THE MISSION GROUP
plc
("MISSION", "the
Group")
FINAL RESULTS FOR THE YEAR
ENDED 31 DECEMBER 2023
Robust response to
challenging market conditions with continued resilient revenue
growth underpinned by strong Client retention and strategic new
business wins
28 March 2024
The MISSION Group (AIM: TMG), creator
of Work That
CountsTM, comprising a group
of digital marketing and communications Agencies delivering real,
sustainable growth for its Clients, announces its final results for the
year ended 31 December 2023.
FINANCIAL HIGHLIGHTS
Year ended 31 December, Continuing
operations
|
2023
|
2022
|
change
|
· REVENUE (OPERATING INCOME)
|
£86.3m
|
£79.6m
|
+£6.7m
|
· HEADLINE OPERATING PROFIT*
|
£6.5m
|
£8.8m
|
-£2.3m
|
· HEADLINE PROFIT MARGINS
|
7.5%
|
11.1%
|
-3.6%
|
· HEADLINE PROFIT BEFORE TAX*
|
£4.2m
|
£7.9m
|
-£3.7m
|
· REPORTED LOSS/PROFIT BEFORE TAX
|
-£10.9m
|
£3.7m
|
-£14.6m
|
· HEADLINE EARNINGS PER SHARE*
|
3.1p
|
6.9p
|
-3.8p
|
· HEADLINE DILUTED EARNINGS PER SHARE*
|
3.1p
|
6.9p
|
-3.8p
|
*Headline results are
calculated before acquisition adjustments, start-up costs and
exceptional restructuring costs (as set out in Note 3).
BUSINESS HIGHLIGHTS
Revenue growth on continuing operations of 9% (+2% like for
like) reflects robust trading from Agencies despite challenging
market conditions
· Strong and enduring Client retention across Agencies
underpinned by strong focus on Client service - 53% revenue
currently comes from Clients who have been with the Group for over
5 years
|
· Strategic new Client wins over the year include Post
Office, Lumen, EasyJet, Beauty Pie,
Pandora, Meta, Hawaiian Tropic and Brabantia.
|
· Successful launch of MISSION
HUBS Program, extending Group access to new markets and
revenue streams through trusted partner and affiliate
relationships
|
Significant progress made against Value Restoration Plan
("VRP"), launched following trading updated on 23 October 2023
("the Update")
|
· Headline profit before tax from continuing operations of
£4.2m, in line with revised guidance in the Update
|
· Careful management of costs, which to date has seen an
annualised projected £5.0m of profit improvements secured for
2024
|
· Disposal of Group's 80% shareholding in Pathfindr with
proceeds used to pay down debt
|
· Net
bank debt as at 31 December 2023 of £15.4m reflected a considerable
improvement on previously stated guidance provided in the
Update
|
Current trading and outlook remain in line with
expectations
· Trading has started well and in line with
expectations.
|
· A
number of new business wins including Herta UK and global
pharmaceutical company Doctor Reddy's were secured in January 2024
and the year brings a series of high profile European and Global
sporting events which should offer important new business
opportunities
|
· Remain focussed on delivering further progress against VRP
with further efficiencies still being achieved
· Net
debt as at 29 February 2024 of £19.5m, excluding the remaining
£1.8m HMRC Time to Pay creditor
|
· Successful refinancing of our existing debt facility with
long-standing lender NatWest, strengthens the Group's balance
sheet
|
|
David Morgan, MISSION's Non-Executive
Chair, commented: "The difficulties encountered in 2023
as a result of the challenging trading backdrop have been well
recorded. Nevertheless the year has still seen the Group continue
to grow revenues with strong client retention and strategic new
business wins.
"We have made quick progress in
executing on our Value Restoration Plan, ensuring we have a
platform from which Group profitability will improve in 2024 and
remain focussed on continuing to strengthen our balance sheet.
Trading in the new financial year remains in line with expectations
and this further underpins our confidence for the year ahead and
beyond."
ENQUIRIES
James Clifton, Chief Executive
Officer
Giles Lee,
Chief Financial Officer
The MISSION Group plc
|
020 7462 1415
|
Simon
Bridges/Andrew Potts/Harry Rees
|
|
Canaccord Genuity Limited
(Nominated Adviser and Broker)
|
020 7523 8000
|
|
|
Kate Hoare / Alexander
Clelland
|
|
HOUSTON (Financial PR and Investor
Relations)
|
0204 529 0549
|
NOTES TO EDITORS
MISSION is a collective of Creative and
MarTech Agencies led by entrepreneurs who encourage an independent
spirit. Employing over 1,100 people across 25 locations and 3
continents, the Group successfully combines its diverse expertise
to produce Work That Counts
TM for our Clients, whatever their ambitions. Creating
real standout, sharing real innovation and delivering real growth
for some of the world's biggest brands. www.themission.co.uk
Certain information contained within Note 21 (Further
Information) in this announcement is deemed to constitute inside
information as stipulated under the Market Abuse (Amendment) (EU
Exit) Regulations 2019. Upon the publication of this announcement,
this inside information is now considered to be in the public
domain.
