Audited Results Full Year 2021 and Trading Update

RNS Number : 7917J

M&C Saatchi PLC

29 April 2022

M&C SAATCHI PLC

(the "Company" or "M&C Saatchi")

Audited Results for the Year Ended 31 December 2021 and Trading Update

The Company today announces its audited results for the year ended 31 December 2021. The Company has demonstrated an exceptional turnaround at a time of unprecedented change and announces that trading is line with expectations for the first three months of 2022.

Highlights

· 2021 net revenue growth of 10.6%. Like-for-like growth of 15.1%.

· Record 2021 Headline operating profit £31.1m (2020: £12.0m). Ahead of expectations, reflecting strong new business and deepening client relationships.

· Record 2021 Statutory profit before tax £21.6m (2020: £8.5m loss).

· 2021 Headline operating profit margin 12.5% (2020: 5.3%).

· Net cash £34.4m (2020: £32.7m). Borrowings reduced to £20.6m (2020: £29.6m).

· New client wins and deepened relationships: Google, Uber, WHOOP, Gorillas, PepsiCo, TikTok and Mondelez.

· Over 50 creative awards won in 2021 and a record number of effectiveness awards.

· Trading continues to be strong in the first quarter of 2022, with the Headline profit before tax for the years ending 31 December 2022 and 31 December 2023 expected to be in the region of £31.0m and £41.0m, respectively.

Financial results for the year ended 31 December 2021


	Headline *			Statutory
£m	2021	2020	Movement	2021	2020	Movement
Revenue	394.6	323.3	22.1%	394.6	323.3	22.1%
Net revenue **	249.3	225.4	10.6%	-	-	-
EBITDA **	40.8	24.1	69.3%	-	-	-
Operating profit/(loss)	31.1	12.0	160.1%	27.3	(4.9)	652.7%
Profit/(loss) before taxation	27.3	8.3	228.0%	21.6	(8.5)	354.3%
Profit/(loss) for the year	20.0	5.0	298.2%	13.2	(9.9)	232.8%
Earnings ***	13.7	1.7	729.5%	12.8	(9.9)	228.9%
Basic Earnings/(loss) per share	11.3p	1.5p	643.4%	10.5p	(9.1p)	215.7%
Tax rate	26.6%	39.6%	-13.0pts	39.1%	-16.6%	55.7pts

* Headline results represent the underlying trading profitability of the group and excludes:

• Separately disclosed items that are one-off in nature and are not part of running the business.

• Acquisition-related costs (including amortisation of acquired intangibles and impairment of goodwill).

• Gains or losses generated by disposals of subsidiaries and associates.

• Fair value adjustments to unlisted equity investments, acquisition related contingent consideration and put options.

• Dividends paid to IFRS 2 put option holders.

** Net revenue and EBITDA excluded from Statutory results as these are not IFRS terms.

*** Earnings are calculated after deducting share of profits attributable to non-controlling interests.

Current trading and outlook

· The strong trading performance and momentum in 2021 has continued into the first quarter of 2022.

· The Company is now forecasting Headline profit before tax in the region of £31.0m for the year ending 31 December 2022 (FY22) and £41.0m for the year ending 31 December 2023 (FY23). Further details are included in the Company's announcement "Issue of Profit Forecasts" made earlier today.

· The strong trading performance has further strengthened the group's cash position, providing the balance sheet flexibility to settle put option liabilities as they fall due in 2022, resume the payment of dividends and to continue the delivery of the group's accelerated growth strategy. As at 31 March 2022, the Company had net cash of £33.9m and £15.0m of its £47.0m revolving multicurrency credit facility drawn.

Possible offer by AdvancedAdvT Limited ("AdvT")

· As detailed in the Company's "Further Extension of "Put Up or Shut Up" Deadline" announcement on 28 April 2022, discussions between the Company and AdvT remain ongoing and in accordance with Rule 2.6(c) of the City Code on Takeovers and Mergers, (the "Code") the directors of the Company other than Vin Murria (the "Independent Directors") have requested, and the Panel has consented to, an extension to the deadline by which AdvT is required either to announce a firm intention to make an offer for M&C Saatchi in accordance with Rule 2.7 of the Code or to announce that it does not intend to make an offer, in which case the announcement will be treated as a statement to which Rule 2.8 of the Code applies. Such announcement must now be made by not later than 5.00 p.m. on 10 May 2022. This deadline can be further extended by the Independent Directors with the consent of the Takeover Panel.

Board changes

· As previously announced on 19 January 2022, Mickey Kalifa, M&C Saatchi's Chief Financial Officer, has resigned from the M&C Saatchi board to pursue other interests. He will step down from his position as Chief Financial Officer and as a Director of the Company on 13 May 2022.

· The search process for a new Chief Financial Officer is underway. In the meantime, Bruce Marson, Deputy Chief Financial Officer, has been appointed as Interim Chief Financial Officer effective from 13 May 2022.

Commenting on the 2021 performance and outlook, Moray MacLennan, Chief Executive Officer said:

"These record-breaking results reflect the outstanding levels of commitment and creativity that our teams deliver to clients, on a daily basis.

The strength and depth of our client relationships and the breadth of our capabilities position us exceptionally well for the remainder of this year, and beyond."

For further information please call:

M&C Saatchi Plc +44 (0)20-7543-4500

Moray MacLennan, Mickey Kalifa

Brunswick Group +44 (0)207-404-5959

Sumeet Desai, Stuart Donnelly, Kate Pope

Numis Securities +44 (0)20-7260-1000

Nick Westlake, NOMAD

Iqra Amin

Liberum +44 (0)20-3100-2000

Neil Patel, Benjamin Cryer, Will King

Chief Executive Statement

2021 Performance

In 2021 I outlined a new strategy to: become more connected via greater collaboration across specialisms and regions; drive digital acceleration by enhancing the Group's technology capabilities including data analytics and digital innovation; and implement further simplification from efficiencies delivered by central systems and consolidation. The impact of this strategy is evidenced by the 2021 performance.

· We had seven consecutive positive trading updates since January 2021.

· We had a record year in many companies across the Group.

· We trebled our Headline profit before tax.

· The Group's net cash position is at its strongest ever, £34.4m at December 2021.

This was delivered through strong new business, deepening client relationships and key client retention. Notable new business wins included PepsiCo, WHOOP and Mondelez, and new campaigns for Uber, De'Longhi and Franklin Templeton. We extended our client relationships into new specialisms with clients including Reckitt, GSK, Lexus and Sonos; and retained key clients, including key UK and US government assignments.

Our creative heartbeat remains strong, with over 50 awards won in the last 12 months including a record number of Effies - the Oscars of campaign effectiveness.

Specialism Performance

The business operates through five connected specialisms, all of which benefit from our Central Fuel which provides expertise and capabilities in data and technology, digital innovation, sustainability and our Growth Team. All specialisms saw like-for-like growth in 2021.

Advertising & CRM: Blending marketing science with creativity through earned, owned and paid-for content

Like-for-like net revenue increased by 6% (2021: £121.2m vs. 2020: £114.8m).

New business wins across the specialisms included NHS England, Origin Energy, Franklin Templeton, Gorillas, PepsiCo, BNY Mellon, Arla and Uber.

Relationships with existing clients including Nando's, Woolworths in Australia, De'Longhi across Europe, and the UK Government - delivered significant organic growth as we focused on supporting their digital ambitions across the marketing ecosystem. We also built new relationships with organisations at the start-up and scale-up phase.

Highlights included the most successful UK Census Campaign in history, the Australia office deepening its data capability and reinforcing its position as one of the leaders in the market, our SS+K office being named in the Top 10 most innovative agencies in the United States, a campaign for Tourism Iceland that parodied the Metaverse but nevertheless was retweeted by Zuckerberg, whilst our South African agency became the first African agency in the Metaverse.

Media & Performance: Connecting brands with digitally connected consumers

Like-for-like net revenue increased by 39% (2021: £32.8m vs. 2020: £23.6m).

As the influence of Covid-19 continued to accelerate the shift to digital, our Media & Performance business benefitted from new digital advertisers entering the market.

M&C Saatchi Performance celebrated its fifteenth anniversary, winning Performance Agency of the Year in Southeast Asia, supporting clients in their IPOs, and being responsible for millions of new app downloads and mobile transactions.

Global & Social Issues: Driving global and social change, protecting the planet and transforming lives for the better

Like-for-like net revenue increased by 19% (2021: £33.2m vs. 2020: £27.9m).

This specialism continued to focus on the development, diplomatic, security and social impact sectors. It uses the latest in creativity, behavioural science and tech capabilities to tackle a broad range of critical global and social issues.

Highlights of 2021 included leading comms for COP26 and new assignments from the UK, US and Australian Governments, the Conrad N. Hilton Foundation, UNICEF and the World Health Organisation.

Brand & Experience: Transforming businesses by unlocking existing and new growth opportunities

Like-for-like net revenue increased by 17% (2021: £30.9m vs. 2020: £26.4m).

This growth reflects the continued demand from clients to re-examine and re-design their product, service and experience propositions in an increasingly digital world. Revenue gains were a result of major contract extensions with Discover and Optus. Growth was also a reflection of impressive new business wins, with clients including TikTok, Toyota and Diageo added to the roster.

As we move into 2022, we are further investing in data, digital and technology, with the addition of new capabilities in digital business innovation. Our new start-up, Thread, brings key hires from Fjord/Accenture Interactive. It blends the commercial rigour of consulting with the creativity of design studios to help clients develop and build high-growth digital products and services.

Sponsorship & Talent: Connecting brands direct to consumers through passions and personalities

Like-for-like net revenue increased by 35% (2021: £24.5m vs. 2020: £18.1m).

Following the devastating effects of Covid-19 on the sport and entertainment industry in 2020, this specialism bounced back to a record high in 2021. We won more than 40 pitches worldwide throughout the year including major client wins with Barclays, Red Bull, WHOOP, Dettol, Kia, Dreams and Origin Energy. The M&C Saatchi Talent Group added new talent and digital-first influencers and delivered its most successful year to date.

Highlights included creating "live" digital and social campaigns for many brands throughout EURO 2020 (played in 2021) as well as for the delayed Olympics in Japan. We added talent including data analysts which gave us forensic insight into our clients' customers, as well as hiring visual effects expertise.

Central Fuel

Our central fuel capabilities are shared across the Group enabling growth through shared platforms consisting of:

· Growth Team: Our focus on connected business is led by our Chief Growth Officer and the central growth team. This has delivered an increase in connected business opportunities with client wins including Samsung, Barclays, Sonos, Healthcode and KLM.

· Data: Our data capability and consultancy, M&C Saatchi Fluency, launched in January 2021. It has grown its capabilities and client base, and now works with over 15 blue chip clients and has developed a proprietary data platform of our eight core data services.

· Sustainability: We strengthened our ESG position both in the way we work and in the work we do. We are delivering on significant societal commitments for "People and Planet" including announcing our Net Zero target, launching M&C Saatchi LIFE, a specialist sustainability consultancy, and promoting equity and inclusion through a number of initiatives including Mentor Black Business, Open House, Street Store and our internal colleague networks.

· Innovation: Our digital innovation consultancy, Thread, launched in February 2022 to help clients identify, develop and build high-growth digital products and services.

Accelerated Strategy

The strategy of connection, digitisation and simplification will be accelerated.

Growth will increasingly come from cross-specialism and cross-border opportunities. We continue to fuel this through investment in central capabilities. In 2022 we launched and will scale two new service offerings: sustainability communications (M&C Saatchi LIFE) and digital innovation (Thread), and we continue to deepen our data capability by scaling our global data platform and consultancy. The Growth Team will further strengthen its resources as opportunities are converted.

The simplification programme makes the Group's services easier for clients to understand and engage with. We will drive further efficiencies through accelerating centralisation of Group functions including IT, Finance and HR.

We are investing in platforms to enhance ways of working, encourage collaboration and to attract and retain talent.

Confidence in our future

With record profits, a strong cash position, a more simplified structure and a loyal and committed management team, we can face the future with renewed confidence.

M&C Saatchi is renowned for the impact it has on the world. This year we reinforced that reputation with leading campaigns addressing the major issues of the day from Covid-19 to climate change. We navigate, create and lead meaningful change and this market-leading proposition enables us to attract and retain the talent that provides solutions for our clients.

2021 Financial Review

Financial key performance indicators

The Group manages its financial performance through a number of key performance indicators. These are stated below, with the comparative key performance indicators for 2020.

· Net revenue of £249.3m, up 10.6% from £225.4m; like-for-like growth of 15.1%.

· Headline staff cost ratio, down 3.7pts from 71.9% to 68.2%.

· Headline operating profit margin, up from 5.3% to 12.5%.

· Statutory operating profit margin, improved from -2.2% to 10.9%.

· Headline profit before tax, up from £8.3m to £27.3m.

· Statutory profit before tax, up from a loss of £8.5m to a profit of £21.6m.

· Statutory earnings per share up from a loss of 9.1p per share to positive earnings of 10.5p per share.

· Increase in net cash, up from £32.7m to £34.4m.

Headline results

To assist understanding of the underlying performance of the business, the commentary concentrates on the Headline measures used by the Board to assess the underlying profitability of the Group. These Headline figures are alternative performance measures that the Board considers an appropriate basis to manage the business, to monitor its results on a month-to-month basis, enable comparison with industry peers and measure like-for-like year-on-year performance. The Headline results also more closely correlate with the operating cashflow position of the Group.

The Group performed well ahead of expectations. Whilst there were stand-out performers amongst individual entities, we saw growth across the board, across virtually all entities and specialisms.

Group net revenue increased by 10.6% or 15.1% on a like-for-like basis. This is significantly ahead of the 6% CAGR targeted growth in net revenue from 2020 to 2025 announced at the Capital Markets Day in January 2021.

Group Headline operating profit was £31.1m, increasing from £12.0m in 2020. This represents a 51% increase compared to 2019 (£20.6m profit), showing a strong recovery in profits following the negative impact of the Covid-19 pandemic. The Group reported a Statutory operating profit of £27.3m (2020 loss of £4.9m; 2019 loss of £11.0m).

Group Headline operating profit margin increased to 12.5% from 5.3% in 2020 and from 8.0% in 2019. This shows good progress towards the Group's operating profit margin target of 18% by 2025 announced at the Capital Markets Day in January 2021. The Statutory operating profit margin improved to 10.9% from an operating loss margin of -2.2% in 2020 and -4.3% in 2019.

The key movements between Statutory to Headline results

	Year ended 31 December 2021	Year ended 31 December 2020
Reconciliation of Statutory to Headline profit before taxation	£000	£000
Statutory profit/(loss) before taxation	21,632	(8,507)
Separately disclosed items	(3,783)	1,972
Amortisation of acquired intangibles	965	1,686
Impairment of non-current assets	2,770	3,920
(Gain)/loss on disposal of subsidiaries and associates	83	(1,432)
Revaluation of associates on transition to subsidiaries	234	-
FVTPL investments under IFRS 9	(2,510)	2,095
Revaluation of contingent consideration	532	446
Dividends paid to IFRS 2 put option holders	4,314	4,728
Put option accounting - IFRS 9 and IFRS 2	3,077	3,420
Headline profit before taxation	27,314	8,328

Some of the larger items causing the movement between Statutory and Headline results for 2021 are explained below:

Separately disclosed items, including restructuring

One-off credits of £3.8m (2020: costs of £2.0m) arise as a result of the forgiveness of £2.2m of US Paycheck Protection Program (PPP) loans and the £2.8m release of a long-term incentive plan accrual relating to an employee who has now left the business. These are partially reduced by lease surrender expenses, due to the restructuring of two leases, and the cost arising from the repayment of £1.0m of furlough money to the UK government. Last year's charge arose because of one-off restructuring costs, partially offset by the credits arising from the UK furlough money received.

Impairment of non-current assets

In 2021, the Group recorded goodwill write-offs of £1.9m in Santa Clara Participaçes Ltda, which moved from being an associate to a subsidiary during the year, and in Scarecrow Communications Limited. The remainder relates to the impairment of M&C Saatchi Little Stories SAS, an associate, in which the Group increased its ownership in February 2021, and of an intangible asset in M&C Saatchi Share Inc. The 2020 charge mainly consisted of a £2.7m impairment against the carrying value of our right of use of property assets and a £0.9m associate impairment.

Gain/(loss) on disposal of subsidiaries and associates

The Board made a strategic decision at the start of 2020 to eliminate loss-making businesses from the Group. This process continued into 2021, with the closure, merger or divestment of our interest in M&C Saatchi PR LLP, M&C Saatchi Marketing Arts Limited and Create Collective Pte, which together generated a loss on disposal in 2021 of £83k, net of severance and legal fees.

Financial assets at fair value through profit and loss - FVTPL investments under IFRS 9

The Group holds unlisted equity investments in early-stage companies (detailed in Note 19 of the financial statements). The revaluation of these companies is excluded from Headline results. The portfolio had a much stronger year than in 2020, as several companies bounced back following the Covid-19 pandemic, resulting in an upwards revaluation of £3.5m. This is partially offset by an increase in management fees linked to the increase in the value of the investments.

Put option accounting

These charges relate to the revaluations of the put option liabilities (both IFRS 2 and IFRS 9) during the year.

Net revenue performance by specialism and region

Group net revenue increased 10.6% in 2021 (15.1% on a like-for-like basis, which removes entities disposed of or acquired during 2020 and 2021). The Media & Performance and Sponsorship & Talent specialisms saw the largest net revenue growth of all specialisms, and except for Advertising & CRM, all experienced double-digit growth in 2021. All specialisms, except for Advertising & CRM, have recovered to 2019 net revenue levels, with Global & Social Issues and Sponsorship & Talent showing growth of around 30% compared to 2019.

There has been a marked shift in revenue between the different specialisms over the last two years. Advertising & CRM remains the largest specialism comprising 50% of total net revenue (2020: 54%) on a like-for-like basis. However, the other four specialisms have increased their share of total net revenue to 50% (2020: 46%). This shift away from Advertising & CRM has had a very significant upwards impact on operating profit, as these have an operating profit margin of 26% compared to Advertising & CRM with an operating profit margin of 9%.

At the regional level, the UK remains the largest region in the Group comprising 43% of total net revenue (2020: 41%) on a like-for-like basis.

Financial income and expense

The Group's finance income and expense includes bank interest, lease interest and fair value adjustments to minority shareholder put option liabilities (IFRS 9). Further details can be found in Note 7 of the financial statements.

Bank interest payable for the year was £1.6m (2020: £1.2m). The increase is mainly due to a higher interest margin on the Group's new revolving multicurrency credit facility agreement which was signed during the first half of 2021.

The interest on leases increased to £2.8m (2020: £2.5m), due to new property leases entered into as old leases expired.

The fair value adjustment of put option liabilities created a charge of £0.9m (2020: charge of £0.1m). This increase is due to an increase in the Company's share price year-on-year and the improved profitability in the agencies where there are outstanding put options.

Tax

Headline Tax

Our Headline tax rate has reduced from 39.6% to 26.6%. The tax rate reduction is driven by fewer prior year tax adjustments (2020 was affected by the 2019 accounts restatements) and fewer loss-making subsidiaries where we expect no future tax benefit.

Statutory Tax

Statutory profit this year compared to a Statutory loss last year gave rise to a much higher tax rate. The Statutory tax rate increased from -16.6% in 2020 to 39.1% in 2021. We expect our effective tax rates to be higher than the actual tax rates in our markets, as a result of items such as put option charges being capital in nature and non-deductible for corporation tax purposes. In 2020 tax was payable despite the Statutory loss and in 2021 the effective Statutory tax rate is significantly higher than the worldwide average standard tax rate.

Non-controlling interests (minority interests)

On a Headline basis, the non-controlling interest share of the Group's profit represents the minority shareholders' share of each of the Group's subsidiaries' profit or loss for the year. In 2021, the share of profits attributable to non-controlling interests increased to £6.4m (2020: £3.4m). This reflects the increase in overall Headline profit in 2021. Despite this increase in the share of profits attributable to non-controlling interests, minority interests reduced to 32% of profit after tax in 2021 (2020: 67%) as a result of the settlement of £5.3m of put options during the year.

On a Statutory basis, non-controlling interests excludes any minority interests which are IFRS 2 put option holders (holders of put options that are contingent on being employed by the relevant company). Their share of the entity's Statutory profit is paid as dividends each year, which is reported as staff costs in the Statutory results.

Dividend

The Company did not pay a dividend to its shareholders in 2021 (2020: nil). The intention is to reinstate dividends from 2022.

Cash flow and banking arrangements

Total gross cash (excluding bank overdrafts) at 31 December 2021 was £69.4m (2020: £76.3m). Cash net of bank borrowings was £34.4m, compared to £32.7m in 2020.

The Group generated operating cash (before working capital) of £41.0m in 2021 (2020: £19.1m). This was offset by a £15.2m net outflow of working capital (compared to a £16.2m net inflow in 2020), £9.0m of lease payments made (compared to payments of £9.7m made in 2020) and £5.3m of payments made to acquire non-controlling interests (2020: £0.2m). The swing in working capital was driven by £14.5m of agreed deferral of payments from 2020 to 2021 (supplier invoices, UK VAT, UK rent and UK furlough), which was not repeated at the end of 2021, and the increase in billings issued in the last quarter of 2021, which were collected after 31 December 2021. There was also an increase in tax payments of £6.8m in 2021 (compared to £1.6m in 2020), due to the increased profitability across the Group.

On 31 May 2021, the Company entered into a revolving multicurrency credit facility agreement with National Westminster Bank Plc and Barclays Bank PLC for up to £47.0m (the "Facility"). The Facility includes a £2.5m overdraft and the ability to draw up to £3.0m as a bonding facility as required. The Facility is provided on a three-year term (with two optional one-year extensions). The primary purpose of the Facility is to provide the Group with additional liquidity headroom to support any variations in working capital.

At 31 December 2021, £20.0m was drawn on the Facility. This has been reduced to £15.0m at 31 March 2022.

Capital expenditure

Total capital expenditure in 2021 (including software acquired) decreased to £2.6m (2020: £3.7m). This included £1.4m (2020: £0.9m) on computer equipment and £0.8m (2020: £0.5m) on software and film rights. The remaining £0.4m (2020: £2.3m) was incurred on leasehold improvements and furniture and fittings.

Share-based incentive arrangements

The Group operates a business model through which certain senior management have minority ownership in the subsidiary companies they operate, through share-based incentive (put option) arrangements. Given the Group's strong cash position, we now intend to settle put options in cash rather than shares, when the options fall due, which significantly reduces the risk of substantial share dilution to shareholders.

The table below presents a range of potential cash payments to settle put options, LTIPs, restricted share awards and deferred and contingent consideration for the next six years based on the future share price of the Company, the estimated future business performance for each business unit and assuming the put options are exercised as soon as possible. These forecasts are based on the Group's five-year plans developed as part of our budget cycle, assuming all Total Shareholder Return LTIP targets are fulfilled, and that equity is bought by the LTIP in the year of vesting at 168.5p (the share price at 31 December 2021).

	Paid so	Potentially payable
Future share price of the Company	far in 2022 £000	2022 £000	2023 £000	2024 £000	2025 £000	2026 £000	2027 & 2028 £000	Total £000
At 150p	1,135	18,879	6,810	6,107	87	1,798	3,163	37,979
At 168.5p	1,135	20,403	7,733	6,806	122	1,985	3,553	41,753
At 190p	1,135	22,091	8,722	7,619	162	2,203	4,007	45,939
At 210p	1,135	23,608	9,589	8,373	200	2,405	4,428	49,738
At 230p	1,135	25,126	10,457	9,130	238	2,607	4,850	53,543
At 250p	1,135	26,643	11,324	9,885	275	2,809	5,272	57,343
At 300p	1,135	30,436	13,492	11,775	370	3,315	6,326	66,849

Put option holders are not required to exercise their options at the first opportunity. Many do not and prefer to remain shareholders in the subsidiary companies they manage. As a result, some put option holders may exercise their options later than the dates we have estimated in the table above.

