Final Results
EBIQUITY PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2020
25 March 2021
Ebiquity plc ("Ebiquity" or the "Group"), a world leader in media investment analysis, today announces its preliminary results for the year ended 31 December 2020. Ebiquity works with over 70 of the world's top 100 advertisers, served from 19 offices worldwide by some 520 staff.
Financial Highlights1
|
|
2020 |
2019 2 |
Change |
|
£m |
£m |
£m |
|
|
Revenue |
55.9 |
68.1 |
(12.2) |
|
Underlying Operating Profit 1 |
(0.3) |
5.6 |
(5.9) |
|
Underlying (Loss)/Profit before Tax 1 |
(1.3) |
4.7 |
(6.0) |
|
Underlying (Loss)/Earnings per Share 1 |
(1.9)p |
2.9p |
(4.8)p |
|
Statutory Operating Loss |
(2.9) |
(4.8) |
1.9 |
|
Statutory Loss before Tax |
(3.9) |
(5.7) |
1.8 |
|
Statutory Loss per Share |
(4.8)p |
(9.6)p |
4.8p |
· Second half revenue increased by 9% from first, although full year revenue fell by 18% compared to 2019
· Project-related costs also reduced by 27%, enabling net revenue margin to rise to 89% (2019: 87%)
· Underlying operating costs reduced by 7% to £50.0m (2019: £53.7m)
· Financial position at 31 December 2020 remains strong: net bank debt of £7.8m (31 December 2019: £5.6m) with cash balances of £11.1m and undrawn bank facilities of £5.0m
· Underlying operating cash inflow of £7.3m
Note 1: Underlying operating profit is defined as the operating profit excluding highlighted items. These include share-based payments, amortisation of purchased intangibles and non-recurring items. Underlying profit before tax and earnings per share are calculated based on the underlying operating profit.
Note 2: The 2019 financial statements have been re-stated as set out in Note 1 of the Group financial statements. This impacted revenue, underlying operating, profit before tax and earnings per share.
Operational Highlights
· Nick Waters, former Executive Chair, UK & Ireland, Dentsu Aegis Network started as Group Chief Executive Officer on 1 July 2020 with the objective to simplify, clarify and focus the business on a growth trajectory
· New business wins including Daimler, Generali, Perfetti van Melle and Reckitt
· Digital Decisions - which monitors advertising spend through the digital supply chain - acquired in January 2020 - performing as planned, winning ten new clients
· New Digital Innovation Centre set up in order to speed up development of digital product suite
· Shared service media delivery centre in Spain continued to expand and deliver operational efficiencies
· Six new operational KPIs to be introduced in future results statements to track delivery of key business objectives. These are:
o Number of clients buying two or more service lines
o Number of clients buying one or more products from the new digital portfolio
o Volume of digital advertising monitored - number of impressions
o Volume of digital advertising monitored - US$ of spend
o Number of countries served with new digital products
o % of revenue from digital services
Divisional highlights
Media : Media Management, Media Performance and Contract Compliance
· Revenue of £46.0m (2019: £54.0m), reduced by 15%
· Operating profit of £6.8m (2019 £11.8m), reduced by 40%
Analytics and Tech : Advanced Analytics, MarTech and AdTech
· Revenue of £9.9m (2019: £14.1m) LFL decline of 15% excluding Stratigent
· Operating loss of £0.7m (2019: profit of £1.0m)
Outlook
· Industry dynamics are expected to encourage brand owners to review their channel and media investment strategies
· Ebiquity's market position and capabilities should enable it to capitalise on positive market trends
· New business won over the last year and renewals from existing clients - commissioning have already led to an encouraging start in the first quarter
· Group's re-defined strategic focus make it well-positioned to deliver revenue growth and a return to profitability in the year ahead
Nick Waters, CEO of Ebiquity said:
"Ebiquity's results in 2020 clearly reflected the impact of the Covid-19 pandemic on global advertising spending and on our clients' demand for our services as they reduced their budgets. Our staff transitioned to working from home efficiently and continued to support our clients effectively. I thank all of them for their resilience and professionalism under challenging circumstances. As anticipated at the interim stage, our revenue increased in the second half of the year, compared to the first half. This reflected the macro-environment and more demand from existing clients, especially in automotive and FMCG as well as new business successes, helped by Accenture's exit from our market. This improved performance has continued into the start of this year and we except to deliver revenue growth and a return to profitability in 2021."
Details of presentation
Management will be hosting a webcast presentation for analysts and investors at 9:30am today. If you would like to register please contact guy.scarborough@instinctif.com .
Market abuse regulation
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/201 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR").
Enquiries
|
Ebiquity plc Nick Waters (CEO) Alan Newman (CFO)
|
020 7650 9600
|
|
Instinctif Partners Matthew Smallwood Guy Scarborough |
07831 379 122 07917 178 920 |
|
Panmure Gordon (Financial Adviser, NOMAD & Broker) Alina Vaskina / Sandy Clark (Corporate Advisory) Charles Leigh-Pemberton (Corporate Broking)
|
020 7886 2500 |
About Ebiquity plc
Ebiquity plc (LSE AIM: EBQ) is a world leader in media investment analysis. It harnesses the power of data to provide independent, fact-based advice, enabling brand owners to perfect media investment decisions and improve business outcomes. Ebiquity is able to provide independent, unbiased advice and solutions to brands because we have no commercial interest in any part of the media supply chain.
We are a data-driven solutions company helping brand owners drive efficiency and effectiveness from their media spend, eliminating wastage and creating value. We provide analysis and solutions through five Service Lines: Media management, Media performance, Marketing effectiveness, Technology advisory, Contract compliance.
Ebiquity's clients are served by more than 500 media specialists operating from 19 offices covering 80% of the global advertising market.
The Company has the most comprehensive, independent view of today's global media market, analysing $55bn of media spend from 75 markets annually, including trillions of digital media impressions. Our Contract Compliance division, FirmDecisions, audits $40bn of contract value annually.
As a result, more than 70 of the world's top 100 advertisers today choose Ebiquity as their trusted independent media advisor.
For further information, please visit: www.ebiquity.com
Chair's Statement
In a year that has been dominated by the Covid-19 pandemic and its unprecedented economic and societal impacts, Ebiquity has continued to deliver a high-quality service to clients, while ensuring a safe working environment for its staff. The impact of Covid-19 on our clients' activity caused a significant revenue decline in our business and led to an underlying loss, despite implementing immediate cost reduction measures. Against this difficult background, the Group has continued to progress through a period of transition and concluded the year with strong new leadership together with a clear and focussed growth strategy and enhanced operational structure.
From March 2020, our global teams moved efficiently to working from home and I wish to thank them for their exceptional resourcefulness and resilience in continuing to provide first class client support under the most challenging of conditions. By the end of the financial year, several offices including Hamburg, Shanghai, Singapore and Sydney had fully or partially re-opened, depending on local regulations. We look forward to embracing new ways of working as restrictions associated with the pandemic are lifted.
Importantly, and despite the challenging environment, the year continued to be one of significant transition for the Group, highlighted by the appointment of Nick Waters as CEO in July and the establishment of a strengthened and refreshed leadership team.
Following Nick's appointment, the Board and management launched a thorough operational review to refine the Group's strategy, update market priorities, drive revenue growth and improve operating margins. In November, we set out this refreshed strategy which aims to deliver product solutions for the digital market, develop higher value strategic client relationships and improve operating efficiencies.
As part of the extensive review process and to facilitate the development of higher value engagement with clients, the Group has implemented a new geographically-led organisational structure, as opposed to its previous practice-led format. The new operating model which took effect from January 2021, means that Ebiquity can offer harmonised end-to-end client solutions and is better placed to identify and take advantage of cross-selling opportunities. To measure the delivery of our strategic ambition, we will be establishing and reporting against a number of broader non-financial KPIs to monitor progress.
As reported at the interim stage, the Covid-19 pandemic led to a significant reduction in global advertising activity and spend, especially in the second and third quarters of 2020. The downturn in activity varied by sector and geography, with the most pronounced impact being seen in the automotive, travel, leisure and non-food retail industries.
The Group implemented cost management measures in response to maintain liquidity and protect the business while also preserving jobs. These included a hiring and pay freeze, temporary pay reductions for the Board and some senior managers, and the use of government support schemes in a number of countries. We also renegotiated the covenants on our banking facilities and have deferred the payment of dividends until economic and business conditions become more certain. As a result, the Group has maintained a robust financial position with good covenant headroom and low levels of gearing.
As also anticipated at the interim stage, the second half of the year saw an improved performance as Covid-19 restrictions began to ease in some markets and advertisers adjusted to the changed environment. Group revenue increased by 9% compared to the first half, driven by a return to activity by existing clients together with notable new business wins. These included some twenty former clients of Accenture following its withdrawal from media audit and management services in August 2020.
The impact of Covid-19 has accelerated the existing shift in consumers' media consumption towards digital channels and in their buying behaviour from physical retail to e-commerce. As a result, brand owners are even keener to ensure that their media investment strategies remain effective. This increases their need for informed, expert advice based on robust data and rigorous analysis. These trends should lead to renewed demand for our portfolio of services in 2021 and beyond as advertisers re-set their plans.
The Board acknowledges the increasing focus on Environmental, Social and Governance issues and the need for companies to demonstrate how they are addressing these important areas. We are at early stage in setting out our ESG agenda and building on our existing policies to enhance the role Ebiquity can play in supporting our global clients to meet their own targets. We will continue to engage with clients and investors on ESG and sustainability issues and develop plans for becoming a more sustainable business. We will set out our position and report our activities in this respect over the course of the next year.
Looking ahead, as the global economy begins to recover from the pandemic, we are confident that Ebiquity's new strategic focus together with its strong market position and solid financial platform, make it well-positioned to achieve its growth ambitions and deliver sustainable, long term shareholder value.
Rob Woodward
Chair
Chief Executive Officer's Review
Strategic Direction
Since my appointment as CEO in July 2020, we have undertaken a process to review Ebiquity's business and operations, and to develop our strategic plans with a view to returning the business to top line revenue growth and operating margin improvement.
The process was approached with the objective to simplify, clarify and focus the business. The resulting strategy is one of maintaining stability, evolution and change. It was first set out publicly at the Capital Markets Day held in November 2020.
Ebiquity's purpose, which underpins our strategy, is to remain the world leader in media investment analysis.
We harness the power of data to provide independent, fact-based advice, enabling brand owners to perfect media investment decisions and improve business outcomes. Our aim is to be a data-driven solutions company helping brand owners drive efficiency and effectiveness from their media spend, eliminating wastage and creating value.
In order to maintain momentum and ensure we deliver on our strategic targets, we will be establishing and reporting on a number of broader non-financial KPIs in future results statements as noted below. These measurements are tailored to our new operating model and specifically to driving digital growth and integration, cross-selling and high-value client development.
· Number of clients buying two or more service lines
· Number of clients buying one or more products from the new digital portfolio
· Volume of digital advertising monitored - number of impressions
· Volume of digital advertising monitored - US$ of spend
· Number of countries served with new digital products
· % of revenue from digital services
Ebiquity is able to provide independent, unbiased advice and solutions to brands because it has no commercial interest in any part of the media supply chain. Our independence is recognised and highly valued by our clients, which include the world's leading advertisers.
The global media advertising market is large scale with over US$500bn traded annually and with significant complexity for brand owners. Ebiquity's focus is in the media market, advising brand marketers how to navigate the market's complexity and to improve media investment decisions for better business outcomes.
Digital channels are the growth drivers of the media investment business, now accounting for more than 50% of all advertising spend. 70% of digital advertising (excluding search) is now traded programmatically. The impact of Covid-19 has been to accelerate existing market trends with consumers increasing the amount of time and activity online for shopping, working and entertainment. However, the digital and programmatic landscape has given rise to many well documented challenges for advertisers with brand safety, viewability, fraud, wastage, lack of transparency, attribution, efficiency and effectiveness all topics of frequent industry debate. As advertisers grapple with these challenges there is a need for high quality, independent advice, based on empirical evidence.
Digital initiatives / development
Digital Decisions, which was acquired as an early stage business in January 2020, has bolstered the Group's capabilities in investment analysis of digital media. Its Source Data Monitoring ("SDM") service provides brand owners with much needed visibility into the distribution of their digital advertising investment through their global media supply chains, down to individual websites. It is demonstrating significant value to users, regularly identifying how up to 30% of their digital advertising spend is being wasted and enabling them to course-correct and optimise for greater efficiency and effectiveness.
Digital Decisions has performed as expected and won contracts with existing Ebiquity clients (including Huawei, Mars and Nestlé) - demonstrating the potential to cross-sell into our existing client base - as well as other major brands, including Heineken and Reckitt. At the end of December 2020 ten clients were live on the SDM platform, with some US$500 million of digital media spend being tracked and optimised, and we are now on-boarding clients at an increasing rate.
To help develop and drive the product roadmap for our entire global business, Ruben Schreurs, the founder CEO of Digital Decisions, has been appointed to the new role of Group Chief Product Officer.
We are focussing efforts on building out the SDM platform, having proved its scalability. We also aim to make the Digital Decisions data services model a core building block for Ebiquity's enhanced digital media measurement service. This is being developed to meet clients' requests for a more comprehensive offering covering all aspects of digital media, including paid search and social media.
