Preliminary Results

RNS Number : 3066S
Jaywing PLC
07 July 2015
 

 

 

Date:                7 July 2015

On behalf of:      Jaywing plc ("the Company")

Embargoed:     0700hrs 7 July 2015

 

 

Jaywing plc

Preliminary Results 2015

 

 

Jaywing plc (AIM: JWNG), the data driven, insight and creative agency, is pleased to announce its audited preliminary results for the year ended 31 March 2015.

 

 

Financial highlights from continuing operations

 


Year to 31 March 2015

£'000

Year to 31 March 2014

£'000

Revenue

33,789

26,693

Gross profit*

30,086

21,624

Adjusted EBITDA**

4,063

2,320

Adjusted EBITDA margin***

13.5%

10.7%

Basic EPS on adjusted EBITDA

5.3p

3.1p

Basic EPS

(1.91p)

(6.44p)

Net debt

5,188

5,806

 

* Revenue less direct costs of sale

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

*** As a percentage of gross profit

 

 

Highlights:

·      Gross profit (fee income) up 39% to £30.1 million (2014: £21.6 million)

·      Adjusted EBITDA up 75% to £4.1 million (2014: £2.3 million)

·      Adjusted EBITDA margin increased by 2.8% to 13.5%

·      Fourth consecutive period of EBITDA growth (half yearly)

·      Epiphany acquisition fully integrated and making strong contribution

·      New strategy in place to accelerate growth and tighten operational focus

·      Board changes to align with delivery of new strategy

 

Outlook:

·      Trading in Q1 2015 in line with management expectations

 


 

 

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

 

"I am pleased to report another strong set of results from Jaywing. Gross profit and EBITDA have continued to grow, with a clear strategy to deliver continued growth and a client offering highly differentiated from our competitors."

 

Enquiries:

 

Jaywing plc


Michael Sprot (Finance Director)

Tel: 0114 281 1200




Nicholas Wells (Nomad)

Tel: 020 7397 8900

 

 



 

Chief Executive's Report

 

·      Jaywing today

 

Jaywing is a leading UK based agency employing approximately 600 people across five sites in the UK (Leeds, Sheffield, Newbury, Swindon and London) and with an embryonic operation in Sydney, Australia.  It is the largest agency in the North of England and I'm delighted to say was recently voted the best large agency in the Prolific North Awards.

 

Data now sits at the heart of Jaywing. We believe that the size and calibre of our data science team clearly distinguishes us from the competition. Our data scientists help blue chip clients to make sense of the ever more complex multi-channel, multi-device world in which they operate. Jaywing data scientists, comprising a team of over 50 people, work in collaboration with Jaywing's wider marketing and customer experience specialists. By bringing on and offline data together, they are able to produce unique insights and algorithms to help power and increase the efficiency of clients' marketing and customer experience programmes.

 

 

 

·      The last 12 months

 

 

Acquisition and integration of Epiphany

 

The acquisition and successful integration of search marketing specialist Epiphany Solutions Limited ("Epiphany") in March 2014 has proven to be transformational for Jaywing. It has given us a profitable growth platform as well as access to digital data and online media expertise. This has enabled our data scientists to develop innovative new products and services whilst Epiphany itself has benefited from being part of Jaywing in new business terms by sharing its competitive advantage in data science.

 

 

Improved resilience

 

The resilience of the business has significantly improved:

 

Following the acquisition of Epiphany and after winning a large customer experience contract for Collect+, approximately 50% of our income is now recurring with contracts lasting between 12 months and 3 years. The remaining income is derived from multi-year framework agreements or project specific contracts. Consequently, visibility of income has improved from a situation where approximately 30% of income was visible beyond six weeks to a place where approximately 60% is now secure.

 

Jaywing has diversified its customer base, substantially reducing client concentration risk. Currently, no single client accounts for more than 5% of income and no industry sector accounts for more than 25% of income.

 

 

Increased sales

 

Cross-selling of products and services is now well established and continues to be a key focus. Over a quarter of our top 50 clients are now buying services from at least two different service lines, with some buying from up to four.  In addition, our drive to win new business continues and generated an additional £4 million of income from new clients, which was well ahead of the previous year's performance.  Notable wins include Irwin Mitchell and Nationwide Building Society.

 

 

Innovation

 

During the period, product and service innovation has been a high priority.  We have now created a data architecture that uses digital data capture alongside "Big Data" processing components to create a repository for on and offline data.  Powerful algorithms developed using data in this repository can now deliver highly personalised display advertising, websites and email programmes that distinguish between non, new and existing customers. 

 

 

Strong cash generation

 

The business remains cash generative. During the period, net debt fell from £5.8 million to £5.2 million after earn-out payments of £1.4 million and corporation tax payments of £0.8 million. Free cash flow generated was £2.0 million. The net debt to EBITDA ratio was 1.3x at the year end, an improvement from the previous period. The balance sheet includes accruals for the final Iris Associates Limited ("Iris") earn-out payment, in addition to the first Epiphany earn-out payment.

 

 

·      The next 12 months and beyond

 

Market conditions are likely to remain positive

 

The latest influential IPA Bellwether Report shows that UK marketing budgets increased for the tenth consecutive quarter, and at an accelerated pace with spend on digital marketing seeing the highest upward revisions. This trend looks set to continue with 28% of brands intending to increase their marketing budgets in 2015/16.

