Earnings Release • Jul 16, 2014
Earnings Release
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Ebiquity PLC
16 July 2014
Ebiquity plc
Final Results for the year ended 30 April 2014
Ebiquity plc, a leading international provider of independent, data-driven media and marketing insights, announces final results for the year ended 30 April 2014. Ebiquity provides services to over 1,100 clients across 40 countries, including over 90%¹ of the top 100 global advertisers.
Continued growth boosted by strong performance from key business segments
· 8th successive year of growth delivering £69.0m revenue at constant currency and £68.5m on a reported basis (2013: £64.0m)
· Underlying2operating profit growth of 10% to £11.5m at constant currencyand £11.3m on a reported basis (2013: £10.4m)
· Underlying2 diluted EPS of 10.1p, up 12% (2013: 9.00p)
· Future-focused segments of business delivering strong organic growth
· Underlying2 PBT growth of 8% to £10.3m at constant currency and £10.2m on a reported basis (2013: £9.5m), with reported PBT of £3.4m (2013: £6.6m)
New company structure positions company to benefit from continually evolving global marketing industry
· Business restructured into three focussed business segments:
o Media Value Measurement (MVM)
o Market Intelligence (MI)
o Marketing Performance Optimization (MPO)
· Key appointments made across business to support international growth
· Acquired the leading independent media auditing and benchmarking company in China
· Broadened shareholder base following placing of VSS and founder directors' shares
· Increasing complexity of advertising industry driving worldwide demand for independent marketing and media performance measurement and optimization
Strategy remains unchanged: to become the leading and most respected provider of data-driven actionable insights to the global marketing community
Michael Greenlees, CEO, commented:
"This has been a year of considerable change and momentum as we continue our journey to becoming a global leader in data analytics.
"We have restructured our business so it is best placed to take advantage of the ever changing marketing industry and we have put the necessary building blocks in place to accelerate our international business, especially in the US and Asia. We begin the new year with a high level of visibility on revenue potential which gives us confidence about the year ahead."
16 July 2014
Enquiries:
| Ebiquity | 020 7650 9600 |
| Michael Greenlees, CEO | |
| Andrew Beach, CFOO | |
| Instinctif Partners | 020 7457 2020 |
| Matthew Smallwood | |
| Jamie Ramsay | |
| Numis Securities | 020 7260 1000 |
| Nick Westlake (NOMAD) | |
| David Poutney, James Serjeant (Corporate Broker) |
¹Source: Advertising Age 2013
2Underlying results are stated before highlighted items (see note 3)
Chairman's Statement
This has been Ebiquity's eighth successive year of growth across all significant metrics. We have delivered strong organic growth in both our Media Value Measurement ("MVM") and Marketing Performance Optimization ("MPO") segments helped by a growing awareness of the importance of data analytics amongst the media and marketing community who we serve. Whilst the last year has not been without its challenges in the Market Intelligence ("MI") segment, we are encouraged by the high level of revenue visibility for the year ahead across the Group.
In the year ended 30 April 2014, I am pleased to announce that we delivered total revenue growth of 8%, operating profit before highlighted items up 10%, improved margins, and our underlying diluted EPS has increased by 12% (all on a constant currency basis).
This has been a year of strategic importance for Ebiquity during which we have concluded an extensive strategic review of the business, extended our geographic footprint, most notably into China, restructured our business into three clearly defined segments and strengthened our MPO offering with the key acquisition of Stratigent in the US.
In Februaryand March, following the completion of our strategic review, a successful placing was undertaken of the entire shareholdings ofVeronis Suhler Stevenson ("VSS"), the founding Directors - Sarah Jane and Stephen Thomson - and the Group's Chief Operations Officer, Paul Adams representing over 45% of the Company's total share capital. Following the placings, the three founding Directors and the two VSS representatives retired from the Board.
I would like to take this opportunity to thank our retiring Directors for their help and insight; their contribution has been invaluable and we wish them well in the future. We are already taking steps to strengthen our Board with the addition of at least one new independent Non-Executive Director and I look forward to making an announcement regarding this shortly.
Ebiquity has evolved greatly over the last year, both as a company and as a business. From an ownership viewpoint we now benefit from a new diverse institutional shareholder base. From a business perspective our capabilities and geographic reach have been extended and our role as a leading international independent data analytics partner to our clients is increasingly recognised and valued.
Finally I would like to recognise the commitment and skills of our employees. They are the Group's most valuable asset and the Board extends its thanks to them for their continuedcommitment and enthusiasm.
We have a clear strategy, a motivated team and with the new financial year starting with a high level of revenue visibility, we look forward to the future with confidence.
Michael Higgins
Chairman
15 July 2014
Chief Executive's and Financial Review
Background
2013/14 represented yet another year in our journey from being a predominantly UK based advertising monitoring company to becoming a global leader in data analytics for the media and marketing community.
We have come a long way from our early years, with over fifteen offices worldwide, an extensive partner network and over 800 employees. We proudly work with over 1,100 clients across our Group including over 90 of the top 100 advertisers worldwide.
We have been able to deliver growth in a rapidly changing and dynamic market:
· The advertising and marketing industry is becoming increasingly consolidated and globalised
· Advertisers are under increased pressure to demonstrate marketing spend ROI
· Marketing and media channels continue to proliferate
· Digital channels offer the promise of greater customer engagement
· Consumer data available to brands is turning marketing into a science
· Multi-channel marketing is driving the need for data-driven measurement and advice
This increasing complexity is driving a worldwide demand for independent marketing and media performance measurement and optimization. Importantly, our clients are increasingly seeking advice that is independent of the transaction market, dominated as it is by the big media buying groups, in order to validate their choices.
Our Business Model
During the year we revised the way in which we report our results. We now report across three segments:
• MVM - Media Value Measurement (which includes our media benchmarking, financial compliance and associated services)
• MI - Market Intelligence (which includes our advertising monitoring, reputation management and research/insight services)
• MPO - Marketing Performance Optimization (consisting of our marketing effectiveness services and the recently acquired Stratigent business)
Across these three segments Ebiquity has over 1,100 clients ranging in contract size from tens of thousands to several millions of pounds. We work both locally and globally across a network of offices in Europe, Asia Pacific and the Americas.
Our business model is to leverage our media technology, data sources and marketing knowledge to build long term client relationships with our key clients and to provide them with a growing range of services across our three segments.
We do this by ensuring that we are the trusted independent adviser on data and technology solutions in the media and marketing sector, and thus achieve:
· High recurring revenues
· Growing scope of services both by product and geography
· Scalable, technology-enabled services
· Strong margins
Our Strategy
Ebiquity's objective is to become the leading and most respected independent provider of data-driven actionable insights to the global marketing community, and in so doing to help our clients:
· Achieve greater insights into the marketing landscape
· Make better informed decisions
· Achieve the best return on their media and marketing investments
· Continuously improve their business performance
· Monitor competitors' advertising strategy and investments
· Understand the value of their business and brand reputation
We achieve this as follows:
BUILD- data, analytics and software capabilities that will enable us to provide our clients with the insights that they need to achieve their objectives and improve their performance whilst at the same time creating tools that will become part of our clients' work flow and thus encourage recurring revenue streams.
GROW - our international footprint to ensure that we can serve the needs of our global clients in geographies that are important to them and in the process to provide a seamless global service.
INCREASE - our brand profile and reputation to help achieve a worldwide competitive advantage.
DEVELOP - the skills and talent of our people to enable them to help drive our business by providing our clients with significant added value.
Summary of results
We have once again delivered a strong set of results:
· Revenue growth of 7%
· Underlying operating profit growth of 9%
· Margin improvement at gross profit, EBITDA and operating profit levels
· Underlying diluted EPS growth of 12%
· MVM organic revenue growth of 8%, led to operating profit up 30%
· MPO organic revenue growth of 32% and combined with Stratigent acquisition led to operating profit almost doubling
The table below sets out our results on a constant currency basis:
| 2014 (constant currency) £'000s |
2014 (as reported) £'000 |
2013 (as reported) £'000 |
|
| Revenue | 68,980 | 68,452 | 64,046 |
| Underlying operating profit | 11,456 | 11,339 | 10,441 |
| Underlying operating profit margin % | 16.6% | 16.6% | 16.3% |
At constant currency rates (using the same foreign exchange rates as were applicable in the year to 30 April 2013), revenue has grown by 8%, operating profit by 10% and margin has increased.
We enjoyed particularly strong growth in both MVM and MPO - which together account for 60% of our Group - with organic growth rates of 8% and 32% respectively. Overall growth for the year was held back as a result of revenue erosion in the Market Intelligence segment where advertisers' needs are changing and we are in the process of adapting to these needs.
All results are reported before taking into account highlighted items, unless otherwise stated. These highlighted items include share based payment expenses, amortisation of purchased intangible assets, acquisition costs, restructuring and other non-recurring items.
MVM - Media Value Measurement(53% of total revenue)
| 2014 £'000 |
2013 £'000 |
|
| Revenue | 36,477 | 32,364 |
| Operating profit | 10,289 | 8,003 |
| Operating profit margin % | 28.2% | 24.7% |
We continue to see a strong performance from our MVM business with revenue up 9% on a like-for-like basis. On an organic basis, the segment has seen growth of 8% with strong performances in particular from our European offices. In addition, the prior year acquisition of Firm Decisions and the current year acquisition of CMCG have both helped drive the segment performance.