If, in the future, the Company decides to fulfil the put options in equity, then the amount of equity that will be provided is equal to the liability divided by the share price at the date of settlement.

Summary

The Company's performance in 2021 was exceptional. Driven by a 22% increase in revenue and a very strong increase in operating profit margin to 12.5% (2020: 5.3%), the Company generated the highest operating profit in its history. The foundations for future growth have now been laid. Trading has continued to be strong in the first quarter of 2022, with the outlook for the remainder of 2022 very positive.

This statement along with the audited consolidated statutory financial statements is available on our website: https://www.mcsaatchiplc.com/reports-results/2021

Printed copies of the Annual Report are being posted to shareholders who have requested hard copies.

Consolidated Financial Statements for the year ended 31 December 2021

Consolidated Income Statement


		2021	2020
		Total	Total
Year ended 31 December	Note	£000	£000
Billings (unaudited)		533,350	454,504
Revenue	4	394,575	323,250
Project cost/direct cost		(145,239)	(97,861)
Net revenue		249,336	225,389
Staff costs	5	(172,493)	(171,717)
Depreciation	16,17	(9,196)	(11,659)
Amortisation	14	(1,412)	(2,275)
Impairment charges	14	(2,937)	(3,217)
Other operating charges		(39,573)	(38,635)
Other gains/(losses)	19	3,533	(2,818)
Operating profit/(loss)		27,258	(4,932)
Share of results of associates and joint ventures	15	(190)	(113)
Gain on disposal of subsidiaries	11	42	1,432
Impairment of associate investment	15	(357)	(895)
Finance income	7	260	364
Finance expense	7	(5,381)	(4,363)
Profit/(loss) before taxation		21,632	(8,507)
Taxation	8	(8,459)	(1,411)
Profit/(loss) for the year		13,173	(9,918)
Attributable to:
Equity shareholders of the Group		12,757	(9,897)
Non-controlling interests		416	(21)
Profit/(loss) for the year		13,173	(9,918)
Profit/(loss) per share
Basic (pence)	1	10.53p	(9.10)p
Diluted (pence)*	1	9.38p	(9.10)p


Headline results
Operating profit	1	31,136	11,970
Profit before taxation	1	27,314	8,328
Profit after tax attributable to equity shareholders of the Group	1	13,687	1,650
Basic earnings per share (pence)	1	11.30p	1.52p
Diluted earnings per share (pence)*	1	10.06p	1.31p
EBITDA		40,821	24,105

* It is the intention to fulfil all options by either buying equity from market or in cash so the difference between Basic and Dilutive EPS is purely due to fact that the Group still has a choice that we intend not to take.

The following note s form part of these consolidated financial statements.

Consolidated Statement of Other Comprehensive Income


	2021	2020
Year ended 31 December	£000	£000
Profit / (loss) for the year	13,173	(9,918)
Other comprehensive profit/(loss)*
Exchange differences on translating foreign operations	664	(289)
Other comprehensive profit/(loss) for the year net of tax	664	(289)

Total comprehensive profit/(loss) for the year	13,837	(10,207)

Total comprehensive profit/(loss) attributable to:
Equity shareholders of the Group	13,421	(10,186)
Non-controlling interests	416	(21)
Total comprehensive profit/(loss) for the year	13,837	(10,207)

*All items in the consolidated statement of comprehensive profit/(loss) may be reclassified to the income statement.

The following notes form part of these consolidated financial statements.

Consolidated Balance Sheet


		2021	2020
At 31 December	Note	£000	£000
Non-current assets
Intangible assets	14	40,499	36,523
Investments in associates and joint ventures	15	202	2,829
Plant and equipment	16	6,333	7,157
Right-of-use assets	17	44,397	34,006
Other non-current assets	18	1,211	3,494
Deferred tax assets	9	6,777	8,301
Financial assets at fair value through profit or loss	19	15,183	11,410
		114,602	103,720
Current assets
Trade and other receivables	20	132,741	89,262
Current tax assets		247	2,621
Cash and cash equivalents		69,419	76,295
		202,407	168,178
Current liabilities
Trade and other payables	21	(154,049)	(124,740)
Provisions	22	(1,193)	(666)
Current tax liabilities		(837)	(2,019)
Borrowings	23	(14,737)	(41,083)
Lease liabilities	17	(6,950)	(6,250)
Deferred and contingent consideration	13	(984)	(1,679)
Minority shareholder put option liabilities	26/27	(20,788)	(978)
		(199,538)	(177,415)
Net current assets/(liabilities)		2,869	(9,237)
Total assets less current liabilities		117,471	94,483
Non-current liabilities
Deferred tax liabilities	9	(777)	(405)
Borrowings	23	(19,821)	(2,199)
Lease liabilities	17	(49,895)	(40,171)
Minority shareholder put option liabilities	26/27	(11,572)	(1,804)
Other non-current liabilities	24	(2,549)	(4,773)
		(84,614)	(49,352)
Total net assets		32,857	45,131


		2021	2020
At 31 December	Note	£000	£000
Equity
Share capital	28	1,227	1,159
Share premium		50,327	44,607
Merger reserve		37,554	37,554
Treasury reserve		(550)	(550)
Minority interest put option reserve		(6,615)	(4,953)
Non-controlling interest acquired		(29,190)	(29,190)
Foreign exchange reserve		1,853	1,210
Accumulated losses		(22,122)	(4,939)
Equity attributable to shareholders of the Group		32,484	44,898
Non-controlling interest		373	233
Total equity		32,857	45,131

The following notes form part of these consolidated financial statements.

Reserves are defined in Note 35.

These consolidated financial statements were approved and authorised for issue by the Board of Directors on 27 April 2022 and signed on its behalf by:

Mickey Kalifa

Chief Financial Officer

M&C Saatchi plc

Company Number 05114893

Consolidated Statement of Changes in Equity


		Share capital	Share premium	Merger reserve	Treasury reserve	MI put option reserve	Non-controlling interest acquired	Foreign exchange reserves	Retained earnings/(accumulated losses)	Subtotal	Non-controlling interest in equity	Total
	Note	£000	£000	£000	£000	£000	£000	£000	£000	£000	£000	£000
At 31 December 2019		936	44,607	33,400	(550)	(4,953)	(32,239)	1,181	6,854	49,236	365	49,601
Exercise of Minority Interest put options	26	82	-	4,154	-	-	-	-	-	4,236	-	4,236
Exercise of share-based payment schemes	27	141	-	-	-	-	-	-	(683)	(542)	-	(542)
Disposal of subsidiaries		-	-	-	-	-	3,049	318	(3,367)	-	40	40
Share option charge	27	-	-	-	-	-	-	-	3,275	3,275	-	3,275
Reclassification of equity-settled share-based payments to cash-settled		-	-	-	-	-	-	-	(1,121)	(1,121)	-	(1,121)
Dividends	10	-	-	-	-	-	-	-	-	-	(151)	(151)
Total transactions with owners		223	-	4,154	-	-	3,049	318	(1,896)	5,848	(111)	5,737
Total loss for the year		-	-	-	-	-	-	-	(9,897)	(9,897)	(21)	(9,918)
Total other comprehensive loss for the year		-	-	-	-	-	-	(289)	-	(289)	-	(289)
At 31 December 2020		1,159	44,607	37,554	(550)	(4,953)	(29,190)	1,210	(4,939)	44,898	233	45,131
Acquisitions including deferred consideration	12,13	54	4,949	-	-	(2,000)	-	-	-	3,003	-	3,003
Exercise of Minority Interest put options	26	5	419	-	-	338	-	-	-	762	-	762
Transfer from equity to cash-settled put options	27	-	-	-	-	-	-	-	(32,555)	(32,555)	-	(32,555)
Transfer from cash to equity-settled put options	27	-	-	-	-	-	-	-	994	994	-	994
Share option charge	27	-	-	-	-	-	-	-	2,235	2,235	-	2,235
Buyout of equity put options in cash		-	-	-	-	-	-	-	(632)	(632)	-	(632)
Issue of shares		6	352	-	-	-	-	-	-	358	-	358
Exercise of put options		3	-	-	-	-	-	-	(3)	-	-	-
Disposal of subsidiaries		-	-	-	-	-	-	(21)	21	-	-	-
Dividends	10	-	-	-	-	-	-	-	-	-	(276)	(276)
Total transactions with owners		68	5,720	-	-	(1,662)	-	(21)	(29,940)	(25,835)	(276)	(26,111)
Total profit for the year		-	-	-	-	-	-	-	12,757	12,757	416	13,173
Total other comprehensive income for the year		-	-	-	-	-	-	664	-	664	-	664
At 31 December 2021		1,227	50,327	37,554	(550)	(6,615)	(29,190)	1,853	(22,122)	32,484	373	32,857

The following notes form part of these consolidated financial statements.

Consolidated Cash Flow Statement and Analysis of Net Cash

Year ended 31 December	Note	2021 £000	2020 £000
Operating profit/(loss)		27,258	(4,932)
Adjustments for:
Depreciation of plant and equipment	16	2,237	2,555
Depreciation of right-of-use assets	17	6,959	9,104
Impairment of right-of-use asset	17	-	2,651
Loss on sale of plant and equipment		95	640
Impairment of plant and equipment	16	-	374
Loss on sale of software intangibles		824	433
Revaluation of financial assets at FVTPL	19	(3,533)	3,315
Gain on disposal of financial assets at FVTPL	19	-	(497)
Revaluation of contingent consideration	13	532	446
Amortisation of acquired intangible assets	14	965	1,686
Impairment of goodwill and other intangibles	14	1,900	-
Impairment and amortisation of capitalised software intangible assets	14	1,484	781
Exercise of share-based payment schemes with cash		-	(683)
Equity-settled share-based payment expenses	27	2,235	3,275
Operating cash before movements in working capital		40,956	19,148
(Increase)/decrease in trade and other receivables		(38,912)	9,052
Increase in trade and other payables		23,434	9,425
Increase/(decrease) in provisions		316	(2,323)
Cash generated from operations		25,794	35,302
Tax paid		(6,844)	(1,645)
Net cash from operating activities		18,950	33,657
Investing activities
Acquisitions of subsidiaries and deferred consideration paid, net of cash acquired	12,13	633	-
Disposal of associate or subsidiary (net of cash disposed of)	11	(2)	(4,114)
Acquisition of associates	15	-	(1)
Acquisitions of unlisted investments	19	(81)	(713)
Proceeds from sale of unlisted investments		209	1,233
Proceeds from sale of plant and equipment		223	387
Purchase of plant and equipment	16	(1,789)	(3,184)
Purchase of capitalised software	14	(837)	(502)
Interest received	7	260	364
Net cash consumed by investing activities		(1,384)	(6,530)
Net cash from operating and investing activities		17,566	27,127
Financing activities
Dividends paid to non-controlling interest		(152)	(151)
Cash consideration for non-controlling interest acquired	27	(5,348)	(204)
Buyout of equity put options in cash		(632)	-
Payment of lease liabilities	17	(6,210)	(7,224)
Proceeds from bank loans	23	9,301	3,472
Repayment of bank loans	23	(16,909)	(8,900)
Borrowing costs		(602)	(518)
Interest paid	7	(1,555)	(1,751)
Interest paid on leases	17	(2,800)	(2,471)
Net cash consumed by financing activities		(24,907)	(17,747)
Net (decrease)/increase in cash and cash equivalents		(7,341)	9,380
Effect of exchange rate fluctuations on cash held		(55)	246
Cash and cash equivalents at the beginning of the year		62,375	52,749
Total cash and cash equivalents at the end of the year		54,979	62,375

Cash and cash equivalents		69,419	76,295
Bank overdrafts*	23	(14,440)	(13,920)
Total cash and cash equivalents at the end of the year		54,979	62,375
Bank loans and borrowings**	23	(20,590)	(29,628)
Net cash		34,389	32,747

* These overdrafts are legally offset against balances held in the UK; however, they have not been netted off in accordance with the requirements of IAS32.42.

** Bank loans and borrowings are defined in Note 23; they exclude our lease liability of £56,844k (2020 £46,421k) (Note 17)

The following notes form part of these consolidated financial statements.

Preparation

Basis of preparation

The consolidated financial statements have been prepared in accordance with UK adopted international accounting standards, in conformity with the requirements of the Companies Act 2006.

The consolidated financial statements are presented in pounds sterling and, unless stated otherwise, rounded to the nearest thousand. They have been prepared under the historical cost convention, except for the revaluation of certain financial instruments.

Going concern

These consolidated financial statements have been prepared on the going concern basis.

The Board have concluded that under the most likely going concern scenarios, the Group will have sufficient liquidity and headroom on bank covenants to continue to operate for a period of not less than a year from approving the consolidated financial statements.

The Board have formed their opinion after evaluating four different severe but plausible forecast scenarios and a reverse stress test, extending to 31 December 2023. The severe but plausible scenarios comprise:

1. A significant reduction in new business wins.

2. A significant increase in wage inflation.

3. A significant number of top clients are lost.

4. A significant economic downturn.

These severe but plausible scenarios are assumed to materialise from the second quarter of 2022 onwards. The estimated decline in profit before tax under these scenarios ranges from £8.3m to £19.1m compared to the base case plan for the cumulative period ending 31 December 2023: a £2.3m to £10.2m decline in profit before tax in 2022 and a £6.0m to £11.0m decline in profit before tax in 2023.

The reverse stress test case evaluates how extreme conditions would need to be for the Group to break its covenants within the going concern review period. The conditions go significantly further than the severe but plausible scenarios and reflect a scenario that the Directors consider to be highly unlikely.

The Directors have also considered the impact of climate change on going concern, taking into account the Company's support for Ad Net Zero (the industry initiative to tackle climate change led by the Advertising Association and its members), and do not believe that there is a significant financial impact.

The Board is satisfied that the Group's forecasts, which take into account reasonably possible changes in trading performance, show that there are no material uncertainties over going concern, and that, even under the severe but plausible scenarios, the Group will continue to have sufficient liquidity and headroom to operate within the terms of its banking covenants. The Board, therefore, have concluded the going concern basis of preparation continues to be appropriate.

Foreign exchange

Transactions in foreign currencies are translated at the exchange rate ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the exchange rates ruling at the balance sheet date, with the resulting exchange differences recognised in the income statement.

The accounts of each subsidiary are prepared using the functional currency of that subsidiary. The income statements of foreign subsidiary undertakings are translated into pounds sterling at average exchange rates on consolidation. The assets and liabilities of overseas subsidiaries (which comprise the Group's net investment in foreign operations) are translated at the exchange rate ruling at the balance sheet date. The resulting exchange differences are recognised in other comprehensive income and accumulated in equity within the foreign exchange reserve.

Consolidation

The Group's consolidated financial statements consolidate the results of the Company and its subsidiary entities and include the share of its joint ventures' and associates' results accounted for under the equity method.

A subsidiary is an entity controlled by the Group. The Group controls a subsidiary when it is exposed, or has the rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary.

The results of subsidiaries are included from the date of acquisition. Where necessary, adjustments are made to the consolidated financial statements of subsidiaries to bring their accounting policies into line with those of the Group. Intra-group transactions, balances, income, and expenses are eliminated on consolidation.

Where a consolidated company is less than 100% owned by the Group, the treatment of the non-controlling interest share of the results and net assets is dependent on how the non-controlling interests' equity award is accounted for. Where the equity is accounted for as a share-based payment award under IFRS 2, all dividend outflow is taken to staff costs, and there is no non-controlling interest. In all other cases, the non-controlling interest share of the results and net assets is recognised at each reporting date in equity, separately from the equity attributable to the shareholders of the Company.

Significant accounting policies

The significant accounting policies applied in the preparation of these consolidated financial statements are set out in the relevant notes. These policies have been applied consistently to all the years presented, unless otherwise stated.

Critical accounting policies

Certain of the Group's significant accounting policies are considered by the Directors to be critical, due to the level of complexity, judgement, or estimation involved in their application and their potential impact on the consolidated financial statements. The critical accounting policies are listed below and are explained in more detail in the relevant notes to the Group consolidated financial statements.

Revenue recognition

The Group's revenue is earned from the provision of advertising and marketing services, together with commission-based income in relation to media spend and talent performance. Under IFRS 15, revenue from contracts with customers is recognised as, or when, the performance obligations present within the contractual agreements are satisfied. Depending on the arrangement with the client, the Group may act as principal or as agent in the provision of these services.

See Note 4 for a full listing of the Group's revenue accounting policies.

Put option accounting (IFRS 2 and IFRS 9)

It is common for equity partners in the Group's subsidiaries to hold put options over their equity, such that they can require the Group to purchase their non-controlling interest for either a variable number of Company shares or cash. Dependent on the terms and substance of the underlying agreement, these options are either recognised as a put option liability under IFRS 9 (Note 26) or as a put option under IFRS 2 (Note 27) - see significant judgements below.

An IFRS 9 scheme should be considered as reward for future business performance and is not conditional on the put option holder being an employee of the business. These instruments are recognised in full at the amortised cost of the underlying award on the date of inception, with both a liability on the balance sheet and a corresponding amount within the minority interest put option reserve being recognised. At each period end, the amortised cost of the put option liability is calculated in accordance with the put option agreement, to determine a best estimate of the future value of the expected award. Resultant movements in the amortised cost of these instruments are charged to the income statement within finance income/expense. The put option liability will vary with both the Company's share price and the subsidiary's financial performance. Upon exercise of an award by a put option holder, the liability is extinguished, and the associated minority interest put option reserve is transferred to the non-controlling interest acquired reserve.

An IFRS 2 scheme should be considered as reward for future business performance and is conditional on the holder being an employee of the business. These schemes are recognised as staff costs over the vesting period (if equity-settled) or until the option is exercised (if cash-settled). In September 2021, the Board made the decision to move to cash settlement of these put options going forward. This required a fair value assessment on the day of the modification and a movement between reserves and liabilities.

See Note 27 for a full description of the Group's accounting policy for IFRS 2 put options.

Headline results

As stated in the Financial review, the Directors believe that the Headline results and Headline earnings per share (see Note 1), provide additional useful information on the underlying performance of the business. The Headline results reflect the underlying profitability of the business units, by excluding a number of items that are not part of routine business income and expenses.

In addition, the Headline results are used for internal performance management and reward, and they are also used to calculate minority shareholder put option liabilities. The term "Headline" is not a defined term in IFRS. Note 1 reconciles Statutory results to Headline results and the segmental reporting (Note 3) reflects Headline results, in accordance with IFRS 8.

The items that are excluded from Headline results are:

· Exceptional separately disclosed items that are one-off in nature and are not part of running the business.

· Acquisition-related costs.

· Gains or losses generated by disposals of subsidiaries and associates.

· Fair value adjustments to unlisted equity investments, acquisition related contingent consideration and put options.

· Dividends paid to IFRS 2 put option holders.

Unlisted investments

The Group holds certain unlisted equity investments which are classified as financial assets at FVTPL (see Note 19). These investments are initially recognised at their fair value. At the end of each reporting period, the fair value is reassessed, with gains or losses being recognised in the income statement.

Significant accounting judgements and key sources of estimation uncertainty

In the course of preparing consolidated financial statements, management necessarily makes judgements and estimates that can have a significant impact on the consolidated financial statements. The estimates and judgements that are made are continually evaluated, based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and judgements that have a significant risk of causing a material adjustment to the consolidated financial statements within the next financial year are outlined below:

Significant accounting judgements

Management has made the following judgements, which have the most significant effect in terms of the amounts recognised, and their presentation, in the consolidated financial statements.

Non-controlling interest put option accounting - IFRS 2 or IFRS 9

The key judgement is whether the awards are given beneficially as a result of employment, which can be determined where there is an explicit service condition, where the award is given to an existing employee, where the employee is being paid below market value or where there are other indicators that the award is a reward for employment. In such cases, the awards are accounted for as a share-based payment in exchange for employment services under IFRS 2.

Otherwise, where the holder held shares prior to the Group acquiring the subsidiary or gained the equity as a result of starting up a subsidiary using their unique skills and there are no indicators the award should be accounted for under IFRS 2, then the award is accounted for under IFRS 9.

Impairment - assessment of CGUs and assessment of indicators of impairment

Impairment reviews are undertaken annually, or more frequently if events or changes in circumstances indicate a potential impairment. Assets with finite lives are reviewed for indicators of impairment (an impairment "trigger") and judgement is applied in determining whether such a trigger has occurred. External and internal factors are monitored by management, including a) adverse changes in the economic or political situation of the geographic locale in which the underlying entity operates, b) heightened risk of client loss or chance of client gain, and c) internal reporting suggesting that an entity's future economic performance is better or worse than previously expected. Where management have concluded that such an indication of impairment exists, then the recoverable amount of the asset is assessed.

The Group assesses whether an impairment is required by comparing the carrying value of the CGU assets (including the right-of-use assets under IFRS 16) to their value in use. Generally, discounted cash flow models, based on the Group's latest budget and five-year financial plan, and a long-term growth rate, are used to determine the recoverable amount for the CGUs. The appropriate estimates and assumptions used require judgement and there is significant estimation uncertainty. The results of impairment reviews conducted at the end of the year are reported in Note 14 (Intangible Assets), Note 15 (Associates), Note 16 (Plant and Equipment) and Note 17 (Right-of-use Assets).

The Group has recognised a total impairment charge of £3,294k in the year (2020: £4,112k), of which £2,937k relates to intangible assets (2020: £192k) and £357k relates to associate investments (2020: £895k). There was no impairment in the year of plant and equipment (2020: £374k), nor of right-of-use assets (2020: £2,651k).

Deferred tax assets

The Group assesses the future availability of carried forward losses and other tax attributes, by reference to jurisdiction-specific rules around carry forward and utilisation, and it assesses whether it is probable that future taxable profits will be available against which the attribute can be utilised.

Significant estimates and assumptions

Some areas of the Group's consolidated financial statements are subject to key assumptions and other significant sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. The Group has based its assumptions and estimates on parameters available when the consolidated financial statements were prepared.

Fair value measurement of financial instruments

The Group holds certain financial instruments, which are recorded on the balance sheet at fair value at the point of recognition and remeasured at the end of each reporting period. At the year-end these relate to:

(i) equity investments at FVTPL in non-listed limited companies (Note 19); and

(ii) certain contingent consideration (Note 13).

No formal market exists to trade these financial instruments and, therefore, their fair value is measured by the most appropriate valuation techniques available, which vary based on the nature of the instruments. The inputs to the valuation models are taken from observable markets where possible, but where this is not feasible, judgement is required to establish fair values.

The basis of calculation of the estimated fair value of these financial instruments (in addition to sensitivity analyses on the estimates' salient inputs) is detailed in Note 29.

Share-based incentive arrangements

Share-based incentives are valued at the date of the grant, using stochastic Monte Carlo pricing models with non-market vesting conditions. Typically, the value of these awards is directly related to the performance of a particular entity of the Group in which the employee holds a minority interest. The key inputs to the pricing model are risk-free interest rates, share price volatility and expected future performance of the entity to which the award relates. Management apply judgement to these inputs, using various sources of information, including the Company's share price, experience of past performance and published data on risk-free interest rates (government gilts).

