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XLMedia PLC (XLM)

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Monday 23 September, 2019

XLMedia PLC

Interim Results & Full Year Update

RNS Number : 2037N
XLMedia PLC
23 September 2019
 

23 September 2019

 

XLMedia PLC

("XLMedia" or the "Group" or the "Company")

 

Interim results for the six months ended 30 June 2019 and full year update

 

XLMedia (AIM: XLM), a leading provider of digital performance marketing services, announces its unaudited interim results for the six months ended 30 June 2019.

 

Financial highlights1

 

·     Revenues of $42.5 million (H1 2018: $47.2 million)

·     Gross profit of $28.8 million (H1 2018: $31.7 million)

·     Adjusted EBITDA2  of $18.6 million (H1 2018: $21.6 million)

·     Profit before tax of $13.8 million (H1 2018: $17.6 million)

·     Stable earnings per share of $0.06 in volatile market conditions 

·     Interim dividend of $5.8 million or 3.1584 cents per share (H1 2018: 3.0040 cents per share) - maintaining the Group's progressive dividend policy

·     Strong balance sheet with $43.1 million of cash and short-term investments at 30 June 20193

 

Operating highlights

 

·     Continued diversification of assets underpinned by record performance from the Group's personal finance division, now representing 14% of Group revenue (H1 2018: 7%)

·     US gambling market continues to develop positively

The Company's subsidiary, XLMedia US Limited, was accepted last week as an authorized Gaming Service Provider by the Pennsylvania Gaming Control Board for online advertising of online sports betting and casino brands in the state of Pennsylvania

Currently implementing ongoing organic investment programme while developing the Group's presence and existing assets for this market

·     Execution of strategy to focus on higher margin publishing activities and discontinue some of the media activities. In August the Company announced the sale of the Group's mobile apps marketing subsidiary;

·     Industry wide regulatory headwinds continue to be felt in 2019.  Key Swedish, German, UK and Swiss markets creating near term challenges for the Group, specifically;

Newly regulated

§ New gambling regulation in Sweden impacting both volumes and customer sign ups - the Group believes the market will stabilise in the mid-term, but revenues from this market may not return to previous volumes in the midterm. So far the decrease is 23% as the market adjusts to the new regulatory framework

§ New regulatory regime of the Swiss online casino market resulting in many operators exiting the market, including most of the Group's existing clients in the region

Ongoing regulation - Evolving UK regulatory landscape continues to put pressure on revenues

To be regulated - German regulatory uncertainty within the online casino market - decreased our revenues by 36% in this market

·     Announced the appointment of Stuart Simms as Chief Executive Officer on 29 July 2019, effective 2 October 2019, with Ory Weihs remaining on the Board as a Non-executive Director of the Company

 

Trading update

·     Despite underlying trading in the first half year stabilising, regulatory headwinds highlighted above continue to create trading uncertainty for the Group which has led to weaker-than-expected performance in July and August

·     The combination of this performance and a slowdown in the Group's acquisition activity this year, alongside reviewing all strategic investments, means the Board is today revising market guidance for the year ended 31 December 2019

·     The Board now expects the Group to deliver revenues of circa US $80 million and adjusted EBITDA to be circa US $34 million, for the year ending 31 December 2019

 

Ory Weihs, Chief Executive Officer of XLMedia, commented:

"This year has proven to be challenging for both XLMedia and the industry as a whole, as the gaming industry changes and regulates.  However, this does result in the Group having greater visibility, more sustainable revenues and stable earnings. Whilst we expect this disruption to continue in the midterm, we remain committed to our stated strategy, focusing on publishing.  We continue to diversify our asset base, specifically developing our US gambling strategy and the personal finance sector, in which we continue to make good progress with this sector now accounting for 14% of the Group's revenues. 

 

"As my last address as CEO of XLMedia, I would like to wish Stuart every success and firmly believe that with the support of the Board and management team he will lead the business back to sustainable growth."