CHAIR'S STATEMENT
The difficulties that we
encountered in 2023 have been well recorded, suffice to say that we
ended in a better place than was feared after our Trading Update in
October. Nevertheless and with hindsight we should have reacted
earlier and faster than we did but the response from the management
in the final quarter was very impressive.
In returning to Chair the business in November, I learnt that
despite those setbacks we have a robust and growing business which,
given the structural and operational cost reductions we have
implemented, is set fair for 2024 and beyond. I also learnt that we
have a supportive Bank, exceptional Clients and Agencies that
continue to punch above their weight. Capable of winning against
whatever competition we come across.
In 2023 we had some great new business wins and two contributory
factors to our downturn that I am pleased to report have already
been rectified. We sold the Pathfindr business in December 2023 and
thereby removed the losses in running costs for the current year.
We have also turned around our US Technology Agency that had
had a horrendous first six months in 2023 but showed
some recovery
over the final six
months.
Structurally we have reassessed our operating model and tweaked or
changed the way we do things, which as a Board will keep us risk
averse and nimble. Whilst we remain confident that our long-term
strategy remains sound we have streamlined our operations, ensuring
we are leaner and more able to react to market conditions. Our
Agencies will be supported by innovative specialisms from data to
AI and behavioural to media. With innovative, ostrobogulous
creativity, embedded in all that we do.
Board
I was pleased to be asked by the
Board to return as Non-Executive Chair in November 2023. Despite
the ongoing challenges for our industry, MISSION is made up of extremely
dynamic, entrepreneurial Agencies managed by very talented people
and I look forward to working closely with James, Giles and the
senior team to help the Group consolidate its strategic progress
and deliver long-term value for all our stakeholders.
On behalf of the Board and the
wider team at MISSION I
would also like to thank Julian Hanson-Smith for his contribution
to the Group during his eight year tenure.
Dividend
In line with the Group's
commitment to reducing its net debt position as soon as possible,
as previously reported the Board took the decision to cancel the
interim dividend of 0.87 pence per share (approximately £0.79m)
that was due to go ex dividend on 2 November 2023 and be paid to
shareholders on 1 December 2023. The Board has proposed that,
whilst there will be no final FY2023 dividend, it remains committed
to a progressive dividend policy once the balance sheet
strength is restored.
Debt Refinancing
We have refinanced our existing
debt facility with our long-standing lender NatWest. Further detail
on this is included in Notes 20 and 21.
Outlook
With our new Value Restoration
Plan in place we are confident of the future and have redefined our
strategy against the goals that we are setting over the coming five
years.
Through 2024 and 2025 our focus will
be on debt reduction, rebuilding the balance sheet and delivering
our profit targets. Thereafter we will look to expand faster under
new initiatives but retain our focus of being a Group active in
generalist and specialist areas whether that be sports, healthcare,
property, technology or automotive.
I believe that we have the platform, the passion and the people in
place to deliver sustained success in the years to come and I am
delighted to be back among them.
David Morgan
Non-Executive Chair
CHIEF EXECUTIVE'S STATEMENT
The market challenges that both we
and the industry experienced in 2023 have been well documented but
it is important not to lose sight of the significant strategic
progress that was achieved over the course of the year. The year
saw us confirm strategic new Client wins that are not only
testament to the creativity of our Agencies but also our commitment
to deliver work that underpins real business growth and the growing
strength of our Group capabilities, reinforced by the investments
made to expand our Client service offering in both 2023 and
previous years.
As previously stated the collapse
of the US tech market in the first quarter of 2023 resulted in a
sudden reduction and deferral of Client spending that proved
difficult to quickly mitigate at a point when the Group was fully
resourced following a record 2022 in that sector, leaving no margin
for error in the remainder of the year.
As soon as the resulting trading
impact became clear in the third quarter, the Board promptly
instigated a full strategic review of the business, putting in
place a Value Restoration Plan ("VRP") through which progress was
immediately made to drive significant cost saving initiatives and
margin improvements.
The response of the business has
been incredible, a testament to the 'can-do' and entrepreneurial
culture inherent in MISSION. All Agencies have been tasked
with delivering Agency-led plans to drive appropriate efficiencies
whilst still maintaining our market-leading focus on Client service
and business development. To date this has seen an annualised
projected £5.0m of profit improvements secured for 2024.
