INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2023
26 September 2023
THE MISSION GROUP plc
("MISSION", "the Group")
INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2023
Resilient revenue growth despite challenging trading environment
MISSION Group plc (AIM: TMG), creator of Work That CountsTM, comprising a group of digital marketing and communications Agencies delivering real, sustainable growth for its Clients, is pleased to announce interim results for the six months ended 30 June 2023 ("the period" or "H1").
FINANCIAL HIGHLIGHTS
|
· |
Strong revenue performance across most segments combined with diligent cost control delivered a robust headline operating profit outcome for the period, despite a more difficult trading environment. |
|
|
Six months ended 30 June |
2023 |
2022 |
% |
|
|
Revenue |
£41.8m |
£37.5m |
+11% |
|
|
Headline Operating Profit* |
£2.0m |
£2.2m |
-11% |
|
|
Headline Profit Before Tax* |
£1.0m |
£1.9m |
-46% |
|
|
Reported Profit Before Tax |
£0.1m |
£1.5m |
-95% |
|
|
Headline Earnings Per Share (pence)* |
0.81 |
1.71 |
-53% |
|
|
Headline Diluted Earnings Per Share * (pence) |
0.81
|
1.70
|
-52%
|
|
· |
Net bank debt of £14.9m (30 June 2022: £7.1m, 31 December 2022: £11.4m), driven predominantly by year on year changes in Client prepayment behaviour, closely linked to the tightening within the US Tech sector. |
|
· |
Bank debt leverage ratio closed at 1.7x (30 June 2022: 0.8x, 31 December 2022 1.2x). |
|
· |
Interim dividend of 0.87p declared (2022: 0.83p), an increase of 5%. |
*Headline results are calculated before start-up costs, acquisition adjustments, goodwill and business impairment and restructuring costs.
BUSINESS HIGHLIGHTS
|
· |
H1 performance broadly in line with Board's expectations and achieved despite considerable industry-wide headwinds. |
|
· |
Revenue growth has been driven by strong progress across MISSION's Property, Sports & Entertainment and Health & Wellness sectors. |
|
· |
The Group has not been immune from the challenges in the US technology sector and the reduced level of activity in this market in 2023 has impacted margins, particularly in comparison to 2022.
|
|
· |
Sustained recovery across Agencies most impacted by the pandemic including events and property. |
|
· |
Major new Client win, UK Post Office, secured since period end on an integrated basis, with work commencing in H2 2023.
|
|
· |
Further new business wins secured during H1 include: UK Space Agency, Macmillan Coffee Morning, M1 Telecom, Goldman Sachs, Jägermeister and Worldpay. |
|
· |
Further progress against strategic areas of focus with new acquisitions and organic investment made during the period in Data Science & Digital Analytics and Growth Media. |
|
· |
Recent Sports & Entertainment acquisitions have bedded in well. |
OUTLOOK
|
· |
As in previous years, the Group expects the majority of its profit to be generated in the second half of the year. |
|
· |
Despite the continued, heightened level of global macro-economic uncertainty, we currently remain on track to deliver against the Board's expectations. |
Commenting on the results, Julian Hanson-Smith, Chair of The MISSION Group plc, said:
"MISSION continues to report robust organic revenue growth from existing Clients across all areas, despite the well-documented industry headwinds. The recent announcement of a major new Client win, UK Post Office, reflects the growing success of MISSION's integrated offering, and the benefits of the recent investments we have made to expand our capabilities and services.
We continue to be mindful of wider macro-economic uncertainty impacting Client spend, but still anticipate full year revenue growth across all the Group's primary business sectors. Encouragingly, run rates from the US technology sector are starting to return to 2022 levels. We remain confident that the Group's strategy of deliberate investment in our people and capabilities will underpin a good full year performance. The effects of higher operating and interest costs are likely to have an impact on profit growth for the current year which, as previously reported, we expect to be at the lower end of the Board's original expectations but still ahead of last year's level.
ENQUIRIES:
|
James Clifton, Chief Executive Officer Giles Lee, Chief Financial Officer The MISSION Group plc |
020 7462 1415 |
|
Simon Bridges/Andrew Potts/Harry Rees |
|
|
Canaccord Genuity Limited (Nominated Adviser and Broker) |
020 7523 8000 |
|
|
|
|
Kate Hoare / Alexander Clelland |
|
|
HOUSTON (Financial PR and Investor Relations) |
0204 529 0549 |
NOTES TO EDITORS
MISSION is a collective of Creative and MarTech Agencies led by entrepreneurs who encourage an independent spirit. Employing over 1,000 people across 29 locations and 3 continents, the Group successfully combines its diverse expertise to produce Work That Counts TM for our Clients, whatever their ambitions. Creating real standout, sharing real innovation and delivering real growth for some of the world's biggest brands. www.themission.co.uk
OVERVIEW
The sustained global macroeconomic and geo-political uncertainty coupled with rising inflation and the cost-of-living crisis continued to impact trading conditions across the Group's industry sectors and beyond. Against this backdrop MISSION is encouraged to report overall revenue growth of 11 percent to £41.8m (2022: £37.5m) for the period.
Headline operating profit of £2.0m (2022: £2.2m), primarily reflected the changes to margin mix relative to H1 2022, largely as a result of lower spend in the US Technology sector in recent months. A reduced headline reported profit before tax of £1.0m compared to 2022 (2022: £1.9m) is the result of the higher interest charges resulting from significantly increased interest rates as well as higher debt when compared to last year.
The strategic changes implemented across the business in recent years have placed us in good stead to manage the current industry headwinds. We have seen good underlying trading from our Agencies, reflecting our increasing exposure to more robust sectors and geographies. This is further underpinned by the benefits of the investments we have made in high-potential areas of our markets to expand our capabilities and services.
