Final Results
29 March 2022
XLMedia PLC
("XLMedia" or the "Group" or the "Company")
Results for the Year Ended 31 December 2021
XLMedia (AIM: XLM), a leading global digital performance publisher, announces the Company's audited results for the year ended 31 December 2021.
Financial summary
· Revenues of $66.5 million (FY 2020: $54.8 million)
o Sports vertical generated revenues of $31.4 million (2020: US$11.3 million)
o Personal Finance generated revenues of $8.7 million (2020: US$8.4 million)
o European Casino assets generated revenues of US$23.2 million (2020: US$31.7 million)
o Other legacy revenues were $3.1 million (FY 2020: $3.5 million)
· Operating profit of $3.9 million (FY 2020: $0.1 million)
· Adjusted EBITDA (1) of $17.9million (FY 2020: $12.2 million)
· Adjusted profit before tax (2) of $10.5 million (FY 2020: $5.3 million)
· Reported Profit before tax of $4 million (FY 2020: $1.1 million)
· Cash and short-term investments of $24.6 million (31 December 2020: $13.9 million)
1 Adjusted EBITDA in all references is defined as Earnings Before Interest, Taxes, Depreciation and Amortisation, and excluding any share-based payments, impairment and reorganisation costs
2 Excluding loss from impairment and reorganisation costs
Operating summary
· Grown presence and created a significant market opportunity within North American Sports, with coverage across the 15 states where online sports betting is legal, as well as US states and Canadian provinces soon to legalise
o Successfully harmonised two US sports acquisitions (Sports Betting Dime and Saturday Inc.) with CBWG assets and team
o Commercial content team successfully working across a number of media partners
· European Sports and Personal Finance assets now managed from UK and US respectively
· Managed decline within European Casino retaining profitability
· Strengthened board and executive teams with the appointments of:
o Chief Financial Officer, Caroline Ackroyd, Chief Information Officer, Nigel Leigh, Chief People Officer, Sonja Haas, and Julie Markey and Cédric Boireau as Non-Executive Directors
· Global operational reorganisation to complete in H1 22
o Annualised gross cost savings of between $5 million and $6 million
Outlook
· Current trading for year ending 31 December 2022 in-line with management expectations
· North American Sports vertical now a key growth, profit and cash driver for the Group, buoyed by a strong start to 2022
Stuart Simms, Chief Executive Officer at XLMedia, commented:
"We've made great progress in North America during 2021 alongside delivering important organisational changes to both rationalise and ring-fence legacy areas of our business. We set out to become a significant player in North American Sports - in line with our strategy to pursue high growth, large, regulated markets - we're now in really good shape, with strong geographical coverage and capability, ready to fully exploit this significant market opportunity."
Julie Markey, Interim-Chair at XLMedia, commented:
"In 2021, the Group evolved its operational capabilities - upskilling and realigning our global workforce to better match strategy and generate new future growth. I'm proud of our people for driving through a period of significant change including having to navigate continued restrictions relating to the Covid pandemic. The business is becoming more agile and responsive so that it can fully exploit new opportunities."
Investor presentation webcast
A webcast of the presentation will be made available on the Company's website at https://www.xlmedia.com/investor-relations/webcasts/
For further information, please contact:
XLMedia plc Stuart Simms, Chief Executive Officer Rowan Ellis, Interim Chief Financial Officer
| via Vigo Consulting |
Vigo Consulting Jeremy Garcia / Kendall Hill
| Tel: 020 7390 0233 |
Cenkos Securities plc (Nomad and Joint Broker) Giles Balleny / Max Gould
| Tel: 020 7397 8900 |
Berenberg (Joint Broker) Mark Whitmore / Richard Andrews / Jack Botroswww.berenberg.com | Tel: 020 3207 7800 |
Notes:
XLMedia is a global digital performance publisher. Operating across a variety of vertical markets including online gambling, personal finance and sports, the Group uses proprietary tools and methodologies to identify and target high value consumers for platform operators.
XLMedia operates branded, content-rich websites, underpinned by intelligent market-leading technology and data, to build stronger and lasting relationships with consumers.
The Group seeks to create a balanced portfolio of premium websites to cover a range of attractive geographies, both stable and high-growth verticals, with greater exposure to regulated markets.
Chair & Chief Executive Officer review
Introduction
The Group delivered a robust financial performance across FY21, underpinned by a strong performance from our Sports vertical, which has been driven by our key acquisitions and the ongoing legalisation of sports gambling across the U.S.
We will complete the comprehensive organisational redesign and rationalisation of the business in H1 2022, ensuring XLMedia is rightsized and focused on addressing high growth regulated markets.
Pleasingly, the business is now fully focused on expanding our portfolio of premium assets, underpinned by content-rich and consumer-centric sites, servicing high growth markets and geographies whilst delivering enhanced operating performance and efficiency.
Rationalisation
Our organisational redesign, which was initiated in H2 2021, will be completed in H1 2022. The Group has focused on reshaping our operating model, and this process, alongside realigning both talent and resources globally, will yield annualised cost savings of between $5 million and $6 million. The Group has been evolving its operating model in that time, creating global and regional hubs, which has improved our access to an economical pool of talent. Our acquisition of BlueClaw has also accelerated this process, bringing enhanced SEO and digital PR expertise; we have applied this expertise to our European Sports vertical to good effect in H2 21 and will be rolling out these best practices across the wider Group portfolio during FY 2022.
People / Talent
During the period, the Company has re-built the executive team, appointing Caroline Ackroyd as Chief Financial Officer in March 2022, in addition to the appointments of Chief Information Officer, Nigel Leigh, and Chief People Officer, Sonja Haas. The Group also strengthened the Board with the appointments of Julie Markey and Cédric Boireau as Non-Executive Directors, bringing a wealth of experience in international people management and value investing respectively.
Divisional summary
Sports
The Group's Sports division delivered a strong performance during FY 2021, driven by a number of highly strategic US sports acquisitions. Following the successful integration of these businesses, XLMedia has now established a considerable North American sports platform underpinned by increasing regulatory tailwinds, which continue to create multiple growth opportunities for the Group.
Our North American sports platform generated significant levels of online traffic across H2 2021, growing to a year-end audience of 17.8 million unique monthly users. Our North American teams have successfully signed a number of key commercial and partnership agreements, which includes AMNY, a leading news site in Manhattan and New York City focused on local news and events, to complement the partnerships already in place through the acquisition of CBWG. Media partnerships are a core competency and remain a key focus to ensure geographical coverage, alongside owned and operated brands.
The North American Sports season, running September through April, generated $5.7 million in 2020-2021. While the 2021-2022 season is yet to conclude, generated revenues currently standing at $38.4 million, representing a 574% year-on-year increase.
Our pipeline continues to strengthen as more US states and Canadian provinces regulate, including, for example, Ohio, Illinois and Ottawa.
The Group's European Sports vertical delivered a solid 7% uplift in revenue performance during 2021 to $10 million, whilst migrating operations from Israel to BlueClaw in the UK.
European Casino
The Group's European Casino assets, which are in managed decline, delivered a profitable performance across 2021, albeit from a smaller, more efficient cost base. This vertical continues to experience ongoing trading pressures alongside expected tail revenue decline.
The Group's Finnish Casino assets generated revenue of $11.7 million (FY 2020: $15.0 million), as previously highlighted, and which continue to face strong regulatory pressures and management anticipates a prolonged period of adjustment to this new regulatory environment.
Personal Finance
Personal Finance delivered a flat performance in FY 2021, with FY 2022 revenue expected to be less than FY 2021 as trading continuing to be challenging, yet profitable. Migration of the Personal Finance team to North America from Israel was completed in H2 21. All key Personal Finance assets will be re-platformed during FY 22, which will deliver improved site performance and SEO operations, as well as enhance consumer experience and engagement.
Regulation
XLMedia remains focused on large, high-growth regulated markets, underpinning the Group's focus on Sports, both in the US and Europe. Regulatory changes in the European casino vertical have led the group to lower its exposure to the region alongside the associated cost base.
It is XLMedia's experience that operating within a clear regulatory framework will further drive our strategic ambitions.
Outlook
With the Group's restructuring set to be completed in H1 2022, XLMedia is now fully focused on growth and profit generation. The Group's Sports vertical is now a key growth driver for the business and has fast created a powerful operational footprint from which to expand our services.
With the ongoing strength of our US Sports assets and rationalisation of the broader business, XLMedia continues to trade in-line with expectations for the year ended 31 December 2022.
Financial Review
$'000 | 2021 | 2020 | Change |
Revenues | 66,487 | 54,839 | 21% |
Expenses: |
|
|
|
Operating | (40,740) | (36,222) | 12% |
Sale and marketing | (14,837) | (9,819) | 51% |
Depreciation and amortisation | (6,970) | (7,720) | 10%- |
Impairment loss | - | (955) | 100%- |
Operating profit | 3,940 | 123 | 3103% |
EBITDA3 | 10,910 | 8,798 | 24% |
Adjusted EBITDA2 | 17,934 | 12,161 | 47% |
Adjusted1 profit before tax on income | 10,519 | 5,332 | 97% |
Profit before taxes on income | 4,015 | 1,106 | 263% |
1 Excluding loss from impairment and reorganisation costs
2 Earnings Before Interest, Taxes, Depreciation, Amortisation and excluding share-based payments, impairment, and reorganisation costs
3 Earnings Before Interest, Taxes, Depreciation, Amortisation, and impairment.
XLMedia revenues in FY 2021 totalled $66.5 million (2020: $54.8 million), an increase of 21% compared to the previous year, underpinned by acquisitive growth within the North American Sports vertical, which more than offsets the anticipated revenue fall in the Casino vertical.
Operating expenses for 2021 were $40.7 million (2020: $36.2 million), an increase of 12% compared to the previous year reflecting costs associated with M&A activity, and restructuring.
Sales and marketing expenses for 2021 were $14.8 million (2020: $9.8 million), an increase of 51% which largely relates to the North American Sports network model, and which differs from the owned and operated model.
EBITDA for 2021 was $10.9 million or 16.4% of revenues (2020: $8.9 million, or 16% of revenues), the latter excludes the impairment charge of $1 million in 2020.
Adjusted EBITDA for 2021 was $17.9 million or 27% of revenues (2020: $12.2 million, or 22.2% of revenues), an increase of 47% on prior year due mainly to the increase in revenues.
Net financing expenses for 2021 were $0.2 million (2020: $0.1 million).
No impairment loss was recorded for 2021, (2020: $1 million, following the demotion of the Group's websites by Google in January 2020).
In 2021 the Group recorded transformation costs of $6.5 million (2020: $3.3 million) following the commencement of its restructuring plan mid 2020, as well as costs associated with M&A activity.
Adjusted profit before tax on income in 2021 was $10.6 million (2020: $5.3 million), an increase of 97%.
Non-current assets as at 31 December 2021 were $123 million (31 December 2020: $66.9 million). The increase of 84% compared to the previous year was primarily due to $56.1 million from acquiring domains and websites in the U.S. Sports market.