Details of awards made in the year are shown in Note 27.

Leasing estimates

Within IFRS 16, two estimates are used for the recognition of new leases and making amendments to existing leases:

i. Derivation of the interest rate used for discounting future cash flows - the discount rate used in the calculation of the lease liability involves estimation on a lease-by-lease basis. This involves an estimate of incremental borrowing costs, driven by the territory risk (which comprises both the currency used and the risk-free rates of that country), the date of lease inception, and the lease term.

ii. Anticipated length of lease term - IFRS 16 defines the lease term as the non-cancellable period of a lease, together with the options to extend or terminate a lease, if the lessee is reasonably certain to exercise that option. Where a lease includes the option for the Group to extend the lease term, the Group takes a view, at inception, as to whether it is reasonably certain that the option will be exercised. This will take into account the length of time remaining before the option is exercisable, current trading, future trading forecasts and the level and type of any planned capital investment. The assessment of whether the option will be exercised is reassessed in each reporting period. A reassessment of the remaining life of the lease could result in a recalculation of the lease liability and a material adjustment to the associated balances.

Non-statutory accounts statement

The financial information for the year ended 31 December 2021 and the year ended 31 December 2020 does not constitute the company's statutory accounts for those years.

Statutory accounts for the year ended 31 December 2020 have been delivered to the Registrar of Companies. The statutory accounts for the year ended 31 December 2021 will be delivered to the Registrar of Companies in due course.

The auditor's report on the accounts for 31 December 2021 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006. The auditor's report on the accounts for 31 December 2020 was qualified in respect of the comparability of the Group loss and cash flows with the 2019 year end and did not draw attention to any matters by way of emphasis. Solely in respect of the qualification the auditor included a statement under 498(2) and 498(3) of the Companies Act 2006.

Notes to the Financial Statements

1. Headline results and earnings per share

The analysis below provides a reconciliation between the Group's Statutory results and the Headline results for the current year.


		Statutory 2021	Separately disclosed items (Note 2)	Amortisation of acquired intangibles (Note 14)	Impairment of non-current assets (Note 14 & 15)	Net loss on disposal of subsidiaries and related costs (Note 11)	Revaluation of associates on transition to subsidiaries (Note 15)	FVTPL investments under IFRS 9 (Note 19)	Revaluation of contingent consideration (Note 13)	Dividends paid to IFRS 2 put holders (Note 5)*	Put option accounting (Note 26 & 27)	Headline results
Year ended 31 December 2021	Note	£000	£000	£000	£000	£000	£000	£000	£000	£000	£000	£000
Billings (unaudited)		533,350										533,350
Revenue		394,575	-	-	-	-	-	-	-	-	-	394,575
Net revenue		249,336	-	-	-	-	-	-	-	-	-	249,336
Staff costs	5	(172,493)	(3,975)	-	-	28	-	-	-	5,270	1,225	(169,945)
Depreciation	16,17	(9,196)	-	-	-	-	-	-	-	-	-	(9,196)
Amortisation	14	(1,412)	-	965	-	-	-	-	-	-	-	(447)
Impairments	14	(2,937)	-	-	2,413	-	-	-	-	-	-	(524)
Other operating charges		(39,573)	192	-	-	97	-	664	532	-	-	(38,088)
Other gains	19	3,533	-	-	-	-	-	(3,533)	-	-	-	-
Operating profit		27,258	(3,783)	965	2,413	125	-	(2,869)	532	5,270	1,225	31,136
Share of results of associates and joint ventures	15	(190)	-	-	-	-	234	-	-	-	-	44
Gain on disposal of subsidiaries	11	42	-	-	-	(42)	-	-	-	-	-	-
Impairment of associate investment	15	(357)	-	-	357	-	-	-	-	-	-	-
Finance income	7	260	-	-	-	-	-	-	-	-	-	260
Finance expense	7	(5,381)	-	-	-	-	-	359	-	-	896	(4,126)
Profit before taxation	8	21,632	(3,783)	965	2,770	83	234	(2,510)	532	5,270	2,121	27,314
Taxation	8	(8,459)	743	(246)	-	-	-	680	-	11	-	(7,271)
Profit for the year		13,173	(3,040)	719	2,770	83	234	(1,830)	532	5,281	2,121	20,043
Non-controlling interests		(416)	-	-	-	-	-	-	-	(5,940)	-	(6,356)
Profit attributable to equity holders of the Group**		12,757	(3,040)	719	2,770	83	234	(1,830)	532	(659)	2,121	13,687

* The non-controlling interest charge is moved to operating profit due to underlying equity being defined as a IFRS 2 put option.

** Headline earnings are profit attributable to equity holders of the Group after adding back items within the columns above.

The analysis below provides a reconciliation between the Group's Statutory results and the Headline results for the prior year.


		Statutory 2020	Separately disclosed items (Note 2)	Amortisation of acquired intangibles (Note 14)	Impairment of non-current assets (Note 15, 16 & 17)	Gain on disposal of subsidiaries and associates	FVTPL investments under IFRS 9 (Note 19)	Revaluation of contingent consideration (Note 13)	Dividends paid to IFRS 2 put holders (Note 5)*	Put option accounting (Note 26 & 27)	Headline results
Year ended 31 December 2020	Note	£000	£000	£000	£000	£000	£000	£000	£000	£000	£000
Billings (unaudited)		454,504	-	-	-	-	-	-	-	-	454,504
Revenue		323,250	-	-	-	-	-	-	-	-	323,250
Net revenue		225,389	-	-	-	-	-	-	-	-	225,389
Staff costs	5	(171,717)	1,661	-	-	-	-	-	4,728	3,300	(162,028)
Depreciation	16,17	(11,659)	-	-	-	-	-	-	-	-	(11,659)
Amortisation	14	(2,275)	-	1,686	-	-	-	-	-	-	(589)
Impairments	16,17	(3,217)	-	-	3,025	-	-	-	-	-	(192)
Other operating charges		(38,635)	311	-	-	-	(232)	446	-	-	(38,110)
Other losses		(2,818)	-	-	-	-	1,977	-	-	-	(841)
Operating (loss) / profit		(4,932)	1,972	1,686	3,025	-	1,745	446	4,728	3,300	11,970
Share of results of associates and joint ventures	15	(113)	-	-	-	-	-	-	-	-	(113)
Gain on disposal of subsidiaries	11	1,432	-	-	-	(1,432)	-	-	-	-	-
Impairment of associate investment	15	(895)	-	-	895	-	-	-	-	-	-
Finance income	7	364	-	-	-	-	-	-	-	-	364
Finance expense	7	(4,363)	-	-	-	-	350	-	-	120	(3,893)
(Loss)/profit before taxation		(8,507)	1,972	1,686	3,920	(1,432)	2,095	446	4,728	3,420	8,328
Taxation	8	(1,411)	(482)	(405)	(575)	-	(398)	-	-	(24)	(3,295)
(Loss)/profit for the year		(9,918)	1,490	1,281	3,345	(1,432)	1,697	446	4,728	3,396	5,033
Non-controlling interests		21	-	-	-	-	-	-	(3,404)	-	(3,383)
(Loss)/profit attributable to equity holders of the Group**		(9,897)	1,490	1,281	3,345	(1,432)	1,697	446	1,324	3,396	1,650

* The non-controlling interest charge is moved to operating profit due to underlying equity being defined as a IFRS 2 put option.

** Headline earnings are profit attributable to equity holders of the Group after adding back the adjustments noted above.

Earnings per share

Basic and diluted earnings per share are calculated by dividing the Group's appropriate earnings metrics by the weighted average number of shares in issue during the year.

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue on the assumption of conversion of all potentially dilutive ordinary shares. Anti-dilutive potential ordinary shares are excluded. The dilutive effect of unvested outstanding options is calculated based on the number that would vest had the balance sheet date been the vesting date.

It is the intention to fulfil all options by either buying equity from market or in cash so the difference between Basic and Dilutive EPS is purely due to fact that the Group still has a choice that we intend not to take.


		Headline
Year ended 31 December 2021	2021	2021
Profit attributable to equity shareholders of the Group (£000)	12,757	13,687
Basic earnings per share
Weighted average number of shares (thousands)	121,130	121,130
Basic EPS	10.53p	11.30p
Diluted earnings per share
Weighted average number of shares (thousands) as above	121,130	121,130
Add
- LTIP	178	178
- Restricted Shares	649	649
- Deferred consideration (payable in cash)	695	695
- Put options (payable in cash)	13,342	13,342
Total	135,994	135,994
Diluted EPS	9.38p	10.06p
	135,994	135,994
Excluding the deferred consideration (payable in cash)	(695)	(695)
Excluding the put options (payable in cash)	(13,342)	(13,342)
Weighted average number of shares (thousands) including dilutive shares	121,957	121,957
Diluted EPS - excluding items we intend and are able to pay in cash	10.46p	11.22p

		Headline
Year ended 31 December 2020	2020	2020
(Loss)/profit attributable to equity shareholders of the Group (£000)	(9,897)	1,650
Basic earnings per share
Weighted average number of shares (thousands)	108,783	108,783
Basic EPS	(9.10)p	1.52p
Diluted earnings per share
Weighted average number of shares (thousands) as above	108,783	108,783
Add
- Conditional shares	-	11,963
- Put option	-	3,356
- Contingent consideration	-	1,757
Total	108,783	125,859
Diluted EPS	(9.10)p	1.31p

2. Separately disclosed items

Policy

Separately disclosed items include one off, non-recurring revenues, or expenses. These are shown separately and are excluded from Headline profit to provide a better understanding of the underlying results of the Group.

Analysis

Separately disclosed items for the year ended 31 December 2021 comprise the following:

2021	Operating costs £000	Staff costs £000	Taxation £000	After tax total £000
Strategic review and restructuring	192	(2,751)	466	(2,093)
Forgiveness of US Payment Protection Program ("PPP") loan	-	(2,200)	462	(1,738)
Repayment of UK furlough money	-	976	(185)	791
Total separately disclosed items	192	(3,975)	743	(3,040)

In 2021, we have recognised the repayment of the UK furlough money that was received in 2020 and the forgiveness of the US "PPP" loan that was received in 2020. Included within strategic review and restructuring above are:

· Staff costs relating to the release of a long-term incentive plan accrual for a previous employee who is no longer part of the business (£1.8m of this relates to pre-2021); and

· Operating costs comprising of the lease surrender expense incurred during 2021, due to restructuring of two lease spaces.

Separately disclosed items for the year ended 31 December 2020 comprise the following:

2020	Operating costs £000	Staff costs £000	Taxation £000	After tax total £000
Restructuring	-	2,637	(608)	2,029
Legal fees	311	-	(59)	252
Furlough salary expense	-	(976)	185	(791)
Total separately disclosed items	311	1,661	(482)	1,490

In 2020, the Board continued its strategic review of the Group to improve the long-term profitability of the business. This restructuring of the Group led to staff redundancy costs in the year.

3. Segmental information

Headline segmental income statement

Segmental results are reconciled to the income statement in Note 1. The Board reviews Headline results.

The Group's operating segments are aligned to those business units that are evaluated regularly by the chief operating decision maker ("CODM"), namely the Board, in making strategic decisions, assessing performance and allocating resources.

The operating segments have historically comprised of individual country entities, the financial information of which is provided to the CODM and is aggregated into specific geographic regions on a Headline basis, with each geographic region considered a reportable segment. Each country included in that region has similar economic and operating characteristics. The products and services provided by entities in a geographic region are all related to marketing communications services and generally offer complementary products and services to their customers.

From 2021, following the Group's strategic review, presented at the Capital Markets Day in January 2021, we now also assess the Group's performance under a new structure of specialisms, and this will be reported under two segments: Advertising & Customer and High Growth Specialisms, excluding Group Central Costs.

Segmental Information by Geography


	UK	Europe	Middle East and Africa	Asia	Australia	Americas	Group Central Costs	Total
Year Ended 31 December 2021	£000	£000	£000	£000	£000	£000	£000	£000
Net revenue	104,231	15,207	20,216	17,213	53,997	38,472	-	249,336
Operating profit/(loss)	26,599	1,929	2,842	1,385	5,832	4,709	(12,160)	31,136
Operating profit margin	26%	13%	14%	8%	11%	12%	-	12%
Profit/(loss) before tax	26,188	1,906	2,430	756	5,257	3,625	(12,848)	27,314


	UK	Europe	Middle East and Africa	Asia	Australia	Americas	Group Central Costs	Total
Year Ended 31 December 2020	£000	£000	£000	£000	£000	£000	£000	£000
Net revenue	86,919	28,433	15,648	10,631	47,991	35,767	-	225,389
Operating profit/(loss)	11,687	1,501	640	(706)	3,042	3,668	(7,862)	11,970
Operating profit margin	13%	5%	4%	-	6%	10%	-	5%
Profit/(loss) before tax	10,623	1,353	282	(1,006)	2,939	2,705	(8,568)	8,328

No revenues were derived from an individual customer with a net revenue contribution of greater than 10% of the total net revenue during either 2021 or 2020.

Other operating expenses consists of facilities & equipment, legal & professional fees, establishment, travel, new business and other admin expenses.

Segmental Information by Specialisms

	Advertising & CRM	High Growth Specialisms	Group Central Costs	Total
Year Ended 31 December 2021	£000	£000	£000	£000
Net revenue	127,195	122,141	-	249,336
Operating profit/(loss)	11,052	32,244	(12,160)	31,136
Operating profit margin	9%	26%	-	12%
Profit/(loss) before tax	9,370	30,792	(12,848)	27,314

	Advertising & CRM	High Growth Specialisms	Group Central Costs	Total
Year Ended 31 December 2020	£000	£000	£000	£000
Net revenue	128,903	96,926	-	225,389
Operating profit/(loss)	5,184	14,648	(7,862)	11,970
Operating profit margin	4%	15%	-	5%
Profit/(loss) before tax	4,646	12,249	(8,568)	8,328

4. Revenue from contracts with customers

Billings comprise all gross amounts billed, or billable, to clients and is stated exclusive of VAT and sales taxes. Billings is a non-GAAP measure and is included as it influences the quantum of trade and other receivables recognised at a given date. The difference between billings and revenue is represented by costs incurred on behalf of clients with whom we operate as an agent, and timing differences, where invoicing occurs in advance or in arrears of the related revenue being recognised.

Net revenue is a non-GAAP measure and is reviewed by the CODM and other stakeholders as a key metric of business performance (Note 3).

Revenue recognition policies

Revenue is stated exclusive of VAT and sales taxes. Net revenue is exclusive of third-party costs recharged to our clients, where we are acting as principal.

Performance obligations

At the inception of a new contractual arrangement with a customer, the Group identifies the performance obligations inherent in the agreement. Typically, the terms of the contracts are such that the services to be rendered are considered to be either integrated or to represent a series of services that are substantially the same with the same pattern of transfer to the customer. Accordingly, this amalgam of services is accounted for as a single performance obligation.

Where there are contracts with services which are distinct within the contract, then they are accounted for as separate obligations. In these instances, the consideration due to be earned from the contract is allocated to each of the performance obligations, in proportion to their stand-alone selling price.

Further discussion of performance obligations arising in terms of the main types of services provided by the Group, in addition to their typical pattern of satisfaction, is provided below.

Measurement of revenue

Based on the terms of the contractual arrangements entered into with customers, revenue is typically recognised over time. This is based on either the fact that (i) the assets generated under the terms of the contracts have no alternative use to the Group and there is an enforceable right to payment, or (ii) the client exerts editorial oversight during the course of the assignment such that they control the service as it is provided.

Principal vs agent

When a third-party supplier is involved in fulfilling the terms of a contract then, for each performance obligation identified, the Group assesses whether the Group is acting as principal or agent. The primary indicator used in this assessment is whether the Group is judged to control the specified services prior to the transfer of those services to the customer. In this instance it is typically concluded the Group is acting as principal.

When we act as an agent, the revenue recorded is the net amount retained. Costs incurred with external suppliers are excluded from revenue. When the Group acts as principal, the revenue recorded is the gross amount billed and, when allowable by the terms of the contract, out-of-pocket costs (such as travel) are also recognised as revenue with a corresponding amount recorded as an expense.

Treatment of costs

Costs incurred in relation to the fulfilment of a contract are generally expensed as incurred, if revenue is recognised over time or held in contract assets, if it is recognised at a point in time.

Disaggregation of revenue

The Group monitors the composition of revenue earned by the Group on a geographic basis and by specialism.

Net Revenue by Specialism	Reported		LFL
	2021	2021 vs 2020	2021	2021 vs 2020
Specialism	£m	Movement	£m	Movement
Advertising & CRM	127.2	(1.3%)	121.2	5.6%
Media & Performance	32.8	39.1%	32.8	39.1%
Global & Social Issues	33.9	21.6%	33.2	18.9%
Brand & Experience	30.9	15.0%	30.9	17.1%
Sponsorship & Talent	24.5	35.3%	24.5	35.3%
Group	249.3	10.6%	242.6	15.1%

Net Revenue by Region	Reported		LFL
	2021	2021 vs 2020	2021	2021 vs 2020
Region	£m	Movement	£m	Movement
UK	104.2	19.9%	104.2	20.1%
Europe	15.2	(46.5%)	15.2	(8.4%)
Middle East & Africa	20.2	29.2%	20.2	35.4%
Asia	17.2	61.9%	12.3	16.2%
Australia	54.0	12.5%	54.0	12.5%
Americas	38.5	7.6%	36.6	8.0%
Group	249.3	10.6%	242.6	15.1%

Assets and liabilities related to contracts with customers

Contract assets and liabilities arise when there is a difference (generally due to timing) in the amount of revenue which can be recognised and the amount which can be invoiced under the terms of the contractual arrangement.

Where revenue earned from customers is recognised over time, many of the Group's contractual arrangements have terms which permit the Group to remit invoices for the amount of work performed to date on a specific contract (described in our accounting policies as "Right-to-invoice"). Where the terms of a contractual arrangement do not carry such right to invoice, then a contract asset is recognised over time, as work is performed until such point that an invoice can be remitted.

Where revenue earned from customers is recognised at a point in time, then this will be dependent on satisfaction of a specific performance obligation. At such point, it is usual that there are no other conditions required to be met for receipt of consideration and, as such, a trade receivable is recognised at this point upon raising of an invoice, otherwise it is recognised as a contract asset.

Contract liabilities comprise instances where a customer has made payments relating to services prior to their provision. Where payments are received in advance, IFRS 15 requires assessment of whether these cash transfers contain any financing component. Under the terms of the contractual arrangements entered into by the Group, there are no instances where such financing elements arise. This is the case even for those arrangements where the Group receives monies more than a year in advance by virtue of the terms of the contractual agreement so entered into.

The Group operates a standard 30 day credit terms policy. All contract liabilities and contract assets (other receivables per Note 20) brought forward have been recognised in the current period.

Revenue recognition policies and performance obligation satisfaction by category of services performed

Further details regarding revenue recognition and performance obligations of the Group's main service offerings are summarised below.

Provision of advertising and marketing services

Our provision of advertising and marketing services to our clients typically meets the criteria identified above for revenue to be recognised over time. The quantum of revenue to be recognised over the period of the assignments is either based on the "right-to-invoice" expedient or as the services are provided, depending on the contractual terms. In measuring the progress of services provided in an assignment, the Group uses an appropriate measure depending on the circumstances, which may include inputs (such as internal labour costs incurred) or outputs (such as media posts). Where projects are carried out under contracts, the terms of which entitle the Group to payment for its performance only when a discrete point is reached (such as an event has occurred or a milestone has been reached), then revenue is recognised at the time that payment entitlement occurs, i.e. at a point in time.

The provision of advertising and marketing services can encompass provision of a range of media deliverables in addition to development and deployment of a media strategy. Regular assessment of the effectiveness of the project with regards to the objective of the contractual arrangement may also be included. Often the range of services provided within these arrangements is considered to be integrated to an extent that no separable performance obligations can be identified other than a single over-arching combined performance obligation relating to the delivery of the project. In these instances, revenue is recognised over time as the performance obligation is being satisfied depending on the circumstances, which may include inputs (such as internal labour costs incurred) or outputs (such as media posts).

When services provided are considered separable, and not integrated, then multiple performance obligations are recognised.

Multiple performance obligations are most common in projects where there are clearly separable conceptual preparatory obligations culminating in a customer deliverable, such as an event. In these scenarios the conceptual preparation element and the deliverable are concluded as forming separate performance obligations with the revenue and corresponding cost of sales (typically third-party pass-through costs) assigned to the obligation to which they relate.

Whilst it is uncommon for projects to be such that revenue is not able to be recognised over time, examples can occur. In these instances, the element of the transaction price assigned to each performance obligation (in proportion to stand-alone selling prices) is recognised as revenue once an obligation has been fully satisfied, for example an event has occurred or a milestone has been reached.

The Group enters into retainer fees that relate to arrangements whereby the nature of the Group's contractual promise is to agree to 'stand-ready' to deliver services to the customer for a period of time rather than to deliver the goods or services underlying that promise. Revenue relating to retainer fees is recognised over the period of the relevant assignments or arrangements, typically in line with the 'stand-ready' incurred costs.

Where fees are remunerated to the agency in excess of the services rendered then a contract liability is recognised. Conversely where the services rendered are in excess of the actual fees paid, then a contract asset is recognised when there is a right to consideration.

Certain of these arrangements have contractual terms relating to the agency meeting specific customer identified KPIs. As a result, the overall level of consideration can vary by increasing or decreasing as a result of performance against these KPI metrics. To reflect this variability in the overall level of consideration, management estimate the most likely outcome and then reflect that outcome in the revenue recognised as the performance obligation(s) of the contract are satisfied. When determining the likely outturn position the estimated consideration is such that it is highly probable there will not be significant reversal of the revenue in the future. The estimated portion of the variable element is recalculated at the earlier of the completion of the contract or the next reporting period and revenue is adjusted accordingly. These estimates are based on historical award experience, anticipated performance and best judgement at the time.

Commission based income in relation to media spend

The Group arranges for third parties to provide the related goods and services to its customers in the capacity of an agent. Revenue is recognised in relation to the amount of commission the Group is entitled to. Often additional integrated services are provided at the same time with regards to the development and deployment of an overarching media strategy. Due to the integration of the services provided under the terms of the contract, management judgement is applied to assess whether there is a single combined performance obligation.

The performance obligation for media purchases is considered to have been satisfied when the associated advertisement has been purchased.

In the majority of instances where the Group purchases media for clients, the Group is acting as agent.

Commission based income in relation to talent performance

Revenue in relation to talent performance involves the Group acting as agent. Typically, such arrangements have a single, or a sequence, of specific performance obligations relating to the talent (or other third party) providing services. The performance obligations are generally satisfied at a point in time once the service has been provided, at which point, revenue is recognised. The consideration for the services is normally for a fixed amount (as a percentage of the talent's fee) with no degree of variability.

Recognition of supplier discounts and rebates as revenue from contracts with customers

The Group receives discounts and rebates from certain suppliers for transactions entered into on behalf of clients, which the clients have agreed we can retain. When the contractual terms of the agreements entered into are such that the Group acts as agent in these instances, then such rebates are recognised as revenue from contracts with customers. By contrast, when the contractual terms of the agreements are such that the Group is acting as principal then such rebates are recognised as a reduction in direct costs. Certain of the Group's clients, however, have contractual terms such that the pricing of their contracts is structured with the rebate being passed through to them.

5. Staff costs

Policy

Contributions to personal pension plans are charged to the income statement in the period in which they are due. Bonuses are given on an ad hoc basis, or as otherwise agreed, and are accrued in the year to which the services performed relate (when there is an expectation these will be awarded).