Careful control of costs across the business has remained a priority. Talent costs are one of the key variables for the Group and whilst wage inflation has clearly been a challenge for the whole industry, we were quick to recognise the potential impact this would have and have continued to manage this well, investing ahead to improve our people proposition in a competitive market.
Net debt has increased in the last six months, to £14.9m (2022 £7.1m, 31 December 2022: £11.4m). This increase has been driven in particular by increased working capital and specifically changes in Client prepayment behaviour, again closely related to the general tightening within the US Tech sector.
Performance and progress
The Group has reported good, organic growth of 6%, guided by strong performances in our Property, Health & Wellness and Sports & Entertainment segments and, whilst the wider new business landscape remains challenging, opportunities have continued to present themselves. A number of significant Client wins have been secured throughout the period including UK Space Agency, Macmillan Coffee Morning, M1 Telecom, Goldman Sachs, Jägermeister and Worldpay.
Furthermore, in August we were delighted to announce a major MISSION Group win with
UK Post Office who will be working with four of our Agencies as part of a new Group mandate. This win was following a competitive process and highlights the strength of our integrated offering.
The Group has not been immune from the previously highlighted challenges in the US technology sector and revenues from our Technology & Mobility segment have reduced by 5% for the first half year on year, with margins also being significantly impacted in the period. Nevertheless, there are encouraging signs that the run-rate in this segment is returning to late-2022 levels, buoyed by new business successes such as Lumens.
In line with its stated strategy for growth, the Group continues to expand its capabilities in new areas of opportunity. In H1, this included the acquisition of Mezzo Labs, a global data science and digital analytics consultancy, and the launch of Turbine, an integrated Growth Media agency specialising in earned, owned and paid media for consumer brands. These, alongside a solid start for our recent Influence Sports & Media and Populate Social acquisitions contribute new revenue streams to the Group. Since the period end we have been pleased to announce the further expansion of Influence Sports, since MISSION acquired the business in December 2022 with the opening of its first office in the US in New York.
FINANCIAL PERFORMANCE
Billings and Revenue
Turnover ("billings") for the six months ended 30 June 2023 increased by 14% to £92.9m (2022: £81.2m) while operating income ("revenue") increased by 11% to £41.8m (2022: £37.5m).
Profit, Margins and Earnings Per Share
The increased revenues demonstrate good progress, particularly in light of the previously noted reductions in US technology income. Firm, but future-focussed cost control alongside a continued commitment to sharing infrastructure through the MISSION Made and Shared Services initiatives, has enabled the Group to deliver an operating profit that is modestly behind the prior year comparison.
Headline operating profits decreased by 11% to £2.0m (H1 2022: £2.2m). Headline operating margins decreased to 4.7% (H1 2022: 5.9%).
Financing costs increased to £1.0m (H1 2022: £0.4m), reflecting both a higher average level of debt in the period and a significant increase in interest rates payable on the debt. Headline profit before tax decreased as a result of this to £1.0m (H1 2022: £1.9m).
Adjustments to headline profits in the first half of 2023, at £0.9m, were higher than the prior year comparable period (H1 2022: £0.3m). After these adjustments, reported profit before tax was £0.1m (H1 2022: £1.5m).
The Group estimates an effective tax rate on headline profits before tax of 24% (H1 2022: 22%), resulting in a decrease in headline earnings to £0.8m for the six months (H1 2022: £1.5m) and reported profit after tax of £0.0m (H1 2022: £1.2m). Fully diluted EPS decreased to 0.00 pence (H1 2022: 1.37 pence), while headline diluted EPS decreased to 0.81 pence (H1 2022: 1.70 pence).
Balance Sheet and Cash Flow
The key balance sheet ratio measured and monitored by the Board is the ratio of debt to headline EBITDA ("leverage ratio"). The Group started the year in a strong financial position with a net bank debt leverage ratio of x1.2 and closed the half year at x1.7 (30 June 2022: x0.8). The Board also monitors the ratio of total debt, including remaining acquisition obligations, to EBITDA and this ratio has increased to x2.2 (30 June 2022: x1.0, 31 December 2022: x1.6) following the acquisitions made in the last 12 months.
The Group spent £0.3m on acquisitions during the period (2022 £nil) and a total of £0.4m of acquisition obligations from prior years were settled in the first half of the year, all of which were in cash (30 June 2022: £0.8m all of which were cash). After adjustments to estimated future contingent consideration payments the total estimated acquisition liability at 30 June 2023 totalled £5.1m (30 June 2022: £2.5m). Of this £1.0m is due for payment in the second half of 2023.
Trade and other receivables increased against last year to £53.7m (30 June 2022: £51.6m). Trade and other payables remained stable at £52.2m (30 June 2022: £52.0m). The net change to working capital is primarily driven by a significant reduction in Client prepayments resulting in a reduction in deferred income of £6.2m relative to 30 June 2022. This change in behaviour is once again linked to caution in the US Tech sector.
Consequently, the Group's net bank debt on 30 June 2023 of £14.9m has increased against the positions on both 30 June 2022 (£7.1m) and 31 December 2022 (£11.4m). As a result, total debt (being net bank debt plus acquisition obligations) closed at £20.0m (30 June 2022: £9.6m) as the Group completes the investment in strategic areas of focus.
Dividend
As a reflection of this robust performance in the first half of the year, the Directors have declared an interim dividend of 0.87 pence per ordinary share (H1 2022: 0.83 pence), representing a 5% increase on the prior year. This will be payable on 1 December 2023 to all shareholders on the register on 3 November 2023. The ex-dividend date is 2 November 2023.
