Half-year Report

RNS Number : 7631P

Jaywing PLC

22 November 2016

 

Date:   21^st November 2016

On behalf of:   Jaywing plc ("Jaywing", "the Company" or "the Group")

Embargoed:    0700 hrs 22^nd November 2016

Jaywing plc

Interim Results 2016/2017

Jaywing plc (AIM: JWNG) today announces its interim results for the six months ended
30 September 2016.

Financial highlights from continuing operations

	Period to 30 September 2016 £'000	Period to 30 September 2015 £'000
Gross profit*	17,114	15,447
Adjusted EBITDA**	2,132	1,807
Adjusted EBITDA margin***	12.5%	11.7%
Adjusted operating profit#	758	503
Basic EPS on adjusted EBITDA	1.66p	1.46p
(Loss) / profit after tax	(384)	21
Reported EPS	(0.45)p	0.03p
Net debt	3,398	6,389

* Revenue less direct costs of sale

** Before amortisation, share based charges, exceptional items and acquisition related costs

*** As a percentage of gross profit

# Before acquisition related costs

Highlights:

                 ·      Gross profit growth of 11% (7% excluding acquisitions)

                 ·      Adjusted EBITDA growth of 18% (12% excluding acquisitions)

                 ·      0.8% improvement in EBITDA margin

                 ·      Increased operating profit excluding the one-off impact of acquisition related costs

                 ·      Reduction in net debt

Outlook:

·      Trading in line with full year market expectations

Commenting on the results, Ian Robinson, Chairman of Jaywing plc, said:

"The first half of the financial year has seen Jaywing continue make excellent progress in its growth strategy. EBITDA was up 12% organically and up by 18% after including the impact of two recent strategic acquisitions in Australia and the UK, both of which were completed towards the end of the half year in year in July and August respectively. I am also pleased to report that strong cash flow has seen net debt almost halved from £6.4m to £3.4m.

Putting (advanced) data science at the heart of all our service offerings remains our core objective and is a key differentiator. This is being achieved through effective internal collaboration across varied but complementary skill sets across Jaywing. This enables us to provide bespoke and highly effective solutions to our clients' most challenging briefs."

Enquiries:

Jaywing plc
Michael Sprot (Company Secretary)	Tel: [phone]
Cenkos Securities plc
Ivonne Cantú/Callum Davidson	Tel: [phone]

 

CHIEF EXECUTIVE COMMENTARY

I'm pleased to report that the momentum built towards the end of our last financial year has been maintained and we have seen strong organic growth rates in the first half of this year.  What is more, we've made two strategic acquisitions and have achieved all of this in a period of uncertainty in the market due to the European Union membership referendum.

Overall gross profit (GP) has grown by 11% compared with H1 2016, whilst EBITDA has increased by 18% as EBITDA margin has improved by 0.8% to 12.5%. Profits generated from our acquisitions of Digital Massive and Bloom are included from the start of July and September respectively and accordingly growth has primarily been driven organically with GP up by 7% and EBITDA by 12%.

The Media & Analysis segment comprising search marketing (branded Epiphany) and data analysis, has seen the strongest growth with GP and EBITDA up by 15% and 18% respectively compared with H1 2016.  Organic growth excluding acquisitions was still 11% and 14% as the acquisitions were only completed at the start of July and end of August. This segment now represents nearly 70% of our overall EBITDA. The area of strongest growth for Epiphany has been in its programmatic display and mobile advertising revenues where the use of data science provides differentiation and delivers improved outcomes for clients. The demand for our IFRS9 work remains high as smaller lenders are now turning their attention to compliance and the launch of Horizon, our SaaS IFRS9 product, in September has created a great deal of interest amongst those smaller lenders. Product and Product Development sits within this segment and we have continued to invest through our P&L.

We have continued to see organic growth in our Agency Services segment that contains our social media, website design and build, brand communications and customer management outsourcing propositions. Whilst GP has grown by 2%, EBITDA has increased by 7% due to improved margins from H1 2016.

We are encouraged by the performance of our two recent acquisitions with both businesses tracking well against their plans. Digital Massive based in Sydney is leveraging the experience and resources of our Epiphany search marketing team in the UK and has won several new contracts since the acquisition was completed.  The team at Bloom has hit the ground running, introducing its unique products to all areas of Jaywing.  At the same time, the dedicated environment where the enlarged Company's data products will be developed and managed has been set up.