Analysis

Staff costs (including Directors)


		2021	2020
Year ended 31 December		£000	£000
Wages and salaries **		141,615	134,782
Social security costs		13,085	16,360
Pension costs**		5,403	5,070
Other staff costs*		6,950	6,555
Total		167,053	162,767

Allocations and dividends paid to holders of IFRS 2 put options	1	5,270	4,728
Share-based incentive plans:
Cash-settled	27	(2,065)	947
Equity-settled	27	2,235	3,275
Total share-based incentive plans		170	4,222
Total staff costs		172,493	171,717

* Other staff costs include dividends, profit share, LTIP charges, redundancy costs and insurance.

** Within the 2020 figures we identified an amount of £2.5m that needed to be presented within pension costs, rather than wages and salaries. This was correctly accounted for in 2021 and reclassified in 2020 for comparative purposes.

Staff numbers
UK	734	687
Europe	161	357
Middle East and Africa	383	373
Asia	592	342
Australia	465	436
Americas	318	255
Total	2,653	2,450

These staff numbers are based on the average number of monthly staff in December each year.

Pensions

The Group does not operate any defined benefit pension schemes. The Group makes payments, on behalf of certain individuals, to personal pension schemes.

Payments of £5,403k (2020: £5,070k) were made in the year and charged to the income statement in the period they relate to.

Compensation for key management personnel and Directors

	2021	2020
Key management remuneration	£000	£000
Short-term employee benefit	2,735	2,325
Post-employment benefit	88	249
Share-based payments	268	485
Total	3,091	3,059

Key management personnel include the Directors and employees responsible for planning, directing and controlling the activities of the Group.

6. Auditors' remuneration

The Group paid the following amounts to its auditors in respect of the audit of the consolidated financial statements and for other services provided to the Group:

other assurance services - interim agreed upon procedures
	2021	2020
Year ended 31 December	£000	£000
Audit services:
Audit of the Company and its consolidated financial statements	1,450	2,337
Audit of the Company's subsidiaries pursuant to legislation	237	255
	1,687	2,592
Other services provided by the Auditors:
Other assurance services - interim agreed upon procedures	46	-
Taxation compliance services	66	-
Taxation advisory services	112	-
	224	-
Total	1,911	2,592

In 2020, the Group's auditors were PricewaterhouseCoopers LLP. BDO LLP became the Group's auditors in 2021.

7. Net finance income/(expense)

Policy

Interest income and expense, including fair value adjustments to IFRS 9 put options, are recognised in the income statement in the period in which they are incurred.

Analysis

Year ended 31 December	2021	2020
	£000	£000
Bank interest receivable	187	215
Other interest receivable	47	78
Sublease finance income	26	71
Financial income	260	364
Bank interest payable	(1,555)	(1,240)
Amortisation of loan costs	(130)	(228)
Other interest payable	-	(304)
Interest on lease liabilities	(2,800)	(2,471)
Valuation adjustment to IFRS 9 put option liabilities (Note 26)	(896)	(120)
Financial expense	(5,381)	(4,363)
Net finance expense	(5,121)	(3,999)

8. Current Taxation

Policy

Current tax, including UK and foreign tax, is provided for using the tax rates and laws that have been substantively enacted at the balance sheet date.

Analysis

Income statement charge for year ended 31 December	2021	2020
	£000	£000
Taxation in the year
UK	1,832	(8)
Overseas	4,470	3,765
Withholding taxes payable	31	7
Adjustment for under provision in prior periods *	1,476	1,312
Total	7,809	5,076

Deferred taxation
Recognition/(reversal) of temporary differences	1,651	(3,100)
Adjustment for over provision in prior periods *	(974)	(565)
Effect of changes in tax rates	(27)	-
Total	650	(3,665)
Total taxation	8,459	1,411

* The 2020 tax position was adjusted due to the accounting restatements made in 2019. In 2021, the deferred tax positions became current due to the increase in profitability in the year.

The differences between the actual tax and the standard rate of corporation tax in the UK applied to the Group's Statutory profit/(loss) for the year are as follows:

	2021	2021	2020	2020
Year ended 31 December	£000	%	£000	%
Profit/(loss) before taxation	21,632		(8,507)
Taxation at UK corporation tax rate of 19.00% (2019: 19.00%)	4,110	19.0%	(1,616)	19.0%
Different tax rates applicable in overseas jurisdictions (i)	1,467	6.8%	213	(2.5%)
Adjustment for current tax under/(over) provision in prior periods (ii)	1,465	6.8%	1,312	(15.4%)
Adjustment for deferred tax (over)/under provision in prior periods (ii)	(974)	(4.5%)	(565)	6.6%
Option charges not deductible for tax (iii)	925	4.3%	1,303	(15.3%)
Impairment with no tax credit (iv)	537	2.4%	170	(2.0%)
Tax losses for which no deferred tax asset was recognised	528	2.4%	711	(8.3%)
Expenses not deductible for tax	386	1.8%	127	(1.5%)
Disposal of subsidiaries on which no tax is charged	16	0.1%	(272)	3.2%
Withholding taxes payable	31	0.1%	7	(0.1%)
Tax effect of associates	1	0.0%	21	(0.3%)
Effect of changes in tax rates on deferred tax	(33)	(0.1%)	-	-
Statutory taxation	8,459	39.1%	1,411	(16.6%)
Statutory effective tax rate	39.1%		(16.6%)

The key differences between the actual and Statutory tax rates are as follows:

i. Different tax rates applicable in overseas jurisdictions: the Group operates in multiple locations around the world where tax rates are higher than the UK (e.g. Australia (30%) and USA (between 21% to 28%)).

ii. The net effect of the adjustment for current and deferred tax in prior periods is £491k (2020: £747k) of total tax charge.

iii. Option charges include dividends paid to option holders that are not deductible for tax. Our share-based payment schemes mostly relate to equity held in subsidiary companies. The Group generally receives no tax benefit on the exercise of these put options or payment of the dividends.

iv. Impairment with no tax credit: On most of our acquisitions we received no tax benefit from the acquisition of goodwill and correspondingly there is no tax benefit from goodwill impairment.

Looking forward, taxes are rising to recover the costs of the Covid-19 pandemic. For instance, UK corporation tax will increase from 19% to 25% from 2023.

We expect large variations in future tax rates due to significant items such as share-based payments (option charges), put options and investment in subsidiaries being non-deductible against corporation tax as a result of these items being capital in nature.

Tax on Headline profits

In 2021, the key difference between the actual and Headline tax rates is driven by our local entities' profitability in higher tax countries such as Australia and USA, with central costs being incurred in the UK, a lower tax market.

Our Headline tax rate has reduced from 39.6% in 2020 to 26.6%. The tax rate reduction is driven by fewer prior period tax adjustments (2020 was affected by the 2019 accounts restatements) and fewer loss-making subsidiaries where we expect no future tax benefit.


	2021	2021	2020	2020
Year ended 31 December	£000	%	£000	%
Headline profit before taxation (Note 1)	27,312		8,328
Taxation at UK corporation tax rate of 19.00% (2020: 19.00%)	5,189	19.0%	1,582	19.0%
Different tax rates applicable in overseas jurisdictions	1,510	5.4%	406	4.8%
Adjustment for current tax under/(over) provision in prior periods	1,476	5.4%	1,312	15.8%
Adjustment for deferred tax (over)/under provision in prior periods	(974)	(3.6%)	(561)	(6.7%)
Tax losses for which no deferred tax asset was recognised	528	1.9%	710	8.5%
Expenses not deductible for tax	386	1.4%	127	1.5%
Withholding taxes payable	31	0.1%	7	0.1%
Effect of changes in tax rates	(6)	(0.0%)	-	-
Tax effect of associates	(44)	(0.2%)	21	0.3%
Effect of changes in tax rates on deferred tax	(230)	(0.8%)	-	-
Non-controlling interest share of partnership income	(595)	(2.2%)	(309)	(3.7%)
Headline taxation (Note 1)	7,271	26.6%	3,295	39.6%
Headline effective tax rate	26.6%		39.6%

9. Deferred taxation

Policy

Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax is not, however, provided for temporary differences that arise from: (i) initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss, (ii) the initial recognition of goodwill.

Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

Deferred tax assets are recognised to the extent that it is probable future taxable profit will be available against which the temporary differences can be utilised.

Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and the Group intends to settle its current tax assets and current tax liabilities on a net basis.

Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

Analysis

	2021	2020
At 31 December	£000	£000
Deferred tax assets	6,777	8,301
Deferred tax liabilities	(777)	(405)
Net deferred tax	6,000	7,896

The deferred tax asset is recoverable against future profits, and future corporation tax liabilities. The following table shows the deferred tax asset/(liability) recognised by Group and movements in 2021 and 2020.


	Intangibles	Capital allowances	Tax losses	Purchased investments	Working capital differences	Total
	£000	£000	£000	£000	£000	£000
At 1 January 2020	298	49	1,523	(964)	4,008	4,914
Exchange differences	(4)	(1)	(143)	-	(54)	(202)
Income statement (charge)/credit	(58)	1,278	7,136	499	(5,190)	3,665
Disposals (Note 11)	-	-	(13)	-	(468)	(481)
At 31 December 2020	236	1,326	8,503	(465)	(1,704)	7,896
Exchange differences	(16)	(52)	(337)	-	237	(168)
Income statement (charge)/credit	(47)	103	(4,460)	(767)	4,522	(649)
Acquisitions (Note 12)	(1,150)	-	71	-	-	(1,079)
At 31 December 2021	(977)	1,377	3,777	(1,232)	3,050	6,000

Based on the 2021 Board approved budget and five-year plans, the Group has reviewed the deferred tax asset created by tax losses for their recoverability. Where the Group believes such losses are not recoverable, they have not been recognised on the balance sheet and have been included in unrecognised deferred tax assets.

Within the local entities £3,101k (2020: £5,733k) of deferred tax has been naturally offset. Disregarding this offset, the split of deferred tax is as follows:

	Intangibles	Capital allowances	Tax losses	Purchased investments	Working capital differences	Total
	£000	£000	£000	£000	£000	£000
At 31 December 2020
Deferred tax assets	290	1,328	8,503	-	3,953	14,074
Deferred tax liabilities	(54)	(2)	-	(465)	(5,657)	(6,178)
Net deferred tax	236	1,326	8,503	(465)	(1,704)	7,896
At 31 December 2021
Deferred tax assets	47	1,377	3,777	-	4,677	9,878
Deferred tax liabilities	(1,024)	-	-	(1,232)	(1,622)	(3,878)
Net deferred tax	(977)	1,377	3,777	(1,232)	3,055	6,000

The working capital differences mostly relate to the tax effects of working capital in Australia which calculates tax on a cash basis rather than the accruals basis used in other countries; along with the continuing tax effects of the adoption of IFRS 16 (Leases); and tax provision on any long-term deferred bonuses.

UK tax legislation was implemented on 24 May 2021 which increased the UK corporation tax from 19% to 25% with effect from 1 April 2023. The effect on the revaluation of the deferred tax balance of this change is partly reliant on projections for 2022 and 2023 profits so is an estimate.

An unrecognised deferred tax asset in respect of carried forward tax losses is shown below:

	Losses	Deferred tax impact
	£000	£000
At 1 January 2021	4,772	975
Exchange differences	(52)	(14)
Written off in year	(750)	(154)
Differences in tax rates	-	122
Losses in year	2,456	528
At 31 December 2021	6,426	1,457

Expiry date of losses:

	2021	2020
	£000	£000
One to five years	-	-
Five to ten years	648	439
Ten years or more	809	536
Total	1,457	975

The unrecognised deferred tax assets in respect of certain losses in overseas territories, referred to in the tables above, have not been recognised as there is insufficient certainty of future taxable profits against which these would reverse.

10. Dividends

Policy

Equity dividends on ordinary share capital are recognised as a liability in the period in which they are declared. The interim dividend is recognised when it has been approved by the Board and the final dividend is recognised when it has been approved by the shareholders at the Company's Annual General Meeting.

No interim or final dividends were approved for either 2020 or 2021. The dividend policy was reviewed as part of the Group's recent strategic review, which concluded that the Group's priority is to return the business to pre-pandemic levels of profitability and earnings and, thereafter, to grow in line with the targets set out at the Capital Markets Day held in January 2021. Assuming a return to normal trading conditions, the intention is to reinstate dividends from 2022.

11. Disposals

Policy

We account for disposals of entities in the Group in accordance with IFRS 10. When the parent's ownership of a subsidiary company changes and results in the parent's loss of control of a subsidiary within the Group, the parent:

· Derecognises the assets and liabilities attributable to the former subsidiary from the consolidated balance sheet.

· Recognises any investment retained in the former subsidiary when control is lost and subsequently accounts for it and for any amounts owed by or to the former subsidiary in accordance with relevant IFRS standards.

· Recognises the gain or loss associated with the loss of control attributable to the former controlling interest.

Analysis

The Board made a strategic decision at the start of 2020 to eliminate loss-making businesses from the Group by the end of the year. This process continued into 2021, with four entities either ceasing trading or being divested. The entities that ceased trading were M&C Saatchi PR LLP and M&C Saatchi Marketing Arts Limited. The entity that was divested was Create Collective PTE. These entities contributed £39k of losses to the 2021 results.

The Headline results of the entities disposed in 2021, which have been included in the results for the year, were as follows:

Year ended 31 December 2021	UK	Europe	Middle East and Africa	Asia and Australia	Americas	Total
	£000	£000	£000	£000	£000	£000
Revenue	5	-	-	87	-	92
Project cost/direct cost	-	-	-		-	-
Net revenue	5	-	-	87	-	92
Staff costs	(27)	-	(1)	(46)	-	(74)
Depreciation	-	-	-	(1)	-	(1)
Amortisation	-	-	-	-	-	-
Other operating charges	(5)	-	-	(37)	(14)	(56)
Operating (loss)/gain	(27)	-	(1)	3	(14)	(39)
Finance income	-	-	-	-	-	-
Finance expense	-	-	-	-	-	-
(Loss) / profit before taxation	(27)	-	(1)	3	(14)	(39)

The Headline results of the entities disposed in 2020, which were included in the results for 2020, were as follows:

Year ended 31 December 2020	UK	Europe	Middle East and Africa	Asia and Australia	Americas	Total
	£000	£000	£000	£000	£000	£000
Revenue	155	23,170	897	1,209	3,375	28,806
Project cost/direct cost	-	(11,345)	(178)	(7)	(604)	(12,134)
Net revenue	155	11,825	719	1,202	2,771	16,672
Staff costs	(664)	(9,788)	(962)	(945)	(3,631)	(15,990)
Depreciation	(2)	(833)	(17)	(2)	(327)	(1,181)
Amortisation	(79)	-	(4)	(291)	-	(374)
Other operating charges	(197)	(1,518)	(94)	(355)	(880)	(3,044)
Operating loss	(787)	(314)	(358)	(391)	(2,067)	(3,917)
Finance income	-	-	(1)	-	2	1
Finance expense	-	(110)	15	-	(32)	(127)
Loss before taxation	(787)	(424)	(344)	(391)	(2,097)	(4,043)

The gain on disposal of the subsidiaries is calculated as follows:

	2021	2020
	£000	£000
Consideration received in cash and cash equivalents	-	979
Share consideration receivable	-	444
Deferred consideration payable	-	(536)
Total consideration	-	887
Plant and equipment	2	562
Right-of-use assets	-	2,661
Other non-current assets	-	63
Deferred tax assets	-	481
Trade and other receivables	21	11,708
Current tax assets	-	583
Cash and cash equivalents	2	5,094
Trade and other payables	(67)	(17,425)
Borrowings	-	(1,462)
Lease liabilities	-	(2,810)
Add net liabilities	(42)	(545)
Gain on disposal of subsidiaries	42	1,432
Within Note 1, there are costs of £125k that relate to severance and legal fees for the disposal.

12. Acquisitions of subsidiaries

On 10 February 2021, the Group acquired two entities that were previously associates, 40.0% of M&C Saatchi (Hong Kong) Limited and 25.1% of Santa Clara Participaçes Ltda. In addition, on 1 January 2021 we deemed that we had control of the 51% held in M&C Saatchi World Services Pakistan (Pvt) Ltd, therefore obtaining control of the three entities. M&C Saatchi (Hong Kong) Limited's primary activity is consultancy, and both Santa Clara Participaçes Ltda and M&C Saatchi World Services Pakistan (Pvt) Limited are marketing agencies, of which all qualify as a business as defined in IFRS 3.

The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are as set out in the table below.




	M&C Saatchi (Hong Kong) £000s	Santa Clara £000s	Pakistan £000s	Total £000s
Financial assets	4,158	1,879	482	6,519
Property, plant and equipment	284	29	48	361
Identifiable intangible assets	1,653	2,211	-	3,864
Financial liabilities	(3,395)	(3,472)	(530)	(7,397)
Deferred tax assets/(liabilities)	(343)	(736)	-	(1,079)
Total identifiable assets acquired and liabilities assumed	2,357	(89)	-	2,268
Plus: goodwill (Note 14)	2,677	1,945	-	4,622
Net assets acquired	5,034	1,856	-	6,890

Satisfied by:
Equity instruments	2,627	1,856	-	4,483
Fair value of associate investment	2,407	-	-	2,407
Total consideration transferred	5,034	1,856	-	6,882

Net cash inflow arising on acquisition:
Cash and cash equivalent balances acquired	750	513	29	1,292
	750	513	29	1,292

M&C Saatchi (Hong Kong) Limited

The fair value of the financial assets includes trade receivables that amount to £1.1m. It is expected that the full contractual amounts can be collected.

Goodwill is mainly attributable to the workforce and synergies and amounts to £2.7m. None of the goodwill is expected to be deductible for tax purposes.

The fair value of the Company's 3,027,860 ordinary shares issued as the consideration (£2,627k) was determined on the basis of the agreed put option agreement, created at the time M&C Saatchi (Hong Kong) Limited became an associate in 2015.

The entity acquired contributed £15.5m revenue and £0.1m to the Group's operating profit for the period between the date of acquisition and the reporting date.

If the acquisition of this entity had been completed on the first day of the financial year, Group results for the year would have included £16.4m of revenue and £0.6m of profit.

Santa Clara Participaçes Ltda

The fair value of the financial assets includes trade receivables that amount to £0.8m. The gross amount of trade receivables is £0.8m and it is expected that the full contractual amounts can be collected.

Goodwill is mainly attributable to the workforce and synergies and amounts to £1.9m. None of the goodwill is expected to be deductible for tax purposes and this has been impaired in 2021 by £1.4m.

The fair value of the Company's 2,084,825 ordinary shares issued as the consideration (£1,856k) was determined on the basis of the agreed put option agreement, created at the time Santa Clara Participaçes Ltda. became an associate.

The entity acquired contributed £8.2m revenue and £0.1m to the Group's operating profit for the period between the date of acquisition and the reporting date.

If the acquisition of this entity had been completed on the first day of the financial year, Group results for the year would have included £8.5m of revenue and Group profit of £nil.

13. Deferred and contingent consideration

Policy

Certain acquisitions made by the Group include contingent or deferred consideration, the quantum of which is dependent on the future performance of the acquired entity. Such consideration is recognised as a liability and recorded at fair value in line with IFRS 13 (Note 29).

The liability arising is remeasured at the earlier of either the end of each reporting period or crystallisation of the consideration payment. The movements in the fair value are recognised in profit or loss.

Analysis


Liabilities	2021	2020
	£000	£000
Current
Deferred consideration
Levergy Marketing Agency (Pty) Limited	(984)	(691)
M&C Saatchi F&Q Brasil Comunicaço LTDA	-	(536)

Contingent consideration
Scarecrow Communications Limited	-	(452)

Total current	(984)	(1,679)

Movements in liabilities in the year	2021		2020
	£000		£000
At 1 January	(1,679)		(758)
Exchange differences	48		61
Deferred consideration due on disposals *	-		(536)
Charged to the income statement **	(532)		(446)
Conditional consideration paid in cash ***	659		-
Conditional consideration paid in equity ****	520		-
At 31 December	(984)		(1,679)

* £536k due to M&C Saatchi F&Q Brasil Comunicaço LTDA.

** £984k revaluation of deferred consideration due to Levergy Marketing Agency (Pty) less £452k revaluation of contingent consideration due to Scarecrow Communications Limited.

*** £536k paid to M&C Saatchi F&Q Brasil Comunicaço LTDA and £123k paid to Levergy Marketing Agency (Pty).

**** £520k paid to Levergy Marketing Agency (Pty) Limited.

£984k of deferred consideration is payable to Levergy Marketing Agency (Pty) Limited from the Company and is held as a liability in the Company's own balance sheet. This has increased in 2021 due to Levergy's increased profitability in 2021, compared to 2020.

Detail surrounding the fair value measurement of the contingent consideration recognised at year-end is provided in Note 29.

14. Intangible assets

Policy

Intangible assets are carried at cost less accumulated amortisation and impairment losses.

Cost

Goodwill

Under the acquisition method of accounting for business combinations, goodwill is the fair value of consideration transferred, less the net of the fair values of the identifiable assets acquired and the liabilities assumed.

Other intangibles acquired as part of a business combination

Intangible assets acquired as part of a business combination (which includes brand names and customer relationships) are capitalised at fair value, if they are either separable or arise from contractual or other legal rights and their fair value can be reliably measured.

Software & film

Purchased software and internally created software and film rights are recorded at cost. Internally created software and film rights are created so that they can be directly used to generate future client income.

Amortisation

Goodwill is not amortised. Amortisation of other classes of intangible assets is charged to the income statement on a straight-line basis over their estimated useful lives as follows:

Software and film rights: 3 years

Customer relationships: 1 to 8 years

Brand name: 1 to 10 years

The Group has no indefinite life intangibles other than goodwill.

Impairment

Goodwill and other intangibles are reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the assets may be impaired.

Impairment losses arise when the carrying amount of an asset or CGU is in excess of the recoverable amount, and these losses are recognised in the income statement. All recoverable amounts are from future trading (i.e. their value in use) and not from the sale of unrecognised assets or other intangibles.

The value in use calculations have been based on the forecast profitability of each CGU, using the 2022 budget and five-year plans approved by the Board, with a residual growth rate of 1.5% p.a. applied thereafter. This forecast data is based on past performance and current business and economic prospects. A discount rate is then applied to create a discounted future cash flow forecast (DCF) for each CGU, which forms the basis for determining the recoverable amount of each CGU. If the DCF of a CGU is not in excess of its carrying amount (that includes the value of its fixed assets and right-of-use assets), then an impairment loss would be recognised.

In conducting the review, a residual growth rate of 1.5% has been used for all countries. Market betas of 1.0 have been used for Brazil, South Africa and China, while 1.4 has been used for India and 1.2 has been used for rest of the world.

Pre-tax discount rates are based on the Group's nominal weighted average cost of capital adjusted for the specific risks relating to the country and market in which the CGU operates.

