (8,607)       (8,607)              451    (8,156) 
Other comprehensive 
 expense                                     -        -     (716)          -         (716)                -      (716) 
Total comprehensive 
 (expense)/income for 
 the year                                    -        -     (716)    (8,607)       (9,323)              451    (8,872) 
Shares issued for 
 cash                                      251        2         -          -           253                -        253 
Share options charge               3         -        -         -        195           195                -        195 
Acquisition of non-controlling 
 interest                                    -        -         -      (252)         (252)             (83)      (335) 
Dividends paid to 
 shareholders                     11         -        -         -      (534)         (534)                -      (534) 
Dividends paid to 
 non-controlling interests                   -        -         -          -             -            (181)      (181) 
------------------------------  ----  --------  -------  --------  ---------  ------------  ---------------  --------- 
31 December 2019 (as 
 restated) (1)                          20,029       46     4,428     12,210        36,713            1,179     37,892 
(Loss)/profit for 
 the year 2020                               -        -         -    (3,703)       (3,703)              186    (3,517) 
Other comprehensive 
 income                                      -        -     1,033          -         1,033                -      1,033 
------------------------------  ----  --------  -------  --------  ---------  ------------  ---------------  --------- 
Total comprehensive 
 income/(expense) for 
 the year                                    -        -     1,033    (3,703)       (2,670)              186    (2,484) 
Shares issued for 
 cash                                        8        -         -        (8)             -                -          - 
Share options credit               3         -        -         -    (1,845)       (1,845)                -    (1,845) 
Acquisition of non-controlling 
 interest                                  609      209         -    (2,712)       (1,894)            (779)    (2,673) 
Dividends paid to                            -        -         -          -             -                -          - 
non-controlling interests                    -        -         -          -             -            (144)      (144) 
------------------------------  ----  --------  -------  --------  ---------  ------------  ---------------  --------- 
31 December 2020                        20,646      255     5,461      3,942        30,304              442     30,746 
------------------------------  ----  --------  -------  --------  ---------  ------------  ---------------  --------- 
 

(1.) Refer to note 1 for further details.

(2) .Includes a credit of GBP3,667,000 (31 December 2019: GBP3,667,000) in the merger reserve, a gain of GBP3,272,000 (31 December 2019: GBP2,239,000) recognised in the translation reserve, and is partially offset by a debit balance of GBP1,478,000 (31 December 2019: GBP1,478,000) in the ESOP reserve. Refer to note 23 for further details.

Consolidated statement of cash flows

for the year ended 31 December 2020

 
                                                                        Year ended   Year ended 
                                                                       31 December  31 December 
                                                                              2020         2019 
                                                                 Note      GBP'000      GBP'000 
---------------------------------------------------------------  ----  -----------  ----------- 
Cash flows from operating activities 
Cash generated from operations                                     12        5,827        5,657 
Finance expenses paid                                                        (563)        (727) 
Finance income received                                                         13            9 
Income taxes paid                                                          (2,285)      (1,345) 
---------------------------------------------------------------  ----  -----------  ----------- 
Net cash generated by operating activities                                   2,992        3,594 
Cash flows from investing activities 
Acquisition of subsidiaries, net of cash acquired                            (597)            - 
Disposal of subsidiaries                                            5           18       24,845 
Payments to acquire non-controlling interest                       10      (1,539)        (335) 
Payments in respect of contingent consideration                    10            -        (648) 
Purchase of property, plant and equipment                                     (87)      (2,024) 
Purchase of intangible assets                                       8      (1,230)      (1,211) 
---------------------------------------------------------------  ----  -----------  ----------- 
Net cash (used in)/generated by investing activities                       (3,435)       20,627 
Cash flows from financing activities 
Proceeds from issue of share capital (net of issue costs)                        -          253 
Proceeds from bank borrowings                                      10        5,000            - 
Repayment of bank borrowings                                       10            -     (20,000) 
Proceeds from government borrowings                                10          806            - 
Bank loan fees paid                                                           (21)        (204) 
Repayment of lease liabilities                                      9      (2,130)      (1,192) 
Dilapidations payments                                                       (300)            - 
Dividends paid to shareholders                                     11            -        (534) 
Dividends paid to non -- controlling interests                               (144)        (518) 
Capital repayment of finance leases                                              -            - 
---------------------------------------------------------------  ----  -----------  ----------- 
Net cash flow generated by/(used in) financing activities                    3,211     (22,195) 
---------------------------------------------------------------  ----  -----------  ----------- 
Net increase in cash, cash equivalents and bank overdrafts                   2,768        2,026 
Cash, cash equivalents and bank overdraft at beginning of year               8,236        6,414 
Effects of exchange rate changes on cash and cash equivalents                  117        (204) 
---------------------------------------------------------------  ----  -----------  ----------- 
Group cash and cash equivalents at the end of the year                      11,121        8,236 
---------------------------------------------------------------  ----  -----------  ----------- 
 

Notes to the consolidated financial statements

for the year ended 31 December 2020

1. Accounting policies

General information

Ebiquity plc (the 'Company') and its subsidiaries (together, the 'Group') exists to help brands optimise return on investment from their marketing spend, working with many of the world's leading advertisers to improve marketing outcomes and enhance business performance. The Group has 19 offices.

The Company is a public limited company, which is listed on the London Stock Exchange's Alternative Investment Market and is limited by shares. The Company is incorporated and domiciled in the UK. The address of its registered office is Chapter House, 16 Brunswick Place, London N1 6DZ.

Basis of preparation

The consolidated financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 ('IFRS') and the applicable legal requirements of the Companies Act 2006.

Prior year restatement

During the year, a misstatement was discovered in the balance sheet of subsidiary Firm Decisions ASJP LLC as at 31 December 2019. This followed an internal review of balance sheet items by the Group Finance team as part of enhanced internal control procedures put in place by the Chief Financial Officer during the last year. The causes of this error were specific to the unit involved and related to the misstatement of accrued income and revenue balances for which process and system improvements have been made to avoid any recurrence. In accordance with IAS 8, the financial statements for 2019 have been restated to reflect this adjustment. The impact was a reduction of GBP600,000 in 2019 Group revenue, a reduction of GBP148,000 in retained earnings brought forward as at 1 January 2019, and a reduction of GBP748,000 in accrued income as at 31 December 2019.

 
                                                   2018        2018      2018      2019        2019      2019 
                                               Reported  Adjustment  Restated  Reported  Adjustment  Restated 
                                               GBP '000    GBP '000  GBP '000  GBP '000    GBP '000  GBP '000 
---------------------------------------------  --------  ----------  --------  --------  ----------  -------- 
Consolidated income statement 
Revenue                                          69,368        (56)    69,312    68,733       (600)    68,133 
 
Consolidated statement of financial position 
Trade and other receivables                      29,408       (148)    29,260    27,586       (748)    26,838 
Retained earnings                                21,556       (148)    21,408    12,958       (748)    12,210 
---------------------------------------------  --------  ----------  --------  --------  ----------  -------- 
 

Going concern

The financial statements have been prepared on a going concern basis. The Group meets its day-to-day working capital requirements through its cash reserves and borrowings, described in note 10 to the financial statements. As at 31 December 2020, the Group had cash balances of GBP11,121,000 and undrawn bank facilities available of GBP5,000,000 and was cash generative and within its banking covenants.

The lenders, Barclays and NatWest Bank, have agreed to covenant waivers and modifications where required in order to negate the risk of any future covenant breaches.

The existing covenants remained in place for the 12 months to March 2020 and June 2020 and were achieved. In response to the disruption caused by the Covid-19 pandemic, modified covenants were agreed with the lenders in May 2020 which applied from July 2020 to 30 November 2021. These require the Group to maintain minimum liquidity of at least GBP5 million at the end of every month during that period. In March 2021, a further covenant amendment was agreed with the lenders. With effect from September 2021, the minimum liquidity covenant will increase to GBP7.0 million and will be in place until June 2022. In addition, with effect from September 2021 an interest cover covenant will be reintroduced at > 4.0 and an adjusted leverage covenant will also be reintroduced initially at < 4.0, increasing to < 4.25 in December 2021 and to < 4.5 in March 2022, then reducing to < 3.5 in June 2022. The original covenants which were in force until June 2020 will apply again from September 2022 onwards.

