JAYWING PLC

Interim / Quarterly Report • Nov 21, 2017

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RNS Number : 0309X

Jaywing PLC

21 November 2017

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

Date:   20th November 2017

On behalf of:   Jaywing plc ("Jaywing", "the Company" or "the Group")

Embargoed:    0700 hrs 21st November 2017

Jaywing plc

Interim Results 2017/2018

Jaywing plc (AIM: JWNG) today announces its interim results for the six months ended

30 September 2017 ("H1").

Financial highlights from continuing operations

	Period to 30 September 2017 £'000	Period to 30 September 2016 £'000
Gross profit*	17,835	17,114
Adjusted EBITDA**	1,454	2,132
Adjusted EBITDA margin***	8.2%	12.5%
Loss after tax	(376)	(384)
Reported EPS	(0.44)p	(0.45)p
Net debt	8,083	3,398

* Revenue less direct costs of sale

** Before amortisation, share based charges, exceptional items and acquisition related costs

*** As a percentage of gross profit

Commenting on the results, Martin Boddy, Chairman of Jaywing plc, said:

"Since the election was called in the Spring we have seen consumer-led businesses in the UK grapple with difficult trading conditions.  In common with previous periods where there has been a squeeze on consumer spending and more general economic uncertainty, their first action has been to cut costs, including marketing costs. Over the past months, we have experienced the impact of these market pressures in particular parts of our business, alongside every other agency.

If things continue to follow the same cycle, then we can expect the remaining marketing spend to move towards the most accountable and cost effective digital marketing channels and then expect to see spend start to recover on the back of improved marketing performance. Indeed, digital marketing spend is still forecast to increase in the latest e-Marketer report. So as a specialist in data science led digital marketing, we can expect Jaywing to benefit from this in the medium term.

As a result of these market conditions, we saw a number of existing clients either delay or reduce their spend on marketing contracts. With limited exposure to growth in overseas markets to offset this, our UK H1 financial performance has been adversely impacted and we expect profits to be substantially below market expectations for the full financial year. We have continued to carefully monitor costs and have implemented mitigating actions in response.

Despite these factors, we are encouraged with the strong performance of our Media and Analysis segment during H1 due to the demand for our data science consultancy services. We have experienced strong growth in our Australian operation and have secured some excellent new business wins across the UK business, including a rapidly growing company in the UK financial services sector.

Furthermore, our industry profile continues to grow with Epiphany being named Search Agency of the Year at the UK Agency Awards in September. Jaywing was named Prolific North's Large Integrated Agency of the Year and also won Silver at the industry's most prestigious Cannes Corporate Awards in September.

Looking ahead to H2 we are optimistic that performance will improve, particularly in Q4 as this has historically been the period when we typically generate around a third of our profits for the entire year."

Enquiries:

Jaywing plc
Michael Sprot (Company Secretary)	Tel: 0114 281 1200
Cenkos Securities plc
Nicholas Wells/Callum Davidson	Tel: 020 7397 8900

CHIEF EXECUTIVE COMMENTARY

"Overall Gross Profit increased by 4% from the same period last year as a result of the acquisitions of Digital Massive and Bloom.

In the Media & Analysis segment, our data science consultancy has had a strong H1 largely as a result of demand for its risk proposition. However, within our performance marketing division, as a result of the adverse market conditions described above, we saw some clients reduce their monthly spend at renewal or in the case of five clients, cease trading. This impacted H1 performance despite strong Q1 sales. Our Australian operation is performing well. Looking ahead to H2, the reduction in client spend appears to be stabilising, whilst potential new clients remain cautious.

In May we launched Jaywing Intelligence and have since built a pipeline of sales opportunities. At the end of August we acquired a small social content agency and expect to see this contribute to a better H2.

In our Agency segment, we saw some excellent new business wins in brand led marketing.  However, these have been somewhat overshadowed by the spend from one of our larger FMCG clients stalling since the election was called. We are now seeing spend from this client slowly recover as well as revenues flow from recent wins.