A 30% improvement in operating profit has resulted from a 9% increase in revenue on a well-controlled organic cost base and a strong margin from the Firm Decisions and CMCG acquisitions and demonstrates the strong operational leverage.
Recent research conducted by the World Federation of Advertisers (WFA) clearly indicates that brand owners are increasingly concerned with the growing complexity of the media buying market.
The growing strength of the media buying groups, increasing lack of transparency in the transaction chain and the development of real time buying have all contributed to a growing trend for advertisers to seek independent advice and verification of both the value and efficacy of their media buying programs.
WFA's research showed that there has been a significant increase in the proportion of its members permanently using a media benchmarking company (+19 percentage points versus 2011). The same research shows that Ebiquity's share of this market in Europe has grown by over 30 percentage points since 2011 with the majority (59%) believing that independent companies like Ebiquity will play an increasingly important role in helping advertisers assess programmatic media buying and digital media effectiveness.
MI - Market Intelligence (40% of total revenue)
| 2014 £'000 |
2013 £'000 |
|
| Revenue | 27,162 | 29,639 |
| Operating profit | 4,801 | 5,936 |
| Operating profit margin % | 17.7% | 20.0% |
Our Portfolio products, which make up the majority of our MI segment, have under-performed this year. Advertising monitoring remains a highly competitive market, and advertisers' needs are changing. As a result we have seen price pressure on new contract opportunities during the year which has challenged top line growth and held back our overall margin performance. Retention of existing clients continues to be strong - despite being lower than the record high recorded in the prior year - with a renewal rate (by value) of 87% (2013: 93%).
MI accounts for 40% of our total business and our performance in this segment in 2013/14 has masked what has otherwise been a strong year, with strong growth in both MVM and MPO. We are already taking action to ensure that we remain competitive in our MI segment and anticipate a return to growth.
For the year reported, revenue from our MI business was down 7% on a like-for-like basis. This revenue decline has, however, been partially offset by a 6% reduction in our cost base following a successful efficiency improvement programme.
MPO - Marketing Performance Optimization (7% of total revenue)
| 2014 £'000 |
2013 £'000 |
|
| Revenue | 4,813 | 2,043 |
| Operating profit | 1,523 | 774 |
| Operating profit margin % | 31.6% | 37.9% |
The growth of online channels, coupled with the abundance of available data which can track the minutiae of customer behaviour and media habits at an individual person level, has transformed the discipline of marketing into a sophisticated science based on data analytics. Targeting and personalisation are now complementing the broadcast model to improve advertisers' effectiveness and efficiency.
Brand owners increasingly recognise the need to apply this discipline to better optimise their channel choices in order to build more effective communications programs, while minimising wastage and costs.
This is the main driver of our segment success and is a trend that is likely to grow in importance in the future. It is also the thinking behind our recent acquisition of US-based Stratigent, which combined with our existing skills in modelling, should enable us to develop a new source of revenue and is a natural extension of Ebiquity's services. In the coming year we will look at plans to extend Stratigent's capabilities into Europe.
It is against this backdrop that we continue to see a strong performance from our MPO business with revenue up 32% on a like-for-like basis. Both our organic business and that of the acquired Stratigent business have grown at similar levels.
We have invested in our MPO segment to allow acceleration in revenue growth and whilst this - together with a lower margin from the acquired Stratigent business - has resulted in a reduction in margin as anticipated, the organic operating profit has grown by 15% and total operating profit has nearly doubled.
Central costs
| 2014 £'000 |
2013 £'000 |
|
| Central costs | 5,274 | 4,272 |
Central costs include central salaries (Board, Finance, IT and HR), legal and advisory costs and property costs. Central costs have increased by £1.0m largely due to an increased investment in centrally managed IT developers (representing approximately £0.3m of the increase) to enhance our Market Intelligence offerings, increased investment in Central support functions to support the larger group (£0.3m) and increases in the allocation of UK property costs to Central (£0.2m).
Margins
The underlying operating profit margin has improved from 16.3% to 16.6% largely due to the revenue growth and a well-managed cost base. The underlying EBITDA and gross margins have also improved, increasing from 18.3% to 18.6% and from 54.2% to 56.2% respectively.
Result before tax
| 2014 £'000 |
2013 £'000 |
|
| Underlying operating profit | 11,339 | 10,441 |
| Highlighted items | (6,727) | (2,936) |
| Reported operating profit | 4,612 | 7,505 |
| Net finance costs | (1,191) | (975) |
| Share of profit of associates | 19 | 26 |
| Reported profit before tax | 3,440 | 6,556 |
| Underlying profit before tax | 10,167 | 9,492 |
Highlighted items total £6.7m, which includes £1.9m of purchased intangible asset amortization, £1.5m adjustments to fair value of deferred consideration as a result of strong performance from our recent acquisitions and £1.1m in relation to significant office moves. Other items included within highlighted items are share options charges, professional fees in relation to acquisitions and the costs of a significant strategic review.
Net finance costs were £1.2m (2013: £1.0m) and the year on year increase reflects the higher level of debt following the acquisitions made during the current and previous financial years.
Reported profit before tax is down to £3.4m (2013: £6.6m) as a direct result of the increased level of highlighted items relating to acquisitions and integrations. Underlying profit before tax was up 7% to £10.2m (2013: £9.5m).
Taxation
Tax for the year is £nil (2013: charge of £1.4m) representing a current tax charge of £0.9m (2013: £2.0m) at an effective tax rate of 26% (2013: 31%) and a deferred tax credit of £0.9m (£0.6m).
Acquisitions in the year
On 19 August 2013, we acquired 100% of Stratigent, LLC ("Stratigent") for total expected consideration of £5.1m (sterling equivalent) consisting of upfront consideration of £2.7m and estimated earn out payments of £2.4m. Total consideration is capped at approximately £5.6m ($8.8m). Stratigent operates from offices in Chicago and employs 22 people.
On 15 January 2014, we acquired 100% of China Media Consulting Group Limited ("CMCG") for total expected consideration of £6.2m (sterling equivalent) consisting of upfront consideration of £1.6m and estimated earn out payments of £4.7m. Total consideration is capped at approximately £6.6m (HK$85m). CMCG operates from offices in Shanghai and Beijing and employs 21 people.
The results of Stratigent have been consolidated into our MPO segment from the date of acquisition. The results of CMCG have been consolidated into our MVM segment from the date of acquisition.
Equity
At the time of the acquisition of Xtreme in April 2010, convertible loan notes were issued that were convertible into 13,802,861 ordinary shares. During the year, the entirety of the loan notes were converted into ordinary shares. Since their issue - and until conversion - they were included within equity as they demonstrated the characteristics of ordinary share capital, and for the same reason they were also included within the number of shares for the purposes of both the basic and diluted earnings per share calculations.
In addition, 1,226,421 shares were issued upon the exercise of employee share options and 102,981 new shares were issued to acquire an increased share of a subsidiary from a minority holder.
These events resulted in an increase in our share capital to 75,491,111 ordinary shares (30 April 2013: 60,358,849).
Earnings per share
Underlying diluted earnings per share was 10.11p (2013: 9.00p). This is an increase of 12% over the prior year, reflecting the positive impact of the improved profitability of the majority of the segments and the recent acquisitions along with the utilisation of brought forward tax losses, offset by an increase in central costs.
The Group reports diluted earnings per share of 3.4p (2013: 6.7p), reduced from the prior year due to the increase in highlighted items, despite the improved underlying profitability.
Net debt and banking facilities
| 2014 £'000 |
2013 £'000 |
|
| Cash | 6,521 | 7,109 |
| Bank debt1 | (29,321) | (22,636) |
| Net debt | (22,800) | (15,527) |
1Bank debt on the Balance Sheet at 30 April 2014 is shown net of £0.1m (2013: £0.2m) of loan arrangement fees that have been paid and which are amortised over the life of the facility. The bank debt stated above excludes these costs.
During the year, the term loan facility was increased by £6.0m, all of which was drawn by the end of the year in relation to the acquisition of Stratigent and CMCG.
At 30 April 2014, our total drawn facilities comprised £15.0m of term loan and £14.0m of revolving credit facility ("RCF"). Both the term loan and the RCF had a maturity date of 9 March 2016. £3.9m of the term loan was being repaid on a quarterly basis to maturity, and the balance of the term loan and any drawings under the RCF were repayable on maturity of the facility.
On 2 July 2014, we refinanced our banking facilities with Barclays and Royal Bank of Scotland ("RBS") and on 7 July 2014 we drew down on these new facilities. The new committed facility, totalling £40.0m, comprises a term loan of £10.0m (of which all was drawn on refinance) and an RCF of £30.0m (of which £20.8m was drawn on refinance). Both the term loan and the RCF have a maturity date of 2 July 2018. The £10.0m term loan is being repaid on a quarterly basis to maturity, and the drawn RCF and any further drawings under the RCF are repayable on maturity of the facility. The facility may be used for deferred consideration payments on past acquisitions, to fund future potential acquisitions, and for general working capital requirements.
During the year the Group continued to trade within all of its banking facilities and associated covenants.