 

 

A webcast of our results presentation will be available on our website later this week at the following link:  https://www.xlmedia.com/investor-relations/webcasts/

 

The information contained within this announcement (the "Announcement") is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this Announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.

 

For further information, please contact:

 

XLMedia plc

Ory Weihs

www.xlmedia.com

 

Via Vigo Communications

Vigo Communications

Jeremy Garcia / Fiona Henson / Simon Woods

www.vigocomms.com

 

Tel: 020 7390 0233

Cenkos Securities plc (Nomad and Joint Broker)

Giles Balleny / Max Gould

www.cenkos.com

 

Tel: 020 7397 8900

Berenberg (Joint Broker)

Chris Bowman / Mark Whitmore / Simon Cardron www.berenberg.com

Tel: 020 3207 7800

 

Strategy

 

The Group has started the year with stabilised rankings to our major assets, however, regulatory headwinds have slowed progress and delayed expected recovery of performance in some of our markets, mainly as gambling operators cease their activities in certain markets or are limiting the deposits they can accept from players.

 

Although regulation has had a negative impact on performance, we do believe that in the medium and longer term it provides sustainable opportunities for XLMedia, as we leverage our strong asset base, vast experience, know how and advanced unique technology which positions XLMedia as a top publishing group in the gaming sector.

 

Going forward we will continue our focus on publishing, and focus on diversifying our investments in the following:

·     Pursuit of growth opportunities in North America to both build and develop a comprehensive portfolio of online assets for the US gambling market

·     Continue developing the Group's core technology to retain competitive advantage

·     Ongoing expansion of the Group's publishing portfolio in other regulated European gambling markets

·     Seeking to acquire earnings accretive publishing assets, leveraging benefits of scale and technology

 

All new sites being developed will help bolster the Group's asset base, expanding and enhancing its existing geographical footprint.

 

The Group started the year with the strategic decision to focus on publishing and discontinue some of its media activities. As a result, in August 2019 the Group announced the sale of Webpals Mobile Ltd ("Mobile"), the Group's subsidiary which was focused on the promotion of apps which are not in the Group's core verticals of gambling and personal finance.

 

Under the terms of the agreement, Mobile repaid $1.9 million of inter-company balances to the Group on completion of the transaction.  There will be a final settlement to be made based on the assets and liabilities of Mobile as at completion following the preparation of final accounts. In 2018, Mobile delivered nil contribution at EBITDA level. The net proceeds from the sale will be used by the Group in the furtherance of its strategy of developing its publishing assets.

 

 

Regulation

 

As previously disclosed, the Group has seen a number of regulatory headwinds, namely new gambling legislation in Sweden currently impacting all market participants and uncertainty within the online German casino sector with brands pausing activity.  The Swiss market has also slowed significantly following the adoption of a new regulatory regime which has significantly limited the number of online licenses. The UK regulatory landscape continues to evolve with ongoing downward pressure on revenues remaining.  Despite this, strong online ranking across key sites, including freebets.com, remains.

 

Ongoing regulation

United Kingdom

Increased compliance demands on operators, including more stringent age verification and Know-Your-Customer rules, continue to slow down our conversion rate for new depositing customers across a number of our gambling clients.  As of April 2019, the UK online casino tax has increased from 15% to 21%. Despite our rankings remaining high, the Group has experienced an impact on ARPU (average revenue per user).

 

Europe - other countries

The Group continues to seek opportunities to expand its presence in other European countries which have already undergone regulation, affording the Group greater visibility of market conditions and quality of earnings.

 

To be regulated

Germany

The German online casino market remains in a state of flux with regulatory uncertainty around online casino activity.  Some clients continue to operate as usual while others have paused all activity in the market. 

 

Newly regulated

United States

The US market continues to present a mid to long term opportunity as the number of States in various stages of regulating sports betting continues to grow, with very few, including New Jersey and Pennsylvania, which are already live. The Company's subsidiary, XLMedia US Limited, was last week accepted as an Authorized Registered Gaming Service provider by the Pennsylvania Gaming Control Board for online advertising of online sports betting and casino brands in the state of Pennsylvania. The Company remains committed to investing US $7 million over the next three years.