Further details on both of these acquisitions can be found in the RNS releases dated 7^th July 2016 and 1^st September 2016.

Cash generation has been strong with net debt reducing to £3.4m from £6.4m at 30^th September 2015 (and £5.3m at 31^st March 2016). High levels of recurring revenues allied to low client and sector concentration continue to underpin the resilience of the business.

Profit before tax (PBT) has been temporarily impacted by the cost of the acquisitions. Excluding these one off costs, PBT is £758k compared with £503k for H1 2016.

The second half of the year has started well and we are on track to achieve our full year expectations.

Martin Boddy

Chief Executive Officer

21 November 2016

Consolidated interim statement of comprehensive income (unaudited)

		Six months ended 30 Sept 2016	Six months ended 30 Sept 2015	Audited year ended 31 March 2016
	Note	£'000	£'000	£'000
Revenue	4	20,895	17,051	35,973
Direct costs		(3,781)	(1,604)	(4,181)
Gross profit		17,114	15,447	31,792
Other operating income		-	-	71
Amortisation		(762)	(787)	-
Operating expenses		(16,446)	(14,370)	(30,538)
Operating (loss)/profit		(94)	290	1,325
Finance income		1	-	-
Finance costs		(111)	(128)	(251)
Net financing costs		(110)	(128)	(251)
(Loss)/profit before tax		(204)	162	1,074
Tax expense	5	(180)	(173)	(369)
(Loss)/profit for the period from continuing operations		(384)	(11)	705
Exchange differences on retranslation of foreign operations		-	32	(18)
(Loss)/profit for the period attributable to the equity holders of the parent		(384)	21	687
(Loss)/profit per ordinary share	6
Basic (loss)/earnings per share		(0.45p)	0.03p	0.90p
Diluted (loss)/earnings per share		(0.41p)	0.03p	0.83p

 

Consolidated interim balance sheet (unaudited)

		30 Sept 2016	30 Sept 2015	Audited 31 March 2016
	Note	£'000	£'000	£'000
Assets
Non-current assets
Property, plant and equipment		763	707	744
Goodwill		36,384	30,446	30,446
Other intangible assets		8,169	7,278	6,562
		45,316	38,431	37,752
Current assets
Trade and other receivables		10,953	8,402	10,150
Cash and cash equivalents		2,952	1	347
		13,905	8,403	10,497
Total assets		59,221	46,834	48,249
Liabilities
Current liabilities
Bank overdraft	7	-	(184)	-
Other interest bearing loans and borrowings	7	(4,750)	(4,612)	(4,612)
Trade and other payables		(12,883)	(5,824)	(7,534)
Tax payable		(933)	(631)	(452)
Provisions		(175)	(161)	(167)
		(18,741)	(11,412)	(12,765)
Non-current liabilities
Other interest bearing loans and borrowings	7	(1,600)	(1,594)	(1,063)
Deferred tax liabilities		(1,536)	(1,526)	(1,387)
		(3,136)	(3,120)	(2,450)
Total liabilities		(21,877)	(14,532)	(15,215)
Net assets		37,344	32,302	33,034
Equity
Capital and reserves attributable to equity holders of the company
Share capital		34,639	34,139	34,139
Share premium account		9,108	6,608	6,608
Minority interest		1,513	-	-
Capital redemption reserve		125	125	125
Shares purchased for treasury		(25)	(25)	(25)
Share option reserve		327	80	146
Foreign currency translation reserve		3	53	3
Retained earnings		(8,346)	(8,678)	(7,962)
Total equity		37,344	32,302	33,034

 

Consolidated interim cash flow statement (unaudited)