Part of our VRP has also included
a review of the Group's balance sheet with a focus on improving
flexibility and resilience in order to support both our medium and
long term plans.
The Group has identified the
selected disposal of a non-core business and since the year end has
been pleased to confirm the disposal of its 80% shareholding in
Pathfindr Ltd with the initial proceeds of £1m being deployed to
reduce debt.
Furthermore, the Board have taken
a cautious view regarding the goodwill valuation of our agencies
and in so doing have impaired the carrying value of the Story and
Krow agencies, resulting in a £10.3m, non-cash write down in
2023.
Finally, we are pleased that we
have refinanced our existing debt facility with NatWest.
Performance
Review
Despite the challenges experienced
throughout 2023 which, as previously mentioned, were particularly
felt by our Agencies exposed to the Technology and Mobility
sectors, our teams have remained nimble and quick to respond to new
market opportunities as trading momentum improved in the final
quarter of the year. This resulted in FY2023 operating income
of £86.3m from continuing operations, representing growth of 9% on
2022 (2022: £79.6m) including the impact of 2023 acquisitions and
ahead of Advertising Association expectations for 2023 of
2.6%.
Of the £6.8m increase in operating
income from continuing operations, organic growth of £1.6 million
was up 2% on the prior year driven by a particularly robust
performance across our Property and Sports and Entertainment
business segments. Client retention across the Group also continued
to be excellent, a true testament to our teams' focus on excellent
Client service, with 53% of operating income now coming from
Clients who have been with the Group for over 5 years.
Whilst the wider new business
landscape remained challenging we have continued to leverage the
investments we have made in previous years to enhance MISSION's service offering and
capabilities. This has underpinned our success on several highly
significant new business mandates. Our appointment to UK Post
Office in September marked the Group's largest Client mandate to
date and represents a fully integrated cross-Agency response. Other
notable new Client wins secured over the course of the year
included Lumen, EasyJet, Beauty Pie, Pandora, Meta, Hawaiian Tropic
and Brabantia. Good momentum has continued into 2024 with further
new Client wins including Herta UK for Speed and global
pharmaceutical company Dr Reddy's for Bray Leino.
In line with our strategic areas
of focus, the first half of the year saw us make selective
investments in Data Science & Digital Analytics through the
acquisition of Mezzo Labs and Growth Media through the launch of
Turbine, an integrated Growth Media agency specialising in earned,
owned and paid media for consumer brands. These, along with
recent acquisitions Populate and Influence, continue to contribute
new, profitable, revenue streams to the Group contributing £5.2m to
the £6.8m increase in operating income growth from continuing
operations in 2023, as well as underpinning our work for existing
Clients. We look forward to realising the continued benefit of this
enhanced service capability in 2024.
We continue to see multiple
examples of AI infused work being created in our Agencies and as
part of our plans to define and hone our Group AI strategy have
created an AI steering panel focused on addressing three key
pillars of focus; ensuring AI literacy in every role to empower and
enable everyone with AI learning; provide specialist centralised AI
support and resources to work alongside our Agencies; and define
guidelines to inform AI usage across the Group and ensure
compliance and best practice.
The year also saw the Group launch
its MISSION Hubs Program,
an agency ecosystem with MISSION at its heart, connected to a
series of Affiliates and Partners from around the globe. The
Program provides the Group with extended access to new markets and
revenue streams through trusted relationships. At the same time,
Affiliates and Partners gain access to our 19 Agencies in 25
locations worldwide and the MISSION Advantage portfolio of
strategic services including media, data & analytics, AI and
production.
Making positive change
Following the launch of our
Environmental, Social and Governance (ESG) manifesto 'Making
Positive Change' in 2020, we have made further progress against our
key commitments over the course of 2023.
Particular areas of progress have
included the development of our Carbon Transition Plan which
clearly outlines how we will transform existing assets, operations,
and business models to transition towards achieving net-zero by
2050. Moving forward this plan will be reviewed annually to ensure
we are assessing not just our progress against our net-zero target
but are committed to action for change.
We are also pleased to be adopting
a new approach in 2024 to re-evaluate our social targets. In order
to ensure we can become a truly diverse and inclusive place to work
we've designed four key areas that we'll focus on: workforce,
workplace, marketplace and insight, and full details of this
approach and our wider progress against our commitments can be
found in our ESG Report which is available on our website within
the Culture section under Making A Positive Change.
Current Trading and
Outlook
On behalf of the Board I would
like to thank all of our talented team for their commitment and
dedication in 2023.