Our contact centre division also sits within the Agency segment. With a major client taking their contact centre function in house plus cost increases in relation to living wage, apprenticeship levy and rent following a rent review, its H1 performance was adversely impacted. Despite this, we are pleased to report that we have already replaced the client lost with another of similar significance to Jaywing and expect to benefit from this win in Q4.

In terms of cash, net debt has increased by £4.6m from the previous year end to £8.1m at 30 September 2017. £2.7m of this relates to planned earn-out payments with the rest due to capex on the new Sheffield office building and a negative movement in working capital from the strong debtors position at the previous year end. We expect net debt to reduce by this year end.

We continue to actively pursue our strategy to scale the business by looking at complementary acquisitions in other territories and the UK. Adding new capabilities to our successful Australian business is a priority as is adding new services to our online media and data science offerings".

Rob Shaw

Chief Executive Officer

20th November 2017

Consolidated interim statement of comprehensive income (unaudited)

		Unaudited Six months ended 30 Sept 2017	Unaudited Six months ended 30 Sept 2016	Audited year ended 31 March 2017
	Note	£'000	£'000	£'000
Revenue	4	23,466	20,895	44,537
Direct costs		(5,631)	(3,781)	(8,560)
Gross profit		17,835	17,114	35,977
Other operating income		46	-	26
Amortisation		(1,010)	(762)	-
Operating expenses		(17,101)	(16,446)	(38,909)
Operating profit/(loss)		(230)	(94)	(2,906)
Finance income		-	1	165
Finance costs		(79)	(111)	(197)
Net financing costs		(79)	(110)	(32)
Loss before tax		(309)	(204)	(2,938)
Tax expense	5	(67)	(180)	(43)
Loss for the period from continuing operations		(376)	(384)	(2,981)
Exchange differences on retranslation of foreign operations		(10)	-	16
Loss for the period attributable to the equity holders of the parent		(386)	(384)	(2,965)
Loss per ordinary share	6
Basic loss per share		(0.44p)	(0.45p)	(3.42p)
Diluted loss per share		(0.42p)	(0.41p)	(3.42p)

Consolidated interim balance sheet (unaudited)

		Unaudited 30 Sept 2017	Unaudited 30 Sept 2016	Audited 31 March 2017
	Note	£'000	£'000	£'000
Assets
Non-current assets
Property, plant and equipment		1,423	763	1,095
Goodwill		33,842	36,384	33,732
Other intangible assets		6,296	8,169	7,230
		41,561	45,316	42,057
Current assets
Trade and other receivables		12,687	10,953	11,311
Cash and cash equivalents		1	2,952	2,216
		12,688	13,905	13,527
Total assets		54,249	59,221	55,584
Liabilities
Current liabilities
Bank overdraft	7	(934)	-	-
Other interest bearing loans and borrowings	7	(4,750)	(4,750)	(4,750)
Trade and other payables		(10,607)	(12,883)	(11,768)
Tax payable		(782)	(933)	(557)
Provisions		(172)	(175)	(173)
		(17,245)	(18,741)	(17,248)
Non-current liabilities
Other interest bearing loans and borrowings	7	(2,400)	(1,600)	(1,000)
Deferred consideration		-	-	(2,314)
Deferred tax liabilities		(1,078)	(1,536)	(1,229)
		(3,478)	(3,136)	(4,543)
Total liabilities		(20,723)	(21,877)	(21,791)
Net assets		33,526	37,344	33,793
Equity
Capital and reserves attributable to equity holders of the company
Share capital		34,666	34,639	34,657
Share premium account		9,108	9,108	9,108
Minority interest		1,513	1,513	1,513
Capital redemption reserve		125	125	125
Shares purchased for treasury		(25)	(25)	(25)
Share option reserve		614	327	504
Foreign currency translation reserve		9	3	19
Retained earnings		(12,484)	(8,346)	(12,108)
Total equity		33,526	37,344	33,793

Consolidated interim cash flow statement (unaudited)