Sweden

At the start of 2019, a new regulatory regime became effective in Sweden, requiring casino operators in Sweden to apply for a license from the Swedish Gambling Authority ("SGA").  This change was followed by the introduction of tough monitoring and sanctioning by the SGA of licensed operators, affecting conversion rates and overall performance, causing uncertainty in the market.

 

These changes will undoubtedly take time to bed down, and the short term impact has been lower than expected player values overall, and some operators struggling. 

 

Switzerland

A new gambling regulatory regime came into effect in Switzerland in January 2019. Under the new regime, licenses for online gambling are only granted to a limited number of operators, mainly consisting of existing land-based casino operators. As a result, most of our customers have exited the market, negatively affecting the Group's performance in the market.

 

General Regulation

The Group continues to monitor regulations worldwide, responding to changing regulatory environments and new compliance needs in the gambling advertising sector. The Group aims to continue to build its asset portfolio across regulated markets globally in both the gambling and personal finance sectors, by investing in developing assets organically and acquiring selected targets.

 

 

Financial review

 

 

H1 2019

($'000s)

H1 2018

($'000s)

Change

Revenues

42,459

47,183

-10%

Gross Profit

28,838

31,688

-9%

Operating expenses

14,514

13,649

+6%

Operating income

14,324

18,039

-21%

Adjusted EBITDA

18,616

21,601

-14%

Profit Before Tax

13,795

17,584

-22%

 

The financial performance reflects continued operations excluding discontinued media activities following strategic decision to focus on higher margin publishing activities and discontinue some of the media activities.

 

In the six months ended 30 June 2019, the Company delivered revenues of $42.5 million (H1 2018: $47.2 million) and adjusted EBITDA of $18.6 million (H1 2018: $21.6 million).

 

The first half of 2019 was impacted by the regulatory trends and other operational issues which resulted in revenues of $42.5 million, a decrease of 10% compared to the same period last year. The decrease is from the Group's core gaming activity affected by regulatory headwinds, for example new regulation in Sweden which impacted more than expected and the revenues in this territory decreased 23%. The Group's revenues from its personal finance assets in H1 2019 increased to $6.0 million or 14% of the Group's revenues (H1 2018: $3.1 million, 7%).

 

Gross profit was $28.8 million or 68% of revenues, representing a 1% increase compared to the same period last year (H1 2018: $31.7 million, 67%). High gross margins reflect the Group's strategic decision to focus on its publishing activities.

 

Operating expenses during the first six months of the year were $14.5 million, an increase of 6% compared to the same period last year (H1 2018: $13.6 million). The increase is mainly from increased general and administration costs relating to changes in management and increased amortization of capitalized R&D costs.

 

Operating expenses include the first implementation of IFRS 16 - a new accounting principle which requires a lessee to recognise assets and liabilities for leases with a term of more than 12 months. As a result, the Group recorded increased amortization expenses of $0.7 million, increased financing expenses of $0.9 million and reduced rent expenses of $0.7 million.

 

Operating expenses included $0.7 million of research and development expenses, similar to the same period last year. These expenses are in addition to investments in technology and internal systems developed during the period of $4.1 million (H1 2018: $4.3 million). Total R&D spend together with capitalised costs was $4.8 million compared to $5.8 million in H1 2018. We see technology as a key driver to increasing revenues and profit for the coming years, and the majority of the spend is invested for future business development.

 

Adjusted EBITDA4 reached $18.6 million or 44% of revenues, reflecting a decrease of 14% relative to the same period last year (H1 2018: $21.6 million, 46%).

 

As a result of the reduced revenues and gross profit as compared to the same period last year, profit before tax decreased by 22% to $13.8 million (H1 2018: $17.6 million). Net income for the period was $12.2 million, reflecting a decrease of 14% (H1 2018: $14.1 million). Net income included Income from discontinued operations5 of $0.08 million and non-controlling interest of $0.4 million.

