TIDMEBQ
RNS Number : 0870O
Ebiquity PLC
29 September 2023
Ebiquity plc
Interim Results for the six months ended 30 June 2023
Focused strategy, integrated acquisitions and performance
enhancements support strong growth
Ebiquity plc ("Ebiquity" or the "Group"), a world leader in
media investment analysis, announces interim results for the six
months ended 30 June 2023 ("H1 2023").
Strong financial performance
Group H1 2023 H1 2022(2) Change
GBPm GBPm GBPm %
-------- ----------- ------ ----
Revenue 40.6 36.7 3.9 11%
-------- ----------- ------ ----
Adjusted Operating Profit
(1) 6.0 4.9 1.1 23%
-------- ----------- ------ ----
Adjusted Operating Profit
Margin (%) (1) 14.7% 13.3% 1.4% 11%
-------- ----------- ------ ----
Adjusted Profit before
Tax (1) 5.0 4.7 0.4 8%
-------- ----------- ------ ----
Adjusted Earnings per Share
(1) 2.94p 2.72p 0.22p 8%
-------- ----------- ------ ----
Statutory Operating Profit/(Loss) 2.4 (1.2) 3.5 NA
-------- ----------- ------ ----
Statutory Profit/(Loss)
before Tax 1.4 (1.4) 2.8 NA
-------- ----------- ------ ----
Statutory Earnings/(Loss)
per Share 0.44p (3.43)p 3.87p NA
-------- ----------- ------ ----
Note 1: Throughout these interim results, management presents
alternative performance measures to explain further the movements
in our business. These are not statutory financial measures.
Further information can be found in the Alternative Performance
Measures section below.
Note 2: The prior year results have been re-presented to
eliminate the results of Digital Balance Australia Pty Limited
which was sold in April 2023 and its results are accordingly
presented within discontinued operations in both 2023 and 2022.
Current year results include six months contribution from the
MMi and Media Path acquisitions which were completed in April
2022.
-- Revenue increased by GBP3.9 million to GBP40.6 million (+11%)
-- Adjusted Operating Profit increased by GBP1.1 million to GBP6.0 million (+23%)
-- Adjusted Operating Profit margin increased by 1.4 percentage points to 14.7% (2022: 13.3%)
-- Statutory Operating Profit increased by GBP3.5m to GBP2.4m
-- Net bank debt of GBP15.0 million with cash balances of GBP9.8
million and undrawn bank facilities of GBP4.7 million as at 30 June
2023.
Operational Momentum
-- Improved profitability in H1 driven from UK and North America
-- Continued strong revenue and margin performance in North America
-- Three-year transformation and integration programme is
progressing, with focus for 2023 on rationalising and automating
products and processes
-- Revenue growth of 10% from Media Performance, Ebiquity's
largest service line, within which Digital Media Solutions' revenue
grew by 32% to GBP3.7 million with an operating profit margin of
over 50%
-- APAC region profitability impacted by phasing of revenue
delivery which is expected to largely recover in the second
half
Current Trading and Outlook
-- A small number of large clients have recently reduced
budgets, however, the business continues to trade broadly in line
with expectations for 2023.
-- The pressure from macro conditions on clients' businesses is
creating some uncertainty for 2024, but we do note that our
business has historically been significantly less sensitive to weak
conditions in the advertising market as our clients often look to
us to help even more with improving marketing efficiency in such an
environment.
-- Strategically, the business is continuing to improve its
offering and its operating model to take advantage of the
attractive opportunities for revenue growth and margin
enhancement.
Nick Waters, CEO, commented:
"We have delivered a good performance despite the more
challenging market conditions. Revenue, profit and margins all grew
driven by particularly strong momentum in the US following our
successful integration of MMi and continued growth from Digital
Media Solutions.
One of the key drivers of our growth is our ability to
cross-sell and up-sell more solutions and encouragingly we have
seen the scope of work expanding from major clients including:- GM,
Amgen, J&J in the US; Danone and Ferrero with global projects;
Disney and Jaguar Land Rover in Europe.
We are now six months into a three-year transformation programme
which will see the transitioning of core services onto the GMP365
data management platform, fundamentally changing the process by
which work is delivered. This is a major undertaking for the Group
and although there is much more to do before we see the full
financial benefits, we are making good progress and remain on track
to achieve our objectives.
While we are seeing some major customers cutting budgets as a
result of prevailing market conditions and trends, Ebiquity
continues to trade broadly in line with expectations. Looking
further ahead, as the market leader we remain well positioned to
help our clients and see further opportunities for revenue growth
and margin enhancement."
Details of presentations
The Executive Directors will be hosting a webcast presentation
for analysts and institutional investors at 09:30 BST today. If you
would like to register, please contact alex.campbell@camarco.co.uk
.
They will also be giving a presentation for investors via the
Investor Meet Company platform on 2 October 2023 at 11:30 BST.
Investors can sign up to Investor Meet Company for free and add to
meet Ebiquity plc via:
https://www.investormeetcompany.com/ebiquity-plc/register-investor
. Investors who already follow Ebiquity plc on the Investor Meet
Company platform will automatically be invited.
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"). Upon the publication of this announcement via a Regulatory
Information Service this inside information is now considered to be
in the public domain.
The person responsible for arranging release of this
announcement on behalf of the Company is Julia Hubbard, Chief
Financial Officer of the Company.
Enquiries:
Ebiquity Via Camarco
Nick Waters, CEO
Julia Hubbard, CFO
Camarcco
Ben Woodford +44 (0)7990 653 341
Geoffrey Pelham-Lane
+44 (0)7733 124 226
Panmure Gordon (Financial Adviser, NOMAD & Broker) +44 (0)20
7886 2500
Dominic Morley / Dougie McLeod (Corporate Advisory)
Mark Murphy / Sam Elder (Corporate Broking)
Chief Executive's Review
Continued progress
Ebiquity has continued to make good progress during the period,
building momentum and delivering effectively against our strategic
objectives.
Following last year's acquisition of Media Management Inc
("MMi") in the US , it is particularly encouraging to see revenue
growth accelerating with North America our fastest growing region
at 50%. We are also pleased to see continued progress from our
portfolio of Digital Media Solutions with 32% revenue growth year
on year. Revenue from major international clients managed by our
Global Clients Solutions Centre in the UK has also recovered well
from some setbacks last year.
In what has been a challenging market to date , we can be
satisfied with our performance during the period , having expanded
relationships with clients, progressed our three-year business
transformation programme, and continued to build scale in the US,
the world's largest advertising market.
A highly dynamic market
Inflation and high interest rates have continued to dominate the
market discourse. While this has undoubtedly led to increased
pressure on consumers and brand owners becoming more cautious with
their marketing budgets, the anticipated steep downturn in
advertising in the first half of 2023 did not materialise. However,
the market remains highly cautious with a prevailing sense that
'things must get worse'.
Although Ebiquity cannot claim immunity from the pressure on
marketing budgets, such a volatile environment presents
opportunities for us to help brand owners navigate this uncertainty
and ensure they are maximising returns from their media investments
.
Our role as a business intelligence company for the global
advertising industry means that we are well placed to advise on the
changing industry dynamics and trends. This includes major
developments such as the shift from linear free-to-air broadcasting
to advertising funded video on demand ("AVOD"); and the
implications of advertising delivered through Connected TV ("CTV")
, which is forecast to be the fastest growing ad format in the US ,
growing 21.2% to become a market worth US$25. 1 billion in 2023
(Source: eMarketer April 2023).
Becoming more efficient
Against this background, we are now six months into a three-year
business transformation programme (2023-2025) with a considerable
focus on increasing the use of automation to create a more
efficient service and experience for our clients. Following last
year's acquisition of MediaPath, we have a high quality data
management platform which is providing us with a base from which to
drive greater efficiency in the delivery of our services Group
wide.