 

Econsultancy's quarterly Digital Intelligence Briefing published in January found that 78% of companies aim to differentiate themselves by improving their customer experience in the year ahead with almost 60% of respondents saying that cross-channel marketing would be a key focus for them in 2015.  Consequently, targeting and personalisation (30%), content optimisation (29%) and social media engagement (27%) are the most likely to be prioritised during 2015.

 

Not surprisingly, marketers are concerned about the growing complexity arising from the proliferation of channels and devices, the explosion of data and the expectation of a seamless multi-channel customer experience.  According to a recent IBM survey of Chief Marketing Officers, 80% felt that they would need to deal with high levels of complexity in the next few years and fewer than 50% felt they and their organisations were prepared to cope with it.

 

These market trends are all positive for Jaywing. We have real depth in today's key specialisms and the ability to join them up through our collaborative operating model and culture. More than that, we have an outstanding team of data scientists who can harness the power of the data that is so vital to personalising and prioritising communications.

 

Encouraging start to the new financial year

 

The year started with the launch of our new proposition "making sense of NOW".  This directly addresses the challenges marketers face in managing the complexity of ever more sophisticated marketing activities in the rapidly changing, technology-led consumer world in which they operate.

 

Our websites, along with all of our other marketing collateral, have been re-developed for the Jaywing and Epiphany brands. The reaction from both our clients and our people has been very positive and we now believe we have the platform to build far greater brand awareness and to generate far more inbound sales opportunities.

 

Financially, we've also made a good start to the year with some significant client wins, strong spend from existing clients and encouraging levels of cross-selling activity.

 

 

 

 

 

·      Strategic update

 

Sharpening our focus

 

Following the successful launch of our new proposition, we will continue to sharpen our focus and concentrate on activities where we see the biggest opportunity to benefit from the use of data science and which offer attractive margins.

 

Creating a low risk international growth platform

 

The UK is a highly competitive market place with sophisticated buyers of our services. Whilst the market outlook remains very positive in our sector, achieving double digit growth rates domestically for a business of our scale is challenging.  Consequently, we have been exploring complementary strategies to accelerate our organic growth, and in particular, we are exploring options to generate international sales. 

 

Industry trends indicate that higher growth is achieved internationally in less mature and competitive markets.  We are currently seeking access to an international distribution channel through which we can sell our newly developed products and a number of our services (to be delivered primarily from our UK base). We consider this to be a low risk and proven model in the industry.

 

Our intention is to explore possibilities either to enter into a commercial joint venture or acquire a business with an established international distribution channel and a product suite that sits well alongside our own. In addition, we will seek to develop an improved sales channel in Australia by growing our small operation in Sydney, which currently only sells search marketing services.

 

Closer to home, we remain interested in opportunities to repeat the success of our acquisition of Iris, the Sheffield based creative agency. Here, we acquired a relatively small business with great people that was located in close proximity to one of our existing operations.  By integrating it immediately we were able to deliver significant synergies whilst scaling the overall operation.

 

 

Innovation in data science

 

We believe that, over the next few years, innovation in data science has the potential to disrupt the marketing industry, changing the way marketing is done and the role played by marketing agencies.  We intend to be at the forefront of developments in this space and are seeking to build links with academia as well continuing to build our impressive data science team.

 

Following successful testing last year and some live client projects this year, our short-term focus is to hone our new product set and generate sales. We will also seek to re-launch our Digital Collections product which allows organisations such as retailers and local government to automate debt collection through highly personalised communication and enhanced online payment functionality.

 

Re-aligning the Board

 

As announced today, given the ambitious plan we have set for ourselves, we have decided to strengthen and realign the Executive team of the Board in service of our new strategic direction:

 

·      Andy Gardner (currently COO) will lead our strategic initiatives (M & A, product and distribution) and take on the title of Chief Strategy Officer.

 

·      Mike Sprot (currently Finance Director) will be promoted to the role of Chief Financial Officer (CFO).

 

·      Rob Shaw (CEO Epiphany) will join the Board as CEO UK & Australia. He will be joined by Adrian Lingard (MD Consulting) who will take on the role of COO. Rob and Adrian both have tremendous track records and will be responsible for the performance of our core Jaywing business. Their current roles will be filled from within their own teams providing welcome progression for some very talented individuals.

 

·      I will remain CEO of Jaywing plc with the individuals above reporting to me.

 

So, in summary, on the back of a successful year, the business is now in a position to push forward with greater ambition. 

 

We have an exciting strategy that will see Jaywing move ever further away from being "another" marketing agency group to being a marketing agency specialising in data science and working in areas of growing marketing spend. A business that has both a high level of resilience and a strong platform for domestic and international growth. And, of course, a business with some exceptional people working in a highly collaborative environment for blue chip clients.

 

 

 

 

 

Martin Boddy

Chief Executive Officer

Jaywing plc

 


 

Chairman's Statement

 

Performance

 

I am pleased to report that 2014/15 has been a transformational year for Jaywing.  The successful acquisition and integration of Epiphany along with a new strategic direction and the realignment of an expanded executive team has given us a strong growth platform going forward.