 

As at 30 June 2019 we had $43.1 million of cash and short-term investments compared to $43.7 million as at 31 December 2018. The cash amount included $3.0 million within Mobile classified as assets held for sale in the balance sheet, and which was later settled prior to the disposal of Mobile.     

 

Current assets as at 30 June 2019 were $55.5 million (31 Dec 2018: $60.0 million). Assets held for sale6 were $6.2 million (31 Dec 2018: $9.3 million) and non-current assets were $138.0 million (31 Dec 2018: $127.2 million). The increase in non-current assets of $10.0 million is attributed to the implementation of IFRS 16 as at 1 January 2019 as mentioned above.

 

Total equity as at 30 June 2019 was $161.5 million, or 81% of total assets (31 Dec 2018: 85%). During H1 the Company executed its buyback programmes and bought shares in a total amount of $9.7 million. Also, during H1 we repaid $1.4 million of bank loans and recognized a lease liability of $1.7 million (IFRS 16 - see explanation above). The strong balance sheet combined with cash and short-term investments of $43.1 million ensures the Group is well positioned to continue to execute its strategic plan.

 

Dividend, Share Buyback & Tender Offer

 

On 18 December 2018, the Company instigated a share buyback programme with repurchased shares being held in treasury. To date, the Company has purchased 13.5 million shares for an aggregate sum of $10.8 million.

 

In addition, the Company further capitalised on its strong cash position, and highly cash generative business model by completing a £15.7 million Tender Offer in August 2019, acquiring 19.7 million Ordinary Shares at 80 pence per share.  The repurchased shares are held in treasury and the number of Shares in issue carrying voting rights reduced accordingly.

 

The Board is declaring an interim dividend of $5.8 million or 3.1584 cents per share, to be paid in Pound Sterling 2.5328 pence per share 1 November 2019 to shareholders on the register at 4 October 2019. The ex-dividend date is 3 October 2019.

 

 

Board changes

 

On 29 July 2019, the Company announced the appointment of Stuart Simms as Chief Executive Officer with effect from 2 October 2019. Ory Weihs will continue in his role as Chief Executive Officer until Stuart's arrival and thereafter will remain a supporter of the business through his role on the Board as a Non-executive Director of the Company. Stuart has been working closely with Ory to ensure an orderly hand-over of responsibilities whilst conducting a full review of the business.

 

Stuart has significant experience in technology companies, and specifically the performance marketing sector, and joins having previously held several Board and senior executive positions, including as Chief Executive Officer of Rakuten Marketing ("Rakuten"), one of the world's largest performance marketing companies with revenues in excess of $1 billion. During his tenure at Rakuten, Stuart oversaw a substantial transformation and re-structuring of the business, resulting in a return to growth. Stuart implemented a clear strategy to utilise inhouse technology and integrate acquisitions, accelerating both revenue and profit growth.

 

Outlook

 

As highlighted earlier in the announcement, both H1 and the full year results will be impacted by regulatory developments across Sweden, Germany, Switzerland and the UK.  This, alongside no acquisition activity, which was expected to deliver additional EBITDA in the full year results, has impacted expected performance for the year.

 

 

Accordingly, the Board now expects the Group to deliver revenues of circa US $80 million and adjusted EBITDA to be circa US $34 million, for the year ending 31 December 2019.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

 

 

 

30 June

 

31 December

 

 

2019

 

2018

 

 

Unaudited

 

Audited

 

 

USD in thousands

 

 

 

 

 

Assets

 

 

 

 

   Current assets:

 

 

 

 

Cash and cash equivalents

 

40,273

 

44,627

Short-term investments

 

2,805

 

2,996

Trade receivables

 

9,410

 

16,112

Other receivables

 

2,992

 

5,502

 

 

55,480

 

69,237

 

 

 

 

 

Assets held for sale (Note 4)

 

6,187

 

-

 

 

 

 