MAKING POSITIVE CHANGE
Over the course of the period, we are pleased to have made further progress against our Environmental, Social and Governance (ESG) commitments, outlined in our manifesto 'Making Positive Change'. Traction against our social goals, focused on building diverse and healthy teams and supporting the communities we work within, has also been a key priority. This has seen positive movement against our representation goals and impactful community support through pro bono work, donations and volunteering.
Another important priority has been the clarification of our Environmental journey, which has seen us benchmark and set our emissions reduction targets in line with the Paris Climate Agreement and validate these targets via the Science-Based Targets initiative (SBTi) Net-Zero Standard. We have targeted a 21% reduction in our Emissions by 2024 with a 42% reduction by 2029. We are pleased to report that we are on track to meet these targets as a result of our actions taken to date, with total emissions reduced by 40% since we began reporting in 2019. We are also aiming to achieve ISO 14001 status for the majority of our Agencies by end of 2023. We will be working with several identified partners to ensure a faster transition in line with these goals as part of our transition to net zero and to improve our measurement and reporting.
OUTLOOK
MISSION has a significant second-half weighting with respect to profitability. Revenue growth is anticipated across all the Group's sectors with run rates from the US technology sector starting to return to 2022 levels. Whilst the Group remains on track to meet full-year guidance, as highlighted in our trading update on 27 July 2023, profitability is likely to be at the lower end of the Board's expectations albeit with profit before tax still expected to exceed that of 2022 (£7.8m).
Condensed Consolidated Income Statement for the six months ended 30 June 2023
|
|
|
Six months to |
Six months to |
Year ended |
|
|
|
30 June 2023 |
30 June 2022 |
31 December 2022 |
|
|
|
Unaudited |
Unaudited |
Audited |
|
|
Note |
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
TURNOVER |
2 |
92,908 |
81,226 |
182,685 |
|
|
|
|
|
|
|
Cost of sales |
|
(51,110) |
(43,712) |
(102,871) |
|
OPERATING INCOME |
2 |
41,798 |
37,514 |
79,814 |
|
|
|
|
|
|
|
Headline operating expenses |
|
(39,832) |
(35,297) |
(71,157) |
|
HEADLINE OPERATING PROFIT |
|
1,966 |
2,217 |
8,657 |
|
|
|
|
|
|
|
Start-up costs |
3 |
(512) |
- |
(776) |
|
Acquisition adjustments |
4 |
(418) |
(346) |
(593) |
|
Goodwill and business impairment |
3 |
- |
- |
(5,257) |
|
Restructuring costs |
3 |
- |
- |
(402) |
|
OPERATING PROFIT |
|
1,036 |
1,871 |
1,629 |
|
|
|
|
|
|
|
Share of results of associates and joint ventures |
|
75 |
75 |
160 |
|
PROFIT BEFORE INTEREST AND TAXATION |
|
1,111 |
1,946 |
1,789 |
|
|
|
|
|
|
|
Net finance costs |
5 |
(1,042) |
(432) |
(1,046) |
|
PROFIT BEFORE TAXATION |
|
69 |
1,514 |
743 |
|
|
|
|
|
|
|
Taxation |
6 |
(35) |
(358) |
(707) |
|
PROFIT FOR THE PERIOD |
|
34 |
1,156 |
36 |
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
Equity holders of the parent |
|
3 |
1,250 |
9 |
|
Non-controlling interests |
|
31 |
(94) |
27 |
|
|
|
34 |
1,156 |
36 |
|
|
|
|
|
|
|
Basic earnings per share (pence) |
7 |
0.00 |
1.38 |
0.01 |
|
Diluted earnings per share (pence) |
7 |
0.00 |
1.37 |
0.01 |
|
Headline basic earnings per share (pence) |
7 |
0.81 |
1.71 |
6.79 |
|
Headline diluted earnings per share (pence) |
7 |
0.81 |
1.70 |
6.74 |
Condensed Consolidated Statement of Comprehensive Income for the six months ended 30 June 2023
|
|
Six months to |
Six months to |
Year ended |
|
|
30 June 2023 |
30 June 2022 |
31 December 2022 |
|
|
Unaudited |
Unaudited |
Audited |
|
|
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
PROFIT FOR THE PERIOD |
34 |
1,156 |
36 |
|
|
|
|
|
|
Other comprehensive (loss) / income - items that may be reclassified separately to profit or loss: |
|
|
|
|
Exchange differences on translation of foreign operations |
(153) |
189 |
(688) |
|
TOTAL COMPREHENSIVE (LOSS) / INCOME FOR THE PERIOD |
(119) |
1,345 |
(652) |
|
|
|
|
|
|
Attributable to: |
|
|
|
|
Equity holders of the parent |
(159) |
1,526 |
(601) |
|
Non-controlling interests |
40 |
(181) |
(51) |
|
|
(119) |
1,345 |
(652) |
Condensed Consolidated Balance Sheet as at 30 June 2023
|
|
|
As at |
As at |
As at |
|
|
|
30 June 2023 |
30 June 2022 |
31 December 2022 |
|
|
|
Unaudited |
Unaudited |
Audited |
|
|
Note |
£'000 |
£'000 |
£'000 |
|
FIXED ASSETS |
|
|
|
|
|
Intangible assets |
8 |
101,704 |
99,639 |
99,741 |
|
Property, plant and equipment |
|
3,599 |
2,045 |
2,090 |
|
Right of use assets |
9 |
19,033 |
8,746 |
9,536 |
|
Investments, associates and joint ventures |
|
512 |
592 |
437 |
|