Statement of financial position and net assets
Net current assets as at 30 April 2014 increased by 42% to £4.2m and total net assets increased by 6% compared to 30 April 2013 primarily as a result of the improved performance of the Group including the impact of the recent acquisitions. Goodwill has increased by £7.3m from 30 April 2013, largely reflecting the Stratigent and CMCG acquisitions.
Deferred contingent consideration has increased by a net £3.0m since 30 April 2013, due to the acquisition of Stratigent and CMCG, and performance beyond expectations from other recent acquisitions. During the year, earn out payments totaling £5.4m were made. Remaining deferred consideration is currently estimated to be £8.7m which relates to our three most recent acquisitions, £4.6m of which is forecast to be settled in the next 12 months.
Outlook
The final months of 2013/14 were extremely active with a significant volume of new business which is only now reaching closure. We therefore begin 2014/15 with a high level of visibility on our revenue potential for the year. This, together with the fact that our acquisitions continue to perform well, gives us confidence about the year ahead.
By order of the Board
| Michael Greenlees | Andrew Beach |
| Chief Executive Officer | Chief Financial and Operating Officer |
| 15 July 2014 |
Consolidated Income Statement
for the year ended 30 April 2014
| Year ended 30 April 2014 | Year ended 30 April 2013 | ||||||
| Before | Highlighted | Before | Highlighted | ||||
| highlighted | items | highlighted | items | ||||
| items | (note 3) | Total | items | (note 3) | Total | ||
| Note | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Revenue | 68,452 | - | 68,452 | 64,046 | - | 64,046 | |
| Cost of sales | (30,008) | - | (30,008) | (29,359) | - | (29,359) | |
| Gross profit | 38,444 | - | 38,444 | 34,687 | - | 34,687 | |
| Administrative expenses | (27,105) | (6,727) | (33,832) | (24,246) | (2,936) | (27,182) | |
| Operating profit | 11,339 | (6,727) | 4,612 | 10,441 | (2,936) | 7,505 | |
| Finance income | 15 | - | 15 | 13 | - | 13 | |
| Finance expenses | (1,206) | - | (1,206) | (988) | - | (988) | |
| Net finance costs | (1,191) | - | (1,191) | (975) | - | (975) | |
| Share of profit of associates | 19 | - | 19 | 26 | - | 26 | |
| Profit before taxation | 10,167 | (6,727) | 3,440 | 9,492 | (2,936) | 6,556 | |
| Taxation credit/(charge) | 4 | (2,041) | 2,046 | 5 | (2,396) | 1,003 | (1,393) |
| Profit for the year | 8,126 | (4,681) | 3,445 | 7,096 | (1,933) | 5,163 | |
| Attributable to: | |||||||
| Equity holders of the parent | 7,661 | (4,637) | 3,024 | 6,760 | (1,716) | 5,044 | |
| Non-controlling interests | 465 | (44) | 421 | 336 | (217) | 119 | |
| 8,126 | (4,681) | 3,445 | 7,096 | (1,933) | 5,163 | ||
| Earnings per share | |||||||
| Basic | 5 | 4.06p | 6.95p | ||||
| Diluted | 5 | 3.99p | 6.71p | ||||
| Underlying basic1 | 5 | 10.29p | 9.32p | ||||
| Underlying diluted1 | 5 | 10.11p | 9.00p | ||||
| 1 Underlying basic and diluted earnings per share are calculated based on profit for the year adjusted for highlighted items and the tax impact of these highlighted items (Note 3). |
Consolidated Statement of Comprehensive Income
for the year ended 30 April 2014
| Year ended 30 April 2014 |
Year ended 30 April 2013 |
||
| £'000 | £'000 | ||
| Profit for the year | 3,445 | 5,163 | |
| Other comprehensive income: | |||
| Items that will not be reclassified subsequently to profit or loss | |||
| Exchange differences on translation of overseas subsidiaries | (1,929) | 302 | |
| Movement in valuation of hedging instruments | 93 | (105) | |
| Total comprehensive income for the year | 1,609 | 5,360 | |
| Attributable to: | |||
| Equity holders of the parent | 1,146 | 5,364 | |
| Non-controlling interests | 463 | (4) | |
| 1,609 | 5,360 |
| Consolidated Statement of Financial Position as at 30 April 2014 |
|||
| Company number: 03967525 | 30 April 2014 |
30 April 2013 |
|
| Note | £'000 | £'000 | |
| Non-current assets | |||
| Goodwill | 6 | 55,121 | 47,864 |
| Other intangible assets | 7 | 14,426 | 13,159 |
| Property, plant and equipment | 3,162 | 2,544 | |
| Investment in associates | 87 | 68 | |
| Deferred tax asset | 1,377 | 1,217 | |
| Total non-current assets | 74,173 | 64,852 | |
| Current assets | |||
| Trade and other receivables | 26,865 | 22,395 | |
| Cash and cash equivalents | 6,521 | 7,109 | |
| Total current assets | 33,386 | 29,504 | |
| Total assets | 107,559 | 94,356 | |
| Current liabilities | |||
| Trade and other payables | (8,370) | (7,231) | |
| Accruals and deferred income | (10,838) | (10,871) | |
| Financial liabilities | 8 | (7,747) | (5,948) |
| Current tax liabilities | (1,764) | (2,003) | |
| Provisions | (465) | (498) | |
| Total current liabilities | (29,184) | (26,551) | |
| Non-current liabilities | |||
| Financial liabilities | 8 | (30,360) | (22,554) |
| Provisions | (610) | (227) | |
| Deferred tax liability | (2,888) | (2,908) | |
| Total non-current liabilities | (33,858) | (25,689) | |
| Total liabilities | (63,042) | (52,240) | |
| Total net assets | 44,517 | 42,116 | |
| Equity | |||
| Ordinary shares | 18,873 | 15,090 | |
| Share premium | 10,750 | 4,588 | |
| Convertible loan note reserve | - | 9,445 | |
| Other reserves | 367 | 2,136 | |
| Retained earnings | 13,810 | 10,496 | |
| Equity attributable to the owners of the parent | 43,800 | 41,755 | |
| Non-controlling interests | 717 | 361 | |
| Total equity | 44,517 | 42,116 |
Consolidated Statement of Changes in Equity
For the year ended 30 April 2014
| Ordinary shares | Share premium | Convertible loan note reserve | Other reserves | Retained earnings | Total | Non-controlling interests | Total equity | ||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
| 1 May 2012 | 14,729 | 4,233 | 9,445 | 1,816 | 5,132 | 35,355 | 407 | 35,762 | |
| Profit/(loss) for the year | - | - | - | - | 5,044 | 5,044 | 119 | 5,163 | |
| Other comprehensive income/(loss) | - | - | - | 320 | - | 320 | (123) | 197 | |
| Total comprehensive income/(loss) for the year | - | - | - | 320 | 5,044 | 5,364 | (4) | 5,360 | |
| Shares issued for cash | 274 | 107 | - | - | - | 381 | - | 381 | |
| Acquisition of subsidiaries | 87 | 248 | - | - | - | 335 | 23 | 358 | |
| Share options charge | - | - | - | - | 267 | 267 | - | 267 | |
| Deferred tax on share options | - | - | - | - | 53 | 53 | - | 53 | |
| Dividends paid to non-controlling interests | - | - | - | - | - | - | (65) | (65) | |
| 30 April 2013 | 15,090 | 4,588 | 9,445 | 2,136 | 10,496 | 41,755 | 361 | 42,116 | |
| Profit for the year | 3,024 | 3,024 | 421 | 3,445 | |||||
| Other comprehensive (loss)/income | - | - | - | (1,878) | - | (1,878) | 42 | (1,836) | |
| Total comprehensive (loss)/income for the year | - | - | - | (1,878) | 3,024 | 1,146 | 463 | 1,609 | |
| Shares issued for cash | 307 | 67 | - | 109 | (93) | 390 | - | 390 | |
| Acquisition of non-controlling interest | 25 | 101 | - | - | (157) | (31) | (47) | (78) | |
| Conversion of loan note | 3,451 | 5,994 | (9,445) | - | - | - | - | - | |
| Share options charge | - | - | - | - | 337 | 337 | - | 337 | |
| Deferred tax on share options | - | - | - | - | 203 | 203 | - | 203 | |
| Dividends paid to non-controlling interests | - | - | - | - | - | - | (60) | (60) | |
| 30 April 2014 | 18,873 | 10,750 | - | 367 | 13,810 | 43,800 | 717 | 44,517 |
| Consolidated Cash Flow Statement for the year ended 30 April 2014 |
|||
| Year ended | Year ended | ||
| Note | 30 April 2014 | 30 April 2013 | |
| £'000 | £'000 | ||
| Cash flows from operating activities | |||
| Cash generated from operations | 9 | 6,799 | 7,526 |
| Finance expenses paid | (856) | (714) | |
| Finance income received | 15 | 13 | |
| Income taxes paid | (1,159) | (1,582) | |
| Net cash from operating activities | 4,799 | 5,243 | |
| Cash flows from investing activities | |||
| Acquisition of subsidiaries, net of cash acquired | (9,230) | (7,264) | |
| Disposal of investments | - | 62 | |
| Purchase of property, plant and equipment | (1,756) | (892) | |
| Purchase of intangible assets | 7 | (796) | (414) |
| Net cash used in investing activities | (11,782) | (8,508) | |
| Cash flows from financing activities | |||
| Proceeds from issue of share capital (net of issue costs) | 326 | 381 | |
| Proceeds from bank borrowings | 10,766 | 6,456 | |
| Repayment of bank borrowings | (3,937) | (2,309) | |
| Acquisition of interest in a subsidiary from non-controlling interests | (78) | - | |
| Dividends paid to non-controlling interests | (60) | (65) | |
| Capital repayment of finance leases | (202) | (157) | |
| Net cash flow from financing activities | 6,815 | 4,306 | |
| Net (decrease)/increase in cash, cash equivalents and bank overdrafts | (168) | 1,041 | |
| Cash, cash equivalents and bank overdraft at beginning of year | |||
| 7,109 | 6,190 | ||
| Effect of unrealised foreign exchange losses | (420) | (122) | |
| Cash, cash equivalents and bank overdraft at | |||
| end of year | 6,521 | 7,109 |
Notes to the Consolidated Financial Statements
For the year ended 30 April 2014
1. Accounting policies
General information
Ebiquity Plc ('the Company') and its subsidiaries (together, 'the Group') provide independent data-driven insights to the global media and marketing community. The Group has 18 offices across 11 countries. During the year, the Group acquired Stratigent, a multi-channel analytics business based in Chicago; and China Media Consulting Group (CMCG), a media auditing business with offices in Shanghai and Beijing.