In assessing the going concern status of the Group and Company, the Directors have considered the Group's forecasts and projections, taking account of reasonably possible changes in trading performance and the Group's cash flows, liquidity and bank facilities. Specifically, the Directors have prepared a model to forecast covenant compliance and liquidity to 31 December 2022 that includes a base case and scenarios to form a severe but plausible downside case.

The base case assumes growth in revenue and EBITDA when compared to the outturn of FY20 and assumes that trading will recover to 2019 levels by 31 December 2022. The severe but plausible case assumes a downside adjustment to revenue of 7%, offset by mitigating factors within the control of the Directors. Under both of these cases, there is headroom on covenant compliance and liquidity throughout the going concern period.

The Directors have also considered a scenario that leads to a breach in covenants; a form of reverse stress test. Actual trading in FY21 and the proportion of secured revenue at this time, is ahead of last year and whilst there is inherent uncertainty in trading for the second half of FY21 and into FY22, trading levels would need to significantly reduce to a level that is consistent with FY20 for there to be a breach in covenants. This scenario is not deemed plausible by the Directors.

In addition, the downside assumptions that are applied to the base case are different from those modelled at the half year. The Directors are satisfied that based on the current trading performance of the Group and Company, the proven ability of the Group and Company to work remotely and still serve clients during the pandemic and the current vaccine roll outs, the prior downside assumptions are no longer plausible.

The Directors consider that the Group and Company will have sufficient liquidity within existing bank facilities, totalling GBP24,000,000 to meet its obligations during the next 12 months and hence consider it appropriate to prepare the financial statements on a going concern basis.

The financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities at fair value through profit or loss.

The consolidated financial statements are presented in pounds sterling and rounded to the nearest thousand.

The principal accounting policies adopted in these consolidated financial statements are set out below. These policies have been consistently applied to all periods presented, unless otherwise stated.

On 13 February 2018, the Group agreed to sell its Advertising Intelligence ('AdIntel') business to Nielsen Media Research Limited ('Nielsen'), a subsidiary of Nielsen Holdings plc; the transaction was approved as at 31 December 2018 and completion took place on 2 January 2019. On 19 March 2018, the Group entered into an agreement to sell the business assets of its Reputation division; completion took place on 31 March 2018. Collectively, these divisions formed the Intel segment. Accordingly, profit on disposal arising in the prior year has been presented within discontinued operations in the income statement.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. The results of each subsidiary are included from the date that control is transferred to the Group until the date that control ceases.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those used by the Group. All intra -- group transactions, balances, income and expenses are eliminated on consolidation.

Non -- controlling interests represent the portion of the results and net assets in subsidiaries that is not held by the Group.

Revenue recognition

Revenue is recognised in accordance with IFRS 15 'Revenue from Contracts with Customers'. Under IFRS 15 an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. This core principle is delivered in a five-step model:

   --   Identify the contract(s) with a customer 
   --   Identify the performance obligation(s) in the contract 
   --   Determine the transaction price 
   --   Allocate the transaction price to the performance obligations in the contract 
   --   Recognise revenue when (or as) the entity satisfies a performance obligation. 

Revenue from providing services is recognised in the accounting period in which the services are rendered. For fixed-price contracts, revenue is recognised based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided because the customer receives and uses the benefits simultaneously. This is determined based on the actual labour hours spent relative to the total expected labour hours.

Estimates of revenues, costs or extent of progress toward completion are revised if circumstances change. Any resulting increases or decreases in estimated revenues or costs are reflected in profit or loss in the period in which the circumstances that give rise to the revision become known by management.

In the case of fixed-price contracts, the customer pays the fixed amount based on a payment schedule. If the services rendered by the Company exceed the payment, a contract asset is recognised. If the payments exceed the services rendered, a contract liability is recognised.

Highlighted items

Highlighted items comprise non -- cash charges and non -- recurring items which are highlighted in the consolidated income statement as separate disclosure is considered by the Directors to be relevant in understanding the underlying performance of the business. The non -- cash charges include share option charges and amortisation of purchased intangibles.

The non -- recurring items include the costs associated with potential acquisitions (where formal discussion is undertaken), completed acquisitions and disposals, and their subsequent integration into/separation from the Group, adjustments to the estimates of contingent consideration on acquired entities, asset impairment charges, management restructuring and other significant one -- off items. Costs associated with ongoing market landscaping, acquisition identification and early stage discussions with acquisition targets are reported in underlying administrative expenses.

Critical accounting estimates and judgements

In preparing the consolidated financial statements, the Directors have made certain estimates and judgements relating to the reporting of results of operations and the financial position of the Group. Actual results may significantly differ from those estimates, often as a result of the need to make assumptions about matters which are uncertain. The estimates and judgements discussed below are considered by the Directors to be those that have a critical accounting impact to the Group's financial statements.

Critical accounting estimates include the terminal growth rate used in impairment assessments, inputs to share option accounting fair value models and amounts to capitalise as intangible assets. These estimates are reached with reference to historical experience, supporting detailed analysis and, in the case of impairment assessments and share option accounting, external economic factors.

Critical accounting judgements include the treatment of events after the reporting period as adjusting or non -- adjusting and the determination of segments for segmental reporting, based on the reports reviewed by the Executive Directors that are used to make strategic decisions. These judgements are determined at a Board level based on the status of strategic initiatives of the Group.

Carrying value of goodwill and other intangible assets

Impairment testing requires management to estimate the value -- in -- use of the cash -- generating units to which goodwill and other intangible assets have been allocated. The value -- in-use calculation requires estimation of future cash flows expected to arise from the cash -- generating unit and the application of a suitable discount rate in order to calculate present value. The sensitivity around the selection of particular assumptions including growth forecasts and the pre -- tax discount rate used in management's cash flow projections could significantly affect the Group's impairment evaluation and therefore the Group's reported assets and results.

Further details, including a sensitivity analysis, are included in notes 7 and 8 to the financial statements.

Contingent consideration

The Group has recorded liabilities for contingent consideration on acquisitions made in the current and prior periods. The calculation of the contingent consideration liability requires judgements to be made regarding the forecast future performance of these businesses for the earn -- out period. Any changes to the fair value of the contingent consideration after the measurement period are recognised in the income statement within administrative expenses as a highlighted item.

Taxation

The Group is subject to income taxes in all the territories in which it operates, and judgement and estimates of future profitability are required to determine the Group's deferred tax position. If the final tax outcome is different to that assumed, resulting changes will be reflected in the income statement, unless the tax relates to an item charged to equity, in which case the changes in the tax estimates will also be reflected in equity. The Group believes that its accruals for tax liabilities are adequate for all open audit years based on its assessment of many factors including past experience and interpretations of tax law. This assessment relies on estimates and assumptions and may involve a series of complex judgements about future events. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact income tax expense in the period in which such determination is made.

Provisions

The Group provides for certain costs of reorganisation that has occurred due to the Group's acquisition and disposal activity. When the final amount payable is uncertain, these are classified as provisions. These provisions are based on the best estimates of management.

Adoption of new standards and interpretations

The Group has applied the following standards and amendments for the first time for the annual reporting period commencing 1 January 2020:

   --   Definition of Material - amendments to IAS 1 and IAS 8 
   --   Definition of a Business - amendments to IFRS 3 
   --   Interest Rate Benchmark Reform - amendments to IFRS 9, IAS 9 and IFRS 7 
   --   Revised Conceptual Framework for Financial Reporting 

The amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.

The following new standard has been published that is mandatory to the Group's future accounting periods but has not been adopted early in these financial statements:

   --   Annual Improvements to IFRS Standards 2018-2020 Cycle effective on or after 1 January 2022. 

The adoption of the standard listing above is not expected to significantly affect future periods.

2. Segmental Reporting

In accordance with IFRS 8, the Group's operating segments are based on the reports reviewed by the Executive Directors that are used to make strategic decisions.

Certain operating segments have been aggregated to form two reportable segments: Media and Analytics & Tech:

   --   Media includes our Media Performance, Media Management and Contract Compliance services; and 
   --   Analytics & Tech consists of our Advanced Analytics, MarTech and AdTech services. 

The Executive Directors are the Group's chief operating decision -- maker. They assess the performance of the operating segments based on operating profit before highlighted items. This measurement basis excludes the effects of non -- recurring expenditure from the operating segments such as restructuring costs and purchased intangible amortisation. The measure also excludes the effects of equity -- settled share -- based payments. Interest income and expenditure are not allocated to segments, as this type of activity is driven by the central treasury function, which manages the cash position of the Group.