		Six months ended 30 Sept 2016	Six months ended 30 Sept 2015	Audited year  ended 31 March 2016
	Note	£'000	£'000	£'000
Cash flow from operating activities
(Loss)/profit for the period		(384)	(11)	705
Adjustment for:
Depreciation, amortisation and impairment		997	980	1,910
Movement in provisions		8	3	9
Foreign exchange		-	32	(18)
Finance income		(1)	-	-
Finance costs		111	128	251
Share based payment charge		373	221	412
Taxation		180	173	369
Operating cash flow before changes in working capital		1,284	1,526	3,638
Decrease/(increase)  in trade and other receivables		27	(911)	(2,667)
Increase in trade and other payables		1,210	113	1,837
Cash generated from operations		2,521	728	2,808
Interest received		1	-	-
Interest paid		(111)	(128)	(251)
Tax paid		(15)	-	(500)
Net cash flow from operating activities		2,396	600	2,057
Cash flows from investing activities
Acquisition of subsidiaries Digital Massive and Bloom net of cash acquired		(3,372)	-	-
Receipt/(payment) of deferred consideration		151	(1,589)	(1,728)
Acquisition of property, plant and equipment		(245)	(213)	(469)
Net cash outflow from investing activities		(3,466)	(1,802)	(2,197)
Cash flows from financing activities
Increase in borrowings		941	550	-
Repayment of borrowings		(266)	(531)	(513)
Proceeds from issue of share capital		3,000	-	-
Net cash inflow/(outflow) from financing activities		3,675	19	(513)
Net increase/(decrease) in cash, cash equivalents and bank overdrafts		2,605	(1,183)	(653)
Cash and cash equivalents at beginning of period		347	1,000	1,000
Cash and cash equivalents at end of period		2,952	(183)	347
Cash and cash equivalents comprise:
Cash at bank and in hand		2,952	1	347
Bank overdrafts	7	-	(184)	-
Cash and cash equivalents at end of period		2,952	(183)	347

 

Consolidated interim statement of changes in equity (unaudited)

	Share capital	Share premium account	Capital redemption reserve	Treasury Shares	Minority interest £'000	Share option reserve	Foreign currency translation reserve	Retained earnings	Total  equity
	£'000	£'000	£'000	£'000		£'000	£'000	£'000	£'000

Balance at 31 March 2015

34,139

6,608

125

(25)

-

-

21

(8,667)

32,201

Loss for the period	-	-	-	-	-	-	-	(11)	(11)
Retranslation of foreign currency	-	-	-	-	-	-	32	-	32
Charge in respect of share based payments	-	-	-	-	-	80	-	-	80
Total comprehensive income for the period	-	-	-	-	-	80	32	(11)	101
Balance at 30 September 2015	34,139	6,608	125	(25)	-	80	53	(8,678)	32,302
Charge in respect of share based payments	-	-	-	-	-	66	-	-	66
Transactions with owners	-	-	-	-	-	66	-	-	66
Profit for the period	-	-	-	-	-	-	-	716	716
Retranslation of foreign currency	-	-	-	-	-	-	(50)	-	(50)
Total comprehensive income for the period	-	-	-	-	-	-	(50)	716	666
Balance at 31 March 2016 (audited)	34,139	6,608	125	(25)	-	146	3	(7,962)	33,034
Issue of share capital	500	2,500	-	-	-	-	-	-	3,000
Acquisition of subsidiaries	-	-	-	-	1,513	-	-	-	1,513
Charge in respect of share based payments	-	-	-	-	-	181	-	-	181
Transactions with owners	500	2,500	-	-	1,513	181	-	-	4,694
Loss for the period	-	-	-	-	-	-	-	(384)	(384)
Total comprehensive income for the period	-	-	-	-	-	-	-	(384)	(384)
Balance at 30 September 2016	34,639	9,108	125	(25)	1,513	327	3	(8,346)	37,344

 

1.     General Information

Jaywing plc (the "Company") is incorporated and domiciled in the United Kingdom. The Company is listed on the AIM market of the London Stock Exchange. The registered address is Players House, 300 Attercliffe Common, Sheffield, S9 2AG.

The interim financial information was approved for issue on 22^nd November 2016.                      . 

2.     Basis of preparation

The consolidated interim financial statements for the six months ended 30 September 2016 have been prepared in accordance with applicable accounting standards and under the historical cost convention except for certain financial instruments that are carried at fair value.

The financial information for the year ended 31 March 2016 set out in this interim report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.  The Group's statutory financial statements for the year ended 31 March 2016 have been filed with the Registrar of Companies.  The auditor's report on those financial statements was unqualified and did not contain statements under Section 498 (2) or Section 498 (3) of the Companies Act 2006.

The consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 March 2016, which have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

3.     Accounting policies

Except as described below, the principal accounting policies of Jaywing plc and its subsidiaries ("the Group") are consistent with those set out in the Group's 2016 annual report and financial statements.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

The following standards and interpretations of relevance to the Group have been issued but are not yet effective and have not been adopted by the Group:

· IFRS 9 Financial Instruments (effective 1 January 2018)

· IFRS 15 Revenue for Contracts with Customers (effective 1 January 2018)

· IFRS 16 Leases (effective 1 January 2019)

· IFRS 2 Classification and Measurement of Share-based Payment Transactions (effective 1 January 2018)

The Group are conducting a review of IFRS 15 - Revenue from Contracts with Customers which is ongoing.

The Group does not currently anticipate that the adoption of the other standards and interpretations above will have a material impact on the Group's financial statements in the period of initial application other than IFRS 16 Leases. A review of IFRS 16 will be conducted to determine its impact on the Group.

Other standards and interpretations in issue but not yet effective are not considered to have any relevance to the Group.

4.     Segment information (unaudited)

The Group reports its business activities in two areas: Agency Services and Media & Analysis being its two primary business activities. Unallocated represents the Group's head office function, along with intragroup transactions.

Total assets exclude intangible assets, cash and external borrowings which have not been allocated to operating segments.

The majority of the Group's activities are carried out within the UK. There is also a small subsidiary in Australia.

4.     Segment information (unaudited) (continued)

Six months ended 30 September 2016
	Agency Services	Media & Analysis	Unallocated	Total Group
	£'000	£'000	£'000	£'000
Revenue	8,216	13,340	(661)	20,895
Direct costs	(1,344)	(3,098)	661	(3,781)
Gross profit	6,872	10,242	-	17,114
Operating expenses excluding depreciation, amortisation, exceptional items, acquisition related costs and charges for share based payments	(5,575)	(7,533)	(1,874)	(14,982)
Operating profit / (loss) before depreciation, amortisation, exceptional items, acquisition related costs and credit for share based payments	1,297	2,709	(1,874)	2,132
Depreciation	(153)	(66)	(16)	(235)
Amortisation	(420)	(342)	-	(762)
Other exceptional costs	(4)	2	(2)	(4)
Acquisition related costs	-	(98)	(754)	(852)
Charge for share based payments	-	-	(373)	(373)
Operating profit / (loss)	720	2,303	(3,169)	(94)
Finance costs				(110)
Loss before tax				(204)
Tax expense				(180)
Loss for the period				(384)
Six months ended 30 September 2015
	Agency Services	Media & Analysis	Unallocated	Total Group
	£'000	£'000	£'000	£'000
Revenue	7,352	9,865	(166)	17,051
Direct costs	(666)	(1,104)	166	(1,604)
Gross profit	6,686	8,761	-	15,447
Operating expenses excluding depreciation, amortisation, exceptional items, acquisition related costs and charges for share based payments	(5,536)	(6,530)	(1,574)	(13,640)
Operating profit/(loss) before depreciation, amortisation, exceptional items, acquisition related costs and charges for share based payments	1,150	2,231	(1,574)	1,807
Depreciation	(128)	(54)	(11)	(193)
Amortisation	(458)	(329)	-	(787)
Compensation for loss of office	(1)	(29)	(68)	(98)
Acquisition related costs	(48)	(165)	-	(213)
Credit for share based payments	-	-	(226)	(226)
Operating profit / (loss)	515	1,654	(1,879)	290
Finance costs				(128)
Profit before tax				162
Tax expense				(173)
Loss for the period				(11)