As part of this strategy, Digital Decisions has now been fully integrated into the Group and re-branded as the Digital Innovation Centre, launched publicly in February 2021 with a remit to develop new data-led productised service solutions. This dedicated central unit will develop, maintain, and deliver digital solutions for Ebiquity's global clients. Building on the existing Media Data Vault architecture the Group's new product initiatives include governance monitoring, commitments and productivity tracking, digital cost benchmarking, and digital media reviews.
Organisational structure
Ebiquity has demonstrated its ability to grow revenue when putting strategic focus on a core group of clients. To drive further development of this successful approach, Mark Gay, one of our senior client partners, has been appointed to the new role of Chief Client Officer. Under his remit and with enhanced Client Partner teams covering a larger proportion of our major clients across the network, we aim to grow further the number of higher value clients buying more than one of our services. This initiative includes the recent appointment of a former Accenture senior partner to focus on major European brand owners.
We have simplified our organisational structure to be able to provide integrated solutions and consultancy advice as well as developing higher value client relationships. The Group is transitioning from a matrix structure of practices and geographies to one that is mainly organised and managed on a geographic P&L basis. Our aim is to offer our main service lines to clients across the country, regional and global business structures.
We have recently appointed two new regional managing directors with Leela Nair moving up from Southeast Asia to lead the Asia Pacific region and Paul Williamson joining the Group as MD, North America following senior business development, trading and investment, and digital leadership roles at Dentsu Aegis and Publicis Groupe.
As announced at the interim stage, Federica Bowman has taken over the leadership of FirmDecisions, our market leading Contract Compliance practice, having successfully directed its digital media services. Although FirmDecisions was impacted this year by Covid-19 disruptions to its traditional physical audit model, it has worked with agencies to enable remote audits to be conducted. We therefore expect a return to growth in the near term.
A new role of Business Operations Director has also been established to develop and execute plans to achieve greater operational efficiency in order to enhance margins. Its objectives include further automation and standardisation of our service delivery processes supported by the expansion of the Scaled Delivery Centre established in 2019, which is taking on a broader remit as a Media Operations Centre.
To support the Group CEO in executing our strategy and deliver our plans, an Executive Leadership Team has been established comprising the Group's Chief Financial & Operating, People, Client and Product Officers along with the four regional managing directors and the CEO of FirmDecisions.
Ebiquity has a strong track record of publishing high-quality analysis and commentary on specific aspects of the global media industry. We maintained our position as a thought leader during 2020, publishing white papers on "The Rise and Rise of Influencer Marketing", "Digital Media Performance: the Power of Context", and "Deconstructing ROI: A New Framework for Driving Marketing Effectiveness in the Age of Media Fragmentation". We also published guides designed to respond specifically to the demands of a world impacted by Covid-19. These included: "The Ebiquity Guide to Virtual Pitching", "Advertising Through a Recession" and "2021: Emerging Perspectives in a Post Pandemic World".
With a clear focus on the provision of services in the media sector, a refreshed product offering for the digital market, and a simplified organisational structure we believe Ebiquity is well placed to capitalise on its strengths.
Performance in the Year
Ebiquity Group's business performance was materially impacted in 2020 by the global Covid-19 pandemic.
Group revenue in the year to 31 December 2020, fell by 18% to £55.9 million or 15% on a like-for-like basis, excluding the US analytics business, Stratigent, which was wound down in September 2019. The revenue decline was clearly due in large part to the impact of the Covid-19 pandemic on our clients' businesses and on their demand for media-related services. There was some recovery in the second half of the year as business conditions improved, with revenue up 9% against the first half.
The UK and Western European economies were among the worst affected by the pandemic. Consequent government measures to restrict movement and activities of their populations were among the most severe in the world. The UK media market was down 39% in Q2 according to the World Advertising Research Centre. The Group is heavily weighted to these geographies, with some 75% of revenue derived from the UK and Continental Europe and was therefore relatively more exposed to the downturn in these regions.
Many clients reacted in the first half by cancelling or postponing advertising campaigns and the work commissioned from Ebiquity. This effect was felt most strongly in the automotive, travel, leisure, and entertainment sectors. Automotive is Ebiquity's second largest vertical by revenue and so contributed materially to the revenue decline. Fast Moving Consumer Goods (FMCG) represents the Group's largest vertical by revenue and - with supermarkets declared essential retail by governments around the world - was among the least affected categories. This provided some cushion for Group revenue against declines in other sectors.
As the pandemic developed, the Group made cost savings leading to a reduction of 7% in underlying operating expenses from the prior year. We prioritised the protection of jobs and made use of government payroll support schemes in Australia, China, France, UK and USA. We also suspended the annual pay review and the Board and senior executives took pay reductions for a period. These measures contributed to total savings in staff costs of 10% compared to 2019, although year-end staff numbers of 522 were just 1% below those at the 2019 year-end.
Despite the challenges of the year, there were some bright spots. Accenture's exit from the media assurance business enabled the Group to win new business among high-quality brand owners. These will deliver annualised revenues of £5 million, some of which will be fully recognised in 2021. Some of this revenue is from existing clients but much is from clients new to Ebiquity, such as American Express, Daimler and Reckitt.
The approach of establishing a team of client partners to focus on developing relationships and revenue among selected high value clients, also continued to prove its worth. Despite the challenging environment, we achieved 1% revenue growth from this core group of clients which include two from the automotive sector.
Revenue by Segment
|
|
Revenue |
|||
|
FY20 |
FY19 |
Variance |
|
|
|
£m |
£m |
£m |
% |
|
|
Media |
46.0 |
54.0 |
(8.0) |
(15%) |
|
Analytics and Tech |
9.9 |
14.1 |
(4.2) |
(30%) |
|
Group |
55.9 |
68.1 |
(12.2) |
(18%) |
Media
Revenue in the Media segment which comprises Media Performance, Media Management and Contract Compliance services fell by 15% year-on-year. However, as anticipated at the interim stage, revenue grew by 10% in the second half compared to the first as client activity returned to some normality following the initial Covid-19 pandemic period when many clients had reduced their media-related expenditure. There was also a revenue benefit in the new business won from former Accenture clients following its exit from media performance and management services in August 2020. These new contracts included several global engagements as well as local work in France, Germany, Spain, UK and USA.
Revenue in UK & Ireland, our largest Media region, fell by 13% although the group serving large global clients experienced higher levels of activity in the second half and its revenue fell by only 6%. European revenue reduced by 15%, with Germany falling by 20% while some markets such as Russia and Spain increased or held their revenue static. In the USA, which like Germany has a large proportion of automotive clients, revenue fell by 23%. Asia Pacific revenue decreased by 11% overall, although Singapore increased, due to new business wins.
Our Media Performance services assist advertisers to monitor and evaluate their agencies' media buying performance. We harness the expert knowledge of our global network of media specialists, the most extensive of its kind, and our access to unique client media spend data pools to assess the value for money delivered, both in comparison to the market and to the client's specific objectives. This helps brand owners to obtain accountability and transparency over the performance of their chosen media supply partners, especially given the industry's complex purchasing arrangements. Major clients for this area include Ferrero, L'Oréal, General Motors, Jaguar Land Rover, Vodafone and VW Group.
Media Management services include advising clients in the selection of media agencies and setting of media buying objectives as well as in the organisation of media functions. We conduct many agency selections at global level and within individual markets. However, the number of agency reviews was much lower than usual in 2020 as the Covid-19 pandemic led to advertisers deferring decisions while their business and media plans were uncertain. Agency selection activity is expected to increase in 2021 as advertisers re-evaluate their longer-term media objectives. This is already being reflected in the number of new media management engagements secured in the first quarter of 2021.
During the year, we developed further the functionality and use of the key MediaSuite tools used to support further process and efficiency improvements. EbiquityConnect™ streamlines data ingestion from agencies, many of which have given positive feedback following the system's introduction. EbiquitySelect™ supports our agency selection work. EbiquitySync™ provides a standardised tool for benchmarking paid digital media spend and is now being integrated with the recently acquired Digital Decisions technology applications.
Our shared services media delivery centre in Spain which became operational in 2019, doubled the amount of work it undertakes for the network from the prior year, helping further to reduce media delivery costs.
Our Contract Compliance service (trading as "FirmDecisions") was impacted by the Covid-19 restrictions to on-site access to agencies which delayed a number of audits and its revenue fell by 52% compared to 2019. Although the team rapidly re-designed its approach to enable remote audits to be conducted, it took time to obtain full agency agreement to electronic provision of information. Its clients in the period included FCA Group, Mondelez and Nike. The new CEO's focus has been to streamline and automate the audit approach and achieve greater scale efficiencies and speed of delivery across the global network. These are important factors in maintaining FirmDecisions' position as the global leader in its field with increased competition being faced, notably from new entrants.
Analytics and Tech
Analytics and Tech total revenue of £9.9 million (2019: £14.1 million) fell by 30% in reported terms but by 21% on a like-for-like basis, excluding Stratigent whose operation ceased in September 2019. Advanced Analytics, the largest element, fell by 10%, AdTech by 29% and Digital Balance by 33%.
Our Advanced Analytics practice helps brands to plan and optimise their investment in media by applying advanced analytical techniques to attribute and forecast the impact of marketing investments on business outcomes (eg sales) and to optimise these investments. With a client base oriented to retail, travel and automotive its revenue was impacted by cancellations and deferrals in the first half. However, its offering is well suited to helping brands to re-plan their media investment strategy to reflect changed conditions and it recovered to an extent in the second half in response to these client needs.
Our AdTech practice helps brand owners to address the specific challenges of managing digital media and automated trading programmes by designing the data and technology ecosystem best suited to deliver their marketing strategy and optimise their digital media investments. Their solutions include the evaluation and planning of in-house alternatives and the selection of advertising technology partners. It has a number of continuous projects for several global clients, although delayed purchase approvals by one of these impacted its revenue in this period.
The MarTech practice now comprises a single unit, Digital Balance, in Australia, following the closure of Stratigent in the USA in September 2019. During the year, Digital Balance has been more closely integrated with the media practice to increase cross-selling of its services. However, although it won projects for global clients based in France and Germany, demand from its core Australian client base was affected by the pandemic.
Operating Profit by Segment
|
|
Underlying Operating Profit |
Operating profit margin |
||||
|
|
FY20 |
FY19 |
Variance |
FY20 |
FY19 |
|
|
|
£m |
£m |
£m |
% |
% |
% |
|
|
|
|
|
|
|
|
|
Media |
6.8 |
11.2 |
(4.4) |
(39%) |
15% |
21% |
|
Analytics and Tech |
(0.7) |
1.0 |
(1.7) |
- |
(7%) |
7% |
|
Unallocated costs |
(6.4) |
(6.6) |
0.2 |
3% |
- |
- |
|
Group |
(0.3) |
5.6 |
(5.9) |
- |
(1%) |
9% |
The reduction in operating profitability compared to 2019, largely reflected the revenue performance, despite reductions of £3.8m achieved in operating expenses. The Media practice remained profitable although its margins fell from 21% to 15%. Analytics and Tech moved into a loss of £0.7m, due largely to the fall in revenue although it was also impacted by an expansion of the staff base in 2019 which had been made in anticipation of expected revenue growth in 2020.
ESG
At Ebiquity, we understand the importance of a clear approach to Environmental, Social and Governance ("ESG") matters. We are at an early stage in developing our policies and practices and now plan to establish appropriate baseline metrics and objectives against which we will report in future. We will continue to engage with investors and other stakeholders on ESG issues and ensure that the Board and management team review ways for Ebiquity to progress further towards becoming a more sustainable business.
Outlook
Although 2020 was an exceptionally difficult year for many businesses, including Ebiquity, the outlook for 2021 is more positive, and it is expected to be a year of recovery, albeit not immediately to the activity levels of 2019. There are early signs of economic activity, including advertising expenditure, returning to more normalised levels during 2021, although this depends on the success of vaccine programmes and other measures in continuing to reduce the global impact of Covid-19.
In addition to cautious optimism about market conditions, the Group aims to build on the progress seen in the second half of 2020. It expects to benefit from the new business won over the last year and from re-commissioning of some client projects deferred or cancelled in 2020. These factors have already led to an encouraging contract pipeline in the first quarter.
Covid-19 has had a pronounced effect on consumer behaviour, changing their media consumption patterns and accelerating the growth in online activity. These dynamics are expected to encourage brand owners to review their channel and media investment strategies to ensure they are effective and deliver return on investment. Ebiquity's data-driven, product solutions strategy means it is well-positioned to take advantage of these dynamics in response to demand for media investment analysis.
Notwithstanding this broader market uncertainty, the Group's re-defined strategic focus together with its strong market position and solid financial platform, make it well-positioned to deliver revenue growth and a return to profitability in the year ahead.
Financial Review
Group revenues for the year ended 31 December 2020 fell by £12.2 million or 18% to £55.9 million, from £68.1 million in 2019.
Reflecting the lower activity, project-related costs (which comprise external partner and production costs) fell by £2.4 million (27%) from £8.8 million to £6.4 million and the net revenue margin rose from 87% to 88%. Operating expenses were also reduced, by £3.8 million, (7%) to £50.0 million from £53.7 million. This only partially offset the revenue reduction and the Group recorded an underlying operating loss of £0.3 million in the year, compared to an underlying operating profit of £5.6 million and operating margin of 9% in 2019.
Net finance costs rose slightly from £0.9 million to £1.0 million, due to the increase in net debt. This and the operating loss led to an underlying loss before tax in the year of £1.3 million, compared to a profit of £4.7 million in 2019.