The segment information provided to the Executive Directors for the reportable segments for the year ended 31 December 2020 is as follows:

Year ended/As at 31 December 2020

 
                                                            Analytics 
                                                                    &  Reportable 
                                                     Media       Tech    segments  Unallocated    Total 
                                                   GBP'000    GBP'000     GBP'000      GBP'000  GBP'000 
-------------------------------------------------  -------  ---------  ----------  -----------  ------- 
Revenue                                             46,042      9,865      55,907            -   55,907 
Operating profit/(loss) before highlighted items     6,770      (692)       6,078      (6,412)    (334) 
Total assets                                        67,659      9,838      77,497        2,435   79,932 
-------------------------------------------------  -------  ---------  ----------  -----------  ------- 
 

Unsatisfied long-term contracts

The following table shows unsatisfied performance obligations results from long-term contracts:

 
                                                                                               Year ended   Year ended 
                                                                                              31 December  31 December 
                                                                                                     2020         2019 
                                                                                                  GBP'000      GBP'000 
--------------------------------------------------------------------------------------------  -----------  ----------- 
Aggregate amount of the transaction price allocated to long-term contracts that are 
 partially 
 or fully unsatisfied as at 31 December 2020                                                          866          304 
--------------------------------------------------------------------------------------------  -----------  ----------- 
 

It is expected that 94% of the transaction price allocated to the unsatisfied contracts as of 31 December 2020 will be recognised during the next reporting period (31 December 2019: 97%); the remaining 6% will be recognised in the 2022 financial year (31 December 2019: 3% to be recognised in 2021).

Significant changes in contract assets and liabilities

Contract assets have decreased from GBP8,618,000 to GBP6,563,000 and contract liabilities have decreased from GBP4,635,000 to GBP4,498,000 from 31 December 2019 to 31 December 2020. The reduced contract assets is a result of the reduction in revenue year on year.

Year ended/As at 31 December 2019

 
                                                   Restated 
                                                   ---------------------------------------------------- 
                                                            Analytics 
                                                             &         Reportable 
                                                   Media    Tech       segments    Unallocated  Total 
                                                   GBP'000  GBP'000    GBP'000     GBP'000      GBP'000 
-------------------------------------------------  -------  ---------  ----------  -----------  ------- 
Revenue                                            53,985   14,148     68,133      -            68,133 
Operating profit/(loss) before highlighted items   11,245   966        12,211      (6,644)      5,567 
Total assets                                       68,634   11,581     80,215      1,919        82,134 
-------------------------------------------------  -------  ---------  ----------  -----------  ------- 
 

A reconciliation of segment operating profit before highlighted items to total profit before tax is provided below:

 
                                                                               Restated 
                                                                Year ended   Year ended 
                                                               31 December  31 December 
                                                                      2020         2019 
                                                                   GBP'000      GBP'000 
-------------------------------------------------------------  -----------  ----------- 
Reportable segment operating profit before highlighted items         6,078       12,211 
Unallocated (costs)/income(1) : 
Staff costs                                                        (3,480)      (3,428) 
Property costs                                                     (1,595)      (1,513) 
Exchange rate movements                                                181        (208) 
Other administrative expenses                                      (1,518)      (1,495) 
-------------------------------------------------------------  -----------  ----------- 
Operating (loss)/profit before highlighted items                     (334)        5,567 
Highlighted items (note 3)                                         (2,541)     (10,330) 
-------------------------------------------------------------  -----------  ----------- 
Operating loss                                                     (2,875)      (4,763) 
Net finance costs (2)                                              (1,012)        (898) 
-------------------------------------------------------------  -----------  ----------- 
Loss before tax                                                    (3,887)      (5,661) 
-------------------------------------------------------------  -----------  ----------- 
 

(1.) Unallocated (costs)/income comprise central costs that are not considered attributable to the segments.

Net finance costs in the current year include GBP137,000 relating to foreign exchange movements on intercompany loan balances. Previously this was included as an administrative expense, however it was considered appropriate to reclassify this in the current year in accordance with IAS 12.

A reconciliation of segment total assets to total consolidated assets is provided below:

 
                                                       Restated 
                                       31 December  31 December 
                                              2020         2019 
                                           GBP'000      GBP'000 
-------------------------------------  -----------  ----------- 
Total assets for reportable segments        77,497       80,215 
Unallocated amounts: 
Other intangible assets                        388          642 
Other receivables                            1,291          868 
Cash and cash equivalents                      420          332 
Deferred tax asset                             336           77 
-------------------------------------  -----------  ----------- 
Total assets                                79,932       82,134 
-------------------------------------  -----------  ----------- 
 

The table below presents revenue and non -- current assets by geographical location:

 
                                                Restated 
                       Year ended/As at     Year ended/As at 
                        31 December 2020     31 December 2019 
                      -------------------  ------------------- 
                        Revenue              Revenue 
                             by                   by 
                       location    Non --   location    Non -- 
                             of   current         of   current 
                      customers    assets  customers    assets 
                        GBP'000   GBP'000    GBP'000   GBP'000 
--------------------  ---------  --------  ---------  -------- 
United Kingdom           29,083    21,684     33,176    27,802 
Rest of Europe           15,999    12,424     18,783     7,402 
North America             4,671     2,721      8,351     3,416 
Rest of world             6,154     6,348      7,823     7,454 
--------------------  ---------  --------  ---------  -------- 
                         55,907    43,177     68,133    46,074 
Deferred tax assets           -     1,145          -       986 
--------------------  ---------  --------  ---------  -------- 
Total                    55,907    44,322     68,133    47,060 
--------------------  ---------  --------  ---------  -------- 
 

No single customer (or group of related customers) contributes 10% or more of revenue.

3. Highlighted items

Highlighted items comprise items which are highlighted in the income statement because separate disclosure is considered relevant in understanding the underlying performance of the business.

 
 
                                                               Year ended                 Year ended 
                                                             31 December 2020           31 December 2019 
                                                        -------------------------  ------------------------- 
                                                                  Non --                     Non -- 
                                                           Cash     cash    Total     Cash     cash    Total 
                                                        GBP'000  GBP'000  GBP'000  GBP'000  GBP'000  GBP'000 
------------------------------------------------------  -------  -------  -------  -------  -------  ------- 
Administrative expenses 
Share option (credit)/charge                               (61)  (1,845)  (1,906)     (78)      195      117 
Amortisation of purchased intangibles                         -    1,122    1,122        -    1,169    1,169 
Impairment of goodwill                                        -      817      817        -    6,751    6,751 
Severance and reorganisation costs                        1,194      315    1,509    1,333        -    1,333 
Acquisition, integration and strategic costs/(income)       809      190      999      998     (38)      960 
------------------------------------------------------  -------  -------  -------  -------  -------  ------- 
Total highlighted items before tax                        1,942      599    2,541    2,253    8,077   10,330 
Taxation (credit)/charge                                  (289)      113    (176)    (536)       82    (454) 
------------------------------------------------------  -------  -------  -------  -------  -------  ------- 
Total highlighted items after tax 
 - continuing operations                                  1,653      712    2,365    1,717    8,159    9,876 
 
Highlighted items - discontinued operations               (220)        -    (220)    2,521  (1,503)    1,018 
------------------------------------------------------  -------  -------  -------  -------  -------  ------- 
Total highlighted items                                   1,433      712    2,145    4,238    6,656   10,894 
------------------------------------------------------  -------  -------  -------  -------  -------  ------- 
 

In the current year, a non -- cash IFRS 2 credit of GBP1,845,000 (31 December 2019: charge of GBP195,000) was recorded. Separate disclosure is considered relevant to isolate charges and credits which are subject to volatility as a result of non-trading factors.

Amortisation of purchased intangibles relates to acquisitions made in the current financial year of GBPnil and to acquisitions made in prior years of GBP1,122,000 (31 December 2019: GBPnil in the current financial year and GBP1,169,000 in prior years). Separate disclosure is considered relevant because amortisation of purchased intangibles has no correlation to underlying profitability of the Group.

Impairment of goodwill and intangibles of GBP817,000 (2019: GBP6,751,000) has been recognised in the year. This is in relation to the impairment of goodwill in Digital Balance Australia Pty Limited. The impairment was determined by the excess of the carrying value of goodwill and purchased intangibles over and above the calculated value-in-use.

