TIDMSAA
RNS Number : 5620D
M&C Saatchi PLC
30 June 2021
30 June 2021
M&C SAATCHI PLC
(the "Company")
Unaudited results for the year ended 31 December 2020 and
trading update
The Company today announces its unaudited results for the year
ended 31 December 2020. The Company demonstrated resilience and
agility in a challenging environment during 2020 and announces that
trading is ahead of expectations for the first five months of
2021.
Key Updates
-- 2020 Headline profit before tax GBP8.3m (2019: GBP17.2m).
Ahead of expectations, reflecting strong client retention and new
business performance.
-- Headline Operating profit margin 5.3% (or over 7.5% excluding
losses from entities that were disposed of/divested); H1 2021
current run rate 10%+.
-- Strong client retention and new business performance. New
appointments and assignments from clients including Tik Tok, Lexus,
HM Government and Tinder.
-- Net cash: GBP33.0m (2019: GBP16.6m). A new three year GBP47m
revolving credit facility with National Westminster Bank plc and
Barclays Bank PLC was agreed post year end.
-- Simplification programme: 34% reduction in the number of operating units 2019-2021.
-- Business transformation programme including new divisional
structure introduced in 2021 delivering strong digital growth.
-- Trading ahead of expectations for first five months of 2021.
Half year Headline profit before tax expected to be in excess of
GBP10m.
-- Management expects full year results to be ahead of consensus.
-- Potential to reduce dilution from future share issues from c.19% to c.5%.
Financial results for the year to 31 December 2020
Headline* Statutory
------------------------ -------------------------- -------------------------
GBPm 2020 2019 **** Movement 2020 2019 Movement
restated
Net revenue
** 225.4 256.4 -12.1% - - -
Operating profit/(loss) 12.0 19.5 -38.5% (4.9) (11.0) 55.2%
Operating profit/(loss)
margin 5.3% 7.6% -2.3pt -2.2% -4.3% +2.1pt
Profit/(loss)
before taxation 8.3 17.2 -51.5% (8.5) (8.6) 1.1%
Profit/(loss)
for the year 5.0 11.9 -57.6% (9.9) (11.8) 15.9%
Earnings *** 1.6 7.0 -77.0% (7.7) (13.1) 41.0%
Earnings/(loss)
per share 1.5p 7.7p -80.3% (8.6p) (13.1)p 34.4%
Net cash 33.0 16.6 99.0%
*The Headline results reflect the underlying profitability of
the business units by excluding exceptional items; the amortisation
or impairment of intangible assets (including goodwill and acquired
intangibles, but excluding software) acquired in business
combinations; changes to contingent consideration and other
acquisition related charges taken to the income statement;
impairment of investments in associates and right-of-use assets;
gain or loss on disposal of associates and subsidiaries;
revaluation of investments in relation to SaatchInvest and their
related costs; and the income statement impact of put option
accounting and share-based payment charges.
** Net revenue is excluded from Statutory results due to it not
being a defined term in IFRS.
*** Earnings are calculated after deducting the share of profits
attributable to non-controlling interests.
**** 2019 Headline operating profit restated (reduced) by
GBP1.1m as a result of put option schemes being reclassified as
bonuses, previously reported as equity settled schemes. Refer to
Note 19 of the unaudited consolidated non-statutory financial
statements.
Commenting on the 2020 results, Gareth Davis, Chairman:
"I am pleased to report that 2020 proved to be a year of
resilient business performance. Whilst the Covid-19 pandemic
disrupted all of our lives, both personally and professionally, the
business rose to the challenge. We aggressively addressed the need
to simplify the Group's operating structure. We drove efficiencies
through a robust cost reduction programme. We strengthened the
business through the introduction of greater central controls, new
processes and systems.
These measures, together with a focus on corporate governance
and the introduction of a new strategy have laid firm foundations
for renewed growth in the coming year".
Commenting on current performance and outlook, Moray MacLennan,
Chief Executive Officer:
"2020 was undoubtedly a watershed year for the Company. We went
into the year confronted by Covid-19 and ended with a new strategy
and the unswerving support of the Group's employees and a new
structure in place for 2021.