 

It has also been a year of innovation with the development of our secure Big Data environment where we combine on and offline data to improve our client's marketing and customer experience programmes.  We have also invested in product development that uses this data environment and in strengthening our content marketing team.

 

These are exciting times for Jaywing and we find ourselves ideally placed to take advantage of the changes in the industry and the increasing focus on Big Data science.

 

The Board and Governance

 

The Board has been active during the year, supporting the Executive as they have developed the strategic direction of the business. Going forward, we will continue to work closely with them to assist in the implementation of these plans.

 

I would like to welcome Rob and Adrian to the Board, and I look forward to working with them as we continue to move Jaywing forward. These additions, coupled with the change in role for Andy and the promotion for Mike, have strengthened the senior management of the business.

 

Our people

 

On behalf of the Board, I would like to thank all of our colleagues - the 'Jaywingers' - for their continued hard work and contribution to the business. Their skill, enthusiasm and dedication are a credit to the organisation.

 

 

 

 

Ian Robinson

Chairman

 

 

 


 

Strategic Report

 

 

Business Review

 

Gross profit was up significantly to £30.1m (2014: £21.6m). The underlying business delivered increased operating profits of £4.1m (2014: £2.3m) which was in line with expectations.

 

The adjusted operating performance line, before interest, tax, depreciation, amortisation, share based payment charges, loss before tax on disposal, exceptional items and acquisition related costs, shows EBITDA of £4.1m (2014: £2.9m continuing and discontinued). 

 

Jaywing plc reported a statutory loss of £1.5m in the year ended 31 March 2015 (2014: £4.8m loss).

 

The business operates in two divisions: Agency Services and Media & Analysis, the latter comprising the ongoing former Consulting division and Epiphany.  The segmental performance of our business in these two practice areas is shown in Note 1, together with the comparative performance from the previous year.

 

At a divisional level, the Media and Analysis segment which represents 55% of the group total revenue has performed well with EBITDA growing 200% from £2.3m to £4.6m.  The Agency Services segment has fallen slightly as a consequence of the unexpected loss of an outsourced customer management contract being managed in-house and our investment in content marketing in the form of two key senior hires. 

 

During the year, the Group benefited from the receipt of £0.1m (2014: £0.3m) from the administrator of a client where a contractual obligation existed. Based on communication from the administrator, the Board believes there will be further distributions but the quantum will reduce.

 

The table below shows the adjusted operating profit of the Group analysed between the two half years and adjustments made against the reported numbers:



Full year to

31 March 2015

Six months to

31 March 2015

Six months to

30 September 2014



£'000

£'000

£'000

Reported profit before tax


(1,359)

(72)

(1,287)






Interest


269

134

135

Amortisation


3,474

1,707

1,767

Depreciation


380

192

188

Share based payment charge / (credit)


13

18

(5)

Acquisition related costs


1,270

129

1,141

Exceptional costs


73

36

37

Adjusted operating profit


4,120

2,144

1,976






Deduct other income


(57)

(57)

-






Adjusted operating profit before other income

4,063

2,087

1,976

 

Excluding other income the Group produced £2.1m adjusted operating profit after interest in the six months to 31 March 2015 and £2.0m in the first half.

 

 

The table below shows the consistent growth in GP and EBITDA over the last five six-monthly periods:

 

Continuing business EBITDA


Six months to 31 March 2015

Six months to 30 Sept 2014

Six months to 31 March 2014

Six months to 30 Sept 2013

Six months to 31 March 2013



£'000

£'000

£'000

£'000

Revenue

16,541

17,261

13,489

13,204

13,923

Direct costs

(1,726)

(1,990)

(2,264)

(2,805)

(3,698)

Gross profit

14,815

15,271

11,225

10,399

10,225

Operating expenses excluding depreciation, amortisation, exceptional items, acquisition related costs and (credit)/charges for share based payments

(12,728)

 

 

(13,295)

 

 

(9,999)

(9,305)

(9,136)

Operating profit before depreciation, amortisation, exceptional items, acquisition related costs and (credit)/charges for share based payments

2,087

 

 

1,976

 

 

1,226

1,094

1,089

 


 

Liquidity review

 

The Group's facilities comprise a term loan for £3.2m, a revolving credit facility for £3.5m and a bank overdraft of £2.0m.

 

The consolidated cash flow statement shows the Group to have generated cash from operating activities of £2.8m (2014: £2.2m) before changes in working capital.

 

We paid £0.8m in tax (2014: £0.5m). There were repayments of £1.1m of the term loan.

 

As at 31 March 2015, the Group had net debt of £5.2m (2014: £5.8m).

 

Impairment

 

As required by IAS 36, we have carried out an impairment review of the carrying value of our intangible assets and goodwill. We calculate our weighted average cost of capital with reference to long term market costs of debt and equity and the Company's own cost of debt and equity, adjusted for the size of the business and risk premiums. Based on this calculation, a rate of 10.6% (2014:9.0%) has been derived. This is applied to cash flows for each of the business units using growth rates in perpetuity of 2% from 2019/20. As a result of these calculations the Board has concluded that the carrying values of intangible assets and goodwill on the Group's balance sheet do not need to be impaired and therefore no charge has been made (2014: £Nil).