Total severance and reorganisation costs of GBP1,509,000 (31 December 2019: GBP1,333,000) were recognised during the year, relating to severances in the UK, the US, Germany, Australia and France as part of management restructuring in those countries. Separate disclosure is considered relevant as these charges are non-recurring and not reflective of the underlying operating costs of the business.

Total acquisition, integration and strategic costs of GBP999,000 (31 December 2019: GBP960,000) were recognised during the year, predominantly relating to the adjustment to the fair value of contingent consideration by GBP791,000 predominantly arising in relation to the upward revision of the amounts payable in relation to the Ebiquity Marsh Limited acquisition in line with the latest actuals. GBP80,000 was incurred in relation to the loan covenant amendments. Costs of GBP72,000 have been recognised in relation to the Chicago sublease arrangement. Costs of GBP56,000 were also recognised in relation to the acquisitions of Digital Decisions B.V. and the minority buyout in Ebiquity Italy Media Advisor S.r.l., Ebiquity Russia Limited and Ebiquity Russia OOO which completed in the year; see note 13 for further details. Separate disclosure is considered relevant as these charges are non-recurring and not reflective of the underlying operating costs of the business.

Current tax arising on the highlighted items is included as a cash item, while deferred tax on highlighted items is included as a non -- cash item. Refer to note 4 for more detail.

Highlighted items on discontinued operations in the current year comprise the overprovision of prior year tax on the profit on disposal of the AdIntel business of GBP220,000 due to information now known. Highlighted items on discontinued operations in the prior year comprise the profits on disposal of the AdIntel and the Reputation business respectively of GBP1,408,000 and GBP36,000 and the tax charge arising thereon of GBP2,462,000.

As at 31 December 2020, GBP1,314,000 of the GBP1,942,000 cash highlighted items had been settled (31 December 2019: GBP1,526,000 of the GBP2,254,000 cash highlighted items had been settled).

4. Taxation charge/(credit)

 
 
                                                  Year ended                         Year ended 
                                                31 December 2020                   31 December 2019 
                                       ---------------------------------  --------------------------------- 
                                            Before                             Before 
                                       highlighted  Highlighted           highlighted  Highlighted 
                                             items        items    Total        items        items    Total 
                                           GBP'000      GBP'000  GBP'000      GBP'000      GBP'000  GBP'000 
-------------------------------------  -----------  -----------  -------  -----------  -----------  ------- 
UK tax 
Current year                                  (20)         (82)    (102)          298        (383)     (85) 
Adjustment in respect of prior years         (309)            -    (309)          494            -      494 
-------------------------------------  -----------  -----------  -------  -----------  -----------  ------- 
                                             (329)         (82)    (411)          792        (383)      409 
Foreign tax 
Current year                                   686        (207)      479        1,404        (153)    1,251 
Adjustment in respect of prior years          (78)            -     (78)          120            -      120 
-------------------------------------  -----------  -----------  -------  -----------  -----------  ------- 
                                               608        (207)      401        1,524        (153)    1,371 
-------------------------------------  -----------  -----------  -------  -----------  -----------  ------- 
Total current tax                              279        (289)     (10)        2,316        (536)    1,780 
-------------------------------------  -----------  -----------  -------  -----------  -----------  ------- 
Deferred tax 
Origination and reversal of 
temporary differences                        (186)          113     (73)        (295)           82    (213) 
Adjustment in respect of prior years          (67)            -     (67)         (90)            -     (90) 
-------------------------------------  -----------  -----------  -------  -----------  -----------  ------- 
Total tax charge/(credit)                       26        (176)    (150)        1,931        (454)    1,477 
-------------------------------------  -----------  -----------  -------  -----------  -----------  ------- 
 

The difference between tax as charged in the financial statements and tax at the nominal rate is explained below:

 
                                                                       Restated 
                                                        Year ended   Year ended 
                                                       31 December  31 December 
                                                              2020         2019 
                                                           GBP'000      GBP'000 
-----------------------------------------------------  -----------  ----------- 
Loss before tax                                            (3,887)      (5,661) 
-----------------------------------------------------  -----------  ----------- 
Corporation tax at 19.00% (31 December 2019: 19.00%)         (739)      (1,076) 
Non -- deductible taxable expenses                           1,605        1,253 
Overseas tax rate differential                                 117          361 
Overseas(gains)/losses not recognised                        (460)          149 
Losses utilised not previously recognised                        1          266 
Adjustment in respect of prior years                         (674)          524 
-----------------------------------------------------  -----------  ----------- 
Total tax (credit)/charge                                    (150)        1,477 
-----------------------------------------------------  -----------  ----------- 
 

Following the Budget on 11 March 2020, the corporation tax rate effective from 1 April 2020 and 1 April 2021 will remain at 19%. This supersedes the announcement on 6 September 2016 which detailed a reduction to 17% from 1 April 2020. The Budget 2021 detailed an increase in the corporation tax from 1 April 2023 to 25%, however this has not yet been substantively enacted.

The table below shows a reconciliation of the current tax liability for each year end:

 
                                                   GBP'000 
-------------------------------------------------  ------- 
At 1 January 2019                                    1,358 
Corporation tax payments                           (1,499) 
Corporation tax refunds                                151 
Under -- provision in relation to prior years          614 
Provision for the year ended 31 December 2019(1)     3,629 
Foreign exchange                                     (101) 
-------------------------------------------------  ------- 
At 31 December 2019                                  4,152 
Corporation tax payments                           (2,476) 
Corporation tax refunds                                191 
Withholding tax                                       (25) 
Under -- provision in relation to prior years        (220) 
Provision for the year ended 31 December 2020(1)      (10) 
Foreign exchange                                        91 
-------------------------------------------------  ------- 
At 31 December 2020                                  1,703 
-------------------------------------------------  ------- 
 

(1) The provision for the current year includes an overprovision of tax relating to the prior year of GBP220,000 in relation to the discontinued operation (31 December 2019: a tax charge of GBP2,462,000 in relation to the discontinued operation on the profit on disposal).

5. Discontinued operations

On 12 February 2018, the Group agreed to dispose of the AdIntel business to Nielsen for gross consideration of GBP26,000,000. This disposal was completed on 2 January 2019. The gross consideration was dependent upon a working capital target position at the date of completion. The working capital acquired by Nielsen was below this target and a resulting repayment was made to Nielsen of GBP1,155,000 on 31 October 2019; net consideration was therefore GBP24,845,000. The results of this division have been presented within discontinued operations as appropriate.

On 19 March 2018, the Group entered into an agreement to sell the business assets of its Reputation division to Echo Research Holdings Limited. Completion took place on 31 March 2018. The consideration payable was dependent upon the revenue performance of the business during the 12 months following completion. The consideration resulting was GBP36,000, half of which was paid in the prior year and the balance was paid in the current year. The results of this division have been presented within discontinued operations as appropriate.

The financial performance and cash flow information presented below for Intel reflects the overprovision of tax on the AdIntel sale in the year ended 31 December 2020, whilst the comparative information shows the profit on disposal and tax charge thereon recognised in 2019 on the sale completing on 2 January 2019. The financial performance and cash flow information presented below for Reputation reflects the contingent consideration receivable recognised in 2019.