The resilience of the Company and our people was reflected in
the outstanding client retention across 2020. Our agility allowed
us to quickly adapt to the new market conditions (including an even
greater focus on digital) and enabled the swift implementation of
our new strategy.
This is delivering a positive performance in the first five
months of 2021, so we anticipate being ahead of consensus for the
full year. Profit in all five of the new divisions has grown in
2021 through meeting new client demands in the new digital
landscape.
This initial success and our continued focus on innovation,
technology and data, combined with creativity, which is at our
core, gives us confidence for the remainder of the year and
beyond".
For further information please call:
M&C Saatchi Plc +44 (0)20-7543-4500
Moray MacLennan, Mickey Kalifa
Tulchan Communications +44 (0)20-7353-4200
Tom Murray, Matt Low, Hollie
Ralston
Numis Securities +44 (0)20-7260-1000
Nick Westlake, Hugo Rubinstein,
NOMAD
Charles Farquhar, Corporate
Broking
Liberum +44 (0)20-3100-2000
Neil Patel, Benjamin Cryer,
Edward Phillips, Will King
Chairman and Chief Executive Statement
2020 Performance
2020 was a year when the Company simplified its operations, grew
client relationships and demonstrated extraordinary resilience.
We saw unprecedented trading conditions, with many clients
worldwide reducing or cancelling their marketing spend. While there
was a 12% reduction in Group net revenue, swift action on costs
protected profitability so that the operating profit margin
reduction was only 2 percentage points. Encouragingly, underlying
margin for 2020, excluding losses from entities that were disposed
of/divested, was over 7.5%. This provided a strong platform for
continued business transformation.
Key Themes:
Simplification:
Simplification was made a key priority. Twenty operating
entities were sold, closed or merged.
The process has continued in 2021 and the number of operating
entities has now been reduced by 34% compared to 2019 year end.
Losses in Spain and France were reduced through taking our
shareholding to minority status. This allows us to continue to have
a meaningful presence for international assignments, but de-risks
for the future.
In Singapore, plans for a fundamental restructure were drawn up,
to be implemented in 2021.
We combined our advertising and CRM agencies into a single, more
relevant offering for clients in the new digital landscape. The
combined business, under new leadership, delivered a turnaround in
profit.
Additionally, we merged our different PR agencies into a single,
global capability.
Our marketing consultancy business unified its UK and US
operations to improve efficiencies.
Resilience:
Corporate Governance: Substantial progress has been made to
comply fully with the UK Corporate Governance Code 2018. New
financial systems and personnel have laid the foundations for a
better-controlled and managed Group.
One of the Company's priorities was the management of cash and
liquidity. We are pleased to say that we excelled in this regard,
with year-end cash being significantly ahead of expectations - net
cash of GBP33.0m, twice the level of the previous year.
We received approximately GBP1m of furlough payments in the UK,
which have now voluntarily been returned in full to HMRC.
Further centralisation across our HR function will accelerate
the move from a federation of local operations to a more unified
global Group through the introduction of new policies, procedures
and platforms.
Covid-19 Response: The Company responded with agility to the
crisis. M&C Saatchi Sport & Entertainment was hit hard by
the cancellation of events but had a near perfect record in terms
of client retention and new business conversion. Critically, it
pivoted from a live event landscape to one entirely digitally
focused.
Significant contracts were secured from health authorities
across the globe to help combat the Covid-19 crisis, including the
UK, Australia and a number of developing markets.
Our Talent and Influencer businesses continued to perform
strongly by capitalising on the accelerated demand for online
content.
Our Global & Social Issues business continued to see strong
demand in the Covid-19 environment and grew revenues.
Our Performance Media business benefited from continued online
growth to deliver strong results.
Industry Awards & Accolades included: M&C Saatchi Sport
& Entertainment, Agency of the Year; M&C Saatchi
Performance, Media Buying Agency of the Year; M&C Saatchi
Milan, Agency of the Decade; M&C Saatchi Indonesia, Digital
Agency of the Year.
Client growth:
Deepening Client Relationships: Client retention was very
strong. The scope of work from existing clients was successfully
extended. Examples include new assignments from: UK Government,
Costa, O2, Homebase, Yum Foods across GCC, Nandos in South Africa
and Woolworths, Commonwealth Bank and Optus in Australia.