The statutory operating loss of £2.9 million (calculated after highlighted items) improved from the loss of £4.8 million in 2019, due largely to a significantly lower level of net highlighted costs which fell from £10.3 million to £2.5 million (as detailed below). This also led to a reduction in the statutory loss before tax to £3.9 million compared to £5.7 million in 2019.
Highlighted items
Highlighted items during the year included the following:
· £1.9 million credit relating to share-based payments mainly arising from the lapse of options over 4.2 million shares originally awarded in May 2010.
· £1.1 million charge for amortisation of purchased intangibles (2019: £1.2 million)
· £0.8 million charge due to the impairment of goodwill in Digital Balance, the martech business based in Australia
· £1.5 million charge relating to severance and re-organisation costs following re-structuring of management and staff roles in Australia, France, Germany, UK and USA as part of actions taken to improve business performance.
· £0.8 million relating to currency revaluation of deferred consideration payments for Ireland and Italy
· £0.2 million relating to professional costs incurred on acquisitions and bank facility negotiations.
Prior Year Adjustment
During the year, a misstatement was discovered in the balance sheet of Firm Decisions' US subsidiary as at 31 December 2019. This followed an internal review of balance sheet items by the Group Finance team as part of enhanced internal control procedures put in place by the Chief Financial and Operating Officer during the last year. The causes of this error were specific to the unit involved and related to the misstatement of accrued income and revenue balances for which process and system improvements have been made to avoid any recurrence. In accordance with FRS 102, the financial statements for 2019 have been re-stated to reflect this adjustment. The impact was a reduction of £600,000 in 2019 Group revenue, a reduction of £148,000 in retained earnings brought forward as at 1 January 2019 and a reduction of £748,000 in accrued income as at 31 December 2019.
Taxation
There was an underlying tax charge in the year of £0.03 million compared to £1.9 million in 2019. This reduced charge reflected the loss before tax incurred in the year.
There was a total tax credit including on highlighted items of £0.2 million compared to a charge of £1.5 million in 2019.
Earnings per share
The loss after tax led to an underlying loss per share of 1.9p, compared to earnings of 2.8p in 2019. There was a statutory diluted loss per share of 4.81p, an improvement of 4.74p, compared to the statutory diluted loss per share of 9.55p in 2019.
Dividend
Although our Group is in a healthy financial position and has bank borrowing facilities in place until 2023, the Board considers it prudent to conserve the Group's cash resources given the Group's performance in 2020 and the uncertainty created by the Covid-19 pandemic. It will therefore not be proposing the payment of a dividend in respect of 2020 at the forthcoming AGM and will defer any dividend recommendation until economic and business conditions are more certain.
Cash conversion
|
|
Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
|
£'000 |
£'000 |
|
Reported cash from operations |
5,827 |
5,657 |
|
Underlying cash from operations |
7,300 |
8,870 |
|
Underlying operating profit/loss |
(334) |
6,167 |
|
Cash conversion |
- |
144% |
Underlying cash from operations represents the cash flows from operations excluding the impact of highlighted items. The underlying net cash inflow from operations was £7.3 million during 2020 (2019: £8.9 million). This cash inflow reflecting continued tight management of working capital despite the challenging business environment.
Equity
During the year to 31 December 2020, 2,467,628 shares were issued. 2,437,628 of these were as partial settlement of the Italian minority buy-out and a further 30,000 upon the exercise of employee share options. As a result, the total share capital increased to 82,583,254 shares (31 December 2019: 80,115,626).
Net debt and banking facilities
|
|
31 December 2020 |
31 December 2019 |
|
|
£'000 |
£'000 |
|
Net cash |
11,121 |
8,236 |
|
Bank debt |
(19,000) |
(14,000) |
|
Loan fee prepayments |
120 |
168 |
|
Net bank debt |
(7,759) |
(5,596) |
|
US PPP Loan 1 |
(750) |
---- |
|
Net Debt as in Statement of Financial Position |
(8,509) |
(5,596) |
1 This represents a loan received in May 2020 under the US Payroll Protection Programme. The qualifying conditions required for loan forgiveness have been met but at the year-end the providing bank had not opened the forgiveness application process. If the application is successful, this loan will be credited to the income statement in 2021 as a grant.
All bank borrowings are held jointly with Barclays and NatWest. On 20 September 2019, the Group entered into a new RCF facility agreement of £24.0 million with broadly similar terms to the previous one. The facility has a maturity period of four years, expiring in September 2023 with an option for the company to extend for one further year. The committed RCF facility at 31 December 2020 totalled £24.0 million, of which £19.0 million was drawn (2019: RCF of £25.0 million, of which £14.0 million was drawn). During the year, the Group drew down £5.0 million to cover working capital requirements that it anticipated might have arisen due to the Covid 19 pandemic. In the prior year, the drawn RCF facility of £14.0 million was included as a current liability since the facility was set to expire within one year.
The Group continued to trade throughout the year, within the limits of its banking facilities and associated covenants. The covenants applying on a quarterly basis until June 2020 were based on EBITDA multiples as follows: interest cover > 4.0; adjusted leverage < 2.5; and adjusted deferred consideration leverage < 3.0. In response to the Covid-19 disruption, modified covenants were agreed with the lenders in May 2020 which applied from July 2020 to 30 November 2021. These require the Group to maintain minimum liquidity of at least £5 million at the end of every month during that period. Minimum liquidity is defined as the aggregate amount of cash together with any available undrawn amount under the facility. Liquidity as at 31 December 2020 totalled £15.4 million. In March 2021, a further covenant amendment was agreed with the lenders. With effect from December 2021, the minimum liquidity covenant will increase to £7 million. In addition, with effect from September 2021 an adjusted leverage covenant will be re-introduced, initially at < 4.0, increasing to < 4.25 in December 2021 and to < 4.5 in March 2022, then reducing to < 3.5 in June 2022 and < 3.0 in September 2022. The original covenants which were in force until June 2020 will apply again from December 2022 onwards.
Statement of financial position and net assets
A summary of the Group's balance sheet as at 31 December 2020 and 31 December 2019 is set out below:
|
|
31 December 2020 |
31 December 2019 |
|
|
£'000 |
£'000 |
|
Goodwill and intangible assets |
34,698 |
35,172 |
|
Right of use asset |
6,237 |
8,339 |
|
Other non-current assets |
3,387 |
3,549 |
|
Net working capital |
8,504 |
12,179 |
|
Other current liabilities |
(1,953) |
(4,724) |
|
Lease liability |
(8,158) |
(9,590) |
|
Other non-current liabilities |
(1,503) |
(1,423) |
|
Deferred consideration |
(1,957) |
(14) |
|
Net debt |
(8,509) |
(5,596) |
|
Net assets |
30,746 |
37,892 |
Net assets as at 31 December 2020 decreased by £7.1 million to £30.7 million (2019: £37.9 million).
Debtor days have remained consistent year on year at 58 days (2019: 62 days) due to continued strong cash collection in particular, at the end of the year.
Corporate Development Activities
On 8 January 2020, the Group completed the purchase of Digital Decisions B.V ('Digital Decisions'). The initial cash consideration paid was €700,000 (£597,000) with further contingent consideration payable in a mix of cash and Ebiquity plc shares. The first deferred contingent payment is based on profit performance in the year to 31 December 2020 and the second payment is based on the average profit performance for the two years ended 31 December 2022. Payment of the deferred contingent consideration is conditional upon the vendor remaining in Ebiquity's employment and is therefore deemed to be post-date remuneration in accordance with IFRS 3 (revised). No payment was earned in respect of the year ended 31 December 2020, since although Digital Decisions' revenue increased significantly, its profit did not reach the required threshold. Due to the integration of the Digital Decisions service with the Group's overall digital media products, the basis of the revenue included in the performance calculation for the two years ended 31 December 2022 was amended in January 2021 to include the contribution from all digital media products developed by the Digital Innovation Centre. The multiple applied in calculating the contingent consideration has been reduced from 8 times to 6 times the average of the relevant profits generated in 2021 and 2022.
On 3 February 2020, the Company agreed to acquire the outstanding 49% interest in its subsidiary Ebiquity Italy Media Advisor S.r.l ('Ebiquity Italy') from the founders and minority shareholders, Arcangelo DiNieri and Maria Gabrielli. The transaction completed on 28 May 2020, following the approval of the Group's audited accounts. The total consideration of £3.1 million was based on an average of Ebiquity Italy's profit before tax and management charges for the years ending 31 December 2018 and 2019. The consideration is being paid in a combination of cash and Ebiquity plc shares. At completion, 25% of the total consideration was settled by the issue of 2,437,628 Ebiquity plc shares and 5% in cash. The remaining cash payments totalling £2.3m were made between August 2020 and March 2021.
On 24 December 2020, the Group acquired a further 24.95% of the share capital of its subsidiaries Ebiquity Russia Limited and Ebiquity Russia OOO from Vladimir Rass, the former CEO, for a total payment of US$517,000 (£405,000). The Group now holds 75.05% of the share capital of each of these companies.
Alan Newman
Chief Financial and Operating Officer
Alternative Performance Measures
In these results we refer to "underlying" and "statutory" results, as well as other non-GAAP alternative performance measures.
Alternative Performance Measures (APMs) used by the Group are:-
· Net revenue
· Like-for-like revenue growth
· Underlying operating profit
· Underlying operating margin
· Underlying profit before tax
· Underlying earnings per share
· Underlying operating cash flow conversion
Net revenue is the result when project-related costs, comprising external production costs, are deducted from revenue.
Underlying results are not intended to replace statutory results but remove the impact of highlighted items in order to provide a better understanding of the underlying performance of the business. The above APMs are consistent with how business performance is measured internally by the Group.
Underlying profit is not recognised under IFRS and may not be comparable with underlying profit measures used by other companies.
Highlighted items comprise non-cash charges and non-recurring items which are highlighted in the consolidated income statement as their separate disclosure is considered by the Directors to be relevant in understanding the underlying performance of the business. The non-cash charges include share option charges and amortisation of purchased intangibles.
The non-recurring items include the costs associated with potential and completed acquisitions and disposals, adjustments to the estimates of contingent consideration on acquired entities, asset impairment charges, management restructuring and other significant one-off items. Costs associated with acquisition identification and early stage discussions with acquisition targets are reported in underlying administrative expenses.
Further details of highlighted items are set out within the financial statements and the notes to the financial statements.
