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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| M&C Saatchi | AQSE:SAA.GB | Aquis Stock Exchange | Ordinary Share | GB00B01F7T14 | Ordinary Shares 1p |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 189.00 | 180.00 | 198.00 | 189.00 | 189.00 | 189.00 | 0.00 | 06:59:38 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Dec 2022 to Dec 2024
TIDMSAA
RNS Number : 3807M
M&C Saatchi PLC
14 September 2023
M&C SAATCHI PLC
INTERIM RESULTS
SIX MONTHSED
30 JUNE 2023
14 September 2023
M&C SAATCHI PLC
(the "Company")
Interim results for the six months
ended 30 June 2023
Strong double-digit growth in the Issues and Passions specialisms.
Good margin momentum going into second half with acceleration of new operating model.
H1 Highlights
Financial
Hot Features
Premium
-- Net revenue of GBP120.4million (H1 2022: GBP129.4million).
-- Headline operating profit margin of 8.3% (H1 2022: 14.0%), with Q2 margin of 12%.
-- Headline profit before tax of GBP8.8million (H1 2022: GBP16.0million), with strong operating leverage
mitigating the impact of lower revenue.
-- Headline EPS of 4.47p (H1 2022: 6.37p).
-- Net cash at 30 June 2023 of GBP15.4million (30 June 2022: GBP39.7million), reflecting lower trading
and the settling of put options.
Operational
-- Strong double-digit net revenue growth in our Issues (+22% LFL) and Passions (+10% LFL) specialisms,
which now account for c.GBP40million (33%) of the Group's net revenue, demonstrates the value
of our ongoing diversification away from traditional advertising. New clients include Unilever,
Channel 4 and JPMorgan, with new assignments from Diageo, Samsung and Pepsico.
-- Good progress being made on the strategy set out at the Capital Markets Day, with growth in our
Fluency brand expanding our data capabilities, and put option settlement creating more opportunities
for growth and investment returns.
-- Along with the wider market, we have seen a significant slowdown in technology client spend in
our Media specialism and a slower pace of new business wins in the Advertising division. However,
85% of the Company's full year revenue forecast is now booked as at the end of August, marginally
ahead of 84% for the same time last year. Recovery is expected in the second half of the year.
-- Enhanced, simplified leadership structure under a new Executive Chair implemented, with investment
focused on our specialisms, and new leadership roles to drive creativity, execution, and efficiency.
-- Global efficiency programme refocussed to accelerate quick wins, while delivering the strategy
for the longer term. As a result, we expect to deliver annualised savings of GBP3.8million in
FY2023 with an in-year impact of GBP1.5million. We are targeting annualised savings of GBP10million
by the end of FY2024.
Current Trading and Outlook
-- Revenue pacing marginally ahead of this time last year, with 85% of full year expected revenue
booked. Improving momentum in H2, with a small single digit net revenue decline expected.
-- Operating leverage in Advertising, combined with our global efficiency programme, means that we
are expecting improvement in Headline operating margin in H2. F ull year margin is expected to
be in line with last year.
-- In light of the continued challenging macro environment, we are taking a cautious view overall
on H2. In 2024, the Group should benefit from the global efficiency programme and review of loss-making
entities .
Unaudited Headline (1) Results
Six Months To 30 June 2023
---------------------------------------------------- --------
2023 2022 Movement LFL (2)
GBPM GBPM
------------------------- ------ ------ --------- --------
Net revenue (1) 120.4 129.4 (7%) (7%)
Operating profit 10.0 18.1 (45%) (48%)
Profit before taxation 8.8 16.0 (45%) (48%)
Earnings(3) 5.5 7.8 (30%) (12%)
Operating profit margin 8.3% 14.0% -5.7pts
EBITDA (4) 14.5 22.8 (36%)
Net cash (1) 15.4 39.7 (61%)
------------------------- ------ ------ --------- --------
Unaudited Statutory Results
Six Months To 30 June 2023
------------------------------------------------------
2023 2022 Movement
GBPM GBPM
-------------------------- ------- ------ ---------
Revenue 216.7 221.7 (2%)
Net revenue (1) 120.4 129.4 (7%)
Operating (loss)/profit (3.6) 2.7 (231%)
(Loss)/profit before
taxation (5.1) 0.3 (1759%)
Losses(3) (6.3) (4.0) (57%)
Operating (loss)/profit
margin (3.0%) 2.1% -5.1pts
-------------------------- ------- ------ ---------
1 Refer to Notes for the definition of Headline net revenue and net cash.
(2) Like-for-like excluding the effect of the disposal of Clear Deutschland GMBH in H1 2023 and retranslating 2022 figures to 2023 FX rates.
(3) Earnings and Losses are calculated after deducting tax and the share of profits attributable to non-controlling interests.
(4) EBITDA is calculated excluding the income statement charges relating to IFRS 16.
Moray MacLennan, Chief Executive Officer, said:
The diversification of our offering, combined with swift action on our cost base, have ensured good momentum into the second half, despite a slower start to 2023. Strong double-digit growth in Issues and Passions, in particular, reflects our continued investment in our specialisms.
Zillah Byng-Thorne, Executive Chair, said:
The second half of the year is about growth, execution, and efficiency. Whilst some economic headwinds are likely to continue, we are focused on what we can control: continued connectivity of our business, elevating our highest-margin businesses in resilient segments, underpinned by tight cost management.
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014.
M&C Saatchi Half Year 2023 Results - Analyst Presentation
M&C Saatchi plc will host an in-person analyst presentation today at 9:00am at 36 Golden Square, London, W1F 9EE. The presentation will be followed by a Q&A with Zillah Byng-Thorne, Executive Chair, Moray MacLennan, Chief Executive Officer, and Bruce Marson, Chief Financial Officer.
Please email MCS@Brunswickgroup.com to register to attend. Dial-in details are also available for those not able to attend in person.
For further information please call: M&C Saatchi plc +44 (0)20-7543-4500 Zillah Byng-Thorne, Executive Chair Moray MacLennan, Chief Executive Officer Bruce Marson, Chief Financial Officer Numis Securities Limited +44 (0)20-7260-1000 Nick Westlake, Iqra Amin Liberum Limited +44 (0)20-3100-2000 Max Jones, Benjamin Cryer, Will King Brunswick Group Limited +44 (0)207-404-5959 Andrew Porter, Kate Pope
SUMMARY OF RESULTS
Net revenue for H1 was GBP120.4million, down 7.0% compared to last year. Our specialisms delivered GBP70.3million (+0.9% vs last year), compared to the Advertising division at GBP50.1m, (-16.1% vs last year), reflecting the delivery of our strategy set out at our Capital Markets Day earlier this year. The specialisms were fueled by double digit revenue growth in the Issues (+20.6%) and Passions (+11.0%) specialisms, underpinning their strong market position. Along with the wider market, we experienced challenging trading conditions in H1, particularly in those businesses with more exposure to a technology client base or where there is more discretion around client spend resulting in lead times for new projects widening. This had an impact on revenues in our Media specialism (-30.1%) and the Advertising division (- 16.1%), although we saw a strong performance in our US advertising business (+4.1%).
Headline operating costs decreased by 1% to GBP110.4million compared to H1 2022 (GBP111.3million) and decreased by 11% versus H2 2022 (GBP124.4million). The nature of the business means that as some markets began to see revenue soften, we were able to flex the variable cost base, with most of these actions impacting Q2 onwards, while ensuring we continued to invest in our specialisms. As a consequence, the Headline operating profit margin was 12% in Q2, compared to 8.3% for H1 overall. This improvement in margins was also a consequence of some of the early wins from the global efficiency programme announced at our Capital Markets Day, with GBP0.5million of savings delivered within the H1 results.
Overall Headline operating profit was GBP10.0million, a decline of GBP8.1million versus last year. The global efficiency programme has been refocused into quick wins and more structural savings. The quick wins have secured annualised savings of GBP3.8million already, which is expected to have an impact of GBP1.5million in FY2023. We are targeting further annualised savings of around GBP6million by the end of FY2024, as a result of the centralisation of certain back and middle office functions.
In H2, we expect continued strong momentum in the Issues and Passions specialisms, and some recovery in the Media specialism and Advertising division, supported by the typical seasonality of client campaigns.