|
|
124,848 |
111,022 |
111,804 |
|
CURRENT ASSETS |
|
|
|
|
|
Stock |
|
2,400 |
2,457 |
2,185 |
|
Trade and other receivables |
|
53,732 |
51,607 |
41,255 |
|
Corporation tax receivable |
|
75 |
- |
- |
|
Cash and short term deposits |
|
5,096 |
7,847 |
6,153 |
|
|
|
61,303 |
61,911 |
49,593 |
|
CURRENT LIABILITIES |
|
|
|
|
|
Trade and other payables |
|
(52,219) |
(51,993) |
(39,667) |
|
Corporation tax payable |
|
- |
(819) |
(794) |
|
Bank loans |
10 |
(23) |
- |
(27) |
|
Acquisition obligations |
11 |
(1,873) |
(405) |
(1,371) |
|
|
|
(54,115) |
(53,217) |
(41,859) |
|
NET CURRENT ASSETS |
|
7,188 |
8,694 |
7,734 |
|
TOTAL ASSETS LESS CURRENT LIABILITIES |
|
132,036 |
119,716 |
119,538 |
|
NON CURRENT LIABILITIES |
|
|
|
|
|
Bank loans |
10 |
(19,960) |
(14,917) |
(17,488) |
|
Lease liabilities |
9 |
(18,226) |
(7,700) |
(8,481) |
|
Acquisition obligations |
11 |
(3,180) |
(2,120) |
(2,772) |
|
Deferred tax liabilities |
|
(704) |
(412) |
(622) |
|
|
|
(42,070) |
(25,149) |
(29,363) |
|
NET ASSETS |
|
89,966 |
94,567 |
90,175 |
|
|
|
|
|
|
|
CAPITAL AND RESERVES |
|
|
|
|
|
Called up share capital |
|
9,102 |
9,102 |
9,102 |
|
Share premium account |
|
45,928 |
45,928 |
45,928 |
|
Own shares |
|
(983) |
(759) |
(994) |
|
Share-based incentive reserve |
|
1,069 |
944 |
1,010 |
|
Foreign currency translation reserve |
|
(772) |
276 |
(610) |
|
Retained earnings |
|
35,531 |
38,998 |
35,558 |
|
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT |
|
89,875 |
94,489 |
89,994 |
|
Non-controlling interests |
|
91 |
78 |
181 |
|
TOTAL EQUITY |
|
89,966 |
94,567 |
90,175 |
Condensed Consolidated Cash Flow Statement for the six months ended 30 June 2023
|
|
Six months to |
Six months to |
Year ended |
|||
|
|
30 June 2023 |
30 June 2022 |
31 December 2022 |
|||
|
|
Unaudited |
Unaudited |
Audited |
|||
|
|
£'000 |
£'000 |
£'000 |
|||
|
|
|
|
|
|
||
|
Operating profit |
1,036 |
1,871 |
1,629 |
|
||
|
Depreciation and amortisation charges |
2,207 |
2,123 |
8,701 |
|
||
|
Movements in the fair value of contingent consideration |
22 |
- |
(334) |
|
||
|
(Profit) / loss on disposal of fixed assets |
(1) |
10 |
10 |
|
||
|
Non cash charge for share options, growth shares and shares awarded, net of awards settled in cash |
40 |
26 |
73 |
|
||
|
(Increase) / decrease in receivables |
(12,109) |
(10,917) |
149 |
|
||
|
Increase in stock |
(215) |
(345) |
(73) |
|
||
|
Increase in payables |
11,528 |
13,793 |
1,056 |
|
||
|
OPERATING CASH FLOW |
2,508 |
6,561 |
11,211 |
|
||
|
Net finance costs |
(1,063) |
(412) |
(1,002) |
|
||
|
Tax (paid) / refund |
(1,053) |
40 |
(482) |
|
||
|
Net cash inflow from operating activities |
392 |
6,189 |
9,727 |
|
||
|
|
|
|
|
|
||
|
INVESTING ACTIVITIES |
|
|
|
|
||
|
Proceeds on disposal of property, plant and equipment |
5 |
- |
64 |
|
||
|
Purchase of property, plant and equipment |
(2,021) |
(535) |
(1,092) |
|
||
|
Investment in software development |
(3) |
(469) |
(1,852) |
|
||
|
Acquisition of or investments in businesses |
(397) |
(100) |
(1,893) |
|
||
|
Payment relating to acquisitions made in prior periods |
(393) |
(790) |
(790) |
|
||
|
Cash acquired with subsidiaries |
71 |
84 |
271 |
|
||
|
Net cash outflow from investing activities |
(2,738) |
(1,810) |
(5,292) |
|
||
|
|
|
|
|
|
||
|
FINANCING ACTIVITIES |
|
|
|
|
||
|
Dividends paid |
- |
- |
(2,180) |
|
||
|
Dividends paid to non-controlling interests |
(130) |
(13) |
(40) |
|
||
|
Repayment of lease liabilities |
(913) |
(1,012) |
(1,935) |
|
||
|
Increase in / (repayment of) bank loans |
2,485 |
(1,500) |
992 |
|
||
|
Purchase of own shares held in EBT |
- |
(262) |
(497) |
|
||
|
Net cash inflow / (outflow) from financing activities |
1,442 |
(2,787) |
(3,660) |
|
||
|
|
|
|
|
|
||
|
(Decrease) / increase in cash/equivalents |
(904) |
1,592 |
775 |
|
||
|
Exchange differences on translation of foreign subsidiaries |
(153) |
189 |
(688) |
|
||
|
Cash and cash equivalents at beginning of period |
6,153 |
6,066 |
6,066 |
|
||
|
Cash and cash equivalents at end of period |
5,096 |
7,847 |
6,153 |
|
||
Condensed Consolidated Statement of Changes in Equity for the six months ended 30 June 2023
|
|
Share capital £'000 |
Share premium £'000 |
Own shares £'000 |
Share-based incentive reserve £'000 |
Foreign currency translation reserve £'000 |
Retained earnings £'000 |
Total attributable to equity holders of parent £'000 |
Non-controlling interest £'000 |
Total equity £'000
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
||
|
At 1 January 2022 |
9,102 |
45,928 |
(518) |
868 |
- |
37,820 |
93,200 |
272 |
93,472 |
|||
|
Profit for period |
- |
- |
- |
- |
- |
1,250 |
1,250 |
(94) |
1,156 |
|||
|
Exchange differences on translation of foreign operations |
- |
- |
- |
- |
276 |
- |
276 |
(87) |
189 |
|||
|