 

 

Key performance indicators

 

Over the last twelve months, the key areas of focus have been:

-       The integration of Epiphany

-       Improved resilience

-       Increased sales

-       Innovation

-       Strong cash generation

Progress against these is described in the Chief Executive's Report on page 2.

 

 


 

Consolidated statement of comprehensive income

 

For the year ended 31 March



2015

2014

Continuing operations

Note


£'000

£'000











Revenue

1


33,789

26,693

Direct costs



(3,703)

(5,069)

Gross profit



30,086

21,624






Other operating income

2


57

312

Operating expenses

3


(31,233)

(22,264)

Operating loss



(1,090)

(328)

Finance income



3

-

Finance costs



(272)

(52)

Net financing costs



(269)

(52)

Loss before tax



(1,359)

(380)

Tax (expense)/credit

4


(119)

182

Loss for the year from continuing operations



(1,478)

(198)






Loss for the year from discontinued operations



-

(4,597)






Other comprehensive income





Exchange differences on retranslation of foreign operations



21

-






Loss for the year attributable to equity holders of the parent



(1,457)

(4,795)






Total comprehensive income for the period attributable to equity holders of the parent



(1,457)

(4,795)











Loss per share

5




Basic loss per share





 - Loss from continuing operations



(1.91p)

(0.27p)

 - Loss from discontinued operations



-

(6.17p)




(1.91p)

(6.44p)






Diluted loss per share





 - Loss from continuing operations



(1.75p)

(0.26p)

 - Loss from discontinued operations



-

(6.03p)




(1.75p)

(6.29p)

 

 

 

Consolidated balance sheet






As at 31 March



2015

2014

2013


Note


£'000

£'000

£'000

Non-current assets






Property, plant and equipment

6


685

638

713

Goodwill

7


30,446

30,442

29,753

Other intangible assets

8


8,065

11,539

8,984




39,196

42,619

39,450

Current assets






Trade and other receivables



7,530

8,691

10,851

Cash and cash equivalents

9


1,000

1,994

1




8,530

10,685

10,852







Total assets



47,726

53,304

50,302







Current liabilities






Bank overdraft

9


-

-

816

Other interest-bearing loans and borrowings

9


4,062

4,612

1,500

Trade and other payables



7,157

8,886

6,731

Current tax liabilities



355

492

742

Provisions



158

131

-




11,732

14,121

9,789

Non-current liabilities






Other interest-bearing loans and borrowings



2,126

3,188

-

Deferred tax liabilities



1,667

2,337

2,060




3,793

5,525

2,060







Total liabilities



15,525

19,646

11,849







Net assets



32,201

33,658

38,453







Equity attributable to owners of the parent






Share capital

10


34,139

34,051

34,051

Share premium



6,608

6,608

6,608

Capital redemption reserve



125

125

125

Shares purchased for treasury



(25)

(25)

(25)

Share option reserve



-

88

137

Foreign currency translation reserve



21

-

-

Retained earnings



(8,667)

(7,189)

(2,443)







Total equity



32,201

33,658

38,453







 

 

 



 

Consolidated cash flow statement

For the year ended 31 March


2015

2014


Note

£'000

£'000





Cash flow from operating activities




Loss after tax


(1,478)

(4,795)

Adjustments for:




Depreciation and amortisation


3,854

2,063

Loss on disposal


-

5,442

Movement in provision


27

131

Foreign exchange


21


Financial income


(3)

-

Financial expenses


272

52

Share-based payment expense


-

36

Taxation charge / (credit)


119

(694)





Operating cash flow before changes in working capital


2,812

2,235

Decrease in trade and other receivables


1,034

366

(Decrease)/increase in trade and other payables


(327)

2,237

Cash generated from operations


3,519

4,838





Interest received


3

-

Interest paid


(267)

(41)

Tax paid


(801)

(509)

Net cash flow from operating activities


2,454

4,288





Cash flow from investing activities




Proceeds from sale of assets


-

3,288

Payment of deferred consideration


(1,405)

-

Acquisition of subsidiary Epiphany Solutions net of cash acquired


(4)

(10,543)

Acquisition of property, plant and equipment

6

(427)

(392)

Net cash outflow from investing activities


(1,836)

(7,647)





Cash flows from financing activities




Increase in borrowings


-

7,800

Repayment of borrowings


(1,612)

(1,632)

Net cash (outflow)/inflow from financing activities


(1,612)

6,168





Net (decrease)/increase in cash and cash equivalents


(994)

2,809

Cash and cash equivalents at beginning of year


1,994

(815)

Cash and cash equivalents at end of year


1,000

1,994





Cash and cash equivalents comprise:




Cash at bank and in hand


1,000

1,994

Bank overdrafts

9

-

-

Cash and cash equivalents at end of year


1,000

1,994





 

 

The accompanying notes form part of these consolidated financial statements.