Consolidated income statement
for the year ended 31 December 2020
|
|
|
|
Restated 1 |
||||
|
|
|
Year ended 31 December 2020 |
Year ended 31 December 2019 |
||||
|
|
|
Before |
Highlighted |
|
Before |
Highlighted |
|
|
|
|
highlighted |
items |
|
highlighted |
items |
|
|
|
|
items |
(note 3) |
Total |
items |
(note 3) |
Total |
|
|
Note |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Revenue |
2 |
55,907 |
- |
55,907 |
68,133 |
- |
68,133 |
|
Project-related costs |
|
(6,436) |
- |
(6,436) |
(8,857) |
- |
(8,857) |
|
Net revenue |
|
49,471 |
- |
49,471 |
59,276 |
- |
59,276 |
|
Cost of sales |
|
(24,784) |
- |
(24,784) |
(27,355) |
- |
(27,355) |
|
Gross profit |
|
24,687 |
- |
24,687 |
31,921 |
- |
31,921 |
|
Administrative expenses |
|
(25,172) |
(2,541) |
(27,713) |
(26,354) |
(10,330) |
(36,684) |
|
Other operating income |
|
151 |
- |
151 |
- |
- |
- |
|
Operating (loss)/profit |
|
(334) |
(2,541) |
(2,875) |
5,567 |
(10,330) |
(4,763) |
|
Finance income |
|
39 |
- |
39 |
9 |
- |
9 |
|
Finance expenses |
|
(914) |
- |
(914) |
(907) |
- |
(907) |
|
Foreign exchange |
|
(137) |
- |
(137) |
- |
- |
- |
|
Net finance costs |
|
(1,012) |
- |
(1,012) |
(898) |
- |
(898) |
|
(loss)/profit before taxation from continuing operations |
|
(1,346) |
(2,541) |
(3,887) |
4,669 |
(10,330) |
(5,661) |
|
Taxation (charge)/credit |
|
|
|
|
|
|
|
|
- continuing operations |
4 |
(26) |
176 |
150 |
(1,931) |
454 |
(1,477) |
|
(Loss)/profit for the year |
|
|
|
|
|
|
|
|
- continuing operations |
|
(1,372) |
(2,365) |
(3,737) |
2,738 |
(9,876) |
(7,138) |
|
Net profit/(loss) from |
|
|
|
|
|
|
|
|
discontinued operations |
5 |
- |
220 |
220 |
- |
(1,018) |
(1,018) |
|
(Loss)/Profit for the year |
|
(1,372) |
(2,145) |
(3,517) |
2,738 |
(10,894) |
(8,156) |
|
Attributable to: |
|
|
|
|
|
|
|
|
Equity holders of the parent |
|
(1,569) |
(2,134) |
(3,703) |
2,275 |
(10,882) |
(8,607) |
|
Non ‑ controlling interests |
|
197 |
(11) |
186 |
463 |
(12) |
451 |
|
|
|
(1,372) |
(2,145) |
(3,517) |
2,738 |
(10,894) |
(8,156) |
|
Earnings per share - continuing operations |
|
|
|
|
|
|
|
|
Basic |
6 |
|
|
(4.81)p |
|
|
(9.55)p |
|
Diluted |
6 |
|
|
(4.81)p |
|
|
(9.55)p |
|
Earnings per share - discontinued operations |
|
|
|
|
|
|
|
|
Basic |
6 |
|
|
0.27p |
|
|
(1.28)p |
|
Diluted |
6 |
|
|
0.27p |
|
|
(1.28)p |
1 Refer to note 1 for further details.
Consolidated statement of comprehensive income
for the year ended 31 December 2020
|
|
|
Restated 1 |
|
|
Year ended |
Year ended |
|
|
31 December |
31 December |
|
|
2020 |
2019 |
|
|
£'000 |
£'000 |
|
Loss for the year |
(3,517) |
(8,156) |
|
Other comprehensive income/(expense): |
|
|
|
Items that will not be reclassified subsequently to profit or loss |
|
|
|
Exchange differences on translation of overseas subsidiaries |
1,033 |
(716) |
|
Total other comprehensive income/(expense) for the year |
1,033 |
(716) |
|
Total comprehensive expense for the year |
(2,484) |
(8,872) |
|
Attributable to: |
|
|
|
Equity holders of the parent |
(2,670) |
(9,323) |
|
Non ‑ controlling interests |
186 |
451 |
|
|
(2,484) |
(8,872) |
1 Refer to note 1 for further details.
Consolidated statement of financial position
as at 31 December 2020
|
|
|
|
Restated 1 |
Restated 1 |
|
|
|
31 December |
31 December |
31 December |
|
|
|
2020 |
2019 |
2018 |
|
|
Note |
£'000 |
£'000 |
£'000 |
|
Non ‑ current assets |
|
|
|
|
|
Goodwill |
7 |
28,563 |
28,409 |
34,774 |
|
Other intangible assets |
8 |
6,135 |
6,763 |
8,477 |
|
Property, plant and equipment |
|
1,962 |
2,563 |
1,170 |
|
Right-of-use assets |
9 |
6,237 |
8,339 |
- |
|
Lease receivables |
9 |
280 |
- |
- |
|
Deferred tax asset |
|
1,145 |
986 |
979 |
|
Total non ‑ current assets |
|
44,322 |
47,060 |
45,400 |
|
Current assets |
|
|
|
|
|
Trade and other receivables |
|
24,318 |
26,838 |
29,260 |
|
Assets held for sale |
|
- |
- |
27,734 |
|
Lease receivables |
9 |
171 |
- |
- |
|
Cash and cash equivalents |
|
11,121 |
8,236 |
8,793 |
|
Total current assets |
|
35,610 |
35,074 |
65,787 |
|
Total assets |
|
79,932 |
82,134 |
111,187 |
|
Current liabilities |
|
|
|
|
|
Trade and other payables |
|
(6,096) |
(5,575) |
(7,510) |
|
Liabilities held for sale |
|
- |
- |
(4,316) |
|
Accruals and contract liabilities |
|
(9,890) |
(9,084) |
(10,640) |
|
Financial liabilities |
10 |
(1,912) |
22 |
(2,822) |
|
Current tax liabilities |
4 |
(1,703) |
(4,152) |
(1,358) |
|
Provisions |
|
- |
(300) |
(570) |
|
Lease liabilities |
9 |
(2,338) |
(1,834) |
- |
|
Deferred tax liability |
|
(250) |
(272) |
(323) |
|
Total current liabilities |
|
(22,189) |
(21,195) |
(27,539) |
|
Non ‑ current liabilities |
|
|
|
|
|
Financial liabilities |
10 |
(19,675) |
(13,868) |
(34,934) |
|
Provisions |
|
(412) |
(387) |
(67) |
|
Lease liabilities |
9 |
(5,820) |
(7,756) |
- |
|
Deferred tax liability |
|
(1,090) |
(1,036) |
(1,281) |
|
Total non ‑ current liabilities |
|
(26,997) |
(23,047) |
(36,282) |
|
Total liabilities |
|
(49,186) |
(44,242) |
(63,821) |
|
Total net assets |
|
30,746 |
37,892 |
47,366 |
|
Equity |
|
|
|
|
|
Ordinary shares |
|
20,646 |
20,029 |
19,778 |
|
Share premium |
|
255 |
46 |
44 |
|
Other reserves |
|
5,461 |
4,428 |
5,144 |
|
Retained earnings |
|
3,942 |
12,210 |
21,408 |
|
Equity attributable to the owners of the parent |
|
30,304 |
36,713 |
46,374 |
|
Non ‑ controlling interests |
|
442 |
1,179 |
992 |
|
Total equity |
|
30,746 |
37,892 |
47,366 |
1 Refer to note 1 for further details.
Consolidated statement of changes in equity
for the year ended 31 December 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
Ordinary |
Share |
Other |
Retained |
Attributable to owners of |
Non-controlling |
Total |
|
|
|
shares |
premium |
Reserves 2 |
earnings |
the parent |
interests |
equity |
|
|
Note |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
31 December 2018 (as reported) |
|
19,778 |
44 |
5,144 |
21,556 |
46,522 |
992 |
47,514 |
|
Impact of restatement at 31 December 2018 |
|
- |
- |
- |
(148) |
(148) |
- |
(148) |
|
31 December 2018 (as restated) 1 |
|
19,778 |
44 |
5,144 |
21,408 |
46,374 |
992 |
47,366 |
|
(Loss)/profit for the year 2019 (as reported) |
|
- |
- |
- |
(8,007) |
(8,007) |
451 |
(7,556) |
|
Adjustment for 2019 |
|
- |
- |
- |
(600) |
(600) |
- |
(600) |
|
(Loss)/profit for the year 2019 (as restated) 1 |
|
- |
- |
- |
(8,607) |
(8,607) |
451 |
(8,156) |
|
Other comprehensive expense |
|
- |
- |
(716) |
- |
(716) |
- |
(716) |
|
Total comprehensive (expense)/income for the year |
|
- |
- |
(716) |
(8,607) |
(9,323) |
451 |
(8,872) |
|
Shares issued for cash |
|
251 |
2 |
- |
- |
253 |
- |
253 |
|
Share options charge |
3 |
- |
- |
- |
195 |
195 |
- |
195 |
|
Acquisition of non-controlling interest |
|
- |
- |
- |
(252) |
(252) |
(83) |
(335) |
|
Dividends paid to shareholders |
11 |
- |
- |
- |
(534) |
(534) |
- |
(534) |
|
Dividends paid to non-controlling interests |
|
- |
- |
- |
- |
- |
(181) |
(181) |
|
31 December 2019 (as restated) 1 |
|
20,029 |
46 |
4,428 |
12,210 |
36,713 |
1,179 |
37,892 |
|
(Loss)/profit for the year 2020 |
|
- |
- |
- |
(3,703) |
(3,703) |
186 |
(3,517) |
|
Other comprehensive income |
|
- |
- |
1,033 |
- |
1,033 |
- |
1,033 |
|
Total comprehensive income/(expense) for the year |
|
- |
- |
1,033 |
(3,703) |
(2,670) |
186 |
(2,484) |
|
Shares issued for cash |
|
8 |
- |
- |
(8) |
- |
- |
- |
|
Share options credit |
3 |
- |
- |
- |
(1,845) |
(1,845) |
- |
(1,845) |
|
Acquisition of non-controlling interest |
|
609 |
209 |
- |
(2,712) |
(1,894) |
(779) |
(2,673) |
|
Dividends paid to |
|
- |
- |
- |
- |
- |
- |
- |
|
non-controlling interests |
|
- |
- |
- |
- |
- |
(144) |
(144) |
|
31 December 2020 |
|
20,646 |
255 |
5,461 |
3,942 |
30,304 |
442 |
30,746 |
1.Refer to note 1 for further details.
2.Includes a credit of £3,667,000 (31 December 2019: £3,667,000) in the merger reserve, a gain of £3,272,000 (31 December 2019: £2,239,000) recognised in the translation reserve, and is partially offset by a debit balance of £1,478,000 (31 December 2019: £1,478,000) in the ESOP reserve. Refer to note 23 for further details.
Consolidated statement of cash flows
for the year ended 31 December 2020
|
|
|
Year ended |
Year ended |
|
|
|
31 December |
31 December |
|
|
|
2020 |
2019 |
|
|
Note |
£'000 |
£'000 |
|
Cash flows from operating activities |
|
|
|
|
Cash generated from operations |
12 |
5,827 |
5,657 |
|
Finance expenses paid |
|
(563) |
(727) |
|
Finance income received |
|
13 |
9 |
|
Income taxes paid |
|
(2,285) |
(1,345) |
|
Net cash generated by operating activities |
|
2,992 |
3,594 |
|
Cash flows from investing activities |
|
|
|
|
Acquisition of subsidiaries, net of cash acquired |
|
(597) |
- |
|
Disposal of subsidiaries |
5 |
18 |
24,845 |
|
Payments to acquire non-controlling interest |
10 |
(1,539) |
(335) |
|
Payments in respect of contingent consideration |
10 |
- |
(648) |
|
Purchase of property, plant and equipment |
|
(87) |
(2,024) |
|
Purchase of intangible assets |
8 |
(1,230) |
(1,211) |
|
Net cash (used in)/generated by investing activities |
|
(3,435) |
20,627 |
|
Cash flows from financing activities |
|
|
|
|
Proceeds from issue of share capital (net of issue costs) |
|
- |
253 |
|
Proceeds from bank borrowings |
10 |
5,000 |
- |
|
Repayment of bank borrowings |
10 |
- |
(20,000) |
|
Proceeds from government borrowings |
10 |
806 |
- |
|
Bank loan fees paid |
|
(21) |
(204) |
|
Repayment of lease liabilities |
9 |
(2,130) |
(1,192) |
|
Dilapidations payments |
|
(300) |
- |
|
Dividends paid to shareholders |
11 |
- |
(534) |
|
Dividends paid to non ‑ controlling interests |
|
(144) |
(518) |
|
Capital repayment of finance leases |
|
- |
- |
|
Net cash flow generated by/(used in) financing activities |
|
3,211 |
(22,195) |
|
Net increase in cash, cash equivalents and bank overdrafts |
|
2,768 |
2,026 |
|
Cash, cash equivalents and bank overdraft at beginning of year |
|
8,236 |
6,414 |
|
Effects of exchange rate changes on cash and cash equivalents |
|
117 |
(204) |
|
Group cash and cash equivalents at the end of the year |
|
11,121 |
8,236 |
Notes to the consolidated financial statements
for the year ended 31 December 2020
1. Accounting policies
General information
Ebiquity plc (the 'Company') and its subsidiaries (together, the 'Group') exists to help brands optimise return on investment from their marketing spend, working with many of the world's leading advertisers to improve marketing outcomes and enhance business performance. The Group has 19 offices.
The Company is a public limited company, which is listed on the London Stock Exchange's Alternative Investment Market and is limited by shares. The Company is incorporated and domiciled in the UK. The address of its registered office is Chapter House, 16 Brunswick Place, London N1 6DZ.
Basis of preparation
The consolidated financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 ('IFRS') and the applicable legal requirements of the Companies Act 2006.
Prior year restatement
During the year, a misstatement was discovered in the balance sheet of subsidiary Firm Decisions ASJP LLC as at 31 December 2019. This followed an internal review of balance sheet items by the Group Finance team as part of enhanced internal control procedures put in place by the Chief Financial Officer during the last year. The causes of this error were specific to the unit involved and related to the misstatement of accrued income and revenue balances for which process and system improvements have been made to avoid any recurrence. In accordance with IAS 8, the financial statements for 2019 have been restated to reflect this adjustment. The impact was a reduction of £600,000 in 2019 Group revenue, a reduction of £148,000 in retained earnings brought forward as at 1 January 2019, and a reduction of £748,000 in accrued income as at 31 December 2019.
|
|
2018 |
2018 |
2018 |
2019 |
2019 |
2019 |
|
|
Reported |
Adjustment |
Restated |
Reported |
Adjustment |
Restated |
|
|
£ '000 |
£ '000 |
£ '000 |
£ '000 |
£ '000 |
£ '000 |
|
Consolidated income statement |
|
|
|
|
|
|
|
Revenue |
69,368 |
(56) |
69,312 |
68,733 |
(600) |
68,133 |
|
|
|
|
|
|
|
|
|
Consolidated statement of financial position |
|
|
|
|
|
|
|
Trade and other receivables |
29,408 |
(148) |
29,260 |
27,586 |
(748) |
26,838 |
|
Retained earnings |
21,556 |
(148) |
21,408 |
12,958 |
(748) |
12,210 |
Going concern
The financial statements have been prepared on a going concern basis. The Group meets its day-to-day working capital requirements through its cash reserves and borrowings, described in note 10 to the financial statements. As at 31 December 2020, the Group had cash balances of £11,121,000 and undrawn bank facilities available of £5,000,000 and was cash generative and within its banking covenants.
The lenders, Barclays and NatWest Bank, have agreed to covenant waivers and modifications where required in order to negate the risk of any future covenant breaches.
The existing covenants remained in place for the 12 months to March 2020 and June 2020 and were achieved. In response to the disruption caused by the Covid-19 pandemic, modified covenants were agreed with the lenders in May 2020 which applied from July 2020 to 30 November 2021. These require the Group to maintain minimum liquidity of at least £5 million at the end of every month during that period. In March 2021, a further covenant amendment was agreed with the lenders. With effect from September 2021, the minimum liquidity covenant will increase to £7.0 million and will be in place until June 2022. In addition, with effect from September 2021 an interest cover covenant will be reintroduced at > 4.0 and an adjusted leverage covenant will also be reintroduced initially at < 4.0, increasing to < 4.25 in December 2021 and to < 4.5 in March 2022, then reducing to < 3.5 in June 2022. The original covenants which were in force until June 2020 will apply again from September 2022 onwards.