Key assumptions used for impairment review	Residual growth rates 2021	Residual growth rates 2020	Pre-tax discount rates 2021	Pre-tax discount rates 2020
Market	%	%	%	%
UK	1.5	1.5	14-17	12-13
Asia and Australia	1.5	1.5	16-19	13-14
Middle East	1.5	1.5	17	12
India	1.5	1.5	23	18
South Africa	1.5	1.5	28	24
Europe	1.5	1.5	15	11
Americas	1.5	1.5	15-18	12-13

Analysis


	Goodwill £000	Brand name £000	Customer relationships £000	Software and film rights £000	Total £000
Cost
At 1 January 2020	57,105	8,769	14,090	3,598	83,562
Exchange differences	12	(17)	(173)	185	7
Acquired	-	-	-	502	502
Disposal	(2,809)	(1,404)	(2,766)	(776)	(7,755)
Reclassification*	-	-	-	850	850
At 31 December 2020	54,308	7,348	11,151	4,359	77,166
Exchange differences	(493)	(73)	(1)	(46)	(613)
Acquired - business combinations	4,621	919	2,901	45	8,486
Acquired	-	-	-	837	837
Disposal	-	-	-	(1,963)	(1,963)
At 31 December 2021	58,436	8,194	14,051	3,232	83,913

Accumulated amortisation and impairment
At 1 January 2020	23,539	8,091	12,308	1,417	45,355
Exchange differences	125	5	(162)	175	143
Amortisation charge	-	335	1,351	589	2,275
Impairment	-	-	-	192	192
Disposal	(2,809)	(1,404)	(2,766)	(343)	(7,322)
At 31 December 2020	20,855	7,027	10,731	2,030	40,643
Exchange differences	(295)	(79)	(20)	(45)	(439)
Amortisation charge	-	181	784	447	1,412
Impairment**	1,900	-	-	1,037	2,937
Disposal	-	-	-	(1,139)	(1,139)
At 31 December 2021	22,460	7,129	11,495	2,330	43,414

Net book value
At 31 December 2019	33,566	678	1,782	2,181	38,207
At 31 December 2020	33,453	321	420	2,329	36,523
At 31 December 2021	35,976	1,065	2,556	902	40,499

* In 2020, there was a reclassification of property, plant and equipment and intangible assets, relating to software previously classified within computer equipment.

** The difference to Note 1 relates to the impairment of the Skategoat film which is yet to be released. This is treated as a headline expense.


Goodwill Cash generating units (CGUs)	31 December 2021 £000	31 December 2020 £000	Segment
M&C Saatchi Sport & Entertainment Limited	1,184	1,184	UK
M&C Saatchi Mobile Limited	4,283	4,283	UK
M&C Saatchi Merlin Limited	765	765	UK
Talk PR Limited	625	625	UK
M&C Saatchi Social Limited	2,612	2,612	UK
Clear Ideas Limited	5,031	5,031	Europe
M&C Saatchi Advertising GmbH	1,306	1,392	Europe
M&C Saatchi Middle East Fz LLC (Dubai)	684	677	Middle East and Africa
Levergy Marketing Agency (PTY) Limited (South Africa)	820	882	Middle East and Africa
M&C Saatchi Agency Pty Limited (Australia)	2,719	2,860	Australia
Bohemia Group Pty Limited (Australia)	1,812	1,907	Australia
Shepardson Stern + Kaminsky LLP	5,375	5,321	Americas
LIDA NY LLP (MCD)	5,198	5,145	Americas
Santa Clara Participaçes Ltda.*	529	-	Americas
M&C Saatchi (Hong Kong) Limited*	2,806	-	Asia
Scarecrow Communications Limited*	159	663	Asia
M&C Saatchi (M) SDN BHD	68	106	Asia
Total	35,976	33,453

* With exception of CGUs marked, all other movements in the table above are due to foreign exchange differences.

During the year the Group made impairments of Santa Clara Participaçes Ltda. £1,400k and Scarecrow Communications Limited £500k (2020: Nil).

Excluding the CGUs that have been impaired, the following sensitivity analysis of the remaining CGUs shows the impairment required, if the profit forecasts reduced and the discount rates increased.

	Annual profit forecast reduced by
Discount rates increased by	0%	10%	20%	30%
0%	-	-	174	894
1%	-	-	588	1,477
3%	170	710	1,767	2,955
5%	975	1,984	3,033	4,076

The CGUs affected by this sensitivity analysis are LIDA NY LLP (MCD), M&C Saatchi Advertising GmbH, M&C Saatchi (Hong Kong) Limited (AEIOU) and Levergy Marketing Agency (PTY) Limited (South Africa). These entities remain at risk of impairment.

15. Investments in associates and joint ventures

Policy

The Group invests in associates and joint ventures, either to deliver its services to a strategic marketplace, or to gain strategic mass by being part of a larger local or functional entity.

An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but it is neither control nor joint control over those policies.

The carrying value of these investments comprise the Group's share of their net assets and any purchased goodwill. These carrying amounts are reviewed at each balance sheet date, to determine whether there is any indication of impairment.

Analysis


			Investment in associates		Proportion of ownership interest held at 31 December
			2021	2020	2021	2020
Region & Name	Nature of business	Country of incorporation or registration	£000	£000
Europe
M&C Saatchi Istanbul****	Advertising	Turkey	-	-	-	25%
M&C Saatchi Little Stories SAS*	PR	France	-	-	25%	6%
M&C Saatchi SAL	Advertising	Lebanon	-	-	10%	10%
Asia and Australia
M&C Saatchi (Hong Kong) Limited**	Advertising	China	-	2,365	80%	40%
February Communications Private Limited***	Advertising	India	-	18	20%	20%
M&C Saatchi Limited***	Advertising	Japan	-	2	10%	10%
Love Frankie Limited	Advertising	Thailand	202	185	25%	25%
Americas
Technology, Humans and Taste LLC****	Advertising	USA	-	3	-	30%
Santa Clara Participaçes Ltda**	Advertising	Brazil	-	256	50%	25%
Total			202	2,829

* In February 2021, the minority shareholders in M&C Saatchi Little Stories SAS exercised their right to put their shares on the Group, increasing the Group's interest to 25%.This investment in associate has been fully impaired.

** In February 2021, the Group took a controlling stake in both these entities, becoming subsidiaries of the Group. They are therefore no longer associates.

*** The investments for these associates have been fully impaired.

**** Disposed in the year.

The above associates at 31 December 2021 have the following subsidiaries: M&C Mena Limited and Al Dallah For Creativity & Design LLC.

All shares in associates are held by subsidiary companies in the Group and have no special rights. Where an associate has the right to use our brand name, we hold the right to withdraw such use, to protect it from damage.

The Group holds neither associates nor joint ventures in Australia, Middle East & Africa, or the UK.

Disposals in the year

M&C Saatchi International Holdings B.V. previously held a 25% investment in its associate M&C Saatchi Istanbul, but the parties agreed to dispose of the investment and terminate the licence agreement with effect from October 2021. No consideration was received for the disposal of the associate. The entity has been loss-making in the last few years and the investment was fully impaired in 2020.

M&C Saatchi Agency Inc. held a 30% investment in its associate Technology, Humans and Taste LLC (THAT). On 21 December 2021, the membership interest in THAT was transferred back to the company (THAT), following which we no longer held any interest in THAT. The entity has been loss-making in the last few years and the investment in THAT was fully impaired in 2020. M&C Saatchi Agency Inc. received a credit of $200k as consideration for services to be provided by THAT, which can be used across the Group over the 36 months as of 21 December 2021. The fair value of the consideration is valued at nil as of 31 December 2021.

	2021	2020
Balance sheet value at 31 December	£000	£000
Investments intended to be held in the long-term	202	2,829
Investments categorised as held-for-sale	-	-
Total associate investments	202	2,829


	2021	2020
Balance sheet movements	£000	£000
At 1 January	2,829	3,780
Exchange movements	(11)	56
Transferred to subsidiary	(2,407)	-
Revaluation of associates on transition to subsidiaries	(233)	-
Acquisition of associates	338	1
Impairment of associate	(357)	(895)
Share of profit/(loss) after taxation	43	(113)
At 31 December	202	2,829


	2021	2020
Income statement	£000	£000
Profit net of cost of disposal	-	-
Share of profit/(loss) after taxation	43	(113)
Revaluation of associates on transition to subsidiaries	(233)	-
Share of result of and gain on disposal of Associates and Joint Ventures	(190)	(113)
Impairment of associate investment	(357)	(895)
Year to 31 December	(547)	(1,008)

The results and net assets of the associate entities are set out below, along with our share of these results and net assets:

				2020
	Asia	Europe	Americas		Total 2021	Asia	Americas	Total 2020
Income statement	£000	£000	£000		£000	£000	£000	£000
Revenue	4,240	2,580	148		6,968	8,953	3,822	12,775
Operating profit/(loss)	940	71	(14)		997	(367)	12	(355)
Profit/(loss) before taxation	215	71	(25)		261	(343)	(151)	(494)
Profit/(loss) after taxation	174	49	(32)		191	(325)	(251)	(576)
Group's share	43	12	(12)		43	(32)	(81)	(113)

Dividends received	-	-	-		-	-	-	-


	Asia	Europe	Americas*	Total 2021	Asia	Americas	Total 2020
Balance sheet	£000	£000	£000	£000	£000	£000	£000
Total assets	1,410	804	-	2,214	6,768	3,451	10,219
Total liabilities	(914)	(854)	-	(1,768)	(3,950)	(4,909)	(8,859)
Net assets/(liabilities)	496	(50)	-	446	2,818	(1,458)	1,360
Our share	124	(12)	-	112	1,172	(365)	807
Losses not recognised	12	12	-	24	178	365	543
Goodwill	66	-	-	66	1,219	260	1,479
Total	202	-	-	202	2,569	260	2,829

* Technology, Humans and Taste LLC was disposed of in the year, therefore we are showing an income statement above, but nil for the balance sheet at December 31, 2021.

16. Plant and equipment

Policy

Tangible fixed assets are stated at historical cost less accumulated depreciation. Depreciation is provided to write off the cost of all fixed assets, less estimated residual values, evenly over their expected useful lives.

Depreciation is calculated at the following annual rates:

Leasehold improvements - Lower of useful life and over the period of the lease

Furniture and fittings - 10% straight-line basis

Computer equipment - 33% straight-line basis

Other equipment - 25% straight-line basis

Motor vehicles - 25% straight-line basis

The need for any fixed asset impairment write-down is assessed by a comparison of the carrying value of the asset against the higher of a) the fair value less costs to sell, or b) the value in use.

Assets under construction are recognised at cost and only commence depreciation once the assets are completed and ready for use.

Analysis

	Leasehold improvements	Furniture, fittings and other equipment	Computer equipment	Motor vehicles	Total
	£000	£000	£000	£000	£000
Cost
At 1 January 2020	10,299	5,387	6,109	66	21,861
Exchange differences	(1,080)	551	136	11	(382)
Additions	1,442	826	916	-	3,184
Reclassifications**	-	-	(88)	-	(88)
Disposals	(2,171)	(2,743)	(2,228)	(60)	(7,202)
At 31 December 2020	8,490	4,021	4,845	17	17,373
Exchange differences	(114)	(48)	(86)	1	(227)
Additions	145	266	1,352	41	1,789
Additions - business combinations	3	152	177	29	361
Disposals	(1,228)	(473)	(456)	(10)	(2,172)
At 31 December 2021	7,296	3,918	5,832	78	17,124

Depreciation
At 1 January 2020	4,830	3,977	3,596	3	12,406
Exchange differences	(856)	381	201	6	(268)
Depreciation charge	1,046	551	941	17	2,555
Impairment*	374	-	-	-	374
Reclassifications**	-	-	762	-	762
Disposals	(1,310)	(2,264)	(2,015)	(24)	(5,613)
At 31 December 2020	4,084	2,645	3,485	2	10,216
Exchange differences	84	50	53	4	191
Depreciation charge	802	409	1,001	25	2,237
Disposals	(940)	(449)	(449)	(15)	(1,853)
At 31 December 2021	4,030	2,655	4,090	16	10,791

Net book value
At 31 December 2019	5,469	1,410	2,513	63	9,455
At 31 December 2020	4,406	1,376	1,360	15	7,157
At 31 December 2021	3,266	1,263	1,742	62	6,333

* Leasehold improvement impairment relates to the impairment of the right-of-use assets in 2020.

** In 2020, there was a reclassification of property, plant and equipment and intangible assets, relating to software previously classified within computer equipment.

Total depreciation in the income statement is broken down as follows:

	Note	2021 £000	2020 £000
From plant and equipment	16	2,237	2,555
From right-of-use assets	17	6,959	9,104
		9,196	11,659

17. Leases

The Group leases various assets, comprising properties, equipment, and motor vehicles. The determination whether an arrangement is, or contains, a lease is based on whether the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.

Policy

The following sets out the Group's lease accounting policy for all leases, with the exception of leases with a term of 12 months or less and those of low value assets. In both these instances the Group applies the exemptions permissible by IFRS 16 Leases. These are typically expensed to the income statement as incurred.

Right-of-use assets and lease liabilities

At the inception of a lease, the Group recognises a right-of-use asset and a lease liability.

The value of the lease liability is determined by reference to the present value of the future lease payments, as determined at the inception of the lease. Lease liabilities are disclosed separately on the balance sheet. These are measured at amortised cost, using the effective interest rate method. Lease payments are apportioned between a finance charge and a reduction of the lease liability, based on a constant interest rate applied to the remaining balance of the liability. Interest expense is included within net finance costs in the consolidated income statement. The interest rate applied to a lease is typically the incremental borrowing rate of the entity entering into the lease. This is as a result of the interest rates implicit in our leases not being readily determined. The incremental borrowing rate applied by each relevant entity is determined based on the interest rate adjudged to be required to be paid by that entity to borrow a similar amount over a similar term for a similar asset in a similar economic environment.

A corresponding right-of-use fixed asset is also recognised at an equivalent amount adjusted for a) any initial direct costs, b) payments made before the commencement date (net of lease incentives), and c) the estimated cost for any restoration costs the Group is obligated to at lease inception. Right-of-use assets are subsequently depreciated on a straight-line basis over the shorter of the lease term or the assets' estimated life. Under IFRS 16, right-of-use assets are tested for impairment in accordance with IAS 36 'Impairment of Assets', when there is an indication of impairment.

Lease term

The lease term comprises the non-cancellable period of the lease contract. Periods covered by an option to extend the lease are included, if the Group has reasonable certainty that the option will be exercised. Periods covered by an option to terminate are included, if it is reasonably certain that this option will not be exercised.

Lease payments

Lease payments comprise fixed payments and variable lease payments (that depend on an index or a rate, initially measured using the minimum index or rate at inception date). Payments include any lease incentives and any penalty payments for terminating the lease, if the lease term reflects the lessee exercising that option. The lease liability is subsequently remeasured (with a corresponding adjustment to the related right-of-use asset) when there is a change in future lease payments due to a) a renegotiation or market rent review, b) a change of an index or rate, or c) a reassessment of the lease term.

Lease modifications

Where there are significant changes in the scope of the lease, then the arrangement is reassessed to determine whether a lease modification has occurred and, if there is such a modification, what form it takes. This may result in a modification of the original lease or, alternatively, recognition of a separate new lease.

Subleases

At times entities of the Group will sublet certain of their properties when their underlying business requirements change. Under IFRS 16, the Group assesses the classification of these subleases with reference to the right-of-use asset, not the underlying asset.

When the Group acts as an intermediate lessor, it accounts for its interests in the head lease and the sublease separately. At lease commencement, a determination is made whether the lease is a finance lease or an operating lease. To classify each lease, the Group makes an overall assessment of whether the lease transfers to the lessee substantially all of the risks and rewards of ownership in relation to the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. The Group recognises lessor payments under operating leases as income on a straight-line basis over the lease term. The Group accounts for finance leases as finance lease receivables, using the effective interest rate method. It is typically the case that subleases into which the Group enters are determined to be finance leases in nature.

Short-term leases and leases of low-value assets

The Group applies the short-term lease recognition exemption to those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option. It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value (defined by the Group as being below £3,000). Lease payments on short-term leases and leases of low-value assets are recognised as an expense on a straight-line basis over the lease term.

Estimates relating to leases

The Group has made estimates in adopting IFRS 16, additions subsequent to adoption, along with the ongoing recognition of amendments and modifications, which are considered to be: determining the interest rate used for discounting of future cash flows, and the lease term.

Analysis

Set out below are the carrying amounts of right-of-use assets and lease liabilities recognised, and the movements during the year:

	Land & Buildings	Computer equipment	Motor vehicles	Total
Right-of-use assets	£000	£000	£000	£000
At 1 January 2020	45,839	607	96	46,542
Additions	1,097	426	51	1,574
Modifications	640	-	-	640
Sublease	(259)	-	-	(259)
Disposals	(30)	-	-	(30)
Depreciation	(8,705)	(328)	(71)	(9,104)
Impairment	(2,651)	-	-	(2,651)
Subsidiary disposals	(2,661)	-	-	(2,661)
Foreign exchange	(62)	11	6	(45)
At 1 January 2021	33,208	716	82	34,006
Additions	16,802	24	60	16,886
Modifications	1,048	9	34	1,091
Disposals	(394)	(4)	-	(398)
Depreciation	(6,563)	(309)	(87)	(6,959)
Foreign exchange	(209)	(14)	(6)	(229)
At 31 December 2021	43,892	422	83	44,397

	Land & Buildings	Computer equipment	Motor vehicles	Total
Lease liabilities	£000	£000	£000	£000
At 1 January 2020	54,014	659	97	54,770
Additions	1,097	426	51	1,574
Modifications	640	-	-	640
Covid modifications	(600)	(59)	-	(659)
Disposals	(30)	-	-	(30)
Accretion of interest	2,428	38	5	2,471
Payments	(9,328)	(289)	(78)	(9,695)
Subsidiary Disposals	(2,810)	-	-	(2,810)
Dilapidations	211	-	-	211
Foreign exchange	(49)	(8)	6	(51)
At 1 January 2021	45,573	767	81	46,421
Additions	16,789	24	50	16,863
Modifications	823	9	34	866
Disposals	(425)	(4)	0	(429)
Accretion of interest	2,766	31	3	2,800
Payments	(8,557)	(358)	(95)	(9,010)
Reclassification*	(211)	-	-	(211)
Foreign exchange	(426)	(24)	(5)	(455)
At 31 December 2021	56,332	445	68	56,845

*This relates to lease dilapidations which have been reclassified to Provisions in 2021, refer to Note 22.

The additions in 2021 predominately relate to the new offices in Sydney, Australia, and New York, Americas.

Of lease payments made in the year of £9,010k (2020: £9,695k), £6,210k (2020: £7,224k) related to payment of principal on the corresponding lease liabilities and the balance to payment of interest £2,800k (2020: £2,471k) due on the lease liabilities.

Lease liabilities	Land & Buildings	Computer equipment	Motor vehicles	Total
	£000	£000	£000	£000
Amounts due within one year	6,624	283	43	6,950
Amounts due after one year	49,708	162	25	49,895
At 31 December 2021	56,332	445	68	56,845


Amounts due within one year	5,859	335	56	6,250
Amounts due after one year	39,714	432	25	40,171
At 31 December 2020	45,573	767	81	46,421

Income statement charge	2021 £000	2020 £000
Depreciation of right-of-use assets	(6,959)	(9,104)
Short-term lease expense	(300)	(337)
Low-value lease expense	(263)	(220)
Short-term sublease income	94	94
Right-of-use asset impairment	-	(2,651)
Charge to operating profit	(7,428)	(12,218)
Sublease finance income	26	71
Lease liability interest expense	(2,800)	(2,471)
Lease charge to profit before tax	(10,202)	(14,618)

The Group does not face a significant liquidity risk with regard to its lease liabilities and manages them in line with its approach to other month-to-month liquidity matters, as described in Note 30.

The cash payment maturity of the lease liabilities held at 31 December 2021, net of sublease receipts, is as follows:

Future cash payments	2021 £000	2020 £000
Period ending 31 December:
2022	9,280	8,974
2023	8,074	8,223
2024	6,730	5,448
2025	6,689	5,062
2026	5,922	4,199
Later years	35,943	26,546
Gross future liability before discounting	72,638	58,452

Of the future lease payments post-2026, £24.9m relates to a single office lease which expires in 2034. This lease agreement was entered into in December 2019.

18. Other non-current assets

Policy

Loans to employees

Represent financial assets at amortised cost and subsequently measured using the effective interest rate method.

Analysis

	2021	2020
At 31 December	£000	£000
Other debtors including rent deposits	1,113	1,244
Loans to employees*	98	2,250
Total other non-current assets	1,211	3,494

* During the year the Group reclassified many of its put options from equity-settled to cash-settled, creating a liability on the balance sheet, as £1,967k of loans that the Group lent local management of M&C Saatchi Agency Pty Limited in 2015 to enable them to acquire 20% of that business will be extinguished by the put option liability when the shares are put, the debt and liability were offset at the time of the put options reclassification. The remaining employee loans relate to South African £98K (2020: £283K) loans that the Group lent investors in South African companies to enable them to acquire equity in the South African Group business. The full recourse loans are repayable in full if the purchasers no longer have a beneficial interest in the shares of the South African Group or are no longer employed. The loan is unsecured and charged interest at 2% above the LIBOR. The carrying value of the loans approximately equates to fair value.

19. Financial assets at fair value through profit and loss (FVTPL)

Policy

The Group holds certain unlisted equity investments, which are classified as financial assets at FVTPL. These investments are initially recognised at their fair value. At the end of each reporting period the fair value is reassessed, with gains or losses being recognised in the income statement.

The valuations are based on several factors, including the share price from the latest funding round, recent financial performance (where available), discounting for liquidation preference shares and discounting for convertible loan notes.

Analysis

The unlisted equity investments held by the Group mainly relate to 20 (2020: 26) early-stage companies in the SaatchInvest portfolio. In addition, overseas investments are owned by:

· M&C Saatchi International Holdings B.V. which owns shareholdings in a French company, Australie SAS, and an Australian company, Sesión Tequila Holdings Pty Limited;

· M&C Saatchi Agency Pty Limited (Australia) which also owns a shareholding in Sesión Tequila Holdings Pty Limited;

· M&C Saatchi European Holdings Limited which owns a 10% shareholding in a Spanish company, M&S Saatchi Madrid SL.

With regards to the early-stage non-client investments, the most we have invested in any one company over time is £0.7m and the least is £0.1m. The Group invests in these companies for long-term return.

The activity in the year relating to our equity investments held at FVTPL is presented below:

Financial assets held at FVTPL	2021	2020
	£000	£000
At 1 January	11,410	14,851
Additions	501	713
Disposals	(209)	(736)
Revaluations	3,533	(3,315)
Foreign exchange	(52)	(103)
At 31 December	15,183	11,410

Other gains/(losses) in income statement	2021	2020
	£000	£000
Gains on disposal	-	497
Revaluations	3,533	(3,315)
Total	3,533	(2,818)

Of the 2021 additions of £501k, £420k relates to a 10% shareholding in an unlisted investment, Australie SAS, acquired as part of a share for share exchange, and the remainder relates to additions of £81k in SaatchInvest which were paid in cash. Of the 2020 additions, the £713k related to additions in SaatchInvest and was paid in cash. Refer to Note 30 and the significant estimate in relation to financial instruments.

In 2021, the £209k disposal was of a company in the SaatchInvest portfolio and it resulted in neither a gain nor loss on disposal. The 2020 disposals of £736k both related to companies in the SaatchInvest portfolio and resulted in a gain on disposal of £497k.

Of the 2021 revaluations, £3,758k relates to the unlisted investments held by SaatchInvest Limited (2020 - downward revaluation of £2,477k), which is partially offset by a reduction relating to the shareholding held by our Australian business and M&C Saatchi International Holdings B.V. in Sesión Tequila Holdings Pty Limited.

The Group also holds 10% shareholdings in M&C Saatchi Madrid SL, Send Me A Sample Limited and 59A Limited. All of these investments are valued at nil.