Current assets as at 31 December 2021 were $39.4 million (31 December 2021: $25.2 million). The increase of 56% compared to the previous year was primarily due to the increase in cash and cash equivalents mentioned below.
As at 31 December 2021, the Company had $22.4 million cash and cash equivalents (not including short- and long-term deposits) (31 December 2020: $12.6 million). The change in cash reflects $7.2 million generated by operating activities and $34.7 million generated by financing activities offset by $31.9 million used for investment activity.
Total equity as at 31 December 2021 was $109.2 million or 67% of total assets (31 December 2020: $67.3 million or 73% of total assets). The increase of 62%, compared to the previous year, was primarily due to the issue of $35.8 million of new ordinary shares for the acquisition consideration of U.S. websites.
Non-current liabilities as at 31 December 2021 were $11.2 million (31 December 2020: $1.6 million). The increase of 600%, compared to the previous year, was primarily due to deferred consideration liabilities related to the acquisition of U.S. domains and websites.
Current liabilities as at 31 December 2021 were $42.1 million (31 December 2020: $23.3 million). The increase of 81%, compared to prior year was mostly related to deferred consideration liabilities linked with the acquisition of U.S. domains and websites acquisitions.
2021 has been an important year for the Company - we have made significant progress on our fundamental rationalisation programme, repositioning ourselves well for future growth. We exited the year with a positive trajectory and successfully completed our third acquisition in the North American Sports market. We remain optimistic about the Group's prospects in the years ahead.
INDEPENDENT AUDITORS' REPORT
To the Shareholders of XLMEDIA PLC
Report on the audit of the consolidated financial statements
Opinion
We have audited the consolidated financial statements of XLMedia PLC and its subsidiaries (the Group), which comprise the consolidated statement of financial position as of 31 December 2021 and 2020, and the consolidated statements of profit or loss and other comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for each of the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of 31 December 2021 and 2020 and its consolidated financial performance and its consolidated cash flows for each of the years then ended in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report. We are independent of the Group in accordance with the International Ethics Standards Board for Accountants' International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the consolidated financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying consolidated financial statements.
|
|
Description of key audit matter |
Description of auditor's response |
|
Revenue recognition |
Revenues which amounted to USD 66.5 million in 2021 are significant to the consolidated financial statements based on their quantitative materiality. As such, there is inherent risk that revenues may be improperly recognised, inflated or misstated.
Recognition of revenues in the accounts of the Group is a highly automated process. The Group is heavily reliant on the reliability and continuity of its in-house IT platform to support automated data processing in its recognition and recording of revenues. |
In 2021 in order to gain the required level of assurance, we performed substantive audit procedures relating to the recognition and recording of revenues, including tests of reconciliations from underlying data to the financial accounts. IT audit specialists were deployed to assist in understanding the design and operation of the relevant IT systems and in performing various data analyses in order to test completeness, accuracy and timing of the recognition of revenues. We also evaluated the adequacy of the disclosures provided in relation to revenues in Notes 2 and 17 to the consolidated financial statements. |
|
Domains and Websites and other intangible assets - impairment test |
As of 31 December 2021, the total net carrying amount of domains and websites with indefinite useful life and other intangible assets was approximately USD 120.3 million. In accordance with IFRS as adopted by the European Union, the Group is required to annually test these assets for impairment. As a result of the impairment test, no impairment loss was recorded in 2021.
|
Our audit procedures included, among others, evaluating the assumptions and methodologies used by the Group. In particular, we tested the Group's determination of the recoverability of these assets by reviewing management's forecasts of revenues and profitability. We assessed the reliability of these forecasts through, among others, a review of actual performance against previous forecasts. We evaluated and tested the discount rates and attribution of expenses, and we considered the reasonableness of management's other assumptions. We also verified the adequacy of the disclosure of the assumptions and other data in Note 7 to the consolidated financial statements.
|
|
Taxation |
The Group's operations are subject to income tax in various jurisdictions. Taxation is significant to our audit because the assessment process is complex and judgmental, and the amounts involved are material to the consolidated financial statements as a whole. |
We included in our team tax specialists to analyse and evaluate the assumptions used to determine tax provisions. We evaluated and tested the underlying support, such as transfer price studies, for the calculation of income taxes in the various jurisdictions. We also assessed the adequacy of the Group's disclosures in Note 15 to the consolidated financial statements. |
Other information included in the Group's 2021 Annual Report
Other information consists of the information included in the Annual Report, other than the consolidated financial statements and our auditor's report thereon. Management is responsible for the other information. The Group's 2021 Annual Report is expected to be made available to us after the date of this auditor's report.
Our opinion on the financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
Responsibilities of management and the board of directors for the consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS as adopted by the European Union, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
The board of directors is responsible for overseeing the Group's financial reporting process.
Auditor's responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
► Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
► Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
► Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
► Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Group to cease to continue as a going concern.
► Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
► Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.
We communicate with the board of directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the board of directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated with the board of directors, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on other legal and regulatory requirements
The consolidated financial statements have been prepared in accordance with the requirements of the Companies (Jersey) Law 1991.
The partner in charge of the audit resulting in this independent auditor's report is Eli Barda.
|
Tel-Aviv, Israel |
KOST FORER GABBAY & KASIERER |
|
28 March 2022 |
A Member of Ernst & Young Global |
Consolidated statements of financial position
as at 31 December 2021 |
|
|
|
| |||
|
|
|
| 2021 |
| 2020 | |
|
| Notes |
| $000 |
| $000 | |
Assets |
|
|
|
|
|
| |
Non-current assets |
|
|
|
|
|
| |
Intangible assets and goodwill |
| 7 |
| 120,284 |
| 63,866 | |
Property and equipment |
| 6 |
| 2,401 |
| 1,072 | |
Other assets |
|
|
| 247 |
| 497 | |
Long-term deposits |
| 4 |
| 83 |
| 1,478 | |
|
|
|
| 123,015 |
| 66,913 | |
Current assets |
|
|
|
|
|
| |
Short-term deposits |
| 4 |
| 2,158 |
| 1,228 | |
Trade receivables |
| 5 |
| 8,701 |
| 5,792 | |
Other receivables |
| 5 |
| 6,119 |
| 5,578 | |
Cash and cash equivalents |
|
|
| 22,437 |
| 12,648 | |
|
|
|
| 39,415 |
| 25,246 | |
Total assets |
|
|
| 162,430 |
| 92,159 | |
|
|
|
|
|
|
| |
Equity and liabilities |
|
|
|
|
|
| |
Equity |
|
|
|
|
|
| |
Share capital |
| 12 |
| *) - |
| *) - | |
Share premium |
| 12 |
| 122,071 |
| 86,022 | |
Capital reserve |
|
|
| 14 |
| (258) | |
Accumulated deficit |
|
|
| (12,869) |
| (18,510) | |
Total equity |
|
|
| 109,216 |
| 67,254 | |
|
|
|
|
|
|
| |
Non-current liabilities |
|
|
|
|
|
| |
Lease liabilities |
| 10 |
| 1,242 |
| 366 | |
Deferred taxes |
| 15 |
| 1,372 |
| 1,243 | |
Deferred consideration |
| 7 |
| 7,737 |
| - | |
Contingent consideration |
| 16 |
| 808 |
| - | |
|
|
|
| 11,159 |
| 1,609 | |
Current liabilities |
|
|
|
|
|
| |
Trade payables |
|
|
| 2,333 |
| 2,000 | |
Deferred consideration |
| 7,16 |
| 18,401 |
| - | |
Consideration payable on intangible assets |
| 7 |
| 3,000 |
| - | |
Other liabilities and accounts payable |
| 8 |
| 7,820 |
| 8,769 | |
Income tax provision |
|
|
| 10,190 |
| 11,899 | |
Financial derivatives |
| 11 |
| - |
| 304 | |
Current maturities of lease liabilities |
| 10 |
| 311 |
| 324 | |
|
|
|
| 42,055 |
| 23,296 | |
Total liabilities |
|
|
| 53,214 |
| 24,905 | |
Total equity and liabilities |
|
|
| 162,430 |
| 92,159 | |
*) Less than $1,000.
The accompanying notes are an integral part of the consolidated financial statements.
28 March 2022 |
|
|
|
|
|
|
Date of approval of the |
| Julie Markey |
| Stuart Simms |
| Rowan Ellis |
financial statements |
| InterimChairman of the Board of Directors |
| Chief Executive Officer |
| Interim Chief Financial Officer |
Consolidated statements of profit or loss and other comprehensive income
for the year ended 31 December 2021 |
|
|
|
| ||
|
|
|
| 2021 |
| 2020 |
|
|
|
| $000 |
| $000 |
|
| Notes |
|
|
|
|
Revenue |
| 17 |
| 66,487 |
| 54,839 |
Expenses: |
|
|
|
|
|
|
Operating |
| 14 |
| (40,740) |
| (36,222) |
Sale and marketing |
|
|
| (14,837) |
| (9,819) |
Depreciation and amortisation |
| 6,7 |
| (6,970) |
| (7,720) |
Impairment loss |
| 7 |
| - |
| (955) |
Operating profit |
|
|
| 3,940 |
| 123 |
|
|
|
|
|
|
|
Finance expenses |
|
|
| (549) |
| (834) |
Finance income |
|
|
| 306 |
| 695 |
Other income |
|
|
| 318 |
| 1,122 |
Profit before taxes on income |
|
|
| 4,015 |
| 1,106 |
|
|
|
|
|
|
|
Income tax benefit / (expense) |
| 15 |
| 1,626 |
| (314) |
Profit for the year |
|
|
| 5,641 |
| 792 |
|
|
|
|
|
|
|
Other comprehensive income |
|
|
|
|
|
|
Exchange loss arising on translation of foreign operations |
|
|
| (16) |
| - |
Total comprehensive income |
|
|
| 5,625 |
| 792 |
|
|
|
|
|
|
|
Profit for the year attributable to: |
|
|
|
|
|
|
Equity owners of the Company |
|
|
| 5,641 |
| 531 |
Non-controlling interests |
|
|
| - |
| 261 |
|
|
|
| 5,641 |
| 792 |
|
|
|
|
|
|
|
Total comprehensive income attributable to: |
|
|
|
|
|
|
Equity owners of the Company |
|
|
| 5,625 |
| 531 |
Non-controlling interests |
|
|
| - |
| 261 |
|
|
|
| 5,625 |
| 792 |
|
|
|
|
|
|
|
Earnings per share attributable to equity holders of the Company: |
|
|
|
|
|
|
Basic and diluted earnings per share (in $) |
| 12 |
| 0.023 |
| 0.004 |
See note 1c with respect to the presentation for the year ended 31 December 2020.
The accompanying notes are an integral part of the consolidated financial statements.