The table below summarises the income statement for the discontinued business units for both the current and the prior year:

 
 
                                                          Year ended                    Year ended 
                                                       31 December 2020              31 December 2019 
                                                 ----------------------------  ---------------------------- 
                                                 AdIntel  Reputation    Total  AdIntel  Reputation    Total 
                                                 GBP'000     GBP'000  GBP'000  GBP'000     GBP'000  GBP'000 
-----------------------------------------------  -------  ----------  -------  -------  ----------  ------- 
Revenue                                                -           -        -        -           -        - 
Cost of sales                                          -           -        -        -           -        - 
-----------------------------------------------  -------  ----------  -------  -------  ----------  ------- 
Gross result                                           -           -        -        -           -        - 
Administrative expenses                                -           -        -        -           -        - 
Impairment of asset held for sale                      -           -        -        -           -        - 
-----------------------------------------------  -------  ----------  -------  -------  ----------  ------- 
Operating result                                       -           -        -        -           -        - 
Highlighted items                                      -           -        -  (1,408)        (36)  (1,444) 
-----------------------------------------------  -------  ----------  -------  -------  ----------  ------- 
(Loss) before tax                                      -           -        -  (1,408)        (36)  (1,444) 
Tax                                                (220)           -    (220)    2,455           7    2,462 
-----------------------------------------------  -------  ----------  -------  -------  ----------  ------- 
 
Net profit/(loss) from discontinued operations       220           -      220  (1,047)          29  (1,018) 
-----------------------------------------------  -------  ----------  -------  -------  ----------  ------- 
 

Below is a table summarising the cash flows from continuing and discontinued operations:

 
                                                                                Year ended   Year ended 
                                                                               31 December  31 December 
                                                                                      2020         2019 
                                                                                   GBP'000      GBP'000 
-----------------------------------------------------------------------------  -----------  ----------- 
Cash generated from operations - continuing operations                               2,992        3,594 
Cash generated from operations - discontinued operations                                 -            - 
-----------------------------------------------------------------------------  -----------  ----------- 
Total cash generated from operations                                                 2,992        3,594 
-----------------------------------------------------------------------------  -----------  ----------- 
Cash used in investment activities - continuing operations                         (3,453)      (4,218) 
Cash generated by/(used in) investment activities - discontinued operations             18       24,845 
-----------------------------------------------------------------------------  -----------  ----------- 
Total cash (used in)/generated by investment activities                            (3,435)       20,627 
-----------------------------------------------------------------------------  -----------  ----------- 
Cash generated by/(used in) financing activities - continuing operations             3,211     (22,195) 
Cash generated by financing activities - discontinued operations                         -            - 
-----------------------------------------------------------------------------  -----------  ----------- 
Total cash generated by/(used in) financing activities                               3,211     (22,195) 
-----------------------------------------------------------------------------  -----------  ----------- 
Net increase/(decrease) in cash and cash equivalents - continuing operations         2,750     (22,819) 
Net increase in cash and cash equivalents - discontinued operations                     18       24,845 
-----------------------------------------------------------------------------  -----------  ----------- 
Net increase in cash and cash equivalents                                            2,768        2,026 
-----------------------------------------------------------------------------  -----------  ----------- 
 

Below is a table summarising the details of the sale of the divisions:

 
 
                                                        Year ended                    Year ended 
                                                     31 December 2020              31 December 2019 
                                               ----------------------------  ---------------------------- 
                                               AdIntel  Reputation    Total  AdIntel  Reputation    Total 
                                               GBP'000     GBP'000  GBP'000  GBP'000     GBP'000  GBP'000 
---------------------------------------------  -------  ----------  -------  -------  ----------  ------- 
Cash received or receivable: 
Cash                                                 -           -        -   26,000          36   26,036 
Decrease of consideration                            -           -        -  (1,155)           -  (1,155) 
---------------------------------------------  -------  ----------  -------  -------  ----------  ------- 
Total disposal consideration                         -           -        -   24,845          36   24,881 
Carrying amount of net assets sold                   -           -        -   23,060           -   23,060 
Costs to sell - current year                         -           -        -       95           -       95 
Reclassification of foreign 
 currency translation reserve                        -           -        -      282           -      282 
---------------------------------------------  -------  ----------  -------  -------  ----------  ------- 
Total                                                -           -        -   23,437           -   23,437 
---------------------------------------------  -------  ----------  -------  -------  ----------  ------- 
Gain on sale before income tax                       -           -        -    1,408          36    1,444 
Income tax credit/(charge) on gain (1)             220           -      220  (2,455)         (7)  (2,462) 
---------------------------------------------  -------  ----------  -------  -------  ----------  ------- 
Gain/(loss) on sale after income tax               220           -      220  (1,047)          29  (1,018) 
Costs to sell - prior year                           -           -        -  (3,176)           -  (3,176) 
---------------------------------------------  -------  ----------  -------  -------  ----------  ------- 
 
Gain/(loss) on sale after income tax - total       220           -      220  (4,223)          29  (4,194) 
---------------------------------------------  -------  ----------  -------  -------  ----------  ------- 
 

(1.) The income tax charge on the gain on disposal is GBP2,462,000 and exceeds the gain on sale of GBP1,444,000 due primarily to the difference between accounting base costs and tax base costs for the assets sold. Certain goodwill and intangible balances recognised for accounting purposes do not have base costs for corporation tax purposes, therefore these items are not able to shield the gain from a tax perspective.

6. Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

 
                                                                                               Restated 
                                                       Year ended                             Year ended 
                                                    31 December 2020                       31 December 2019 
                                          ------------------------------------  -------------------------------------- 
                                          Continuing  Discontinued       Total   Continuing  Discontinued        Total 
                                             GBP'000       GBP'000     GBP'000      GBP'000       GBP'000      GBP'000 
----------------------------------------  ----------  ------------  ----------  -----------  ------------  ----------- 
Earnings for the purpose of basic 
earnings 
per share, being net (loss)/profit 
 attributable to equity holders of the 
 parent                                      (3,923)           220     (3,703)      (7,589)       (1,018)      (8,607) 
Adjustments: 
Impact of highlighted items (net of 
 tax)(1)                                       2,354         (220)       2,134        9,864         1,018       10,882 
----------------------------------------  ----------  ------------  ----------  -----------  ------------  ----------- 
Earnings for the purpose of underlying 
 earnings per share                          (1,569)             -     (1,569)        2,275             -        2,275 
Number of shares: 
Weighted average number 
of shares during the year 
- basic                                   81,571,242    81,571,242  81,571,242   79,490,174    79,490,174   79,490,174 
- dilutive effect of share options           528,254       528,254     528,254    1,155,106     1,155,106    1,155,106 
----------------------------------------  ----------  ------------  ----------  -----------  ------------  ----------- 
- diluted                                 82,099,496    82,099,496  82,099,496   80,645,280    80,645,280   80,645,280 
----------------------------------------  ----------  ------------  ----------  -----------  ------------  ----------- 
Basic earnings per share                     (4.81)p         0.27p     (4.54)p      (9.55)p       (1.28)p     (10.83)p 
Diluted earnings per share                   (4.81)p         0.27p     (4.54)p      (9.55)p       (1.28)p     (10.83)p 
 
Underlying basic earnings per share          (1.92)p             -     (1.92)p        2.86p             -        2.86p 
 
Underlying diluted earnings per share        (1.92)p             -     (1.92)p        2.82p             -        2.82p 
----------------------------------------  ----------  ------------  ----------  -----------  ------------  ----------- 
 

(1.) Highlighted items attributable to equity holders of the parent (see note 3), stated net of their total tax impact.

7. Goodwill

 
                               GBP'000 
-----------------------------  ------- 
Cost 
At 1 January 2019               40,510 
Disposals (1)                  (3,129) 
Foreign exchange differences     (632) 
-----------------------------  ------- 
At 31 December 2019             36,749 
Acquisitions (2)                   484 
Foreign exchange differences       518 
-----------------------------  ------- 
At 31 December 2020             37,751 
-----------------------------  ------- 
Accumulated impairment 
At 1 January 2019              (5,736) 
Impairment (3)                 (5,989) 
Disposals (1)                    3,129 
Foreign exchange differences       256 
-----------------------------  ------- 
At 31 December 2019            (8,340) 
Impairment (4)                   (817) 
Foreign exchange differences      (31) 
-----------------------------  ------- 
At 31 December 2020            (9,188) 
-----------------------------  ------- 
Net book value 
At 31 December 2020             28,563 
-----------------------------  ------- 
At 31 December 2019             28,409 
-----------------------------  ------- 
 

(1.) The disposal in the prior year relates to the write off of the goodwill cost and accumulated amortisation in relation to the Reputation division which was sold in the prior year.

(2.) Goodwill of GBP484,000 has been recognised on the acquisition of Digital Decisions BV in the year.

(3.) An impairment of GBP5,082,000 was recognised in the prior year in relation to goodwill held in Stratigent LLC so that the carrying value was adjusted down to GBPnil on the decision being taken to wind down this division. A further impairment of GBP907,000 was recognised for goodwill held in Digital Balance which equates to the downward revision of the contingent consideration payable.

(4.) An impairment of GBP817,000 has been recognised in the current year relating to the goodwill held in Digital Balance Australia Pty Limited so that the carrying value is in line with the value-in-use.