Our priority has been to transition client work onto the GMP365
platform , which is central to our transformation plan, enabling us
over time to fundamentally change the processes by which work is
delivered. This is a major, time intensive undertaking for the
business involving training staff, changing working practices,
recalibrating some of our product and processes, and engaging with
our clients and the agencies we work with on the benefits of the
new approach.
The process requires some additional investment in people's time
as we transition each area of the business starting with agency
selection processes (Media Management) followed by ValueTrack
(Media Performance) and concluding with benchmarking (Media
Performance). Although there is much more to do before we see the
financial benefits of the transformation process, I am pleased with
progress to date with c.30% of Ebiquity staff having undergone
training, 78 agency selection processes managed on the platform in
the first half of the year, and five of our ten largest ValueTrack
clients transferred. Benchmarking is currently in the testing and
planning phase with the transition to the new process and
methodology expected to commence in early 2024 with a measured
roll-out.
We have taken an additional step to streamline the business by
folding our small Technology Advisory offering into the Media
Management Service Line.
Building client momentum
One of the key drivers of our growth is our ability to
cross-sell and up-sell more solutions to more clients in more
geographies. Our universe of clients buying two or more service
lines continues to grow and pleasingly we have seen the scope of
work expanding from major clients including:- GM, Amgen and J&J
in the US; Danone and Ferrero with global projects; Disney and
Jaguar Land Rover in Europe. We have also seen new business wins
from major brand owners including:- Mercedes Benz and Lenovo in
China; L'Oreal in Latin America; Dubai Holdings in the Middle
East.
Developing our global presence
The successful integration of last year's MMi acquisition in the
US has accelerated growth in North America with revenue up 50 %,
representing our strongest regional performance. UK&I has
experienced a good recovery from the international clients managed
from this market, with the UK domestic business showing resilience
in difficult market conditions.
Following the lifting of zero-Covid restrictions, the Chinese
economy has not recovered at the rate most commentators forecast ;
nonetheless, our business continues to progress and is expected to
deliver growth in China . The Asia Pacific performance overall has
been impacted by a slow first half in the Contract Compliance
service line , with revenue back-weighted to Q4.
France and Spain were our strongest performers in Continental
Europe , while conditions were more challenging in Italy and
Germany. We have also established a new operation in the Nordics
following the acquisition of MediaPath to manage a number of
clients in that region.
Product Innovation underpinned by unrivalled market
intelligence
Our ability to successfully integrate businesses into Ebiquity
is reflected by the deferred consideration we paid out in May of
this year, concluding the earnout period for Digital Decisions,
which was twice the sum expected at the time of acquisition ,
reflecting its strong performance. The business became our Digital
Innovation Centre, making a significant contribution to Group
revenue and profit growth since it was acquired in 2020. Some of
its resources are now being distributed in other areas of the
business as part of the transformation programme to distribute
digital knowledge and skills more widely.
One of our great strengths is our unrivalled independent
intelligence on the digital media market generated from data
processed and stored in our Media Data Vault. This competitive
advantage underpins our strong progress in selling the Digital
Media Solutions portfolio which also provides high levels of
renewable revenue with only one client not renewing since
inception.
The nature of the media market provides ample opportunity to
innovate new solutions and during the period we brought two new
initiatives to market. A partnership with Scope3 enables us to
measure the quantum of CO(2) and equivalent emissions resulting
from digital media activity. We now offer our clients a "CO2PM"
metric to give them visibility of the worst polluting elements of
their activity and the opportunity to minimise these. With large
publicly listed companies required to publish plans to reduce
emissions we believe this product innovation should have a
receptive market. We have also developed an initial "pioneers
programme" in the US to address the booming Connected TV market. We
see large sums of money flowing into this market with little
governance and believe our new solution represents a significant
benefit to advertisers. Both of these developments are
demonstrating interesting results and offer a real value
proposition for our clients.
Artificial Intelligence
Artificial Intelligence became the new hot topic in the first
half of the year. This is being seen as both a threat and an
opportunity by different players in the media industry. While still
in its early stages , advertising agencies are expressing
excitement at its potential for almost limitless low cost content
creation , while publishers see a significant threat if engaging
content can be produced by anyone, and a potential risk to their
intellectual property. It seems clear that a regulatory framework
needs to be drawn up as a matter of some urgency.
We are assessing the potential impact of AI on our business from
both an internal and external perspective. Internal applications
are likely to include enhancement to workflows of data management
and analysis, and the production of our solutions. For external use
, we will explore new client interface opportunities,
productisation of first line account management, and providing
greater value to the long tail of smaller clients without the cost
of additional human input.
Generative AI needs to be trained on data. The quality of that
data is a determinant in the quality and therefore value of the
output. One competitive advantage of Ebiquity is our vast and
growing lake of data from the global media industry that can be
trusted. It is actual data from billions of pounds/Euros/dollars of
bought media activity. A challenge faced by Generative AI
applications that require training on open-source data is the
quality of that information. As we know, the information available
on the internet can be flawed, misleading, or fake . Reliance on
this opensource information can undermine the accuracy and
therefore value of the output.
A significant advantage for Ebiquity therefore is the trusted
data we manage in our proprietary closed environment. As such, we
believe Generative AI represents more of an opportunity than a
threat for Ebiquity.
Outlook
The global advertising market remains cautious and risk averse
with many global brand owners planning for the short term rather
than the long term. As a result , we are seeing some delays to
client commitments and deferred work. In recent weeks , we have
started to see business challenges impact some major clients
leading to increased pressure on projects and fees, and some budget
cuts. Although inflation statistics have started to moderate there
remains some upward pressure on staff costs. This notwithstanding,
the business overall continues to trade broadly in line with
expectations for 2023.
As the market leader we remain well positioned to help our
clients and firmly believe our product and service offering has
resilience as media and marketing budgets come under more pressure
and the efficiency and effectiveness of advertising investments
comes under increased scrutiny.
While the global economic environment is weighing on brand
owners' businesses and there is more uncertainty about the outlook
heading into 2024, the business is well positioned to take
advantage of continued opportunities for revenue growth and margin
enhancement.
CFO's review
In April 2023, the Group disposed of Digital Balance Australia
Pty Limited, a very small, non-core Australian consultancy
business. The results of this business have been disclosed as
Discontinued Operations and the 2022 results have been re-presented
accordingly.
Service Line 2023 2022 Variance v
PY
GBPm GBPm GBPm %
----- ----- ------ -----
Media Performance 28.1 25.6 2.5 10
----- ----- ------ -----
Media Management 4.8 4.2 0.6 14
----- ----- ------ -----
Technology Advisory 0.5 0.6 (0.1) (17)
----- ----- ------ -----
Marketing Effectiveness 4.5 3.6 0.9 25
----- ----- ------ -----
Contract Compliance 2.7 2.7 - -
----- ----- ------ -----
Total 40.6 36.7 3.9 11
----- ----- ------ -----
Current year results include six months contribution from the
MMi and Media Path acquisitions which were completed in April 2022.
As both of these acquisitions have been fully integrated into the
enlarged business, it is not possible to fully determine the impact
from those acquisitions on the results in the period.
Revenue for the six months ended 30 June 2023 of GBP40.6 million
was GBP3.9 million or 11% higher than the comparable period in
2022, with growth driven from the US in particular, but also across
the UK and Europe.
Revenue from Media Performance services increased by GBP2.5
million or 10 % , which was largely derived from technology enabled
products such as the portfolio of Digital Media Solutions and
services delivered utilising the more efficient Media Performance
GMP365 platform following last year's acquisition of MediaPath. The
progress of Digital Media Solutions sales to new clients continued
in H1 and is expected to continue in the second half.
