TIDMTMG
RNS Number : 5933N
Mission Group PLC (The)
26 September 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 Counts (TM) ,
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 %
GBP37
Revenue GBP41.8m .5 m +11%
Headline Operating Profit* GBP2.0m GBP2.2m -11%
Headline Profit Before
Tax* GBP1.0m GBP1.9m -46%
Reported Profit Before
Tax GBP0.1m GBP1.5m -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 GBP14.9m (30 June 2022: GBP7.1m, 31 December
2022: GBP11.4m), 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
G iles Lee , Chief Financial Officer
The MISSION Group plc 020 7462 1415
S imon 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 GBP41.8m (2022:
GBP37.5m) for the period.
Headline operating profit of GBP2.0m (2022: GBP2.2m), 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 r eported profit before tax of GBP1.0m
compared to 2022 (2022: GBP1.9m) 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 GBP14.9m (2022
GBP7.1m, 31 December 2022: GBP11.4m). 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 GBP92.9m (2022: GBP81.2m) while operating
income ("revenue") increased by 11% to GBP41.8m (2022:
GBP37.5m).
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 GBP2.0m (H1 2022:
GBP2.2m). Headline operating margins decreased to 4.7% (H1 2022:
5.9%).
Financing costs increased to GBP1.0m (H1 2022: GBP0.4m),
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 GBP1.0m
(H1 2022: GBP1.9m).
Adjustments to headline profits in the first half of 2023, at
GBP0.9m, were higher than the prior year comparable period (H1
2022: GBP0.3m). After these adjustments, reported profit before tax
was GBP0.1m (H1 2022: GBP1.5m).
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 GBP0.8m for the six months (H1 2022: GBP1.5m)
and reported profit after tax of GBP0.0m (H1 2022: GBP1.2m). 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 GBP0.3m on acquisitions during the period (2022
GBPnil) and a total of GBP0.4m of acquisition obligations from
prior years were settled in the first half of the year, all of
which were in cash (30 June 2022: GBP0.8m all of which were cash).
After adjustments to estimated future contingent consideration
payments the total estimated acquisition liability at 30 June 2023
totalled GBP5.1m (30 June 2022: GBP2.5m). Of this GBP1.0m is due
for payment in the second half of 2023.
Trade and other receivables increased against last year to
GBP53.7m (30 June 2022: GBP51.6m). Trade and other payables
remained stable at GBP52.2m (30 June 2022: GBP52.0m). The net
change to working capital is primarily driven by a significant
reduction in Client prepayments resulting in a reduction in
deferred income of GBP6.2m 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
GBP14.9m has increased against the positions on both 30 June 2022
(GBP7.1m) and 31 December 2022 (GBP11.4m). As a result, total debt
(being net bank debt plus acquisition obligations) closed at
GBP20.0m (30 June 2022: GBP9.6m) 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 (GBP7.8m).
Condensed Consolidated Income Statement for the six months ended
30 June 2023
Six months Six months Year ended
to to
30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
Note GBP'000 GBP'000 GBP'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 Six months Year ended
to to
30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'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 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
Note GBP'000 GBP'000 GBP'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 Six months Year ended
to to
30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'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
Total
Share-based Foreign attributable
incentive currency to equity Non-controlling
Share Share Own reserve translation Retained holders interest Total
capital premium shares GBP'000 reserve earnings of parent GBP'000 equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
GBP5.0m and the temporary increase in the overdraft limit to
GBP6.0m 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 Consumer Health Property Sports Technology MISSION Investments Total
& & & & & Mobility Advantage
Corporate Lifestyle Wellness Entertainment & Central
Six months GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
to 30 June
2023
---------- ---------- --------- --------- -------------- ----------- ---------- ------------ ---------
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 Consumer Health Property Sports Technology MISSION Investments Total
& & & & & Mobility Advantage
Corporate Lifestyle Wellness Entertainment & Central
Six months GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
to 30 June
2022
---------- ---------- --------- --------- -------------- ----------- ---------- ------------ ---------
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 Consumer Health Property Sports Technology MISSION Investments Total
& & & & & Mobility Advantage
Corporate Lifestyle Wellness Entertainment & Central
Year to GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
31 December
2023
---------- ---------- --------- --------- -------------- ----------- ---------- ------------ ----------
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 Six months Year ended
to to
30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'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 Six months Year ended
to to 31 December
30 June 30 June 2022
2023 2022 Audited
Unaudited Unaudited
PBT PAT PBT PAT PBT PAT
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 Six months Year ended
to to 31 December
30 June 30 June 2022
2023 2022 Audited
Unaudited Unaudited
GBP'000 GBP'000 GBP'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 Six months
to to Year ended
30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'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 Six months Year to
to to
30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'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 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'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 Six months Year ended
to 30 June to 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'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
GBP2.0m of goodwill relating to this CGU.
Other Intangible Assets
Six months to Six months
to Year ended
30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Cost
At 1 January 11,575 11,940 11,940
Additions 522 469 2,616
Transfers to PPE - - (103)
Disposals - - (3)
Impairment - - (2,875)
At 30 June / 31 December 12,097 12,409 11,575
---------- ------------- --------------
Amortisation and impairment
At 1 January 8,047 7,570 7,570
Charge for the period 469 612 856
Transfers to PPE - - (100)
Disposals - - (2)
Impairment - - (277)
At 30 June / 31 December 8,516 8,182 8,047
---------- ------------- --------------
Net book value 3,581 4,227 3,528
---------- ------------- --------------
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 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'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 GBP20.0m, with an option to increase
the facility by GBP5.0m. 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 GBP6.0m with interest payable by
reference to National Westminster Bank plc Base Rate plus 2.25%.
This overdraft limit of GBP6.0m is a temporary increase until 31
December 2023, after which the limit will return to GBP3.0m.
Included in the above is GBP60,000 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 Shares Total
GBP'000 GBP'000 GBP'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 Shares Total
GBP'000 GBP'000 GBP'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 GBP1,678,000,
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 GBP81,000 and were
expensed.
Maximum contingent consideration of GBP4,000,000 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 GBP1,281,000 to date.
The fair value of the net identifiable liabilities acquired was
GBP584,000 resulting in goodwill and previously unrecognised other
intangible assets of GBP2,262,000. 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 Fair value Fair
value adjustments value
----------------------------------- -------- ------------- ---------
GBP'000 GBP'000 GBP'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 GBP860,000, operating income of
GBP822,000 and headline operating profit of GBP59,000 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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END
IR DZGZLRKNGFZM
(END) Dow Jones Newswires
September 26, 2023 02:00 ET (06:00 GMT)
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