Consolidated statements of changes in equity
for the year ended 31 December 2021
|
|
Share capital |
|
Share premium |
|
Capital reserve from share-based transactions |
|
Capital reserve from the translation of a foreign operation |
|
Capital reserve from transactions with non-controlling interests |
|
Treasury shares |
|
Accumulated deficit |
|
Total attributable to owners of the Company |
|
Non-controlling interests |
|
Total equity |
|
|
$000 |
|
$000 |
|
$000 |
|
$000 |
|
$000 |
|
$000 |
|
$000 |
|
$000 |
|
$000 |
|
$000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 1 January 2021 |
*) - |
|
86,022 |
|
2,368 |
|
- |
|
(2,626) |
|
- |
|
(18,510) |
|
67,254 |
|
- |
|
67,254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
5, 641 |
|
5, 641 |
|
- |
|
5, 641 |
|
Other comprehensive income |
- |
|
- |
|
- |
|
(16) |
|
- |
|
- |
|
- |
|
(16) |
|
- |
|
(16) |
|
Total comprehensive income |
- |
|
- |
|
- |
|
(16) |
|
- |
|
- |
|
5, 641 |
|
5, 625 |
|
- |
|
5, 625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of share-based payment |
- |
|
- |
|
520 |
|
- |
|
- |
|
- |
|
- |
|
520 |
|
- |
|
520 |
|
Share capital issuance |
*) - |
|
35,806 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
35,806 |
|
- |
|
35,806 |
|
Exercise of option |
*) - |
|
243 |
|
( 232 ) |
|
- |
|
- |
|
- |
|
- |
|
11 |
|
- |
|
11 |
|
As at 31 December 2021 |
*) - |
|
122,071 |
|
2,656 |
|
(16) |
|
(2,626) |
|
- |
|
(12, 869 ) |
|
109, 216 |
|
- |
|
109, 216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 1 January 2020 |
*) - |
|
112,624 |
|
2,276 |
|
- |
|
(2,445) |
|
(30,159) |
|
(19,041) |
|
63,255 |
|
291 |
|
63,546 |
|
Profit for the year |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
531 |
|
531 |
|
261 |
|
792 |
|
Cancellation of treasury shares |
- |
|
(30,159) |
|
- |
|
- |
|
- |
|
30,159 |
|
- |
|
- |
|
- |
|
- |
|
Cost of share-based payment |
- |
|
- |
|
92 |
|
- |
|
- |
|
- |
|
- |
|
92 |
|
- |
|
92 |
|
Share capital issuance |
*) - |
|
3,557 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
3,557 |
|
- |
|
3,557 |
|
Acquisition of non-controlling interest |
- |
|
- |
|
- |
|
- |
|
(181) |
|
- |
|
- |
|
(181) |
|
(291) |
|
(472) |
|
Dividend to non-controlling interest |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(261) |
|
(261) |
|
As at 31 December 2020 |
*) - |
|
86,022 |
|
2,368 |
|
- |
|
(2,626) |
|
- |
|
(18,510) |
|
67,254 |
|
- |
|
67,254 |
*) Less than $1,000.
The accompanying notes are an integral part of the consolidated financial statements.
Consolidated statements of cash flows
|
for the year ended 31 December 2021 |
|
|
|
|
|
|
|
2021 |
|
2020 |
|
|
|
$ 000 |
|
$ 000 |
|
Operating activities |
|
|
|
|
|
Profit for the year |
|
5, 641 |
|
792 |
|
Adjustments to reconcile profit for the year to net cash flows: |
|
|
|
|
|
Depreciation and amortisation |
|
6,970 |
|
7, 72 0 |
|
Impairment loss |
|
- |
|
9 55 |
|
Finance (income) / expense, net |
|
( 76 ) |
|
824 |
|
Other income |
|
(437) |
|
(1,122) |
|
Cost of share-based payment |
|
520 |
|
92 |
|
Taxes on income (benefit) |
|
(1, 626 ) |
|
3 14 |
|
Exchange differences on balances of cash and cash equivalents |
|
246 |
|
(297) |
|
Working capital changes: |
|
|
|
|
|
(Increase) / decrease in trade receivables |
|
(2,672) |
|
1,963 |
|
Decrease / (increase) in other receivables |
|
647 |
|
(340) |
|
Increase / (decrease) in trade payables |
|
31 3 |
|
(1,02 8 ) |
|
Decrease in other liabilities and accounts payable |
|
(1, 681 ) |
|
(1,204) |
|
|
|
7,8 45 |
|
8,669 |
|
Interest paid |
|
(76) |
|
(544) |
|
Interest received |
|
3 |
|
99 |
|
Income tax paid |
|
(572) |
|
(799) |
|
Income tax received |
|
48 |
|
996 |
|
Net cash flows from operating activities |
|
7,248 |
|
8,421 |
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
Purchase of property and equipment |
|
(1,11 8 ) |
|
(319) |
|
Acquisition of and additions to domains, websites and other intangible assets |
|
( 23 , 127 ) |
|
(12,842) |
|
Acquisition of and additions to systems, software and licenses |
|
( 7 , 718 ) |
|
(6,642) |
|
Loan to a third party |
|
- |
|
(500) |
|
Adjustments of proceeds from the sale of discontinued operation |
|
- |
|
(270) |
|
Acquisition of subsidiary, net of cash acquired |
|
(395) |
|
- |
|
Short-term and long-term deposits, net |
|
507 |
|
91 1 |
|
Net cash flows used in investing activities |
|
(31, 85 1) |
|
(19,662) |
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
Share capital issuance |
|
35,806 |
|
- |
|
Proceeds from exercise of share options |
|
11 |
|
- |
|
Acquisition of non-controlling interest |
|
- |
|
(472) |
|
Dividend paid to non-controlling interests |
|
- |
|
(261) |
|
Repayment of long and short-term liability |
|
- |
|
(1,500) |
|
Payment of principal portion of lease liabilities |
|
(1,163) |
|
(1,283) |
|
Net cash flows from/ (used in) financing activities |
|
34, 654 |
|
(3,516) |
|
Net increase in cash and cash equivalents |
|
10, 051 |
|
(14,757) |
|
Net foreign exchange difference |
|
(262) |
|
297 |
|
Cash and cash equivalents at 1 January |
|
12,648 |
|
27,108 |
|
Cash and cash equivalents at 31 December |
|
22,437 |
|
12,648 |
|
|
|
|
|
|
|
Significant non-cash transactions: |
|
|
|
|
|
Deferred consideration payable on acquisition of and additions to domains, websites and other intangible |
|
28,113 |
|
3,557 |
|
Right-of-use asset recognised with corresponding lease liabilities |
|
2,460 |
|
6,819 |
The accompanying notes are an integral part of the consolidated financial statements.
1. General
a. Corporate information
XLMedia PLC ("the Company") is a global performance publisher listed on the London Stock Exchange Alternative Investment Market (AIM) since March 2014. The Company was incorporated in Jersey and commenced its operations in 2012. The Company's registered office is in 12 Castle Street St. Helier Jersey,
JE2 3RT. XLMedia PLC and its consolidated subsidiaries ("the Group") owns and operates more than 100 premium branded websites across various sectors, including Personal Finance, Sports and Casino. Headquartered in the United Kingdom, with a significant presence in the United States. The Company has a long track record of success in digital publishing and performance marketing, working with some of the world's largest advertisers. XLMedia PLC is focused on regulated, high growth markets.
b. Definitions
In these financial statements
|
EUR |
- |
E uro |
|
GBP |
- |
British Pound Sterling |
|
IFRS |
- |
International Financial Reporting Standards as adopted by the European Union |
|
NIS |
- |
New Israeli Shekel |
|
Related parties |
- |
As defined in IAS 24 |
|
Subsidiaries |
- |
Entities controlled (as defined in IFRS 10) by the Company and whose accounts are consolidated with those of the Company. For a list of the main subsidiaries, see Note 21 |
|
U.S. |
- |
United States |
|
U.K. |
- |
United Kingdom |
|
USD/$
|
- |
U.S. dollar, all values are rounded to the nearest thousand ($000), except when otherwise indicated |
c. Significant changes in the current reporting period
The financial position and performance of the Group was particularly affected by the following events and transactions during the reporting period:
- The acquisition of Sports Betting Dime in March 2021 (Note 7).
- The acquisition of Saturday Football Inc. (Note 7) and Blueclaw Media Ltd ("Blueclaw") in September 2021 (Note 16).
- The Company elected to change the presentation of its expenses in its consolidated statement of profit or loss from a classification based on function to classification based on the nature of expense. Group management believes that this presentation provides reliable and more relevant information because due to a change in the operating model of the Group, the new presentation provides greater clarity and insight into the major categories of expenses and the key cost drivers of the Company's business. This change has been applied retrospectively to the prior year's comparative information.
The spread of Coronavirus continues to impact the Group's operations. The Group has a well-balanced portfolio of assets. The Group is continually monitoring and responding to the outbreak's potential impact.
2. Significant accounting policies
The following accounting policies have been applied consistently in the financial statements for all periods presented unless otherwise stated.
2. Significant accounting policies continued
a. Basis of presentation of the consolidated financial statements
i. Compliance with IFRS
The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) adopted by the European Union. And as issued by the International Accounting Standards Board (IASB) and in accordance with the requirements of the Companies (Jersey) Law 1991.
ii. Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following:
- certain financial assets and liabilities (including derivative instruments) and certain property, plant and equipment - measured at fair value or revalued amount, and
- assets held for sale - measured at the lower of carrying amount and fair value less costs to sell.
b. Consolidated financial statements
The consolidated financial statements comprise the financial statements of companies that are controlled by the Company (subsidiaries). Control is achieved when the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Potential voting rights are considered when assessing whether an entity has control. The consolidation of the financial statements commences on the date on which control is obtained and ends when such control ceases.
The financial statements of the Company and of the subsidiaries are prepared as of the same dates and periods. The consolidated financial statements are prepared using uniform accounting policies by all companies in the Group. Significant intragroup balances and transactions and gains or losses resulting from intragroup transactions are eliminated in full in the consolidated financial statements.
Non-controlling interests in subsidiaries represent the equity in subsidiaries not attributable, directly or indirectly, to a parent. Non-controlling interests are presented in equity separately from the equity attributable to the equity holders of the Company. Profit or loss and components of other comprehensive income are attributed to the Company and to non-controlling interests. A change in the ownership interest of a subsidiary without a change of control is accounted for as an equity transaction in accordance with IFRS 10.
c. Business combinations and goodwill
Business combinations are accounted for by applying the acquisition method. The consideration transferred for the acquisition of a subsidiary comprises the:
- fair values of the assets transferred
- liabilities incurred to the former owners of the acquired business
- equity interests issued by the Group
- fair value of any asset or liability resulting from a contingent consideration arrangement, and
- fair value of any pre-existing equity interest in the subsidiary.
The cost of the acquisition is measured at the fair value of the consideration transferred on the date of acquisition with the addition of non-controlling interests in the acquiree. In each business combination, the Company chooses whether to measure the non-controlling interests in the acquiree based on their fair value on the date of acquisition or at their proportionate share in the fair value of the acquiree's net identifiable assets. Direct acquisition costs are expensed as incurred.
2. Significant accounting policies continued
Contingent consideration is recognised at fair value on the acquisition date and classified as a financial asset or liability in accordance with IFRS 9. Subsequent changes in the fair value of the contingent consideration are recognised in profit or loss. If the contingent consideration is classified as an equity instrument, it is measured at fair value on the acquisition date without subsequent remeasurement.