We remain focused on delivering
further progress against our Value Restoration Plan and I am
pleased that the efficiencies already realised are helping to
restore profitable growth and reinforce the Group's balance sheet
which, is now further underpinned by the completion of the
successful bank refinancing.
Whilst the market is still
somewhat subdued, trading in the current financial year has started
well and in line with expectations. 2024 brings with it a number of
high profile European and Global sporting events which should bode
well for the marketeer's calendar including the Olympics and UEFA
European Championships and we are particularly pleased to have
secured a number of early new business wins in January.
The opening of our new central
London Head Office has also created a busy hub for the Group, the
perfect home for continued collaboration and learning and it is
really encouraging to see the benefit to our teams' growth and
development, on a day to day basis.
In summary, the plan for the year
ahead is simple. We remain focused on leveraging the continued
success of MISSION's
integrated Group offering to expand our capabilities and market
leading services for our Clients.
James Clifton
Group Chief Executive
CHIEF FINANCIAL OFFICER'S REVIEW
Trading performance
Overview
Growing revenues in a flat and
often unpredictable market is not easy. The strong operating income
growth delivered in 2023, despite a particularly challenging year
for our Technology segment that weighed heavily on both profit and
working capital, highlights both the successful integration of
recent acquisitions and investments as well as the underlying
resilience of our core agency portfolio.
Operating income growth in 2023 of
9% from continuing operations provided a helpful platform and was a
significant achievement. However, managing operating expenditure
levels in a changeable trading environment proved problematic as
the fixed nature of our cost base rendered us over-resourced when
revenue streams reduced suddenly in certain markets and
geographies, most notably the US Technology market sector. The
result of this was a reduction in headline operating margins on
continuing operations to 7.5% (2022: 11.1%). Therefore, headline
operating profit from continuing operations reduced to £6.5m (2022:
£8.8m). A cautious review of the carrying value of our agency
assets, primarily in relation to the Story and Krow agency groups,
resulted in one-off impairment adjustment of £10.3m. This is
described more fully below and set out in Note 3. This adjustment
along with a number of other, smaller adjustments and an increase
in borrowing costs led to a reported loss before tax of £12.0m
(2022 £0.7m profit).
Another unusual dynamic
experienced in the year as a result of the downturn in US
Technology trading was a significant reduction in Client
prepayments (deferred income), particularly through quarter 2 and
quarter 3. Furthermore, the Group experienced a more general
extension to the working capital cycle as assignments in most
segments took considerably longer to get from 'bid' status through
to purchase order, then billing and finally cash collection. These
factors, combined with how late in the year many sales were
delivered, put considerable pressure on working capital. This in
turn lay heavy on net debt, pushing the Group to the limits of its
banking facility in the later months of the year. The threat of
exceeding these facilities and the risk of not passing banking
covenants has seen the Group work with long-time, and highly
supportive, lender NatWest plc on a refinancing plan.
This plan, the 'Value Restoration
Plan', saw the Group review operational expenditure in order to
make significant improvements to profitability on continuing
operations going into 2024. The Group has also considered different
strategies to reduce leverage, including divestments of non-core
operations and as a result of this review disposed of Pathfindr Ltd
for £1.3m in December. Furthermore, both accrued income and
deferred income balances closed at similar levels to December
2022.
The Group has successfully
refinanced its debt facility, further details of which are set out
in Notes 20 and 21.
Billings and revenue
Turnover (billings) was 7% higher
than the previous year, at £195.9m (2022: £182.7m), but since
billings include pass-through costs (e.g. TV companies' charges for
buying airtime), the Board does not consider turnover to be a key
performance measure for its Agencies. Instead, the Board views
operating income (turnover less third-party costs) as a more
meaningful measure of activity levels. Taken as a whole, the
Group's operating income (referred to as "revenue") from continuing
operations for the year increased by 9% to £86.3m (2022:
£79.6m).
Of this £6.8m growth in revenue,
£1.6m (2%) was organic, reflecting the continued growth across a
number of MISSION business segments, most notably Property (£1.7m
increase in revenue) and Sports & Entertainment (£0.5m increase
in revenue), and in so doing mitigated the dramatic and sudden
reduction in revenues experienced in the Technology and Mobility
segment in the first half of 2023 (£2.2m reduction in revenue). The
revenue run rate from this segment was restored in the final
quarter.
The remaining £5.2m of growth came
in part from the benefit of a full year of Influence (acquired
December 2022) and Populate (acquired October 2022) trading in the
Sports and Entertainment segment. This was supplemented by the
revenue impact of new MISSION Advantage agency Mezzo (acquired
February 2023).