The company is a public limited company, which is listed on the London Stock Exchange's AIM Market and is incorporated and domiciled in the UK.
Basis of preparation
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRSs) issued by the International Accounting Standards Board (IASB) as adopted by European Union (Adopted IFRSs) and with those parts of the Companies Act 2006 applicable to companies preparing their financial statements under Adopted IFRSs.
The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.
Going concern
The directors, after making appropriate enquiries, have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its consolidated financial statements.
The Group holds bank borrowings which are subject to quarterly covenant tests. The directors have a reasonable expectation that the covenants will be met for the foreseeable future. Further information on the Group's borrowings is given in Note 8.
Significant accounting policies
The principal accounting policies adopted in these consolidated financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.
Changes in accounting policies
There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning on or after 1 May 2013 that have had a material impact on the group.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. The results of each subsidiary are included from the date that control is transferred to the Group until the date that control ceases.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Non-controlling interests represent the portion of the results and net assets in subsidiaries that is not held by the Group.
Business combinations
Acquisition method of accounting
The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities assumed, and equity instruments issued by the Group in exchange for control of the acquiree. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value at the acquisition date. All costs directly attributable to the business combination are recorded as incurred in the Income Statement within highlighted items.
Where the consideration for the acquisition includes a contingent deferred consideration arrangement, this is measured at fair value at the acquisition date. Any subsequent changes to the fair value of the contingent deferred consideration are adjusted against the cost of the acquisition if they occur within the measurement period. Any subsequent changes to the fair value of the contingent deferred consideration after the measurement period are recognised in the Income Statement within administrative expenses as a highlighted item. The carrying value of contingent deferred consideration at the Balance Sheet date represents management's best estimate of the future payment at that date, based on historical results and future forecasts.
The interest of non-controlling shareholders in the acquiree is initially measured at the non-controlling interest's proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.
Investments in associates
An associate is an entity over which the Group is in a position to exercise significant influence, but not control or joint control, through participation in the financial and operating policy decisions of the investee generally accompanying a shareholding of between 25% and 50% of the voting rights. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.
The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting. Investments in associates are carried in the statement of financial position at cost as adjusted by post-acquisition changes in the Group's share of the net assets of the associate, less any impairment in the value of individual investments. Losses of an associate in excess of the Group's interest in that associate (which includes any long-term interests that, in substance, form part of the Group's net investment in the associate) are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.
Any excess of the cost of acquisition over the Group's share of the fair values of the identifiable net assets of the associate at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment annually.
Where a group company transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group's interest in the relevant associate. Losses may provide evidence of an impairment of the asset transferred in which case appropriate provision is made for impairment.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group's interest in the fair value of the identifiable assets and liabilities of a subsidiary. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment at least annually. Any impairment is recognised immediately in the Income Statement and is not subsequently reversed.
For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided in the normal course of business, net of discounts, VAT and other sales related taxes. Income is recognised evenly over the period of the contract for our Market Intelligence businesses, and in accordance with the stage of completion of the contract activity for our Media Value Measurement and Marketing Performance Optimization businesses. The stage of completion is determined relative to the total number of hours expected to complete the work or provision of services. Where recorded revenue exceeds amounts invoiced to clients, the excess is classified as accrued income and where recorded revenue is less than amounts invoiced to clients, the difference is classified as deferred income.
Where services are performed by an indeterminate number of acts over a specific period, revenue is recognised on a straight-line basis over the specific period unless there is evidence that some other method better represents the stage of completion.
If the outcome of a contract cannot be estimated reliably, the contract revenue is recognised to the extent of contract costs incurred that it is probable would be recoverable. Costs are recognised as an expense in the period in which they are incurred.
Finance income and expenses
Finance income and expense represents interest receivable and payable. Finance income and expense is recognised on an accruals basis, based on the interest rate applicable to each bank or loan account.
Foreign currencies
For the purposes of the consolidated financial statements, the results and financial position of each Group company are expressed in pounds sterling, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of transactions. At each year end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the year end date.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing on the year end date. Income and expense items are translated at the average exchange rate for the period, which approximates to the rate applicable at the dates of the transactions.
The exchange differences arising from the retranslation of the year end amounts of foreign subsidiaries and the difference on translation of the results of those subsidiaries into the presentational currency of the Group are recognised in the translation reserve. All other exchange differences are dealt with through the Income Statement.
Highlighted items
Highlighted items comprise significant non-cash charges and non-recurring items which are highlighted in the Income Statement as separate disclosure is considered by the directors to be relevant in understanding the underlying performance of the business. The non-cash charges include share option charges and amortisation of purchased intangibles.
The non-recurring items include the costs associated with acquisitions and their subsequent integration into the Group, adjustments to the estimates of deferred consideration on acquired entities, asset impairment charges and other significant one off items.
Taxation
The tax expense included in the Income Statement comprises current and deferred tax. Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted by the year end date.
The Group is subject to corporate taxes in a number of different jurisdictions and judgement is required in determining the appropriate provision for transactions where the ultimate tax determination is uncertain. In such circumstances, the Group recognises liabilities for anticipated taxes based on the best information available and where the anticipated liability is both probable and estimable. Where the final outcome of such matters differs from the amount recorded, any differences may impact the income tax and deferred tax provisions in the period in which the final determination is made.
Tax is recognised in the Consolidated Income Statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Using the liability method, deferred tax is provided on all temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases, except for differences arising on:
· the initial recognition of goodwill;
· the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and
· investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised. The recognition of deferred tax assets is reviewed at each year end date.
The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the year end date and are expected to apply when the deferred tax liabilities/assets are settled/recovered.
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:
· the same taxable group company; or
· different group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.
Depreciation is charged so as to write off the cost or valuation of assets over their estimated useful lives and is recognised in the Income Statement within administrative expenses. The rates generally applicable are:
| Motor vehicles | 25% per annum reducing balance |
| Fixtures, fittings and equipment | 7% to 20% per annum straight line; or 25% per annum reducing balance |
| Computer equipment | 25% to 40% straight line |
| Short leasehold land and buildings improvements | Over the shorter of the life or the estimated useful life of the lease |
Other intangible assets
Internally-generated intangible assets - development expenditure
Internally generated intangible assets relate to bespoke computer software and technology developed by the Group's internal software development team.
An internally-generated intangible asset arising from the Group's development expenditure is recognised only if all of the following conditions are met:
· It is technically feasible to develop the asset so that it will be available for use or sale;
· Adequate resources are available to complete the development and to use or sell the asset;
· There is an intention to complete the asset for use or sale;
· The Group is able to use or sell the intangible asset;
· It is probable that the asset created will generate future economic benefits; and
· The development cost of the asset can be measured reliably.
Internally-generated intangible assets are amortised on a straight-line basis over their useful lives. Amortisation commences when the asset is available for use and useful lives range from 1-5 years. The amortisation expense is included within administrative expenses. Where an internally-generated intangible asset cannot be recognised, development expenditure is recognised as an expense in the period in which it is incurred.
Purchased intangible assets
Externally acquired intangible assets are initially recognised at cost and subsequently amortised on a straight-line basis over their useful economic lives, which vary from 3 to 10 years. The amortisation expense is included as a highlighted item within the administrative expenses line in the Income Statement. Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other contractual/legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques. The significant intangibles recognised by the Group are customer relationships.
Computer software
Purchased computer software intangible assets are amortised on a straight-line basis over their useful lives which vary from 2 to 4 years.
Impairment
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If any such condition exists, the recoverable amount of the asset is estimated in order to determine the extent, if any, of the impairment loss. Where the asset does not generate cash flows that are independent from other assets, estimates are made of the cash flows of the cash generating unit to which the asset belongs.