Goodwill is initially measured at cost, which represents the excess of the acquisition consideration and the
amount of non-controlling interests over the net identifiable assets acquired and liabilities assumed. If the
resulting amount is negative, the acquirer recognises the resulting gain on the acquisition date. After initial recognition, goodwill is measured at cost less any accumulated impairment losses.
d. Functional currency, presentation currency and foreign currency
Functional currency and presentation currency
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are presented in USD, which is the Group's functional and presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions, and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates, are generally recognised in profit or loss. They are deferred in equity if they relate to qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation. Foreign exchange gains and losses that relate to borrowings are presented in the statement of profit or loss, within finance costs. All other foreign exchange gains and losses are presented in the statement of profit or loss on a net basis within other gains/(losses).
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss.
Group companies
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
i. assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet,
ii. income and expenses for each statement of profit or loss and statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and
iii. all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When a foreign operation is sold or any borrowings forming part of the net
2. Significant accounting policies continued
investment are repaid, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.
e. Cash equivalents
Cash is cash on hand and demand deposits. Cash equivalents are highly liquid investments, including unrestricted short-term bank deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value. Investments normally only qualify as cash equivalent if they have a short maturity of three months or less from the date of acquisition.
f. Short-term and long-term deposits
Short-term bank deposits are deposits with an original maturity of more than three months from the investment date and do not meet the definition of cash equivalents. Long-term deposits are deposits with a maturity of more than twelve months from the reporting date. The deposits are presented according to their terms of deposit.
g. Revenue recognition
The Group generates revenues mainly from referred players who visit the Group's premium branded websites. The main revenue streams are: cost per acquisition ("CPA"), revenue-share fees or a combination of both, which is referred to as a hybrid.
CPA fees are fixed-rate fees owed for each player who registers and usually deposits a minimum balance on the operator's site, and they are recognised when earned upon acceptance of the referral by the operator.
Revenue-share fees represent a set percentage of net revenues generated over the lifetime of the referred player. The Group has no material obligations for discounts, incentives or refunds of commissions subsequent to completion of performance obligations.
Deferred revenues are recorded when payments are received from customers in advance of the Company's rendering of services.
h. Taxes on income
Current or deferred taxes are recognised in profit or loss, except to the extent that they relate to items that are recognised in other comprehensive income or equity.
Current taxes
The current tax liability is measured using the tax rates and tax laws that have been enacted or substantively enacted by the reporting date, as well as adjustments required in connection with the tax liability in respect of previous years.
Deferred taxes
Deferred taxes are computed in respect of temporary differences between the carrying amounts in the financial statements and the amounts attributed for tax purposes. Deferred taxes are measured at the tax
2. Significant accounting policies continued
rate that is expected to apply when the asset is realised or the liability is settled based on tax laws that have been enacted or substantively enacted by the reporting date.
Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is not probable that they will be utilised. Deductible temporary differences for which deferred tax assets had not been recognised are reviewed at each reporting date, and a respective deferred tax asset is recognised to the extent that their utilisation is probable. Taxes that would apply in the event of the disposal of investments in investees have not been taken into account in computing deferred taxes, as long as the disposal of the investments in investees is not probable in the foreseeable future. Also, deferred taxes that would apply in the event of distribution of earnings by investees as dividends have not been taken into account in computing deferred taxes, since the distribution of dividends does not involve an additional tax liability or since it is the Group's policy not to initiate distribution of dividends from a subsidiary that would trigger an additional tax liability.
Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against current tax liability, and the deferred taxes relate to the same taxpayer and the same taxation authority.
i. Leases
The Group accounts for a contract as a lease when the contract terms convey the right to control the use of an identified asset for a period of time in exchange for consideration.
Recognition of assets and liabilities
For leases in which the Group is the lessee, the Group recognises on the commencement date of the lease a right-of-use asset and a lease liability, excluding leases whose term is up to 12 months and leases for which the underlying asset is of low value. For these excluded leases, the Group has elected to recognise the lease payments as an expense in profit or loss on a straight-line basis over the lease term. In measuring the lease liability, the Group has elected to apply the practical expedient and does not separate the lease components from the non-lease components (such as management and maintenance services, etc.) included in a single contract. On the commencement date, the lease liability includes all unpaid lease payments discounted at the interest rate implicit in the lease, if that rate can be readily determined, or otherwise using the Group's incremental borrowing rate. After the commencement date, the Group measures the lease liability using the effective interest rate method. The right-of-use asset is recognised in an amount equal to the lease liability plus lease payments already made on or before the commencement date and initial direct costs incurred. The right-of-use asset is measured applying the cost model and depreciated over the shorter of its useful life or the lease term (see j below). The Group tests for impairment of the right-of-use asset whenever there are indications of impairment pursuant to the provisions of IAS 36.
Variable lease payments that depend on an index
The Group uses the index rate prevailing on the commencement date to calculate the future lease payments. For leases in which the Group is the lessee, the aggregate changes in future lease payments resulting from a change in the index are discounted (without a change in the discount rate applicable to the lease liability) and recorded as an adjustment of the lease liability and the right-of-use asset, only when there is a change in the cash flows resulting from the change in the index (that is, when the adjustment to the lease payments takes effect).
2. Significant accounting policies continued
Lease extension and termination options
A non-cancellable lease term includes both the periods covered by an option to extend the lease when it is reasonably certain that the extension option will be exercised and the periods covered by a lease termination option when it is reasonably certain that the termination option will not be exercised.
In the event of any change in the expected exercise of the lease extension option or in the expected non-exercise of the lease termination option, the Group remeasures the lease liability based on the revised lease term using a revised discount rate as of the date of the change in expectations. The total change is recognised in the carrying amount of the right-of-use asset until it is reduced to zero, and any further reductions are recognised in profit or loss.
Lease modifications
If a lease modification does not reduce the scope of the lease and does not result in a separate lease, the Group remeasures the lease liability based on the modified lease terms using a revised discount rate as of the modification date and records the change in the lease liability as an adjustment to the right-of-use asset. If a lease modification reduces the scope of the lease, the Group recognises a gain or loss arising from the partial or full reduction of the carrying amount of the right-of-use asset and the lease liability. The Group subsequently remeasures the carrying amount of the lease liability according to the revised lease terms at the revised discount rate as of the modification date and records the change in the lease liability as an adjustment to the right-of-use asset.
j. Property and equipment
Property and equipment are measured at cost, including directly attributable costs less accumulated depreciation. Depreciation is calculated on a straight-line basis over the useful life of the assets at annual rates as follows:
|
| Mainly % |
Office furniture and equipment |
| 10 |
Computers and peripheral equipment |
| 33 |
Right of use leased assets and leasehold improvement (over the lease term) |
| 10 - 15 |
Right of use leased assets, and leasehold improvements are depreciated on a straight-line basis over the shorter lease term (including any extension option held by the Group and intended to be exercised) and the asset's expected life. The useful life, depreciation method and residual value of an asset are reviewed at least each year-end and any changes are accounted for prospectively as a change in accounting estimate.
Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale and the
date that the asset is derecognised. An asset is derecognised on disposal or when no further economic benefits are expected from its use.
k. Intangible assets
Separately acquired intangible assets are measured on initial recognition at cost, including directly attributable costs. Intangible assets acquired in a business combination are measured at fair value at the acquisition date. Expenditures relating to internally generated intangible assets, excluding capitalised development costs, are recognised in profit or loss when incurred. Intangible assets with a finite useful life are amortised over their useful life and reviewed for impairment whenever there is an indication that the asset may be impaired. The amortisation period and the amortisation method for an intangible asset are reviewed at least at each year-end.
2. Significant accounting policies continued
Intangible assets (domains and websites) with indefinite useful lives are not systematically amortised and are tested for impairment annually or whenever there is an indication that the intangible asset may be impaired. The useful life of these assets is reviewed annually to determine whether their indefinite life assessment continues to be supportable. If the events and circumstances do not continue to support the assessment, the change in the useful life assessment from indefinite to finite is accounted for prospectively as a change in accounting estimate and on that date, the asset is tested for impairment. Commencing from that date, the asset is amortised systematically over its useful life.
Research expenditures are recognised in profit or loss when incurred. An intangible asset arising from a development project or from the development phase of an internal project is recognised if the Group can demonstrate: the technical feasibility of completing the intangible asset so that it will be available for use or sale; the Company's intention to complete the intangible asset and use or sell it; the Company's ability to use or sell the intangible asset; how the intangible asset will generate future economic benefits; the availability of adequate technical, financial and other resources to complete the intangible asset; and the Company's ability to measure reliably the expenditure attributable to the intangible asset during its development. The asset is measured at cost less any accumulated amortisation and any accumulated impairment losses. Amortisation of the asset begins when development is completed and the asset is available for use. The asset is amortised over its useful life. Testing of impairment is performed annually over the period of the development project.
The Group's assets include computer systems comprising hardware and software. Software forming an integral part of the hardware to the extent that the hardware cannot function without the programs installed on it is classified as property and equipment. In contrast, software that adds functionality to the hardware is classified as an intangible asset.
Systems and software (purchased and in-house development cost) are amortised on a straight-line basis over the useful life of three years. Non-competition and Agencies Relationships is amortised on a straight-line basis over the agreement term (between 2 to 3 years).
l. Impairment of non-financial assets
The Group evaluates the need to record an impairment of the carrying amount of non-financial assets whenever events or changes in circumstances indicate that the carrying amount is not recoverable.
If the carrying amount of the cash-generating unit of the non-financial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverable amount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using a pre-tax discount rate that reflects the risks specific to the asset.
The recoverable amount of an asset that does not generate independent cash flows is determined for the cash-generating unit to which the asset belongs. Impairment losses are recognised in profit or loss. An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. Reversal of an impairment loss, as above, shall not be increased above the lower of the carrying amount that would have been determined (net of depreciation or amortisation) had no impairment loss been recognised for the asset in prior years and its recoverable amount. The reversal of impairment loss of an asset presented at cost is recognised in profit or loss.
2. Significant accounting policies continued
Goodwill is tested for impairment by assessing the recoverable amount of the cash-generating unit (or Group of cash-generating units) to which the goodwill has been allocated. An impairment loss is recognised if the recoverable amount of the cash-generating unit (or Group of cash-generating units) to which goodwill has been allocated is less than the carrying amount of the cash-generating unit (or Group of cash-generating units). Any impairment loss is allocated first to goodwill. Impairment losses recognised for goodwill cannot be reversed in subsequent periods.
Goodwill - The Company reviews goodwill and intangible assets with indefinite useful life that are not systematically amortised (domains and websites) for impairment annually on 31 December, or more frequently if events or changes in circumstances indicate that there is a need for such review.
m. Financial instruments
i. Financial assets
Financial assets are measured upon initial recognition at fair value plus transaction costs directly attributable to the acquisition of the financial assets, except for financial assets measured at fair value through profit or loss in respect of which transaction costs are recorded in profit or loss.
The Company classifies and measures debt instruments in the financial statements based on the following criteria:
- the Company's business model for managing financial assets; and
- the contractual cash flow terms of the financial asset.