 

Total current assets

 

61,667

 

69,237

 

 

 

 

 

Non-current assets:

 

 

 

 

Long-term investments

 

668

 

633

Property and equipment

 

10,891

 

1,296

Goodwill

 

23,652

 

23,652

Domains and websites

 

92,226

 

92,053

Other intangible assets

 

10,574

 

9,146

Deferred taxes

 

-

 

99

Other assets

 

372

 

435

 

 

 

 

 

 

 

138,383

 

127,314

 

 

 

 

 

 

 

200,050

 

196,551

 

 

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 

 

 

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

 

30 June

 

31 December

 

 

2019

 

2018

 

 

Unaudited

 

Audited

 

 

USD in thousands

   Liabilities and equity

 

 

 

 

   Current liabilities:

 

 

 

 

Current maturity of long-term bank loans

 

4,216

 

5,585

Lease liability

 

1,729

 

-

Trade payables

 

2,660

 

6,416

Other liabilities and accounts payable

 

7,346

 

7,058

Income tax payable

 

10,090

 

9,049

 

 

 

 

 

 

 

26,041

 

28,108

 

 

 

 

 

   Liabilities attributed to assets held for sale: (Note 4)

 

3,431

 

-

 

 

 

 

 

Total current liabilities

 

29,472

 

28,108

 

 

 

 

 

   Non-current liabilities:

 

 

 

 

Lease liability

 

8,762

 

-

Long- term bank loans

 

-

 

1,380

Deferred taxes

 

193

 

-

Other liabilities

 

146

 

248

 

 

 

 

 

 

 

9,101

 

1,628

 

 

 

 

 

Total liabilities

 

38,573

 

29,736

 

 

 

 

 

 

 

 

 

 

   Equity:

 

 

 

 

Share capital

 

*)

 

*)

Share premium

 

112,352

 

112,224

Capital reserve from share-based transactions

 

3,233

 

2,590

Capital reserve from transactions with non-controlling interests

 

(2,445)

 

(2,445)

Treasury shares

 

(10,121)

 

(468)

Retained earnings

 

58,167

 

54,623

 

 

 

 

 

Equity attributable to equity holders of the Company

 

161,186

 

166,524

 

 

 

 

 

Non-controlling interests

 

291

 

291

 

 

 

 

 

   Total equity

 

161,477

 

166,815

 

 

 

 

 

 

 

200,050

 

196,551

*) Lower than USD 1 thousand.

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 

 

22 September, 2019

 

 

 

 

 

 

Date of approval of the

 

Chris Bell

 

Ory Weihs

 

Yehuda Dahan

financial statements

 

Chairman of the Board of Directors

 

Chief Executive Officer

 

Chief Financial Officer

 

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

 

 

 

 

 

 

 

 

 

Six months ended

30 June

 

Year ended

31 December

 

 

2019

 

2018

 

2018

 

 

Unaudited

 

Audited

 

 

USD in thousands

(except per share data)

 

 

 

 

 

 

 

Revenues

 

42,459

 

47,183

 

93,502

Cost of revenues

 

13,621

 

15,495

 

30,133

 

 

 

 

 

 

 

Gross profit

 

28,838

 

31,688

 

63,369

 

 

 

 

 

 

 

Research and development expenses

 

696

 

733

 

1,043

Selling and marketing expenses

 

2,646

 

2,563

 

5,044

General and administrative expenses

 

11,172

 

10,353

 

20,597

 

 

 

 

 

 

 

 

 

14,514

 

13,649

 

26,684

 

 

 

 

 

 

 

Operating profit

 

14,324

 

18,039

 

36,685

 

 

 

 

 

 

 

Finance expenses

 

(1,212)

 

(556)

 

(837)

Finance income

 

683

 

101

 

300

 

 

 

 

 

 

 

Finance expenses, net 

 

(529)

 

(455)

 

(537)

 

 

 

 

 

 

 

Profit before taxes on income

 

13,795

 

17,584

 