In assessing the going concern status of the Group and Company, the Directors have considered the Group's forecasts and projections, taking account of reasonably possible changes in trading performance and the Group's cash flows, liquidity and bank facilities. Specifically, the Directors have prepared a model to forecast covenant compliance and liquidity to 31 December 2022 that includes a base case and scenarios to form a severe but plausible downside case.
The base case assumes growth in revenue and EBITDA when compared to the outturn of FY20 and assumes that trading will recover to 2019 levels by 31 December 2022. The severe but plausible case assumes a downside adjustment to revenue of 7%, offset by mitigating factors within the control of the Directors. Under both of these cases, there is headroom on covenant compliance and liquidity throughout the going concern period.
The Directors have also considered a scenario that leads to a breach in covenants; a form of reverse stress test. Actual trading in FY21 and the proportion of secured revenue at this time, is ahead of last year and whilst there is inherent uncertainty in trading for the second half of FY21 and into FY22, trading levels would need to significantly reduce to a level that is consistent with FY20 for there to be a breach in covenants. This scenario is not deemed plausible by the Directors.
In addition, the downside assumptions that are applied to the base case are different from those modelled at the half year. The Directors are satisfied that based on the current trading performance of the Group and Company, the proven ability of the Group and Company to work remotely and still serve clients during the pandemic and the current vaccine roll outs, the prior downside assumptions are no longer plausible.
The Directors consider that the Group and Company will have sufficient liquidity within existing bank facilities, totalling £24,000,000 to meet its obligations during the next 12 months and hence consider it appropriate to prepare the financial statements on a going concern basis.
The financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities at fair value through profit or loss.
The consolidated financial statements are presented in pounds sterling and rounded to the nearest thousand.
The principal accounting policies adopted in these consolidated financial statements are set out below. These policies have been consistently applied to all periods presented, unless otherwise stated.
On 13 February 2018, the Group agreed to sell its Advertising Intelligence ('AdIntel') business to Nielsen Media Research Limited ('Nielsen'), a subsidiary of Nielsen Holdings plc; the transaction was approved as at 31 December 2018 and completion took place on 2 January 2019. On 19 March 2018, the Group entered into an agreement to sell the business assets of its Reputation division; completion took place on 31 March 2018. Collectively, these divisions formed the Intel segment. Accordingly, profit on disposal arising in the prior year has been presented within discontinued operations in the income statement.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. The results of each subsidiary are included from the date that control is transferred to the Group until the date that control ceases.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those used by the Group. All intra ‑ group transactions, balances, income and expenses are eliminated on consolidation.
Non ‑ controlling interests represent the portion of the results and net assets in subsidiaries that is not held by the Group.
Revenue recognition
Revenue is recognised in accordance with IFRS 15 'Revenue from Contracts with Customers'. Under IFRS 15 an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. This core principle is delivered in a five-step model:
· Identify the contract(s) with a customer
· Identify the performance obligation(s) in the contract
· Determine the transaction price
· Allocate the transaction price to the performance obligations in the contract
· Recognise revenue when (or as) the entity satisfies a performance obligation.
Revenue from providing services is recognised in the accounting period in which the services are rendered. For fixed-price contracts, revenue is recognised based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided because the customer receives and uses the benefits simultaneously. This is determined based on the actual labour hours spent relative to the total expected labour hours.
Estimates of revenues, costs or extent of progress toward completion are revised if circumstances change. Any resulting increases or decreases in estimated revenues or costs are reflected in profit or loss in the period in which the circumstances that give rise to the revision become known by management.
In the case of fixed-price contracts, the customer pays the fixed amount based on a payment schedule. If the services rendered by the Company exceed the payment, a contract asset is recognised. If the payments exceed the services rendered, a contract liability is recognised.
Highlighted items
Highlighted items comprise non ‑ cash charges and non ‑ recurring items which are highlighted in the consolidated income statement as separate disclosure is considered by the Directors to be relevant in understanding the underlying performance of the business. The non ‑ cash charges include share option charges and amortisation of purchased intangibles.
The non ‑ recurring items include the costs associated with potential acquisitions (where formal discussion is undertaken), completed acquisitions and disposals, and their subsequent integration into/separation from the Group, adjustments to the estimates of contingent consideration on acquired entities, asset impairment charges, management restructuring and other significant one ‑ off items. Costs associated with ongoing market landscaping, acquisition identification and early stage discussions with acquisition targets are reported in underlying administrative expenses.
Critical accounting estimates and judgements
In preparing the consolidated financial statements, the Directors have made certain estimates and judgements relating to the reporting of results of operations and the financial position of the Group. Actual results may significantly differ from those estimates, often as a result of the need to make assumptions about matters which are uncertain. The estimates and judgements discussed below are considered by the Directors to be those that have a critical accounting impact to the Group's financial statements.
Critical accounting estimates include the terminal growth rate used in impairment assessments, inputs to share option accounting fair value models and amounts to capitalise as intangible assets. These estimates are reached with reference to historical experience, supporting detailed analysis and, in the case of impairment assessments and share option accounting, external economic factors.
Critical accounting judgements include the treatment of events after the reporting period as adjusting or non ‑ adjusting and the determination of segments for segmental reporting, based on the reports reviewed by the Executive Directors that are used to make strategic decisions. These judgements are determined at a Board level based on the status of strategic initiatives of the Group.
Carrying value of goodwill and other intangible assets
Impairment testing requires management to estimate the value ‑ in ‑ use of the cash ‑ generating units to which goodwill and other intangible assets have been allocated. The value ‑ in-use calculation requires estimation of future cash flows expected to arise from the cash ‑ generating unit and the application of a suitable discount rate in order to calculate present value. The sensitivity around the selection of particular assumptions including growth forecasts and the pre ‑ tax discount rate used in management's cash flow projections could significantly affect the Group's impairment evaluation and therefore the Group's reported assets and results.
Further details, including a sensitivity analysis, are included in notes 7 and 8 to the financial statements.
Contingent consideration
The Group has recorded liabilities for contingent consideration on acquisitions made in the current and prior periods. The calculation of the contingent consideration liability requires judgements to be made regarding the forecast future performance of these businesses for the earn ‑ out period. Any changes to the fair value of the contingent consideration after the measurement period are recognised in the income statement within administrative expenses as a highlighted item.
Taxation
The Group is subject to income taxes in all the territories in which it operates, and judgement and estimates of future profitability are required to determine the Group's deferred tax position. If the final tax outcome is different to that assumed, resulting changes will be reflected in the income statement, unless the tax relates to an item charged to equity, in which case the changes in the tax estimates will also be reflected in equity. The Group believes that its accruals for tax liabilities are adequate for all open audit years based on its assessment of many factors including past experience and interpretations of tax law. This assessment relies on estimates and assumptions and may involve a series of complex judgements about future events. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact income tax expense in the period in which such determination is made.
Provisions
The Group provides for certain costs of reorganisation that has occurred due to the Group's acquisition and disposal activity. When the final amount payable is uncertain, these are classified as provisions. These provisions are based on the best estimates of management.
Adoption of new standards and interpretations
The Group has applied the following standards and amendments for the first time for the annual reporting period commencing 1 January 2020:
· Definition of Material - amendments to IAS 1 and IAS 8
· Definition of a Business - amendments to IFRS 3
· Interest Rate Benchmark Reform - amendments to IFRS 9, IAS 9 and IFRS 7
· Revised Conceptual Framework for Financial Reporting
The amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.
The following new standard has been published that is mandatory to the Group's future accounting periods but has not been adopted early in these financial statements:
· Annual Improvements to IFRS Standards 2018-2020 Cycle effective on or after 1 January 2022.
The adoption of the standard listing above is not expected to significantly affect future periods.
2. Segmental Reporting
In accordance with IFRS 8, the Group's operating segments are based on the reports reviewed by the Executive Directors that are used to make strategic decisions.
Certain operating segments have been aggregated to form two reportable segments: Media and Analytics & Tech:
· Media includes our Media Performance, Media Management and Contract Compliance services; and
· Analytics & Tech consists of our Advanced Analytics, MarTech and AdTech services.
The Executive Directors are the Group's chief operating decision ‑ maker. They assess the performance of the operating segments based on operating profit before highlighted items. This measurement basis excludes the effects of non ‑ recurring expenditure from the operating segments such as restructuring costs and purchased intangible amortisation. The measure also excludes the effects of equity ‑ settled share ‑ based payments. Interest income and expenditure are not allocated to segments, as this type of activity is driven by the central treasury function, which manages the cash position of the Group.
The segment information provided to the Executive Directors for the reportable segments for the year ended 31 December 2020 is as follows:
Year ended/As at 31 December 2020
|
|
|
Analytics & |
Reportable |
|
|
|
|
Media |
Tech |
segments |
Unallocated |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Revenue |
46,042 |
9,865 |
55,907 |
- |
55,907 |
|
Operating profit/(loss) before highlighted items |
6,770 |
(692) |
6,078 |
(6,412) |
(334) |
|
Total assets |
67,659 |
9,838 |
77,497 |
2,435 |
79,932 |
Unsatisfied long-term contracts
The following table shows unsatisfied performance obligations results from long-term contracts:
|
|
Year ended |
Year ended |
|
|
31 December |
31 December |
|
|
2020 |
2019 |
|
|
£'000 |
£'000 |
|
Aggregate amount of the transaction price allocated to long-term contracts that are partially or fully unsatisfied as at 31 December 2020 |
866 |
304 |
It is expected that 94% of the transaction price allocated to the unsatisfied contracts as of 31 December 2020 will be recognised during the next reporting period (31 December 2019: 97%); the remaining 6% will be recognised in the 2022 financial year (31 December 2019: 3% to be recognised in 2021).
Significant changes in contract assets and liabilities
Contract assets have decreased from £8,618,000 to £6,563,000 and contract liabilities have decreased from £4,635,000 to £4,498,000 from 31 December 2019 to 31 December 2020. The reduced contract assets is a result of the reduction in revenue year on year.
Year ended/As at 31 December 2019
|
|
Restated |
||||
|
|
|
Analytics & |
Reportable |
|
|
|
|
Media |
Tech |
segments |
Unallocated |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Revenue |
53,985 |
14,148 |
68,133 |
- |
68,133 |
|
Operating profit/(loss) before highlighted items |
11,245 |
966 |
12,211 |
(6,644) |
5,567 |
|
Total assets |
68,634 |
11,581 |
80,215 |
1,919 |
82,134 |
A reconciliation of segment operating profit before highlighted items to total profit before tax is provided below:
|
|
|
Restated |
|
|
Year ended |
Year ended |
|
|
31 December |
31 December |
|
|
2020 |
2019 |
|
|
£'000 |
£'000 |
|
Reportable segment operating profit before highlighted items |
6,078 |
12,211 |
|
Unallocated (costs)/income1: |
|
|
|
Staff costs |
(3,480) |
(3,428) |
|
Property costs |
(1,595) |
(1,513) |
|
Exchange rate movements |
181 |
(208) |
|
Other administrative expenses |
(1,518) |
(1,495) |
|
Operating (loss)/profit before highlighted items |
(334) |
5,567 |
|
Highlighted items (note 3) |
(2,541) |
(10,330) |
|
Operating loss |
(2,875) |
(4,763) |
|
Net finance costs 2 |
(1,012) |
(898) |
|
Loss before tax |
(3,887) |
(5,661) |
1.Unallocated (costs)/income comprise central costs that are not considered attributable to the segments.
Net finance costs in the current year include £137,000 relating to foreign exchange movements on intercompany loan balances. Previously this was included as an administrative expense, however it was considered appropriate to reclassify this in the current year in accordance with IAS 12.
A reconciliation of segment total assets to total consolidated assets is provided below:
|
|
|
Restated |
|
|
31 December |
31 December |
|
|
2020 |
2019 |
|
|
£'000 |
£'000 |
|
Total assets for reportable segments |
77,497 |
80,215 |
|
Unallocated amounts: |
|
|
|
Other intangible assets |
388 |
642 |
|
Other receivables |
1,291 |
868 |
|
Cash and cash equivalents |
420 |
332 |
|
Deferred tax asset |
336 |
77 |
|
Total assets |
79,932 |
82,134 |
The table below presents revenue and non ‑ current assets by geographical location:
|
|
|
Restated |
||
|
|
Year ended/As at 31 December 2020 |
Year ended/As at 31 December 2019 |
||
|
|
Revenue by |
|
Revenue by |
|
|
|
location of |
Non ‑ current |
location of |
Non ‑ current |
|
|
customers |
assets |
customers |
assets |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
United Kingdom |
29,083 |
21,684 |
33,176 |
27,802 |
|
Rest of Europe |
15,999 |
12,424 |
18,783 |
7,402 |
|
North America |
4,671 |
2,721 |
8,351 |
3,416 |
|
Rest of world |
6,154 |
6,348 |
7,823 |
7,454 |
|
|
55,907 |
43,177 |
68,133 |
46,074 |
|
Deferred tax assets |
- |
1,145 |
- |
986 |
|
Total |
55,907 |
44,322 |
68,133 |
47,060 |
No single customer (or group of related customers) contributes 10% or more of revenue.