On a statutory basis, the Company delivered a loss before tax of GBP5.1million (2022: GBP0.3million profit), due to the decline in net revenue of GBP9.0million that has been partially mitigated by statutory cost savings of GBP3.6million.
Net cash as at 30 June 2023 was GBP15.4million (GBP30.0million at 31 December 2022). During H1, we cash-settled GBP3.3milliion of put options and experienced a negative working capital swing of GBP6.8million driven by lower trading volumes and one-off adverse working capital timing at the end of June, much of which we expect to reverse in H2. During H2 we expect to cash settle a further GBP15.5million of put options, leaving us with a residual liability of c.GBP12million at a 152p share price.
Market Dynamics
Market growth in the first half of 2023 slowed significantly, with clients slower to commit budgets and generally spending less. While there are some indications of the wider market beginning to recover in H2 2023 and beyond, we are taking a cautious outlook for H2 until we see more data points. Beyond the economic trends we see several key themes emerging:
-- Generative AI - especially the diversity, scale, and rate of acceleration of the application layer.
-- Digital transformation - continuing at pace, and responsible for a large proportion of the sector's
growth.
-- Complex marketing mix - channel and customer engagement platform fragmentation resulting in client
demand for simplification and consolidation.
-- Automation at speed - increased speed, personalisation and customisation of messaging across more
channels as a result of tech (including Generative AI).
-- Creativity as a competitive advantage - enabling differentiation, cut through and improved ROI.
-- Sustainability - albeit eclipsed in coverage by the economic headwinds and cost of living crisis.
We have reflected these themes in our proposition and believe we are well positioned to succeed due to our: broad diversified client base, geographic breadth, and specialist capabilities in resilient, counter-cyclical segments: public sector, issues-based marketing, passions and talent.
Strategy Update
During our Capital Markets Day, we outlined our strategy centred around accelerating high-margin, digital-led growth, with three clear pillars:
-- Building capabilities with a focus on data, tech and digital transformation. -- Developing new opportunities through M&A and partnerships; moving away from start-ups. -- A new operating model that delivers significant cost savings and enhanced productivity.
Delivery of this strategy is core to our ongoing success. In H1 we have made good progress, with Fluency growing at scale and underpinning our data capabilities. The settlement of the put options also means that only 10% of earnings will be attributable to minorities by the end of 2023 (2022: 25%), further simplifying our opportunities for growth and freeing up capital for M&A moving forward. The initial benefit of our operating model work is beginning to be seen in our business, and we expect to have completed our new organisation design by the end of the year.
At the heart of our strategy is creativity and award-winning work. The recent additions to our trophy cabinet are an endorsement of this, winning awards in Data (Campaign's Start up Agency of the Year - M&C Saatchi Fluency) and Consultancy (Consultant of the Year - Consulting Magazine). While winning, Agency of The Year, Sports Industry Awards (M&C Saatchi Sport & Entertainment) and Performance Marketing Agency of Year - Marketing Interactive, highlight the peer recognition of our specialisms.
Our ongoing ability to deliver on this strategy is underpinned by a focus on growth, execution and efficiency, and the key developments in each of these areas is outlined below.
Growth Plans
Core to our strategy are our growth plans. As technology advances, creativity is even more integral to our future growth than it has been in our past. Our ability to stand out from the crowd, with award winning creative, is the easiest way to win new clients, and while we have many fantastic creative resources across the businesses, we had no one person representing our creative agenda at the leadership table. As a result, we have embarked on a search for a new Chief Creative Officer who will set the benchmark for our work internally, while also playing a hands-on leadership role across our UK Group.
We are focussing our investment and energy on growing our strategically important businesses, whilst also undertaking a review of loss-making and non-core entities. Where businesses do not have a clear route to profitability within the next 18 months we will look to divest or close them, unless there is a clear strategic imperative not to.
Replicating success is an easy way to accelerate growth and, as we have examined our track record, it is evident that where we provide clients with integrated solutions across regional advertising centres, we excel. As a consequence, we have decided to organise around a regional first strategy. The benefits of this include simplifying collaboration and ensuring more of our revenue can become connected, harnessing the benefits of the wider group at scale.
Justin Graham will lead this for us across the APAC region, while Marcus Peffers will take on an extended remit to include Chief Executive Officer of the UK Group. The increased focus on regional integration supports the drive towards connected revenue, which now accounts for c.60% of net revenue, driven by technology platforms, new capabilities and collaboration processes.
Execution
The effective execution of our strategy is critical to our success. To enable this, we have made a number of changes to how we are organised and drive performance. To improve alignment, clear accountabilities and ownership, we have simplified our leadership structure from over 20 (the old ExCo) to a new Executive Leadership Team of 13. This new team includes two newly created roles including the Chief Creative Officer as referenced above and a Chief Operating Officer who will support the execution and delivery of the global efficiency programme. A new way of working, focussed on meeting cadences, pipeline management and lead sharing has been introduced. This is in addition to work that is underway for a new LTIP and incentive plan for the Executive Leadership Team and senior leaders, to drive collaboration and entrepreneurialism.
Efficiency
We have broadened and deepened the scope of our global efficiency programme and refocussed it into two streams; quick wins and structural changes. Having identified savings of just under GBP4million already, we are now targeting an additional GBP6.2million of savings from the creation of shared service centres and centralised procurement. This will bring the total annualised savings to GBP10million by the end of 2024, and we expect the costs of change to be in the range of 0.5-1x of the saving.
During the year we intend to merge our small advertising head office in Asia with Australia, to increase resource and capability available to the APAC region. While we have also reviewed the central group structure reducing the absolute size of the team, with increased accountability for growth and strategy being devolved to the regions and specialisms, in order for the Group to focus on delivery of global efficiencies and effective capital allocation.
Headline Segmental Information (Like-for-Like) [1]
Specialisms
Net Net Operating Operating Operating Operating
Revenue Revenue Profit Profit Profit Profit
Margin Margin
H1 2023 H1 2022 Movement H1 2023 H1 2022 Movement H1 2023 H1 2022 Movement
GBP000 GBP000 GBP000 GBP000
------------- -------- -------- --------- ----------- ---------- --------- ---------- ---------- ---------
Specialisms 70,158 70,250 0% 13,866 19,979 (31%) 19.8% 28.4% (8.6)pts
Advertising 50,091 59,465 (16%) 461 4,113 (89%) 0.9% 6.9% (6.0)pts
Group
Central
Costs - - - (4,353) (4,922) 12% - - -
------------- -------- -------- --------- ----------- ---------- --------- ---------- ---------- -----------
Total 120,249 129,715 (7%) 9,974 19,170 (48%) 8.3% 14.8% (6.5)pts
------------- -------- -------- --------- ----------- ---------- --------- ---------- ---------- -----------
Specialisms now represent 58% of the Group's net revenue (from 49% two years ago). These specialisms contributed GBP70.3million of the Group's net revenue (H1 2022: GBP70.3million, 54%), and GBP13.9million (139%) of the Group's Headline operating profit (H1 2022: GBP20.0million, 104%). Net revenue decreased by GBP0.1million (0%) compared to H1 2022, the revenue decline in Media offsetting the strong growth in Issues and Passions.
Headline operating profit margins decreased to 19.8% from 28.4% in H1 2022, due to the impact of the revenue decline in Media (which is high margin), although this was partially mitigated in the Media specialism by headcount reductions in the US and UK. In addition, the Issues, Passions and Consulting specialisms have invested in staff to retain the best talent and added headcount to drive future growth.
Advertising contributed GBP50.1million (42%) of the Group's net revenue (H1 2022: GBP59.5million, 46%) and GBP0.5 million (5%) of the Group's Headline operating profit (H1 2022: GBP4.1million, 21%). Net revenue decreased by GBP9.4million (16%) compared to H1 2022. Operating profit margins decreased to 0.9% from 6.9% in H1 2022, as cost saving measures lagged the decrease in revenue.
-- Specialisms
-- Issues - driving critical global and social change, protecting the planet, transforming lives
for the better
A net revenue increase of GBP4.1million to GBP23.4million (+21.5%), driven by ongoing growth
of the security and defense business, continuing the momentum from the prior year. New client
assignments include WHO, Ofcom, and UNICEF.
