M&C Saatchi – 2023 Interim Results

M&C Saatchi PLC
14 September 2023
 

M&C SAATCHI PLC

 

 

 

 

 

INTERIM RESULTS

 

 

SIX MONTHS ENDED

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

·     

Net revenue of £120.4million (H1 2022: £129.4million).

·     

Headline operating profit margin of 8.3% (H1 2022: 14.0%), with Q2 margin of 12%.

·     

Headline profit before tax of £8.8million (H1 2022: £16.0million), 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 £15.4million (30 June 2022: £39.7million), 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.£40million (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 £3.8million in FY2023 with an in-year impact of £1.5million.  We are targeting annualised savings of £10million 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. Full 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 Headline1  Results

 


 

 

 

 




 

 



Six Months To 30 June 2023

 

 

2023

£M

2022

£M

Movement

LFL2

Net revenue1

120.4

129.4

(7%)

(7%)

Operating profit

10.0

18.1

(45%)

(48%)

Profit before taxation

8.8

16.0

(45%)

(48%)

Earnings3

5.5

7.8

(30%)

(12%)

Operating profit margin

8.3%

14.0%

-5.7pts

 

EBITDA4

14.5

22.8

(36%)

 

Net cash1

15.4

39.7

(61%)

 








 

 

Unaudited Statutory Results

 


 

 

 

 




 

 



Six Months To 30 June 2023

 

 

 

2023

£M

2022

£M

Movement

 

Revenue

216.7

221.7

(2%)

 

Net revenue1

120.4

129.4

(7%)

 

Operating (loss)/profit 

(3.6)

2.7

(231%)

 

(Loss)/profit before taxation

(5.1)

0.3

(1759%)

 

Losses3

(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 £120.4million, down 7.0% compared to last year. Our specialisms delivered £70.3million (+0.9% vs last year), compared to the Advertising division at £50.1m, (-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 £110.4million compared to H1 2022 (£111.3million) and decreased by 11% versus H2 2022 (£124.4million). 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 £0.5million of savings delivered within the H1 results.

Overall Headline operating profit was £10.0million, a decline of £8.1million 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 £3.8million already, which is expected to have an impact of £1.5million in FY2023. We are targeting further annualised savings of around £6million 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 £5.1million (2022: £0.3million profit), due to the decline in net revenue of £9.0million that has been partially mitigated by statutory cost savings of £3.6million.

Net cash as at 30 June 2023 was £15.4million (£30.0million at 31 December 2022). During H1, we cash-settled £3.3milliion of put options and experienced a negative working capital swing of £6.8million 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 £15.5million of put options, leaving us with a residual liability of c.£12million 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 £4million already, we are now targeting an additional £6.2million of savings from the creation of shared service centres and centralised procurement. This will bring the total annualised savings to £10million 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 Revenue

Net Revenue

 

 

Operating Profit

Operating Profit

 

 

Operating Profit Margin

Operating Profit Margin

 

 


H1 2023

H1 2022

Movement

 

H1 2023

H1 2022

Movement

 

H1 2023

H1 2022

Movement

 


£000

£000

 

 

£000

£000

 

 

 

 

 

 




 




 




 

 

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 £70.3million of the Group's net revenue (H1 2022: £70.3million, 54%), and £13.9million (139%) of the Group's Headline operating profit (H1 2022: £20.0million, 104%). Net revenue decreased by £0.1million (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 £50.1million (42%) of the Group's net revenue (H1 2022: £59.5million, 46%) and £0.5 million (5%) of the Group's Headline operating profit (H1 2022: £4.1million, 21%). Net revenue decreased by £9.4million (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 £4.1million to £23.4million (+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 £1.6million to £17.1million (+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 £0.2million to £17.5million (-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 £5.6million to £12.1million (-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 £9.4million to £50.1million (-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 £0.5million to £4.4million (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 £5.1m (2022: £0.3m 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 £4.2million, which was lower than last year (£7.7million in H1 2022), but in line with the lower profitability.

We invested £1.6million, similar to last year, buying replacement IT equipment, fit-outs for new offices in Dubai and Berlin, and procuring new software. We paid out £3.3million 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 (£4.4million), down from £4.9million last year.

Cash net of bank borrowings at 30 June 2023 is £15.4million, compared to £30.0million of net cash at 31 December 2022 and £39.7million net cash at 30 June 2022.