The Group has reviewed and
restructured its operations as part of the Value Restoration Plan
and as a result the Board made the decision to dispose of its 80%
share of Pathfindr Ltd. The disposal took place in December 2023
alongside the decision to withdraw from its Technology and Mobility
operations in Singapore. The Group maintains a presence in SE Asia
through Bray Leino Splash PTE.
One of the differentiating
features of MISSION is the longevity and loyalty of its Client base
exemplified by over 50% of income coming from Clients with whom
MISSION has worked for more than five years. We believe this is due
to the dynamic and Agency-driven culture which ensures Clients
receive a boutique level of Client service but supported by the
resources of a multi-national group.
Loss and margins
The Directors measure and report
the Group's performance primarily by reference to headline results
in order to avoid the distortions created by the one-off events and
non-cash accounting adjustments relating to acquisitions that are
detailed below. Headline results are therefore calculated before
acquisition adjustments, exceptional items and losses from new
ventures as described above and set out in Note 3.
The Group reported an operating
loss across all operations this year of £9.7m compared to a £1.6m
profit in 2022.
Reported profit before tax
decreased by £12.8m, from £0.7m in 2022 to a £12.0m loss in 2023,
resulting in a loss after tax of £11.9m (2022 £0.0m).
Adjustments to reported profits,
detailed further in Note 3, totalled £14.8m (2022: £7.0m) a
significant increase on the previous year. This was primarily due
to the £10.3m impairment of the Story (£5.2m) and Krow (£5.1m)
intangible assets following a cautious review of these long-held
cash generating units. The charges of £5.3m in 2022 related to
similar valuation-driven impairments on Splash and
Pathfindr.
In addition to this the Group
invested £1.8m in new ventures (2022: £0.8m) most notably the new
performance marketing joint venture Turbine and the Livity
youth-marketing offer as well as smaller investments in the MISSION
Hubs venture and a MISSION office in China to serve Clients in the
region.
Acquisition-related costs of £1.7m
compared to £0.6m in 2022. The 2023 charge consists primarily of
the amortisation of intangibles recognised on acquisitions of £0.9m
(2022: £0.5m) as well as professional fees in support of the
acquisitions such as Mezzo made in the year. Finally, there was an
increase in fair value of contingent consideration of £0.4m in 2023
following the strong performance of recently acquired agencies, in
contrast to a reduction in valuation in 2022 of £0.3m relating to
historic acquisitions.
As part of the Value Restoration
Plan there were, unfortunately, significant one-off headcount
reductions late in 2023. The resultant one-off costs associated
with this restructure £0.7m (2022: £0.4m). Bank refinancing costs
of £0.5m have been provided for in 2023 (2022: £Nil).
Finally, the Group was pleased to
record a profit on the disposal of the Pathfindr operation of £0.3m
(2022: £Nil).
Adjusting for these items delivers
a headline operating profit from continuing operations of £6.5m
(2022: £8.8m).
The headline operating expenditure
base from continuing operations increased in the year by 13% (from
£70.8m in 2022 to £79.8m in 2023). On a like for like basis,
removing the impact of Influence, Populate and Mezzo, this
expenditure increased by £4.7m. Operating expenditure grew in the
Property segment pro-rata with revenue (£1.3m increase) but also
grew by £1.0m in Technology and Mobility despite reduced revenues.
This anomaly occurred as a result of the sudden and extreme nature
of the revenue reductions in early 2023 from a high base at the end
of 2022. Operating expenditure also increased by £2.5m on a like
for like basis in the MISSION Advantage platform as further
services were shared across the agency base.
Interest charges of £2.5m
increased significantly on 2022 (£1.0m) driven by the increased net
debt levels alongside interest rate increases globally as central
banks sought to curb inflationary pressures.
The resultant headline profit
before tax from continuing operations for 2023 was £4.2m, a
reduction of £3.7m on 2022 at £7.9m.
Taxation
The headline tax rate increased to
31.8% (2022: 21.1%), as a result of the increase in the corporation
tax rate in 2023, an increase in non-deductible expenses, and lower
levels of non-taxable income.
On a reported basis in 2023 the
impact of the large one-off non-deductible expenditure primarily in
relation to impairment of goodwill resulted in a tax credit of
£0.2m on a reported loss before tax of £12.0m, a rate of 1.3%. This
compares to the 95.2% tax rate reported in 2022, when the
non-deductible impairment of goodwill increased the tax rate
payable on a profit before tax of £0.7m.
The tax rate is generally expected
to be consistently higher than the statutory rate (23.5% in 2023,
an increase from the 19% in 2022) when the Group is profit making,
since the amortisation of acquisition-related intangibles is not
deductible for tax purposes and tax rates on our US operations are
substantially higher than the UK corporation tax rate.