Total comprehensive income for period |
- |
- |
- |
- |
276 |
1,250 |
1,526 |
(181) |
1,345 |
|||
|
Share option charge |
- |
- |
- |
17 |
- |
- |
17 |
- |
17 |
|||
|
Growth share charge |
- |
- |
- |
59 |
- |
- |
59 |
- |
59 |
|||
|
Own shares purchased by EBT |
- |
- |
(262) |
- |
- |
- |
(262) |
- |
(262) |
|||
|
Shares awarded and sold from own shares |
- |
- |
21 |
- |
- |
(72) |
(51) |
- |
(51) |
|||
|
Dividend paid |
- |
- |
- |
- |
- |
- |
- |
(13) |
(13) |
|||
|
At 30 June 2022 |
9,102 |
45,928 |
(759) |
944 |
276 |
38,998 |
94,489 |
78 |
94,567 |
|||
|
Loss for period |
- |
- |
- |
- |
- |
(1,241) |
(1,241) |
121 |
(1,120) |
|||
|
Exchange differences on translation of foreign operations |
- |
- |
- |
- |
(886) |
- |
(886) |
9 |
(877) |
|||
|
Total comprehensive income for period |
- |
- |
- |
- |
(886) |
(1,241) |
(2,127) |
130 |
(1,997) |
|||
|
Share option charge |
- |
- |
- |
16 |
- |
- |
16 |
- |
16 |
|||
|
Growth share charge |
- |
- |
- |
50 |
- |
- |
50 |
- |
50 |
|||
|
Own shares purchased by EBT |
- |
- |
(235) |
- |
- |
- |
(235) |
- |
(235) |
|||
|
Shares awarded and sold from own shares |
- |
- |
- |
- |
- |
(19) |
(19) |
- |
(19) |
|||
|
Dividend paid |
- |
- |
- |
- |
- |
(2,180) |
(2,180) |
(27) |
(2,207) |
|||
|
At 31 December 2022 |
9,102 |
45,928 |
(994) |
1,010 |
(610) |
35,558 |
89,994 |
181 |
90,175 |
|||
|
Profit for period |
- |
- |
- |
- |
- |
3 |
3 |
31 |
34 |
|||
|
Exchange differences on translation of foreign operations |
- |
- |
- |
- |
(162) |
- |
(162) |
9 |
(153) |
|||
|
Total comprehensive income for period |
- |
- |
- |
- |
(162) |
3 |
(159) |
40 |
(119) |
|||
|
Growth share charge |
- |
- |
- |
59 |
- |
- |
59 |
- |
59 |
|||
|
Shares awarded and sold from own shares |
- |
- |
11 |
- |
- |
(30) |
(19) |
- |
(19) |
|||
|
Dividend paid |
- |
- |
- |
- |
- |
- |
- |
(130) |
(130) |
|||
|
At 30 June 2023 |
9,102 |
45,928 |
(983) |
1,069 |
(772) |
35,531 |
89,875 |
91 |
89,966 |
|||
Notes to the unaudited Interim Report for the six months ended 30 June 2023
1. Accounting Policies
Basis of preparation
The condensed consolidated interim financial statements for the six months ended 30 June 2023 have been prepared in accordance with the IAS 34 "Interim Financial Reporting" and the Group's accounting policies.
The Group's accounting policies are in accordance with International Financial Reporting Standards as adopted by the United Kingdom and are set out in the Group's Annual Report and Accounts 2022 on pages 59-63. These are consistent with the accounting policies which the Group expects to adopt in its 2023 Annual Report. The Group has not early-adopted any Standard, Interpretation or Amendment that has been issued but is not yet effective.
The information relating to the six months ended 30 June 2023 and 30 June 2022 is unaudited and does not constitute statutory financial statements as defined in Section 434 of the Companies Act 2006. The comparative figures for the year ended 31 December 2022 have been extracted from the Group's Annual Report and Accounts 2022, on which the auditors gave an unqualified opinion and did not include a statement under section 498 (2) or (3) of the Companies Act 2006. The Group Annual Report and Accounts for the year ended 31 December 2022 have been filed with the Registrar of Companies.
Going concern
The Directors have considered the financial projections of the Group, including cash flow forecasts, the availability of committed bank facilities (including the option to increase the facility by £5.0m and the temporary increase in the overdraft limit to £6.0m until the end of the year) and the headroom against covenant tests for the coming 12 months. They are satisfied that the Group has adequate resources for the foreseeable future and that it is appropriate to continue to adopt the going concern basis in preparing these interim financial statements.
Accounting estimates and judgements
The Group makes estimates and judgements concerning the future and the resulting estimates may, by definition, vary from the actual results. The Directors considered the critical accounting estimates and judgements used in the interim financial statements and concluded that the main areas of judgement are:
· Potential impairment of goodwill;
· Contingent payments in respect of acquisitions;
· Revenue recognition policies in respect of contracts which straddle the period end;
· Valuation of intangible assets on acquisitions; and
· Intangible development costs.
2. Segmental Information
Business segmentation
For management purposes the Board monitors the performance of its individual agencies and groups them into service segments based on the sectors in which they operate. Each reportable segment therefore includes a number of agencies with similar characteristics.