-- Passions - connecting brands direct to consumers through passions and personalities
A net revenue increase of GBP1.6million to GBP17.1million (+10.3%), driven mainly by the Sport
and Entertainment business in the UK, which supported clients such as Barclays to maximise
their sponsorship of Wimbledon, and the Sport and Entertainment business in Germany, which
won new clients such as Porsche.
-- Consulting - transforming businesses by unlocking existing and new growth opportunities
A net revenue decrease of GBP0.2million to GBP17.5million (-0.7%), with our CX business in
the US winning additional new projects and our small startup consultancies starting to win
more new business including McDonalds, Channel 4 and Nike. This was offset by a decline in
our brand design business as clients pause or defer new projects.
-- Media - connecting brands with today's connected customers
A net revenue decrease of GBP5.6million to GBP12.1million (-31.9%), due to the well-publicised
downturn in the technology sector in the US and UK. A restructuring programme has been undertaken
to mitigate the full-year profit impact of the lower revenues during H1 2023. However, we
did pick up some notable wins with Amazon, Sega and TickPick.
-- Advertising - Blending marketing science with creativity through earned, owned and paid-for content
A net revenue decrease of GBP9.4million to GBP50.1million (-15.8%). The Advertising division includes a large number of businesses. We saw good revenue growth in the US, driven primarily by increased activity with Meta; Italy, driven by growth in its partnership with EY; Brazil, driven by increased spend from clients (including BASF and Uber); and UAE, where we won more work with new and existing clients. While our businesses in the UK, Australia, Germany and China, suffered revenue declines year-on-year as a consequence of the challenging market conditions.
Group Central Costs
Further to the global efficiency programme, central costs have reduced by GBP0.5million to GBP4.4million (12%). This is driven primarily by a reduction in external audit fees and executive bonuses.
Income Statement
-- Statutory Profit Before Tax
Statutory loss before tax was GBP5.1m (2022: GBP0.3m profit). This loss was primarily driven by
non-trading items, such as the revaluations of put options and equity investments. A full listing
of these items is set out in Note 4.
-- Taxation
The effective tax rate for H1 2023 has decreased to 23.7% (H1 2022: 29.1%). This is mainly due
to the takeover transaction costs in H1 2022, which were treated as non-deductible for corporation
tax provision purposes.
-- Earnings
The Headline earnings decline was partially mitigated, as minority interests were further
reduced
in H1 to 18% (from 32% in H1 2022).
Balance sheet and cashflow
-- Cash and Borrowings
Operating cash inflow before movements in working capital was GBP4.2million, which was lower
than last year (GBP7.7million in H1 2022), but in line with the lower profitability.
We invested GBP1.6million, similar to last year, buying replacement IT equipment, fit-outs for
new offices in Dubai and Berlin, and procuring new software. We paid out GBP3.3million to settle
put options and reduce our minority interests (with more to come in H2). We also paid what was
due on our property leases (GBP4.4million), down from GBP4.9million last year.
Cash net of bank borrowings at 30 June 2023 is GBP15.4million, compared to GBP30.0million of
net cash at 31 December 2022 and GBP39.7million net cash at 30 June 2022.
-- Working Capital Movement
Trade and other receivables decreased by GBP15.7million (11%) between 30 June 2022 and 30 June
2023, driven by the reduction in activity. Trade and other payables decreased by GBP33.1million
(19%) between 30 June 2022 and 30 June 2023, driven by the reduction in activity and lower levels
of cost accruals .
Net working capital decreased by GBP6.8million since the beginning of the year. This has been
driven by lower trading volumes (which has reduced our ongoing positive working capital position)
and one-off timings on when suppliers have been paid and clients have been billed in June (versus
December). We expect much of this to reverse in H2.
-- Put Options
Based on the put option holders that have exercised in 2023, around 50% of the remaining liability
will be settled in H2 2023. This is expected to reduce minority interests to 10% of Headline
earnings in 2023, down from nearly 40% in 2019. We expect the remaining liability at the end
of the year to be around GBP15m, and this will be settled over the next five years.
-- Other Balance Sheet Movements
The other movements include the revaluation of unlisted equity investments held in early-stage
companies, reported as financial assets at fair value through profit and loss. The revaluation
of GBP1.9million of these companies is excluded from Headline results.
Notes to Editors
Company
M&C Saatchi plc, a company incorporated and domiciled in England and Wales with company number 05114893, listed on the AIM Market of the London Stock Exchange plc.
Group
The Company and its subsidiaries.
Headline results
A self-defined alternative measure of profit that provides a different perspective to the Statutory results. The Directors believe it provides a better view of the underlying performance of the Company, because it excludes a number of items that are not part of routine business income and expenses. These Headline figures are a better way to measure and manage the business and are used for internal performance management and reward. "Headline results" is not a defined term in IFRS.
Headline results represent the underlying trading profitability of the Group and excludes:
-- Separately disclosed items that are one-off in nature and are not part of running the business.
-- Acquisition-related costs.
-- Gains or losses generated by disposals of subsidiaries and associates.
-- Fair value adjustments to unlisted equity investments, acquisition related contingent consideration
and put options.
-- Dividends paid to IFRS 2 put option holders.
A reconciliation of Statutory to Headline results is presented in Note 4.
Operating profit margin
Operating profit margin refers to the percentage calculated through dividing operating profit by net revenue.
Net cash
Net cash refers to cash and cash equivalents, less borrowings of the Group, derived from the accounts in the balance sheet, excluding lease liabilities.
Net revenue
Net revenue is equal to revenue less project cost / direct cost. It is not an IFRS defined term. It is, however, used as a key performance indicator by the Group.
Revenue
Revenue comprises the total of all gross amounts billed, or billable to clients in respect of commission-based, fee-based and any other income where we act as principal and our share of income where we act as an agent. The difference between Billings and Revenue is represented by costs incurred on behalf of clients with whom we operate as an agent, and timing differences where invoicing occurs in advance or in arrears of the related revenue being recognised.
EBITDA
EBITDA is earnings before depreciation, amortisation, finance expense and taxation, and excludes any charges relating to IFRS 16. It is not an IFRS defined term. It is, however, used as a key performance indicator by the Group.
Billings
Billings comprise all gross amounts billed, or billable to clients in respect of commission-based and fee-based income, whether acting as agent or principal, together with the total of other fees earned, in addition to those instances where the Group has made payments on behalf of customers to third parties. It is stated exclusive of VAT and sales taxes.
Minority interests and non-controlling interests
Within the Group, there are a number of subsidiary companies and partnerships in which employees hold a direct interest in the equity of those companies. These employees are referred to as minority shareholders. Of these subsidiary companies and partnerships, most account for the shareholding of their minority shareholders as a management incentive (through the award of conditional shares) and are 100% consolidated in the Group's financial statements. The remaining four subsidiary companies (including one without a put option) account for their minority shareholders as non-controlling interests, a defined IFRS term, with their share of the Group's profits being shown separately on the Income Statement.