Recoverable amount is the higher of fair value, less costs to sell, and value in use. In assessing value in use, estimated future cash flows are discounted to their present value using a discount rate appropriate to the specific asset or cash generating unit.
If the recoverable amount of an asset or cash generating unit is estimated to be less than its carrying amount, the carrying value of the asset or cash generating unit is reduced to its recoverable amount. Impairment losses are recognised immediately in highlighted items in the Income Statement.
In respect of assets other than goodwill, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if the impairment loss had been recognised.
Financial instruments
Financial assets and financial liabilities are recognised in the Group's statement of financial position when the Group becomes a party to the contractual provisions of the instrument.
Financial assets
The Group classifies its financial assets as 'loans and receivables'. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers (trade receivables), but also incorporate other types of contractual monetary asset. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.
Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables, which are reported net, such provisions are recorded in a separate allowance account with the loss being recognised within administrative expenses in the Income Statement. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.
Financial liabilities
Financial liabilities are initially recognised at fair value. Interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the statement of financial position. "Finance expense" in this context includes initial transaction costs as well as any interest or coupon payable while the liability is outstanding.
Forward currency contracts and interest rate swaps are carried at fair value with changes in fair value being reflected in the Statement of Comprehensive Income, and are classified within other financial assets and liabilities as appropriate.
The convertible loan notes in the prior year possess all the characteristics of an equity instrument and have therefore been classified as such.
Bank borrowings
Interest bearing borrowings are initially recognised at fair value net of transaction costs incurred and subsequently measured at amortised cost. Finance charges are recognised in the Income Statement over the period of the borrowings using the effective interest method.
Loan fees relating to the bank borrowings are capitalised against the loan and amortised over the period of the borrowings to which they relate.
The revolving credit facility is considered to be a long term loan.
Derivative financial instruments
The Group uses derivative financial instruments to reduce its exposure to foreign exchange and interest rate movements. The Group does not hold or issue derivative financial instruments for financial trading purposes but derivatives that do not qualify for hedge accounting are accounted for at fair value through the Income Statement. Derivative financial instruments are initially recognised at fair value at the contract date and continue to be stated at fair value at the balance sheet date with gains and losses on revaluation being recognised immediately in the Income Statement.
Cash flow hedges are used to hedge against fluctuations in future cash flows on the Group's debt funding due to movements in interest rates, and on certain foreign currency trade receivable balances. When a cash flow hedge is employed and hedge accounting applied, the effective portion of the change in the fair value of the hedging instrument is recognised directly in equity (hedging reserve) until the gain or loss on the hedged item is realised. Any ineffective portion is always recognised in the Income Statement.
The fair value of derivatives is determined by reference to market values for similar instruments.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and short term deposits. Bank overdrafts are an integral part of the Group's cash management and are included as a component of cash and cash equivalents for the purpose of the Cash Flow Statement. Cash and cash equivalents and bank overdrafts are offset when there is a legally enforceable right to offset.
Share capital
Ordinary shares are classified as equity.
Provisions
Provisions, including provisions for onerous lease costs, are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle that obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.
Provisions are measured at the Directors' best estimate of the expenditure required to settle the obligation at the year end date. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate which reflects current market assessments of the time value of money and, where appropriate, the risks specific to the obligations.
Employee Share Ownership Plan (ESOP)
As the Company is deemed to have control of its ESOP trust, it is treated as a subsidiary and consolidated for the purposes of the Group accounts. The ESOP's assets (other than investments in the company's shares), liabilities, income and expenses are included on a line-by-line basis in the Group financial statements. The ESOP's investment in the Company's shares is deducted from shareholders' equity in the Group statement of financial position as if they were treasury shares, except that profits on the sale of ESOP shares are not credited to the share premium account.
Share-based payments
Where equity settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the Income Statement over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity investments expected to vest at each year end date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. A charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition.
Where there are modifications to share based payments that are beneficial to the employee then as well as continuing to recognise the original share based payment charge, the incremental fair value of the modified share options as identified at the date of the modification is also charged to the Income Statement over the remaining vesting period. Where the Group cancels share options and identifies replacement options this arrangement is also accounted for as a modification.
The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity in the parent entity accounts.
Retirement benefits
For defined contribution pension schemes, the Group pays contributions to privately administered pension plans on a voluntary basis. The Group has no further payment obligations once the contributions have been paid. Contributions are charged to the Income Statement in the year to which they relate.
Leases
Where substantially all of the risks and rewards incidental to ownership of a leased asset have been transferred to the Group (a "finance lease"), the asset is treated as if it had been purchased outright. The amount initially recognised as an asset is the lower of the fair value of the leased property and the present value of the minimum lease payments payable over the term of the lease. The corresponding lease commitment is shown as a liability. Lease payments are analysed between capital and interest. The interest element is charged to the Income Statement over the period of the lease and is calculated so that it represents a constant proportion of the lease liability. The capital element reduces the balance owed to the lessor.
Where substantially all of the risks and rewards incidental to ownership are retained by the lessor (an "operating lease"), the total rentals payable under the lease are charged to the Income Statement on a straight-line basis over the lease term. The aggregate benefit of lease incentives is recognised as a reduction of the rental expense over the lease term on a straight-line basis. The land and buildings elements of property leases are considered separately for the purposes of lease classification.
Government grants
Government grants are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions.
Government grants relating to costs are deferred and recognised in the Income Statement over the period necessary to match them with the costs that they are intended to compensate.
Government grants relating to property, plant and equipment are deducted from the carrying value of the assets that they are intended to compensate and are credited to the Income Statement on a straight-line basis over the expected lives of the related assets.
Dividend distribution
Dividend distribution to the Company's shareholders is recognised as a liability in the Group's financial statements in the period in which the dividends are approved by the Company's shareholders.
Critical accounting estimates and judgements
The Group makes estimates and judgements concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Revenue recognition
The Group is required to make an estimate of the project completion levels in respect of contracts which straddle the year end for revenue recognition purposes. Estimates are based on expected total costs and revenues from each contract. This involves a level of judgement and therefore differences may arise between the actual and estimated result.
Carrying value of goodwill and other intangible assets
Determining whether goodwill and other intangibles should be capitalised, the amortisation period appropriate to intangible assets and whether or not these assets are impaired requires estimation of the value in use of the cash-generating units to which the goodwill and other intangible assets has been allocated. The value in use calculation requires the entity to estimate future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Details regarding the goodwill and other intangible assets carrying value and assumptions used in carrying out the impairment reviews are provided in notes 6 and 7.
Income taxes
The Group is subject to income taxes in all the territories in which it operates, and judgement and estimates of future profitability are required to determine the Group's deferred tax position. If the final tax outcome is different to that assumed, resulting changes will be reflected in the Income Statement, unless the tax relates to an item charged to equity in which case the changes in the tax estimates will also be reflected in equity. The Group believes that its accruals for tax liabilities are adequate for all open audit years based on its assessment of many factors including past experience and interpretations of tax law. This assessment relies on estimates and assumptions and may involve a series of complex judgements about future events. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact income tax expense in the period in which such determination is made.
Contingent deferred consideration
The Group has recorded liabilities for deferred consideration on acquisitions made in the current and prior periods. The calculation of the deferred consideration liability requires judgements to be made regarding the forecast future performance of these businesses for the earn out period. Any changes to the fair value of the contingent deferred consideration after the measurement period are recognised in the Income Statement within administrative expenses as a highlighted item.
Provisions
The Group provides for certain costs of reorganisation that has occurred due to the Group's acquisition and disposal activity. When the final amount payable is uncertain, these are classified as provisions. These provisions are based on the best estimates of management.
Adoption of new standards and interpretations
The following new standards and changes came into effect during the year beginning 1 May 2013 and were adopted by the Group:
Amendment to IAS 12, 'Income taxes'. This standard provides guidance on measuring deferred tax assets and liabilities when investment property is measured at fair value.
IAS 1, 'Financial statement presentation'. This amendment outlines new disclosure requirements for 'other comprehensive income'.
IFRS 10, 'Consolidated Financial Statements'. This standard builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements.
IFRS 13, 'Fair value measurement'. This standard provides guidance on how fair value accounting should be applied and disclosed where its use is already required by other IFRS standards.
These did not have a material impact on the Group's financial statements.
Certain new standards, amendments to new standards and interpretations have been published that are mandatory to the Group's future accounting periods but have not been adopted early in these financial statements. These are set out below:
IFRS 9, 'Financial Instruments: Classification and Measurement' (effective on or after 1 January 2015). This standard introduces new requirements for the classification and measurement of financial assets and financial liabilities and for derecognition. The Group will apply IFRS 9 from 1 May 2015.
IFRS 15, 'Revenue from Contracts with Customers' (effective on or after 1 January 2017). This standard establishes a single comprehensive framework for revenue recognition to determine when to recognise revenue and how much revenue to recognise. This standard replaces the previous revenue standards IAS18 'Revenue' and IAS 11 'Construction Contracts'. The Group will apply IFRS 15 from 1 May 2017.
The Directors do not expect that the adoption of the Standards and amendments listed above will have a material impact on the financial statements of the Group in future periods, although the detailed impact has not yet been quantified.
2. Segmental reporting
In accordance with IFRS 8 the Group's operating segments are based on the reports reviewed by the Executive Directors that are used to make strategic decisions.