3. Highlighted items
Highlighted items comprise items which are highlighted in the income statement because separate disclosure is considered relevant in understanding the underlying performance of the business.
|
|
Year ended 31 December 2020 |
Year ended 31 December 2019 |
||||
|
|
||||||
|
|
Cash |
Non ‑ cash |
Total |
Cash |
Non ‑ cash |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Administrative expenses |
|
|
|
|
|
|
|
Share option (credit)/charge |
(61) |
(1,845) |
(1,906) |
(78) |
195 |
117 |
|
Amortisation of purchased intangibles |
- |
1,122 |
1,122 |
- |
1,169 |
1,169 |
|
Impairment of goodwill |
- |
817 |
817 |
- |
6,751 |
6,751 |
|
Severance and reorganisation costs |
1,194 |
315 |
1,509 |
1,333 |
- |
1,333 |
|
Acquisition, integration and strategic costs/(income) |
809 |
190 |
999 |
998 |
(38) |
960 |
|
Total highlighted items before tax |
1,942 |
599 |
2,541 |
2,253 |
8,077 |
10,330 |
|
Taxation (credit)/charge |
(289) |
113 |
(176) |
(536) |
82 |
(454) |
|
Total highlighted items after tax - continuing operations |
1,653 |
712 |
2,365 |
1,717 |
8,159 |
9,876 |
|
Highlighted items - discontinued operations |
(220) |
- |
(220) |
2,521 |
(1,503) |
1,018 |
|
Total highlighted items |
1,433 |
712 |
2,145 |
4,238 |
6,656 |
10,894 |
In the current year, a non ‑ cash IFRS 2 credit of £1,845,000 (31 December 2019: charge of £195,000) was recorded. Separate disclosure is considered relevant to isolate charges and credits which are subject to volatility as a result of non-trading factors.
Amortisation of purchased intangibles relates to acquisitions made in the current financial year of £nil and to acquisitions made in prior years of £1,122,000 (31 December 2019: £nil in the current financial year and £1,169,000 in prior years). Separate disclosure is considered relevant because amortisation of purchased intangibles has no correlation to underlying profitability of the Group.
Impairment of goodwill and intangibles of £817,000 (2019: £6,751,000) has been recognised in the year. This is in relation to the impairment of goodwill in Digital Balance Australia Pty Limited. The impairment was determined by the excess of the carrying value of goodwill and purchased intangibles over and above the calculated value-in-use.
Total severance and reorganisation costs of £1,509,000 (31 December 2019: £1,333,000) were recognised during the year, relating to severances in the UK, the US, Germany, Australia and France as part of management restructuring in those countries. Separate disclosure is considered relevant as these charges are non-recurring and not reflective of the underlying operating costs of the business.
Total acquisition, integration and strategic costs of £999,000 (31 December 2019: £960,000) were recognised during the year, predominantly relating to the adjustment to the fair value of contingent consideration by £791,000 predominantly arising in relation to the upward revision of the amounts payable in relation to the Ebiquity Marsh Limited acquisition in line with the latest actuals. £80,000 was incurred in relation to the loan covenant amendments. Costs of £72,000 have been recognised in relation to the Chicago sublease arrangement. Costs of £56,000 were also recognised in relation to the acquisitions of Digital Decisions B.V. and the minority buyout in Ebiquity Italy Media Advisor S.r.l., Ebiquity Russia Limited and Ebiquity Russia OOO which completed in the year; see note 13 for further details. Separate disclosure is considered relevant as these charges are non-recurring and not reflective of the underlying operating costs of the business.
Current tax arising on the highlighted items is included as a cash item, while deferred tax on highlighted items is included as a non ‑ cash item. Refer to note 4 for more detail.
Highlighted items on discontinued operations in the current year comprise the overprovision of prior year tax on the profit on disposal of the AdIntel business of £220,000 due to information now known. Highlighted items on discontinued operations in the prior year comprise the profits on disposal of the AdIntel and the Reputation business respectively of £1,408,000 and £36,000 and the tax charge arising thereon of £2,462,000.
As at 31 December 2020, £1,314,000 of the £1,942,000 cash highlighted items had been settled (31 December 2019: £1,526,000 of the £2,254,000 cash highlighted items had been settled).
4. Taxation charge/(credit)
|
|
Year ended 31 December 2020 |
Year ended 31 December 2019 |
|||||
|
|
Before |
|
|
Before |
|
|
|
|
|
highlighted |
Highlighted |
|
highlighted |
Highlighted |
|
|
|
|
items |
items |
Total |
items |
items |
Total |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
UK tax |
|
|
|
|
|
|
|
|
Current year |
(20) |
(82) |
(102) |
298 |
(383) |
(85) |
|
|
Adjustment in respect of prior years |
(309) |
- |
(309) |
494 |
- |
494 |
|
|
|
(329) |
(82) |
(411) |
792 |
(383) |
409 |
|
|
Foreign tax |
|
|
|
|
|
|
|
|
Current year |
686 |
(207) |
479 |
1,404 |
(153) |
1,251 |
|
|
Adjustment in respect of prior years |
(78) |
- |
(78) |
120 |
- |
120 |
|
|
|
608 |
(207) |
401 |
1,524 |
(153) |
1,371 |
|
|
Total current tax |
279 |
(289) |
(10) |
2,316 |
(536) |
1,780 |
|
|
Deferred tax |
|
|
|
|
|
|
|
|
Origination and reversal of |
|
|
|
|
|
|
|
|
temporary differences |
(186) |
113 |
(73) |
(295) |
82 |
(213) |
|
|
Adjustment in respect of prior years |
(67) |
- |
(67) |
(90) |
- |
(90) |
|
|
Total tax charge/(credit) |
26 |
(176) |
(150) |
1,931 |
(454) |
1,477 |
|
The difference between tax as charged in the financial statements and tax at the nominal rate is explained below:
|
|
|
Restated |
|
|
Year ended |
Year ended |
|
|
31 December |
31 December |
|
|
2020 |
2019 |
|
|
£'000 |
£'000 |
|
Loss before tax |
(3,887) |
(5,661) |
|
Corporation tax at 19.00% (31 December 2019: 19.00%) |
(739) |
(1,076) |
|
Non ‑ deductible taxable expenses |
1,605 |
1,253 |
|
Overseas tax rate differential |
117 |
361 |
|
Overseas(gains)/losses not recognised |
(460) |
149 |
|
Losses utilised not previously recognised |
1 |
266 |
|
Adjustment in respect of prior years |
(674) |
524 |
|
Total tax (credit)/charge |
(150) |
1,477 |
Following the Budget on 11 March 2020, the corporation tax rate effective from 1 April 2020 and 1 April 2021 will remain at 19%. This supersedes the announcement on 6 September 2016 which detailed a reduction to 17% from 1 April 2020. The Budget 2021 detailed an increase in the corporation tax from 1 April 2023 to 25%, however this has not yet been substantively enacted.
The table below shows a reconciliation of the current tax liability for each year end:
|
|
£'000 |
|
At 1 January 2019 |
1,358 |
|
Corporation tax payments |
(1,499) |
|
Corporation tax refunds |
151 |
|
Under ‑ provision in relation to prior years |
614 |
|
Provision for the year ended 31 December 20191 |
3,629 |
|
Foreign exchange |
(101) |
|
At 31 December 2019 |
4,152 |
|
Corporation tax payments |
(2,476) |
|
Corporation tax refunds |
191 |
|
Withholding tax |
(25) |
|
Under ‑ provision in relation to prior years |
(220) |
|
Provision for the year ended 31 December 20201 |
(10) |
|
Foreign exchange |
91 |
|
At 31 December 2020 |
1,703 |
1 The provision for the current year includes an overprovision of tax relating to the prior year of £220,000 in relation to the discontinued operation (31 December 2019: a tax charge of £2,462,000 in relation to the discontinued operation on the profit on disposal).
5. Discontinued operations
On 12 February 2018, the Group agreed to dispose of the AdIntel business to Nielsen for gross consideration of £26,000,000. This disposal was completed on 2 January 2019. The gross consideration was dependent upon a working capital target position at the date of completion. The working capital acquired by Nielsen was below this target and a resulting repayment was made to Nielsen of £1,155,000 on 31 October 2019; net consideration was therefore £24,845,000. The results of this division have been presented within discontinued operations as appropriate.
On 19 March 2018, the Group entered into an agreement to sell the business assets of its Reputation division to Echo Research Holdings Limited. Completion took place on 31 March 2018. The consideration payable was dependent upon the revenue performance of the business during the 12 months following completion. The consideration resulting was £36,000, half of which was paid in the prior year and the balance was paid in the current year. The results of this division have been presented within discontinued operations as appropriate.
The financial performance and cash flow information presented below for Intel reflects the overprovision of tax on the AdIntel sale in the year ended 31 December 2020, whilst the comparative information shows the profit on disposal and tax charge thereon recognised in 2019 on the sale completing on 2 January 2019. The financial performance and cash flow information presented below for Reputation reflects the contingent consideration receivable recognised in 2019.
The table below summarises the income statement for the discontinued business units for both the current and the prior year:
|
|
Year ended 31 December 2020 |
Year ended 31 December 2019 |
|||||
|
|
AdIntel |
Reputation |
Total |
AdIntel |
Reputation |
Total |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Revenue |
- |
- |
- |
- |
- |
- |
|
|
Cost of sales |
- |
- |
- |
- |
- |
- |
|
|
Gross result |
- |
- |
- |
- |
- |
- |
|
|
Administrative expenses |
- |
- |
- |
- |
- |
- |
|
|
Impairment of asset held for sale |
- |
- |
- |
- |
- |
- |
|
|
Operating result |
- |
- |
- |
- |
- |
- |
|
|
Highlighted items |
- |
- |
- |
(1,408) |
(36) |
(1,444) |
|
|
(Loss) before tax |
- |
- |
- |
(1,408) |
(36) |
(1,444) |
|
|
Tax |
(220) |
- |
(220) |
2,455 |
7 |
2,462 |
|
|
Net profit/(loss) from discontinued operations |
220 |
- |
220 |
(1,047) |
29 |
(1,018) |
|
Below is a table summarising the cash flows from continuing and discontinued operations:
|
|
Year ended |
Year ended |
|
|
31 December |
31 December |
|
|
2020 |
2019 |
|
|
£'000 |
£'000 |
|
Cash generated from operations - continuing operations |
2,992 |
3,594 |
|
Cash generated from operations - discontinued operations |
- |
- |
|
Total cash generated from operations |
2,992 |
3,594 |
|
Cash used in investment activities - continuing operations |
(3,453) |
(4,218) |
|
Cash generated by/(used in) investment activities - discontinued operations |
18 |
24,845 |
|
Total cash (used in)/generated by investment activities |
(3,435) |
20,627 |
|
Cash generated by/(used in) financing activities - continuing operations |
3,211 |
(22,195) |
|
Cash generated by financing activities - discontinued operations |
- |
- |
|
Total cash generated by/(used in) financing activities |
3,211 |
(22,195) |
|
Net increase/(decrease) in cash and cash equivalents - continuing operations |
2,750 |
(22,819) |
|
Net increase in cash and cash equivalents - discontinued operations |
18 |
24,845 |
|
Net increase in cash and cash equivalents |
2,768 |
2,026 |
Below is a table summarising the details of the sale of the divisions:
|
|
Year ended 31 December 2020 |
Year ended 31 December 2019 |
|||||
|
|
AdIntel |
Reputation |
Total |
AdIntel |
Reputation |
Total |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Cash received or receivable: |
|
|
|
|
|
|
|
|
Cash |
- |
- |
- |
26,000 |
36 |
26,036 |
|
|
Decrease of consideration |
- |
- |
- |
(1,155) |
- |
(1,155) |
|
|
Total disposal consideration |
- |
- |
- |
24,845 |
36 |
24,881 |
|
|
Carrying amount of net assets sold |
- |
- |
- |
23,060 |
- |
23,060 |
|
|
Costs to sell - current year |
- |
- |
- |
95 |
- |
95 |
|
|
Reclassification of foreign currency translation reserve |
- |
- |
- |
282 |
- |
282 |
|
|
Total |
- |
- |
- |
23,437 |
- |
23,437 |
|
|
Gain on sale before income tax |
- |
- |
- |
1,408 |
36 |
1,444 |
|
|
Income tax credit/(charge) on gain 1 |
220 |
- |
220 |
(2,455) |
(7) |
(2,462) |
|
|
Gain/(loss) on sale after income tax |
220 |
- |
220 |
(1,047) |
29 |
(1,018) |
|
|
Costs to sell - prior year |
- |
- |
- |
(3,176) |
- |
(3,176) |
|
|
Gain/(loss) on sale after income tax - total |
220 |
- |
220 |
(4,223) |
29 |
(4,194) |
|
1. The income tax charge on the gain on disposal is £2,462,000 and exceeds the gain on sale of £1,444,000 due primarily to the difference between accounting base costs and tax base costs for the assets sold. Certain goodwill and intangible balances recognised for accounting purposes do not have base costs for corporation tax purposes, therefore these items are not able to shield the gain from a tax perspective.
6. Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
|
|
|
Restated |
||||
|
|
Year ended 31 December 2020 |
Year ended 31 December 2019 |
||||
|
|
Continuing |
Discontinued |
Total |
Continuing |
Discontinued |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Earnings for the purpose of basic earnings |
|
|
|
|
|
|
|
per share, being net (loss)/profit attributable to equity holders of the parent |
(3,923) |
220 |
(3,703) |
(7,589) |
(1,018) |
(8,607) |
|
Adjustments: |
|
|
|
|
|
|
|
Impact of highlighted items (net of tax)1 |
2,354 |
(220) |
2,134 |
9,864 |
1,018 |
10,882 |
|
Earnings for the purpose of underlying earnings per share |
(1,569) |
- |
(1,569) |
2,275 |
- |
2,275 |
|
Number of shares: |
|
|
|
|
|
|
|
Weighted average number |
|
|
|
|
|
|
|
of shares during the year |
|
|
|
|
|
|
|
- basic |
81,571,242 |
81,571,242 |
81,571,242 |
79,490,174 |
79,490,174 |
79,490,174 |
|
- dilutive effect of share options |
528,254 |
528,254 |
528,254 |
1,155,106 |
1,155,106 |
1,155,106 |
|
- diluted |
82,099,496 |
82,099,496 |
82,099,496 |
80,645,280 |
80,645,280 |
80,645,280 |
|
Basic earnings per share |
(4.81)p |
0.27p |
(4.54)p |
(9.55)p |
(1.28)p |
(10.83)p |
|
Diluted earnings per share |
(4.81)p |
0.27p |
(4.54)p |
(9.55)p |
(1.28)p |
(10.83)p |
|
Underlying basic earnings per share |
(1.92)p |
- |
(1.92)p |
2.86p |
- |
2.86p |
|
Underlying diluted earnings per share |
(1.92)p |
- |
(1.92)p |
2.82p |
- |
2.82p |
1. Highlighted items attributable to equity holders of the parent (see note 3), stated net of their total tax impact.
7. Goodwill
|
|
£'000 |
|
Cost |
|
|
At 1 January 2019 |
40,510 |
|
Disposals 1 |
(3,129) |
|
Foreign exchange differences |
(632) |
|
At 31 December 2019 |
36,749 |
|
Acquisitions 2 |
484 |
|
Foreign exchange differences |
518 |
|
At 31 December 2020 |
37,751 |
|
Accumulated impairment |
|
|
At 1 January 2019 |
(5,736) |
|
Impairment 3 |
(5,989) |
|
Disposals 1 |
3,129 |
|
Foreign exchange differences |
256 |
|
At 31 December 2019 |
(8,340) |
|
Impairment 4 |
(817) |
|
Foreign exchange differences |
(31) |
|
At 31 December 2020 |
(9,188) |
|
Net book value |
|
|
At 31 December 2020 |
28,563 |
|
At 31 December 2019 |
28,409 |
1. The disposal in the prior year relates to the write off of the goodwill cost and accumulated amortisation in relation to the Reputation division which was sold in the prior year.
2. Goodwill of £484,000 has been recognised on the acquisition of Digital Decisions BV in the year.
3. An impairment of £5,082,000 was recognised in the prior year in relation to goodwill held in Stratigent LLC so that the carrying value was adjusted down to £nil on the decision being taken to wind down this division. A further impairment of £907,000 was recognised for goodwill held in Digital Balance which equates to the downward revision of the contingent consideration payable.
4. An impairment of £817,000 has been recognised in the current year relating to the goodwill held in Digital Balance Australia Pty Limited so that the carrying value is in line with the value-in-use.
Goodwill has been allocated to the following segments:
|
|
31 December |
31 December |
|
|
2020 |
2019 |
|
|
£'000 |
£'000 |
|
Media |
26,855 |
25,905 |
|
Analytics & Tech |
1,708 |
2,504 |
|
|
28,563 |
28,409 |
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill may be potentially impaired. Goodwill is allocated to the Group's cash ‑ generating units ('CGUs') in order to carry out impairment tests. The Group's remaining carrying value of goodwill by CGU at 31 December was as follows:
|
|
|
31 December |
31 December |
|
|
|
2020 |
2019 |
|
Cash ‑ generating unit |
Reporting segment |
£'000 |
£'000 |
|
Media UK and International |
Media |
9,262 |
9,241 |
|
Media Germany |
Media |
4,327 |
4,319 |
|
Media Value Group |
Media/Analytics & Tech |
3,187 |
3,042 |
|
FirmDecisions |
Media |
2,981 |
2,981 |
|
Media Australia |
Media |
2,422 |
2,289 |
|
China |
Media |
2,256 |
2,150 |
|
Effectiveness |
Analytics & Tech |
1,678 |
1,678 |
|
Media America |
Media |
604 |
604 |
|
Media France |
Media |
571 |
560 |
|
Digital Decisions |
Media |
507 |
- |
|
Media Italy |
Media |
401 |
382 |
|
Russia |
Media |
337 |
337 |
|
Digital Balance |
Analytics & Tech |
30 |
826 |
|
|
|
28,563 |
28,409 |
The impairment test involves comparing the carrying value of the CGU to which the goodwill has been allocated to the recoverable amount. The recoverable amount of all CGUs has been determined based on value-in-use calculations.
Under IFRS, an impairment charge is required for goodwill when the carrying amount exceeds the recoverable amount, defined as the higher of fair value less costs to sell and value-in-use.
An impairment of £817,000 has been recognised in the year ended 31 December 2020 in relation to Digital Balance Australia Pty Limited, in order to write down the goodwill carrying value in line with the value-in-use.
Value-in-use calculations
The key assumptions used in management's value-in-use calculations are budgeted operating profit, pre ‑ tax discount rate and the long ‑ term growth rate.
Budgeted operating profit assumptions
To calculate future expected cash flows, management has taken the Board-approved budgeted operating profit ('EBIT') for each of the CGUs for the 2021 financial year.
For the 2022 and 2023 financial years, the forecast EBIT is as per management and market expectations. The forecast 2023 balances are taken to perpetuity in the model. The forecast for 2022 and 2023 uses certain assumptions to forecast revenue and operating costs within the Group's operating segments beyond the 2021 budget.
Discount rate assumptions
The Directors estimate discount rates using rates that reflect current market assessments of the time value of money and risk specific to the CGUs. The three ‑ year pre-tax cash flow forecasts have been discounted at between 10% and 11% (31 December 2019: between 7.0% and 12.0%).
Growth rate assumptions
Cash flows beyond the three ‑ year period are extrapolated at a rate of 2.00% (31 December 2019: 2.25%) for all CGUs with the exception of China where a rate of 2.60% has been applied, which does not exceed the long ‑ term average growth rate in any of the markets in which the Group operates.
The excess of the value-in-use to the goodwill carrying values for each CGU gives the level of headroom in each CGU. The estimated recoverable amounts of the Group's operations in all CGUs significantly exceed their carrying values, with the exception of the China and Media America CGUs.
Sensitivity analysis
The Group's calculations of value-in-use for its respective CGUs are sensitive to a number of key assumptions. Other than disclosed below, management does not consider a reasonable possible change, in isolation, of any of the key assumptions to cause the carrying value of any CGU to exceed its value-in-use. The considerations underpinning why management believes no impairment is required in respect of China and Media America are as follows, specifically what change in key assumptions would result in an impairment:
|
|
China |
Media America |
||
|
|
Current % |
% change leading |
Current % |
% change leading |
|
|
(2022 / 2023) |
to impairment 1 |
(2022 / 2023) |
to impairment 1 |
|
Budgeted revenue growth |
15% / 10% |
(3)% to 12% / 7% |
15% / 15% |
(2)% to 13% |
|
Budgeted cost growth |
2% / 2% |
+3% to 5% |
2% / 2% |
+2% to 4% |
|
Pre ‑ tax discount rate |
10% /10% |
+3% to 13% |
10% / 10% |
+3% to 13% |
1. These changes have been applied to 2022 and 2023 projected information.
8. Other intangible assets
|
|
Capitalised |
|
Purchased |
Total |
|
|
development |
Computer |
intangible |
intangible |
|
|
costs |
software |
Assets 1 |
assets |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Cost |
|
|
|
|
|
At 1 January 2019 |
3,258 |
2,675 |
17,881 |
23,814 |
|
Additions |
1,203 |
13 |
- |
1,216 |
|
Reallocation |
10 |
- |
- |
10 |
|
Disposals |
(388) |
(139) |
(1,402) |
(1,929) |
|
Foreign exchange differences |
(49) |
(24) |
(314) |
(387) |
|
At 31 December 2019 |
4,034 |
2,525 |
16,165 |
22,724 |
|
Additions |
1,226 |
4 |
- |
1,230 |
|
Acquisitions 5 |
- |
- |
70 |
70 |
|
Disposals |
(460) |
(10) |
- |
(470) |
|
Foreign exchange differences |
91 |
23 |
346 |
460 |
|
At 31 December 2020 |
4,891 |
2,542 |
16,581 |
24,014 |
|
Amortisation and impairment |
|
|
|
|
|
At 1 January 2019 |
(1,258) |
(1,606) |
(12,473) |
(15,337) |
|
Charge for the year 2 |
(464) |
(409) |
(1,169) |
(2,042) |
|
Impairment 3 |
(155) |
- |
(607) |
(762) |
|
Reallocation |
(10) |
- |
- |
(10) |
|
Disposals |
388 |
134 |
1,402 |
1,924 |
|
Foreign exchange differences |
28 |
28 |
210 |
266 |
|
At 31 December 2019 |
(1,471) |
(1,853) |
(12,637) |
(15,961) |
|
Charge for the year 2 |
(685) |
(280) |
(1,122) |
(2,087) |
|
Disposals |
460 |
10 |
- |
470 |
|
Foreign exchange differences |
(49) |
(24) |
(228) |
(301) |
|
At 31 December 2020 |
(1,745) |
(2,147) |
(13,987) |
(17,879) |
|
Net book value |
|
|
|
|
|
At 31 December 2020 4 |
3,146 |
395 |
2,594 |
6,135 |
|
At 31 December 2019 |
2,563 |
672 |
3,528 |
6,763 |
1 .Purchased intangible assets consist principally of customer relationships with a typical useful life of eight to 10 years.
2 .Amortisation is charged within administrative expenses so as to write off the cost of the intangible assets over their estimated useful lives. The amortisation of purchased intangible assets is included as a highlighted administrative expense.
3 .No impairment charge has been recognised in the current year (year ended 31 December 2019: £762,000 following management's review of the carrying value of other intangible assets).
4 .Of the net book value of capitalised development costs, £1,982,000 remains in development at 31 December 2020.
5 .As asset of £70,000 was recognised on the acquisition of Digital Decisions B.V. in the year.
9. Right-of-use assets and lease liabilities
Right-of-use assets
|
|
Buildings |
Equipment |
Vehicles |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Cost |
|
|
|
|
|
At 1 January 2019 |
- |
- |
- |
- |
|
Assets recognised on adoption of IFRS 16 on 1 January 2019 |
5,208 |
178 |
41 |
5,427 |
|
Additions |
5,109 |
22 |
18 |
5,149 |
|
At 31 December 2019 |
10,317 |
200 |
59 |
10,576 |
|
Additions |
568 |
22 |
115 |
705 |
|
Disposals |
(331) |
(10) |
(12) |
(353) |
|
Allocations |
324 |
- |
- |
324 |
|
Reclassification to lease receivables |
(1,113) |
- |
- |
(1,113) |
|
Foreign exchange |
24 |
17 |
(9) |
32 |
|
At 31 December 2020 |
9,789 |
229 |
153 |
10,171 |
|
Accumulated depreciation |
|
|
|
|
|
At 1 January 2019 |
- |
- |
- |
- |
|
Charge for the year |
(1,568) |
(15) |
(13) |
(1,596) |
|
Impairment for the year |
(641) |
- |
- |
(641) |
|
At 31 December 2019 |
(2,209) |
(15) |
(13) |
(2,237) |
|
Charge for the year |
(1,942) |
(50) |
(34) |
(2,026) |
|
Disposals |
136 |
10 |
12 |
158 |
|
Allocations |
(324) |
- |
- |
(324) |
|
Reclassification to lease receivables |
558 |
- |
- |
558 |
|
Impairment for the year |
(24) |
- |
- |
(24) |
|
Foreign exchange |
- |
(44) |
5 |
(39) |
|
At 31 December 2020 |
(3,805) |
(99) |
(30) |
(3,934) |
|
Net book value |
|
|
|
|
|
At 31 December 2020 |
5,984 |
130 |
123 |
6,237 |
|
At 31 December 2019 |
8,108 |
185 |
46 |
8,339 |
Lease liabilities
|
|
Buildings |
Equipment |
Vehicles |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Cost |
|
|
|
|
|
At 1 January 2019 |
- |
- |
- |
- |
|
Liabilities recognised on adoption of IFRS 16 on 1 January 2019 |
5,533 |
178 |
41 |
5,752 |
|
Additions |
4,739 |
22 |
18 |
4,779 |
|
Cash payments in the year |
(1,139) |
(36) |
(19) |
(1,194) |
|
Interest charge in the year |
247 |
5 |
1 |
253 |
|
At 31 December 2019 |
9,380 |
169 |
41 |
9,590 |
|
Additions |
568 |
22 |
115 |
705 |
|
Disposals |
(131) |
- |
- |
(131) |
|
Cash payments in the year |
(2,192) |
(58) |
(19) |
(2,269) |
|
Interest charge in the year |
277 |
6 |
1 |
284 |
|
Foreign exchange |
(44) |
35 |
(12) |
(21) |
|
At 31 December 2020 |
7,858 |
174 |
126 |
8,158 |
|
Current |
2,215 |
76 |
47 |
2,338 |
|
Non-current |
5,643 |
98 |
79 |
5,820 |
The present value of the minimum lease payments are as follows:
|
|
Minimum lease payments |
|
|
|
31 December |
31 December |
|
|
2020 |
2019 |
|
|
£'000 |
£'000 |
|
Amounts due: |
|
|
|
Within one year |
2,556 |
2,116 |
|
Between one and two years |
2,219 |
2,307 |
|
Between two and three years |
1,946 |
2,115 |
|
Between three and four years |
917 |
1,896 |
|
Between four and five years |
609 |
893 |
|
Later than five years |
454 |
1,083 |
|
|
8,701 |
10,410 |
Lease receivables
|
|
|
|
|
|
31 December |
31 December |
|
|
2020 |
2019 |
|
|
£'000 |
£'000 |
|
|
|
|
|
Lease receivables |
451 |
- |
|
Current |
171 |
- |
|
Non-current |
280 |
- |
During the year a sublease arrangement was entered into relating to the Chicago office lease. Accordingly, the right-of-use asset was derecognised and instead a lease receivable was recognised, being the equivalent of the remaining lease receivables over the lease term. The amount due within one year is presented within current assets and the amount due after one year is presented within non-current assets. The sublease arrangement expires in September 2023.