Unaudited Consolidated Income Statement
Six months ended Six months ended Year ended 31 December
30 June 2023 30 June 2022 2022
Note GBP000 GBP000 GBP000
---------------------------------- ----------------- ----------------- -----------------------
Billings 250,448 262,208 597,520
----------------------------------- ----------------- ----------------- -----------------------
Revenue 216,672 221,699 462,533
----------------------------------- ----------------- ----------------- -----------------------
Project cost / direct cost (96,281) (92,305) (191,393)
----------------------------------- ----------------- ----------------- -----------------------
Net revenue 120,391 129,394 271,140
----------------------------------- ----------------- ----------------- -----------------------
Staff costs (99,030) (94,401) (198,765)
Depreciation (4,458) (4,543) (9,326)
Amortisation (397) (454) (1,060)
Impairment charges (426) - (564)
Other operating charges (17,731) (27,712) (49,474)
Other (losses)/gains (1,922) 452 (1,403)
----------------------------------- ----------------- ----------------- -----------------------
Operating (loss)/profit (3,573) 2,736 10,548
----------------------------------- ----------------- ----------------- -----------------------
Share of results of associates
and joint ventures (14) - (10)
Gain on disposal of subsidiaries 304 - -
Finance income 874 70 391
Finance costs (2,650) (2,501) (5,506)
----------------------------------- ----------------- ----------------- -----------------------
(Loss)/profit before taxation (5, 059) 305 5,423
----------------------------------- ----------------- ----------------- -----------------------
Taxation (1,223) (4,294) (5,178)
----------------------------------- ----------------- ----------------- -----------------------
(Loss)/profit for the
period (6,282) (3,989) 245
----------------------------------- ----------------- ----------------- -----------------------
Attributable to:
Equity shareholders of
the Group (6,376) (4,137) 90
Non-controlling interests 94 148 155
----------------------------------- ----------------- ----------------- -----------------------
(Loss)/profit for the
period (6,282) (3,989) 245
----------------------------------- ----------------- ----------------- -----------------------
(Loss)/Earnings per share
Basic (pence) 4 (5.22)p (3.38p) 0.07p
Diluted (pence) 4 (5.22)p (3.38p) 0.07p
----------------------------------- ----------------- ----------------- -----------------------
Headline results
----------------------------------- ----------------- ----------------- -----------------------
Net revenue 120,391 129,394 271,140
Operating profit 4 9,980 18,079 35,388
Profit before tax 4 8,848 16,041 31,833
Profit after tax attributable
to equity shareholders
of the Group 4 5,462 7,790 18,105
EBITDA 14,524 22,774 45,168
Unaudited Consolidated Statement of Comprehensive Income
Six months Six months ended Year ended
ended 30 June 30 June 2022 31 December 2022
2023
GBP000 GBP000 GBP000
------------------------------------- --------------- ----------------- ------------------
(Loss)/profit for the period (6,282) (3,989) 245
--------------------------------------- --------------- ----------------- ------------------
Other comprehensive income/(loss)
Exchange differences on translating
foreign operations before
tax (3,657) 3,988 4,785
--------------------------------------- --------------- ----------------- ------------------
Other comprehensive income/(loss)
for the period net of tax (3,657) 3,988 4,785
Total comprehensive (loss)/income
for the period (9,939) (1) 5,030
--------------------------------------- --------------- ----------------- ------------------
Total comprehensive (loss)/income
attributable to:
Equity shareholders of the
Group (10,033) (41) 4,875
Non-controlling interests 94 40 155
--------------------------------------- --------------- ----------------- ------------------
Total comprehensive (loss)/income
for the period (9,939) (1) 5,030
--------------------------------------- --------------- ----------------- ------------------
Unaudited Consolidated Balance Sheet
Six months ended Six months Year ended
30 June 2023 ended 31 December
30 June 2022 2022
GBP000 GBP000 GBP000
--------------------------------------- ----------------- -------------- -------------
Non-current assets
Intangible assets 39,812 41,785 41,968
Investments in associates and
JVs 177 200 191
Plant and equipment 7,793 6,287 8,310
Right-of-use assets 39,191 42,297 43,992
Other non-current assets 1,290 1,283 1,107
Deferred tax assets 5,878 7,105 5,131
Financial assets at fair value
through profit or loss 10,796 15,515 11,986
Deferred and contingent consideration 738 - 914
------------------ -------------- -------------
105,675 114,472 113,599
--------------------------------------- ------------------ -------------- -------------
Current assets
Trade and other receivables 130,054 145,803 132,067
Current tax assets 5,274 1,587 3,909
Cash and cash equivalents 27,393 56,429 41,492
------------------ --------------
162,721 203,819 177,468
--------------------------------------- ------------------ -------------- -------------
Current liabilities
Trade and other payables (142,649) (173,954) (155,547)
Provisions (487) (917) (1,056)
Current tax liabilities (2,551) (2,215) (481)
Borrowings (157) (6,913) (4,430)
Lease liabilities (6,003) (6,139) (6,448)
Deferred and contingent consideration - (1,250) -
Minority shareholder put option
liabilities (21,578) (26,953) (18,419)
------------------------------------------ ------------------ -------------- -------------
(173,425) (218,341) (186,381)
--------------------------------------- ------------------ -------------- -------------
Net current (liabilities) /
assets (10,704) (14,522) (8,913)
------------------------------------------ ------------------ -------------- -------------
Total assets less current liabilities 94,971 99,950 104,686
------------------------------------------ ------------------ -------------- -------------
Non-current liabilities
Deferred tax liabilities (1,939) (902) (1,245)
Corporation tax liabilities - - (856)
Borrowings (11,795) (9,795) (6,802)
Lease liabilities (45,890) (48,371) (49,122)
Minority shareholder put option
liabilities (5,075) (5,296) (4,429)
Other non-current liabilities (3,566) (3,322) (4,046)
------------------------------------------ ------------------ -------------- -------------
(68,265) (67,686) (66,500)
--------------------------------------- ------------------ -------------- -------------
Total net assets 26,706 32,264 38,186
------------------------------------------ ------------------ -------------- -------------
Unaudited Consolidated balance sheet (continued)
Six months Six months Year ended
ended 30 ended 30 June 31 December
June 2023 2022 2022
GBP000 GBP000 GBP000
---------------------------- --- ------------ --------------- -------------
Equity
Share capital 1,227 1,227 1,227
Share premium 50,327 50,327 50,327
Merger reserve 37,554 37,554 37,554
Treasury reserve (550) (550) (550)
Minority interests put
option reserve (2,506) (6,615) (2,896)
Non-controlling interests
acquired (33,251) (29,190) (32,984)
Foreign exchange reserve 2,981 5,841 6,638
Accumulated loss (29,092) (26,564) (21,303)
---------------------------------- ------------ --------------- -------------
Equity attributable to
shareholders of the Group 26,690 32,030 38,013
---------------------------------- ------------ --------------- -------------
Non-controlling interests 16 234 173
---------------------------------- ------------ --------------- -------------
Total equity 26,706 32,264 38,186
---------------------------------- ------------ --------------- -------------
Unaudited Consolidated Statement of Changes in Equity
Retained
MI put Non-controlling Foreign earnings/ Non-controlling
Share Share Merger Treasury option interests exchange (accumulated interests
capital premium reserve reserve reserve acquired reserves losses) Subtotal in equity Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------- -------- -------- -------- --------- -------- ---------------- --------- ------------- --------- ---------------- --------
At 31 December
2022 1,227 50,327 37,554 (550) (2,896) (32,984) 6,638 (21,303) 38,013 173 38,186
--------------- -------- -------- -------- --------- -------- ---------------- --------- ------------- --------- ---------------- --------
Share option
charge - - - - - - - 491 491 - 491
Exercise of
Minority
Interest put
options - - - - 390 (267) - - 123 (123) -
Disposal of
subsidiaries - - - - - - - (69) (69) - (69)
Dividends - - - - - - - (1,834) (1,834) (128) (1,962)
--------------- -------- -------- -------- --------- -------- ---------------- --------- ------------- --------- ---------------- --------
Total
transactions
with owners - - - - 390 (267) - (1,412) (1,289) (251) (1,540)
--------------- -------- -------- -------- --------- -------- ---------------- --------- ------------- --------- ---------------- --------
Total
(loss)/profit
for the
period - - - - - - - (6,376) (6,376) 94 (6,282)
Total other
comprehensive
loss for the
period - - - - - - (3,657) - (3,657) - (3,657)
--------------- -------- -------- -------- --------- -------- ---------------- --------- ------------- --------- ---------------- --------
At 30 June
2023 1,227 50,327 37,554 (550) (2,506) (33,251) 2,981 (29,092) 26,690 16 26,706
--------------- -------- -------- -------- --------- -------- ---------------- --------- ------------- --------- ---------------- --------
Retained
MI put Non-controlling Foreign earnings/ Non-controlling
Share Share Merger Treasury option interests exchange (accumulated interests
capital premium reserve reserve reserve acquired reserves losses) Subtotal in equity Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------- -------- -------- -------- --------- -------- ---------------- --------- ------------- --------- ---------------- -------
At 31 December
2021 1,227 50,327 37,554 (550) (6,615) (29,190) 1,853 (22,122) 32,484 373 32,857
--------------- -------- -------- -------- --------- -------- ---------------- --------- ------------- --------- ---------------- -------
Share option
charge - - - - - - - 1,229 1,229 - 1,229