Strong new business performance. New clients included:
UK & Europe: Census 2021, COP26, Barclays, Kia, TikTok,
Hello Fresh, Care International.
Tele2, Fortum, Polaroid.
Africa / Middle East Standard Bank, TikTok, Astron Energy,
Telkom, Wizz Air.
Asia: Indonesia Tourism Ministry, BP Castrol, Tinder, Grab.
Australia: Victoria State Government, World Vision, Domain,
Origin Energy, Maurice Blackburn.
US: The Biden-Harris campaign, NFL, Anheuser Busch, Weather
Channel, Iceland Tourism.
Sustainability & ESG:
The Company's mission of driving Meaningful Change has been
applied to our own actions for Environmental and Social Governance
(ESG) under two key pillars: Planet and People.
In addition to established environmental credentials that have
resulted in our headquarters running on 100% renewable electricity,
2020 saw full implementation of the UK Government's Streamlined
Energy and Carbon Reporting (SECR) Policy disclosing energy use and
associated greenhouse gas (GHG) emissions from London, our global
HQ and largest global footprint.
The Company also launched a number of initiatives to lead the
advancement of our industry's need to actively embrace diverse
talent. Open House was a first in creating access to industry
knowledge and employment experience via a virtual education
programme for 1,500 trainees in every corner of the world, over
eight weeks. Additionally, Mentor Black Business was established to
help black businesses thrive, giving access to the best industry
experience. 500 black-owned SMEs registered, accessing over 1,500
mentors. It was supported by major corporations such as Google,
Lloyds, and Goldman Sachs.
Work we created for clients to address these issues included:
International Solar Alliance in the UK, Cisco's global conservation
campaign, and Haven Shelter in South Africa.
Financial Performance by Region:
UK
-- Like-for-like net revenue in the UK declined by 14% (2020: GBP88.9m 2019: GBP103.2m).
-- Headline operating profit was up 21% (2020: GBP16.4m 2019: GBP13.5m).
-- Headline operating costs decreased by 19%.
Europe
-- Like-for-like net revenue in Europe declined by 7% (2020: GBP28.4m 2019: GBP30.5m).
-- Headline operating profit declined by 51% (2020: GBP1.5m 2019: GBP3.0m).
-- Headline operating costs reduced by 2%.
Middle East and Africa
-- The Middle East and Africa region performed well.
Like-for-like net revenue was down by just 6% (2020: GBP15.6m 2019:
GBP16.6m).
-- Headline operating profit declined by 55% (2020: GBP0.7m 2019: GBP1.5m).
-- Headline operating costs remained flat.
Asia
-- Like-for-like net revenue declined by 25% (2020: GBP10.5m 2019: GBP13.9m).
-- Headline operating profit reduced by 287% (2020: -GBP0.8m 2019: GBP0.4m).
-- Headline operating costs reduced by 10%.
Australia
-- Like-for-like net revenue declined by 6% (2020: GBP47.4m 2019: GBP50.6m).
-- Headline operating profit reduced by 41% (2020: GBP3.1m 2019: GBP5.2m).
-- Headline operating costs reduced by 12%.
Americas
-- Like-for-like net revenue declined by 17% (2020: GBP34.6m 2019: GBP41.6m).
-- Headline operating profit reduced by 19% (2020: GBP2.5m 2019: GBP3.1m).
-- Headline operating costs reduced by 12%.
2021 trading and outlook
Strong financial performance in 2021 to date:
-- Strong growth in net revenue and Headline profit before tax
in the first five months of 2021.
-- Headline operating margin for the first five months exceeds 10%.
-- Headline profit before tax for the first six months is
expected to be around GBP10m (H1 2020: GBP2m).
-- Strong performance across all divisions driven by new
business wins against a more positive market backdrop, especially
in recent weeks.
-- Continued balance sheet strength, with net cash of GBP32m as at 31 May 2021.
Full year 2021:
-- Net revenue, Headline profit before tax and Headline earnings
projected to end year ahead of consensus.
-- Strength of H1 performance may not be fully matched in H2.
-- A very positive first five months of the year, but the market
remains fluid and with limited visibility.