The Board assesses the performance of each segment by looking at turnover, operating income and headline operating profit. The headline operating profit shown below is after the reallocation to the agencies of certain head office costs relating to the Shared Services function. These costs include a significant portion of the total operating costs which are now centrally managed.
The Board does not review the assets and liabilities of the Group on a segmental basis. A segmental breakdown of assets and liabilities is therefore not disclosed.
|
|
Business & Corporate |
Consumer & Lifestyle |
Health & Wellness |
Property |
Sports & Entertainment |
Technology & Mobility |
MISSION Advantage & Central |
Investments |
Total
|
|
Six months to 30 June 2023 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Turnover
|
34,725 |
12,874 |
2,165 |
14,973 |
4,032 |
17,494 |
6,217 |
428 |
92,908 |
|
Operating income |
10,127 |
9,180 |
2,032 |
6,821 |
3,000 |
7,849 |
2,439 |
350 |
41,798 |
|
Headline operating profit |
1,350 |
868 |
216 |
585 |
357 |
273 |
(1,126) |
(557) |
1,966 |
|
|
Business & Corporate |
Consumer & Lifestyle |
Health & Wellness |
Property |
Sports & Entertainment |
Technology & Mobility |
MISSION Advantage & Central |
Investments |
Total
|
|
Six months to 30 June 2022 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Turnover
|
31,523 |
12,373 |
1,710 |
12,341 |
2,371 |
16,569 |
4,157 |
182 |
81,226 |
|
Operating income |
10,121 |
9,296 |
1,512 |
5,941 |
1,432 |
8,236 |
857 |
119 |
37,514 |
|
Headline operating profit |
936 |
900 |
138 |
270 |
245 |
1,222 |
(836) |
(658) |
2,217 |
|
|
Business & Corporate |
Consumer & Lifestyle |
Health & Wellness |
Property |
Sports & Entertainment |
Technology & Mobility |
MISSION Advantage & Central |
Investments |
Total
|
|
Year to 31 December 2023 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Turnover
|
62,134 |
24,880 |
4,694 |
26,505 |
6,040 |
48,527 |
9,544 |
361 |
182,685 |
|
Operating income |
20,637 |
18,243 |
3,891 |
13,353 |
3,352 |
17,295 |
2,786 |
257 |
79,814 |
|
Headline operating profit |
2,459 |
1,182 |
953 |
1,895 |
654 |
3,369 |
(1,720) |
(135) |
8,657 |
Geographical segmentation
The following table provides an analysis of the Group's operating income by region of activity:
|
|
Six months to |
Six months to |
Year ended |
|
|
30 June 2023 |
30 June 2022 |
31 December 2022 |
|
|
Unaudited |
Unaudited |
Audited |
|
|
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
UK |
35,828 |
32,124 |
67,766 |
|
USA |
4,203 |
4,144 |
9,156 |
|
Asia |
1,643 |
1,148 |
2,667 |
|
Rest of Europe |
124 |
98 |
225 |
|
|
41,798 |
37,514 |
79,814 |
3. Reconciliation of Headline Profit to Reported Profit
The Board believes that headline profits, which eliminate certain amounts from the reported figures, provide a better understanding of the underlying trading of the Group. The adjustments to reported profits generally fall into three categories: acquisition-related items, exceptional restructuring costs and start-up costs.
|
|
Six months to 30 June 2023 Unaudited |
Six months to 30 June 2022 Unaudited |
Year ended 31 December 2022 Audited |
|
|||
|
|
PBT |
PAT |
PBT |
PAT |
PBT |
PAT |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Headline profit |
999 |
759 |
1,860 |
1,451 |
7,771 |
6,130 |
|
Goodwill and business impairment |
- |
- |
- |
- |
(5,257) |
(4,697) |
|
Acquisition-related items (Note 4) |
(418) |
(341) |
(346) |
(295) |
(593) |
(443) |
|
Restructuring costs |
- |
- |
- |
- |
(402) |
(325) |
|
Start-up costs |
(512) |
(384) |
- |
- |
(776) |
(629) |
|
Reported profit |
69 |
34 |
1,514 |
1,156 |
743 |
36 |
Goodwill and business impairment costs in 2022 related to the impairment of Splash goodwill and the impairment of Pathfindr fixed assets and stock, following a review of the valuation of these cash generating units and assets, and the loss on disposal of the Fenturi investment in associate and write-off of intercompany balance.
Restructuring costs in 2022 comprised the costs associated with the major fundamental restructuring of the Splash business.
Start-up costs derive from organically started businesses or loss-making businesses acquired and comprise the trading losses of such entities until the earlier of two years from commencement or when they show evidence of becoming sustainably profitable. Start-up costs in 2022 related to the trading losses of the new Livity youth-marketing offer as well as costs associated with the early-stage foundation of performance marketing and data science capabilities. Start-up costs in 2023 relate to Livity and the launch of Turbine, an integrated Growth Media agency, specialising in owned, earned and paid media for consumer facing brands.
4. Acquisition Adjustments
|
|
|
Six months to 30 June 2023 Unaudited |
Six months to 30 June 2022 Unaudited |
Year ended 31 December 2022 Audited |
|
|
|
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
Amortisation of intangible assets recognised on acquisitions |
(259) |
(259) |
(519) |
|
|
Movement in fair value of contingent consideration |
(22) |
- |
334 |
|
|
Acquisition transaction costs expensed |
(137) |
(87) |
(408) |
|
|
|
|
(418) |
(346) |
(593) |
The movement in fair value of contingent consideration relates to a revision in the estimate payable to vendors of businesses acquired in prior years. Acquisition transaction costs relate to professional fees associated with the acquisitions.