The Group now reports its results in three business divisions with UK central costs allocated to relevant UK entities, as this more accurately reflects the way the Group is now being managed. There is no change to any of the Group's accounting policies and there is no restatement of either revenues or profitability, other than this revised segmentation by the three operating segment headings.
Certain operating segments have been aggregated to form three reportable segments, Media Value Measurement, Market Intelligence and Marketing Performance Optimization:
· Media Value Measurement includes our media benchmarking, financial compliance and associated services.
· Market Intelligence includes our advertising monitoring, reputation management and research/insight services.
· Marketing Performance Optimization consists of our marketing effectiveness services and the recently acquired Stratigent business.
The Executive Directors are the Group's chief operating decision-maker. They assess the performance of the operating segments based on operating profit before highlighted items. This measurement basis excludes the effects of non-recurring expenditure from the operating segments such as restructuring costs and purchased intangible amortisation. The measure also excludes the effects of equity-settled share-based payments. Interest income and expenditure are not allocated to segments, as this type of activity is driven by the central treasury function, which manages the cash position of the Group.
The segment information provided to the Executive Directors for the reportable segments for the year ended 30 April 2014 is as follows:
Year ended 30 April 2014
| Media Value Measurement | Market Intelligence | Marketing Performance Optimization | Reportable Segments | Unallocated | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Revenue | 36,477 | 27,162 | 4,813 | 68,452 | - | 68,452 |
| Operating profit before highlighted items | 10,289 | 4,801 | 1,523 | 16,613 | (5,274) | 11,339 |
| Total assets | 51,685 | 40,878 | 7,955 | 100,518 | 7,041 | 107,559 |
| Other segment information | ||||||
| Capital expenditure - property, plant and equipment | 170 | 332 | 1 | 503 | 1,242 | 1,745 |
| Capital expenditure - intangible assets | 1,863 | 559 | 1,192 | 3,614 | 267 | 3,881 |
| Capital expenditure - goodwill | 4,291 | - | 4,131 | 8,422 | - | 8,422 |
| Total | 6,324 | 891 | 5,324 | 12,539 | 1,509 | 14,048 |
Year ended 30 April 2013
| Media Value Measurement | Market Intelligence | Marketing Performance Optimization | Reportable Segments | Unallocated | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Revenue | 32,364 | 29,639 | 2,043 | 64,046 | - | 64,046 |
| Operating profit before highlighted items | 8,003 | 5,936 | 774 | 14,713 | (4,272) | 10,441 |
| Total assets | 44,183 | 42,941 | 1,718 | 88,842 | 5,514 | 94,356 |
| Other segment information | ||||||
| Capital expenditure - property, plant and equipment | 46 | 72 | - | 118 | 824 | 942 |
| Capital expenditure - intangible assets | 2,360 | 416 | - | 2,776 | 110 | 2,886 |
| Capital expenditure - goodwill | 3,343 | - | - | 3,343 | - | 3,343 |
| Total | 5,749 | 488 | - | 6,237 | 934 | 7,171 |
A reconciliation of segment operating profit before highlighted items to total profit before tax is provided below:
| Year ended 30 April 2014 |
Year ended 30 April 2013 |
|
| £'000 | £'000 | |
| Reportable segment operating profit before highlighted items | 16,613 | 14,713 |
| Unallocated costs: | ||
| Staff costs | (4,685) | (3,815) |
| Property costs | (329) | (97) |
| Exchange rate movements | (51) | 23 |
| Other administrative expenses | (209) | (383) |
| Operating profit before highlighted items | 11,339 | 10,441 |
| Highlighted items (note 3) | (6,727) | (2,936) |
| Operating profit | 4,612 | 7,505 |
| Net finance costs | (1,191) | (975) |
| Share of profit of associates | 19 | 26 |
| Profit before tax | 3,440 | 6,556 |
Unallocated costs comprise central costs that are not considered attributable to the segments.
A reconciliation of segment total assets to total consolidated assets is provided below:
| 2014 | 2013 | |
| £'000 | £'000 | |
| Total assets for reportable segments | 100,518 | 88,842 |
| Unallocated amounts: | ||
| Property, plant and equipment | 2,990 | 2,316 |
| Other receivables | 1,427 | 1,410 |
| Cash and cash equivalents | 1,453 | 700 |
| Deferred tax asset | 1,084 | 1,020 |
| Investments in associates | 87 | 68 |
| Total assets | 107,559 | 94,356 |
The table below presents revenue and non-current assets by geographical location:
| Year ended 30 April 2014 | Year ended 30 April 2013 | |||
| Revenue by location of customers | Non-current assets | Revenue by location of customers | Non-current assets | |
| £'000 | £'000 | £'000 | £'000 | |
| United Kingdom | 21,587 | 52,043 | 21,916 | 52,504 |
| Rest of Europe | 24,880 | 4,800 | 21,835 | 4,954 |
| North America | 14,630 | 5,746 | 13,094 | 878 |
| Rest of world | 7,355 | 10,207 | 7,201 | 5,299 |
| 68,452 | 72,796 | 64,046 | 63,635 | |
| Deferred tax assets | - | 1,377 | - | 1,217 |
| Total | 68,452 | 74,173 | 64,046 | 64,852 |
No single customer (or group of related customers) contributes 10% or more of revenue.
3. Highlighted items
Highlighted items comprise non-cash charges and non-recurring items which are highlighted in the Income Statement because separate disclosure is considered relevant in understanding the underlying performance of the business.
| Year ended 30 April 2014 | Year ended 30 April 2013 | |||||
| Cash | Non-cash | Total | Cash | Non-cash | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Administrative Expenses | ||||||
| Recurring: | ||||||
| Share option charge | - | 337 | 337 | - | 267 | 267 |
| Amortisation of purchased intangibles | - | 1,873 | 1,873 | - | 2,308 | 2,308 |
| - | 2,210 | 2,210 | - | 2,575 | 2,575 | |
| Non-recurring: | ||||||
| Acquisition and integration costs | 3,355 | - | 3,355 | 361 | - | 361 |
| Facility amendment costs | 103 | - | 103 | - | - | - |
| Property costs | 1,059 | - | 1,059 | - | - | - |
| 4,517 | - | 4,517 | 361 | - | 361 | |
| Total highlighted items before tax | 4,517 | 2,210 | 6,727 | 361 | 2,575 | 2,936 |
| Deferred tax on tax losses | (80) | - | (80) | - | - | - |
| Taxation credit | (947) | (1,019) | (1,966) | (331) | (672) | (1,003) |
| Total highlighted items after tax | 3,490 | 1,191 | 4,681 | 30 | 1,903 | 1,933 |
Amortisation of purchased intangibles relates to acquisitions made in the current financial year of £133,000 and to acquisitions made in prior years of £1,740,000.
Acquisition costs represent professional fees incurred in relation to acquisitions (£333,000) and adjustments to the fair value of deferred consideration resulting from strong performances from our recent acquisitions along with the related foreign exchange impact (£1,498,000). Integration costs include certain one-off costs incurred whilst integrating the acquisitions made in the current and prior financial years into the Group's existing operations. Also included are severance costs relating to rationalisation and restructure of senior management following these acquisitions as well as costs incurred in relation to a strategic review which was undertaken in the year. The costs of the strategic review include bonuses totalling £100,000 to certain members of senior management in recognition of their considerable contribution to the process.
Facility amendment costs represent professional fees incurred in relation to the amendment of banking facilities undertaken in August 2013.
Property costs represent the onerous lease costs of certain vacant offices (£853,000) and the costs associated with property moves (£206,000), including the relocation of approximately 260 staff into a single London location.
Deferred tax on tax losses relates to the recognition of a deferred tax asset on the German tax losses. Current tax arising on the highlighted items is included as a cash item, while deferred tax on highlighted items is included as a non-cash item. Refer to note 7 for more detail.
Deferred consideration adjustments within acquisition costs is included as a cash item.
As at 30 April 2014, £3,046,000 of the £4,517,000 cash highlighted items had been settled.
4. Taxation
| Year ended 30 April 2014 | Year ended 30 April 2013 | |||||
| Before highlighted items | Highlighted items | Total | Before highlighted items | Highlighted items | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| UK tax | ||||||
| Current year | 1,007 | (860) | 147 | 1,009 | (309) | 700 |
| Adjustment in respect of prior year | (2) | - | (2) | (8) | - | (8) |
| 1,005 | (860) | 145 | 1,001 | (309) | 692 | |
| Foreign tax | ||||||
| Current year | 1,299 | (87) | 1,212 | 1,343 | (22) | 1,321 |
| Adjustment in respect of prior year | (451) | - | (451) | (12) | - | (12) |
| 848 | (87) | 761 | 1,331 | (22) | 1,309 | |
| Total current tax | 1,853 | (947) | 906 | 2,332 | (331) | 2,001 |
| Deferred tax | ||||||
| Origination and reversal of temporary differences | 188 | (1,099) | (911) | 64 | (672) | (608) |
| Total tax charge/(credit) | 2,041 | (2,046) | (5) | 2,396 | (1,003) | 1,393 |
The difference between tax as charged in the financial statements and tax at the nominal rate is explained below:
| Year ended 30 April 2014 |
Year ended 30 April 2013 |
|
| £'000 | £'000 | |
| Profit before tax | 3,440 | 6,556 |
| Corporation tax at 22.8% (2013: 23.9%) | 785 | 1,567 |
| Non-deductible taxable expenses/income | 562 | 28 |
| Overseas tax rate differential | 409 | 407 |
| Losses not relieved against other Group entities | 43 | 33 |
| Utilisation of previously unrecognised tax losses | (357) | (558) |
| Adjustment in respect of prior years | (453) | (20) |
| Other | (994) | (64) |
| Total tax charge | (5) | 1,393 |
The applicable tax rate has decreased from 23.9% to 22.8% due to the reduction of the UK Corporation Tax rate to 21% in April 2014.