		Unaudited Six months ended 30 Sept 2017	Unaudited Six months ended 30 Sept 2016	Audited year  ended 31 March 2017
	Note	£'000	£'000	£'000
Cash flow from operating activities
(Loss)/profit for the period		(386)	(384)	(2,981)
Adjustment for:
Depreciation, amortisation and impairment		1,264	997	5,140
Movement in provisions		(1)	8	6
Foreign exchange		(10)	-	16
Finance income		-	(1)	(165)
Finance costs		79	111	197
Share based payment charge		110	373	1,141
Taxation		67	180	43
Operating cash flow before changes in working capital		1,123	1,284	3,397
(Increase)/decrease in trade and other receivables		(1,285)	27	(281)
(Decrease)/increase in trade and other payables		(955)	1,210	763
Cash (used in)/generated from operations		(1,117)	2,521	3,879
Interest received		-	1	1
Interest paid		(79)	(111)	(197)
Tax paid		(71)	(15)	(549)
Net cash flow from operating activities		(1,267)	2,396	3,134
Cash flows from investing activities
Acquisitions net of cash acquired		(112)	(3,372)	(3,694)
(Payment)/receipt of deferred consideration		(2,528)	151	151
Acquisition of intangible assets		(76)	-	-
Acquisition of property, plant and equipment		(575)	(245)	(815)
Net cash outflow from investing activities		(3,291)	(3,466)	(4,358)
Cash flows from financing activities
Increase in borrowings		2,000	941	75
Repayment of borrowings		(600)	(266)	-
Proceeds from issue of share capital		9	3,000	3,018
Net cash inflow from financing activities		1,409	3,675	3,093
Net (decrease)/increase in cash, cash equivalents and bank overdrafts		(3,149)	2,605	1,869
Cash and cash equivalents at beginning of period		2,216	347	347
Cash and cash equivalents at end of period		(933)	2,952	2,216
Cash and cash equivalents comprise:
Cash at bank and in hand		1	2,952	2,216
Bank overdrafts	7	(934)	-	-
Cash and cash equivalents at end of period		(933)	2,952	2,216

Consolidated interim statement of changes in equity (unaudited)

	Share capital	Share premium account	Capital redemption reserve	Treasury Shares	Minority interest £'000	Share option reserve	Foreign currency translation reserve	Retained earnings	Total  equity
	£'000	£'000	£'000	£'000		£'000	£'000	£'000	£'000

Balance at 31 March 2016	34,139	6,608	125	(25)	-	146	3	(7,962)	33,034

Issue of share capital	500	2,500	-	-	-	-	-	-	3,000
Acquisition of subsidiaries	-	-	-	-	1,513	-	-	-	1,513
Charge in respect of share based payments	-	-	-	-	-	181	-	-	181
Transactions with owners	500	2,500	-	-	1,513	181	-	-	4,694
Loss for the period	-	-	-	-	-	-	-	(384)	(384)
Retranslation of foreign currency	-	-	-	-	-	-	-	-	-
Total comprehensive income for the period	-	-	-	-	-	-	-	(384)	(384)
Balance at 30 September 2016	34,639	9,108	125	(25)	1,513	327	3	(8,346)	37,344
Issue of share capital	18	-	-	-	-	-	-	-	18
Charge in respect of share based payments	-	-	-	-	-	177	-	-	177
Transactions with owners	18	-	-	-	-	177	-	-	195
Loss for the period	-	-	-	-	-	-	-	(3,762)	(3,762)
Retranslation of foreign currency	-	-	-	-	-	-	16	-	16
Total comprehensive income for the period	-	-	-	-	-	-	16	(3,762)	(3,746)
Balance at 31 March 2017 (audited)	34,657	9,108	125	(25)	1,513	504	19	(12,108)	33,793
Issue of share capital	9	-	-	-	-	-	-	-	9
Charge in respect of share based payments	-	-	-	-	-	110	-	-	110
Transactions with owners	9	-	-	-	-	110	-	-	119
Loss for the period	-	-	-	-	-	-	-	(376)	(376)
Retranslation of foreign currency	-	-	-	-	-	-	(10)	-	(10)
Total comprehensive income for the period	-	-	--	-	-	-	(10)	(376)	(386)
Balance at 30 September 2017	34,666	9,108	125	(25)	1,513	614	9	(12,484)	33,526

1.     General Information

Jaywing plc (the "Company") is incorporated and domiciled in the United Kingdom. The Company is listed on the AIM market of the London Stock Exchange. The registered address is Albert Works, Sidney Street, Sheffield, S1 4RG.