36,148

Taxes on income

 

1,723

 

2,616

 

4,089

 

 

 

 

 

 

 

Income from continuing operations

 

12,072

 

14,968

 

32,059

Income (loss) from discontinued operations, net (Note 4)

 

79

 

(916)

 

(11,284)

 

 

 

 

 

 

 

Net income

 

12,151

 

14,052

 

20,775

 

 

 

 

 

 

 

Net income and other comprehensive income

 

12,151

 

14,052

 

20,775

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 Equity holders of the Company

 

11,770

 

13,553

 

19,818

 Non-controlling interests

 

381

 

499

 

957

 

 

 

 

 

 

 

 

 

12,151

 

14,052

 

20,775

Earnings per share attributable to equity holders of the Company:

 

 

 

 

 

 

Basic and Diluted earnings per share from continuing operation (in USD)

 

0.06

 

0.06

 

0.14

Basic and Diluted loss per share from discontinuing operation (in USD)

 

(*)

 

(*)

 

(0.05)

Weighted average number of shares used in computing basic earnings per share (in thousands)

 

209,329

 

214,466

 

215,441

Weighted average number of shares used in computing diluted earnings per share (in thousands)

 

209,596

 

217,854

 

217,330

 

 

 

 

 

 

 

(*) less than 0.01 USD.

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 

 

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

Six months ended

30 June

 

Year ended

31 December

 

 

2019

 

2018

 

2018

 

 

Unaudited

 

Audited

 

 

USD in thousands

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

12,151

 

14,052

 

20,775

 

 

 

 

 

 

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments to the profit or loss items:

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation, amortisation and impairment

 

3,618

 

2,788

 

6,503

Finance (income) expense, net

 

1,311

 

(1,584)

 

(1,577)

Gain from sale of property

 

-

 

-

 

(10)

Loss from write down to fair value less selling costs of the discontinued operation

 

-

 

-

 

9,938

Cost of share-based payment

 

674

 

774

 

1,667

Taxes on income

 

1,782

 

2,738

 

4,387

Exchange differences on balances of cash and cash equivalents

 

(492)

 

329

 

954

 

 

 

 

 

 

 

 

 

6,893

 

5,045

 

21,862

Changes in asset and liability items:

 

 

 

 

 

 

 

 

 

 

 

 

 

Decrease in trade receivables

 

3,858

 

1,174

 

2,838

Decrease (increase) in other receivables

 

620

 

(2,789)

 

(509)

Increase (decrease) in trade payables

 

(1,419)

 

113

 

(3,397)

Increase (decrease) in other accounts payable

 

1,080

 

(2,459)

 

(4,571)

Increase in other long-term liabilities

 

-

 

24

 

47

 

 

 

 

 

 

 

 

 

4,139

 

(3,937)

 

(5,592)

Cash paid and received during the period for:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest paid

 

(356)

 

(215)

 

(469)

Interest received

 

89

 

99

 

196

Taxes paid

 

(1,167)

 

(2,195)

 

(5,544)

Taxes received

 

2,058

 

556

 

557

 

 

 

 

 

 

 

 

 

624

 

(1,755)

 

(5,260)

 

 

 

 

 

 

 

Net cash provided by operating activities

 

23,807

 

13,405

 

31,785

 

 

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 

 

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont.)

 

 

 

 

 

 

 

Six months ended

30 June

 

Year ended

31 December

 

 

2019

 

2018

 

2018

 

 

Unaudited

 

Audited

 

 

USD in thousands

Cash flows from investing activities:

 

 

 

 

 

 

Purchase of property and equipment

 

(111)

 

(421)

 

(553)

Proceeds from sale of assets and property

 

-

 

150

 

270

Acquisition of and additions to domains, websites, technologies and other intangible assets

 

(4,311)

 

(43,756)

 

(55,516)

Short- term and long-term investments, net

 

139

 

(4,964)

 

1,735

 

 

 

 

 

 

 

Net cash used in investing activities

 

(4,283)