Media Management services revenue grew by GBP0.6 million or 14%
in H1 2023. This service line delivered GBP1.5 million incremental
revenue with the agency selection processes increasingly using the
GMP365 platform. There has been a significant slowdown in local
agency selection work which we expect to be temporary. In 2021 and
2022, this market was extremely buoyant due to the bounce back
after covid and, as a result, the local Agency Selection market is
suffering much lower business levels in 2023. The Group has seen a
corresponding decline in demand for this product and revenue in the
period is GBP0.7 million lower. This market decline is expected to
be temporary and is likely to return to more normal levels in
2024.
Revenue from Marketing Effectiveness grew by GBP0.9 million and
benefited from a large 3-year contract which was secured in the
second quarter of 2022.
Adjusted operating profit (statutory operating profit excluding
highlighted items) from continuing operations increased by 23% to
GBP6.0 million (2022: GBP4.8 million). The adjusted operating
profit margin improved to 14.7% compared to 13.3% in the prior
year.
Segmental Review of Performance
Revenue Analysis
Revenue Change
------------------------------- ------------------ --------------
H1 2023 H1 2022 GBPm %
GBPm GBPm
------------------------------- -------- -------- ------ ------
UK & Ireland 14.2 13.3 0.9 7%
Continental Europe 14.4 13.4 1.0 7%
North America 7.8 5.2 2.6 50%
APAC 4.3 4.8 (0.5) (11%)
Total Revenue from Continuing
Operations 40.6 36.7 3.9 11%
Adjusted Operating Profit Analysis
Adjusted Operating Adjusted Operating
Profit profit margin
H1 2023 H1 2022 H1 2023 H1 2022
--------- ---------- ---------
GBPm GBPm % %
------------------------------ --------- ----------
UK & Ireland 3.7 2.9 25.9% 21.6%
Continental Europe 4.6 4.4 32.2% 32.4%
North America 1.0 0.0 12.8% 0.3%
APAC 0.4 0.8 9.1% 17.4%
Unallocated (3.7) (3.2) (9.2%) (8.8%)
Adjusted Profit - Continuing
Operations 6.0 4.9 14.7% 13.3%
----------
North America delivered the highest regional revenue growth,
increasing revenue by GBP2.6 million or 50% year on year to GBP7.8
million (2022: GBP5.2 million). Whilst some of this growth resulted
from the full half year effect of the MMi acquisition, completed in
April 2022, the remaining growth was largely driven by the Media
Performance service line which incorporates higher margin Digital
Media Services revenue. The scaling benefits of a larger business
together with increasing volumes of higher margin Digital Media
Services revenue delivered a 13 percentage point increase in H1
adjusted operating margin (H1 2023: 13%; H1 2022: 0%).
UK & Ireland revenue increased by 7% from the prior year to
GBP14.2 million (2022: GBP13.3 million) while margin strengthened
by 4 percentage points to 26% (2022: 22%). Revenue and margin
growth in that region was driven from a large 3 -year Marketing
Effectiveness contract which was secured in the second quarter of
2022 and delivered from the existing resource base.
Continental Europe has delivered 7% revenue growth to GBP14.4
million (2022: GBP13.4 million) at a consistently strong margin of
32%. Revenue growth across the countries within this region has
however been mixed with growth delivered in The Nordics, France and
Spain although recent market pressures experienced by some clients
in the Italian and German markets have resulted in budget cuts and
a consequent decline in revenue during the first half.
Asia Pacific is currently the Group's smallest market. Revenue
in H1 2023 was 11% or GBP0.5 million lower than H1 2022 while
operating margin reduced by 8 percentage points to 9% (H1 2022:
17%). The region has been impacted by two main factors. Firstly, as
for all regions, the results from the Contract Compliance business
are included in the appropriate regional results. This business is
traditionally weighted into the second half of the year and in 2023
this back weighting is even more pronounced. As a result, the APAC
Contract Compliance business contributed less revenue and higher
losses in the first half and impacted margin in this smaller region
more significantly. Secondly, agency selection revenue (as
discussed above) was lower in H1 2023 due to the temporary slowdown
in the local agency selection market.
Unallocated costs, which comprise corporate and support costs,
increased by GBP0.5 million largely due to the impact of foreign
exchange gains realised on debtor and creditor balances.
Project related costs (which comprise external partner and
production costs) increased by 6% to GBP3.7 million from GBP3.5
million. These costs now also include the costs of the GMP365
platform which, over time will provide a more efficient way of
providing benchmarking services to clients. Significant work is
underway to integrate this platform into the product base and this
transformation, together with the globalisation of the delivery
resource are expected to generate efficiency savings from H2 2024.
The GMP365 costs have increased at a lower rate than revenue,
demonstrating the benefits of scale.
Highlighted items
Highlighted items comprise charges and credits which are
highlighted in the income statement because separate disclosure is
considered relevant in understanding the underlying performance of
the business. These are used for the calculation of certain
Alternative Performance Measures.
Highlighted items before tax in the period totalled a charge of
GBP3.6 million (2022: GBP6.0 million on a re-presented basis) and
include:
-- GBP0.7 million relating to transformation costs (2022: GBP- million)
-- GBP1.0 million for acquisition integration and strategic costs (2022: GBP5.1 million)
-- GBP1.6 million for purchased intangible assets amortisation (2022: GBP0.7 million)
As previously communicated, the Group is in the process of
undertaking a three-year transformation and integration programme
to rationalise its product portfolio, optimise the use of newly
acquired technologies and move from a regional to a global delivery
model. The transformation programme follows the acquisition of MMi
and MediaPath in April 2022 and is scheduled to run to the end of
2025, with the majority of costs incurred in 2023 and 2024.
Operating efficiency savings are expected to commence during the
second half of 2024 and total savings totalling GBP5 million
(including the original acquisition synergy benefits) on an
annualised basis are expected to be delivered by the end of
2025.
Significant workstreams are underway to support this
transformation. A core number of individuals who are fundamental in
delivering specific workstreams have largely been taken out of
their regional delivery and management roles to focus on the
transformation workstreams and will return to a newly created role
within the new global specialisms that they have been responsible
for implementing. The costs highlighted are therefore not "one-off"
in nature, though the workstreams are. We have determined to
separate through highlighted items, the proportionate costs of
individuals who are spending the majority of their time on these
transformation workstreams and in H1 2023, this was nine employees
with a total cost of GBP0.5 million. In addition, training and
events costs to brief and educate employees about their new roles
within the new global specialisms totalled GBP0.2 million. These
transformation costs, totalling GBP0.7 million, have been
classified as highlighted items.
The acquisition, integration, and strategic costs of GBP1.0
million (2022: GBP1.6 million) largely comprise GBP0.3 million
acquisition related costs incurred during the period and a revision
to the discounting of the deferred consideration payable for the
MMi earnout of GBP0.2 million payable in 2025. The final post-date
remuneration for Digital Decisions B.V. was settled in May 2023 and
resulted in an additional accrual of GBP0.3 million (2022: GBP3.4
million).
The amortisation charge for purchased intangible assets
increased significantly in the period to GBP1.7 million (2022:
GBP0.4 million) due to the addition of intangible assets through
the acquisitions of MMi and MediaPath which completed in Q2 2022.
These assets include customer relationships of acquired entities,
owned software (MMi's Circle Audit system) and MediaPath's GMP
licence asset.
Taxation
The adjusted tax rate for the period is 28.3% (H1 2022: 42.5%)
which is higher than the full year 2022 tax rate of 25.9%, largely
due to increasing tax rates in the UK, together with a higher
proportion of profits delivered in the period in overseas
jurisdictions with higher tax rates (ranging from 25% to 33%). The
tax credit of GBP0.6 million for the loss arising on highlighted
items is restricted to a tax rate of 15.9% (2022: 11.9%) due to the
significant level of disallowable expenses such as acquisition
expenses and amortisation of purchased intangibles within
highlighted items.