Goodwill has been allocated to the following segments:

 
                   31 December  31 December 
                          2020         2019 
                       GBP'000      GBP'000 
-----------------  -----------  ----------- 
Media                   26,855       25,905 
Analytics & Tech         1,708        2,504 
-----------------  -----------  ----------- 
                        28,563       28,409 
-----------------  -----------  ----------- 
 

The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill may be potentially impaired. Goodwill is allocated to the Group's cash -- generating units ('CGUs') in order to carry out impairment tests. The Group's remaining carrying value of goodwill by CGU at 31 December was as follows:

 
                                                      31 December  31 December 
                                                             2020         2019 
Cash -- generating unit            Reporting segment      GBP'000      GBP'000 
---------------------------  -----------------------  -----------  ----------- 
Media UK and International                     Media        9,262        9,241 
Media Germany                                  Media        4,327        4,319 
Media Value Group             Media/Analytics & Tech        3,187        3,042 
FirmDecisions                                  Media        2,981        2,981 
Media Australia                                Media        2,422        2,289 
China                                          Media        2,256        2,150 
Effectiveness                       Analytics & Tech        1,678        1,678 
Media America                                  Media          604          604 
Media France                                   Media          571          560 
Digital Decisions                              Media          507            - 
Media Italy                                    Media          401          382 
Russia                                         Media          337          337 
Digital Balance                     Analytics & Tech           30          826 
                                                           28,563       28,409 
 ---------------------------------------------------  -----------  ----------- 
 

The impairment test involves comparing the carrying value of the CGU to which the goodwill has been allocated to the recoverable amount. The recoverable amount of all CGUs has been determined based on value-in-use calculations.

Under IFRS, an impairment charge is required for goodwill when the carrying amount exceeds the recoverable amount, defined as the higher of fair value less costs to sell and value-in-use.

An impairment of GBP817,000 has been recognised in the year ended 31 December 2020 in relation to Digital Balance Australia Pty Limited, in order to write down the goodwill carrying value in line with the value-in-use.

Value-in-use calculations

The key assumptions used in management's value-in-use calculations are budgeted operating profit, pre -- tax discount rate and the long -- term growth rate.

Budgeted operating profit assumptions

To calculate future expected cash flows, management has taken the Board-approved budgeted operating profit ('EBIT') for each of the CGUs for the 2021 financial year.

For the 2022 and 2023 financial years, the forecast EBIT is as per management and market expectations. The forecast 2023 balances are taken to perpetuity in the model. The forecast for 2022 and 2023 uses certain assumptions to forecast revenue and operating costs within the Group's operating segments beyond the 2021 budget.

Discount rate assumptions

The Directors estimate discount rates using rates that reflect current market assessments of the time value of money and risk specific to the CGUs. The three -- year pre-tax cash flow forecasts have been discounted at between 10% and 11% (31 December 2019: between 7.0% and 12.0%).

Growth rate assumptions

Cash flows beyond the three -- year period are extrapolated at a rate of 2.00% (31 December 2019: 2.25%) for all CGUs with the exception of China where a rate of 2.60% has been applied, which does not exceed the long -- term average growth rate in any of the markets in which the Group operates.

The excess of the value-in-use to the goodwill carrying values for each CGU gives the level of headroom in each CGU. The estimated recoverable amounts of the Group's operations in all CGUs significantly exceed their carrying values, with the exception of the China and Media America CGUs.

Sensitivity analysis

The Group's calculations of value-in-use for its respective CGUs are sensitive to a number of key assumptions. Other than disclosed below, management does not consider a reasonable possible change, in isolation, of any of the key assumptions to cause the carrying value of any CGU to exceed its value-in-use. The considerations underpinning why management believes no impairment is required in respect of China and Media America are as follows, specifically what change in key assumptions would result in an impairment:

 
                                        China                        Media America 
                           -------------------------------  ------------------------------- 
                               Current %  % change leading      Current %  % change leading 
                                             to impairment                    to impairment 
                           (2022 / 2023)               (1)  (2022 / 2023)               (1) 
-------------------------  -------------  ----------------  -------------  ---------------- 
                                               (3)% to 12% 
Budgeted revenue growth        15% / 10%              / 7%      15% / 15%       (2)% to 13% 
Budgeted cost growth             2% / 2%         +3% to 5%        2% / 2%         +2% to 4% 
Pre -- tax discount rate        10% /10%        +3% to 13%      10% / 10%        +3% to 13% 
-------------------------  -------------  ----------------  -------------  ---------------- 
 

(1.) These changes have been applied to 2022 and 2023 projected information.

8. Other intangible assets

 
                               Capitalised             Purchased       Total 
                               development  Computer  intangible  intangible 
                                                          Assets 
                                     costs  software         (1)      assets 
                                   GBP'000   GBP'000     GBP'000     GBP'000 
-----------------------------  -----------  --------  ----------  ---------- 
Cost 
At 1 January 2019                    3,258     2,675      17,881      23,814 
Additions                            1,203        13           -       1,216 
Reallocation                            10         -           -          10 
Disposals                            (388)     (139)     (1,402)     (1,929) 
Foreign exchange differences          (49)      (24)       (314)       (387) 
-----------------------------  -----------  --------  ----------  ---------- 
At 31 December 2019                  4,034     2,525      16,165      22,724 
Additions                            1,226         4           -       1,230 
Acquisitions (5)                         -         -          70          70 
Disposals                            (460)      (10)           -       (470) 
Foreign exchange differences            91        23         346         460 
-----------------------------  -----------  --------  ----------  ---------- 
At 31 December 2020                  4,891     2,542      16,581      24,014 
-----------------------------  -----------  --------  ----------  ---------- 
Amortisation and impairment 
At 1 January 2019                  (1,258)   (1,606)    (12,473)    (15,337) 
Charge for the year (2)              (464)     (409)     (1,169)     (2,042) 
Impairment (3)                       (155)         -       (607)       (762) 
Reallocation                          (10)         -           -        (10) 
Disposals                              388       134       1,402       1,924 
Foreign exchange differences            28        28         210         266 
-----------------------------  -----------  --------  ----------  ---------- 
At 31 December 2019                (1,471)   (1,853)    (12,637)    (15,961) 
Charge for the year (2)              (685)     (280)     (1,122)     (2,087) 
Disposals                              460        10           -         470 
Foreign exchange differences          (49)      (24)       (228)       (301) 
-----------------------------  -----------  --------  ----------  ---------- 
At 31 December 2020                (1,745)   (2,147)    (13,987)    (17,879) 
-----------------------------  -----------  --------  ----------  ---------- 
Net book value 
At 31 December 2020 (4)              3,146       395       2,594       6,135 
-----------------------------  -----------  --------  ----------  ---------- 
At 31 December 2019                  2,563       672       3,528       6,763 
-----------------------------  -----------  --------  ----------  ---------- 
 

(1) .Purchased intangible assets consist principally of customer relationships with a typical useful life of eight to 10 years.

(2) .Amortisation is charged within administrative expenses so as to write off the cost of the intangible assets over their estimated useful lives. The amortisation of purchased intangible assets is included as a highlighted administrative expense.

(3) .No impairment charge has been recognised in the current year (year ended 31 December 2019: GBP762,000 following management's review of the carrying value of other intangible assets).

(4) .Of the net book value of capitalised development costs, GBP1,982,000 remains in development at 31 December 2020.

(5) .As asset of GBP70,000 was recognised on the acquisition of Digital Decisions B.V. in the year.