20. Trade and other receivables

Policy

Trade receivables

Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. These financial assets give rise to cash flows that are "solely payments of principal and interest" on the principal amount outstanding. They are generally due for settlement within 30 - 90 days and therefore are all classified as current. Trade receivables are recognised initially at the amount of consideration that is unconditional. The Group holds trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method.

Impairment - Expected credit losses

The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance ("ECL") for all trade receivables and contract assets. To calculate the lifetime ECL the Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and economic environments in which the Group operates.

Analysis

	2021	2020
	£000	£000
Trade receivables	86,302	58,534
Loss allowance	(877)	(677)
Net trade receivables	85,425	57,857
Prepayments	2,664	3,504
Amounts due from associates	123	837
VAT and sales tax recoverable	52	304
Other receivables*	44,477	26,760
Total trade and other receivables	132,741	89,262

* Other receivables comprises accrued income of £13.9m (31 December 2020: £7.7m), which is considered to constitute trade receivables as defined in IFRS 15 on the basis its collectability is subject only to the passage of time, as well as contract assets of £2.4m (31 December 2020: £1.4m) and other amounts receivable of £28.2m (31 December 2020: £17.7m).

Set out below is the movement in the loss allowance (which includes provision for expected credit losses) of trade receivables and contract assets.


	2021	2020
	£000	£000
At 1 January	(677)	(1,621)
(Increase)/release for expected losses during the year	(40)	32
Movement in forward looking provision for specific bad debts:
- Charge during the year	(375)	(555)
- Released during the year	190	756
- Utilisation of provision	25	711
At 31 December	(877)	(677)

The information about credit exposures is disclosed in Note 30.

21. Trade and other payables

Policy

Trade and other liabilities are non-interest bearing and are stated at their amortised cost subsequent to initial recognition at their fair value, which is considered to be equivalent to their carrying amount due to their short-term nature.

Analysis

	2021	2020
	£000	£000
Trade creditors	36,578	39,490
Contract liabilities	18,939	22,022
Sales taxation and social security payables	6,059	6,803
Accruals	75,466	42,267
Other payables	17,007	14,158
Total trade and other payables	154,049	124,740

Settlement of trade and other payables is in accordance with the terms of trade established with the Group's local suppliers.

22. Provisions

Policy

Provisions are recognised when the Group has a present legal or constructive obligation arising as a result of past events and where it is more likely than not an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are measured at management's best estimate of the expenditure required to settle the obligation at the balance sheet date.

Provisions charged to the income statement in 2020 were higher than in 2021, because of the continued costs of the Group restructuring programme initiated in 2019, the principal cost being staff redundancy. There were also additional provisions in 2020 relating to overseas sales and payroll tax provisions in India and Kenya, along with an income protection provision in the UK, which increased in value in 2021.

Analysis

The year-end provision of £1.2m (2020: £0.7m) comprises of costs relating to the tax liabilities in India and Kenya, and income protection schemes of £0.6m (2020: £0.4m), along with £0.3m (2020: £0.3m) relating to costs for the accounting misstatements (which required the Group's result for the year ended 31 December 2018 to be restated) and £0.3m relation to property dilapidations.


	2021	2020
	£000	£000
At 1 January	(666)	(2,989)
Reclassification*	(346)	-
Charged to the income statement:
- Restructuring costs	-	(2,688)
- Costs associated with accounting misstatements	-	(260)
- Overseas sales taxation and social security liabilities	(16)	(220)
- Income protection provision	(165)	(145)
Utilised in the year
- Restructuring costs	-	5,376
- Costs associated with accounting misstatements	-	260
At 31 December	(1,193)	(666)

*This relates to lease dilapidations which were included within the lease liability at 31 December 2020 (£0.2m), refer to Note 17, plus £0.1m included within other creditors at 31 December 2020.

At the end of 2021 all amounts recognised as provisions were expected to be utilised within 12 months and are held as current liabilities. The Directors do not anticipate that any of the above will have a material adverse effect on the Group's financial position or on the results of its operations.

23. Borrowings

Policy

Loans and overdrafts are recognised initially at fair value, less attributable transaction costs. Subsequently, loans and overdrafts are recorded at amortised cost with interest charged to the income statement under the Effective Interest Rate (EIR) method.

Interest payable is included within accruals as a current liability.

Analysis

Amounts due within one year

	2021	2020
At 31 December	£000	£000
Overdrafts*	(14,440)	(13,920)
Local bank loans	(297)	(158)
Secured bank loans	-	(27,005)
	(14,737)	(41,083)

* These overdrafts are legally offsetable. However, they have not been netted off in accordance with IAS32.42 as we do not intend to settle on a net basis.

Amounts due after one year


	2021	2020
At 31 December	£000	£000
Local bank loans*	(293)	(2,199)
Secured bank loans	(19,528)	-
	(19,821)	(2,199)

* The local bank loans in 2020 included the US Paycheck Protection Program (PPP) loans, which were forgiven in 2021.

Secured bank loans

On 31 May 2021, the Company entered into a revolving multicurrency credit facility agreement with National Westminster Bank Plc and Barclays Bank PLC for up to 47.0m (the "Facility"). The Facility includes a £2.5m net overdraft and the ability to draw up to £3.0m as a bonding facility, as required. The Facility is provided on a three-year term (with two optional one-year extensions). The Facility replaced the Company's previous 33.0m credit facility and 5.0m overdraft which were due to terminate on 30 June 2021, and previously included as short-term.

The Facility includes two financial covenants, which if either were to be breached would result in a default of the Facility:

1. Interest Cover - EBIT for the previous 12 months must exceed 4 times the net finance charge (external debt interest, excluding IFRS 16 finance lease interest payments) for the previous 12 months (increases to 5 times from 30 June 2022).

2. Leverage - Total Indebtedness at the period end must not exceed 3.5 times EBITDA for the previous 12 months (adjusted for acquisitions and disposals). This reduces to 3.0 times from 31 March 2022, 2.5 times from 30 June 2022, and 2.0 times from 31 March 2023.

At 31 December 2021, the Group had up to £47.0m (2020: £33.0m) of funds available under the Facility.

	2021	2020
At 31 December	£000	£000
Gross secured bank loans	(20,000)	(27,271)
Capitalised finance costs	472	266
Total secured bank loans	(19,528)	(27,005)

Total secured bank loans are due as follows:


	2021	2020
At 31 December	£000	£000
In one year or less, or on demand	-	(27,005)
In more than one year but not more than five years	(19,528)	-
	(19,528)	(27,005)

Total bank loans and borrowings used to calculate net cash are as follows, excluding IFRS 16 leases in accordance with our bank covenants:

	Gross secured bank loans £000	Local bank loans £000	Total bank loans £000
At 1 January 2020	(35,677)	(502)	(36,179)
Cash movements	8,900	(3,472)	5,428
Disposals	-	1,462	1,462
Non-cash movements
- Foreign exchange	-	-	-
- Lease	(494)	155	(339)
At 31 December 2020	(27,271)	(2,357)	(29,628)
Cash movements	7,608	-	7,608
Disposals	-	-	-
Acquisitions - business combinations	-	(468)	(468)
Non-cash movements
- Leases	-	-	-
- Foreign exchange	(337)	35	(302)
- Other*	-	2,200	2,200
At 31 December 2021	(20,000)	(590)	(20,590)

* Other includes the forgiveness of the US Paycheck Protection Program (PPP) loans.

24. Other non-current liabilities

	2021	2020
At 31 December	£000	£000
Employment benefit provisions*	561	1,416
Long-term bonus provision	1,014	1,765
Other**	974	1,592
	2,549	4,773

* This relates to long-term service leave in some locations, deferred contributions to pension schemes, employers' tax on put option and long-term bonus plans.

** The main item includes a Termination Indemnity Plan in Italy of £547k (2020: £576k), this liability is for the 13^th month salary accrual for all Italian employees to be paid to them when they leave the company.

25. Equity related liabilities

This disclosure note summarises information relating to all share schemes disclosed in Notes 13, 26 and 27.

In the case of deferred consideration (Note 13), IFRS 9 minority shareholder put option liabilities (Note 26), and IFRS 2 put option schemes (Note 27), the Group has a choice to pay in cash or equity. As part of approving the Group's interim statement, issued on 21 September 2021, the Board made the decision and communicated externally that put options will, from now on, be settled in cash, where we have cash resources to do so. In the case of LTIP and restricted share awards, it is the Board's intention that an ESOP trust is set up to acquire the shares and fulfil these schemes using the acquired equity.

In the table below, we present the potential cash payments, based on the 2021 year-end share price of 168.5p and the estimated future business performance for each business unit. The payments are classified based on the year at which the put option schemes first become exercisable. The forecasts are based on the Group's five-year plans, developed as part of our budget cycle, and assume all TSR targets are fulfilled, and that equity is bought by the LTIP in the year of vesting at 168.5p. The table also shows the amount of these potential cash payments that has been recognised as a liability at 31 December 2021, with the percentage of the related employment services not yet delivered to the Group at that date.

Total future expected liabilities at 31 December 2021


	Paid so far	Potentially payable							Services not yet delivered at 31 Dec 2021 %*	Balance sheet liability at 31 Dec 2021 £000
At168.5p	In 2022 £000	2022 £000	2023 £000	2024 £000	2025 £000	2026 £000	2027 & 2028 £000	Total £000	Services not yet delivered at 31 Dec 2021 %*	Balance sheet liability at 31 Dec 2021 £000
IFRS 9 put option schemes	-	3,238	-	1,000	-	-	1,000	5,238	-	5,238
IFRS 2 put option schemes	1,135	16,181	6,815	2,131	122	1,985	2,553	30,922	14%	27,122
LTIP	-	-	-	3,247	-	-	-	3,247	92%	-**
Restricted share awards	-	-	918	428	-	-	-	1,346	86%	-**
Deferred and contingent consideration	-	984	-	-	-	-	-	984	-	984
	1,135	20,403	7,733	6,806	122	1,985	3,553	41,737	-	31,344

* Share-based payments (Note 27) charge liability to income statement over period of vesting i.e. as the employee fulfils their time obligation to earn the put option.
** LTIP & restricted shares are accounted for as equity-settled, and thus do not create a balance sheet liability.

If the Company in the future decides to settle in equity, then the amount of equity that will be provided is equal to the liability divided by the share price.

Effect of a change in share price

The same data from the table above is presented in the table below, but in this analysis the potential payments are based on a range of different potential future share prices.

	Paid so	Potentially payable
Future Share Price of the Company	far in 2022 £000	2022 £000	2023 £000	2024 £000	2025 £000	2026 £000	2027 & 2028 £000	Total £000
At 150p	1,135	18,879	6,810	6,107	87	1,798	3,163	37,979
At 168.5p	1,135	20,403	7,733	6,806	122	1,985	3,553	41,737
At 190p	1,135	22,091	8,722	7,619	162	2,203	4,007	45,939
At 210p	1,135	23,608	9,589	8,373	200	2,405	4,428	49,738
At 230p	1,135	25,126	10,457	9,130	238	2,607	4,850	53,543
At 250p	1,135	26,643	11,324	9,885	275	2,809	5,272	57,343
At 300p	1,135	30,436	13,492	11,775	370	3,315	6,326	66,849

26. Minority shareholder put option liabilities (IFRS 9)

Policy

See below but also the Basis of Preparation Note.

Some of our subsidiaries' local management have a put option. The put options give these employees a right to exchange their minority holdings in the subsidiary into shares in the Company's or cash (at the Company's election).

These IFRS 9 schemes should be considered as rewards for future business performance and are not conditional on the holder being an employee of the business.

These instruments are recognised in full at the present value of the redemption amount of the underlying award on the date of inception, with both a liability on the balance sheet and a corresponding amount within the minority interest put option reserve being recognised. At each period end, the present value of the redemption amount of the put option liability is calculated in accordance with the put option agreement, to determine a best estimate of the future value of the expected award. Resultant movements in the present value of the redemption amount of these instruments are charged to the income statement within finance income/expense.

The put option liability will vary with both the Company's share price and the subsidiary's financial performance. Current liabilities are determined by the Company's year-end share price and the historical results of the companies in which the minority interest holders can exercise their put options in 2022. Non-current liabilities are determined by the Company's year-end share price and the projected results of the companies in which the minority interest holders can exercise their put options after 2022.

Upon exercise of an award by a holder, the liability is extinguished and the associated minority interest put option reserve is transferred to the non-controlling interest acquired reserve.

Analysis

IFRS 9 put options exercisable from the year ended 31 December:

Subsidiary	Year	% of subsidiaries' shares exercisable

M&C Saatchi (Switzerland) SA	Vested	21.0
M&C Saatchi Merlin Limited	Vested	15.0
Resolution Design Pty Limited	Vested	15.0
Bohemia Group Pty Limited	Vested	25.9
This Film Studio Pty Limited	2022	30.0
Santa Clara Participaçes Ltda*	2024	25.0
Santa Clara Participaçes Ltda*	2027	24.9

* Entity acquired with existing put options in year.

It is the Company's option to fulfil these options in equity or cash and it is the Company's present intention to fulfil the options in cash (if available). However, if we fulfil in equity, the estimated number of Company shares that will be issued to fulfil these options at 168.50p is 3,108,605 shares (2020: 83.6p is 3,327,751 shares).


	2021	2020
Liability at 31 December	£000	£000
Amounts falling due within one year	(3,238)	(978)
Amounts falling due after one year	(2,000)	(1,804)
	(5,238)	(2,782)


	2021	2020
Movement in liability during the year	£000	£000
At 1 January	(2,782)	(7,101)
Exchange difference	16	(1)
Exercises	424	4,440
Acquisitions	(2,000)	-
Income statement charge due to:
- Change in profit estimates	(399)	1,671
- Change in share price of the Company	(497)	(1,732)
- Amortisation of discount	-	(59)
Total income statement charge (Note 7)	(896)	(120)
At 31 December	(5,238)	(2,782)

Put options exercised in year	2021 £000	2020 £000
Paid in equity	424	4,236
Paid in cash	-	204
Exchange difference	-	-
Total	424	4,440

27. Share-based payments (IFRS 2)

Policy

See below but also Basis of Preparation note.

Local management in some of the Group's subsidiaries' (who are minority interests of the Group) have the right to a put option over the equity they hold in the relevant subsidiary. Where this put option is dependent upon the holders' continued employment by the Group, or where the holder received the option as a result of employment with the Group, these options are accounted for under IFRS 2 as equity-settled share-based payments to employees or as cash-settled share-based payment schemes. These are redeemable, at the choice of the Group, either in shares of the Company or by means of a cash payment to the holder. Such schemes should be considered as rewards for future business performance, which are conditional on the holder being an employee of the business.

Equity-settled share-based payment schemes

Where an award is intended to be settled in equity, then the fair value of the award is calculated at the grant date of each scheme based on the present Company's share price and its relevant multiple. The fair value of the awards is calculated by means of a Monte Carlo model with inputs made in terms of the Company's share price at date of grant, risk free rate, historic volatility of share price, dividend yield and time to vest. The Group estimates the shares that will ultimately vest, using assumptions over conditions, such as profitability of the subsidiary, to which the awards relate. This value is recognised as an expense in the income statement over the shorter of the vesting period or the period of required employment on a straight-line basis, with a corresponding increase in reserves.

In the event an employee's contract includes a business continuity clause on departure, that element of the award at issue is treated as vested and charged to the income statement at the grant date valuation, and no credit to the income statement is taken for it in the future. All the remaining award is revalued annually for the non-market condition (profitability of the subsidiary) and allocated to the income statement on a straight-line basis.

Upon exercise of the awards, the nominal value of the shares issued is credited to share capital with the balance to retained income.

Cash-settled share-based payment schemes

When an award is intended to be settled in cash, then a liability is recognised at inception of the award, based on the present Company's share price and its relevant multiple. This value is recognised as an expense in the income statement from the date of award to the date it is exercised, on a straight-line basis, with a corresponding increase in liabilities.

Conversion from equity-settled to cash-settled

In the past, the Group has settled the options using equity, where there was a choice to cash-settle or equity-settle. As part of approving the Group's interim statement, issued 21 September 2021, the Board made the decision that put options will from now on be settled in cash, where we have cash resources to do so. Up to 21 September 2021 we have accounted for these put option as equity-settled, from 21 September 2021 we have accounted for these put options as cash-settled.

The transition from equity-settled to cash-settled requires a fair value assessment on the day of the modification and a movement between equity and liabilities.

Where, for an unvested scheme, the Company's share price multiple (the market condition) at the inception of the option was higher than the current Company's share price multiple, then the difference is charged to the income statement, from 21 September 2021 onwards.

The following table sets out a comparison between equity settlement and cash settlement of IFRS 2 put options:

	Equity-Settled IFRS 2 scheme	Cash-Settled IFRS 2 scheme
Cost of the put option	Booked to staff costs.	Booked to staff costs.
Liability of the put option	Booked to equity (no impact on net assets).	Booked to liabilities (reduces net assets).
Recognition of the cost	Spread evenly between the date the put option is issued and the date the put option vests. No further costs after vesting date.	Spread evenly between the date the put option is issued and the date the put option vests. Further valuation adjustments are made to the income statement until the option is exercised.
Revaluation adjustments	Adjusted by changes in the profit of the subsidiary only.	Adjusted by changes in the profit of the subsidiary and the relevant share price multiple.
Exercise of put option	New Company shares issued to put option holders.	Cash issued to put option holders.

Summary of schemes

The Group has the following share-based payment schemes, and in the year these have been the major changes to them:

· Put options - from 21 September 2021 we have accounted for these put options as cash-settled.

· South African equity purchased with non-recourse loans - some of our South African subsidiaries have sold equity to employees with non-recourse loans that are repaid out of dividends and from the proceeds of selling the equity to other employees, with the entity that has issued the equity acting as an intermediary. The equity does not have any put rights, so there is no obligation to acquire the equity, however the South African Rand 17,706k debt lent to acquire the liability (netted against the fair value of the award) is at risk.

· Cash awards - these are long-term cash schemes that were historically treated as a share-based scheme. At the end of 2021 one of the put option award holders resigned, causing a one-off reversal in the charge.

· Executive LTIP - on 28 September 2021 and 21 December 2021, the Group issued equity-settled LTIPs to senior executive managers. This scheme grants a future award of the Group's shares, dependent on the achievement of certain future performance conditions:

o Group's total shareholder return versus the total shareholder return of the FTSE Small Cap Index over the 3 years from December 2020 to December 2023 (70% of the award);

o Group's Full Year Headline profit before tax performance in 2023 versus target (30% of the award).

· Restricted share awards - the two cash awards made to the Chief Financial Officer on his recruitment were converted to restricted share awards on 28 September 2021, based on the 45-day average share price to 28 May 2021 of 137.7p. No further shares will be issued under the plan.

Analysis

For the Executive LTIP and restricted share awards, it is intended that an ESOP trust is set up to acquire the shares to fulfil these schemes in equity; thus the schemes are accounted for as equity-settled. The inputs to Monte Carlo models used to calculate the fair value of these share awards granted during the year are as follows:

	2021 LTIP	2021 LTIP	2021 Restricted share awards	2021 Restricted share awards
Issue date	21/12/2021	28/09/2021	28/09/2021	28/09/2021
Vesting date	21/12/2024	28/09/2024	15/05/2023	15/05/2024
Share price at grant	£1.63	£1.56	£1.56	£1.56
Expected volatility	80%	81%	88%	85%
Risk free rate	0.67%	0.51%	0.40%	0.51%
Dividend yield	0%	0%	0%	0%
Fair value of award per share	£1.62	£1.55	£1.56	£1.55

TSR element against FTSE Small Cap index:
Expected volatility	147%	158%
Fair value of award per share	£0.72	£0.67

The weighted average share price of options exercised during the period was £1.27 (2020: £0.33).

Income statement charge

	2021 Equity £000	2021 Cash £000	2021 Total £000	2020 Equity £000	2020 Cash £000	2020 Total £000
Put options to 21 September 2021 - equity-settled	1,283	-	1,283	3,275	-	3,275
Put options from 22 September 2021
- imputed equity charge due to transition	779	-	779	-	-	-
- charge/(credit) since transition (see below)	-	(797)	(797)	-	-	-
South Africa non-recourse loan scheme	-	(40)	(40)	-	25	25
Total not affecting Headline results (Note 1)	2,062	(837)	1,225	3,275	25	3,300
Release of cash award due to leaver (Note 1)	-	(2,598)	(2,598)	-	-	-
Executive LTIP	135	-	135	-	-	-
Restricted share awards	38	-	38	-	-	-
Cash awards	-	1,370	1,370	-	922	922
Total	2,235	(2,065)	170	3,275	947	4,222

Total put option liability

	2021 Total £000	2020 Total £000
Put options liability (IFRS 2) (Note 27)	(27,122)	-
Put options liability (IFRS 9) (Note 26)	(5,238)	(2,782)
Total put options (Note 25)	(32,360)	(2,782)

Current - minority shareholder put option liabilities	(20,788)	(978)
Non-current - minority shareholder put option liabilities	(11,572)	(1,804)
Total	(32,360)	(2,782)

Cash-settled liability

The movement in the liability by scheme is detailed below:


	Put options £000	South Africa non-recourse loan scheme £000	Cash awards £000	Total £000
At 1 January 2020	-	(571)	-	(571)
Equity-settled transferred to cash-based and cash-settled awards	-	-	(1,121)	(1,121)
Charged to income statement	-	(25)	(922)	(947)
Foreign exchange	-	51	-	51
At 31 December 2020	-	(545)	(2,043)	(2,588)
Equity-settled options transferred to cash-settled awards	(32,555)	-	-	(32,555)
Offsetable debt	1,691	-	-	1,691

Acquisitions (Note 12)	(1,848)	-	-	(1,848)

Charged to income statement
- Straight-line recognition	(692)	-	(1,043)	(1,735)
- Change in subsidiary profit estimates	(3,382)	-	(327)	(3,709)
- Change in Company multiple	4,871	40	-	4,911
Total income statement charge	797	40	(1,370)	(533)
Reversal of charge caused by employee resignation	-	-	2,598	2,598
Settled	4,859	-	489	5,348
Foreign exchange	(66)	37	-	(29)
At 31 December 2021	(27,122)	(468)	(326)	(27,916)

Put Options

	Vesting	% Entity subject to the put option
Clear Deutschland GmbH	2024	20.00%
Clear Deutschland GmbH	2026	20.00%
Clear Ideas (Singapore) Limited	2023	10.00%
Clear Ideas Ltd - B1 shares***	2022	5.00%
Clear Ideas Ltd - B2 shares***	2022	10.00%
Clear LA LLC	2022	12.00%
Cometis SARL	Vested	49.00%
FCINQ SAS	Vested	11.62%
Greenhouse Australia Pty Limited	2022	11.00%
Greenhouse Australia Pty Limited	2023	1.80%
Greenhouse Australia Pty Limited	2024	7.20%
Human Digital Limited***	Vested	11.50%
Human Digital Limited***	2022	11.50%
Human Digital Limited***	2023	17.00%
Levergy Marketing Agency (Pty) Limited***	Vested	11.90%
LIDA NY LLP (MCD)	Vested	24.50%
M&C Saatchi (Hong Kong) Limited**	Vested	20.00%
M&C Saatchi (UK) Limited	2023	12.00%
M&C Saatchi AB	Vested	30.00%
M&C Saatchi Advertising GmbH	Vested	8.20%
M&C Saatchi Advertising GmbH	2023	4.10%
M&C Saatchi Advertising GmbH	2024	10.00%
M&C Saatchi Agency Pty Limited	Vested	10.00%
M&C Saatchi Digital GmbH	2022	5.00%
M&C Saatchi Holdings Asia Pte Limited (Indonesia)	2024	27.40%
M&C Saatchi Holdings Asia Pte Limited (Indonesia)	2026	22.50%
M&C Saatchi Merlin Limited	2023	15.00%
M&C Saatchi Middle East Holdings Limited	Vested	20.00%
M&C Saatchi Share Inc	Vested	20.00%
M&C Saatchi Social Limited***	Vested	13.50%
M&C Saatchi Social Limited***	2023	13.50%
M&C Saatchi Spencer Hong Kong Limited	2024	30.00%
M&C Saatchi Sport & Entertainment Limited	2022	25.00%
M&C Saatchi Sport & Entertainment NY LLP	Vested	13.00%
M&C Saatchi Sport & Entertainment NY LLP	2024	12.50%
M&C Saatchi Sport & Entertainment NY LLP	2025	5.00%
M&C Saatchi Sport & Entertainment Pty Limited	Vested	10.00%
M&C Saatchi Sports & Entertainment GmbH	Vested	14.00%
M&C Saatchi Talk Limited	Vested	39.00%
M&C Saatchi Talk Limited	2023	10.00%
M&C Saatchi World Services LLP***	Vested	4.00%
M&C Saatchi World Services LLP***	Vested	6.00%
M&C Saatchi World Services LLP***	2022	6.00%
M&C Saatchi, S.A. DE C.V.	2023	40.00%
Majority LLC	2024	8.00%
RE Team Pty Limited	Vested	13.00%
RE Worldwide UK Limited***	2022	49.90%
Scarecrow M&C Saatchi Limited***	2020	24.50%
Scarecrow M&C Saatchi Limited***	2022	24.50%
The Source (W1) LLP	Vested	10.00%
The Source Insight Australia Pty Limited	2022	14.00%
The Source Insight Australia Pty Limited	2025	21.00%
Thread Innovation Limited*	2027	10.00%
Thread Innovation Limited*	2028	10.00%

* New scheme in year.