Debt instruments measured at amortised cost
The Company's business model is to hold the financial assets in order to collect their contractual cash flows, and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. After initial recognition, the
instruments in this category are measured according to their terms at amortised cost using the effective interest rate method, less any provision for impairment.
Financial assets held for trading
Financial assets held for trading (derivatives) are measured through profit or loss unless they are designated as effective hedging instruments.
ii. Impairment of financial assets
The Company reviews at the end of each reporting period the provision for loss of financial debt instruments which are measured at amortised cost. The Company has short-term trade receivables in respect of which the Company applies a simplified approach and measures the loss allowance in an amount equal to the lifetime expected credit losses. An impairment loss on debt instruments measured at amortised cost is recognised in profit or loss with a corresponding loss allowance that is offset from the carrying amount of the financial asset.
iii. Derecognition of financial assets
A financial asset is derecognised when the contractual rights to the cash flows from the financial asset expire.
2. Significant accounting policies continued
iv. Financial liabilities
Financial liabilities are initially recognised at fair value less transaction costs that are directly attributable to the issue of the financial liability. After initial recognition, the Company measures all financial liabilities at amortised cost using the effective interest rate method, except for:
- financial liabilities at fair value through profit or loss such as derivatives; and
- contingent consideration recognised by the buyer in a business combination within the scope of IFRS 3.
At initial recognition, the Company measures financial liabilities that are not measured at amortised cost at fair value. Transaction costs are recognised in profit or loss. After initial recognition, changes in fair value are recognised in profit or loss.
v. Derecognition of financial liabilities
A financial liability is derecognised only when it is extinguished, that is when the obligation is discharged or cancelled or expires.
n. Fair value measurement
Fair value is the price to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurement is based on the assumption that the transaction will take place in the asset's or the liability's principal market, or in the absence of a principal market, in the most advantageous market.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities measured at fair value or for which fair value is disclosed are categorised into levels within the fair value hierarchy based on the lowest level input that is significant to the entire fair value measurement:
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 either directly or indirectly. |
Level 3 | - | inputs that are not based on observable market data (valuation techniques that use inputs that are not based on observable market data). |
o. Provisions
A provision in accordance with IAS 37 is recognised when the Group has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects part or all of the expense to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense is recognised in profit or loss net of the reimbursed amount.
p. Employee benefit liabilities
Short-term employee benefits include salaries, paid sick leave, recreation and social security contributions and are recognised as expenses as the services are rendered. Liability in respect of a cash bonus or a profit-sharing plan is recognised when the Group has a legal or constructive obligation to make such payment as a result of past service rendered by an employee, and a reliable estimate of the amount can be made.
2. Significant accounting policies continued
Post-employment benefits are financed by contributions to insurance companies or pension funds and classified as defined contribution plans. The Israeli subsidiaries of the Group have defined contribution plans pursuant to Section 14 to the Severance Pay Law under which the subsidiary pays fixed contributions and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient amounts to pay all employee benefits relating to employee service in the current and prior periods.
Contributions to the defined contribution plan in respect of severance or retirement pay are recognised as an expense when contributed concurrently with the performance of the employee's services.
q. Share-based payment transactions
The Group's employees and officers are entitled to remuneration in the form of equity-settled share-based payment transactions. The cost of equity-settled transactions is measured at the fair value of the equity instruments granted at the grant date. The fair value is determined using an acceptable option pricing model (also see Note 13). In estimating fair value, the vesting conditions (consisting of service conditions and performance conditions other than market conditions) are not taken into account. The cost of equity-settled transactions is recognised in profit or loss together with a corresponding increase in equity during the period which the performance is to be satisfied ending on the date on which the relevant employees or officers become entitled to the award ("the vesting period"). The cumulative expense recognised for equity-settled transactions at the end of each reporting period until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) are satisfied.
r. Earnings per share
Earnings per share are calculated by dividing the net income attributable to equity holders of the Company by the weighted average number of Ordinary Shares outstanding during the period. The Company's
share of earnings of investees is included based on the earnings per share of the investees multiplied by the number of shares held by the Company. If the number of Ordinary Shares outstanding increases as a result of a capitalisation, bonus issue, or share split, the calculation of earnings per share for all periods presented are adjusted retrospectively. Potential Ordinary shares are included in the computation of diluted earnings per share when their conversion decreases earnings per share from continuing operations. Potential Ordinary shares that are converted during the period are included in diluted earnings per share only until the conversion date and from that date in basic earnings per share.
3. Significant accounting judgements, estimates and assumptions
Estimations and assumptions
The preparation of the financial statements requires management to make estimates and assumptions that have an effect on the application of the accounting policies and on the reported amounts of assets, liabilities, revenues and expenses. Changes in accounting estimates are reported in the period of the change in estimate. The key assumptions made in the financial statements concerning uncertainties at the end of the reporting period and the critical estimates computed by the Group that may result in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
3. Significant accounting judgements, estimates and assumptions continued
Impairment of domains and websites
The Group reviews domains and websites for impairment at least once a year. This requires management to make an estimate of the projected future cash flows from the continuing use of the cash-generating units to which the assets are allocated and also to choose a suitable discount rate for those cash flows (see Note 7).
Income taxes
The Group is subject to income tax in various jurisdictions, and judgment is required in determining the provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination may be uncertain. The Group recognises tax liabilities based on assumptions supported by, among others, transfer price studies. The Group believes that its accruals for tax liabilities are adequate for all open audit years based on its assessment of many factors, including past experience and interpretations of tax law (see Note 15).
4. Short-term and long-term deposits as at 31 December
|
|
|
| 2021 |
| 2020 |
|
|
|
| $000 |
| $000 |
Short-term deposits |
|
|
|
|
|
|
Held in USD |
|
|
| 500 |
| 850 |
Held in NIS |
|
|
| 1,653 |
| 373 |
Held in EUR |
|
|
| 5 |
| 5 |
|
|
|
| 2,158 |
| 1,228 |
Long-term deposits |
|
|
|
|
|
|
Held in NIS |
|
|
| - |
| 1,478 |
Held in EUR |
|
|
| 83 |
| - |
|
|
|
| 83 |
| 1,478 |
Short-term deposits carried a weighted average interest rate of 0.01% for 2021 and 2020.
Short-term deposits have fixed liens in relation to bank guarantees for the Israel office lease and the financial derivatives (Note 11). The long-term deposits have a fixed lien in relation to a bank guarantee for the Cyprus office lease.
5. Trade and other receivables
Trade receivables as at 31 December
|
| 2021 |
| 2020 |
|
| $000 |
| $000 |
|
|
|
|
|
Receivables from third party customers |
| 9,046 |
| 6,867 |
Allowance for expected credit losses |
| (345) |
| (1,075) |
|
| 8,701 |
| 5,792 |
As at 31 December 2021, the Group has no material amounts that are past due and are not impaired. Changes in the allowance for expected credit losses are included in administrative expenses, decreased by $730,000 (2020: $164,000 increase). See Note 11b(ii) on the credit risk of trade receivables.
5. Trade and other receivables continued
Other receivables as at 31 December
|
| 2021 |
| 2020 |
|
| $000 |
| $000 |
|
|
|
|
|
Government authorities |
| 3,024 |
| 2,357 |
Prepaid expenses |
| 1,969 |
| 2,721 |
Assets held for salei |
| 391 |
| - |
Loan to a third partyii |
| 234 |
| 500 |
Financial derivatives (Note 11) |
| 84 |
| - |
Other receivables |
| 417 |
| - |
|
| 6,119 |
| 5,578 |
i. Asset held for sale relates to upcoming termination of the Israel office lease.
ii. In December 2020, the Company lent $500,000 to a third party which is repayable in the next 12 months. Due to the short-term nature of the loan, the carrying amount of the loan is considered to be the same as the fair value. The loan carries an interest rate of 5%.
6. Property and equipment
|
| Computers, furniture, office equipment and others |
| Leasehold improvements |
| Right of use leased assets - Offices (see note 10) |
| Total |
|
| $000 |
| $000 |
| $000 |
| $000 |
Cost |
|
|
|
|
|
|
|
|
At 1 January 2020 |
| 2,816 |
| 538 |
| 9,671 |
| 13,025 |
Additions |
| - |
| - |
| 472 |
| 472 |
Acquisitions during the year |
| 309 |
| 21 |
| - |
| 330 |
Adjustments for indexation |
| - |
| - |
| (12) |
| (12) |
Decreases during the year: |
|
|
|
|
|
|
|
|
Termination of leases |
| - |
| - |
| (6,806) |
| (6,806) |
At 31 December 2020 |
| 3,125 |
| 559 |
| 3,325 |
| 7,009 |
Acquisitions during the year |
| 775 |
| 371 |
| 5,922 |
| 7,068 |
Adjustments for indexation |
| - |
| - |
| 191 |
| 191 |
Decreases during the year: |
|
|
|
|
|
|
|
|
Termination of leases |
| - |
| - |
| (4,643) |
| (4,643) |
Other disposalsi |
| (3,215) |
| (589) |
| - |
| (3,804) |
At 31 December 2021 |
| 685 |
| 341 |
| 4,795 |
| 5,821 |
|
|
|
|
|
|
|
|
|
Accumulated depreciation |
|
|
|
|
|
|
|
|
At 1 January 2020 |
| 2,008 |
| 259 |
| 1,327 |
| 3,594 |
Depreciation during the year |
| 723 |
| 300 |
| 1,320 |
| 2,343 |
At 31 December 2020 |
| 2,731 |
| 559 |
| 2,647 |
| 5,937 |
Depreciation during the year |
| 366 |
| 19 |
| 1,498 |
| 1,883 |
Termination of leases |
| - |
| - |
| )990( |
| )990( |
Other disposalsi |
| )2,847( |
| )563( |
| - |
| )3,410( |
At 31 December 2021 |
| 250 |
| 15 |
| 3,155 |
| 3,420 |
|
|
|
|
|
|
|
|
|
Net book value At 31 December 2021 |
| 435 |
| 326 |
| 1,640 |
| 2,401 |
At 31 December 2020 |
| 394 |
| - |
| 678 |
| 1,072 |
i. In September 2021, the Company announced the migration of all audience-centric functions, except Casino to outside Israel, moving closer to target audiences. Following this announcement, all the relevant fixed assets were disposed.