 

 

 

 

 

 



Consolidated statement of changes in equity


 

Share

capital

Share

premium

Capital

redemption

reserve

 

Treasury shares

Share

option

reserve

Foreign currency translation reserve

 

Retained

earnings

 

 

Total attributed to the owners of the parent


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000










At 1 April 2013

34,051

6,608

125

(25)

137

-

(2,443)

38,453










Transfer from share option reserve

-

-

-

-

(49)

-

49

-

Transactions with owners

-

-

-

-

(49)

-

49

-

Loss for the year

-

-

-

-

-

-

(4,795)

(4,795)

Total comprehensive income for the year

-

-

-

-

-

-

(4,795)

(4,795)










At 31 March 2014

34,051

6,608

125

(25)

88

-

(7,189)

33,658










Transfer from share option reserve

88

-

-

-

(88)

-

-

-

Transactions with owners

88

-

-

-

(88)

-

-

-

Loss for the year

-

-

-

-

-

-

(1,478)

(1,478)

Retranslation of foreign currency

-

-

-

-

-

21

-

21

Total comprehensive income for the year

-

-

-

-

-

21

(1,478)

(1,457)










At 31 March 2015

34,139

6,608

125

(25)

-

21

(8,667)

32,201

 

 

The accompanying notes form part of these consolidated financial statements.

 

 


 

Principal accounting policies

 

Jaywing plc is a Company incorporated in the UK and is AIM listed.

 

The financial information set out in this preliminary announcement does not constitute statutory information as defined in section 434 of the Companies Act 2006.

 

The consolidated balance sheet at 31 March 2015 and the consolidated statement of comprehensive income, consolidated cash flow statement, consolidated statement of changes in equity and associated notes for the year then ended have been extracted from the Group's 2015 statutory financial statements upon which the auditor's opinion is unmodified and does not include any statement under section 498 (2) or (3) of the Companies Act 2006.

 

Those financial statements have not yet been delivered to the registrar of companies.

 

The consolidated financial statements consolidate those of the Company and its subsidiaries (together referred to as the 'Group').

 

The consolidated financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the EU (Adopted IFRSs). The consolidated financial statements have been prepared under the historical cost convention, except for certain financial instruments that are held at fair value.

 

The accounting policies set out in the most recently published statutory financial statements have been followed. The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these consolidated financial statements.

 

Judgements made by the Directors in the application of these accounting policies that have a significant effect on the consolidated financial statements together with estimates with a significant risk of material adjustment in the next year are discussed in note 11.                                                                                               

Going concern

The Directors have reviewed the forecasts for the years ending 31 March 2016 and 31 March 2017 which have been adjusted to take account of the current trading environment.  The Directors consider the forecasts to be prudent and have assessed the impact of them on the Group's cash flow, facilities and headroom within its banking covenants.  Furthermore, the Directors have assessed the future funding requirements of the Group and compared them with the level of available borrowing facilities. Based on this work, the Directors are satisfied that the Group has adequate resources to continue in operational existence for the foreseeable future.  For this reason they continue to adopt the going concern basis in preparing the financial statements.

 

 

 

1.     Segmental analysis

 

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

 

The Group primarily derives its revenue from the provision of digital marketing services in the UK. Approximately £250k of sales were made to clients in Australia. During the year no customer included within either sector accounted for greater than 10% of the Group's revenue. During the prior year one customer included within the Media & Analysis segment accounted for greater than 10% of the Group's revenue. This customer accounted for £4,524,000 of Group revenue.

 

 

 

For the year ended 31 March 2015

 


Agency Services

Media & Analysis

Unallocated

Total


£'000

£'000

£'000

£'000

Revenue

15,491

18,708

(410)

33,789

Direct costs

(1,932)

(2,185)

414

(3,703)

Gross profit

13,559

16,523

4

30,086

Operating expenses excluding depreciation, amortisation, loss before tax on disposal, exceptional items, acquisition related costs and charges for share based payments

(11,465)

(11,943)

(2,615)

(26,023)

Operating profit before depreciation, amortisation, loss before tax on disposal, exceptional items, acquisition related costs and charges for share based payments

2,094

4,580

(2,611)

4,063

Other operating income

-

-

57

57

Depreciation

(264)

(108)

(8)

(380)

Amortisation

(916)

(2,558)

-

(3,474)

Compensation for loss of office

(63)

-

(10)

(73)

Acquisition related costs

(211)

(1,059)

-

(1,270)

Charges for share based payments

-

-

(13)

(13)

Operating profit / (loss)

640

855

(2,585)

(1,090)

Finance income




3

Finance costs




(272)

Loss before tax




(1,359)

Tax expense




(119)

Loss for the period




(1,478)

 

 

For the year ended 31 March 2014


Agency Services

Media & Analysis

Unallocated

Continuing Group

Disposal Group

Total


£'000

£'000

£'000

£'000

£'000

£'000

Revenue

17,917

9,875

(1,099)

26,693

7,382

34,075

Direct costs

(3,543)

(2,684)

1,158

(5,069)

(1,439)

(6,508)

Gross profit

14,374

7,191

59

21,624

5,943

27,567

Operating expenses excluding depreciation, amortisation, loss before tax on disposal, exceptional items, acquisition related costs and charges for share based payments

(11,749)

(4,878)

(2,677)

(19,304)

(5,375)

(24,679)

Operating profit before depreciation, amortisation, loss before tax on disposal, exceptional items, acquisition related costs and charges for share based payments

2,625

2,313

(2,618)

2,320

568

2,888

Other operating income

281

31

-

312

-

312

Depreciation

(232)

(41)

(6)

(279)

(48)

(327)