Earnings per share
Adjusted basic earnings per share increased by 8% to 2.94p
compared to 2.72p in the prior period. Adjusted diluted earnings
per share in the current period increased by 7% to 2.86p from
2.68p. There was a statutory basic profit per share of 0.44p (2022:
loss per share of 3.43p). The diluted earnings per share increased
to 0.43p (2022: loss per share of 3.43p).
Dividend
No dividend has been declared for the six months ended 30 June
2023 (2022: GBPnil).
Equity
During the six months to 30 June 2023, the number of ordinary
shares in issue increased by 20.2 million to 140.4 million (2022:
120.2 million). 19.9 million shares were issued to the previous
owners of Digital Decisions B.V. as partial settlement of the
post-date remuneration. A further 0.2 million shares were issued
upon the exercise of employee share options.
Cash conversion
Six months Six months ended
ended 30 June 2022
30 June 2023
GBP'm GBP'm
Statutory cash from operations (2.8) (3.4)
Add back
Settlement of post-date Digital 6.4 -
Decisions remuneration
Cash outflow from Discontinued 0.5 -
Activities
Highlighted items: cash items 0.6 1.8
-------------- -----------------
Adjusted cash from operations 4.7 (1.6)
Adjusted operating profit/(loss) 6.0 4.9
Cash Flow Conversion Ratio
(as % of Adj OP) 78% (33%)
Adjusted cash from operations represents the cash flows from
operations excluding the impact of cash from highlighted items and
discontinued businesses. There was an adjusted net cash inflow from
operations of GBP4.7 million in the period (2022: GBP1.6 million
outflow) which reflects a cashflow conversion rate of 78% (2022:
(23%)).
As at As at
Net debt and banking facilities 30 June 30 June
2023 2022
GBPm GBPm
Cash and cash equivalents net of
bank overdrafts(1) 9.8 12.4
Bank debt (25.0) (21.5)
Prepaid loan arrangement fees 0.2 0.3
----------------------------------- --------- ---------
Net bank debt (15.0) (8.9)
(1) Includes restricted cash of GBP0.9 million held in Ebiquity
Russia .
Statement of financial position and net assets
Net assets at 30 June 2023 were GBP45.5 million, an increase of
GBP9.2 million since 31 December 2022, largely due to the
settlement in May 2023 of the post-date remuneration relating to
the 2020 acquisition of Digital Decisions B.V. which totalled
GBP16.1 million. Of this balance, GBP6.4 million was settled in
cash and GBP9.7 million was settled by the issue of new shares.
Net current assets at 30 June 2023 totalled GBP18.4 million, an
increase of GBP13.8 million from 31 December 2022 which again is
largely due to the Digital Decisions post-date remuneration
settlement noted above.
Debtor days at 30 June 2023 of 74 days has improved year on year
by 7 days (June 2022: 81 days) due to stronger collections in the
UK market. Debtor days have, however, increased by 13 days compared
to the December 2022 position of 61 days due to the billing profile
of customers predominantly in Europe with extended credit
terms.
Alternative Performance Measures
In these results we refer to 'adjusted' and 'statutory' results,
as well as other non-GAAP Alternative Performance Measures
("APMs"). Adjusted results are not intended to replace statutory
results but remove the impact of highlighted items in order to
provide an understanding of the underlying performance of the
business. The APMs are consistent with how business performance is
measured internally by the Group. Those Alternative Performance
Measures relating to the income statement are shown on the face of
that Primary Statement.
Alternative Performance Measures used by the Group as defined in
the Interim Statement are:
-- Net revenue
-- Organic growth
-- Adjusted operating profit
-- Adjusted operating margin
-- Adjusted profit before tax
-- Adjusted effective rate of tax
-- Adjusted earnings per share
-- Adjusted cash generated from operations
-- Adjusted operating cash flow conversion, and
-- Net bank Debt
Net revenue is the revenue after deducting external production
costs.
Adjusted profit is not recognised under IFRS and may not be
comparable with underlying profit measures used by other companies.
Adjusted operating profit is defined as the operating profit
excluding highlighted items. Adjusted profit before tax and
earnings per share are calculated based on the adjusted operating
profit. These are reconciled on the face of the Profit and Loss
Account.
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 performance of the business. The
non-cash charges include share option charges, amortisation of
purchased intangibles and asset impairment charges. 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, management
restructuring and other significant one-off items. Costs associated
with acquisition identification and early-stage discussions with
acquisition targets are reported in administrative expenses.
Further details of highlighted items are set out within the
financial statements and the notes to the financial statements.
Adjusted cash generated from operations is defined as the cash
generated from operations excluding the cash movements relating to
the highlighted items. The calculation for this period is set out
on page 10.
Interim Consolidated Income Statement
for the six months ended 30 June 2023
Unaudited 6 months ended
Unaudited 6 months ended 30 June 2022 (re-presented)
30 June 2023 (1)
------------------------------------- -------------------------------------
Before Highlighted Before Highlighted
highlighted items highlighted items
(note
items 3) Total items (note 3) Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----- ------------ ------------ --------- ------------ ------------ ---------
Revenue 2 40,631 - 40,631 36,719 - 36,719
Project-related
costs (3,739) - (3,739) (3,520) - (3,520)
------------------ ----- ------------ ------------ --------- ------------ ------------ ---------
Net revenue 36,892 - 36,892 33,199 - 33,199
Staff costs (24,529) - (24,529) (22,891) - (22,891)
Other operating
expenses (6,396) (3,589) (9,985) (5,441) (6,022) (11,463)
------------------ ----- ------------ ------------ --------- ------------ ------------ ---------
Operating
profit/(loss) 5,967 (3,589) 2,378 4,867 (6,022) (1,155)
Finance income 36 - 36 40 - 40
Finance expenses (1,013) - (1,013) (503) - (503)
Foreign exchange 21 - 21 246 - 246
------------------ ----- ------------ ------------ --------- ------------ ------------ ---------
Net finance costs (956) - (956) (217) - (217)
Profit/(loss)
before
taxation from
continuing
operations 5,011 (3,589) 1,422 4,650 (6,022) (1,372)
Taxation
(charge)/credit
- continuing
operations (1,418) 572 (846) (1,977) 23 (1,954)
------------------ ----- ------------ ------------ --------- ------------ ------------ ---------
Profit/(loss) for
the period -
continuing
operations 3,593 (3,017) 576 2,673 (5,999) (3,326)
Profit/(loss) for
the period -
discontinued
operations 5 (81) 248 167 63 (16) 47
------------------ ----- ------------ ------------ --------- ------------ ------------ ---------
Profit/(loss) for
the period 3,512 (2,769) 743 2,736 (6,015) (3,279)
Attributable to: - - -
Equity holders of
the parent 3,470 (2,769) 701 2,715 (6,015) (3,300)
Non-controlling
interests 42 - 42 21 - 21
------------------ ----- ------------ ------------ --------- ------------ ------------ ---------
3,512 (2,769) 743 2,736 (6,015) (3,279)
(1) The prior year results have been re-presented to eliminate the results
of Digital Balance Australia Pty Limited. Its results have instead been
presented within discontinued operations in both 2023 and 2022 as it
was sold in April 2023.