9. Right-of-use assets and lease liabilities

Right-of-use assets

 
                                                                Buildings         Equipment          Vehicles    Total 
                                                                  GBP'000           GBP'000           GBP'000  GBP'000 
--------------------------------------------------------  ---------------  ----------------  ----------------  ------- 
Cost 
At 1 January 2019                                                       -                 -                 -        - 
Assets recognised on adoption of IFRS 16 on 1 January 
 2019                                                               5,208               178                41    5,427 
Additions                                                           5,109                22                18    5,149 
--------------------------------------------------------  ---------------  ----------------  ----------------  ------- 
At 31 December 2019                                                10,317               200                59   10,576 
Additions                                                             568                22               115      705 
Disposals                                                           (331)              (10)              (12)    (353) 
Allocations                                                           324                 -                 -      324 
Reclassification to lease receivables                             (1,113)                 -                 -  (1,113) 
Foreign exchange                                                       24                17               (9)       32 
--------------------------------------------------------  ---------------  ----------------  ----------------  ------- 
At 31 December 2020                                                 9,789               229               153   10,171 
--------------------------------------------------------  ---------------  ----------------  ----------------  ------- 
Accumulated depreciation 
At 1 January 2019                                                       -                 -                 -        - 
Charge for the year                                               (1,568)              (15)              (13)  (1,596) 
Impairment for the year                                             (641)                 -                 -    (641) 
--------------------------------------------------------  ---------------  ----------------  ----------------  ------- 
At 31 December 2019                                               (2,209)              (15)              (13)  (2,237) 
Charge for the year                                               (1,942)              (50)              (34)  (2,026) 
Disposals                                                             136                10                12      158 
Allocations                                                         (324)                 -                 -    (324) 
Reclassification to lease receivables                                 558                 -                 -      558 
Impairment for the year                                              (24)                 -                 -     (24) 
Foreign exchange                                                        -              (44)                 5     (39) 
--------------------------------------------------------  ---------------  ----------------  ----------------  ------- 
At 31 December 2020                                               (3,805)              (99)              (30)  (3,934) 
--------------------------------------------------------  ---------------  ----------------  ----------------  ------- 
Net book value 
At 31 December 2020                                                 5,984               130               123    6,237 
--------------------------------------------------------  ---------------  ----------------  ----------------  ------- 
At 31 December 2019                                                 8,108               185                46    8,339 
--------------------------------------------------------  ---------------  ----------------  ----------------  ------- 
 

Lease liabilities

 
                                                              Buildings          Equipment           Vehicles    Total 
                                                                GBP'000            GBP'000            GBP'000  GBP'000 
------------------------------------------------------  ---------------  -----------------  -----------------  ------- 
Cost 
At 1 January 2019                                                     -                  -                  -        - 
Liabilities recognised on adoption of IFRS 16 on 1 
 January 2019                                                     5,533                178                 41    5,752 
Additions                                                         4,739                 22                 18    4,779 
Cash payments in the year                                       (1,139)               (36)               (19)  (1,194) 
Interest charge in the year                                         247                  5                  1      253 
------------------------------------------------------  ---------------  -----------------  -----------------  ------- 
At 31 December 2019                                               9,380                169                 41    9,590 
Additions                                                           568                 22                115      705 
Disposals                                                         (131)                  -                  -    (131) 
Cash payments in the year                                       (2,192)               (58)               (19)  (2,269) 
Interest charge in the year                                         277                  6                  1      284 
Foreign exchange                                                   (44)                 35               (12)     (21) 
------------------------------------------------------  ---------------  -----------------  -----------------  ------- 
At 31 December 2020                                               7,858                174                126    8,158 
------------------------------------------------------  ---------------  -----------------  -----------------  ------- 
Current                                                           2,215                 76                 47    2,338 
Non-current                                                       5,643                 98                 79    5,820 
------------------------------------------------------  ---------------  -----------------  -----------------  ------- 
 

The present value of the minimum lease payments are as follows:

 
                                  Minimum lease payments 
                               ----------------------------- 
                                    31 December  31 December 
                                           2020         2019 
                                        GBP'000      GBP'000 
-----------------------------  ----------------  ----------- 
Amounts due: 
Within one year                           2,556        2,116 
Between one and two years                 2,219        2,307 
Between two and three years               1,946        2,115 
Between three and four years                917        1,896 
Between four and five years                 609          893 
Later than five years                       454        1,083 
-----------------------------  ----------------  ----------- 
                                          8,701       10,410 
-----------------------------  ----------------  ----------- 
 

Lease receivables

 
 
                    31 December  31 December 
                           2020         2019 
                        GBP'000      GBP'000 
 
Lease receivables           451            - 
------------------  -----------  ----------- 
Current                     171            - 
Non-current                 280            - 
------------------  -----------  ----------- 
 

During the year a sublease arrangement was entered into relating to the Chicago office lease. Accordingly, the right-of-use asset was derecognised and instead a lease receivable was recognised, being the equivalent of the remaining lease receivables over the lease term. The amount due within one year is presented within current assets and the amount due after one year is presented within non-current assets. The sublease arrangement expires in September 2023.

10. Financial liabilities

 
                              31 December  31 December 
                                     2020         2019 
                                  GBP'000      GBP'000 
----------------------------  -----------  ----------- 
Current 
Bank overdraft                          -            - 
Loan fees(1)                         (45)         (36) 
Contingent consideration            1,957           14 
----------------------------  -----------  ----------- 
                                    1,912         (22) 
----------------------------  -----------  ----------- 
Non -- current 
Bank borrowings                    19,000       14,000 
Government borrowings                 750            - 
Loan fees(1)                         (75)        (132) 
                                   19,675       13,868 
----------------------------  -----------  ----------- 
Total financial liabilities        21,587       13,846 
----------------------------  -----------  ----------- 
 

(1) Loan fees were payable on amending the banking facility and are being recognised in the income statement on a straight-line basis to the maturity date of the facility, this being September 2023.

 
                                                          Bank        Bank  Government     Contingent 
                                                    overdrafts  borrowings  borrowings  consideration      Total 
                                                       GBP'000     GBP'000     GBP'000        GBP'000    GBP'000 
--------------------------------------------------  ----------  ----------  ----------  -------------  --------- 
At 1 January 2019                                        2,379      33,900           -          1,477     37,756 
Recognised on acquisition                                    -           -           -            336        336 
Paid                                                         -       (180)           -          (983)    (1,163) 
Charged to the income statement                              -         112           -          (989)      (877) 
Discounting charged to the income statement                  -           -           -            218        218 
Repayments                                             (2,379)    (20,000)           -              -   (22,379) 
Foreign exchange released to the income statement            -           -           -           (45)       (45) 
--------------------------------------------------  ----------  ----------  ----------  -------------  --------- 
At 31 December 2019                                          -      13,832           -             14     13,846 
Recognised on revaluation                                    -           -           -          3,086      3,086 
Paid                                                         -           -           -        (1,934)    (1,934) 
Charged to the income statement                              -          48           -            625        673 
Discounting charged to the income statement                  -           -           -           (44)       (44) 
Borrowings                                                   -       5,000         750              -      5,750 
Foreign exchange released to the income statement            -           -           -            210        210 
--------------------------------------------------  ----------  ----------  ----------  -------------  --------- 
At 31 December 2020                                          -      18,880         750          1,957     21,587 
--------------------------------------------------  ----------  ----------  ----------  -------------  --------- 
 

A currency analysis for the bank borrowings is shown below:

 
                        31 December  31 December 
                               2020         2019 
                            GBP'000      GBP'000 
----------------------  -----------  ----------- 
Pounds sterling              18,880       13,832 
----------------------  -----------  ----------- 
Total bank borrowings        18,880       13,832 
----------------------  -----------  ----------- 
 

All bank borrowings are held jointly with Barclays and NatWest. The committed facility, totalling GBP24,000,000, comprises a revolving credit facility ('RCF') of GBP23,000,000 (of which GBP19,000,000 was drawn as at 31 December 2020 (31 December 2019: GBP14,000,000)) and GBP1,000,000 available as an overdraft for working capital purposes. The RCF has a maturity date of 20 September 2023. The drawn RCF and any further drawings under the RCF are repayable on maturity of the facility. The facility may be used for deferred consideration payments on past acquisitions, to fund future potential acquisitions, and for general working capital requirements.

Loan arrangement fees of GBP120,000 (31 December 2019: GBP168,000) are offset against the term loan and are being amortised over the period of the loan. GBP45,000 of loan arrangement fees have been included within creditors due within one year and the balancing GBP75,000 have been included within creditors due after more than one year.

The facility bears variable interest of LIBOR plus a margin of 2.25%. The margin rate is able to be lowered each quarter end depending on the Group's net debt to EBITDA ratio.

The undrawn amount of the revolving credit facility is liable to a fee of 40% of the prevailing margin. The Group may elect to prepay all or part of the outstanding loan subject to a break fee, by giving five business days' notice.

All amounts owing to the bank are guaranteed by way of fixed and floating charges over the current and future assets of the Group. As such, a composite guarantee has been given by all significant subsidiary companies in the UK, US, Germany and Australia.

Government borrowings represent an amount received as a part of the US Paycheck Protection Programme. Loan forgiveness will be applied for in relation to this balance when the lenders open the application process. If this application is successful, this balance will be treated as a grant rather than a loan and will be released to the income statement. If the application is unsuccessful then this balance will continue to be treated as a loan, will incur interest at 1% and will be repayable within two years.