Amount paid on
settlement
of LTIP - - - - - - - (500) (500) - (500)
Exercise of
Minority
Interest put
options - - - - 3,719 (3,794) - - (75) 75 -
Dividends - - - - - - - - - (430) (430)
--------------- --------
Total
transactions
with owners - - - - 3,719 (3,794) - 729 654 (355) 299
--------------- -------- -------- -------- --------- -------- ---------------- --------- ------------- --------- ---------------- -------
Total profit
for the
period - - - - - - - 90 90 155 245
Total other
comprehensive
income for
the period - - - - - - 4,785 - 4,785 - 4,785
--------------- -------- -------- -------- --------- -------- ---------------- --------- ------------- --------- ---------------- -------
At 31 December
2022 1,227 50,327 37,554 (550) (2,896) (32,984) 6,638 (21,303) 38,013 173 38,186
--------------- -------- -------- -------- --------- -------- ---------------- --------- ------------- --------- ---------------- -------
Unaudited Consolidated Cashflow Statement and Analysis of Net Cash
Six months Six months Year ended
ended 30 June ended 30 June 31 December
2023 2022 2022
GBP000 GBP000 GBP000
---------------------------------------------------- --------------- ------------------- -------------
Operating profit/(loss) (3,573) 2,736 10,548
----------------------------------------------------- --------------- --------------- -------------
Adjustments for:
Depreciation of plant and equipment 1,250 1,263 2,480
Depreciation of right-of-use assets 3,208 3,280 6,846
Impairment of right-of-use assets 463 - -
Loss on sale of plant and equipment 22 - 165
Loss on sale of software intangibles 1 - 175
Revaluation of financial assets at FVTPL 1,922 (452) 1,403
Revaluation of contingent consideration - 266 266
Amortisation of acquired intangible assets 296 302 597
Impairment of goodwill and other intangibles - - 556
Impairment and amortisation of capitalised
software intangible assets 101 152 635
Exercise of share-based payment schemes
with cash - - (500)
Equity settled share-based payment expenses 491 195 1,229
----------------------------------------------------- --------------- --------------- -------------
Operating cash before movements in working
capital 4,181 7,742 24,400
----------------------------------------------------- --------------- --------------- -------------
Decrease/(Increase) in trade and other receivables 2,486 (16,684) (4,187)
(Decrease)/Increase in trade and other payables (8,683) 26,225 9,104
(Decrease)/Increase in provisions (569) (276) (137)
----------------------------------------------------- --------------- --------------- -------------
Cash generated from operations (2,585) 17,007 29,180
----------------------------------------------------- --------------- --------------- -------------
Tax paid (1,812) (4,412) (6,712)
----------------------------------------------------- --------------- --------------- -------------
Net cash (used in)/from operating activities (4,397) 12,595 22,468
----------------------------------------------------- --------------- --------------- -------------
Investing activities
Disposal of subsidiary (net of cost disposed (44) - -
of)
Proceeds from sale of unlisted investments - 138 918
Purchase of plant and equipment (1,402) (1,181) (4,383)
Purchase of capitalised software (212) (220) (1,192)
Interest received 302 70 391
----------------------------------------------------- --------------- --------------- -------------
Net cash (used in)/generated from investing
activities (1,356) (1,193) (4,266)
----------------------------------------------------- --------------- --------------- -------------
Net cash (used in)/from operating and investing
activities (5,753) 11,402 18,202
----------------------------------------------------- --------------- --------------- -------------
Six months Six months Year ended
ended ended 30 June 31 December
30 June 2023 2022 2022
GBP000 GBP000 GBP000
-------------------------------------------------- ------------------- --------------- -------------
Net cash (used in)/from operating and investing
activities (5,753) 11,402 18,202
-------------------------------------------------- ------------------- --------------- -------------
Financing activities
-------------------------------------------------- ------------------- --------------- -------------
Dividends paid to non-controlling interests (128) (287) (430)
Cash consideration for non-controlling interests
acquired (3,264) (1,729) (12,104)
Payment of deferred consideration - - (1,250)
Payment of lease liabilities (3,051) (3,454) (7,307)
Proceeds from bank loans 5,000 - -
Repayment of bank loans (106) (10,000) (13,410)
Interest paid (821) (619) (1,200)
Interest paid on lease liabilities (1,474) (1,489) (2,970)
-------------------------------------------------- ------------------- --------------- -------------
Net cash used in financing activities (3,844) (17,578) (38,671)
-------------------------------------------------- ------------------- --------------- -------------
Net (decrease)/ increase in cash and cash
equivalents (9,597) (6,176) (20,469)
-------------------------------------------------- ------------------- --------------- -------------
Effect of exchange rate fluctuations on cash
held (285) 1,031 2,711
Cash and cash equivalents at the beginning
of the year 37,221 54,979 54,979
-------------------------------------------------- ------------------- --------------- -------------
Total cash and cash equivalents at the end
of period 27,339 49,834 37,221
-------------------------------------------------- ------------------- --------------- -------------
Cash and cash equivalents 27,393 56,429 41,492
Bank overdrafts [2] (54) (6,595) (4,271)
-------------------------------------------------- ------------------- --------------- -------------
Total cash and cash equivalents at the end
of period 27,339 49,834 37,221
-------------------------------------------------- ------------------- --------------- -------------
Bank loans and borrowings (11,898) (10,113) (7,212)
-------------------------------------------------- ------------------- --------------- -------------
Net cash 15,441 39,721 30,009
-------------------------------------------------- ------------------- --------------- -------------
Notes to the Unaudited Consolidated Interim Financial Statements
1. General information
The Company is a public limited company incorporated and domiciled in the UK. The address of its registered office and the Company is 36 Golden Square, London W1F 9EE.
The Company is listed on the AIM market of the London Stock Exchange.
This consolidated half-yearly financial information was approved for issue on 13 September 2023.
The comparative financial information for the year ended 31 December 2022 in these interim financial statements does not constitute statutory accounts for that year.
The statutory accounts for the year ended 31 December 2022 have been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.
2. Basis of preparation
This consolidated half-yearly financial information for the six months ended 30 June 2023 has been prepared on the going concern basis, in accordance with the AIM Rules for companies. The interim financial statements do not include all of the information required in annual financial statements in accordance with IFRS and should be read in conjunction with the consolidated financial statements for the year ended 31 December 2022.
3. Use of judgements and estimates
In the course of preparing the interim financial statements, management necessarily makes judgements and estimates that can have a significant impact on the interim financial statements. These estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Significant accounting judgements
Management has considered the following judgements, which have the most significant effect in terms of the amounts recognised, and their presentation, in the interim financial statements. These are the same accounting estimates and judgements the Group has applied in its financial statements for the year ended 31 December 2022:
-- Non-controlling interests put option accounting - IFRS 2 or IFRS 9
The key judgement is whether the awards are given beneficially as a result of employment, which can be determined where there is an explicit service condition, where the award is given to an existing employee, where the employee is being paid below market value or where there are other indicators that the award is a reward for employment. In such cases, the awards are accounted for as a share-based payment in exchange for employment services under IFRS 2.
Otherwise, where the holder held shares prior to the Group acquiring the subsidiary, or gained the equity to start a subsidiary using their unique skills, and there are no indicators it should be accounted for under IFRS 2, then the award is accounted for under IFRS 9.
-- Impairment - assessment of CGUs and assessment of indicators of impairment
Impairment reviews are undertaken annually, or more frequently if events or changes in circumstances indicate a potential impairment. Assets with finite lives are reviewed for indicators of impairment (an impairment "trigger") and judgement is applied in determining whether such a trigger has occurred. External and internal factors are monitored by management, including a) adverse changes in the economic or political situation of the geographic locale in which the underlying entity operates, b) heightened risk of client loss or chance of client gain, and c) internal reporting suggesting that an entity's future economic performance is better or worse than previously expected. Where management have concluded that such an indication of impairment exists, then the recoverable amount of the asset is assessed.
For the interim financial statements, management have concluded that no such indication of impairment exists.
Significant estimates and assumptions
The areas of the Group's interim financial statements subject to key assumptions and other significant sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are described below. The Group has based its assumptions and estimates on information available when the interim financial statements were prepared.