4.   Segment information (unaudited) (continued)

Year ended 31 March 2016 (audited)
	Agency Services	Media & Analysis	Unallocated	Total
	£'000	£'000	£'000	£'000
Revenue	15,700	21,218	(945)	35,973
Direct costs	(1,899)	(3,227)	945	(4,181)
Gross profit	13,801	17,991	-	31,792
Operating expenses excluding depreciation, amortisation, exceptional items, acquisition related costs and charges for share based payments	(11,669)	(12,804)	(2,986)	(27,459)
Operating profit/(loss) before depreciation, amortisation, exceptional items, acquisition related costs and charges for share based payments	2,132	5,187	(2,986)	4,333
Other operating income	64	7	-	71
Depreciation	(270)	(114)	(23)	(407)
Amortisation	(861)	(642)	-	(1,503)
Compensation for loss of office	-	-	-	-
Exceptional costs	(75)	(24)	(471)	(570)
Acquisition related costs	(178)	(38)	27	(189)
Charges for share based payments	-	-	(412)	(412)
Operating profit / (loss)	812	4,376	(3,865)	1,323
Finance income				-
Finance costs				(251)
Profit before tax				1,074
Tax expense				(369)
Profit for the period				705

Total assets	Agency Services	Media & Analysis	Unallocated	Total
	£'000	£'000	£'000	£'000
30 September 2016	33,477	30,384	(4,640)	59,221
31 March 2016	24,484	29,325	(5,560)	48,249
30 September 2015	24,016	27,817	(4,999)	46,834

 

5.     Tax expense (unaudited)

A reconciliation of the charge that would result from applying the standard UK corporation tax rate to profit before tax to the tax charge is given below.

		Six months ended 30 Sept 2016	Six months ended 30 Sept 2015	Audited year  ended 31 March 2016
		£'000	£'000	£'000
Recognised in the consolidated statement of comprehensive income:
Current year tax		346	273	601
Origination and reversal of temporary differences		(166)	(100)	(232)
Total tax charge		180	173	369
(Loss)/profit before tax		(256)	162	1,074
Tax charge thereon at UK corporation tax rate of 20% (2015: 20%)		(51)	32	215
Effects of:
Non-deductible expenses		231	54	137
Other		-	87	39
Prior year adjustment		-	-	(22)
Total tax charge		180	173	369

6.     (Loss)/profit per share (unaudited)

		Six months ended 30 Sept 2016	Six months ended 30 Sept 2015	Audited year  ended 31 March 2016
		Pence per share	Pence per share	Pence per Share
Basic (loss)/earnings per share		(0.45p)	0.03p	0.90p
Diluted (loss)/earnings per share		(0.41p)	0.03p	0.83p

(Loss)/earnings per share has been calculated by dividing the loss attributable to shareholders by the weighted average number of ordinary shares in issue during the period. The calculations of basic and diluted loss per share are:

			Six months ended 30 Sept 2016	Six months ended 30 Sept 2015	Audited year  ended 31 March 2016
			£'000		£'000
(Loss)/profit for the period from continuing operations			(384)	21	687
Weighted average number of ordinary shares in issue:			Number '000	Number '000	Number '000
Basic			86,260	76,260	76,260
Adjustment for share options, warrants and contingent shares			7,699	6,771	6,067
Diluted			93,959	83,031	82,327

 

Adjusted earnings per share
		Six months ended 30 Sept 2016	Six months ended 30 Sept 2015	Audited year  ended 31 March 2016
		Pence per share	Pence per share	Pence per Share
Basic adjusted earnings per share		1.66p	1.46p	3.38p
Diluted adjusted earnings per share		1.53p	1.34p	3.13p

Adjusted earnings per share have been calculated by dividing the profit attributable to shareholders before other income, amortisation, impairment and charges for share based payments by the weighted average number of ordinary shares in issue during the period. The numbers used in calculating the basic and diluted adjusted earnings per share are reconciled below:

		Six months ended 30 Sept 2016	Six months ended 30 Sept 2015	Audited year  ended 31 March 2016
		£'000	£'000	£'000
(Loss)/profit before tax and impairment		(204)	162	1,074
Amortisation		762	787	1,503
Acquisition related costs		850	213	187
Charge for share based payments		373	226	412
Adjusted profit attributable to shareholders		1,781	1,388	3,176
Current period tax charge		(346)	(273)	(601)
		1,435	1,115	2,575