10. Financial liabilities
|
|
31 December |
31 December |
|
|
2020 |
2019 |
|
|
£'000 |
£'000 |
|
Current |
|
|
|
Bank overdraft |
- |
- |
|
Loan fees1 |
(45) |
(36) |
|
Contingent consideration |
1,957 |
14 |
|
|
1,912 |
(22) |
|
Non ‑ current |
|
|
|
Bank borrowings |
19,000 |
14,000 |
|
Government borrowings |
750 |
- |
|
Loan fees1 |
(75) |
(132) |
|
|
19,675 |
13,868 |
|
Total financial liabilities |
21,587 |
13,846 |
1 Loan fees were payable on amending the banking facility and are being recognised in the income statement on a straight-line basis to the maturity date of the facility, this being September 2023.
|
|
Bank |
Bank |
Government |
Contingent |
|
|
|
overdrafts |
borrowings |
borrowings |
consideration |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
At 1 January 2019 |
2,379 |
33,900 |
- |
1,477 |
37,756 |
|
Recognised on acquisition |
- |
- |
- |
336 |
336 |
|
Paid |
- |
(180) |
- |
(983) |
(1,163) |
|
Charged to the income statement |
- |
112 |
- |
(989) |
(877) |
|
Discounting charged to the income statement |
- |
- |
- |
218 |
218 |
|
Repayments |
(2,379) |
(20,000) |
- |
- |
(22,379) |
|
Foreign exchange released to the income statement |
- |
- |
- |
(45) |
(45) |
|
At 31 December 2019 |
- |
13,832 |
- |
14 |
13,846 |
|
Recognised on revaluation |
- |
- |
- |
3,086 |
3,086 |
|
Paid |
- |
- |
- |
(1,934) |
(1,934) |
|
Charged to the income statement |
- |
48 |
- |
625 |
673 |
|
Discounting charged to the income statement |
- |
- |
- |
(44) |
(44) |
|
Borrowings |
- |
5,000 |
750 |
- |
5,750 |
|
Foreign exchange released to the income statement |
- |
- |
- |
210 |
210 |
|
At 31 December 2020 |
- |
18,880 |
750 |
1,957 |
21,587 |
A currency analysis for the bank borrowings is shown below:
|
|
31 December |
31 December |
|
|
2020 |
2019 |
|
|
£'000 |
£'000 |
|
Pounds sterling |
18,880 |
13,832 |
|
Total bank borrowings |
18,880 |
13,832 |
All bank borrowings are held jointly with Barclays and NatWest. The committed facility, totalling £24,000,000, comprises a revolving credit facility ('RCF') of £23,000,000 (of which £19,000,000 was drawn as at 31 December 2020 (31 December 2019: £14,000,000)) and £1,000,000 available as an overdraft for working capital purposes. The RCF has a maturity date of 20 September 2023. The drawn RCF and any further drawings under the RCF are repayable on maturity of the facility. The facility may be used for deferred consideration payments on past acquisitions, to fund future potential acquisitions, and for general working capital requirements.
Loan arrangement fees of £120,000 (31 December 2019: £168,000) are offset against the term loan and are being amortised over the period of the loan. £45,000 of loan arrangement fees have been included within creditors due within one year and the balancing £75,000 have been included within creditors due after more than one year.
The facility bears variable interest of LIBOR plus a margin of 2.25%. The margin rate is able to be lowered each quarter end depending on the Group's net debt to EBITDA ratio.
The undrawn amount of the revolving credit facility is liable to a fee of 40% of the prevailing margin. The Group may elect to prepay all or part of the outstanding loan subject to a break fee, by giving five business days' notice.
All amounts owing to the bank are guaranteed by way of fixed and floating charges over the current and future assets of the Group. As such, a composite guarantee has been given by all significant subsidiary companies in the UK, US, Germany and Australia.
Government borrowings represent an amount received as a part of the US Paycheck Protection Programme. Loan forgiveness will be applied for in relation to this balance when the lenders open the application process. If this application is successful, this balance will be treated as a grant rather than a loan and will be released to the income statement. If the application is unsuccessful then this balance will continue to be treated as a loan, will incur interest at 1% and will be repayable within two years.
Contingent consideration represents additional amounts that are expected to be payable for acquisitions made by the Group and is held at fair value at the statement of financial position date. All amounts are expected to be fully paid by April 2021.
Contingent consideration has been recognised in the period in relation to the minority buyout of Ebiquity Italy Media Advisor S.r.l. The consideration payable in relation to the minority buyout of Ebiquity Italy was contingent upon the performance for the years ending 31 December 2018 to 31 December 2019.
It has been determined that the deferred payments in relation to the acquisition of Digital Decisions B.V. ('Digital Decisions') should be treated as post-date remuneration. IFRS 3 (revised) provides guidance for situations where contingent consideration may be considered to be remuneration for post-acquisition employment. We have reviewed these guidelines and assessed the indicators in IFRS 3. Taken in aggregate, these indicate that the payments to the seller (who remains an employee) do indeed constitute post-date remuneration but should be treated as such. As a result, instead of the contingent consideration being recognised in full as at 31 December 2020 within financial liabilities, only any amount payable in relation to 2020 is to be provided for, within accruals and contract liabilities. The calculated amount owed relating to 2020 is £nil.
11. Dividends
|
|
Year ended |
Year ended |
|
|
31 December |
31 December |
|
|
2020 |
2019 |
|
|
£'000 |
£'000 |
|
Dividend in respect of the prior year |
- |
534 |
|
Total dividend paid |
- |
534 |
No dividends were paid during the current financial year (2019: £534,000). Dividends were paid to non ‑ controlling interests as shown in the consolidated statement of changes in equity.
12. Cash generated from operations
|
|
|
Restated |
|
|
Year ended |
Year ended |
|
|
31 December |
31 December |
|
|
2020 |
2019 |
|
|
£'000 |
£'000 |
|
(Loss) before taxation |
(3,887) |
(5,661) |
|
Adjustments for: |
|
|
|
Depreciation |
2,761 |
2,163 |
|
Amortisation (note 8) |
2,087 |
2,042 |
|
Loan fees written off |
- |
58 |
|
(Gain)/loss on disposal |
(3) |
5 |
|
Impairment of right-of-use assets (note 9) |
24 |
641 |
|
Impairment of goodwill (note 7) |
817 |
5,989 |
|
Impairment of intangibles (note 8) |
- |
761 |
|
Unrealised foreign exchange loss |
35 |
47 |
|
Share option (credits)/charges (note 3) |
(1,845) |
195 |
|
Finance income |
(39) |
(9) |
|
Finance expenses |
915 |
907 |
|
Contingent consideration revaluations (note 3) |
791 |
(779) |
|
|
1,656 |
6,359 |
|
Decrease in trade and other receivables |
2,457 |
2,136 |
|
Increase/(decrease) in trade and other payables |
1,714 |
(2,838) |
|
Movement in provisions |
- |
- |
|
Cash generated from operations |
5,827 |
5,657 |
13. Acquisitions
Ebiquity Germany GmbH
On 11 June 2019, the Group acquired the outstanding 5.97% interest in its subsidiary undertaking, Ebiquity Germany GmbH, from the minority shareholder for cash consideration of €380,000 (£336,000).
Digital Decisions B.V.
On 8 January 2020, the Group completed the purchase of Digital Decisions B.V. ('Digital Decisions'). The acquisition was for an initial cash consideration of €700,000 (£597,000) with further consideration payable in a mix of cash and Ebiquity plc shares. The first deferred payment will be based on performance in the year to 31 December 2020 and the second will be based on the average performance for the two years ended to 31 December 2022.
Due to the integration of the Digital Decisions service with the Group's overall digital media products, the basis of the revenue included in the performance calculation for the two years ended 31 December 2022 was amended to include the contribution from all digital media products developed by the Digital Innovation Centre. The multiple applied in calculating the contingent consideration was reduced from 8 times to 6 times the average of the relevant profits generated in 2021 and 2022.
The fair value of the purchase consideration for the acquisition of Digital Decisions is as follows:
|
|
|
|
|
|
|
£'000 |
|
Cash |
|
597 |
As discussed in note 10, the deferred payments constitute post-date remuneration and therefore will be accrued in accordance to the period they relate. The amount owing for the first deferred payment in relation to the performance for the year ending 31 December 2020 has been determined as £nil, therefore no accrual is required as at 31 December 2020.
The carrying value and the provisional fair value of the net assets recognised at the date of acquisition are as follows:
|
|
|
Carrying value £'000 |
Fair value adjustment £'000 ¹ |
Fair value £'000 |
|
Brands |
|
- |
70 |
70 |
|
Property, plant and equipment |
|
16 |
- |
16 |
|
Trade and other receivables |
|
127 |
- |
127 |
|
Cash and cash equivalents |
|
10 |
- |
10 |
|
Trade and other payables |
|
(97) |
- |
(97) |
|
Deferred tax liabilities |
|
- |
(13) |
(13) |
|
Net assets acquired |
|
56 |
57 |
113 |
|
Goodwill arising on acquisition ² |
|
|
|
484 |
|
Purchase consideration recognised on acquisition |
|
|
|
597 |
¹ The fair value adjustments relate to the finalisation of the allocation of the purchase consideration accounting for intangible assets (brands) and deferred tax liabilities.
² The goodwill recognised of £484,000 is attributable to the assembled workforce, expected synergies and other intangible assets, which do not qualify for separate recognition. None of the goodwill arising from the acquisition is expected to be tax deductible.
Digital Decisions contributed £429,000 to revenue and a loss of £56,000 to loss before tax for the period between the date of acquisition and the year ended 31 December 2020. Acquisition-related costs of £37,000 were incurred during the year ended 31 December 2020 and have been recognised within highlighted items. Refer to note 3 for further details.
Ebiquity Italy Media Advisor S.r.l.
On 3 February 2020, the Group agreed to acquire the remaining 49% interest in its subsidiary, Ebiquity Italy Media Advisor S.r.l. ('Ebiquity Italy'), from the founders and minority shareholders Arcangelo DiNieri and Maria Gabrielli. The transaction completed on 28 May 2020, following the approval of the Group's audited financial statements. The total consideration of €3,648,000 (£3,086,000) was based on an average of Ebiquity Italy's profit before tax and management charges for the years ending 31 December 2018 and 2019.
The consideration is being paid in a combination of cash and Ebiquity plc shares. At completion, 25% of the total consideration was settled by the issue of 2,437,628 Ebiquity plc shares and 5% in cash. As at 31 December 2020 €1,427,000 (£1,303,000) remains outstanding. All contingent consideration payments were paid by 1 March 2021.
Ebiquity Russia Limited / Ebiquity Russia OOO
On 24 December 2020, the Group acquired a further 24.95% in its subsidiary undertakings, Ebiquity Russia Limited and Ebiquity Russia OOO (collectively, 'Ebiquity Russia'), from its minority shareholder Vladimir Rass. The total consideration of $517,000 (£405,000) is based on a multiple of Ebiquity Russia's profit before tax and management charges for the year ending 31 December 2020 and was paid in full on completion on 24 December 2020. The Group now holds 75.05% of the share capital of each of these companies.
14. Disposals
On 21 August 2019, it was decided to wind down the activities of Stratigent LLC, the Chicago ‑ based marketing technology business which has been trading at a loss due to significantly reduced demand in the US market for the software technology on which its skills were focused. This was the result of a wider review of opportunities for further efficiency gains across the business as well as examining investment areas to ensure these fit with the Group's strategic priorities. As at 31 December 2020, all contractual requirements with remaining clients have been fulfilled.
15. Financial Information
The financial information included in this report does not amount to full financial statements within the meaning of Section 434 of Companies Act 2006. The financial information has been extracted from the Group's Annual Report and financial statements for the period ended 31 December 2020, on which an unqualified report has been made by the Company's auditors, PricewaterhouseCoopers LLP. Financial statements for the period ended 31 December 2020 have been delivered to the Registrar of Companies; the report of the auditors on those accounts was unqualified and did not contain a statement under Section 498 of the Companies Act 2006.
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