A new strategy and operating model were introduced in January
2021, the three key elements of which were:
-- A move from being primarily a local and siloed group to one
that is connected across disciplines and geographies, fuelled by
data and technology.
-- A new proposition: to navigate, create and lead Meaningful Change.
-- Restructure: simplify into five new divisions to make the
Group easier to understand, operate and grow with. These divisions
to be fuelled by enhanced technology, digital proficiency, data
capabilities and sustainability expertise.
The five new divisions are:
-- Connected Creativity: The application of marketing science
and creativity to solve complex problems in the digital landscape -
across PESO (paid, earned, shared and owned) channels.
-- Brand, Experience and Innovation: Transformative digital experience, design and innovation.
-- Performance Media: Connecting brands with today's connected customers.
-- Passion Marketing: Connecting brands direct to consumers through their passions.
-- Global and Social Issues: Driving critical global and social
change. Protecting the planet, transforming lives for the
better.
All five divisions are trading ahead of the Company's forecast
at the beginning of 2021, having been successfully positioned to
capitalise on the increasingly digital market.
New business wins and new assignments from existing clients
include: Victoria State Government, Sonos, Commonwealth Bank,
McCain and Campbell's.
Looking forward, we see the opportunity to apply our digital
expertise and investment in new capabilities, to capitalise on the
following certainties:
-- The accelerated pattern of digital transformation established
during 2020 will continue. Marketeers will respond to people's
deepening relationship with technology and their full immersion in
a digital world. This goes beyond e-commerce to encompass every
aspect of consumers' lives, including healthcare, well-being,
leisure, education, personal interactions and relationships. The
new strategy positions the Company to deliver modern creativity in
this digital world.
-- The inexorable rise of direct to consumer (D to C) will be a
focus for our Connected Creativity Division. In this brutally
competitive Darwinian market, a brand needs to be desirable and
trusted in order to survive. This requires brilliant creative
platforms built on data-driven insight. To thrive, brands need
connected and relevant digital experience delivery through customer
experiences (CX) and precision marketing. We will further invest in
e-commerce expertise to build on our existing global capabilities.
We will continue to excel in paid, earned, shared and owned
channels.
-- ESG will move to the very centre of marketing plans at high
speed. Whilst the vast majority state it as a priority, 50% of CMOs
are at the beginning of placing sustainability at the heart of
their plans and are looking for resource and expertise in order to
do so. We will be investing in growing this expertise with
announcements in the coming months.
The Group will also continue to invest in its data capabilities.
Data analytics will sit at the heart of the Company and will
continue to enhance excellence; pan division, agency and
territory.
Fluency, our data consultancy, launched at the beginning of 2021
and is already working across all five divisions. New clients
include Volvo, The National Trust, Thames Water and Bio
Healthcare.
2020 Financial Review
Financial key performance indicators
The Group manages its operational performance through a number
of financial key performance indicators. These are stated below
with the comparative key performance indicators for 2019.
Headline Statutory
GBPm 2020 2019 restated Movement 2020 2019 Movement
***
Net revenue
* 225.4 256.4 -12.1% - - -
Operating profit/(loss) 12.0 19.5 -38.5% (4.9) (11.0) 55.2%
Operating profit/(loss)
margin 5.3% 7.6% -2.3pt -2.2% -4.3% +2.1pt
Profit/(loss)
before taxation 8.3 17.2 -51.5% (8.5) (8.6) 1.1%
Profit/(loss)
for the year 5.0 11.9 -57.6% (9.9) (11.8) 15.9%
Earnings ** 1.4 7.0 -77.0% (7.7) (13.1) 41.0%
Earnings/(loss)
per share 1.5p 7.7p -80.3% (8.6p) (13.1)p 34.4%
Net cash 33.0 16.6 99.0%
* Net revenue (revenue less project cost / direct cost) is
excluded from Statutory results due to it not being a defined term
in IFRS.
** Earnings are calculated after deducting the share of profits
attributable to non-controlling interests.
*** 2019 Headline profit restated (reduced) by GBP1.1m as a
result of put option schemes being reclassified as bonuses,
previously reported as equity settled schemes. Refer to Note 19 of
the unaudited consolidated non-statutory financial statements.