Earnings per
share-continuing
operations
Basic 4 2.94p 0.44p 2.72p (3.43)p
Diluted 4 2.86p 0.43p 2.68p (3.43)p
Earnings per
share-
Discontinued
operations
Basic 4 (0.07)p 0.14p 0.06p 0.05p
Diluted 4 (0.07)p 0.13p 0.06p 0.05p
Interim Consolidated Statement of Comprehensive Income
for the six months ended 30 June 2023
Unaudited
6 months
ended 30
June 2023
GBP'000
Unaudited
6 months
ended 30
June 2022
GBP'000
-----------
Profit/(loss) for the period 743 (3,279)
Other comprehensive (expense):
Items that may be reclassified subsequently
to profit or loss statement:
Exchange differences on translation of overseas
subsidiaries (1,465) (418)
Total other comprehensive (expense) for the
period (1,465) (418)
------------------------------------------------- ----------- -----------
Total comprehensive expense for the period (722) (3,697)
------------------------------------------------- ----------- -----------
Attributable to:
Equity holders of the parent (764) (3,718)
Non-controlling interests 42 21
------------------------------------------------- ----------- -----------
(722) (3,697)
------------------------------------------------- ----------- -----------
Interim Consolidated Statement of Financial Position
as at 30 June 2023
Unaudited Audited
as at as at
30 June 31 December
2023 2022
Note GBP'000 GBP'000
Non-current assets
Goodwill 6 42,331 43,091
Other intangible assets 7 11,024 12,776
Property, plant and equipment 1,188 1,289
Right of use assets 3,203 3,308
Deferred tax asset 2,233 2,199
---------- -------------
Total non-current assets 59,979 62,663
Current assets
Trade and other receivables 29,595 33,163
Lease receivables 45 141
Corporation tax asset 145 845
Cash and cash equivalents 8 9,847 12,360
---------- -------------
Total current assets 39,632 46,509
---------- -------------
Total assets 99,611 109,172
---------- -------------
Current liabilities
Trade and other payables (8,091) (10,049)
Accruals and contract liabilities 9 (9,993) (29,399)
Financial liabilities 10 - (61)
Current tax liabilities (949) (1,121)
Provisions - (17)
Lease liabilities (2,220) (1,328)
----------
Total current liabilities (21,253) (41,975)
Non-current liabilities
Financial liabilities 10 (27,219) (23,357)
Provisions (502) (446)
Lease liabilities (3,039) (4,654)
Deferred tax liability (2,100) (2,478)
---------- -------------
Total non-current liabilities (32,860) (30,935)
---------- -------------
Total liabilities (54,113) (72,910)
---------- -------------
Total net assets 45,498 36,262
========== =============
Equity
Ordinary shares 13 35,102 30,060
Share premium 15,552 10,863
Other reserves 3,359 4,824
Accumulated losses (8,859) (9,787)
---------- -------------
Equity attributable to the owners
of the parent 45,154 35,960
---------- -------------
Non-controlling interests 344 302
---------- -------------
Total equity 45,498 36,262
========== =============
Interim Consolidated Statement of Changes in Equity
for the six months ended 30 June 2023
Non-controlling
Ordinary Share Other Accumulated interests Total
shares premium reserves Losses Total equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
31 December 2021 20,682 255 4,572 (2,774) 22,735 269 23,004
(Loss)/profit for
the period - - - (3,300) (3,300) 21 (3,279)
Other comprehensive
income - - 418 - 418 - 418
----------- ---------- ----------- -------------- -------- ---------------- ---------
Total comprehensive
income/(expense)
for the period - - 418 (3,300) (2,882) 21 (2,861)
Shares issued for
cash 9,240 10,608 - (30) 19,818 - 19,818
Share options credit 117 - - 207 324 - 324
Acquisitions - - 1,576 - 1,576 - 1,576
----------- ---------- ----------- -------------- -------- ---------------- ---------
30 June 2022 (unaudited) 30,039 10,863 6,566 (5,897) 41,571 290 41,861
(Loss)/profit for
the period (4,195) (4,195) 12 (4,183)
Other comprehensive
expense (166) (166) (166)
----------- ---------- ----------- -------------- -------- ---------------- ---------
Total comprehensive
(expense)/income
for the period - - (166) (4,195) (4,362) 12 (4,350)
Shares issued for
cash - - - (9) (9) - (9)
Share options credit 21 - - 314 335 - 335
Acquisitions (1,576) - (1,576) (1,576)
----------- ---------- ----------- -------------- -------- ---------------- ---------
31 December 2022 30,060 10,863 4,824 (9,787) 35,960 302 36,262
Profit for the period - - - 701 701 42 743
Other comprehensive
(expense) - - (1,465) - (1,465) - (1,465)
----------- ---------- ----------- -------------- -------- ---------------- ---------
Total comprehensive
(expense)/income
for the period - - (1,465) 701 (763) 42 (721)
Shares issued for
cash 4,983 4,689 - (46) 9,626 - 9,626
Share options charge 59 - - 273 332 - 332
30 June 2023 (unaudited) 35,102 15,552 3,359 (8,859) 45,154 344 45,498
Interim Consolidated Cash Flow Statement
for the six months ended 30 June 2023
Unaudited Unaudited
6 months 6 months
ended ended
30 June 30 June
2023 2022
Note GBP'000s GBP'000s
Cash flows from operating activities
Cash (used by) operations 12 (2,836) (3,415)
Finance expenses paid (741) (232)
Finance income received 36 35
Income taxes paid (536) (915)
Net cash from operating activities (4,077) (4,527)
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired 82 (16,525)
Disposals of subsidiaries 502 -
Purchase of property, plant and equipment (292) (194)
Purchase of intangible assets (437) (93)
Net cash flow from investing activities (145) (16,812)
Cash flows from financing activities
Proceeds from issue of share capital (net of issue costs) 80 14,360
Proceeds from bank borrowings 5,000 4,500
Repayment of bank borrowings (1,500) -
Bank loan fees paid - (300)
Payments of lease liabilities (1,258) (1,607)
Dividends paid to non-controlling interests - (138)
Net cash flow from financing activities 2,322 16,815
Net (decrease) in cash, cash equivalents and bank overdrafts (1,900) (4,524)
Cash, cash equivalents and bank overdrafts at beginning of period 12,360 13,134
Effect of exchange rate changes on cash and cash equivalents (613) 662
---------- ----------
Cash, cash equivalents and bank
overdrafts at end of period 8 9,847 9,273
========== ==========
Notes to the interim financial statements for the six months
ended 30 June 2023
1. Accounting Policies
Basis of preparation
The condensed consolidated interim financial statements for the
six months ended 30 June 2023 have been prepared in accordance with
UK adopted International Accounting Standard 34, 'Interim Financial
Reporting'. These interim financial statements should be read in
conjunction with the Group's Annual Report and Accounts for the
year ended 31 December 2022, which 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.
The condensed consolidated interim 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 notes 8 and 9. As at 30 June 2023, the
Group had cash balances of GBP9,847,000, (including restricted cash
of GBP903,000) and undrawn bank facilities available of
GBP4,688,000, and was within its banking covenants.
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. The Directors have prepared a model to forecast
covenant compliance and liquidity to 31 December 2024 that includes
a base case and scenarios to form a severe but plausible downside
case.
The base case assumes growth in revenue and EBITDA based on the
Group's budget for the year ended 31 December 2023 and management
projections for the year ended 31 December 2024. The severe but
plausible case assumes a downside adjustment to revenue of 12.5%
throughout the period with only a 3% reduction in operating costs.
Under this scenario, management is satisfied of covenant compliance
throughout the going concern period.
The Directors consider that the Group and Company will have
sufficient liquidity within existing bank facilities, to meet its
obligations during the next 12 months and hence consider it
appropriate to prepare the condensed consolidated interim financial
statements on a going concern basis.
Following the Russian invasion of Ukraine, the Group has been
reviewing the future of its subsidiary in Russia (Ebiquity Russia
OOO) and has been in negotiations with a view to divesting its
75.01% shareholding in it. In view of the uncertainty regarding
this operation, an impairment provision was made at the year-end
against the value of its assets in the Group balance sheet. Its
cash balances are also deemed to be restricted cash and totalled
GBP0.9m at the end of the period. Details are provided in notes 3
and 7.
In the reporting of financial information, the Directors have
adopted various alternative performance measures ('APMs'). The
Group includes these non-GAAP measures as they consider them to be
both useful and necessary to the readers of the financial
statements to help understand the performance of the Group. The
Group's measures may not be calculated in the same way as similarly
titled measures reported by other companies and therefore should be
considered in addition to IFRS measures. The APMs are consistent
with how business performance is measured internally by the Group.