** Entity acquired with existing put options in year.

*** Shown as a liability in M&C Saatchi plc Company accounts.

Shares issuable

At the start of the year all our equity-settled share-based payment schemes are put options (referred to as conditional shares in last year's Annual Report and Accounts). The shareholder holds equity in a subsidiary company and has a right, after a period of time, to convert it to shares in the Company. Changes to the Company's share price, local subsidiary profitability or Group profitability affect the number of shares we are committed to pay in exchange for these put options. During the year we also issued Executive LTIPs and restricted share awards.

The table below shows the number of shares that we will issue at the share price at 31 December 2021 of 168.5p (2020: 83.6p) assuming:

1) The put option was exercised at the first available opportunity, even if that gives no reward.

2) We do not exercise our right under business continuity clauses to block the exercise (and assuming no revenue declines in the year after the put).

3) All LTIP and restricted awards are held to their vesting date and fully vest.


Number of Shares	Put options 000	LTIP 000	Restricted shares 000	Total 000
At 1 January 2021	22,511	-	-	22,511
Exercised - Shares issued (£1.27)	(327)	-	-	(327)
Reclassification to cash-settled scheme	(22,184)	-	-	(22,184)
Granted or amended	-	1,927	799	2,726
At 31 December 2021	-	1,927	799	2,726

Shares issuable used in these accounts


	Note	2021 Number of shares 000	2021 Share price used	2020 Number of shares 000	2020 Share price used
Per EPS calculation	1	828	141.6p	11,963	65.1p
Share-based payments	27	2,726	155p-162p	22,511	83.6p

The share-based payments (Note 27) calculates the number of shares that could be issued at the first vesting date after the year. The EPS calculation (Note 1) uses the average share price for the year, calculating the number of shares to be issued using its formula value had it been possible to exercise on the year-end date, and takes a deduction for any remaining uncharged share option charge at the start of the year and the share of profits the is allocatable to the equity during the year. Where a scheme has been issued for part of the year (and is not converted from an existing cash-based scheme) the shares are reduced by the proportion of the year that they are in issue. The EPS calculation is thus attempting to show the dilutive effect rather than the likely shares we will issue and is income statement focused rather than the true future position.

28. Issued share capital (allotted, called up and fully paid)

Policy

Ordinary shares are classified as equity. Incremental costs attributable to the issuance of new shares are shown in equity as a deduction from proceeds, net of tax.

Where the Group re-acquires its own equity instruments (treasury shares), the consideration paid is deducted from equity attributable to the owners of the Group and recognised within the treasury reserve.

Analysis


		1p Ordinary shares
	Number of shares	£000
At 31 December 2019	93,596,760	936

Exercise of M&C Saatchi Mobile share options	13,671,602	137
Final payment for acquisition of 33% of Shepardson Stern & Kaminsky LLP	8,295,033	82
Acquisition of 22% M&C Saatchi Social Limited	353,195	4

At 31 December 2020	115,916,590	1,159

Acquisition of 40% of M&C Saatchi (Hong Kong) Limited	3,027,860	30
Acquisition of 25.1% of Santa Clara Participaçes Ltda	2,084,825	21
Acquisition of 19.9% of Little Stories SAS	475,730	5
Acquisition of 5% M&C Saatchi Mobile Asia Pacific PTE. Limited	327,239	3
Shares issued for cash	620,180	6
Payment of deferred consideration	291,011	3

At 31 December 2021	122,743,435	1,227

The Company holds 485,970 (2020: 485,970) of the above shares in the Company in treasury.

29. Fair value measurement

Policy

See also basis of preparation.

Some of the Group's financial assets and liabilities, in addition to certain non-financial assets and liabilities, are held at fair value. The fair value of an asset or liability is the price that would be received from selling the asset or paid to transfer a liability in an orderly transaction between market participants at the balance sheet date.

Both financial and non-financial assets and liabilities measured at fair value in the Balance Sheet are grouped into three levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement, as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and

Level 3: unobservable inputs for the asset or liability.

The Group holds both assets and liabilities which are measured at fair value on a recurring basis and those which are measured at fair value on a non-recurring basis. Items measured at fair value on a non-recurring basis typically relate to non-financial assets arising as a result of business combinations as accounted for under the acquisition method. In this regard, during the year the Group has recognised additions to intangible assets (brand names and customer lists) totalling £3,819k (2020: £Nil). Refer to Note 14 for full details.

In addition, the Group also calculates the fair value of certain non-financial assets when there is the need to conduct an impairment review. These calculations also fall within Level 3 of the IFRS 13 hierarchy and, where applicable, are described in Note 14.

Analysis

Assets and liabilities measured at fair value on a recurring basis.

The following table shows the levels within the hierarchy of financial assets and liabilities measured at fair value on a recurring basis at 31 December 2021 and 31 December 2020:

	Level 1	Level 2	Level 3
At 31 December 2021	£000	£000	£000
Financial assets
Equity investments at FVTPL	-	-	15,185

Financial liabilities
Contingent consideration	-	-	-

	Level 1	Level 2	Level 3
At 31 December 2020	£000	£000	£000
Financial assets
Equity investments at FVTPL	-	-	11,410

Financial liabilities
Contingent consideration	-	-	(452)

The level at which the financial asset or liability is classified is determined based on the lowest level of significant input to the fair value measurement.

The movements in the fair value of the level 3 recurring financial assets and liabilities are shown as follows:


	Equity instruments at FVTPL £000	Contingent consideration £000
At 1 January 2021	11,410	(452)
Net gain in the income statement	3,473	452
Additions	501	-
Disposal	(209)	-
Currency movements	10	-
At 31 December 2021	15,185	-

£452k of contingent consideration relating to management's put option in Scarecrow Communications Limited has been written off because current results indicate that nothing will be payable under the put option scheme.

Valuation and sensitivity to valuation

The Group's finance team performs valuations of financial items for financial reporting purposes, including level 3 fair values.

The equity instruments at FVTPL relate to unlisted equity investments as detailed in Note 19. Management bases its primary assessment of their fair values on the share price from the last funding round but also incorporates discounts depending on performance, more senior shareholdings held by other investors and the possibility of future dilution due to the presence of convertible loan notes. Fluctuations in the share price would change the fair value of the investments recognised at year-end as follows assuming a 10% uplift or downwards movement in the price:

	Increase/ (decrease) in fair value of asset 2021	Increase/ (decrease) in fair value of asset 2020
Adjusted share price	£000	£000
+10%	1,519	1,141
-10%	(1,519)	(1,141)

In addition, management considers there to be a risk that the most recent purchase prices are sensitive to a decision to sell the investments to an unwilling market. If such a market existed, then discounting the investments to reflect such risk could impact the value as shown below:

	Decrease in fair value of asset	Decrease in fair value of asset
	2021	2020
Risk adjusted sales price	£000	£000
-30% sales discount due to illiquid nature*	(4,556)	(3,423)
-12% risk discount for unwilling marketplace**	(1,276)	(958)
Value after discounts	9,353	7,029

* If these illiquid securities were to be sold then such a sale is expected to yield between a 10% and 50% discount, so sensitivity based on 30%.

** Risk that if the cash supply dries up, some of the investments with future growth prospects will run out of cash requiring a fire sale, reflected by additional risk discount of 12%.

30. Financial risk management

Principal financial instruments

The principal financial instruments held by the Group, from which financial instrument risk arises, include trade and other receivables, cash and cash equivalents, trade and other payables, loans and borrowings, put options accounted under IFRS 9 as liabilities and equity instruments representing long-term investments in non-listed entities.

The Group does not typically use derivative financial instruments to hedge its exposure to foreign exchange or interest rate risks arising from operational, financing and investment activities.

30.1 - General objective, policies and processes

The Board has overall responsibility for the determination of the Group's and Company's risk management objectives and policies. Whilst retaining ultimate responsibility for them, the Board has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group's senior management of each core business unit. The Board receives monthly reports from management through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets.

The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility of the global businesses of which it is comprised. Further details regarding these policies are set out below.

30.2 - Market risk

Market risk arises from the Group's use of interest-bearing financial instruments and foreign currency cash holdings. It is the risk that the fair value of future cash flows on its debt finance and cash investments will fluctuate because of changes in interest rates (interest rate risk), foreign exchange rates (currency risk) and other price risk such as equity price risk and share price risk. Financial instruments affected by market risk include loans and borrowings, deposits, debt, equity investments and minority interest put options.

Exposure to market risk arises in the normal course of the Group's business.

30.3 - Foreign exchange risk

Foreign exchange risk arises from transactions and recognised assets and liabilities and net investments in foreign operations. The Group's general operating policy historically has been to conduct business in the currency of the local area in which businesses of the Group are geographically located, thereby naturally hedging the consideration resulting from client work. Businesses of the Group maintain bank accounts in the currency of these transactions solely for working capital purposes. As the Group has grown there has been an increase in services rendered being exported from the UK businesses to clients who transact in non-GBP currencies. The transactional risk arising from such exports is mitigated in terms of the structuring of the billing arrangements and agreement to regular invoices being remitted and promptly paid (<30 days).

The Group is exposed to movements in foreign currency exchange rates in respect of the translation of net assets and income statements of foreign subsidiaries and equity accounted investments. The Group does not hedge the translation effect of exchange rate movements on the income statements or balance sheets of foreign subsidiaries and equity accounted investments as it regards these as long-term investments.

The estimated impact on foreign exchange gains and losses of a +/- 10% movement in the exchange rate of the Group's significant currencies is as follows:

	Increase/ (decrease) in profit before tax	Increase/ (decrease) in profit after tax	Increase/ (decrease) in profit before tax	Increase/ (decrease) in profit after tax
	2021	2021	2020	2020
Exchange rate	£000	£000	£000	£000
USD +10%	362	214	764	625
USD -10%	(330)	(195)	(695)	(568)
AUD +10%	526	349	268	172
AUD -10%	(478)	(317)	(244)	(156)

The year-end and average exchange rates to GBP for the significant currencies are as follows:

	Year End Rate		Average Rate
Currency	2021	2020	2021	2020
USD	1.35	1.37	1.35	1.29
AUD	1.86	1.77	1.87	1.87

The Group assumes that currencies will either be freely convertible, or the currency can be used in the local market to pay for goods and services, which we can sell to clients in a freely convertible currency. Within our 2021 year-end cash balances we hold £307k in Indian Rupees; £637k in Libyan Dinars; and £2,191k in South African Rands.

30.4 - Interest rate risk

The Group is exposed to interest rate risk because it has a banking facility of up to £47.0m and a net overdraft facility of up to £2.5m, both based on floating interest rates. The Group does not consider this risk to be significant.

The sensitivity analysis below has been determined based on the exposure to interest rates for financial instruments held at the balance sheet date. The analysis is prepared assuming the amount of borrowings outstanding at the balance sheet date were outstanding for the whole year. A 50-basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management's assessment of the reasonably possible changes in interest rates.

If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Group's profit for the year ended 31 December 2021 would (decrease)/increase by £(100)k/£100k (2020: £(138)k/£138k). This is principally attributable to the Group's exposure to interest rates on its floating rate loan.

30.5 - Liquidity risk

Liquidity risk arises from the Group's management of working capital and the finance charges and, when appropriate, principal repayments on its debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as and when they fall due. The Group's debt instruments carry interest at LIBOR +3.0%.

The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they fall due. To achieve this aim, the Group has a planning and budgeting process in place to determine the funds required to meet its normal operating requirements on an ongoing basis. The Group and Company ensures that there are sufficient funds to meet its short-term business requirements, taking into account its anticipated cash flows from operations, its holdings of cash and cash equivalent and proposed strategic investments.

The Board receives rolling 12-month cash flow projections on a monthly basis as well as information regarding cash balances. At the end of the financial year, these projections indicated that the Group had sufficient liquid resources to meet its obligations under all reasonably expected circumstances.

The following table sets out the contractual maturities (representing undiscounted contractual cash flows) of financial liabilities:

Group


	Up to 3 months	3 to 12 months	1 to 2 years	2 to 5 years	over 5 years
	£000	£000	£000	£000	£000
At 31 December 2021
Trade and other payables*	(96,561)	(25,359)	(5,285)	(1,846)	(1)
Lease liabilities	(2,320)	(6,960)	(8,074)	(19,342)	(35,943)
Loans and borrowings	-	-	-	(19,528)	-
Overdrafts	(14,440)	-	-	-	-
IFRS 9 put options	-	(3,238)	-	(1,000)	-
Deferred and contingent consideration	-	(984)	-	-	-
Total	(113,321)	(36,541)	(13,359)	(41,716)	(35,944)

* Excludes taxes as these are not considered financial instruments and contract liabilities as these are not financial liabilities


	Up to 3 months	3 to 12 months	1 to 2 years	2 to 5 years	over 5 years
	£000	£000	£000	£000	£000
At 31 December 2020
Trade and other payables	(65,915)	(30,000)	-	-	-
Lease liabilities	(2,244)	(6,731)	(8,223)	(14,709)	(26,546)
Loans and borrowings	-	(27,163)	(2,199)	-	-
Overdrafts	(13,920)	-	-	-	-
IFRS 9 put options	-	(978)	(1,804)	-	-
Deferred and contingent consideration	-	(1,679)	-	-	-
Total	(82,079)	(66,551)	(12,226)	(14,709)	(26,546)

Company

	Up to 3 months	3 to 12 months	1 to 2 years	2 to 5 years	over 5 years
	£000	£000	£000	£000	£000
At 31 December 2021
Trade and other payables	(3,551)	(361)	(292)	(161)	-
Loans and borrowings	-	-	-	(19,528)	-
Total	(3,551)	(361)	(292)	(19,689)	-

	Up to 3 months	3 to 12 months	1 to 2 years	2 to 5 years	over 5 years
	£000	£000	£000	£000	£000
At 31 December 2020
Trade and other payables	(2,887)	(45,355)	-	-	-
Loans and borrowings	-	(21,600)	-	-	-
Total	(2,887)	(66,955)	-	-	-

The Group breached no banking covenants during the year.

30.6 - Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations.

The Group monitors credit risk at both a local and Group level. Credit terms are set and monitored at a local level according to local business practices and commercial trading conditions. The age of debt, and the levels of accrued and deferred income are reported regularly. Age profiling is monitored, both at local customer level and at consolidated entity level. There is only local exposure to debt from our significant global clients. The Group continues to review its debt exposure to foreign currency movements and will review efficient strategies to mitigate risk as the Group's overseas debt increases.

Management determines concentrations of credit risk by reviewing amounts due from customers monthly. The only significant concentrations of credit risk which are accepted are with multinational blue chip (or their equivalent) organisations where credit risk is not considered an issue, the risk of default is considered low.

Impairment

The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables.

The expected loss rates for each business are based on the payment profiles of sales at least over a period of 24 months before 31 December 2021 or 31 December 2020 respectively and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables.

The expected credit loss allowance at 31 December 2021 and 31 December 2020 was determined as follows for trade receivables under IFRS 15.

	Trade receivables
31 December 2021	Not past due	0 - 30 days past due	31 - 90 days past due	91 - 120 days past due	> 120 days past due
Expected loss rate (%)	0.02%	0.01%	0.02%	0.51%	3.55%
Trade receivables	72,941	19,200	6,107	956	3,302
Loss allowance	11	2	1	5	117

	Trade receivables
31 December 2020	Not past due*	0 - 30 days past due	31 - 90 days past due	91 - 120 days past due	> 120 days past due
Expected loss rate (%)	0.02%	0.01%	0.02%	0.51%	3.55%
Trade receivables	53,918	13,312	4,501	966	1,338
Loss allowance	8	1	1	5	47

Under IFRS 9 financial instruments, the expected credit loss is the difference between asset's gross carrying amount and the present value of the estimated future cashflows discounted at the asset's original effective interest rate.

Contract assets relate to work-in-progress, and as we have no experience of material write offs in relation to these financial assets, no expected credit loss allowance is recognised.

30.7 - Share price risk

As detailed in Note 27, the Group uses put option awards to incentivise certain local key management. The value of these awards is in part dependent upon the Company's share price.

30.8 - Equity price risk

The Group's non-listed equity investments are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Group manages equity price risk through diversification and by placing limits on individual and total equity investment securities. Reports on the equity portfolio are submitted to the Group's senior management on a regular basis. The Board reviews and approves all equity investment decisions. The basis of the fair value calculations and the sensitivity of these calculations to the key inputs is detailed in Note 29.

30.9 - Capital management

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. Strong financial capital management is an integral element of the Directors' strategy to achieve the Group's stated objectives. The Directors review financial capital reports on a regular basis and the Group finance function does so on a daily basis ensuring that the Group has adequate liquidity. The Directors' consideration of going concern is detailed in the Directors' report.

The capital structure of the Group consists of debt, which includes the borrowings disclosed in Note 23, cash and cash equivalents as disclosed in the cash flow statement and equity attributable to equity holders of the parent as disclosed in the statement of changes in equity.

31. Group companies

Key

* Entities in which the Group holds less than 50% of the share capital and which are accounted for as Associates (Note 15). All subsidiary companies which the Group controls in line with the requirements of IFRS 10 have been included in the consolidated financial statements.

** This subsidiary company is entitled to, and has opted to take, the exemption from the requirement relating to the audit of its individual accounts for the year/period ended 31 December 2021 by virtue of Section 479A of the Companies Act 2006 as the Company will guarantee the subsidiary company under Section 479C of the Companies Act 2006.

*** With the exception of M&C Saatchi Network Limited, our South African subsidiaries, Scarecrow Communication Limited and M&C Saatchi Social Limited (as indicated in the table below) where all our equity is directly held by the Company, all other subsidiary companies' equity is either in part or wholly held via subsidiaries of the Company.

At 31 December	Specialism	Country	Company Number	Address	Effective % ownership 2021
UK
Lean Mean Fighting Machine Limited**	Advertising & CRM	United Kingdom	5038272	36 Golden Square, London, W1F 9EE	88
LIDA (UK) LLP**	Advertising & CRM	United Kingdom	OC395890	36 Golden Square, London, W1F 9EE	88
LIDA Limited**	Advertising & CRM	United Kingdom	3860916	36 Golden Square, London, W1F 9EE	88
M&C Saatchi (UK) Limited**	Advertising & CRM	United Kingdom	3003693	36 Golden Square, London, W1F 9EE	88
M&C Saatchi Accelerator Limited**	Advertising & CRM	United Kingdom	9660056	36 Golden Square, London, W1F 9EE	89
M&C Saatchi Export Limited**	Advertising & CRM	United Kingdom	3920028	36 Golden Square, London, W1F 9EE	91
M&C Saatchi Fluency Limited**	Advertising & CRM	United Kingdom	12853921	36 Golden Square, London, W1F 9EE	100
M&C Saatchi Marketing Arts Limited**	Advertising & CRM	United Kingdom	3357727	36 Golden Square, London, W1F 9EE	50
M&C Saatchi PR International Limited**	Advertising & CRM	United Kingdom	8838406	36 Golden Square, London, W1F 9EE	100
M&C Saatchi PR Limited**	Advertising & CRM	United Kingdom	7280464	36 Golden Square, London, W1F 9EE	100
M&C Saatchi PR UK LLP**	Advertising & CRM	United Kingdom	OC362334	36 Golden Square, London, W1F 9EE	100
M&C Saatchi Shop Limited**	Advertising & CRM	United Kingdom	9660100	36 Golden Square, London, W1F 9EE	100
M&C Saatchi Talk Limited**	Advertising & CRM	United Kingdom	4239240	36 Golden Square, London, W1F 9EE	51
Talk.Purpose Limited**	Advertising & CRM	United Kingdom	11557398	36 Golden Square, London, W1F 9EE	51
The Source (London) Limited**	Advertising & CRM	United Kingdom	7140265	36 Golden Square, London, W1F 9EE	100
The Source (W1) LLP**	Advertising & CRM	United Kingdom	OC384624	36 Golden Square, London, W1F 9EE	90
This Is Noticed Limited**	Advertising & CRM	United Kingdom	11843904	36 Golden Square, London, W1F 9EE	69
Thread Innovation Limited**	Advertising & CRM	United Kingdom	13510974	36 Golden Square, London, W1F 9EE	80
Alive & Kicking Global Limited**	Brand & Experience	United Kingdom	11250736	36 Golden Square, London, W1F 9EE	100
Clear Ideas Consultancy LLP**	Brand & Experience	United Kingdom	OC362532	36 Golden Square, London, W1F 9EE	85
Clear Ideas Limited**	Brand & Experience	United Kingdom	4529082	36 Golden Square, London, W1F 9EE	85
Influence Communications Limited**	Brand & Experience	United Kingdom	4917646	36 Golden Square, London, W1F 9EE	95
Re Worldwide Limited**	Brand & Experience	United Kingdom	10503044	36 Golden Square, London, W1F 9EE	57
Black & White Strategy Limited**	Dormant	United Kingdom	11295145	36 Golden Square, London, W1F 9EE	100
H2R Research Limited**	Dormant	United Kingdom	11668322	36 Golden Square, London, W1F 9EE	80
Human Digital Limited**	Global & Social Issues	United Kingdom	7510403	36 Golden Square, London, W1F 9EE	60
M&C Saatchi World Services LLP**	Global & Social Issues	United Kingdom	OC364842	36 Golden Square, London, W1F 9EE	80
M&C Saatchi WS .ORG Limited**	Global & Social Issues	United Kingdom	10898282	36 Golden Square, London, W1F 9EE	80
Tricycle Communications Limited**	Global & Social Issues	United Kingdom	7643884	36 Golden Square, London, W1F 9EE	80
M&C Saatchi Network Limited + *	Group Central Costs	United Kingdom	7844657	36 Golden Square, London, W1F 9EE	100
SaatchInvest Limited**	Group Central Costs	United Kingdom	7498729	36 Golden Square, London, W1F 9EE	100
M&C Saatchi International Holdings B.V.	Local Central Costs	United Kingdom	24295679	36 Golden Square, London, W1F 9EE	100
M&C Saatchi European Holdings Limited**	Local Central Costs	United Kingdom	5982868	36 Golden Square, London, W1F 9EE	96
M&C Saatchi German Holdings Limited**	Local Central Costs	United Kingdom	6227163	36 Golden Square, London, W1F 9EE	100
M&C Saatchi International Limited**	Local Central Costs	United Kingdom	3375635	36 Golden Square, London, W1F 9EE	100
M&C Saatchi Middle East Holdco Limited**	Local Central Costs	United Kingdom	9374189	36 Golden Square, London, W1F 9EE	80
M&C Saatchi WMH Limited**	Local Central Costs	United Kingdom	3457658	36 Golden Square, London, W1F 9EE	100
M&C Saatchi Worldwide Limited**	Local Central Costs	United Kingdom	2999983	36 Golden Square, London, W1F 9EE	100
FYND Media Limited**	Media & Performance	United Kingdom	10104986	36 Golden Square, London, W1F 9EE	100
M&C Saatchi Mobile Limited**	Media & Performance	United Kingdom	5437661	36 Golden Square, London, W1F 9EE	100
M&C Saatchi Merlin Limited**	Sponsorship & Talent	United Kingdom	3422630	36 Golden Square, London, W1F 9EE	67
M&C Saatchi Social Limited + *	Sponsorship & Talent	United Kingdom	9110893	36 Golden Square, London, W1F 9EE	73
M&C Saatchi Sport & Entertainment Limited**	Sponsorship & Talent	United Kingdom	3306364	36 Golden Square, London, W1F 9EE	75