The interim financial information was approved for issue on 20th November 2017.       

2.     Basis of preparation

The consolidated interim financial statements for the six months ended 30 September 2017, which are unaudited, have been prepared in accordance with applicable accounting standards and under the historical cost convention except for certain financial instruments that are carried at fair value.

The financial information for the year ended 31 March 2017 set out in this interim report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.  The Group's statutory financial statements for the year ended 31 March 2017 have been filed with the Registrar of Companies.  The auditor's report on those financial statements was unqualified and did not contain statements under Section 498 (2) or Section 498 (3) of the Companies Act 2006.

The consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 March 2017, which have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

3.     Accounting policies

Except as described below, the principal accounting policies of Jaywing plc and its subsidiaries ("the Group") are consistent with those set out in the Group's 2017 annual report and financial statements.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

The following standards and interpretations of relevance to the Group have been issued but are not yet effective and have not been adopted by the Group:

· IFRS 9 Financial Instruments (effective 1 January 2018)

· IFRS 15 Revenue for Contracts with Customers (effective 1 January 2018)

· IFRS 16 Leases (effective 1 January 2019)

· IFRS 2 Classification and Measurement of Share-based Payment Transactions (effective 1 January 2018)

The Group are conducting a review of IFRS 15 - Revenue from Contracts with Customers which is ongoing.

The Group does not currently anticipate that the adoption of the other standards and interpretations above will have a material impact on the Group's financial statements in the period of initial application other than IFRS 16 Leases. A review of IFRS 16 will be conducted to determine its impact on the Group.

Other standards and interpretations in issue but not yet effective are not considered to have any relevance to the Group.

4.     Segment information (unaudited)

The Group reports its business activities in two areas: Agency Services and Media & Analysis being its two primary business activities. Unallocated represents the Group's head office function, along with intragroup transactions.

Total assets exclude intangible assets, cash and external borrowings which have not been allocated to operating segments.

The majority of the Group's activities are carried out within the UK. There is also a small subsidiary in Australia.

4.     Segment information (unaudited) (continued)

Six months ended 30 September 2017
	Agency Services	Media & Analysis	Unallocated	Total Group
	£'000	£'000	£'000	£'000
Revenue	8,381	15,801	(716)	23,466
Direct costs	(1,259)	(5,088)	716	(5,631)
Gross profit	7,122	10,713	-	17,835
Operating expenses excluding depreciation, amortisation, exceptional items, acquisition related costs and charges for share based payments	(6,181)	(7,650)	(2,550)	(16,381)
Operating profit / (loss) before depreciation, amortisation, exceptional items, acquisition related costs and credit for share based payments	941	3,063	(2,550)	1,454
Depreciation	(107)	(116)	(31)	(254)
Amortisation	(646)	(364)	-	(1,010)
Other operating income	46	-	-	46
Other exceptional costs	(29)	(80)	(37)	(146)
Acquisition related costs	-	-	(42)	(42)
Charge for share based payments	-	-	(278)	(278)
Operating profit / (loss)	205	2,503	(2,938)	(230)
Finance costs				(79)
Loss before tax				(309)
Tax expense				(67)
Loss for the period				(376)
Six months ended 30 September 2016
	Agency Services	Media & Analysis	Unallocated	Total Group
	£'000	£'000	£'000	£'000
Revenue	8,216	13,340	(661)	20,895
Direct costs	(1,344)	(3,098)	661	(3,781)
Gross profit	6,872	10,242	-	17,114
Operating expenses excluding depreciation, amortisation, exceptional items, acquisition related costs and charges for share based payments	(5,575)	(7,028)	(2,379)	(14,982)
Operating profit/(loss) before depreciation, amortisation, exceptional items, acquisition related costs and charges for share based payments	1,297	3,214	(2,379)	2,132
Depreciation	(153)	(66)	(16)	(235)
Amortisation	(420)	(342)	-	(762)
Compensation for loss of office	(4)	2	(2)	(4)
Acquisition related costs	-	(98)	(754)	(852)
Charge for share based payments	-	-	(373)	(373)
Operating profit / (loss)	720	2,710	(3,524)	(94)
Finance costs				(110)
Loss before tax				(204)
Tax expense				(180)
Loss for the period				(384)