A further rate reduction to 20% effective from 1 April 2015 was substantively enacted on 2 July 2013 and therefore any relevant deferred tax balances have been measured at this rate.
5. Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
| Year ended 30 April 2014 |
Year ended 30 April 2013 |
|
| £'000 | £'000 | |
| Earnings for the purpose of basic earnings per share being net profit attributable to equity holders of the parent | 3,024 | 5,044 |
| Adjustments: | ||
| Impact of highlighted items (net of tax) 1 | 4,637 | 1,716 |
| Earnings for the purpose of underlying earnings per share | 7,661 | 6,760 |
| Number of shares: | ||
| Weighted average number of ordinary shares for the purpose of basic earnings per share2 | 74,419,656 | 72,557,927 |
| Effect of dilutive potential ordinary shares: | ||
| Share options | 1,325,108 | 2,561,185 |
| Weighted average number of ordinary shares for the purpose of diluted earnings per share2 | 75,744,764 | 75,119,112 |
| Basic earnings per share | 4.06p | 6.95p |
| Diluted earnings per share | 3.99p | 6.71p |
| Underlying basic earnings per share | 10.29p | 9.32p |
| Underlying diluted earnings per share | 10.11p | 9.00p |
1. Highlighted items (see note 3), stated net of their total tax impact.
2. In the prior year, the weighted average number of shares included convertible loan notes that were convertible into 13,802,861 ordinary shares. These were converted into ordinary shares in the current year.
3. It is assumed that all contingent deferred consideration will be settled in cash, therefore there is no dilutive effect.
6. Goodwill
| £'000 | ||
| Cost and net book value | ||
| At 1 May 2012 | 44,311 | |
| Acquisitions | 3,343 | |
| Foreign exchange differences | 210 | |
| At 30 April 2013 | 47,864 | |
| Adjustments in respect of a pre-acquisition period | 34 | |
| Acquisitions | 27 | 8,388 |
| Foreign exchange differences | (1,165) | |
| At 30 April 2014 | 55,121 |
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill may be impaired. The recoverable amounts are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates and revenue, cost and margin growth rates. Management estimates discount rates using rates that reflect current market assessments of the time value of money and risk specific to the cash-generating units. The Group prepares three-year pre-tax cash flow forecasts, and these have been discounted at 9.15% (2013: 11%). Management determines the future growth rates based on their best estimates of market growth and the expected change in our market share. Cash flows beyond the three year period are extrapolated at a rate of 2.0% (2013: 1.5%), which does not exceed the long-term average growth rate in any of the markets in which the Group operates.
No impairment of goodwill was recognised in 2014 (2013: £nil).
Goodwill has been allocated to the following segments:
| Year ended 30 April 2014 |
Year ended 30 April 2013 |
|
| £'000 | £'000 | |
| Media Value Measurement | 24,249 | 20,619 |
| Market Intelligence | 25,358 | 25,567 |
| Marketing Performance Optimization | 5,514 | 1,678 |
| 55,121 | 47,864 |
Goodwill of £13,250,000 (2013: £13,250,000) has been allocated to the UK and International Media Benchmarking CGU within the Media Value Measurement segment, and £19,012,000 (2013: £19,012,000) has been allocated to the International Advertising Intelligence CGU in the Market Intelligence segment.
7. Other intangible assets
| Capitalised development costs |
Computer software | Purchased intangible assets |
Total intangible assets |
|
| £'000 | £'000 | £'000 | £'000 | |
| Cost | ||||
| At 1 May 2012 | 928 | 1,236 | 16,956 | 19,120 |
| Additions | 414 | 165 | - | 579 |
| Acquisitions | - | - | 2,307 | 2,307 |
| Foreign exchange | 3 | 20 | 160 | 183 |
| At 30 April 2013 | 1,345 | 1,421 | 19,423 | 22,189 |
| Additions | 603 | 304 | - | 907 |
| Acquisitions (note 10) | - | 1 | 2,973 | 2,974 |
| Foreign exchange | - | (30) | (540) | (570) |
| At 30 April 2014 | 1,948 | 1,696 | 21,856 | 25,500 |
| Amortisation | ||||
| At 1 May 2012 | (531) | (758) | (5,092) | (6,381) |
| Charge for the year | (142) | (125) | (2,308) | (2,575) |
| Foreign exchange | - | (21) | (53) | (74) |
| At 30 April 2013 | (673) | (904) | (7,453) | (9,030) |
| Charge for the year | (182) | (145) | (1,873) | (2,200) |
| Foreign exchange | - | 27 | 129 | 156 |
| At 30 April 2014 | (855) | (1,022) | (9,197) | (11,074) |
| Net book value | ||||
| At 30 April 2014 | 1,093 | 674 | 12,659 | 14,426 |
| At 30 April 2013 | 672 | 517 | 11,970 | 13,159 |
| At 1 May 2012 | 397 | 478 | 11,864 | 12,739 |
Amortisation is charged within administrative expenses so as to write off the cost of the intangible assets over their estimated useful lives. The amortisation of purchased intangible assets is included as a highlighted administrative expense.
Purchased intangible assets consist principally of customer relationships with a typical useful life of 10 years.
The Group holds assets under finance leases within computer software, with cost of £624,000 (2013: £513,000) and accumulated depreciation of £213,000 (2013: £118,000).
8. Financial liabilities
| 30 April 2014 | 30 April 2013 | |
| £'000 | £'000 | |
| Current | ||
| Bank borrowings | 2,943 | 2,179 |
| Finance lease liabilities | 197 | 145 |
| Derivative financial instrument - interest rate swaps | 52 | - |
| Contingent deferred consideration | 4,555 | 3,624 |
| 7,747 | 5,948 | |
| Non-current | ||
| Bank borrowings | 26,235 | 20,238 |
| Finance lease liabilities | 17 | 138 |
| Derivative financial instrument - interest rate swaps | - | 145 |
| Contingent deferred consideration | 4,108 | 2,033 |
| 30,360 | 22,554 | |
| Total financial liabilities | 38,107 | 28,502 |
| Bank borrowings £'000 |
Finance lease liabilities £'000 |
Interest rate swaps £'000 |
Contingent deferred consideration £'000 |
Total £'000 |
|||||
| At 1 May 2012 | 18,059 | 328 | 39 | 8,102 | 26,528 | ||||
| Recognised on acquisition | - | - | - | 4,436 | 4,436 | ||||
| Additions | - | 111 | - | - | 111 | ||||
| Utilised | - | (157) | - | (6,382) | (6,539) | ||||
| Released to the Income Statement | 75 | - | - | (575) | (500) | ||||
| Charged to reserves | - | - | 105 | - | 105 | ||||
| Borrowings | 6,456 | - | - | - | 6,456 | ||||
| Repayments | (2,309) | - | - | - | (2,309) | ||||
| Foreign exchange | 136 | 1 | 1 | 76 | 214 | ||||
| At 1 May 2013 | 22,417 | 283 | 145 | 5,657 | 28,502 | ||||
| Recognised on acquisition | - | - | - | 7,085 | 7,085 | ||||
| Additions | - | 133 | - | - | 133 | ||||
| Utilised | - | (202) | - | (5,401) | (5,603) | ||||
| Charged to the Income Statement | 75 | - | - | 1,603 | 1,678 | ||||
| Charged to reserves | - | - | (93) | - | (93) | ||||
| Borrowings | 10,766 | - | - | - | 10,766 | ||||
| Repayments | (3,937) | - | - | - | (3,937) | ||||
| Foreign exchange released to the Income Statement | (143) | - | - | (105) | (248) | ||||
| Foreign exchange released to reserves | - | - | - | (176) | (176) | ||||
| At 30 April 2014 | 29,178 | 214 | 52 | 8,663 | 38,107 | ||||
A currency analysis for the bank borrowings is shown below:
| 30 April 2014 £'000 |
30 April 2013 £'000 |
|
| Pounds Sterling | 26,052 | 18,949 |
| US Dollar | 1,068 | 1,360 |
| Euros | 2,058 | 2,108 |
| Total bank borrowings | 29,178 | 22,417 |
As at 30 April 2014, all bank borrowings were held jointly with Bank of Ireland and Barclays Bank. The facility comprises an amortising term loan of £15,000,000 (of which £9,798,000 remains outstanding at 30 April 2014 (2013: £12,168,000)), and a revolving credit facility of £15,000,000 (of which £13,959,000 was drawn down at 30 April 2014 (2013: £10,468,000)), both with a maturity date of 9 March 2016. £3,917,000 of the term loan is being repaid on a quarterly basis over the next 3 years, with the remainder repayable on the maturity of the facility. Loan arrangement fees of £143,000 (2013: £219,000) are offset against the term loan, and are being amortised over the period of the loan.