Contingent consideration represents additional amounts that are expected to be payable for acquisitions made by the Group and is held at fair value at the statement of financial position date. All amounts are expected to be fully paid by April 2021.

Contingent consideration has been recognised in the period in relation to the minority buyout of Ebiquity Italy Media Advisor S.r.l. The consideration payable in relation to the minority buyout of Ebiquity Italy was contingent upon the performance for the years ending 31 December 2018 to 31 December 2019.

It has been determined that the deferred payments in relation to the acquisition of Digital Decisions B.V. ('Digital Decisions') should be treated as post-date remuneration. IFRS 3 (revised) provides guidance for situations where contingent consideration may be considered to be remuneration for post-acquisition employment. We have reviewed these guidelines and assessed the indicators in IFRS 3. Taken in aggregate, these indicate that the payments to the seller (who remains an employee) do indeed constitute post-date remuneration but should be treated as such. As a result, instead of the contingent consideration being recognised in full as at 31 December 2020 within financial liabilities, only any amount payable in relation to 2020 is to be provided for, within accruals and contract liabilities. The calculated amount owed relating to 2020 is GBPnil.

11. Dividends

 
                                         Year ended   Year ended 
                                        31 December  31 December 
                                               2020         2019 
                                            GBP'000      GBP'000 
--------------------------------------  -----------  ----------- 
Dividend in respect of the prior year             -          534 
--------------------------------------  -----------  ----------- 
Total dividend paid                               -          534 
--------------------------------------  -----------  ----------- 
 

No dividends were paid during the current financial year (2019: GBP534,000). Dividends were paid to non -- controlling interests as shown in the consolidated statement of changes in equity.

12. Cash generated from operations

 
                                                                  Restated 
                                                   Year ended   Year ended 
                                                  31 December  31 December 
                                                         2020         2019 
                                                      GBP'000      GBP'000 
------------------------------------------------  -----------  ----------- 
(Loss) before taxation                                (3,887)      (5,661) 
Adjustments for: 
Depreciation                                            2,761        2,163 
Amortisation (note 8)                                   2,087        2,042 
Loan fees written off                                       -           58 
(Gain)/loss on disposal                                   (3)            5 
Impairment of right-of-use assets (note 9)                 24          641 
Impairment of goodwill (note 7)                           817        5,989 
Impairment of intangibles (note 8)                          -          761 
Unrealised foreign exchange loss                           35           47 
Share option (credits)/charges (note 3)               (1,845)          195 
Finance income                                           (39)          (9) 
Finance expenses                                          915          907 
Contingent consideration revaluations (note 3)            791        (779) 
------------------------------------------------  -----------  ----------- 
                                                        1,656        6,359 
Decrease in trade and other receivables                 2,457        2,136 
Increase/(decrease) in trade and other payables         1,714      (2,838) 
Movement in provisions                                      -            - 
------------------------------------------------  -----------  ----------- 
Cash generated from operations                          5,827        5,657 
------------------------------------------------  -----------  ----------- 
 

13. Acquisitions

Ebiquity Germany GmbH

On 11 June 2019, the Group acquired the outstanding 5.97% interest in its subsidiary undertaking, Ebiquity Germany GmbH, from the minority shareholder for cash consideration of EUR380,000 (GBP336,000).

Digital Decisions B.V.

On 8 January 2020, the Group completed the purchase of Digital Decisions B.V. ('Digital Decisions'). The acquisition was for an initial cash consideration of EUR700,000 (GBP597,000) with further consideration payable in a mix of cash and Ebiquity plc shares. The first deferred payment will be based on performance in the year to 31 December 2020 and the second will be based on the average performance for the two years ended to 31 December 2022.

Due to the integration of the Digital Decisions service with the Group's overall digital media products, the basis of the revenue included in the performance calculation for the two years ended 31 December 2022 was amended to include the contribution from all digital media products developed by the Digital Innovation Centre. The multiple applied in calculating the contingent consideration was reduced from 8 times to 6 times the average of the relevant profits generated in 2021 and 2022.

The fair value of the purchase consideration for the acquisition of Digital Decisions is as follows:

 
 
        GBP'000 
Cash    597 
------  ------- 
 

As discussed in note 10, the deferred payments constitute post-date remuneration and therefore will be accrued in accordance to the period they relate. The amount owing for the first deferred payment in relation to the performance for the year ending 31 December 2020 has been determined as GBPnil, therefore no accrual is required as at 31 December 2020.

The carrying value and the provisional fair value of the net assets recognised at the date of acquisition are as follows:

 
                                         Carrying    Fair value   Fair value 
                                            value    adjustment      GBP'000 
                                          GBP'000       GBP'000 
                                                            (1) 
-------------------------------------   ---------  ------------  ----------- 
 Brands                                         -            70           70 
 Property, plant and equipment                 16             -           16 
 Trade and other receivables                  127             -          127 
 Cash and cash equivalents                     10             -           10 
 Trade and other payables                    (97)             -         (97) 
 Deferred tax liabilities                       -          (13)         (13) 
--------------------------------------  ---------  ------------  ----------- 
 Net assets acquired                           56            57          113 
 Goodwill arising on acquisition (2)                                     484 
--------------------------------------  ---------  ------------  ----------- 
 Purchase consideration recognised 
  on acquisition                                                         597 
--------------------------------------  ---------  ------------  ----------- 
 

(1) The fair value adjustments relate to the finalisation of the allocation of the purchase consideration accounting for intangible assets (brands) and deferred tax liabilities.

(2) The goodwill recognised of GBP484,000 is attributable to the assembled workforce, expected synergies and other intangible assets, which do not qualify for separate recognition. None of the goodwill arising from the acquisition is expected to be tax deductible.

Digital Decisions contributed GBP429,000 to revenue and a loss of GBP56,000 to loss before tax for the period between the date of acquisition and the year ended 31 December 2020. Acquisition-related costs of GBP37,000 were incurred during the year ended 31 December 2020 and have been recognised within highlighted items. Refer to note 3 for further details.

Ebiquity Italy Media Advisor S.r.l.

On 3 February 2020, the Group agreed to acquire the remaining 49% interest in its subsidiary, Ebiquity Italy Media Advisor S.r.l. ('Ebiquity Italy'), from the founders and minority shareholders Arcangelo DiNieri and Maria Gabrielli. The transaction completed on 28 May 2020, following the approval of the Group's audited financial statements. The total consideration of EUR3,648,000 (GBP3,086,000) was based on an average of Ebiquity Italy's profit before tax and management charges for the years ending 31 December 2018 and 2019.

The consideration is being paid in a combination of cash and Ebiquity plc shares. At completion, 25% of the total consideration was settled by the issue of 2,437,628 Ebiquity plc shares and 5% in cash. As at 31 December 2020 EUR1,427,000 (GBP1,303,000) remains outstanding. All contingent consideration payments were paid by 1 March 2021.

Ebiquity Russia Limited / Ebiquity Russia OOO

On 24 December 2020, the Group acquired a further 24.95% in its subsidiary undertakings, Ebiquity Russia Limited and Ebiquity Russia OOO (collectively, 'Ebiquity Russia'), from its minority shareholder Vladimir Rass. The total consideration of $517,000 (GBP405,000) is based on a multiple of Ebiquity Russia's profit before tax and management charges for the year ending 31 December 2020 and was paid in full on completion on 24 December 2020. The Group now holds 75.05% of the share capital of each of these companies.

14. Disposals

On 21 August 2019, it was decided to wind down the activities of Stratigent LLC, the Chicago -- based marketing technology business which has been trading at a loss due to significantly reduced demand in the US market for the software technology on which its skills were focused. This was the result of a wider review of opportunities for further efficiency gains across the business as well as examining investment areas to ensure these fit with the Group's strategic priorities. As at 31 December 2020, all contractual requirements with remaining clients have been fulfilled.

15. Financial Information

The financial information included in this report does not amount to full financial statements within the meaning of Section 434 of Companies Act 2006. The financial information has been extracted from the Group's Annual Report and financial statements for the period ended 31 December 2020, on which an unqualified report has been made by the Company's auditors, PricewaterhouseCoopers LLP. Financial statements for the period ended 31 December 2020 have been delivered to the Registrar of Companies; the report of the auditors on those accounts was unqualified and did not contain a statement under Section 498 of the Companies Act 2006.

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