4.   Segment information (unaudited) (continued)

Year ended 31 March 2017 (audited)
	Agency Services	Media & Analysis	Unallocated	Total
	£'000	£'000	£'000	£'000
Revenue	17,297	27,877	(637)	44,537
Direct costs	(2,901)	(6,296)	637	(8,560)
Gross profit	14,396	21,581	-	35,977
Operating expenses excluding depreciation, amortisation, exceptional items, acquisition related costs and charges for share based payments	(11,812)	(14,464)	(4,841)	(31,117)
Operating profit/(loss) before depreciation, amortisation, exceptional items, acquisition related costs and charges for share based payments	2,584	7,117	(4,841)	4,860
Other operating income	26	-	-	26
Depreciation	(280)	(147)	(46)	(473)
Amortisation	(1,046)	(715)	-	(1,761)
Impairment to the carrying value of goodwill	(2,906)	-	-	(2,906)
Exceptional costs	(187)	(30)	(179)	(396)
Acquisition related costs	-	-	(1,115)	(1,115)
Charges for share based payments	(107)	(135)	(899)	(1,141)
Operating (loss)/profit	(1,916)	6,090	(7,080)	(2,906)
Finance income				165
Finance costs				(197)
Loss before tax				(2,938)
Tax expense				(43)
Loss for the period				(2,981)

The segment into which certain operating expenses are allocated was changed from 1st April 2017. To give an accurate comparison, the numbers for the period to 30th September 2016 and the year to 31st March 2017 have been updated. £505k was transferred from Media & Analysis to Unallocated in the period to 30th September 2016, and £1,153k transferred from Media & Analysis to Unallocated in the year to 31st March 2017.

Total assets	Agency Services	Media & Analysis	Unallocated	Total
	£'000	£'000	£'000	£'000
30 September 2017	27,128	26,613	508	54,249
31 March 2017	29,404	31,722	(5,542)	55,584
30 September 2016	33,477	30,384	(4,640)	59,221

5.     Tax expense (unaudited)

A reconciliation of the charge that would result from applying the standard UK corporation tax rate to profit before tax to the tax charge is given below.

		Six months ended 30 Sept 2017	Six months ended 30 Sept 2016	Audited year  ended 31 March 2017
		£'000	£'000	£'000
Recognised in the consolidated statement of comprehensive income:
Current year tax		220	346	533
Origination and reversal of temporary differences		(153)	(166)	(490)
Total tax charge		67	180	43
Loss before tax		(309)	(204)	(2,938)
Tax charge thereon at UK corporation tax rate of 20% (2016: 20%)		(62)	(41)	(588)
Effects of:
Non-deductible expenses		129	221	402
Share based payment charges		-	-	229
Total tax charge		67	180	43

6.     Loss per share (unaudited)

		Six months ended 30 Sept 2017	Six months ended 30 Sept 2016	Audited year  ended 31 March 2017
		Pence per share	Pence per share	Pence per Share
Basic loss per share		(0.44p)	(0.45p)	(3.42p)
Diluted loss per share		(0.42p)	(0.41p)	(3.13p)

Loss per share has been calculated by dividing the loss attributable to shareholders by the weighted average number of ordinary shares in issue during the period. The calculations of basic and diluted loss per share are:

			Six months ended 30 Sept 2017	Six months ended 30 Sept 2016	Audited year  ended 31 March 2017
			£'000		£'000
Loss for the period from continuing operations			(386)	(384)	(2,965)
Weighted average number of ordinary shares in issue:			Number '000	Number '000	Number '000
Basic			86,896	86,260	86,710
Adjustment for share options, warrants and contingent shares			5,268	7,699	7,959
Diluted			92,164	93,959	94,669