Amortisation

(924)

(625)

-

(1,549)

(187)

(1,736)

Loss before tax on disposal

-

-

-

-

(5,442)

(5,442)

Compensation for loss of office

(66)

-

(116)

(182)

-

(182)

Release of provisions

73

-

125

198

-

198

Acquisition related costs

(270)

(441)

(401)

(1,112)

-

(1,112)

Charges for share based payments

-

-

(36)

(36)

-

(36)

Operating profit / (loss)

1,487

1,237

(3,052)

(328)

(5,109)

(5,437)

Finance income




-

-

-

Finance costs




(52)

-

(52)

Loss before tax




(380)

(5,109)

(5,489)

Tax expense




182

512

694

Loss for the period before loss on measurement to fair value




(198)

(4,597)

(4,795)

 

Year ended 31 March 2015








Agency Services

Media &

Analysis

Unallocated

               Total



£'000

£'000

£'000

£'000







Assets


24,518

26,170

(2,962)

47,726

Liabilities


(3,361)

(3,915)

(8,249)

(15,525)







Capital employed


21,157

22,255

(11,211)

32,201

 

Year ended 31 March 2014








Agency Services

Media &

 Analysis

Unallocated

               Total



£'000

£'000

£'000

£'000







Assets


27,078

28,035

(1,809)

53,304

Liabilities


(4,426)

(4,431)

(10,789)

(19,646)







Capital employed


22,652

23,604

(12,598)

33,658

 

Unallocated assets and liabilities consist predominantly of cash, external borrowings and deferred tax liabilities on intangible assets which have not been allocated to the business segments. All of the Group's assets are based in the UK.

 

Capital additions; Property, plant and equipment

 

 

 

Agency

Media & Analysis

Unallocated

Discontinued

               Total


Services






£'000

£'000

£'000

£'000

£'000







Year ended 31 March 2015

269

142

16

-

427







Year ended 31 March 2014

360

6

5

21

392







 

 

2.     Other operating income


2015

2014


£'000

£'000




Other operating income

57

312

 

During the years to 31 March 2014 and 31 March 2015 the Group received part settlement from the administrator of a client for a contractual obligation to perform services on their behalf. During the year we received a further distribution of £57,000. It is anticipated there may be further distributions in the future but the Board is unaware of the quantum or timing of these potential receipts.

 

 

3.     Other operating expenses


2015

2014

Continuing operations:

£'000

£'000




Wages and salaries

22,016

15,960

Share based payments

13

36

Amortisation

3,474

1,549

Administration

5,657

4,735


31,160

22,280

Release of provisions

-

(198)

Compensation for loss of office

73

182


73

(16)


31,233

22,264

                                                                                                                                             

Wages and salaries include £211,000 (2014: £270,000) of post-acquisition employment costs relating to the purchase of Iris Associates Limited, and £1,059,000 (2014: £441,000) of post-acquisition employment costs relating to the purchase of Epiphany Solutions Limited.

 

 

 

4.     Tax expense


2015

2014


£'000

£'000

Recognised in the consolidated statement of comprehensive income:



Current year tax

765

433

Origination and reversal of temporary differences

(646)

(1,127)

Total tax charge / (credit)

119

(694)




Reconciliation of total tax charge:



Loss before tax

(1,359)

(5,489)




Taxation using the UK Corporation Tax rate of 21% (2014: 23%)

(285)

(1,262)




Effects of:



Non deductible expenses

403

883

Share based payment charges

-

-

Capital allowances in excess of depreciation

-

-

Other

(27)

(27)

Prior year adjustment

28

(288)

Total tax charge / (credit)

119

(694)

 

 

5.     Loss per share


2015

2014


Pence per

Share

Pence per

Share




Basic

(1.91p)

(6.44p)

Diluted

(1.75p)

(6.29p)

 

Loss per share has been calculated by dividing the loss attributable to shareholders by the weighted average number of ordinary shares in issue during the year.

 

The calculations of basic and diluted loss per share are:


2015

2014


£'000

£'000




Loss for the year attributable to shareholders

(1,457)

(4,795)

 

Weighted average number of ordinary shares in issue:


2015

2014


Number

Number




Basic

76,259,763

74,505,377

Adjustment for share options

6,771,000

1,754,386

Diluted

83,030,763

76,259,763

 



 

Adjusted earnings per share


2015

2014


Pence per

Share

Pence per

Share

From continuing and discontinued operations:



Basic adjusted earnings per share

3.45p

3.23p

Diluted adjusted earnings per share

3.17p

3.15p

 

Adjusted earnings per share have been calculated by dividing the profit attributable to shareholders before amortisation, charges for share options and loss on disposal before tax in relation to the sale of Tryzens during the year by the weighted average number of ordinary shares in issue during the year. The numbers used in calculating the basic and diluted adjusted earnings per share are reconciled below:

 

 


2015

2014


£'000

£'000




Loss before tax

(1,359)

(5,489)

Amortisation

3,474

1,736

Loss before tax on disposal

-

5,442

Acquisition related costs

1,270

1,112

Charges for share based payments

13

36

Adjusted profit attributable to shareholders

3,398

2,837

Current year tax charge

(765)

(433)


2,633

2,404

 

 

 

6.     Property, plant and equipment

 