·   

Working Capital Movement

Trade and other receivables decreased by £15.7million (11%) between 30 June 2022 and 30 June 2023, driven by the reduction in activity. Trade and other payables decreased by £33.1million (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 £6.8million 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 £15m, 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 £1.9million 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 30 June 2023

 

Six months ended 30 June 2022

 

Year ended 31 December 2022

 

Note


£000

 

 

£000

 

 

£000

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 ended 30 June 2023

Six months ended

30 June 2022

Year ended

31 December 2022

 



£000

£000

£000

(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

30 June 2023

 

Six months ended

30 June 2022

 

Year ended

31 December 2022

 


 


£000


£000

 

£000

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 ended 30 June 2023

 

Six months ended 30 June 2022

 

Year ended

31 December 2022

 



£000


£000

 

£000

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


Share capital

Share premium

Merger reserve

Treasury reserve

MI put option reserve

Non-controlling interests acquired

Foreign exchange reserves

Retained earnings/ (accumulated losses)

Subtotal

Non-controlling interests in equity

Total

 

£000

£000

£000

£000

£000

£000

£000

£000

£000

£000

£000

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)

-

-

-

-

-

-

(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

 

 


Share capital

Share premium

Merger reserve

Treasury reserve

MI put option reserve

Non-controlling interests acquired

Foreign exchange reserves

Retained earnings/ (accumulated losses)

Subtotal

Non-controlling interests in equity

Total

 

£000

£000

£000

£000

£000

£000

£000

£000

£000

£000

£000

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 ended 30 June 2023

 

Six months ended 30 June 2022

 

Year ended

31 December 2022

 

 

£000

 

£000

 

£000

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 of)


(44)


-


-

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 ended

30 June 2023

 

Six months ended 30 June 2022

 

Year ended

31 December 2022

 

 

£000

 

£000

 

£000

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 results

Separately disclosed items[3]

Amortisation of acquired intangibles[4]

FVTPL investments under IFRS 9[5]

Gain/loss on disposal of subsidiaries

Impairment of non-current assets

Dividends paid to put holders

Put option accounting

Headline results

 

 

£000

£000

£000

£000

£000

£000

£000

£000

£000

 

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 results

Separately disclosed items[8]

Amortisation of acquired intangibles[9]

FVTPL investments under IFRS 9

Revaluation of contingent consideration

Dividends paid to IFRS 2 put holders

Put option accounting

Headline results

 

£000

£000

£000

£000

£000

£000

£000

£000

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




 

 

 







 

 

 

 

Statutory results

Separately disclosed  items

Amortisation of acquired intangibles

Impairment of non-current assets

FVTPL investments under IFRS 9

Revaluation of contingent

consideration

Dividends paid to IFRS2 put holders

Put option accounting

Headline results

 

£000

£000

£000

£000

£000

£000

£000

£000

£000

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

2023

Headline

2023



 








 

 


(Loss)/profit attributable to equity shareholders of the Group (£000)




(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

2022

Headline

 2022



Profit attributable to equity shareholders of the Group (£000)




(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

 

 

 

Year ended 31 December 2022

Statutory

2022

Headline

2022

Profit attributable to equity shareholders of the Group (£000)

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 costs

 

£000

Staff costs

 

£000

Taxation

 

£000

Total

 

£000

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 (£527k).

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 £848k of redundancy costs included within non-Headline strategic review and restructuring, and £150k 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 costs

 

£000

Staff costs

 

£000

Taxation

 

£000

Total

 

£000

 

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 costs

 

£000

Staff costs

 

£000

Taxation

 

£000

Total

 

£000

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 £594k 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 (£922k). In addition, within three of the agencies in the Group, a strategic review commenced which resulted in staff redundancy costs in the year (£1,789k).

 

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 Costs

Total

Six Months Ended 30 June 2023

 

 

£000

£000

£000

£000

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

(restated)[11]

Specialisms

(restated)

Group Central Costs

Total

Six Months Ended 30 June 2022

 

 

£000

£000

£000

£000

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 Costs

Total

Year Ended 31 December 2022

 

 

£000

£000

£000

£000

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


UK

Europe

Middle East and Africa

Asia

Australia

Americas

Group Central Costs

Total

Six Months Ended 30 June 2023

£000

£000

£000

£000

£000

£000

£000

£000

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

 


UK

Europe

Middle East and Africa

Asia

Australia

Americas

Group Central Costs

Total

Six Months Ended 30 June 2022

£000

£000

£000

£000

£000

£000

£000

£000

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

 


UK

Europe

Middle East and Africa

Asia

Australia

Americas

Group Central Costs

Total

Year Ended 31 December 2022

£000

£000

£000

£000

£000

£000

£000

£000

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 ended 30 June 2023

Six months ended 30 June 2022

Year ended

31 December 2022

 

 

£000

£000

£000

 

 

 

 

 

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










At 152p

Paid
H1 2023

Payable
H2 2023

2024

2025

2026

2027

2028

Total

 

£000

£000

£000

£000

£000

£000

£000

£000

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 £566k 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 £22,250k.

 

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 of Company

Paid
H1 2023

Payable
H2 2023

2024

2025

2026

2027

2028

Total payable


£000

£000

£000

£000

£000

£000

£000

£000

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 £4.6million, 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 £11.5million 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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