Adjusted earnings per share
		Six months ended 30 Sept 2017	Six months ended 30 Sept 2016	Audited year  ended 31 March 2017
		Pence per share	Pence per share	Pence per Share
Basic adjusted earnings per share		0.73p	1.67p	3.98p
Diluted adjusted earnings per share		0.69p	1.53p	3.65p

Adjusted earnings per share have been calculated by dividing the profit attributable to shareholders before other income, amortisation, impairment, charges for share based payments and the current period tax charge by the weighted average number of ordinary shares in issue during the period. The numbers used in calculating the basic and diluted adjusted earnings per share are reconciled below:

		Six months ended 30 Sept 2017	Six months ended 30 Sept 2016	Audited year  ended 31 March 2017
		£'000	£'000	£'000
Loss before tax		(309)	(204)	(2,938)
Amortisation		1,010	762	1,761
Impairment to the carrying value of goodwill		-	-	2,906
Acquisition related costs		42	852	1,115
Charge for share based payments		110	373	1,141
Adjusted profit attributable to shareholders		853	1,783	3,985
Current period tax charge		(220)	(346)	(533)
		633	1,437	3,452

7.     Bank overdraft, borrowings and loans (unaudited)

		30 Sept 2017	30 Sept 2016	Audited 31 March 2017
Summary		£'000	£'000	£'000
Bank overdraft		934	-	-
Borrowings, undiscounted cash flows		7,150	6,350	5,750
		8,084	6,350	5,750
Borrowings are repayable as follows:
Within 1 year
Bank overdraft		934	-	-
Borrowings		4,750	4,750	4,750
Total due within 1 year		5,684	4,750	4,750
In more than one year but less than two years		1,200	1,200	1,000
In more than two years but less than three years		1,200	400	-
In more than three years but less than four years		-	-	-
Total amount due		8,084	6,350	5,750
Average interest rates at the balance sheet date were:		%	%	%
Overdraft		-	-	-
Term loan		2.61	2.75	2.61
Revolving credit facility		2.51	2.75	2.51

As the loans are at variable market rates their carrying amount is equivalent to their fair value.

The borrowing facilities available to the Group at 30 September 2017 were £1.1 million (2016: £2.0 million) and, taking into account cash balances within the Group, there was £1.1 million (2016: £5.0 million) of available borrowing facilities.

A composite accounting system is set up with the Group's bankers, which allows debit balances on overdraft to be offset across the Group with credit balances.

Reconciliation of net debt	Cash at bank and in hand	Overdraft	Borrowings	Net debt
	£'000	£'000	£'000	£'000
30 September 2017	1	(934)	(7,150)	(8,083)
31 March 2017	2,216	-	(5,750)	(3,534)
30 September 2016	2,952	-	(6,350)	(3,398)

8.     Provisions (unaudited)

		30 Sept 2017	30 Sept 2016	Audited 31 March 2017
		£'000	£'000	£'000
At the beginning of the period		173	167	167
Additional provisions		(1)	8	6
At the end of the period		172	175	173

Provisions relate to leases in the Group where the commercial benefit has either ceased or will cease before the normal expiry period.

9.     Share capital (unaudited)

Authorised:

	45p deferred shares		5p ordinary shares
	£'000		£'000
Authorised share capital at 31 March 2017 and 30 September 2017	45,000		10,000

Allotted, issued and fully paid

	45p deferred shares	5p ordinary shares
	Number	Number		£'000
Issued share capital at 31 March 2017	67,378,520	86,709,898		34,657
Issue of share options	-	185,869		9
Issued share capital at 30 September 2017	67,378,520	86,895,767		34,666

10.   Information on acquisitions

On 30 August 2017, Jaywing announced the acquisition of social publishing, native marketing and audience first creative agency HeadOfffice. The agency will become part of its Leeds based digital marketing business Epiphany.

11.   Related party transactions (unaudited)

There were no significant changes in the nature and size of related party transactions for the period from those disclosed in the Annual Report for the year ended 31 March 2017.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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