-- Deferred tax assets
The Group assesses the future availability of carried forward losses and other tax attributes by reference to jurisdiction-specific rules around carry forward and utilisation and it assesses whether it is probable that future taxable profits will be available against which the attribute can be utilised.
-- Fair value measurement of financial instruments
The Group holds certain financial instruments which are recorded on the balance sheet at fair value at the point of recognition and remeasured at the end of each reporting period. At the period end these relate to:
(i) equity investments at FVTPL in non-listed limited companies; and
(ii) certain contingent consideration.
No formal market exists to trade these financial instruments and, therefore, their fair value is measured by the most appropriate valuation techniques available, which vary based on the nature of the instruments. The inputs to the valuation models are taken from observable markets where possible, but where this is not feasible, judgement is required to establish fair values.
-- Share-based incentive arrangements
Share-based incentives are valued at the date of the grant, using stochastic Monte Carlo pricing models with non-market vesting conditions. Typically, the value of these awards is directly related to the performance of a particular entity of the Group in which the employee holds a minority interest, the Company's share price (market vesting condition) and the future profitability of the Group (non-market vesting condition). For elements that are based on market vesting conditions, the key inputs to the pricing model are risk-free interest rates, share price volatility and expected future performance of the entity to which the award relates. Management apply judgement to these inputs, using various sources of information, including the Company's share price, experience of past performance and published data on risk-free interest rates (government gilts). For elements that are based on non-market vesting conditions, periodic reassessment of the future profitability of the Group is made and the accounting charge is adjusted.
4. Headline results
Headline results - Six Months Ended 30 June 2023
Statutory Separately Amortisation FVTPL Gain/loss Impairment Dividends Put option Headline
results disclosed of acquired investments on disposal of paid to accounting results
items [3] intangibles under IFRS of non-current put
[4] 9 [5] subsidiaries assets holders
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------- ---------- ----------- ------------- ------------ ------------- ------------ ---------- ----------- ---------
Net revenue 120,391 - - - - - - - 120,391
----------------- ---------- ----------- ------------- ------------ ------------- ------------ ---------- ----------- ---------
Staff costs (99,030) 954 - - - - 3,668 6,156 (88,252)
Depreciation (4,458) - - - - - - - (4,458)
Amortisation (397) - 296 - - - - - (101)
Impairment
charges [6] (426) - - - - 463 - - 37
Other operating
charges (17,731) 423 - (329) - - - - (17,637)
Other
(losses)/gains (1,922) - - 1,922 - - - - -
----------------- ---------- ----------- ------------- ------------ ------------- ------------ ---------- ----------- ---------
Operating profit (3,573) 1,377 296 1,593 - 463 3,668 6,156 9,980
Share of result
of and
gain on
disposal of
associates
and joint
ventures (14) - - - - - - - (14)
----------------- ---------- ----------- ------------- ------------ ------------- ------------ ---------- ----------- ---------
Gain/(loss) on
disposal
of subsidiaries
[7] 304 - - - (304) - - - -
----------------- ---------- ----------- ------------- ------------ ------------- ------------ ---------- ----------- ---------
Finance income 874 - - - - - - - 874
Finance expense (2,650) - - 365 - - - 293 (1,992)
----------------- ---------- ----------- ------------- ------------ ------------- ------------ ---------- -----------
Profit before
taxation (5,059) 1,377 296 1,958 (304) 463 3,668 6,449 8,848
----------------- ---------- ----------- ------------- ------------ ------------- ------------ ---------- ----------- ---------
Taxation (1,223) (363) (72) (514) - - - - (2,172)
----------------- ---------- ----------- ------------- ------------ ------------- ------------ ---------- ----------- ---------
(Loss)/profit
for the
year (6,282) 1,014 224 1,444 (304) 463 3,668 6,449 6,676
----------------- ---------- ----------- ------------- ------------ ------------- ------------ ---------- ----------- ---------
Non-controlling
interests (94) - - - - - (1,120) - (1,214)
----------------- ---------- ----------- ------------- ------------ ------------- ------------ ---------- ----------- --------- (Loss)/profit attributable to equity holders of the Group (6,376) 1,014 224 1,444 (304) 463 2,548 6,449 5,462 ----------------- ---------- ----------- ------------- ------------ ------------- ------------ ---------- ----------- ---------
Headline results - Six Months Ended 30 June 2022
Statutory Separately Amortisation FVTPL Revaluation Dividends Put option Headline
results disclosed of acquired investments of contingent paid to accounting results
items [8] intangibles under IFRS consideration IFRS 2
[9] 9 put
holders
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------- ---------- ----------- ------------- ------------ -------------- ---------- ----------- ---------
Net revenue 129,394 - - - - - - 129,394
----------------- ---------- ----------- ------------- ------------ -------------- ---------- ----------- ---------
Staff costs (94,401) 903 - - - 4,635 953 (87,910)
Depreciation (4,543) - - - - - - (4,543)
Amortisation (454) - 302 - - - - (152)
Other operating
charges (27,712) 8,345 - 391 266 - - (18,710)
Other gains/
losses 452 - - (452) - - - -
----------------- ---------- ----------- ------------- ------------ -------------- ---------- ----------- ---------
Operating profit 2,736 9,248 302 (61) 266 4,635 953 18,079
Finance income 70 - - - - - - 70
Finance expense (2,501) - - - - - 393 (2,108)
----------------- ---------- ----------- ------------- ------------ -------------- ---------- -----------
Profit before
taxation 305 9,248 302 (61) 266 4,635 1,346 16,041
----------------- ---------- ----------- ------------- ------------ -------------- ---------- ----------- ---------
Taxation (4,294) (298) (88) 18 - - - (4,662)
----------------- ---------- ----------- ------------- ------------ -------------- ---------- ----------- ---------
(Loss)/profit
for the
year (3,989) 8,950 214 (43) 266 4,635 1,346 11,379
----------------- ---------- ----------- ------------- ------------ -------------- ---------- ----------- ---------
Non-controlling
interests (148) - - - - (3,441) - (3,589)
----------------- ---------- ----------- ------------- ------------ -------------- ---------- ----------- ---------
(Loss)/profit
attributable
to equity
holders of
the Group (4,137) 8,950 214 (43) 266 1,194 1,346 7,790
----------------- ---------- ----------- ------------- ------------ -------------- ---------- ----------- ---------
Headline results - Year Ended 31 December 2022
Impairment FVTPL Dividends
Separately Amortisation of investments Revaluation paid to
Statutory disclosed of acquired non-current under IFRS of contingent IFRS2 put Put option Headline
results items intangibles assets 9 consideration holders accounting results
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Net revenue 271,140 - - - - - - - 271,140
----------------- ----------- ----------- ------------- ------------ ------------ -------------- ---------- ----------- ----------
Staff costs (198,765) 3,412 - - - - 7,811 1,119 (186,423)
Depreciation (9,326) - - - - - - - (9,326)
Amortisation (1,060) - 597 - - - - - (463)
Impairments (564) - - 564 - - - - -
Other operating
charges (49,474) 9,940 - - (272) 266 - - (39,540)
Other losses (1,403) - - - 1,403 - - - -
Operating Profit 10,548 13,352 597 564 1,131 266 7,811 1,119 35,388
----------------- ----------- ----------- ------------- ------------ ------------ -------------- ---------- ----------- ----------
Share of results
of associates
and JV (10) - - - - - - - (10)
Finance income 391 - - - - - - - 391
Finance expense (5,506) - - - 456 - - 1,114 (3,936)
----------------- ----------- ----------- ------------- ------------ ------------ -------------- ---------- -----------
Profit before
taxation 5,423 13,352 597 564 1,587 266 7,811 2,233 31,833
----------------- ----------- ----------- ------------- ------------ ------------ -------------- ---------- ----------- ----------
Taxation (5,178) (1,982) (174) - (409) - - (47) (7,790)
----------------- ----------- ----------- ------------- ------------ ------------ -------------- ---------- ----------- ----------
Profit for the
year 245 11,370 423 564 1,178 266 7,811 2,186 24,043
----------------- ----------- ----------- ------------- ------------ ------------ -------------- ---------- ----------- ----------
Non-controlling
interests (155) - - - - - (5,783) - (5,938)
----------------- ----------- ----------- ------------- ------------ ------------ -------------- ---------- ----------- ----------
Profit
attributable
to equity
holders
of the Group 90 11,370 423 564 1,178 266 2,028 2,186 18,105
----------------- ----------- ----------- ------------- ------------ ------------ -------------- ---------- ----------- ----------
5. Earnings per share
Earnings per share - Six Months Ended 30 June 2023
Basic and diluted earnings per share are calculated by dividing appropriate earnings metrics by the weighted average number of the Company's ordinary shares in issue during the year.