 

Leasehold

improvements

Motor

vehicles

 

Office

equipment

Total


£'000

£'000

£'000

£'000

Cost





At 1 April 2013

446

12

2,760

3,218

Additions

249

-

143

392

Acquisition of subsidiaries

249

-

141

390

Disposals

(277)

-

(1,648)

(1,925)

At 31 March 2014

667

12

1,396

2,075

Additions

115

-

312

427

Disposals

-

-

(331)

(331)

At 31 March 2015

782

12

1,377

2,171






Depreciation





At 1 April 2013

218

7

2,280

2,505

Depreciation charge for the year

104

1

222

327

Acquisition of subsidiaries

133

-

93

226

Depreciation on disposals

(123)

-

(1,498)

(1,621)

At 31 March 2014

332

8

1,097

1,437

Depreciation charge for the year

184

1

195

380

Depreciation on disposals

-

-

(331)

(331)

At 31 March 2015

516

9

961

1,486

Net book value





At 31 March 2015

266

3

416

685

At 31 March 2014

335

4

299

638

At 1 April 2013

228

5

480

713

 

The assets are covered by a fixed charge in favour of the Group's lenders.



 

7.     Goodwill




Goodwill




£'000

Cost and net book value




At 1 April 2014



30,442

Acquisition of Epiphany Solutions



4

At 31 March 2015



30,446

 

Goodwill is attributed to the following cash generating units:


2015

2014

2013


£'000

£'000

£'000





Agency Services




Digital Media & Analytics Limited

438

438

438

Scope Creative Marketing Limited

5,550

5,550

5,550

Jaywing Central Limited

5,817

5,817

5,817

HSM Limited

3,201

3,201

3,201

Gasbox Limited

273

273

273

Media & Analysis




Tryzens Limited

-

-

5,132

Epiphany Solutions Limited

5,825

5,821

-

Alphanumeric Limited

9,342

9,342

9,342


30,446

30,442

29,753

 

Goodwill and other intangible assets have been tested for impairment by assessing the value in use of the relevant cash generating units.  The value in use calculations were based on projected cash flows in perpetuity.  Budgeted cash flows for 2015/16 to 2018/19 were used. These were based on a one year budget with growth rates of 5% to 10% applied for the following three years.  Subsequent years were based on a reduced rate of growth of 2% into perpetuity.

 

The average year on year growth in earnings before interest, tax, depreciation and amortisation (EBITDA) which has been used as the basis for forecasting cash flows for each of the cash generating units when testing for impairment were:

 


Year on year growth





2015/16

5.0% - 10%


2016/17

5.0% - 10%


2017/18

2.5% - 10%


Perpetuity

2.0%


 

These growth rates are based on past experience and market conditions and discount rates are consistent with external information. The growth rates shown are the average applied to the cash flows of the individual cash generating units and do not form a basis for estimating the consolidated profits of the Group in the future.

 

The discount rate used to test the cash generating units was the Group's pre-tax Weighted Average Cost of Capital ("WACC") of 10.6% (2014:9.0%). The individual cash generating units were assessed for risk variances from the WACC, but in the absence of geographical risk, currency risk and any significant price risk variations, the same WACC was used for all the cash generating units.

 

As a result of these tests no impairment was considered necessary (2014: £Nil million).

 

The Directors have performed a sensitivity analysis in relation to the WACC used, which showed that an impairment would be required for WACCs of 14% and above. At a discount rate of 14% a charge of £52,000 would be required.

 

The Directors have also performed a sensitivity analysis in relation to the year on year growth in EBITDA. If the growth rates were to be reduced by 1% in each CGU no impairment charge would be required.

 

 

8.     Other intangible assets

 


Customer

relationships

 

Order books

 

Trademarks

Development

costs

Total


£'000

£'000

£'000

£'000

£'000

Cost






At 1 April 2013

21,621

-

-

152

21,773

Additions during the year

4,277

1,457

1,025

110

6,869

Disposal

(4,550)

-

-

(27)

(4,577)

At 31 March 2014

21,348

1,457

1,025

235

24,065

Additions during the year

-

-

-

-

-

Disposal

-

-

-

-

-

At 31 March 2015

21,348

1,457

1,025

235

24,065







Amortisation






At 1 April 2013

12,667

-

-

122

12,789

Disposals

1,659

61

2

14

1,736

Amortisation charge for the year

(1,990)

-

-

(9)

(1,999)

At 31 March 2014

12,336

61

2

127

12,526

Amortisation charge for the year

1,991

1,396

51

36

3,474

Disposals

-

-

-

-

-

At 31 March 2015

14,327

1,457

53

163

16,000







Net book amount






At 31 March 2015

7,021

-

972

72

8,065

At 1 April 2014

9,012

1,396

1,023

108

11,539

At 1 April 2013

8,954

-

-

30

8,984

 

The cost of brought forward customer relationships was determined as at the date of acquisition of the subsidiaries by professional valuers. The valuations used the discounted cash flow method, assuming rates of customer attrition at 10% and sales growth at 2% each year. The discount rate applied at that time to the future cash flows were specific to each subsidiary and were all in the range 14.6% to 15.5%.