7.     Bank overdraft, borrowings and loans (unaudited)

		30 Sept 2016	30 Sept 2015	Audited 31 March 2016
Summary		£'000	£'000	£'000
Bank overdraft		-	184	-
Borrowings, undiscounted cash flows		6,350	6,206	5,675
		6,350	6,390	5,675
Borrowings are repayable as follows:
Within 1 year
Bank overdraft		-	184	-
Borrowings		4,750	4,612	4,612
Total due within 1 year			4,796	4,612
In more than one year but less than two years		1,200	1,062	1,063
In more than two years but less than three years		400	532	-
In more than three years but less than four years		-	-	-
Total amount due		6,350	6,390	5,675
Average interest rates at the balance sheet date were:		%	%	%
Overdraft		-	2.75	-
Term loan		2.75	3.56	3.56
Revolving credit facility		2.75	3.51	3.51

As the loans are at variable market rates their carrying amount is equivalent to their fair value.

The borrowing facilities available to the Group at 30 September 2016 were £2.0 million (2015: £2.0 million) and, taking into account cash balances within the Group, there was £5.0 million (2015: £1.8 million) of available borrowing facilities.

A composite accounting system is set up with the Group's bankers, which allows debit balances on overdraft to be offset across the Group with credit balances.

Reconciliation of net debt	Cash at bank and in hand	Overdraft	Borrowings	Net debt
	£'000	£'000	£'000	£'000
30 September 2015	2,952	-	(6,350)	(3,398)
31 March 2016	347	-	(5,675)	(5,328)
30 September 2015	1	(184)	(6,206)	(6,389)

 

8.     Provisions (unaudited)

		30 Sept 2016	30 Sept 2015	Audited 31 March 2016
		£'000	£'000	£'000
At the beginning of the period		167	158	158
Additional provisions		8	3	9
At the end of the period		175	161	167

Provisions relate to leases in the Group where the commercial benefit has either ceased or will cease before the normal expiry period.

9.     Share capital (unaudited)

Authorised:

	45p deferred shares		5p ordinary shares
	£'000		£'000
Authorised share capital at 31 March 2016 and 30 September 2016	45,000		10,000

Allotted, issued and fully paid

	45p deferred shares	5p ordinary shares
	Number	Number		£'000
Issued share capital at 31 March 2016	67,378,520	76,359,385		34,139
Equity raise	-	10,000,000		500
Issued share capital at 30 September 2016	67,378,520	86,359,385		34,639

10,000,000 5p ordinary shares were issued on 31^st August 2016.

10.   Information on acquisitions

On 7th July 2016, Jaywing announced that it had acquired 75 per cent of Digital Massive's issued share capital for an initial cash payment of AUS$2 million, plus an earn out consideration of up to AUS$2 million, which will be payable in three instalments over the next two years, subject to the future performance of Digital Massive. From July 2020, the Company will, via a put and call option, be in a position to acquire the remaining 25 per cent of Digital Massive's issued share capital, at a multiple of its average audited EBITDA for the previous two financial years, subject to a maximum total consideration payable of AUS$12 million for the entire business.

On 1st September 2016, Jaywing announced that it had acquired the entire issued share capital of Bloom for an upfront cash consideration of £2.41 million on a cash and debt free basis. Additional earn-out consideration of up to £5.75 million is payable to the Vendors, subject to performance criteria, over a two-year period ending 31 March 2018 and will be satisfied through the Company's own cash resources and debt.

A new subsidiary company, of which Jaywing will own 75%, has been incorporated and into which Jaywing will make a capital investment of £637,500 over a period of two years. Certain of the Vendors, comprising certain of Bloom's existing management team will hold the remaining 25 per cent., having transferred into Newco the suite of Bloom Intelligence products. Newco will be led by Alex Craven who will be responsible for developing and monetising all of Jaywing's data science-led products.

Bloom Management will be granted a put option to sell their stake to Jaywing for 2.0 times the average audited maintainable EBITDA for the financial years ending March 2019 and March 2020 subject to a maximum of £4 million for the 25 per cent stake. Jaywing will also have a call option to acquire the 25 per cent stake under the same terms and the time period over which the average EBITDA is taken may be moved further into the future by mutual agreement. Jaywing may choose to pay up to 25 per cent of the additional consideration as shares.

11.   Related party transactions (unaudited)

There were no significant changes in the nature and size of related party transactions for the period from those disclosed in the Annual Report for the year ended 31 March 2016.

 

END

 

 

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