Details of the APMs and their calculation are set out on page
12.
2. Segmental reporting
In accordance with IFRS 8, the Executive Directors have
identified the operating segments based on the reports they review
as the chief operating decision-maker ('CODM') to make strategic
decisions, assess performance and allocate resources. The
definition of these segments was changed for reporting for 31
December 2022 and the operating segments are now deemed to be the
regional operations instead of the two global practices reported on
in previous years. The comparative segmental reporting for 30 June
2022 has been re-presented to reflect this change.
Certain operating segments have been aggregated to form four
reportable segments: UK & Ireland ("UK&I"), Continental
Europe, North America and Asia Pacific ("APAC").
The Group's chief operating decision -- makers assess the
performance of the operating segments based on revenue and
operating profit before highlighted items. This measurement basis
excludes the effects of non -- recurring expenditure recorded to
highlighted items from the operating segments such as restructuring
costs and acquisition related costs. The measure also excludes the
effects of recurring expenditure recorded to highlighted items such
as equity -- settled share -- based payments, purchased intangible
amortisation and transformation related costs. 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 period ended 30 June 2023 is as
follows:
Revenue
The FY22 Segmental Revenue has been re-presented to include the
impact of intercompany revenues. This is to provide a clearer
understanding of the margin performance of each segment.
--- Revenue Change Revenue
-----------------------
Re-presented
------------------------------- -------- ------------- -------------- -------------------
H1 2023 H1 2022 GBPm GBPm % FY 2022 GBPm
GBPm
------------------------------- -------- ------------- ------ ------
UK & Ireland 14.2 13.3 0.9 7% 26.3
Continental Europe 14.4 13.4 1.0 7% 26.4
North America 7.8 5.2 2.6 50% 12.7
APAC 4.3 4.8 (0.5) (11%) 9.7
Total Revenue from Continuing
Operations 40.6 36.7 3.9 11% 75.1
Operating Profit and Operating Margin
Adjusted Adjusted Adjusted Adjusted
Operating Operating Operating Operating
Profit margin Profit margin
H1 2023 H1 H1 H1 FY 2022 FY 2022
2022 2023 2022
------ ------ ------ -----------
GBPm GBPm % % GBPm %
------------------------------ ------ ------ -----------
UK & Ireland 3.7 2.9 26% 22% 6.6 25%
Continental Europe 4.6 4.4 32% 32% 6.3 24%
North America 1.0 0.0 13% -% 0.9 7%
APAC 0.4 0.8 9% 17% 1.8 19%
Unallocated (3.7) (3.2) (9%) (9%) (6.5) (9%)
Adjusted Profit - Continuing
Operations (1) 6.0 4.9 14.7% 13.2% 9.1 12%
------
Discontinued operations (0.1) 0.1 0.1
Total Group 5.9 5.0 14.6% 13.5% 9.3 12%
------
(1) Operating profit/(loss) before highlighted items means
adjusted operating profit/(loss)
A reconciliation of segment operating profit/(loss) before
highlighted items to total profit/(loss) before tax is provided
below:
Unaudited Unaudited
6 months 6 months
ended ended
30 June 2023 30 June 2022
(re-presented)
GBP'000 GBP'000
Reportable segment operating profit before
highlighted items 9,607 8,091
Unallocated costs:
Staff costs (2,315) (2,134)
Property costs (356) (560)
Exchange rate movements (266) 309
Other administrative expenses (703) (839)
Operating profit before highlighted items 5,967 4,867
Highlighted items (note 3) (3,589) (6,022)
------------------------- -------------------
Operating profit/(loss) 2,378 (1,155)
Net finance costs (956) (217)
------------------------- -------------------
Profit/(loss) before tax - continuing
operations 1,422 (1,372)
Profit before tax - discontinued operations
(note 5) 175 70
------------------------- -------------------
Profit/(loss) before tax 1,597 (1,302)
========================= ===================
3. Highlighted items
Highlighted items comprise items that are highlighted in the
income statement because separate disclosure is considered relevant
in understanding the performance of the business.
Unaudited Unaudited
6 months 6 months
ended ended
30 June 2023 30 June 2022
(re-presented)
GBP'000 GBP'000
Share option charge 307 190
Amortisation of purchased intangibles 1,701 373
Impairment of Ebiquity Russia OOO (53) 365
Post-acquisition remuneration charges
contingent on performance 333 3,436
Acquisition, integration, and strategic
costs 623 1,657
Transformation costs 678 -
Total highlighted items before tax 3,589 6,022
Taxation (credit) (572) (23)
-------------- ----------------
Total highlighted items after tax - continuing
operations 3,017 5,999
-------------- ----------------
Highlighted items - discontinued operations (248) 16
-------------- ----------------
Total highlighted items 2,769 6,015
-------------- ----------------
The share option charge reflects the expense for the period
arising from the cost of share options granted at fair value,
recognised over the vesting period. For the period ended 30 June
2023, a charge of GBP307,000 (30 June 2022: GBP190,000) was
recorded.
The amortisation charge for purchased intangible assets
increased significantly in the period to GBP1,701,000 (30 June
2022: GBP373,000) due to the addition of intangible assets through
the acquisitions of Media Management, LLC (MMi) and Media-Path
which completed in Q2 2022. These assets include customer
relationships of acquired entities, owned software (MMi's Circle
Audit system) and Media-Path's GMP licence asset.
An impairment credit of GBP53,000 (30 June 2022: charge of
GBP365,000) has been made to reflect the adjustment to the planned
divestment of the Group's majority stake in Ebiquity Russia OOO for
a nominal value. This comprises a credit adjustment of GBP96,000
against the Group's share (75%) of the total assets excluding cash
partially offset by a charge to further impair goodwill by
GBP43,000.
A final accrual of GBP333,000 (30 June 2022: GBP3,436,000) has
been made for post-date remuneration which was settled in May 2023
relating to the acquisition of Digital Decisions B.V. in 2020. The
total amount paid was GBP16.1 million.
The acquisition, integration, and strategic costs of GBP623,000
(30 June 2022: GBP1,657,000) comprise a revision to the discounting
of the deferred contingent consideration payable for the MMi earn
out payable in 2025 of GBP218,000, project costs of GBP335,000, and
onerous lease costs of GBP70,000 relating to a charge payable to
terminate the Chicago lease early in September 2023.
The remaining costs of GBP678,000 within the continuing business
are transformation costs. As previously communicated, the Group is
in the process of undertaking a transformation and integration
programme to firstly, rationalise its product portfolio and
optimise the use of newly acquired technologies and secondly, move
from a regional to a global delivery model. In addition, the
integration, alignment and streamlining of delivery and planning
methodologies throughout the organisation are in progress. This
follows the acquisition of MMi and Media-Path in April 2022.
Significant workstreams are underway to support this
transformation. Whilst these workstreams involve a large number of
the employees throughout the organisation, there are a number of
core individuals who are fundamental in delivering specific
workstreams. These individuals have largely been taken out of their
regional delivery and management roles to focus on the
transformation workstreams and will return to a newly created role
within the new global specialisms that they have been responsible
for implementing. The costs highlighted are therefore not "one-off"
in nature, though the workstreams are. We have determined to
separate through highlighted items the proportionate costs of
individuals who are spending the majority of their time on these
transformation workstreams and in H1 2023, this was 9 employees
with a total cost of GBP526,000. In addition, training and events
costs to brief and educate employees of their new roles within the
new global specialisms totalled GBP152,000. These transformation
costs, in total GBP678,000, have been classified as highlighted
items.
As previously communicated this has been planned as a three year
transformation programme scheduled to run to the end of 2025, with
the majority of costs incurred in 2023 and 2024. Savings are
expected to commence during the second half of 2024 and operating
efficiency savings totalling GBP5 million on an annualised basis
are expected to be delivered by the end of 2025.