 

The cost of customer relationships, trademarks and orderbooks acquired in the prior year were determined as at the date of acquisition by professional valuers. For customer relationships the valuations used the discounted cash flow method, assuming a customer attrition rate of 20% and sales growth at 2% each year. The discount rate applied at that time to the future cash flows was 19%.

 

Trademarks represent the trading names used by the company. These are estimated to have an economic life of 20 years. The valuation used the discounted cash flow method, assuming an estimated royalty rate of 2% and sales growth of 2% each year. The valuation assumes that each year 80% to 90% of revenues are generated using the Trademark and applied a discount rate of 19%.

 

The order book represents contracted revenues over the next 12 months. The valuation used the discounted cash flow method, assuming a net operating profit margin of 30.5%. The discount rate applied was 15.8%.

 

Goodwill and other intangible assets have been tested for impairment. The method, key assumptions and results of the impairment review are detailed in note 7. On the basis of this review, it has been concluded that there is no need to impair the carrying value of these intangible assets (2014: £Nil).

 



 

 

 

9.     Bank and overdraft, loans and borrowings


2015

2014

2013

 


£'000

£'000

£'000

 





 

Summary




 

Bank overdraft

-

-

816

 

Borrowings

6,188

7,800

1,500

 


6,188

7,800

2,316

 

Borrowings are repayable as follows:




 

Within one year




 

Bank overdraft

-

-

816

 

Borrowings

4,062

4,612

1,500

 

Total due within one year

4,062

4,612

2,316

 





 

In more than one year but less than two years

1,063

1,062

-

 

In more than two years but less than three years

1,063

1,063

-

 

In more than three years but less than four years

-

1,063

-

 

Total amount due

6,188

7,800

2,316

 

 

Average interest rates at the balance sheet date were:

£'000

%

%

%






Overdraft


2.75

2.75

3.35

Term loan


3.56

3.25

-

Revolver loan


3.51

3.25

3.35


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

 

The borrowing facilities available to the Group at 31 March 2015 was £2.0 million (2014: £2.0 million) and, taking into account cash balances within the Group companies, there was £3.6 million (2014: £4.0 million) of available borrowing facilities.


A Composite Accounting System is set up with the Group's bankers, which allows debit balances on overdraft to be offset across the Group with credit balances.

 

Reconciliation of net debt

 


1 April 2014

Cash flow

Non-cash items

31 March 2015


£'000

£'000

£'000

£'000






Cash and cash equivalents

1,994

(994)

-

1,000


1,994

(994)

-

1,000

Borrowings

(7,800)

1,612

-

(6,188)

Net debt

(5,806)

618

-

(5,188)








 

 

10.   Share capital

Authorised:





45p deferred shares

5p ordinary shares


£'000

£'000

Authorised share capital at 31 March 2014 and at 31 March 2015

45,000

10,000

                              

Allotted, issued and fully paid:






45p deferred shares

5p ordinary shares



Number

Number

£'000

At 31 March 2014

67,378,520

74,604,999

34,051

Shares allotted on exercise of options

-

1,754,386

88

At 31 March 2015

67,378,520

76,359,385

34,139

 

The 5 pence ordinary shares have the same rights (including voting and dividend rights and rights on a return of capital) as the previous 50 pence ordinary shares. Holders of the 45 pence deferred shares do not have any right to receive notice of any general meeting of the Company or any right to attend, speak or vote at any such meeting. The deferred share       holders are not entitled to receive any dividend or other distribution and shall, on a return of assets in a winding up of the Company, entitle the holders only to the repayment of the amounts paid up on the shares, after the amount paid to the holders of the new ordinary shares exceeds £1,000,000 per new ordinary share. The deferred shares will also be incapable of transfer and no share certificates will be issued in respect of them.

 

 

11.   Accounting estimates and judgements

Accounting estimates

 

Impairment of goodwill and other intangible assets

                                                           

The carrying amount of goodwill is £30,446,000 (2014: £30,442,000) and the carrying amount of other intangible assets is £8,065,000 (2014: £11,539,000). The Directors are confident that the carrying amount of goodwill and other intangible assets is fairly stated, and have carried out an impairment review.  The forecast cash generation for each CGU and the WACC represent significant assumptions and should the assumptions prove to be incorrect there would be a significant risk of a material adjustment within the next financial year. The sensitivity to the key assumptions is shown in note 7.

 

Share based payment

 

The share based payment charge consists of two elements, the charge for the fair value at the date of grant and a charge for the employer's NI.


On 4 March 2015, share options were granted to employees in order to incentivise performance. These share options will vest based upon conditions which relate to either EBITDA performance in the period commencing 1 April 2015, or the share price at various future dates.

 

Management have assessed the charge arising during the period and due to the date of grant being less than 1 month from the year end do not believe this to be material to the financial statements.

 

Accounting judgements

 

Recognition of revenue as principal or agent

 

The Directors consider that they act as a principal in transactions where the Group assumes the credit risk. Where this is via an agency arrangement and the Group assumes the credit risk for all billings it therefore recognises gross billings as revenue.

 

 

12.   Annual reports and accounts

Copies of the annual report and accounts for the year ended 31 March 2015 together with the notice of the Annual General Meeting will be issued to shareholders shortly and will be available to view and download from the Company's website: jaywingplc.com.


This information is provided by RNS
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