5. Net Finance Costs
|
|
Six months to |
Six months to |
Year ended |
|
|
30 June 2023 |
30 June 2022 |
31 December 2022 |
|
|
Unaudited |
Unaudited |
Audited |
|
|
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
Net interest on bank loans, overdrafts and deposits |
(742) |
(235) |
(656) |
|
Amortisation of bank debt arrangement fees |
(23) |
(24) |
(48) |
|
Interest expense on leases liabilities |
(277) |
(173) |
(342) |
|
Net finance costs |
(1,042) |
(432) |
(1,046) |
The increase in net interest on bank loans, overdrafts and deposits in the period is driven by an increase in the interest rate payable on the bank debt following general increases in interest rates by the BOE, and an increase in the average level of bank debt, caused predominantly by a large client changing their payment terms, whereby they have moved from paying significant amounts of media in advance, to paying for their media month by month. Mezzo acquisition consideration payments and payments associated with the new London lease and office fitout also contributed to the increased level of bank debt.
The increase in interest expense on lease liabilities in the period is the result of the increase in Right of Use Assets and Lease Liabilities following the entering into of new leases, most notably the new London office.
6. Taxation
The taxation charge for the period ended 30 June 2023 has been based on an estimated effective tax rate on headline profit on ordinary activities of 24% (30 June 2022: 22%).
7. Earnings Per Share
The calculation of the basic and diluted earnings per share is based on the following data, determined in accordance with the provisions of IAS 33: "Earnings per Share".
|
|
Six months to |
Six months to |
Year to |
|
|
30 June 2023 |
30 June 2022 |
31 December 2022 |
|
|
Unaudited |
Unaudited |
Audited |
|
|
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
Earnings |
|
|
|
|
|
|
|
|
|
Reported profit for the year |
|
|
|
|
Attributable to: |
|
|
|
|
Equity holders of the parent |
3 |
1,250 |
9 |
|
Non-controlling interests |
31 |
(94) |
27 |
|
|
34 |
1,156 |
36 |
|
|
|
|
|
|
Headline earnings (Note 3) |
|
|
|
|
Attributable to: |
|
|
|
|
Equity holders of the parent |
728 |
1,545 |
6,103 |
|
Non-controlling interests |
31 |
(94) |
27 |
|
|
759 |
1,451 |
6,130 |
|
Number of shares |
|
|
|
|
Weighted average number of Ordinary shares for the purpose of basic earnings per share |
89,531,712 |
90,310,055 |
89,906,999 |
|
Dilutive effect of securities: |
|
|
|
|
Employee share options |
370,183 |
662,043 |
617,992 |
|
Weighted average number of Ordinary shares for the purpose of diluted earnings per share |
89,901,895 |
90,972,098 |
90,524,991 |
|
Reported basis: |
|
|
|
|
Basic earnings per share (pence) |
0.00 |
1.38 |
0.01 |
|
Diluted earnings per share (pence) |
0.00 |
1.37 |
0.01 |
|
Headline basis: |
|
|
|
|
Basic earnings per share (pence) |
0.81 |
1.71 |
6.79 |
|
Diluted earnings per share (pence) |
0.81 |
1.70 |
6.74 |
A reconciliation of the profit after tax on a reported basis and the headline basis is given in Note 3.
8. Intangible Assets
|
|
30 June 2023 |
30 June 2022 |
31 December 2022 |
|
|
Unaudited |
Unaudited |
Audited |
|
|
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
Goodwill |
98,123 |
95,412 |
96,213 |
|
Other intangible assets |
3,581 |
4,227 |
3,528 |
|
|
101,704 |
99,639 |
99,741 |
Goodwill
|
|
Six months to 30 June 2023 |
Six months to 30 June 2022 |
Year ended 31 December 2022 |
|
|
Unaudited |
Unaudited |
Audited |
|
|
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
Cost |
|
|
|
|
At 1 January |
102,486 |
98,877 |
98,877 |
|
Recognised on acquisition of subsidiary |
1,910 |
808 |
3,609 |
|
At 30 June / 31 December |
104,396 |
99,685 |
102,486 |
|
Impairment adjustment |
|
|
|
|
At 1 January |
6,273 |
4,273 |
4,273 |
|
Impairment during the period |
- |
- |
2,000 |
|
At 30 June / 31 December |
6,273 |
4,273 |
6,273 |
|
|
|
|
|
|
Net book value |
98,123 |
95,412 |
96,213 |
The increase in goodwill during the period relates to the acquisition of Mezzo Labs Ltd.
In accordance with the Group's accounting policies, an annual impairment test is applied to the carrying value of goodwill, unless there is an indication that one of the cash generating units has become impaired during the year, in which case an impairment test is applied to the relevant asset. The next impairment test will be undertaken at 31 December 2023. In 2022, as a result of the performance and restructuring of the operations of Bray Leino Splash Pte Ltd, the Directors considered it prudent to impair £2.0m of goodwill relating to this CGU.
Other Intangible Assets
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other intangible assets consist of Client relationships, trade names, and software and product development costs.
9. Right of Use Assets and Lease Liabilities
The Group leases several assets, the overwhelming majority of which are the office premises from which it operates. Under IFRS 16, the Group recognises Right of Use Assets and Lease Liabilities in relation to these leases. Assets and liabilities reduce over the period of the lease and increase when a lease is renewed, or a new lease entered into. The increase in Right of Use Assets and Lease Liabilities in the period relates to the entering into of new leases, most notably the new long term London office lease.