Earnings Per Share
After tax, the reported loss for
the year was £11.9m (2022: £0.0m profit) and EPS was -13.4 pence
(2022: 0.0 pence). On a diluted basis, EPS was -13.4 pence (2022:
0.0 pence).
However, after adjustments,
Headline EPS from continuing operations was 3.1 pence (2022: 6.9
pence) and, on a diluted basis, was 3.1 pence (2022: 6.9
pence).
Dividend
The Board has historically adopted
a progressive dividend policy,
aiming to grow dividends each year
in line with earnings but always balancing the desire to reward
shareholders via dividends with the need to fund the Group's growth
ambitions and maintain a strong balance sheet and healthy
distributable reserves (2023: £33.7m, 2022: £41.0m).
As a consequence of the pressure on
liquidity experienced in late 2023 and the resulting refinancing
process the Board has made the decision to pause dividend payments
until balance sheet strength is restored (2022: 2.50 pence per
share). The Board will keep this decision under regular
review.
Balance sheet
In common with other marketing
communications groups the main features of our balance sheet are
the goodwill and other intangible assets resulting from
acquisitions made over the years and the debt taken on in
connection with those acquisitions.
The Board undertakes an annual
assessment of the value of all goodwill, explained further in Note
10. At 31 December 2023 the Board concluded that, in the case of
the Story and Krow assets, an impairment adjustment would be
required in order to provide a fairer reflection of value. These
assets have delivered considerable cash inflows since their
original acquisition and are still believed to have a value going
forwards.
The level of intangible assets
relating to acquisitions and internal investments decreased by
£9.1m in the year. This movement being primarily a function of the
acquisition of Mezzo in February netting off against the impairment
of the Story and Krow goodwill and intangible assets. The level of
'total debt' (combined net bank debt and acquisition obligations)
increased by £5.3m.
The Group's acquisition obligations
at the end of 2023 were £5.5m (2022: £4.1m), to be satisfied by a
mix of shares and cash in some instances, at the Group's
discretion. All of this is dependent on post-acquisition earn-out
profits. £1.7m is expected to fall due for payment in cash within
12 months and a further £2.8m which can be satisfied by a mix of
shares and cash in the subsequent 12 months.
Dividend payments and expenditure
on major capital projects such as acquisitions and investments have
been paused until such time as the Directors believe that balance
sheet strength is suitable.
The Directors therefore believe
that the Group's current balance sheet can comfortably accommodate
these acquisition obligations alongside the Group's commitments to
standard capital expenditure (expected to run at similar levels to
recent years).
Consolidated Net Current Assets
closed at £5.6m (2022 £7.7m). This was in part the result of the
increase in Acquisition Obligations noted above and in part a
reduction in cash and short term deposits of £1.5m in comparison to
2022.
At the end of the year the Group's
net bank debt stood at £15.4m (2022: £11.4m). On an adjusted basis
(pre IFRS16) the leverage ratio of net bank debt to headline EBITDA
was x2.0 at 31 December 2023 (2022: x1.2). The Group's adjusted
ratio of total debt, including remaining acquisition obligations,
to EBITDA at 31 December 2023 was x2.7 (2022: x1.6).
Cash flow
The cash flow in 2023 was defined
by the highly unusual underlying working capital outflows,
particularly across the second and third trading
quarters.
The working capital movement is
defined as the aggregate movement in receivables, stock and
payables and was at an overall level reported as an inflow of £0.3m
(2022: £1.1m). However, within this there were two key movements.
The first relates to an increase in the Other tax and social
security creditor, primarily as a result of £4.3m of delayed VAT
and PAYE payments, a payment plan having been agreed with HMRC
whereby all delayed payments will be repaid by the end of May
2024.
This inflow mitigates working
capital outflows stemming from the increase in inventory (£0.8m),
increase in prepayments (£1.0m) and an increase in trade
receivables of £1.8m as a result of the late sales cycle in 2023,
with more sales falling into November and December than in
2022.
As previously noted, banking
headroom came under pressure during the later months of the year.
One reason for this was the extended nature of the working capital
cycle as assignments took considerably longer to get from 'bid'
status through to purchase order, then billing and finally cash
collection. The extension of this cycle, combined with how late in
the year many sales were delivered put considerable pressure on
working capital as the year progressed. This was mitigated almost
entirely by the end of the year but nonetheless had a significant
impact on the business especially when combined with a drastic
reduction in deferred income balances across that same period, as
occurred this year.
Capital expenditure in the year
includes the refit of the new London offices (£1.6m).