Diluted earnings per share is calculated by adjusting the weighted average number of the Company's shares in issue on the assumption of conversion of all potentially dilutive ordinary shares. The dilutive effect of unvested outstanding put options is calculated based on the number that would vest had the balance sheet date been the vesting date. Since the Company made a statutory loss no diluted earnings per share is calculated.
Statutory Headline
2023 2023
(Loss)/profit attributable to equity shareholders
of the Group (GBP000) (6,376) 5,462
------------------------------------------------------- ---------- ---------
Basic earnings per share
Weighted average number of shares
(thousands) 122,257 122,257
Basic (loss)/earnings
per share (5.22)p 4.47p
---------------------------------------------------------- ---------- ---------
Diluted earnings per
share
Weighted average number of shares (thousands)
as above 122,257 122,257
Diluted (loss)/earnings
per share (5.22)p 4.47p
---------------------------------------------------------- ---------- ---------
Earnings per share - Six Months Ended 30 June 2022
Statutory Headline
2022 2022
-------------------------------------------- ---------- ---------
Profit attributable to equity shareholders
of the Group (GBP000) (4,137) 7,790
------------------------------------------------ ---------- ---------
Basic earnings per
share
Weighted average number of
shares (thousands) 122,257 122,257
Basic (loss)/earnings
per share (3.38)p 6.37p
--------------------------------------------------- ---------- ---------
Diluted earnings per
share
Weighted average number of shares
(thousands) as above 122,257 122,257
Diluted (loss)/earnings
per share (3.38)p 6.37p
--------------------------------------------------- ---------- ---------
Earnings per share - Year Ended 31 December 2022
Statutory Headline
Year ended 31 December 2022 2022 2022
Profit attributable to equity shareholders of the
Group (GBP000) 90 18,105
-------------------------------------------------- --------- --------
Basic earnings per share
Weighted average number of shares (thousands) 122,257 122,257
Basic EPS 0.07p 14.81p
-------------------------------------------------- --------- --------
Diluted earnings per share
Weighted average number of shares (thousands) as
above 122,257 122,257
Add
- LTIP 905 905
- Put options 11,302 11,302
-------------------------------------------------- --------- --------
Total 134,464 134,464
Diluted EPS 0.07p 13.47p
-------------------------------------------------- --------- --------
Excluding the put options (payable in cash) (11,302) (11,302)
Weighted average numbers of shares (thousands)
including dilutive shares 123,162 123,162
-------------------------------------------------- --------- --------
Diluted EPS - excluding items we intend and are
able to pay in cash 0.07p 14.70p
-------------------------------------------------- --------- --------
6. Separately disclosed items
Separately disclosed items include one-off, non-recurring revenues or expenses. These are shown separately and are excluded from Headline profit to provide a better understanding of the underlying results of the Group.
30 June 2023
Separately disclosed items for the six months ended 30 June 2023 comprise the following:
Operating Staff costs Taxation Total
costs
GBP000 GBP000 GBP000
GBP000
----------------------------- ---------- ------------ --------- --------
Global efficiency programme 421 106 (132) 395
Local strategic review
and restructuring 2 848 (231) 619
Total separately disclosed
items 423 954 (363) 1,014
----------------------------- ---------- ------------ --------- --------
`
In H2 2022, the Group commenced a global efficiency programme, with the assistance of PricewaterhouseCoopers LLP. The professional and legal fees and staff costs incurred in relation to this project were classified as non-Headline (GBP527k).
In addition, within nine of the agencies in the Group, a strategic review has been commenced which has resulted in staff redundancy costs in the period. The strategic review and restructuring costs are treated as separately disclosed items only when a role has been permanently eliminated from the business (there should be no intention for the role to be replaced in the next 12 months). There are GBP848k of redundancy costs included within non-Headline strategic review and restructuring, and GBP150k of redundancy costs are included within the Headline staff costs.
30 June 2022
Separately disclosed items for the six months ended 30 June 2022 comprise the following:
Operating Staff costs Taxation Total
costs
GBP000 GBP000 GBP000
GBP000
---------------------------- ---------- ------------ --------- --------
Takeover transaction
costs 8,645 903 (298) 9,250
Other (300) - - (300)
Total separately disclosed
items 8,345 903 (298) 8,950
---------------------------- ---------- ------------ --------- --------
During 2022, the Company was subject to two competing offers to acquire the entire issued share capital of the Company. Managing the Company's response to these two offers resulted in significant external advisory costs and a refocusing of several key internal personnel away from the day-to-day running of the business.
Other separately disclosed items relate to the release of the provision associated with the Financial Conduct Authority investigation, which is now closed with
31 December 2022
Separately disclosed items for the year ended 31 December 2022 comprise the following:
Operating Staff costs Taxation Total
costs
GBP000 GBP000 GBP000
GBP000
---------------------------- ---------- ------------ --------- --------
Takeover transaction
costs 9,210 1,623 (1,294) 9,539
Strategic review and
restructuring 992 1,789 (688) 2,093
Other (262) - - (262)
Total separately disclosed
items 9,940 3,412 (1,982) 11,370
---------------------------- ---------- ------------ --------- --------
In H2 2022, the Company incurred incremental bonus costs paid to several key individuals of GBP594k to reflect the significant additional workload they had to undertake in defence of the takeover bids.
The Group commenced a global efficiency programme, with the assistance of PricewaterhouseCoopers LLP. The professional fees incurred in relation to this project have been classified as non-Headline (GBP922k). In addition, within three of the agencies in the Group, a strategic review commenced which resulted in staff redundancy costs in the year (GBP1,789k).
7. Segmental information
The Group's operating segments are aligned to those business units that are regularly evaluated by the chief operating decision maker ("CODM"), namely, the Board, in making strategic decisions, assessing performance and allocating resources.
We primarily assess the Group's performance by division, namely Advertising, Specialisms and Group Central Costs. The segmental information is reconciled to the Headline results in Note 4.