Europe
M&C Saatchi (Switzerland) SA	Advertising & CRM	Switzerland	660-0442009-4	Boulevard Des Promenades 8, 1227, Carouge, Geneva	76
M&C Saatchi AB	Advertising & CRM	Sweden	556902-1792	Skeppsbron 16, 11130, Stockholm	70
M&C Saatchi Advertising GmbH	Advertising & CRM	Germany	95484	Munzstrasse 21-23, 10178, Berlin	78
M&C Saatchi Digital GmbH	Advertising & CRM	Germany	137809	Munzstrasse 21-23, 10178, Berlin	95
M&C Saatchi Go! AB	Advertising & CRM	Sweden	559076-6076	Skeppsbron 16, 11130, Stockholm	70
M&C Saatchi Little Stories SAS*	Advertising & CRM	France	449386944	32 Rue Notre Dame Des Victoires, 75002 Paris	26
M&C Saatchi PR AB	Advertising & CRM	Sweden	559103-4201	Skeppsbron 16, 11130, Stockholm	70
M&C Saatchi PR Srl	Advertising & CRM	Italy	IT08977250961	V.Le Monte Nero 76, Milano, 20135	100
M&C Saatchi SpA	Advertising & CRM	Italy	IT07039280966	V.Le Monte Nero 76, Milano, 20135	100
Clear Deutschland GmbH	Brand & Experience	Germany	113523	C/O Wework, Taunusanlage 8, 60329, Frankfurt Am Main	51
M&C Saatchi Sport & Entertainment Benelux BV	Sponsorship & Talent	Netherlands	860734560	Keizersgracht, 81015cn, Amsterdam	100
M&C Saatchi Sports & Entertainment GmbH	Sponsorship & Talent	Germany	142905	Munzstrasse 21-23, 10178, Berlin	93
Middle East and Africa
Black & White Customer Strategy (Pty) Ltd	Advertising & CRM	South Africa	211/005859/07	Media Quarter, 5^th Floor, Corner, Somerset And De Smit Street, De Waterkant, Cape Town	50
Creative Spark Interactive (Pty) Ltd***	Advertising & CRM	South Africa	2010/016508/07	Media Quarter, 5^th Floor, Corner, Somerset And De Smit Street, De Waterkant, Cape Town	50
Dalmatian Communications (Pty) Ltd***	Advertising & CRM	South Africa	2015/396439/07	Media Quarter, 5^th Floor, Corner, Somerset And De Smit Street, De Waterkant, Cape Town	50
M&C Saatchi Abel (Pty) Ltd	Advertising & CRM	South Africa	2009/022172/07	Media Quarter, 5^th Floor, Corner, Somerset And De Smit Street, De Waterkant, Cape Town	50
M&C Saatchi Africa (Pty) Ltd***	Advertising & CRM	South Africa	2013/037719	Media Quarter, 5^th Floor, Corner, Somerset And De Smit Street, De Waterkant, Cape Town	50
M&C Saatchi FZ LLC	Advertising & CRM	United Arab Emirates	177	PO Box: 77932, Abu Dhabi	80
M&C Saatchi Middle East FZ LLC	Advertising & CRM	United Arab Emirates	30670	M&C Saatchi, Penthouse, Building 1, Twofour54, PO Box 77932, Abu Dhabi	80
M&C Saatchi SAL*	Advertising & CRM	Lebanon	1010949	Quantum Tower, Charles Malek Avenue, St Nicolas, Beirut	10
Razor Media (Pty) Ltd	Advertising & CRM	South Africa	2017/177757/07	9 8^th Street, Houghton, Johannesburg, Gauteng, 2198	49
M&C Saatchi Bahrain WLL	Dormant	Bahrain	74157	Venture Capital House 6^th Floor, PO Box 11409, Manama	90
M&C Saatchi Connect (Pty) Ltd***	Media & Performance	South Africa	2013/037737/07	Media Quarter, 5^th Floor, Corner, Somerset And De Smit Street, De Waterkant, Cape Town	50
Levergy Marketing Agency (Pty) Ltd***	Sponsorship & Talent	South Africa	2005/021589/07	9 8^th Street, Houghton, Johannesburg, Gauteng, 2198	58
Asia
Design Factory Sdn Bhd	Advertising & CRM	Malaysia	201001000000	Unit 10 - 2, 10^th Floor, Bangunan Malaysian Re, No.17, Lorong Dungun, Damansara Heights, 50490 Kuala Lumpur	100
February Communications Pvt Ltd*	Advertising & CRM	India	U74999DL2012PTC233245	141b First Floor, Cl House Shahpur Jat, New Delhi, 110049	20
M&C Saatchi Advertising (Shanghai) Ltd	Advertising & CRM	China	91310000740556813A	Room 248, Floor 2, Unit 5, No.11, Wanghang Road, New Lingang Area, Pilot Free Trade Zone	80
M&C Saatchi Spencer Hong Kong Ltd	Advertising & CRM	Hong Kong	2661802	1^st Floor, Catic Plaza, No.8 Causeway Road	70
M&C Saatchi Communications Pvt Ltd	Advertising & CRM	India	U74300DL2005PTC141682	Flat No.270-D, Pocket C Mayur Vihar Phase II, New Delhi, 110091	95
Scarecrow M&C Saatchi Ltd***	Advertising & CRM	India	U22190MH2008PLC188548	2^nd Floor, Kamani Chambers 32 Ramjibhai Kamani Marg, Ballard Estate, Mumbai, Mumbai City, 400038	51
PT. MCS Saatchi Indonesia	Advertising & CRM	Indonesia	576/1/IU/PMA/2018	Dea Tower 1, Mezzanine Floor, Jl. Mega Kuningan Kav.e4.3 No.1-2, Kuningan Timur, Setiabudi, Jakarta Selatan, 12920	50
M&C Saatchi Ltd*	Advertising & CRM	Japan	0110-01-060760	1-26-1 Ebisu-Nishi, Shibuya-Ku, Tokyo 150-0021	10
M&C Saatchi (M) Sdn Bhd	Advertising & CRM	Malaysia	606116-D	No.15b, 2^nd Floor, Jalan Tengku Ampuan, Zabedah F9/F, Section 9, 40100 Shah Alam, Selangor	49
M&C Saatchi Source (M) SDN BHD	Advertising & CRM	Malaysia	1313653-D	No.15b, 2^nd Floor, Jalan Tengku Ampuan, Zabedah F9/F, Section 9, 40100 Shah Alam, Selangor	49
Watermelon Productions Sdn Bhd	Advertising & CRM	Malaysia	1083441 -M	No.15b, 2^nd Floor, Jalan Tengku Ampuan, Zabedah F9/F, Section 9, 40100 Shah Alam, Selangor	49
M&C Saatchi World Services Pakistan (Pvt) Ltd	Advertising & CRM	Pakistan	81911	2^nd Floor, Mir Square, Civic Center, G-6 Markaz, Islamabad, Islamabad Capital Territory	41
M&C Saatchi (S) Pte Ltd	Advertising & CRM	Singapore	199504816C	59 Mohamed Sultan Road, #02-08, Sultan-Link	100
Love Frankie Ltd*	Advertising & CRM	Thailand	105557000000	571 Rsu Tower, 10^th Floor, Soi Sukhumvit 31, Sukhumvit Road, Wattana District, Bangkok	20
Clear Ideas (Singapore) Pte Ltd	Brand & Experience	Singapore	201020335R	59 Mohamed Sultan Road, #02-08, Sultan-Link	86
Clear Asia Ltd	Dormant	Hong Kong	1289028	6^th Floor, Alexandra House, 18 Chater Road, Central	95
Re HK Ltd	Dormant	Hong Kong	2699219	Rm 2610, 26/F Prosperity, Millennia Plaza, 663 King's Rd, North Point	100
M&C Saatchi World Services (Singapore) Pte Ltd	Global & Social Issues	Singapore	202104508W	59 Mohamed Sultan Road, #02-08, Sultan-Link	80
M&C Saatchi (Hong Kong) Ltd	Local Central Costs	Hong Kong	509500	Rm 2610, 26/F Prosperity, Millennia Plaza, 663 King's Rd, North Point	80
M&C Saatchi Asia Ltd	Local Central Costs	Hong Kong	1959819	Rm 2610, 26/F Prosperity, Millennia Plaza, 663 King's Rd, North Point	100
M&C Saatchi Holdings Asia Pte Ltd	Local Central Costs	Singapore	20172 5519K	1 Coleman Street, #05-06a, The Adelphi, 179803	50
M&C Saatchi Mobile India LLP	Media & Performance	India	AAK-8869	141b First Floor, Cl House Shahpur Jat, New Delhi, 110049	100
M&C Saatchi Mobile Asia Pacific Pte Ltd	Media & Performance	Singapore	201410399M	59 Mohamed Sultan Road, #02-08, Sultan-Link	100
Australia
1440 Agency Pty Ltd	Advertising & CRM	Australia	100 473 363	99 Macquarie Street, Sydney, NSW 2000	90
Bellwether Global Pty Ltd	Advertising & CRM	Australia	114 615 226	99 Macquarie Street, Sydney, NSW 2000	90
Brands In Space Pty Ltd	Advertising & CRM	Australia	129 800 639	99 Macquarie Street, Sydney, NSW 2000	90
Elastic Productions Pty Ltd	Advertising & CRM	Australia	635 737 861	99 Macquarie Street, Sydney, NSW 2000	90
Go Studios Pty Ltd	Advertising & CRM	Australia	092 941 878	99 Macquarie Street, Sydney, NSW 2000	90
Greenhouse Australia Pty Ltd	Advertising & CRM	Australia	629 584 121	99 Macquarie Street, Sydney, NSW 2000	72
Hidden Characters Pty Ltd	Advertising & CRM	Australia	108 886 291	99 Macquarie Street, Sydney, NSW 2000	86
House Key Productions Pty Ltd	Advertising & CRM	Australia	634 729 374	99 Macquarie Street, Sydney, NSW 2000	90
LIDA Australia Pty Ltd	Advertising & CRM	Australia	125 908 009	99 Macquarie Street, Sydney, NSW 2000	90
M&C Saatchi Direct Pty Ltd	Advertising & CRM	Australia	072 221 811	99 Macquarie Street, Sydney, NSW 2000	90
M&C Saatchi Melbourne Pty Ltd	Advertising & CRM	Australia	004 777 379	99 Macquarie Street, Sydney, NSW 2000	90
M&C Saatchi Sydney Pty Ltd	Advertising & CRM	Australia	637 963 323	99 Macquarie Street, Sydney, NSW 2000	90
Park Avenue PR Pty Ltd	Advertising & CRM	Australia	604 298 071	99 Macquarie Street, Sydney, NSW 2000	90
Resolution Design Pty Ltd	Advertising & CRM	Australia	621 985 288	99 Macquarie Street, Sydney, NSW 2000	77
Saatchi Ventures Pty Ltd	Advertising & CRM	Australia	614 007 957	99 Macquarie Street, Sydney, NSW 2000	54
The Source Insight Australia Pty Ltd	Advertising & CRM	Australia	618 841 928	99 Macquarie Street, Sydney, NSW 2000	59
This Film Studio Pty Limited	Advertising & CRM	Australia	624 003 541	99 Macquarie Street, Sydney, NSW 2000	63
Tricky Jigsaw Pty Limited	Advertising & CRM	Australia	069 431 054	99 Macquarie Street, Sydney, NSW 2000	88
Ugly Sydney Pty Limited	Advertising & CRM	Australia	618 242 710	99 Macquarie Street, Sydney, NSW 2000	68
Re Team Pty Limited	Brand & Experience	Australia	105 887 321	99 Macquarie Street, Sydney, NSW 2000	79
Yes Agency Pty Limited	Brand & Experience	Australia	621 425 143	99 Macquarie Street, Sydney, NSW 2000	79
eMCSaatchi Pty Limited	Dormant	Australia	089 856 093	99 Macquarie Street, Sydney, NSW 2000	90
World Services (Australia) Pty Limited	Global & Social Issues	Australia	629 191 420	C/O Walker Wayland Services Pty Limited, Suite 11.01, Leve 11, 60 Castlereagh St, Sydney NSW	80
M&C Saatchi Agency Pty Limited	Local Central Costs	Australia	069 431 054	99 Macquarie Street, Sydney, NSW 2000	90
M&C Saatchi Asia Pac Holdings Pty Limited	Local Central Costs	Australia	097 299 020	99 Macquarie Street, Sydney, NSW 2000	100
Bohemia Group Pty Limited	Media & Performance	Australia	154 100 562	99 Macquarie Street, Sydney, NSW 2000	67
M&C Saatchi Sport & Entertainment Pty Limited	Sponsorship & Talent	Australia	139 568 102	99 Macquarie Street, Sydney, NSW 2000	90
Americas
Agência Digital Zeroacem Ltda	Advertising & CRM	Brazil	NIRE-3522979148	Rua Wisard, 305, Vila Madalena, 3 Andar-Con, Sao Paolo, 05434-080	46
CSZ Comunicaço Ltda	Advertising & CRM	Brazil	03.910.644/0001-05	Rua Wisard, 305, Vila Madalena, 3 Andar-Con, Sao Paolo, 05434-080	50
Lily Participaçes Ltda	Advertising & CRM	Brazil	21.188.539/0001-96	Avenida Brigadeiro Faria Lima, 1355, Jardim Paulistano 16 Andar, Sal, Sao Paulo, 01452-919	100
M&C Saatchi Brasil Participaçes Ltda	Advertising & CRM	Brazil	10.570.593/0001-85	Rua Wisard, 305, Vila Madalena, 3 Andar-Con, Sao Paolo, 05434-080	100
M&C Saatchi, S.A. DE. C.V	Advertising & CRM	Mexico	N-2017052183	Darwin 74, Piso 1, Miguel Hidalgo, 11590 Ciudad de México, CDMX, Mexico	60
Majority LLC	Advertising & CRM	USA	5445173	874 Walker Rd Ste C, Dover, Kent, 19904	92
Santa Clara Participaçes Ltda	Advertising & CRM	Brazil	09.349.720/0001-31	Rua Wisard, 305, Vila Madalena, 3 Andar-Con, Sao Paolo, 05434-080	50
Shepardson Stern + Kaminsky LLP	Advertising & CRM	USA	4656653	80 State Street, Albany, 12207-2543, New York	100
Clear USA LLC	Brand & Experience	USA	20-8599548	138 West 25^th Street, Floor 5, New York, Ny 10001	95
LIDA NY LLP (MCD)	Brand & Experience	USA	4902983	138 West 25^th Street, Floor 5, New York, NY 10001	76
Clear LA LLC	Dormant	USA	6241713	2711 Centerville Road, Suite 400, Wilmington, De 19808	95
Clear NY LLP	Dormant	USA	30-0891764	1209 Orange Street Wilmington De 19801	95
LIDA USA LLP	Dormant	USA	6333479	251 Little Falls Drive, Wilmington, New Castle, 19808, Delaware	100
M&C Saatchi NY LLP	Dormant	USA	45-4683918	874 Walker Rd Ste C, Dover, Kent, 19904	90
M&C Saatchi PR LLP	Dormant	USA	27-1665526	1740 Broadway, New York, 10019	100
M&C Saatchi Share Inc.	Dormant	USA	5580330	160 Greentree Dr Ste 101, Dover, Kent, De, 19904	80
World Services US Inc. (California)	Global & Social Issues	USA	C2543767	2032 Broadway, Santa Monica Ca, 90404	100
World Services US Inc. (New York)	Global & Social Issues	USA	90-0851801	1740 Broadway, New York, 10019	100
M&C Saatchi Agency Inc.	Local Central Costs	USA	13-3839670	304 East 45^th Street, New York, New York, 10017	100
M&C Saatchi Mobile LLC	Media & Performance	USA	45-3638296	2032 Broadway, Santa Monica Ca, 90404	100
M&C Saatchi Sport & Entertainment LA LLC	Sponsorship & Talent	USA	6369786	874 Walker Rd Ste C, Dover, Kent, 19904	65
M&C Saatchi Sport & Entertainment NY LLP	Sponsorship & Talent	USA	46-5182795	160 Greentree Dr Ste 101, Dover, Kent, De, 19904	70

Within the above list the following companies are associates: Love Frankie Limited, M&C Saatchi Limited (Japan), February Communications Private Limited, M&C Saatchi Little Stories SAS and M&C Saatchi SAL. The Group has a 49% effective shareholding in Razor Media (Pty) Limited but retains control so the company is treated as a subsidiary.

32. Related party transactions

Key management remuneration

Key management remuneration is disclosed in Note 5.

Audited detail on Directors' remuneration is disclosed in the Directors' remuneration report.

Other related parties

During the year, the Group made purchases of £418k (2020: £1,534k) from its associates. At 31 December 2021, there was £35k due to associates in respect of these transactions (2020: £118k). During the year, £420k (2020: £574k) of fees were charged by Group companies to associates. At 31 December 2021, associates owed Group companies £123k (2020: £837k).

33. Commitments

With the introduction of IFRS 16 Leases in 2019, all of the Group's commitments are shown on the balance sheet except for those below:

Leases

There has been one lease entered into, post balance sheet, in Indonesia, which commenced on 1 February 2022 for three years, terminating on 31 October 2025. The annual cash payments for this space are IDR972.8m (£0.05m).

Capital commitments

At the year-end we had £nil committed costs (2020: £677k) to acquire property plant and equipment.

Other commitments

Other than our normal contractual commitments to employees and the commitment to complete profitable projects for our clients, the Group does not have any other material commitments which are not reflected on the balance sheet.

34. Post-balance sheet events

As announced on 6 January 2022, the Company has received a preliminary approach from AdvancedAdvT Limited, a vehicle connected with Vin Murria. The Company has facilitated access to provide AdvancedAdvT Limited with the opportunity to make a formal offer to the Company's shareholders, but to date no offer has been received.

On 18 January 2022, the Chief Financial Officer, Mickey Kalifa, notified the Board of his resignation from his executive role of Chief Financial Officer.

On 19 January 2022, as a result of the exercise of two put option arrangements, the Group acquired a 49% holding in Cometis SARL, a French company.

On 21 January 2022, the Company reported that the Financial Conduct Authority had notified the Company that its investigation of the Company was being closed and that no enforcement action would be taken by it against the Company.

In February 2022, the Group launched two new businesses, a digital innovation consultancy, Thread, and a specialist sustainability consultancy, M&C Saatchi LIFE.

The Directors are not aware of any other events since the end of the financial year that have had, or may have, a significant impact on the Group's operations, the results of those operations, or the state of affairs of the Group in future years.

35. Other accounting policies

Reserves

Equity comprises the following:

Share capital

Represents the nominal value of equity shares in issue.

Share premium

Represents the excess over nominal value of the fair value of consideration received for equity shares, net of issuance costs.

Other reserves

Merger reserve

Represents the premium paid for shares above the nominal value of share capital, caused by the acquisition of more than 90% of a subsidiaries' shares. The merger reserve is released to retained earnings when there is a disposal, impairment charge or amortisation charge posted in respect of the investment that created it.

Treasury reserve

Represents the amount paid to acquire our own shares for future use.

Minority interest put option reserve

Represents the initial fair value of the IFRS 9 put option liabilities at creation. When the put option is exercised, the related amount in this reserve is taken to the non-controlling interest acquired reserve.

Non-controlling interest acquired reserve

From 1 January 2010, a non-controlling interest acquired reserve has been used when the Group acquires an increased stake in a subsidiary. It represents either a) the minority interest put option reserve transferred less the book value of the minority interest acquired (where the acquisition is due to an IFRS 9 put option), or b) the consideration paid less the book value of the minority interest acquired. If the equity stake in the subsidiary is subsequently sold, impaired or disposed of, then the related balance from this reserve will be transferred to retained earnings.

Foreign exchange reserve

For overseas operations, income statement results are translated at the annual average rate of exchange and balance sheets are translated at the closing rate of exchange. The annual average rate of exchange approximates to the rate on the date that the transactions occurred. Exchange differences arising from the translation of foreign subsidiaries are taken to this reserve. Such translation differences will be recognised as income or expense in the period in which the operation is disposed of.

Retained earnings

Represents the cumulative gains and losses recognised in the income statement.

36. New and revised standards issued but not yet effective

In the current year, the following standard and interpretation became effective:

· Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16).

We do not believe that the Interest Rate Benchmark Reform has had a material difference on the Group's accounts.

At the date of authorisation of these consolidated financial statements, the Group has not applied the following new and revised IFRS Standards that have been issued but are not yet effective:

Amendments to IFRS 17	Changes to international insurance accounting
Applying IFRS 9 "Financial Instruments" with IFRS 4 'Insurance Contracts' (Amendments to IFRS 4)	IFRS Insurance
Reference to the Conceptual Framework	Amendments to IFRS 3
Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)	Application of consistency
Property, Plant and Equipment - proceeds before intended use (Amendments to IAS 16)	Recognition criteria
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)	Application of materiality
Annual Improvements 2018 - 2020 Cycle	Impacts IFRS 1, IFRS 9, IFRS 16 and IAS 41
Extension of the temporary exemption from applying IFRS 9 (Amendments to IFRS 4)	Fixed expiry date variation
Deferred Tax - Amendments to IAS 12 Income Taxes	Recognising deferred tax on leases
Onerous Contracts - (Amendments to IAS 37)	Cost of fulfilling a contract
Definition of Accounting Estimate (Amendments to IAS 8)	Distinguishing between accounting policies and estimates
Initial Application of IFRS 17 and IFRS 9 - comparative information (Amendments to IFRS 17)	Presentational around comparative information

The Directors do not expect that the adoption of the standards listed above will have a material impact on the consolidated financial statements of the Group in future periods.

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