The costs within discontinued operations represents the
highlighted items after tax for the disposal of the Digital Balance
Australia Pty Limited. Included within this balance is the profit
on disposal of GBP213,000, amortisation of intangibles of GBP10,000
(30 June 2022: GBP21,000) and movement in deferred tax on the
purchased intangibles attributable to the discontinued operation of
GBP(45,000) (30 June 2022: GBP(5,000).
4. Earnings per share
The calculation of basic and diluted earnings per share is based
on the following data:
Unaudited 6 months ended Unaudited 6 months ended
30 June 2023 30 June 2022 (re-presented)
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 profit
attributable
to equity holders of the
parent 534 167 701 (3,347) 47 (3,300)
Adjustments:
Impact of highlighted
items (net of tax) (1) 3,015 (248) 2,768 5,999 16 6,015
----------- ------------ ----------- ---------- ------------ ----------
Earnings for the purpose
of adjusted earnings per
share (2) 3,549 (81) 3,469 2,652 63 2,715
Number of shares:
The weighted average number
of shares during the period
- basic 120,801,928 120,801,928 120,801,928 97,616,982 97,616,982 97,616,982
- dilutive effect of share
options 3,450,356 3,450,356 3,450,356 1,247,599 1,247,599 1,247,599
--------------------------------- ----------- ------------ ----------- ---------- ------------ ----------
- diluted 124,252,284 124,252,284 124,252,284 98,864,580 98,864,580 98,864,580
--------------------------------- ----------- ------------ ----------- ---------- ------------ ----------
Basic earnings/(loss)
per share 0.44p 0.14p 0.58p (3.43)p 0.05p (3.38)p
Diluted earnings/(loss)
per share 0.43p 0.13p 0.56p (3.43)p 0.05p (3.38)p
Adjusted basic earnings/(loss)
per share (2) 2.94p (0.07)p 2.87p 2.72p 0.06p 2.78p
Adjusted diluted earnings/(loss)
per share (2) 2.86p (0.07)p 2.79p 2.68p 0.06p 2.75p
--------------------------------- ----------- ------------ ----------- ---------- ------------ ----------
(1) Highlighted items (see note 3), stated net of their total
tax and non-controlling interest impact.
(2) Adjusted means before highlighted items.
5. Discontinued Operations
During the period, the Group agreed to dispose of its subsidiary
Digital Decisions Australia Pty Limited for gross consideration of
A$891,000 (GBP502,000). This disposal was completed on 6 April
2023. The results of this division have been presented within
discontinued operations as appropriate.
The table below summarises the income statement for the
discontinued business unit for both the current and the prior
period:
6 months 6 months
ended ended
30 June 30 June 2022
2023
GBP'000 GBP'000
----------------------------------------- --------- -------------
Revenue 113 526
Project-related costs - -
----------------------------------------- --------- -------------
Net Revenue 113 526
Staff costs (100) (310)
Other operating expenses (37) (122)
----------------------------------------- --------- -------------
Operating (loss)/profit (24) 94
Finance income - -
Finance expenses (4) (3)
----------------------------------------- --------- -------------
Net finance costs (4) (3)
----------------------------------------- --------- -------------
(Loss) profit before highlighted items (28) 91
----------------------------------------- --------- -------------
Highlighted items 203 (21)
----------------------------------------- --------- -------------
Profit before tax 175 70
Tax (8) (23)
----------------------------------------- --------- -------------
Net profit from discontinued operations 167 47
----------------------------------------- --------- -------------
Below is a table summarising the cash flows from continued and
discontinued operations:
Period ended Period ended
30 June 30 June
2023 2022
GBP'000 GBP'000
----------------------------------------------------- ------------- -------------
Net cash from operating activities - continuing
operations (3,606) (4,556)
Net cash from operating activities - discontinued
operations (471) 29
----------------------------------------------------- ------------- -------------
Total net cash generated from operating activities (4,077) (4,527)
----------------------------------------------------- ------------- -------------
Net cash used in investment activities - continuing
operations (647) (16,812)
Net cash generated from investment activities
- discontinued operations 502 -
----------------------------------------------------- ------------- -------------
Total net cash used in investment activities (145) (16,812)
----------------------------------------------------- ------------- -------------
Net cash generated by financing activities
- continuing operations 2,322 16,815
Net cash generated by financing activities - -
- discontinued operations
----------------------------------------------------- ------------- -------------
Total net cash generated by financing activities 2,322 16,815
----------------------------------------------------- ------------- -------------
Net decrease in cash and cash equivalents -
continuing operations (1,931) (4,553)
Net increase in cash and cash equivalents -
discontinued operations 31 29
----------------------------------------------------- ------------- -------------
Net decrease in cash and cash equivalents (1,900) (4,524)
----------------------------------------------------- ------------- -------------
Below is a table summarising the details of the sale of the
subsidiary:
Period ended Period ended
30-Jun-23 30-Jun-22
-------------------------------------- ------------- -------------
Cash received or receivable:
Cash 502 -
Decease of consideration - -
-------------------------------------- -------------
Total disposal consideration 502 -
Carrying amount of net assets sold 30 -
Costs to sell - current year 259 -
-------------------------------------- ------------- -------------
Total 289 -
-------------------------------------- -------------
Gain on sale before income tax 213 -
Income tax charge on gain (8) -
-------------------------------------- ------------- -------------
Gain on sale after income tax 205 -
Costs to sell - prior year - -
-------------------------------------- ------------- -------------
Gain on sale after income tax - total 205 -
6. Goodwill
GBP'000
Cost
At 1 January 2023 52,965
Acquisitions (1) (143)
Disposals (1,752)
Foreign exchange differences (1,062)
At 30 June 2023 50,008
===================
Accumulated impairment
At 1 January 2023 (9,874)
Impairment (44)
Disposals 1,722
Foreign exchange differences 519
-------------------
At 30 June 2023 (7,677)
===================
Net book value
At 30 June 2023 42,331
-------------------
At 31 December 2022 43,091
===================
(1) An adjustment of GBP143,000 was made to the goodwill balance
on finalisation of the acquisition accounting of MMi which was
provisional at the time of the December 2022 financial
statements.
7. Other intangible assets
Capitalised Purchased Total
development intangible intangible assets
costs Computer software assets (1)
GBP'000s GBP'000s GBP'000s GBP'000s
Cost
At 1 January 2023 9,489 2,531 27,397 39,417
Additions 460 337 - 797
Impairment - 3 - 3
Disposals - - (420) (420)
Foreign exchange (273) (21) (443) (737)
------------- ------------------ ------------ -------------------
At 30 June 2023 9,676 2,850 26,534 39,060
============= ================== ============ ===================
Amortisation
At 1 January 2023 (6,187) (2,502) (17,952) (26,641)
Charge for the period - continuing operations
(2) (575) (17) (1,701) (2,293)
Charge for the period - discontinued operations - - (10) (10)
Impairment - (2) - (2)
Disposals - - 248 248
Foreign exchange 223 20 419 662
------------- ------------------ ------------ -------------------
At 30 June 2023 (6,539) (2,501) (18,996) (28,036)
============= ================== ============ ===================
Net book value
At 30 June 2023 3,137 349 7,538 11,024
============= ================== ============ ===================
At 31 December 2022 3,302 29 9,445 12,777
============= ================== ============ ===================
1 Purchased intangible assets consist principally of customer
relationships with a typical useful life of three to 10 years.
(2) Amortisation is charged within administrative expenses 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.