Headline results
To better assist the readers' understanding of the underlying
performance of the business, the commentary concentrates on the
Headline measures used by the Board to assess the underlying
profitability of the Group. These Headline figures are alternative
performance measures that the Board considers provide an
appropriate basis to manage the business, to monitor its results on
a day-to-day basis, enable comparability with industry peers and
like for like year on year on comparisons. Headline measures
exclude all accounting charges related to acquired equity, put
options and passive investments.
The Headline results also make like-for-like year-on-year
comparisons more understandable and more closely correlate with the
cash and working capital position of the Group. The following items
are excluded from Headline results:
-- Exceptional items;
-- Amortisation and impairment of intangible assets (including
goodwill and acquired intangibles, but excluding software) acquired
in business combinations;
-- Changes to contingent consideration and other acquisition
related charges taken to the income statement;
-- Impairment of investment in associates;
-- Profit and loss on disposal of subsidiaries and associates;
-- Furlough monies received in 2020 that were repaid in 2021;
-- Revaluation of unlisted investments in relation to SaatchInvest and their related costs;
-- The income statement impact of put option accounting and share-based payment charges.
2020 Trading
The Group experienced a sharp reduction in net revenue in the
first three months of the year, reporting a Headline operating loss
of GBP(2.2)m in that initial three-month period. By taking action
to reduce the cost base early in the year, the Group was able to
mitigate the impact of the reduced revenue. The combination of
salary cuts, staff reductions in the form of redundancies, reduced
freelancer numbers and reduced travel costs, contributed to a 9.9%
decline in operating costs compared to 2019. The Group acted
quickly in securing Covid-19 Government financial support, where it
was available. This took the form of furlough payments, loan
forgiveness programmes and tax deferment schemes. We secured
GBP1.0m in the UK through the Coronavirus Job Retention Scheme but
repaid the full amount in 2021.
The key movements between Statutory and Headline results
Year ended Year ended
31 December 31 December
2020 2019 (restated)
Reconciliation of headline profit before taxation to statutory
profit before taxation GBPm GBPm
--------------------------------------------------------------- ------------ ----------------
Statutory loss before taxation (8.5) (8.6)
Exceptional items 2.0 6.2
Amortisation of acquired intangibles 1.7 2.5
Impairment of non-current assets 3.9 11.1
(Gain) on disposal of associates - (13.0)
(Gain) on disposal of subsidiaries (1.4) -
FVTPL investments under IFRS 9 2.1 0.7
Revaluation of contingent consideration 0.4 0.2
Put option accounting - IFRS 2 4.7 5.8
Put option accounting - IFRS 9 3.4 12.3
Headline profit before taxation 8.3 17.2
Some of the larger items causing the movement between Statutory
and Headline results for 2020 are explained below:
Exceptional items, including restructuring
Exceptional items of GBP2.0m (2019: GBP6.2m) include one-off
restructuring and reorganisation costs arising from the Group-wide
commitment to reduce the overhead cost base, as well as the
furlough money received that was repaid subsequent to year end, and
professional fees relating to the accounting misstatements
identified in 2019. The restructuring costs were principally staff
redundancy costs, predominantly involving companies in the UK, US,
Australia and Singapore.
Impairment of non-current assets
During the Covid-19 pandemic, the Group reviewed its global
property portfolio in the wake of the move to a more flexible
working environment. We determined that approximately 17,000 square
feet or 30% of the Group's real estate in London, is now surplus to
requirements and we are actively marketing the space. Accordingly,
of the GBP3.9m total impairment charge, GBP2.7m relates to an
impairment against the carrying value of our right-of-use property
assets. The significantly higher charge in 2019 was due to
impairment of goodwill (GBP5.9m) and associate investments
(GBP5.2m).
Gain on disposal of subsidiaries
The Board made a strategic decision at the start of 2020 to
eliminate loss-making businesses from the Group by the end of the
year. As a result, a total of 20 entities were either closed,
merged or our interest in those entities was divested. Combined,
they contributed GBP4.0m of losses in 2020. The breakdown of the
GBP1.4m gain on disposals and more detail on these losses and costs
are provided in Note 9 of the unaudited consolidated non-statutory
financial statements.