The closing net bank debt position
for 2023 was £15.4m. This represents an increase in net debt of
£4.0m on the 2022 year-end net bank debt of £11.4m.
Headline operating profit from
continuing operations of £6.5m (2022: £8.8m) converted into £1.8m
(2022: £8.5m) of 'free cash flow' (defined as net cash inflow from
operating activities less tangible and intangible capital
expenditure).
Bank loans increased by £2.5m and
this, coupled with the free cash flow and net proceeds from the
disposal of Pathfindr provided funding for new acquisitions
amounting to £0.4m (2022: £1.9m), the settlement of contingent
obligations relating to the profits generated by previous
acquisitions totalling £0.4m (2022: £0.8m) and dividends of £1.7m
(2022: £2.2m).
Working capital days: Total debtor
days and work in progress days both increased and creditors days
remained in line with last year. Overall, the Group's total working
capital days of 17.1 represents a deterioration from the 2022
equivalent (9.6 days), albeit fairly similar to 2021 (15.0
days).
Going concern
The Board believe that, through
the actions taken in recent months and described above, the Group
is well placed to recover previous levels of profitability, cash
generation and facility headroom. However, further scenario
modelling has been undertaken of the Group's net debt position into
the reasonably foreseeable future. This modelling included cautious
assumptions about trading performance, investment plans and
acquisition consideration obligations. The principal uncertainty in
the projections is the continued growth of the trading agencies in
an unpredictable macro-economic environment and potential increases
in cost base that are not proportionate to revenue
growth.
The Directors have considered the
resulting financial projections and cash flow projections for the
Group alongside the availability of renewed committed bank
facilities of £20m (expiring 5 April 2026), an overdraft facility
of £9m (which will reduce to £3m in the event there is a
deleveraging event - further information in note 20 to the
financial statements), and the headroom afforded against Total Debt
Leverage and Bank Debt Leverage covenant tests for the coming 12
months. This successful recent facility renewal is against
the backdrop of the challenging trading conditions experienced in
FY23 which resulted in significant strain on working capital
particularly in the latter half of the year as described
earlier. These conditions led to potential covenant
compliance difficulties and a formal waiver of the covenant
requirements before the year end as part of a package of measures
ultimately resulting in the new facility. The revised
position leaves the Group much better placed to navigate its
funding needs going forward in the knowledge that the bank has been
supportive of the measures already taken and demonstrates
confidence in the strategies adopted by the Board to lower the
overall debt position.
The Directors have also considered
and understood the mitigating actions that would be required in the
event of reduced revenue profiles and any further consequential
difficulties with covenant compliance. Such potential
mitigating actions would include a review of headcount,
particularly in the areas impacted by any downturn.
Furthermore the Group have considered actions that can be taken
should increased headroom be required. This would most likely be
the disposal of non-core or high value agency assets.
Against these scenarios, the Group
was demonstrated to have adequate headroom against the facilities
described above. This leads the Directors to become satisfied that,
taking account of reasonably possible changes in trading
performance, it is appropriate to adopt the going concern basis in
preparing the financial statements.
Key performance indicators
KPIs are designed to monitor the
Group's revenue and profit growth, within a safe capital
structure.
The targets, along with the
outcome for 2023 are as follows:
· Achieve organic revenue growth of at least 5% per year
[delivered + 2%];
· Increase headline operating profit margins to 14% [delivered
8%];
· Grow
headline profit before tax by 10% year-on-year; and [delivered a
47% reduction]
· Maintain the ratio of net bank debt to EBITDA* at or below
x1.5 [delivered x2.0] and the ratio of total debt (including both
bank debt and deferred acquisition consideration) to EBITDA at or
below x2.0 [delivered x2.7].
*EBITDA is headline operating
profit before depreciation and amortisation charges.
At the individual Agency level,
the Group's financial KPIs comprise revenue and controllable
profitability measures, predominantly based on the achievement of
the annual budget. More detailed KPIs are applied within individual
Agencies. In addition to financial KPIs, the Board periodically
monitors the length of Client relationships, the forward visibility
of revenue and the retention of key staff.
Outlook
We enter the year expecting 2024
to be another year of growth, albeit at a time of increasing global
macro-economic & political uncertainty.
The year has started well and
prospects for organic growth and recovery are good. We also expect
to make additional margin improvements in spite of the cost
pressures impacting our sector and we anticipate reaping the
benefits of our strategic review and the focus on the core
operations, offerings and capabilities. Furthermore and as a result
of the actions taken in 2023 this growth is well set to be highly
cash generative.