8. Cash, cash equivalents, bank overdrafts and restricted
cash
Cash, cash equivalents, and bank overdrafts include the
following for the purposes of the cash flow statement:
30 June 31 December
2023 2022
GBP'000 GBP'000
Cash and cash equivalents 8,944 11,311
Restricted cash (1) 903 1,049
-------- ------------
Cash, cash equivalents and bank
overdrafts (2) 9,847 12,360
-------- ------------
(1) Cash and cash equivalents of GBP903,000 (31 December 2022 -
GBP1,049,000) are held in Ebiquity Russia OOO with restrictions on
remittances to certain countries. These balances may not be readily
available to the wider Group but can be used to meet Ebiquity
Russia OOO's obligations within Russia as they fall due.
(2) The main contributors leading to the reduction in the bank
balance in the period are due to the cash element of the post-date
remuneration paid in May 2023 relating to the 2020 acquisition of
Digital Decisions BV and also due to the loan repayment of
GBP1,500,000 in June 2023.
9. Accruals and Contract liabilities
30 June 31 December
2023 2022
GBP'000 GBP'000
Accruals (1) 4,352 21,316
Contract liabilities 5,641 8,083
-------- ------------
Accruals and Contract liabilities 9,993 29,399
======== ============
(1) The significant reduction in the accruals balance in the
period is chiefly due to the settlement of the Digital Decisions BV
post-date remuneration in May 2023. The final amount settled
amounted to GBP16.1m, being settled in a combination of cash and
shares.
10. Financial liabilities
30 June 31 December
2023 2022
GBP'000 GBP'000
Current
Loan Fees(1) - -
Deferred contingent consideration(2) - 61
------------- -----------------
- 61
Non-Current
Bank borrowings 25,000 21,500
Loan Fees(1) (185) (265)
Deferred contingent consideration(2) 2,404 2,122
------------- -----------------
27,219 23,357
------------- -----------------
Total financial liabilities 27,219 23,418
============= =================
(1) Loan fees were payable on amending the banking facility and
are being recognised in the income statement on a straight-line
basis until the maturity date of the facility in March 2025.
(2) Deferred contingent consideration relates to the acquisition
of MMi.
Bank
borrowings Deferred contingent Consideration Total
GBP'000 GBP'000 GBP'000
At 1 January 2023 21,235 2,183 23,418
Paid (1,500) (60) (1,560)
Discounting charged to the income statement - 218 218
Charged to income statement 80 - 80
Borrowings 5,000 - 5,000
Foreign exchange recognised in the translation
reserve - 63 63
------------ ------------------------------------ --------
At 30 June 2023 24,815 2,404 27,219
============ ==================================== ========
All bank borrowings are held jointly with Barclays and NatWest.
The current revolving credit facility ("RCF") facility was agreed
in March 2022 and runs for a period of three years to March 2025,
extendable for up to a further two years with a total commitment of
GBP30 million. GBP25.0 million had been drawn as at 30 June 2023
(30 June 2022: GBP21.5 million). Under this agreement, annual
reductions in the facility of GBP1.25 million will apply in
quarterly instalments from June 2023, therefore the available
facility as at 30 June 2023 is reduced from GBP30.0 million to
GBP29.7 million. The remainder of any drawings is repayable on the
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. The quarterly covenants to be applied since June 2022
are: interest cover > 4.0x; adjusted leverage <2.5x and
adjusted deferred consideration leverage < 3.5x.
Loan arrangement fees accrued in the period of GBP185,000 (30
June 2022: GBP265,000) are offset against the term loan and are
being amortised over the period of the loan.
The facility bears variable interest at Barclays Bank SONIA rate
plus a margin ranging from 2.60% to 3.00%, depending on the Group's
net debt to EBITDA ratio. During the first six months of the
facility, the margin was fixed at 3.0%, it was reduced to 2.8%
effective March 2023 as a result of the covenant assessment for
December 2022.
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, Australia, Germany, Denmark and
Sweden.
Deferred 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 2025. The
consideration payable is determined with reference to the
performance of the North American business for the year ended 31
December 2024.
11. Dividends
No dividend was paid in respect of the year ending 31 December
2022. No dividend is being declared for the six months ended 30
June 2023. Dividends were paid to non-controlling interests as
shown in the consolidated statement of changes in equity.
12. Cash generated from operations
Unaudited Unaudited
6 months 6 months
ended ended
30 June 30 June
2023 2022
(re-presented)
---------- ----------------
GBP'000 GBP'000
Profit/(loss) before taxation 1,422 (1,372)
Adjustments for:
Depreciation 1,109 1,367
Amortisation (note 6) 2,293 944
Gain on disposal - 4
Settlement of post-date remuneration (6,448) -
Unrealised foreign exchange gain 45 (37)
Impairment of goodwill & Intangibles (53) 365
Share option charge 273 207
Finance income (36) (35)
Finance expenses 1,009 503
Contingent consideration revaluations 550 3,436
---------- ----------------
164 5,382
Decrease/(increase) in trade and other
receivables 2,982 (6,062)
(Decrease) in trade and other payables
(including accruals and contract liabilities) (5,546) (2,754)
Movement in provisions 35 (10)
---------- ----------------
Cash generated from operations - continuing
operations (2,365) (3,444)
Cash generated from operations - discontinued
operations (471) 29
---------- ----------------
Cash generated from operations (2,836) (3,415)
13. Share Capital
Nominal
Number value
of shares GBP'000
------------------------------------------ ------------ --------
Allotted, called up, and fully paid
------------------------------------------ ------------ --------
At 31 December 2021 - ordinary shares of
25p 82,728,890 20,682
Shares issued 36,958,789 9,240
Share options exercised 553,502 138
------------------------------------------ ------------ --------
At 31 December 2022 - ordinary shares of
25p 120,241,181 30,060
Shares issued 19,929,502 4,983
Share options exercised 236,083 59
------------------------------------------ ------------ --------
At 30 June 2023 - ordinary shares of 25p 140,406,766 35,102
------------------------------------------ ------------ --------
As at 30 June 2023, the Company's issued share capital consisted
of 140,406,766 Ordinary Shares, carrying one vote each. The
Company's Employee Benefit Trust holds 4,200,000 issued ordinary
shares to satisfy awards under the Company's share option scheme
and the trustee has agreed not to vote the ordinary shares held by
it. As such, 4,200,000 Ordinary Shares are treated as not carrying
voting rights. Therefore, the total voting rights in the Company as
at that date were 136,206,766.
During the period, 19,929,502 shares were issued to the previous
owners of Digital Decisions BV as partial settlement of the
post-date remuneration.
INDEPENT REVIEW REPORT TO EBIQUITY PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the interim results announcement for the
for six months ended 30 June 2023 which comprises the income
statement, the balance sheet, the statement of changes in equity,
the cash flow statement and related notes 1 to 13 .
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the interim results announcement for the six months ended 30
June 2023 is not prepared, in all material respects, in accordance
with United Kingdom adopted International Accounting Standard 34
and the AIM Rules of the London Stock Exchange.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council for use in the
United Kingdom (ISRE (UK) 2410). A review of interim financial
information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with United Kingdom adopted
international accounting standards . The condensed set of financial
statements included in this interim results announcement has been
prepared in accordance with United Kingdom adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
Conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This Conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410; however future events or conditions
may cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the interim results
announcement for the six months in accordance with the AIM rules of
the London Stock Exchange.
In preparing the interim results , the directors are responsible
for assessing the group's ability to continue as a going concern,
disclosing as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors
either intend to liquidate the company or to cease operations, or
have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the interim results announcement , we are
responsible for expressing to the company a conclusion on the
condensed set of financial statements in the interim results
announcement. Our Conclusion, including our Conclusion Relating to
Going Concern, are based on procedures that are less extensive than
audit procedures, as described in the Basis for Conclusion
paragraph of this report.
Use of our report
This report is made solely to the company in accordance with
ISRE (UK) 2410. Our work has been undertaken so that we might state
to the company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company, for our review work, for this
report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
28 September 2023
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END
IR PPUBPBUPWPPR
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