Financial assets at fair value through profit and loss - FVTPL
investments under IFRS 9
The Group holds unlisted equity investments in early-stage
companies detailed in Note 15 of the unaudited consolidated
non-statutory financial statements. The revaluation of these
companies is excluded from Headline results. Two of the unlisted
investments went into administration resulting in a write-down of
GBP2.5m.
Put option accounting
These costs comprise IFRS 2 and IFRS 9 charges, profit
allocations and dividends paid to holders of put options, the
charge being excluded from Headline results. During the year, two
put option schemes which had previously been reported as equity
settled schemes were reclassified as bonus scheme liabilities. The
reclassification had no P&L impact, but reduced equity by
GBP1.1m and increased trade and other payables by GBP1.1m at the
start of the year. It also increased 2019 Headline staff costs by
GBP1.1m so the 2019 comparative numbers in Notes 1,3 and 5 of the
unaudited consolidated non-statutory financial statements have been
adjusted and 2019 Headline profit has reduced accordingly. The
directors do not consider the reclassification requires an
adjustment to prior period financial statements. This is because
the magnitude of the balances in equity and trade and other
payables is sufficiently large that it would not alter the view of
a user of the financial statements of the strength of the
consolidated balance sheet.
Financial income and expense
The Group's finance income and expenses includes bank and other
interest, lease interest, amortisation of loan costs and fair value
adjustments to minority shareholder put option liabilities (IFRS
9).
Interest on leases increased to GBP2.5m (2019: GBP1.8m).
Fair value adjustment of put option liabilities created a debit
of GBP(0.1)m (2019: GBP(2.8)m). Further details can be found in
Note 6 of the unaudited consolidated non-statutory financial
statements.
Non-controlling interests (minority interests)
On a headline reporting basis, the share of profits attributable
to non-controlling interests decreased to GBP3.4m (2019: GBP4.9m).
This was in line with the overall decrease in the Group's
profits.
However, for statutory reporting, certain costs that were
charged to non-controlling interests in headline reporting are
required (under IFRS 2) to be accounted for as staff costs, as the
share option charge is accrued, and subsidiary dividend is paid.
Most of the minorities' share and rewards from local equity have
been defined as staff costs.
Dividend
The Company did not pay a dividend to its shareholders in 2020
(2019: GBP9.8m) because of the need to retain cash in the business
during the Covid-19 pandemic . The Board has reviewed the dividend
policy as part of the Group's recent strategic review and is not
proposing to pay a final dividend for the year ended 2020 (2019:
nil). The Board concluded that the Group's priority is to return
the business to pre-pandemic levels of profitability and earnings
and, thereafter, to grow in line with the targets set out at the
Capital Markets Day held in January 2021. Assuming a return to
normal trading conditions, we would then expect to reinstate
dividends, taking into consideration the competing demands for the
Group's cash.
Cash flow and banking arrangements
Total cash as at 31 December 2020 was GBP76.3m (2019: GBP69.0m).
Cash net of bank borrowings was a net surplus of GBP33.0m compared
to a net surplus of GBP16.6m in 2019.
The Group's net cash flow from operating activities was
GBP33.7m. The improvement in working capital in 2020 was driven by
a combination of factors including the Group's improved treasury
and cash collection procedures.
The Group extended its revolving credit facility (RCF) with
National Westminster Bank plc in May 2020, which was then reduced
from GBP36.0m to GBP33.0m from 1 December 2020. As at 31 December
2020, GBP27.0m of the RCF was drawn. In addition to the RCF, the
Group had a GBP5m overdraft facility with National Westminster Bank
plc, which remained unutilised as at 31 December 2020.
On 31 May 2021, the Company entered into a revolving
multicurrency facility agreement with National Westminster Bank Plc
and Barclays Bank PLC for up to GBP47m (the "Facility"). The
Facility includes a GBP2.5m overdraft and the ability to draw up to
GBP3m as bonds. The Facility is provided on a three-year term (with
two optional one-year extensions). The primary purpose of the
Facility is to support the Group's working capital requirements
which are capable of significant movement within any given month
and from one month to the next.
Capital expenditure
Total capital expenditure in 2020 (including software acquired)
decreased to GBP3.7m (2019: GBP5.8m). Capex includes GBP0.9m on
computer equipment and GBP0.5m on software and film rights. The
remaining GBP2.3m was incurred on leasehold improvements and
furniture and fittings, most of which was incurred in the
refurbishment of the Group's London headquarters.