 

(48,991)

 

(54,064)

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Share capital issuance, net of issuance costs

 

-

 

42,618

 

42,618

Dividend paid to equity holders of the Company

 

(8,226)

 

(8,000)

 

(14,362)

Repayment of lease liabilities                       

 

(703)

 

-

 

-

Acquisition of treasury shares

 

(9,653)

 

-

 

(468)

Dividend paid to non-controlling interests

 

(319)

 

(499)

 

(1,285)

Exercise of options

 

117

 

641

 

976

Repayment of long and short-term liability

 

(2,750)

 

(1,250)

 

(4,000)

Receipt of long-term loan from bank

 

-

 

5,965

 

5,965

 

 

 

 

 

 

 

Net cash provided from (used in) financing activities

 

(21,534)

 

39,475

 

29,444

 

 

 

 

 

 

 

Exchange differences on balances of cash and cash equivalents

 

526

 

(329)

 

(954)

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

(1,484)

 

3,560

 

6,211

Cash and cash equivalents at the beginning of the period

 

44,627

 

38,416

 

38,416

 

 

 

 

 

 

 

Cash and cash equivalents at the end of the period

 

43,143

 

41,976

 

44,627

 

 

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1:        GENERAL

XLMEDIA PLC and its subsidiaries (The Group) are online performance marketing companies.

 

The Group attracts users through online marketing techniques (such as publications and advertisements) which are then directed, by the Group, to its customers in return for a share of the revenue generated by such user, a fee generated per user acquired, fixed fees or a hybrid of any of these three models.

 

 

NOTE 2:        SUPPLEMENTARY INFORMATION

 

The Board of the Company has approved a buyback programme (the "Programme") to buy back up to USD 10 million of the Company's Ordinary shares (the "Shares").

 

The Programme ran from 18 December 2018 to the conclusion of the 2019 annual general meeting of the Company. At the 2019 annual general meeting another buyback programme was approved to buy back up to additional USD 10 million of the Company's Shares.

 

The Programmewas funded from the Company's existing cash balances and did not affect the Company's stated dividend policy of paying out at least 50 per cent of retained earnings.

During 2018 the Company acquired 492,302 Shares at a cost of USD 468 thousand.

 

In the reporting period the Company acquired 12,211,138 Shares in total amount of USD 9,653 thousand. Subsequent to the reporting period the Company acquired 845,303 Shares in total amount of USD 716 thousands.

 

On 16 July, 2019 the Company ceased the buyback programme and published a tender offer, which was accepted on 16 August 2019 and following the Company purchased 19,675,000 Shares at 80 pence per share and at a cost of USD 20,034 thousand including transaction expenses.

 

 

NOTE 3:-       DISCONTINUED OPERATIONS

a.         In February, 2019, the Company's Board of directors decided to reduce certain parts of its Media activities (comprising one CGU) which have lower profit margins. Subsequent to the reporting period, in August 2019, the Company completed the sale of Webpals Mobile Ltd ("Mobile") which is a substantial component of the CGU. Under the terms of the agreement Mobile repaid USD 1.9 million of inter-company balances to the Group on completion. The repayment amount is subject to further adjustments. The gain deriving from the sale will be in the range of USD 1-1.6 million.

 

            Prior to the classification of the CGU as a disposal group, the recoverable amount of the sold assets was calculated as fair value less expected selling costs, and based on that the Group recorded in 2018, a write down loss in the amount of USD 9,938 thousand.