7. Intangible assets and goodwill
|
| Goodwill |
| Domains and websites |
| Agencies Relationships |
| Systems, software and licenses |
| Total |
|
| $000 |
| $000 |
| $000 |
| $000 |
| $000 |
Cost or valuation |
|
|
|
|
|
|
|
|
|
|
At 1 January 2020 |
| 30,052 |
| 94,366 |
| - |
| 33,694 |
| 158,112 |
Additions |
| - |
| 16,681 |
| 232 |
| 1,472 |
| 18,385 |
Additions - internally developed |
| - |
| - |
| - |
| 5,170 |
| 5,170 |
At 31 December 2020 |
| 30,052 |
| 111,047 |
| 232 |
| 40,336 |
| 181,667 |
Additions |
| - |
| 51,240 |
| - |
| 3,400 |
| 54,640 |
Acquisition of a subsidiary (Note 16) |
| 2,063 |
| - |
| 484 |
| - |
| 2,547 |
Additions - internally developed |
| - |
| - |
| - |
| 4,318 |
| 4,318 |
At 31 December 2021 |
| 32,115 |
| 162,287 |
| 716 |
| 48,054 |
| 243,172 |
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortisation and impairment: |
|
|
|
|
|
|
|
|
|
|
At 1 January 2020 |
| 30,052 |
| 54,151 |
| - |
| 27,266 |
| 111,469 |
Amortisation |
| - |
| - |
| 8 |
| 5,369 |
| 5,377 |
Impairment loss |
| - |
| 955 |
| - |
| - |
| 955 |
At 31 December 2020 |
| 30,052 |
| 55,106 |
| 8 |
| 32,635 |
| 117,801 |
Amortisation |
| - |
| - |
| 193 |
| 4,894 |
| 5,087 |
At 31 December 2021 |
| 30,052 |
| 55,106 |
| 201 |
| 37,529 |
| 122,888 |
|
|
|
|
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
|
|
|
|
|
At 31 December 2021 |
| 2,063 |
| 107,181 |
| 515 |
| 10,525 |
| 120,284 |
At 31 December 2020 |
| - |
| 55,941 |
| 224 |
| 7,701 |
| 63,866 |
Main additions during the year
The Company acquired domains and websites, including Sports Betting Dime and Saturday Football inc. and accounted for these as an asset acquisition since substantially all of the fair value of the intangible assets acquired was in a group of similar identifiable assets. The Company recognises a liability for the intangible assets acquired for contingent consideration only when there is sufficient certainty that the liability will be settled. Total domains and websites acquired were $51,240,000 (2020: $16,681,000), including $3,000,000 related to CB Sports and Warwick Gaming contingent payment for the year ended 31 December 2021. The potential future contingent consideration, for these assets is up to an additional $8,500,000 (2020: $10,500,000) payable for the period of 2022-2024. the acquisition cost also includes deferred consideration of $25,091,000 which is payable in the period of 2022-2024.
Carrying amounts of intangible assets with an indefinite useful life
In 2021, due to changes in the Company's operational model, the Company re-evaluated its cash generating units ("CGU's") and how those should be reported. The table below summarises the carrying amounts of goodwill and domains and websites as at 31 December 2021:
|
| Goodwill |
| Domains and websites | ||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
|
| $000 |
| $000 |
| $000 |
| $000 |
|
|
|
|
|
|
|
|
|
Sports U.S. |
| - |
| - |
| 67,102 |
| 15,862 |
Sports Europe |
| - |
| - |
| 12,539 |
| 12,539 |
Personal finance |
| - |
| - |
| 13,835 |
| 13,835 |
Casino |
| - |
| - |
| 13,705 |
| 13,705 |
Performance agency |
| 2,063 |
| - |
| - |
| - |
|
| 2,063 |
| - |
| 107,181 |
| 55,941 |
7. Intangible assets and goodwill continued
In January 2020, 107 of the Group's sites were demoted in search results by Google, of which 23 were premium sites. The demotion of the sites had a material impact on the Group's future revenues. The Company recorded an impairment loss of $955,000, which is included in the statement of profit or loss.
The Group tests goodwill and intangible assets with indefinite useful life for impairment annually. Intangible assets are grouped into CGUs to determine their value in use and compared that to their carrying value to assess if impairment exists. The key assumptions used in calculating the value in use:
- The calculations use cash flow projections based on financial budgets approved by management covering a four-year period. Revenues and the profit rate assumptions are based on management expectations and forecasts for the coming years. These forecasts included an evaluation of those specific sites that suffered a demotion or other factors which could adversely affect revenues and profitability.
- Cash flows beyond the four-year period are extrapolated using the estimated terminal growth rate of 3%. This growth rate is based on the long-term average growth rate as customary in similar industries.
- The discount rate reflects management's assumptions regarding the Group's specific risk premium.
- The pre-tax discount rate that was applied for the cash flow projection was 15%.
The Group concluded that the recoverable amount is in excess of the asset's carrying amount. Consequently, the Group concluded that no impairment exists as of 31 December 2021. Regarding the Personal finance vertical, an increase of 1% in the pre-tax discount rate will create an impairment loss.
8. Other liabilities and accounts payable as at 31 December
|
| 2021 |
| 2020 |
|
| $000 |
| $000 |
|
|
|
|
|
Employees and payroll accruals |
| 3,311 |
| 4,776 |
Accrued expenses |
| 2,264 |
| 3,108 |
Deferred revenues |
| 2,031 |
| 185 |
Government authorities |
| 199 |
| 435 |
Other liabilities |
| 15 |
| 265 |
|
| 7,820 |
| 8,769 |
9. Loans from the bank
In June 2018, a subsidiary of the Company received a loan from a bank for $6,000,000. Fixed charges have been placed on the subsidiary's share capital and goodwill and floating charges on the subsidiary's assets. The loan is repayable in 24 equal instalments and carries an interest rate of USD Libor +4.4%. The loan was repaid in full on 30 June 2020.
10.Lease liabilitiesas at 31 December
|
| 2021 |
| 2020 |
|
| $000 |
| $000 |
|
|
|
|
|
Lease liabilities |
| 1,553 |
| 690 |
Less - current maturities |
| 311 |
| 324 |
|
| 1,242 |
| 366 |
The Group recorded fixed liens on bank deposits in connection with these agreements (see Note 4).
10.Lease liabilities as at 31 Decembercontinued
In 2020, the Company decided not to exercise an option to renew a lease, which renewal period was originally included in the determination of the lease liabilities and corresponding right-of-use assets in the 2019 consolidated financial statements. Accordingly, the Company derecognised the lease liabilities by
$7,695,000 and the related right-of-use and other assets by $6,573,000. The impact on the profit before taxes on income was $1,122,000 and recorded as other income.
In December 2020, the Company signed three new real estate lease agreements. The leases commencement dates were 31 December 2020, 1 January 2021 and 15 February 2021. The impact for 2020 is an increase in the Group's total assets and liabilities of $500,000.
In December 2021, the Company decided to terminate two of three signed leases from 2020. Accordingly, the Company remeasured the U.K. lease liability based on the revised lease term using a revised discount rate as of the date of the change in expectations. The total change is recognised in the carrying amount of the right-of-use asset until it is reduced to zero, and any further reductions are recognised in profit or loss. And for the Israeli lease, the Company derecognised the remaining balances of the lease right-of-use asset and lease liability in December 2021. The impact of profit and loss is a profit of $437,000.
11. Financial instruments
a. Classification of financial assets and liabilities
The financial assets and financial liabilities in the statement of financial position are classified by groups of
financial instruments as follows as at 31 December:
|
| 2021 |
| 2020 |
|
| $000 |
| $000 |
Financial assets |
|
|
|
|
Financial assets at fair value through profit or loss: |
|
|
|
|
Financial derivatives |
| 84 |
| - |
Financial assets measured at amortised cost: |
|
|
|
|
Cash and cash equivalents |
| 22,437 |
| 12,648 |
Short-term and long-term deposits |
| 2,241 |
| 2,706 |
Trade receivables |
| 8,701 |
| 5,792 |
Other receivables |
| 1,100 |
| 500 |
Total financial assets |
| 34,563 |
| 21,646 |
Total non-current |
| 83 |
| 1,478 |
Total current |
| 34,480 |
| 20,168 |
|
|
|
|
|
Financial liabilities |
|
|
|
|
Financial assets at fair value through profit or loss: |
|
|
|
|
Financial derivatives |
| - |
| 304 |
Contingent consideration |
| 808 |
| - |
|
|
|
|
|
Financial liabilities measured at amortised cost: |
|
|
|
|
Trade payables |
| 2,333 |
| 2,000 |
Deferred consideration |
| 26,138 |
| - |
Consideration payable on intangible assets |
| 3,000 |
| - |
Other liabilities and account payables |
| 5,588 |
| 7,594 |
Lease liabilities |
| 1,553 |
| 690 |
Total financial liabilities |
| 39,420 |
| 10,588 |
Total non-current |
| 9,787 |
| 366 |
Total current |
| 29,633 |
| 10,222 |
11. Financial instrumentscontinued
b. Financial risks factors
The Group's activities expose it to various financial risks.
i. Market risk - Foreign exchange risk
A significant portion of the Group's revenues is received in EUR. The Group also has revenues that are received in GBP. A significant portion of the Israeli subsidiaries` expenses are paid in NIS. Therefore, the Group is exposed to fluctuations in the foreign exchange rates in EUR, GBP and NIS against the USD.
Financial derivatives
The Company entered into forward or options contracts with the intention to reduce the foreign exchange risk of forecasted cash flows. These contracts are not designated as hedges for accounting purposes and are measured at fair value through profit or loss. For the year ended 31 December 2021, the Group recorded foreign exchange rate gains of $270,000 (2020: $318,000). As at 31 December 2021, the Group bought put option and sold call option for the sale of USD in exchange for NIS in nominal amount of totaling $2,700,000 (NIS 9,000,000) for the period until the end of March 2022.
ii. Credit risk
The Group usually extends 30-60 days term to its customers. The Group regularly monitors the credit extended to its customers and their general financial condition but does not require collateral as security for these receivables. The Group maintains cash and cash equivalents, short-term and long-term investments in various financial institutions. These financial institutions are located in the EU, Israel and U.S.
iii. Liquidity risk
The table below summarises the maturity profile of the Group's financial liabilities based on contractual
undiscounted payments (including interest payments):
|
| Less than one year |
| 1 to 2 years |
| 2 to 3 years |
| 3 to 4 years |
| > 4 years |
| Total |
|
| $000 |
| $000 |
| $000 |
| $000 |
| $000 |
| $000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade payables |
| 2,333 |
| - |
| - |
| - |
| - |
| 2,333 |
Other liabilities and account payables |
| 5,588 |
| - |
| - |
| - |
| - |
| 5,588 |
Consideration payable on intangible assets |
| 3,000 |
| - |
| - |
| - |
| - |
| 3,000 |
Contingent consideration |
| - |
| 410 |
| 410 |
| - |
| - |
| 820 |
Deferred consideration |
| 18,520 |
| 4,000 |
| 4,000 |
| - |
| - |
| 26,520 |
Lease liabilities |
| 352 |
| 183 |
| 169 |
| 167 |
| 809 |
| 1,680 |
At 31 December 2021 |
| 29,793 |
| 4,593 |
| 4,579 |
| 167 |
| 809 |
| 39,941 |
|
| Less than one year |
| 1 to 2 years |
| 2 to 3 years |
| 3 to 4 years |
| > 4 years |
| Total |
|
| $000 |
| $000 |
| $000 |
| $000 |
| $000 |
| $000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade payables |
| 2,000 |
| - |
| - |
| - |
| - |
| 2,000 |
Other liabilities and account payables |
| 7,594 |
| - |
| - |
| - |
| - |
| 7,594 |
Financial derivatives |
| 304 |
| - |
| - |
| - |
| - |
| 304 |
Lease liabilities |
| 331 |
| 108 |
| 108 |
| 108 |
| 108 |
| 763 |
At 31 December 2020 |
| 10,229 |
| 108 |
| 108 |
| 108 |
| 108 |
| 10,661 |
c. Fair value
The carrying amounts of the Group's financial assets and liabilities approximate their fair value. The fair value of financial derivatives are categorised within level 2 of the fair value hierarchy. The fair value of the contingent consideration is categorised within level 3 of the fair value hierarchy.