10. Bank Loans and Net Bank Debt
|
|
30 June 2023 |
30 June 2022 |
31 December 2022 |
|
|
Unaudited |
Unaudited |
Audited |
|
|
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
Bank loan outstanding |
20,060 |
15,000 |
17,575 |
|
Adjustment to amortised cost |
(77) |
(83) |
(60) |
|
Carrying value of loan outstanding |
19,983 |
14,917 |
17,515 |
|
Less: Cash and short term deposits |
(5,096) |
(7,847) |
(6,153) |
|
Net bank debt |
14,887 |
7,070 |
11,362 |
|
|
|
|
|
|
The borrowings are repayable as follows: |
|
|
|
|
Less than one year |
23 |
- |
27 |
|
In one to two years |
21 |
15,000 |
17,521 |
|
In two to three years |
20,016 |
- |
22 |
|
In three to four years |
- |
- |
5 |
|
|
20,060 |
15,000 |
17,575 |
|
Adjustment to amortised cost |
(77) |
(83) |
(60) |
|
|
19,983 |
14,917 |
17,515 |
|
Less: Amount due for settlement within 12 months (shown under current liabilities) |
(23) |
- |
(27) |
|
Amount due for settlement after 12 months |
19,960 |
14,917 |
17,488 |
At 30 June 2023, the Group's committed bank facilities comprised a revolving credit facility of £20.0m, with an option to increase the facility by £5.0m. On 8 March 2023 the Group exercised the option to extend by one year, the facility now expiring on 5 April 2025. Interest on the facility is based on SONIA (sterling overnight index average) plus a margin of between 1.50% and 2.25% depending on the Group's debt leverage ratio, payable in cash on loan rollover dates.
In addition to its committed facilities, the Group has available an overdraft facility of up to £6.0m with interest payable by reference to National Westminster Bank plc Base Rate plus 2.25%. This overdraft limit of £6.0m is a temporary increase until 31 December 2023, after which the limit will return to £3.0m.
Included in the above is £60,000 of bank loans owing by Populate Social Ltd, one of the companies acquired in 2022. These borrowings are repayable over a three year period.
11. Acquisitions
11.1 Acquisition Obligations
The terms of an acquisition may provide that the value of the purchase consideration, which may be payable in cash or shares or other securities at a future date, depends on uncertain future events such as the future performance of the acquired company. The Directors estimate that the liability for payments that may be due is as follows:
|
|
Cash £'000 |
Shares £'000 |
Total £'000 |
|
30 June 2023 Less than one year |
1,873 |
- |
1,873 |
|
Between one and two years |
2,281 |
- |
2,281 |
|
In more than two but less than three years |
899 |
- |
899 |
|
|
5,053 |
- |
5,053 |
A reconciliation of acquisition obligations during the period is as follows:
|
|
Cash £'000 |
Shares £'000 |
Total £'000 |
|
|
|
|
|
|
|
|
At 31 December 2022 |
4,143 |
- |
4,143 |
|
|
Obligations settled in the period |
(393) |
- |
(393) |
|
|
Adjustments to estimates of obligations |
22 |
- |
22 |
|
|
New acquisitions |
1,281 |
- |
1,281 |
|
|
At 30 June 2023 |
5,053 |
- |
5,053 |
|
11.2 Acquisition of Mezzo Labs Ltd
On 13 February 2023, the Group acquired the entire issued share capital of Mezzo Labs Ltd ("Mezzo"). Mezzo is a leading provider of innovative data services with over 16 years' experience in data strategy and architecture, web analytics, CX analytics, marketing automation, insights generation, data science, Conversion Rate Optimisation (CRO) and personalisation. Headquartered in London, the company also has operations in Singapore. The fair value of the consideration given for the acquisition was £1,678,000, comprising initial cash consideration and deferred contingent consideration. The deferred contingent consideration is to be satisfied by the issue of new ordinary shares up to a maximum of 40% at MISSION's discretion, with the balance payable in cash. Costs relating to the acquisition amounted to £81,000 and were expensed.
Maximum contingent consideration of £4,000,000 is dependent on Mezzo achieving a profit target over the period 1 January 2023 to 31 December 2024. The Group has provided for contingent consideration of £1,281,000 to date.
The fair value of the net identifiable liabilities acquired was £584,000 resulting in goodwill and previously unrecognised other intangible assets of £2,262,000. Goodwill arises on consolidation and is not tax-deductible. Management carried out a review to assess whether any other intangible assets were acquired as part of the transaction. Management concluded that both a brand name and customer relationships were acquired and attributed a value to each of these by applying commonly accepted valuation methodologies. The goodwill arising on the acquisition is attributable to the anticipated profitability of Mezzo.
|
|
Book value |
Fair value adjustments |
Fair value |
|
|
|
£'000 |
£'000 |
£'000 |
|
|
Net assets acquired: |
|
|
|
|
|
Intangible assets |
49 |
- |
49 |
|
|
Fixed assets |
19 |
- |
19 |
|
|
Trade and other receivables |
368 |
- |
368 |
|
|
Cash and cash equivalents |
71 |
- |
71 |
|
|
Trade and other payables |
(1,078) |
- |
(1,078) |
|
|
Deferred tax |
(13) |
- |
(13) |
|
|
|
(584) |
- |
(584) |
|
|
Other intangibles recognised at acquisition |
- |
470 |
470 |
|
|
Deferred tax adjustment |
- |
(118) |
(118) |
|
|
|
(584) |
352 |
(232) |
|
|
Goodwill |
|
|
1,910 |
|
|
Total consideration |
|
|
1,678 |
|
|
Satisfied by: |
|
|
|
|
|
Cash |
|
|
397 |
|
|
Deferred contingent consideration |
|
|
1,281 |
|
|
|
|
|
1,678 |
|
Mezzo contributed turnover of £860,000, operating income of £822,000 and headline operating profit of £59,000 to the results of the Group for the six month period ended 30 June 2023.
12. Post balance sheet events
There have been no material post balance sheet events.
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