  

 

NOTE 3:         DISCONTINUED OPERATIONS (Cont.)

b.     Below are the main groups of assets and liabilities classified as held for sale:

 

 

June 30,

 

 

2019

 

 

Unaudited

 

 

USD in thousands

Assets:

 

 

 

 

 

Cash and cash equivalents

 

2,870

Short-term investments

 

144

Accounts receivable

 

2,844

Other accounts receivable

 

252

Property, plant and equipment

 

77

 

 

 

Assets held for sale

 

6,187

 

 

 

Liabilities:

 

 

 

 

 

Accounts payable

 

2,337

Other liabilities and account payables

 

1,094

 

 

 

Liabilities attributed to assets held for sale

 

3,431

 

 

 

Net assets held for sale

 

2,756

 

c.         Below is data of the operating results attributed to the discontinued operation:

 

 

Six months ended

30 June

 

Year ended

31 December

 

 

2019

 

2018

 

2018

 

 

Unaudited

 

Audited

 

 

USD in thousands

 

 

 

 

 

 

 

Revenues from sales

 

8,082

 

11,905

 

24,364

Cost of sales

 

6,409

 

10,072

 

19,789

 

 

 

 

 

 

 

Gross profit

 

1,673

 

1,833

 

4,575

Selling, general and administrative expenses and research and development expenses

 

1,459

 

2,594

 

5,573

Loss from write down to fair value less selling costs of the discontinued operation

 

-

 

 

-

 

9,938

 

 

 

 

 

 

 

Operating income (loss)

 

214

 

(761)

 

(10,936)

Financial expenses, net

 

(76)

 

(33)

 

(50)

Income (Loss) before income taxes from discontinued operation

 

138

 

 

(794)

 

(10,986)

Taxes on income

 

59

 

122

 

298

 

 

 

 

 

 

 

Income (loss) from discontinued operation, net

 

79

 

(916)

 

(11,284)

 

 

 

NOTE 3:         DISCONTINUED OPERATIONS (Cont.)

d.        Below is data of the net cash flows provided by (used in) the discontinued operation:

 

 

 

Six months ended

30 June

 

Year ended

31 December

 

 

2019

 

2018

 

2018

 

 

Unaudited

 

Audited

 

 

USD in thousands

 

 

 

 

 

 

 

Operating activities

 

(166)

 

407

 

(9)

 

 

 

 

 

 

 

Investing activities

 

-

 

(1,001)

 

(1,407)

               

 

NOTE 4:        OPERATING SEGMENTS

 

The operating segments are identified on the basis of information that is reviewed by the chief operating decision maker ("CODM") to make decisions about resources to be allocated and assess its performance.

As of 30 June, 2019 the main part of the Group's Media activities were classified as discontinued activity and other Media activities were integrated to the Publishing segment activities. The Group now has one operating segment - Publishing, which consists the operation of over 2,300 owned informational websites in 18 languages. These websites refer potential customers to online businesses. The sites' content, written by professional writers, is designed to attract online traffic which the Group then directs to its customers online businesses.

 

NOTE 5:        OTHER INFORMATION

 

Revenues classified by geographical areas based on internet user location:

 

 

 

Six months ended

30 June

 

Year ended

31 December

 

 

2019

 

2018

 

2018

 

 

Unaudited

 

 

 

USD in thousands

 

 

 

 

 

 

 

Scandinavia 

 

18,594

 

20,654

 

42,362

Other European countries

 

11,604

 

13,983

 

26,804

North America

 

9,302

 

7,772

 

14,510

Asia

 

146

 

-

 

56

Oceania

 

814

 

791

 

1,668

Other countries

 

298

 

1,208

 

2,191

 

 

 

 

 

 

 

Total revenues from identified locations 

 

40,758

 

44,408

 

87,591

Revenues from unidentified locations

 

1,701

 

2,775

 

5,911

 

 

 

 

 

 

 

Total revenues

 

42,459

 

47,183

 

93,502

 

- - - - - - - - - - - - - - - -

 

1 Financial performance reflects continued operations excluding discontinued media activities following strategic decision to focus on publishing activities

2 Earnings before interest, taxes, depreciation and amortization adjusted to exclude share based payments

3 Excluding cash and short term investments attributed to the media activity that are classified under held for sale assets

4 Earnings before interest, taxes, depreciation and amortization adjusted to exclude share based payments

5 Discontinued operations resulting from the decision to reduce media activities and the disposal of Mobile subsidiary

6 The discontinued media activities


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