11. Financial instruments continued
d. Sensitivity tests relating to changes in market factors
|
| 2021 |
| 2020 |
Sensitivity test to changes in ERU to USD exchange rate: |
| $000 |
| $000 |
Gain (loss) from the change: |
|
|
|
|
Increase of 10% in the exchange rate |
| 143 |
| (890) |
Decrease of 10% in the exchange rate |
| (143) |
| 890 |
Sensitivity test to changes in NIS to USD exchange rate: |
|
|
|
|
Gain (loss) from the change (net of the effect of derivates): |
|
|
|
|
Increase of 10% in the exchange rate |
| 138 |
| 266 |
Decrease of 10% in the exchange rate |
| 48 |
| (266) |
Sensitivity test to changes in GBP to USD exchange rate: |
|
|
|
|
Gain (loss) from the change: |
|
|
|
|
Increase of 10% in the exchange rate |
| 488 |
| (170) |
Decrease of 10% in the exchange rate |
| (488) |
| 170 |
The sensitivity tests reflect the effects of possible changes in exchange rates on the hedging position of the Group for the above currencies as of the end of the year. As described in b.i. above, these contracts are intended to reduce the Group's exposure to fluctuations in exchange rates on future revenues and expenses. Therefore, although it is expected the above effects will be offset by contra effects upon the recording of the revenues and expenses, the timing of these effects may not coincide in the same reporting period.
Sensitivity tests and principal assumptions
The selected changes in the relevant risk variables were determined based on management's estimate as to
reasonable possible changes in these risk variables.
The Group has performed sensitivity tests of principal market risk factors that are liable to affect its
reported operating results or financial position. The sensitivity tests present the effects (before tax) on
profit or loss and equity in respect of each financial instrument for the relevant risk variable chosen for that
instrument as of each reporting date.
The test of risk factors was determined based on the materiality of the exposure of the operating results or
the financial condition of each risk with reference to the functional currency and assuming that all the other variables are constant.
The Group does not have significant exposure to interest rate risk.
11. Financial instruments continued
e. Changes in liabilities arising from financial activities
|
| Long term loans |
| Consideration payable on intangible assets |
| Contingent consideration |
| Deferred consideration |
| Lease Liabilities |
| Total |
|
| $000 |
| $000 |
| $000 |
| $000 |
| $000 |
| $000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2020 |
| 1,465 |
| - |
| - |
| - |
| 9,228 |
| 10,693 |
Finance lease obligation |
| - |
| - |
| - |
| - |
| 472 |
| 472 |
Cash flows |
| (1,500) |
| - |
| - |
| - |
| (1,635) |
| (3,135) |
Changes in exchange rates |
| - |
| - |
| - |
| - |
| (12) |
| (12) |
Termination of leases |
| - |
| - |
| - |
| - |
| (7,960) |
| (7,960) |
Other changes |
| 35 |
| - |
| - |
| - |
| 597 |
| 632 |
At 31 December 2020 |
| - |
| - |
| - |
| - |
| 690 |
| 690 |
Business combination |
| - |
| - |
| 806 |
| - |
| - |
| 806 |
Website acquisition |
| - |
| 3,000 |
| - |
| 26,138 |
| - |
| 29,138 |
Finance lease obligation |
| - |
| - |
| - |
| - |
| 5,844 |
| 5,844 |
Cash flows |
| - |
| - |
| - |
| - |
| (1,163) |
| (1,163) |
Changes in interest expense |
| - |
| - |
| 2 |
| - |
| 75 |
| 77 |
Termination of leases |
| - |
| - |
| - |
| - |
| (3,783) |
| (3,783) |
Other changes |
| - |
| - |
| - |
| - |
| (110) |
| (110) |
At 31 December2021 |
| - |
| 3,000 |
| 808 |
| 26,138 |
| 1,553 |
| 31,499 |
12. Equity
Composition of share capital
|
| 2021 |
| 2020 |
|
| Thousands |
| Thousands |
Authorised shares |
|
|
|
|
Ordinary Shares with a nominal value of $0.000001 each |
| 100,000,000 |
| 100,000,000 |
|
|
|
|
|
|
|
|
|
|
|
| Thousands |
| $000 |
Ordinary shares issued and outstanding including share premium *) |
|
|
|
|
At 1 January 2020 |
| 216,862 |
| 112,624 |
Cancelled in April 2020, shares held in treasury |
| (33,223) |
| (30,159) |
Issued in December for the consideration of the acquisition of a website |
| 7,955 |
| 3,557 |
At 31 December 2020 |
| 191,594 |
| 86,022 |
Issued in March and April 2021 for the consideration of the acquisition of a website. The transaction costs were $1,600,000 |
| 67,500 |
| 35,806 |
Exercise of option and vesting of RSUs |
| 804 |
| 243 |
At 31 December 2021 |
| 259,898 |
| 122,071 |
*) Net of treasury shares
As at 31 December 2021, IBI held 2,688,684 (2020: 3,315,521) ordinary shares in trust for the Company's share-based payment plan.
12. Equity continued
Earnings per share (EPS)
The following table reflects the income and share data used in the basic and diluted EPS calculations:
|
| 2021 |
| 2020 |
|
| $000 |
| $000 |
|
|
|
|
|
Profit attributable to ordinary equity holders of the Company |
| 5,641 |
| 792 |
|
|
|
|
|
|
| Thousands |
| Thousands |
The weighted average number of ordinary shares for basic EPS |
| 245,710 |
| 184,271 |
Effects of dilution from potential dilutive ordinary shares *) |
| 659 |
| 98 |
|
| 246,369 |
| 184,369 |
*) Options, RSUs and PSUs see Note 13.
13. Share-based payments
The expense recognised in the financial statements for services received is shown in the following table as at 31 December:
|
| 2021 |
| 2020 |
|
| $000 |
| $000 |
|
|
|
|
|
Total expense arising from share-based payment transactions |
| 520 |
| 92 |
In August 2013, the Company adopted a Share Option Plan. In December 2017 and 2020, the Company
adopted additional plans. According to the plans, the Company's Board of Directors are entitled to grant certain employees, officers and other service providers (together herein "employees") of the Group remuneration in the form of equity-settled share-based payment transactions. Pursuant to the plans, the Company's employees may be granted options to purchase the Company's ordinary shares. These options may be exercised, subject to the continuance of engagement of such employees with the Company, within a period of eight years from the grant date, at an exercise price to be determined by the Company's Board of Directors at the grant date. All grants to Israeli employees were made in accordance with Section 102 of the Income Tax Ordinance, capital-gains track (with a trustee).
Grants
In March 2021, the Company granted, to one key manager, 470,977 Restricted Stock Units ("March PSU"). The March RSU Award is subject to a three-year performance period, with vesting subject to the achievement of performance measured by reference to total shareholder return over the performance period compared to the FTSE AIM 100, followed by a two-year holding period. The total fair value was calculated at $289,000 at the grant date (an average of $0.61 per restricted share equal to the share price at the grant date).
The performance conditions to be achieved such that RSUs are capable of vesting are as follows:
Company's ranking relatively to the comparator group | % of PSUs capable of vesting |
Upper quartile or better | 100% |
Between upper quartile and median | The straight-line basis between 100% and 25% based on the Company's rank |
Median | 25% |
Lower than median | - |
13. Share-based payment continued
In April 2021, the Company granted 1,190,476 and 769,231 Performance Stock Units ("April PSU") to the CEO and CFO, respectively. The Company announced that the CFO had left the Company on 22 July 2021 and accordingly his PSUs were forfeited. The remaining award will vest on the fourth anniversary of the grant date if and to the extent that the performance target will be satisfied. The total fair value was calculated at $408,000 and $264,000 at the grant date for the CEO and the CFO, respectively (an average of $0.34 per restricted share equal to the share price at the grant date).
The performance target relating to the performance of the Company's share price is as follows:
Average share price | % of PSUs capable of vesting |
GBP 1.5 or higher | 100% |
Between GBP 1.35 and GBP 1.50 | On a straight-line basis, between 50% and 100% |
Between GBP 1.20 and GBP 1.35 | On a straight-line basis, between 25% and 50% |
Less than GBP 1.20 | 0% |
The April PSU award is a contingent right to acquire shares for no consideration. It is subject to a four-year vesting period followed by a one-year holding period and the achievement of performance targets measured by the increase in the Company's share price between 1 January 2021 and 31 December 2024.
In May 2021, the Company granted 910,000 Restricted Stock Units to key management personnel subject to three years vesting period. The total fair value was calculated at $626,000 at the grant date (an average of $0.69 per restricted share equal to the share price at the grant date).
In July 2020, the Company granted 3,982,848 Restricted Stock Units to the Company's CFO ("CFO's RSUs") and other key management personnel. The CFO's RSUs are subject to a three-year performance period with vesting subject to a performance target comparing the average net return achieved by the Company relative to the net return achieved by the constituents of the FTSE AIM 100 during the three-year period ending in July 2023, followed by a two-year holding period. The other key management personnel's restricted shares are subject to three years vesting period. The total fair value of the other key management personnel's
restricted shares was calculated at $821,000 at the grant date (an average of $0.29 per restricted share equal to the share price at the grant date).
The following tables list the inputs to the models used for the plans for the years ended 31 December 2021 and 2020, respectively:
|
| 2021 |
| 2021 |
| 2020 |
|
| March PSU |
| April PSU |
| CFO's RSUs |
Weighted average fair values at the measurement date ($) |
| 0.61 |
| 0.32 |
| 0.22 |
Dividend yield (%) |
| - |
| - |
| - |
Expected volatility (%) |
| 73.94 |
| 68.6 |
| 67.49 |
Risk-free interest rate (GBP curve) |
| 0.29 |
| 0.5 |
| 0.21 |
Expected life of share options (years) |
| 3 |
| 4 |
| 3 |
Weighted average share price (GBP) |
| 0.54 |
| 0.52 |
| 0.23 |
Model used |
| Monte Carlo |
| Monte Carlo |
| Monte Carlo |
13. Share-based payment continued
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the year (excluding RSUs and PSUs):
|
| 2021 |
| 2021 |
| 2020 |
| 2020 |
|
| Number in thousands |
| WAEP |
| Number in thousands |
| WAEP |
Outstanding at 1 January |
| 3,334 |
| $0.37 |
| 5,526 |
| $0.99 |
Forfeited during the year |
| (957) |
| $1.11 |
| (2,192) |
| $1.48 |
Exercised during the year |
| (18) |
| $0.66 |
| - |
| - |
Outstanding at 31 December |
| 2,359 |
| $0.90 |
| 3,334 |
| $0.37 |
Exercisable at 31 December |
| 1,383 |
| $0.93 |
| 2,196 |
| $0.97 |
Movement during the year of RSUs and PSUs:
|
| 2021 |
| 2020 |
|
| Number in thousands |
| Number in thousands |
|
|
|
|
|
Outstanding at 1 January |
| 3,066 |
| - |
Granted during the year |
| 3,341 |
| 3,983 |
Forfeited during the year |
| (2,286) |
| (917) |
Vested during the year |
| (786) |
| - |
Outstanding at 31 December |
| 3,335 |
| 3,066 |
These restricted shares unit does not have an exercise price.