In August 2013, the facilities were amended to include a further £6,000,000 term loan facility (of which £6,000,000 was drawn down at 30 April 2014) with a maturity date of 9 March 2016. £1,726,000 of the additional drawn term loan is being repaid on a quarterly basis until 31 January 2016, with the remainder payable on the maturity of the facility.
The facility bears variable interest of LIBOR plus a margin of 2.75%. The margin rate may be lowered from April 2014 to 2.50% depending on the Group's net debt to EBITDA ratio. The rate may be further lowered to 2.25% from April 2015 and 2.00% from April 2016.
The undrawn amount of the revolving credit facility is liable to a fee of 45% of the prevailing margin. The Group may elect to prepay all or part of the outstanding loan subject to a break fee, by giving 5 business days' notice.
All amounts owing to the bank are guaranteed by way of fixed and floating charges over the current and future assets of the Group. As such, a composite guarantee has been given by all significant subsidiary companies.
The Group holds floating to fixed interest rate swaps against 100% of its sterling and US dollar denominated term loan for the period from May 2012 to April 2015. These instruments are held at fair value at 30 April 2014.
Subsequent to year end we refinanced our banking facilities with Barclays and Royal Bank of Scotland ("RBS"). Refer to note 11 for more details.
Contingent deferred consideration represents additional amounts that are expected to be payable for acquisitions made by the Group and is held at fair value at the Balance Sheet date. All amounts are expected to be fully paid by August 2017.
All finance lease liabilities fall due within five years. The minimum lease payments and present value of the finance leases are as follows:
| Minimum lease payments | ||
| Year ended 30 April 2014 |
Year ended 30 April 2013 | |
| £'000 | £'000 | |
| Amounts due: | ||
| Within one year | 203 | 145 |
| Between one and five years | 27 | 138 |
| 230 | 283 | |
| Less: finance charges allocated to future periods | (16) | - |
| Present value of lease obligations | 214 | 283 |
The minimum lease payments approximate the present value of minimum lease payments.
9. Cash generated from operations
| Year ended | Year ended | |
| 30 April 2014 | 30 April 2013 | |
| £'000 | £'000 | |
| Profit before taxation | 3,440 | 6,556 |
| Adjustments for: | ||
| Depreciation | 1,102 | 1,026 |
| Amortisation (note 7) | 2,200 | 2,575 |
| Loss/(profit) on disposal | - | 42 |
| Unrealised foreign exchange loss /(gain) | 814 | (36) |
| Share option charges (note 3) | 337 | 267 |
| Finance income | (15) | (13) |
| Finance expenses | 1,206 | 988 |
| Share of profit of associates | (19) | (26) |
| Contingent deferred consideration revaluations | 1,603 | (575) |
| 10,668 | 10,804 | |
| Increase in trade and other receivables | (3,467) | (762) |
| Decrease in trade and other payables | (692) | (2,100) |
| Movement in provisions | 290 | (416) |
| Cash generated from operations | 6,799 | 7,526 |
10. Acquisitions
STRATIGENT LLC ("Stratigent")
On 19 August 2013, the Group acquired 100% of Stratigent LLC, a company incorporated in the United States of America. The initial cash consideration was $4,217,000 (£2,700,000). Additional consideration is payable dependent on future performance during the periods to December 2013, April 2014, April 2015 and April 2016 and will be paid in cash. The maximum total consideration payable is $8,780,000 (£5,621,000).
Stratigent contributed £2,109,000 to revenue and £483,000 to profit before tax for the period between the date of acquisition and the period end.
The carrying value and the fair value of the net assets at the date of acquisition were as follows:
| Carrying value | Recognised on acquisition | |
| £'000 | £'000 | |
| Customer relationships | - | 1,192 |
| Property, plant and equipment | 24 | 24 |
| Trade and other receivables | 483 | 483 |
| Cash and cash equivalents | 146 | 146 |
| Trade and other payables | (277) | (367) |
| Deferred tax liability | - | (488) |
| Net assets acquired | 376 | 990 |
| Goodwill arising on acquisition | 4,131 | |
| 5,121 |
The fair value of trade and other receivables includes trade receivables with a fair value and gross contractual value of £450,000.
The goodwill is attributable to the assembled workforce, expected synergies and other intangible assets, which do not qualify for separate recognition.
Purchase consideration:
| £'000 | |
| Cash | 2,700 |
| Contingent deferred consideration | 2,421 |
| Total purchase consideration | 5,121 |
The fair value of contingent deferred consideration payable is based on EBIT for the year ended 31 December 2013 and revenue growth and operating profit margins for the years ended 30 April 2014, 30 April 2015 and 30 April 2016. The potential range of future payments that Ebiquity plc could be required to make under the contingent consideration arrangement is between £nil and £2,921,000 and will be paid in cash. All contingent deferred consideration payments are expected to be paid by August 2016.
CHINA MEDIA CONSULTING GROUP ("CMCG")
On 15 January 2014, the Group acquired the entire issued share capital of China Media Consulting Group Limited, the Hong Kong incorporated holding company of the CMCG group ("CMCG"). CMCG was acquired for an initial cash consideration of HK$20m (approximately £1.6m), and the maximum total consideration is up to HK$85m (approximately £6.6m), with earn out payments payable in cash, depending on the performance of CMCG in the five financial years ending 30 April 2017.
CMCG contributed £605,000 to revenue and £427,000 to profit before tax for the period between the date of acquisition and the period end.
The carrying value and the fair value of the net assets at the date of acquisition were as follows:
| Carrying value | Recognised on acquisition | |
| £'000 | £'000 | |
| Customer relationships | - | 1,781 |
| Property, plant and equipment | 14 | 14 |
| Trade and other receivables | 407 | 407 |
| Cash and cash equivalents | 324 | 324 |
| Trade and other payables | (96) | (98) |
| Deferred tax liability | - | (445) |
| Net assets acquired | 649 | 1,983 |
| Goodwill arising on acquisition | 4,257 | |
| 6,240 |
The fair value of trade and other receivables includes trade receivables with a fair value and gross contractual value of £214,000.
The goodwill is attributable to the assembled workforce, expected synergies and other intangible assets, which do not qualify for separate recognition.
Purchase consideration:
| £'000 | |
| Cash | 1,576 |
| Contingent deferred consideration | 4,664 |
| Total purchase consideration | 6,240 |
The fair value of contingent deferred consideration payable is based on PBT for the years ended 30 April 2013, 30 April 2014, 30 April 2015, 30 April 2016 and 30 April 2017. The potential range of future payments that Ebiquity plc could be required to make under the contingent consideration arrangement is between £nil and £4,985,000 and will be paid in cash. All contingent deferred consideration payments are expected to be paid by August 2017.
TRANSACTIONS WITH NON CONTROLLING INTERESTS
On 19 July 2013, the Group acquired the remaining 8.3% in its subsidiary undertaking, Ebiquity SAS, for cash consideration of €90,000 (£78,000).
During April 2014, the two French subsidiaries (Ebiquity SAS which was 100% owned and FLE France SAS which was 65% owned) were merged. As a part of the merger the Group acquired part of the FLE France SAS minority shareholding with the consideration being satisfied by the issue of 102,981 new ordinary shares of 25p each in Ebiquity plc. The Group now owns 80% of the newly merged French business.
If all of the above transactions had been completed on 1 May 2013, Group revenue would have been £70,129,000 and Group operating profit before highlighted items would have been £11,584,000, before any potential synergistic benefits are taken into account.
None of the goodwill arising from the acquisitions in the year is expected to be tax deductible.
11. Events after the reporting period
On 2 July 2014, the Group refinanced its banking facilities with Barclays and Royal Bank of Scotland ("RBS") and on 7 July 2014 drew down on these new facilities. The new committed facility, totalling £40.0m, comprises a term loan of £10.0m (of which all was drawn on refinance) and an RCF of £30.0m (of which £20.8m was drawn on refinance). Both the term loan and the RCF have a maturity date of 2 July 2018. The £10.0m term loan is being repaid on a quarterly basis to maturity, and the drawn RCF and any further drawings under the RCF are repayable on maturity of the facility. The facility may be used for deferred consideration payments on past acquisitions, to fund future potential acquisitions, and for general working capital requirements.
Subsequent to year end the 5% minority shareholder of the Group's subsidiary undertaking, Billetts America LLC, exercised their option to increase their shareholding to 15%. The Group then acquired the remaining 15% in Billetts America LLC from the minority shareholder. The consideration payable for these interests is dependent on the performance of the business of Billetts America LLC during the three financial years ending 30 April 2015.
The financial information included in this report does not amount to full financial statements within the meaning of Section 434 of Companies Act 2006. The financial information has been extracted from the Group's Annual Report and financial statements for the year ended 30 April 2014, on which an unqualified report has been made by the Company's auditors, PricewaterhouseCoopers LLP.
Financial statements for the year ended 30 April 2013 have been delivered to the Registrar of Companies; the report of the auditors on those accounts was unqualified and did not contain a statement under Section 498 of the Companies Act 2006. The 2014 statutory accounts are expected to be published on 6 August 2014.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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