Share-based incentive arrangements
The Group operates a business model through which senior
management have minority ownership in the subsidiary companies they
operate, through share-based incentive (put option) arrangements.
Accounting for share-based payments is a complex area, with
different accounting treatments applicable depending on the nature
of the share scheme in place. To increase clarity in this area we
have indicated the potential dilutive effect in Note 17 of the
unaudited consolidated non-statutory financial statements,
providing an estimate of the total number of shares issuable in
each of the next five years through the various share-based
payments schemes based on different share prices that might prevail
over that period.
This is summarised in the table below which shows shares issued
and dilution at different share prices:
Effect of a change in the share price
Potentially issuable
--------------- --------------------------------------- ------------------ ------------------
Shares total by Issued in 2021 2021 2022 2023 2024 2025 Total issued and % dilution on
year '000 '000 '000 '000 '000 '000 issuable issued shares*
'000
--------------- ------- ------ ------ ------ ------ ------------------ ------------------
At 83.6p 7,252 11,340 8,746 4,603 2,849 689 35,255 23%
--------------- ------- ------ ------ ------ ------ ------------------ ------------------
At 100p 6,827 10,511 7,881 4,313 2,817 740 32,863 21%
--------------- ------- ------ ------ ------ ------ ------------------ ------------------
At 135p 6,827 9,430 6,860 3,950 2,911 857 30,532 20%
--------------- ------- ------ ------ ------ ------ ------------------ ------------------
At 150p 6,827 9,158 6,601 3,861 2,989 909 30,024 19%
--------------- ------- ------ ------ ------ ------ ------------------ ------------------
At 200p 6,827 8,545 6,019 3,661 3,329 1,090 29,146 19%
--------------- ------- ------ ------ ------ ------ ------------------ ------------------
At 250p 6,827 8,178 5,670 3,541 3,736 1,272 28,897 18%
--------------- ------- ------ ------ ------ ------ ------------------ ------------------
At 300p 6,827 7,933 5,437 3,461 4,175 1,456 28,961 18%
--------------- ------- ------ ------ ------ ------ ------------------ ------------------
* based on the current issued share capital of 122,743,435 and
taking into consideration all potentially issuable shares.
Using the above data and a share price ranging from 135p to
300p, the total dilution to existing shareholders from the issue of
new shares between now and the end of 2025 will be between 18% -
20%. The Board is actively considering options to substantially
reduce dilution and we will update shareholders on these
initiatives following the Company's annual general meeting to be
held in 2021.
Note: This analysis has been calculated using the Group's most
recent budgets and long-term financial plans to derive valuations
for the share-based schemes. However, valuations may be different
to those used for this analysis, with the result that the number of
shares to be issued and the dilutive impact may be different to
that stated above.
Global accounting function, controls and systems
The historical accounting issues identified in 2019 brought to
light fundamental organisational and control weaknesses within the
Group's finance and accounting functions. The Group has
historically operated a decentralised accounting function. The
increased size and complexity of the Group necessitated a move to a
standardised and enhanced accounting, consolidation and forecasting
system. As at 31 May 2021, approximately 70% of the global Group,
as measured by net revenue, had moved over to this NetSuite-Workday
platform. We have also deployed a global cash management and cash
forecasting platform, Kyriba, providing real-time data and access
to all bank accounts across the Group.
The Group worked tirelessly in implementing changes and
improvements in its financial management, controls and governance.
2020 was an extremely challenging year, but the improved financial
discipline imposed across the Group was instrumental in supporting
our recovery from the challenges of recent years.
Requirements in connection with publication of non-statutory
accounts
These are not the Company's statutory financial statements;
these are non-statutory financial statements and do not constitute
the Company's statutory financial statements for 2019 or 2020. The
Company's audited financial statements for the year ended 31
December 2020 will be issued as soon as the audit has been
completed.
This statement along with the unaudited consolidated
non-statutory financial statements and analyst presentation is
available on our website
https://www.mcsaatchiplc.com/reports-results/2020
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END
FR DKCBPDBKBBAB
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June 30, 2021 02:00 ET (06:00 GMT)
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