The weighted average remaining contractual life for the options outstanding as at 31 December 2021 was
5.9 years (2020: 6.7 years).
The range of exercise prices for options outstanding (not including the RSUs and PSUs) as at 31 December 2021 was $0.66-1.81 (2020: $0.67-1.83).
14. Operating expenses for the years ended 31 December
|
| 2021 |
| 2020 |
|
| $000 |
| $000 |
|
|
|
|
|
Staff costs |
| 26,171 |
| 25,066 |
Technology expenses |
| 3,943 |
| 2,547 |
Professional services |
| 2,153 |
| 3,487 |
Administrative expenses |
| 1,969 |
| 1,851 |
Transformation costs |
|
|
|
|
Consulting services |
| 3,124 |
| 1,088 |
Hiring and settlements |
| 2,342 |
| 1,393 |
Acquisition costs |
| 1,557 |
| 790 |
Lease termination |
| (437) |
| - |
Sale of property |
| (82) |
| - |
|
| 40,740 |
| 36,222 |
15. Taxes on income
Starting 2018, the Company was subject to Cyprus tax at the standard corporate income tax rate of 12.5%. In July 2020, the Company changed its tax residency to the U.K. and since then is subject to U.K. tax at the standard corporate income tax rate of 19%.
15. Taxes on income continued
Tax law applicable to the Company's Israeli subsidiaries is the Israeli tax law - Income Tax Ordinance (New Version) 1961. The Israeli corporate income tax rate was 23% in 2021 and 2020. Amendment 73 to the law for the Encouragement of Capital Investments, 1959 also prescribes special tax tracks for technological enterprises, which became effective in 2017, as follows:
- Technological preferred enterprise - an enterprise for which total consolidated revenues of its parent company and all subsidiaries are less than NIS 10 billion. A preferred technological enterprise, as defined in the law, which is located in the center of Israel, will be subject to tax at a rate of 12% on profits deriving from intellectual property.
- Any dividends distributed to "foreign companies", as defined in the law, deriving from income from the technological enterprises will be subject to a withholding tax at a rate of 4%.
The above amendments apply to one of the Group's Israeli subsidiaries.
The applicable U.S. federal statutory income tax rate for the Company's subsidiary for 2021 is 21% (2020: same). In addition, state and city taxes are applicable in certain states and cities.
Losses carried forward for tax purposes
As at 31 December 2021, carry-forward tax losses of the Group are $6,100,000. The tax benefit in respect of losses (excluding $416,000) has not been recorded in the financial statements due to the uncertainty of their utilisation.
Taxes on income included in profit or loss for the years ended 31 December:
|
| 2021 |
| 2020 |
|
| $000 |
| $000 |
|
|
|
|
|
Current taxes |
| 563 |
| 225 |
Deferred taxes |
| 32 |
| 727 |
Taxes benefit in respect of previous years |
| (2,221) |
| (638) |
|
| (1,626) |
| 314 |
Theoretical tax
The reconciliation between the tax expense, assuming that all the income and expenses were taxed at the statutory tax rate for the U.K., and the taxes on income recorded in profit or loss for the years ended 31 December are as follows:
|
| 2021 |
| 2020 |
|
| $000 |
| $000 |
|
|
|
|
|
Profit before taxes on income |
| 4,015 |
| 1,106 |
Statutory tax rate |
| 19% |
| 19% |
|
|
|
|
|
Tax computed at the statutory tax rate |
| 763 |
| 210 |
Adjustment due to the difference between the Company's statutory tax rate and tax rates applicable to the subsidiaries |
| (126) |
| (262) |
Non-deductible expenses for tax purposes |
| 86 |
| 279 |
Tax benefit of net additional deduction |
| (846) |
| (408) |
Taxes in respect of previous years |
| (2,221) |
| (638) |
Increase in unrecognised tax losses in the year |
| 1,258 |
| 845 |
Unrecognised temporary differences and others |
| (540) |
| 288 |
|
| (1,626) |
| 314 |
15. Taxes on income continued
Deferred taxes
|
| Consolidated statements of financial position |
| Consolidated statements of profit or loss and other comprehensive income | ||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
|
| $000 |
| $000 |
| $000 |
| $000 |
Deferred tax liabilities |
|
|
|
|
|
|
|
|
Domains and websites |
| 2,072 |
| 772 |
| 1,300 |
| 164 |
Other intangible assets |
| - |
| 639 |
| (639) |
| 466 |
|
| 2,072 |
| 1,411 |
|
|
|
|
Deferred tax assets |
|
|
|
|
|
|
|
|
Property and equipment |
| 3 |
| 12 |
| 9 |
| (4) |
Lease liability |
| - |
| 7 |
| 7 |
| 115 |
Carry-forward tax losses |
| 416 |
| - |
| (416) |
| - |
Other intangible assets |
| 270 |
| - |
| (367) |
|
|
Allowance for doubtful account |
| - |
| - |
| - |
| 7 |
Employee benefits |
| 11 |
| 149 |
| 138 |
| (21) |
|
| 700 |
| 168 |
|
|
|
|
Deferred tax expenses |
|
|
|
|
| 32 |
| 727 |
Deferred tax liabilities, net |
| 1,372 |
| 1,243 |
|
|
|
|
The deferred taxes are computed at the tax rates of 19%-23% based on the tax rates that are expected to apply upon realisation (2020: 12%).
16. Business combination
In September 2021, the Company acquired 100% of the ordinary share capital of Blueclaw for the total consideration of $3,872,000. Blueclaw is a multi-award-winning agency based in Leeds, providing services ranging from search engine optimisation and pay per click management to digital Public Relationship and content marketing with significant experience in the market verticals in which the Company operates. The amount of profit recorded in the acquired company's books as of September 2021, the date of acquisition, is not material and the effect of wether the acquisition was at the beginning of the year is not material to the financial statements.
Assets acquired and liabilities assumed
The fair values of the identifiable assets and liabilities of Blueclaw as at the date of acquisition were:
|
| 2021 |
|
| $000 |
Assets |
|
|
Cash and cash equivalents |
| 1,856 |
Agencies Relationships (useful life: 2 years) |
| 484 |
Trade and other receivables |
| 275 |
Property and equipment |
| 25 |
|
|
|
Liabilities |
|
|
Trade payables and other payables |
| (734) |
Deferred tax liability |
| (97) |
Total identifiable net assets at fair value |
| 1,809 |
|
|
|
Goodwill arising on the acquisition |
| 2,063 |
|
| 3,872 |
16. Business combination continued
The purchase consideration includes cash consideration paid on completion, deferred consideration payable in September 2022 and further contingent consideration payable.
Purchase consideration
|
| 2021 |
|
| $000 |
|
|
|
Cash consideration |
| 2,251 |
Deferred consideration |
| 813 |
Contingent consideration |
| 808 |
|
| 3,872 |
17. Revenue and operating segments
An operating segment is a part of the Group that conducts business activities from which it can generate revenue and incur costs, and for which discrete financial information is available. Identification of segments is based on internal reporting to the chief operating decision maker ("CODM"). The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer ("CEO"). The Group does not divide its operations into different segments, and the CODM operates and manages the Group's entire operations as one segment, which is consistent with the Group's internal organisation and reporting system.
Geographic information for the years ended 31 December
|
| 2021 |
| 2020 |
|
| $000 |
| $000 |
|
|
|
|
|
North America |
| 32,489 |
| 11,514 |
Scandinavia |
| 17,634 |
| 21,387 |
Other European countries |
| 12,621 |
| 15,473 |
Oceania |
| 834 |
| 941 |
Other countries |
| 80 |
| 96 |
Total revenues from identified locations |
| 63,658 |
| 49,411 |
Revenues from unidentified locations |
| 2,829 |
| 5,428 |
|
| 66,487 |
| 54,839 |
Revenues by vertical
|
| 2021 |
| 2020 |
|
| $000 |
| $000 |
|
|
|
|
|
Casino |
| 23,216 |
| 31,684 |
Sports U.S. |
| 15,202 |
| 1,992 |
Sports Europe |
| 9,982 |
| 9,321 |
Third Party Network Activity |
| 9,367 |
| 3,471 |
Personal Finance |
| 8,720 |
| 8,371 |
|
| 66,487 |
| 54,839 |
|
|
|
|
|
18. Balances and transactions with related parties including directors
|
| 2021 |
| 2020 |
|
| $000 |
| $000 |
Balances |
|
|
|
|
Current liabilities - management fees and other short-term payables |
| 11 |
| 499 |
|
|
|
|
|
Compensation of key management personnel of the Group |
|
|
|
|
Short-termemployee benefits |
| 2,044 |
| 1,808 |
Share-based payments transactions |
| 68 |
| 41 |
|
| 2,112 |
| 1,849 |
19. Post-employment benefits
The post-employment employee benefits are financed by contributions classified as defined contribution plans.
|
| 2021 |
| 2020 |
|
| $000 |
| $000 |
|
|
|
|
|
Expenses in respect of defined contribution plans |
| 1,966 |
| 1,867 |
20. Subsequent events
a. In February 2022, the Company announced that Christopher Bell, Non-Executive Chair, has step down from the board of directors of the Company. Julie Markey, a non-executive Director of the Company and Chair of the remuneration committee, has been appointed Interim Chair whilst the process of appointing a replacement is undertaken.
b. In March 2022, the Company announced that Caroline Ackroyd has now joined the Company as Chief Financial Officer and as a member of the Board of Directors with immediate effect.
21. List of main subsidiaries
| 2021 |
| 2020 | ||||
| Shares conferring voting rights |
| Shares conferring rights to profits |
| Shares conferring voting rights |
| Shares conferring rights to profits |
| % |
|
|
| % |
|
|
XLMedia Finance Ltd | 100 |
| 100 |
| 100 |
| 100 |
XLMedia Publishing Ltd | 100 |
| 100 |
| 100 |
| 100 |
Webpals Holdings Ltd | 100 |
| 100 |
| 100 |
| 100 |
Webpals Systems S.C Ltd | 100 |
| 100 |
| 100 |
| 100 |
Marmar Media Ltd | 100 |
| 100 |
| 100 |
| 100 |
Webpals, Inc. | 100 |
| 100 |
| 100 |
| 100 |
XLMedia US | 100 |
| 100 |
| 100 |
| 100 |
XLMedia Canada Marketing Ltd | 100 |
| 100 |
| - |
| - |
Blueclaw Media Ltd | 100 |
| 100 |
| - |
| - |
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