Segmental Information by Division [10]
Advertising Specialisms Group Central Total
Costs
Six Months Ended 30 June 2023 GBP000 GBP000 GBP000 GBP000
------------------------------- ------------ ------------ -------------- --------
Net revenue 50,092 70,299 - 120,391
Operating profit/(loss) 464 13,869 (4,353) 9,980
Operating profit margin 0.9% 19.7% - 8.3%
Profit/(loss) before tax 153 11,146 (2,451) 8,848
--------------------------------- ------------ ------------ -------------- --------
Advertising Specialisms Group Central Total
(restated) (restated) Costs
[ 11]
Six Months Ended 30 June 2022 GBP000 GBP000 GBP000 GBP000
------------------------------- ------------ ------------ -------------- --------
Net revenue 59,658 69,736 - 129,394
Operating profit/(loss) 3,259 19,742 (4,922) 18,079
Operating profit margin 5.5% 28.3% - 14.0%
Profit/(loss) before tax 2,671 18,477 (5,108) 16,041
--------------------------------- ------------ ------------ -------------- --------
Advertising Specialisms Group Central Total
Costs
Year Ended 31 December 2022 GBP000 GBP000 GBP000 GBP000
----------------------------- ------------ ------------ -------------- ---------
Net revenue 124,300 146,840 - 271,140
Operating profit/(loss) 11,728 35,015 (11,355) 35,388
Operating profit margin 9% 24% - 13% Profit/(loss) before tax 9,928 31,604 (9,699) 31,833 ------------------------------- ------------ ------------ -------------- ---------
Segmental Information by Geography
Middle Group
East and Central
UK Europe Africa Asia Australia Americas Costs Total
Six Months Ended 30 June 2023 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------- ------- ------- ---------- ------- ---------- --------- --------- --------
Net revenue 46,642 6,957 10,940 10,750 22,613 22,489 - 120,391
Operating profit/(loss) 8,713 247 1,030 1,105 1,541 1,697 (4,353) 9,980
Operating profit margin 18.7% 3.6% 9.4% 10.3% 6.8% 7.5% - 8.3%
Profit/(loss) before tax 7,674 171 928 1,056 1,015 455 (2,451) 8,848
------------------------------- ------- ------- ---------- ------- ---------- --------- --------- --------
Middle Group
East and Central
UK Europe Africa Asia Australia Americas Costs Total
Six Months Ended 30 June 2022 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------- ------- ------- ---------- ------- ---------- --------- --------- --------
Net revenue 49,126 7,644 10,900 12,310 25,726 23,688 - 129,394
Operating profit/(loss) 11,232 715 912 4,185 2,091 3,866 (4,922) 18,079
Operating profit margin 22.9% 9.4% 8.4% 34.0% 8.1% 16.3% - 14.0%
Profit/(loss) before tax 11,550 684 767 4,146 1,686 2,316 (5,108) 16,041
------------------------------- ------- ------- ---------- ------- ---------- --------- --------- --------
Middle Group
East and Central
UK Europe Africa Asia Australia Americas Costs Total
Year Ended 31 December 2022 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------- -------- ------- ---------- ------- ---------- --------- --------- --------
Net revenue 98,241 15,316 23,368 26,154 52,855 55,206 - 271,140
Operating profit/(loss) 19,528 1,852 2,625 6,951 5,817 9,970 (11,355) 35,388
Operating profit margin 19% 12% 11% 29% 11% 18% - 13%
Profit/(loss) before tax 17,416 1,832 2,345 6,757 4,904 8,278 (9,699) 31,833
----------------------------- -------- ------- ---------- ------- ---------- --------- --------- --------
8. Net finance income / (expense)
Six months Six months Year ended
ended 30 June ended 30 June 31 December
2023 2022 2022
GBP000 GBP000 GBP000
Bank interest receivable 189 66 331
Other interest receivable 682 - 55
Sublease finance income 3 4 5
Finance income 874 70 391
-------------------------------------- --------------- --------------- -------------
Bank interest payable (788) (508) (1,200)
Amortisation of loan costs (95) (111) (222)
Interest on lease liabilities (1,474) (1,489) (2,970)
Amortisation adjustment to minority
shareholder put option liabilities (293) (393) (1,114)
Finance expense (2,650) (2,501) (5,506)
-------------------------------------- --------------- --------------- -------------
Net finance expense (1,776) (2,431) (5,115)
--------------------------------------- --------------- --------------- -------------
9. Taxation
Income tax expenses are recognised based on management's estimate of the average annual income tax rate expected for the full financial year.
The estimated effective Headline annual tax rate used for H1 2023 is 23.7% (H1 2022: 29.1%; Full Year 2022: 24.5%).
We expect smaller variations in future statutory tax rates due to lower amounts of significant non-deductible items such as share-based payments (put option charges) and dividends that are payable to minority shareholders that are defined as a staff cost.
10. Dividends
The Board believes that the Group has significant growth potential. Accordingly, the Board believes that the Group would be best served, and this potential realised, from investing annual profits back into the business and into new growth initiatives.
However, the Board recognises the importance of dividends within the Company's capital allocation policy, alongside the settlement of put options and investment in growth initiatives. The Board therefore decided to resume the payment of dividends in 2023 and intends to adopt a progressive dividend policy in the future.
The Company did not pay a dividend to its shareholders in 2022. Given the full year financial performance in 2022, the Board declared a final dividend of 1.5 pence per ordinary share for the financial year ended 31 December 2022, which was paid in July 2023.
Due to the weighting of profits to H2, the Board does not recommend an interim dividend for the year ending 31 December 2023 (2022: nil).
11. Share-based payments
In 2021, the Board made the decision that all put options would be settled in cash. However, the optionality remains to issue shares in the Company to settle put options in the future, should circumstances warrant.
Total future expected put option liabilities at 30 June 2023
Potentially payable
Paid Payable
At 152p H1 2023 H2 2023 2024 2025 2026 2027 2028 Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------ --------- --------- ------- ------- ------- ------- ------- -------
IFRS9 put option
schemes * 785 1,929 19 - 1,983 - - 3,931
IFRS2 put option
schemes ** 2,493 13,573 6,057 1,594 953 882 542 23,601
Total 3,278 15,502 6,076 1,594 2,936 882 542 27,532
------------------ --------- --------- ------- ------- ------- ------- ------- -------
* At 30 June 2023 IFRS9 put option schemes includes a GBP566k fair value discount for time.
** At 30 June 2023 94% of IFRS2 put option schemes by value were vested. The balance sheet liability at 30 June 2023 is GBP22,250k.
Put option holders are not required to exercise their put options at the first opportunity. Many do not and prefer to remain shareholders in the subsidiary companies they manage. As a result, some put option holders may not exercise their put options on the dates estimated in the table above. If the Company in the future decides to settle these put options with the Company's shares, then the amount of Company shares that will be provided is equal to the liability divided by the Company's share price at the date of settlement.
Effect of a change in share price
The same data from the table above is presented in the table below, but in this analysis the potential payments are based on a range of different potential future share prices.
Put option schemes
Potentially payable
Future share price Paid Payable Total
of Company H1 2023 H2 2023 2024 2025 2026 2027 2028 payable
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------- --------- --------- ------- --------- ------- ------- ------- ---------
140.0p 3,278 15,502 5,585 1,460 2,861 813 499 26,720
152.0p 3,278 15,502 6,076 1,594 2,936 882 542 27,532
175.0p 3,278 15,502 7,019 1,852 3,080 1,016 624 29,093
200.0p 3,278 15,579 7,943 2,032 3,316 1,161 713 30,744
225.0p 3,278 15,830 8,794 2,139 3,730 1,306 802 32,601
The Board has issued LTIPs to certain key individuals, which at a share price of 152.0p would generate a maximum potential payable of GBP4.6million, assuming all awards are held to their vesting date and fully vest. LTIPs are accounted for as equity-settled, and thus do not create a balance sheet liability.
12. Events after the balance sheet date
Moray MacLennan informed the Company of his intention to retire from his role of Chief Executive Officer of the Company. The Company and Mr MacLennan agreed that this change will take effect as of 30 September 2023. Until a new Chief Executive Officer joins the Company, which is expected to be within the next 12 months, Zillah Byng-Thorne, currently Non-Executive Chair, is acting as Executive Chair of the Company effective 1 September 2023.
As a result of settling put option arrangements, the Company paid out GBP11.5million to put options holders in July 2023.
The Directors are not aware of any other events since 30 June 2023 that have had, or may have, a significant impact on the Group's operations, the results of those operations, or the state of affairs of the Group in future years.
[1] Like-for-like excluding the effect of the disposal of Clear Deutschland GMBH in H1 2023 and retranslating 2022 figures to 2023 FX rates. Additionally, 2022 comparators have been restated in respect of agencies which changed from Advertising to Specialisms in H2 2022
[2] These overdrafts are legally offset against balances held in the UK; however, they have not been netted off in accordance with the requirements of IAS32.42.
[3] Refer to Note 6
[4] Amortisation of intangible assets acquired in business combinations (including goodwill and acquired intangibles but excluding software).
[5] Financial assets at fair value through profit and loss (FVTPL) relates to assets held in the Saatchinvest portfolio and by the Australian business.
[6] The headline impairment is net positive due to the unwinding of a historic impairment balance of film assets held by the Australian business.
[7] Gain mainly relates to the reversal of put option liability relating to Clear Deutschland GMBH.
[8] Refer to Note 6
[9] Amortisation of intangible assets acquired in business combinations (including goodwill and acquired intangibles but excluding software).
[10] The segmental reporting reflects Headline results
[11] The disclosure has been restated to reclassify entities who changed from Advertising to Specialisms during H2 2022, and to recalculate the allocation of local central costs in line with the method applied in H2 2022 and H1 2023.
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END
IR LJMBTMTBBTMJ
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September 14, 2023 02:00 ET (06:00 GMT)
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