Giles Lee
Group Chief Financial
Officer
Consolidated Income
Statement
For the year ended 31 December
2023
|
|
Continuing
operations
2023
|
Discontinued
operations
2023
|
Total 2023
|
Continuing operations
2022
|
Discontinued operations
2022
|
Total
2022
|
|
|
Note
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
|
|
|
|
|
|
|
|
|
TURNOVER
|
2
|
195,450
|
438
|
195,888
|
182,324
|
361
|
182,685
|
|
Cost of sales
|
|
(109,130)
|
(208)
|
(109,338)
|
(102,767)
|
(104)
|
(102,871)
|
|
OPERATING INCOME
|
2
|
86,320
|
230
|
86,550
|
79,557
|
257
|
79,814
|
|
Headline operating
expenses
|
|
(79,840)
|
(1,668)
|
(81,508)
|
(70,765)
|
(392)
|
(71,157)
|
|
HEADLINE OPERATING PROFIT / (LOSS)
|
|
6,480
|
(1,438)
|
5,042
|
8,792
|
(135)
|
8,657
|
|
|
|
|
|
|
|
|
|
|
Goodwill, business and intangible
impairment
|
3
|
(10,409)
|
-
|
(10,409)
|
(2,396)
|
(2,861)
|
(5,257)
|
|
Profit on sale of Pathfindr (Note
17.3)
|
|
-
|
308
|
308
|
-
|
-
|
-
|
|
Start-up costs
|
3
|
(1,818)
|
-
|
(1,818)
|
(776)
|
-
|
(776)
|
|
Acquisition adjustments
|
3
|
(1,652)
|
-
|
(1,652)
|
(593)
|
-
|
(593)
|
|
Restructuring costs
|
3
|
(715)
|
-
|
(715)
|
(402)
|
-
|
(402)
|
|
Bank refinancing
|
3
|
(475)
|
-
|
(475)
|
-
|
-
|
-
|
|
OPERATING (LOSS) / PROFIT
|
|
(8,589)
|
(1,130)
|
(9,719)
|
4,625
|
(2,996)
|
1,629
|
|
Share of results of associates and
joint ventures
|
|
150
|
-
|
150
|
160
|
-
|
160
|
|
(LOSS) / PROFIT BEFORE INTEREST AND TAXATION
|
|
(8,439)
|
(1,130)
|
(9,569)
|
4,785
|
(2,996)
|
1,789
|
|
Net finance costs
|
5
|
(2,472)
|
-
|
(2,472)
|
(1,046)
|
-
|
(1,046)
|
|
(LOSS) / PROFIT BEFORE TAXATION
|
6
|
(10,911)
|
(1,130)
|
(12,041)
|
3,739
|
(2,996)
|
743
|
|
Taxation
|
7
|
(225)
|
387
|
162
|
(1,273)
|
566
|
(707)
|
|
(LOSS) / PROFIT FOR THE YEAR
|
|
(11,136)
|
(743)
|
(11,879)
|
2,466
|
(2,430)
|
36
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
Equity holders of the
parent
|
|
(11,283)
|
(743)
|
(12,026)
|
2,439
|
(2,430)
|
9
|
|
Non-controlling interests
|
|
147
|
-
|
147
|
27
|
0
|
27
|
|
|
|
(11,136)
|
(743)
|
(11,879)
|
2,466
|
(2,430)
|
36
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
(pence)
|
9
|
(12.6)
|
(0.8)
|
(13.4)
|
2.7
|
(2.7)
|
0.0
|
|
Diluted earnings per share
(pence)
|
9
|
(12.6)
|
(0.8)
|
(13.4)
|
2.7
|
(2.7)
|
0.0
|
|
Headline basic earnings per share
(pence)
|
9
|
3.1
|
(1.2)
|
1.9
|
6.9
|
(0.1)
|
6.8
|
|
Headline diluted earnings per share
(pence)
|
9
|
3.1
|
(1.2)
|
1.9
|
6.9
|
(0.1)
|
6.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Consolidated Statement of Comprehensive Income
For the year ended 31 December
2023
|
|
Continuing operations
2023
|
Discontinuing operations
2023
|
Total
Year to 31 December
2023
|
Continuing operations
2022
|
Discontinuing operations
2022
|
Total
Year to 31 December
2022
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
|
|
|
|
|
|
|
(LOSS) / PROFIT FOR THE YEAR
|
|
(11,136)
|
(743)
|
(11,879)
|
2,466
|
(2,430)
|
36
|
Other comprehensive income - items
that may be reclassified separately to profit or loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange differences on translation
of foreign operations
|
|
(271)
|
-
|
(271)
|
(688)
|
-
|
(688)
|
TOTAL COMPREHENSIVE (LOSS) / INCOME FOR THE
YEAR
|
|
(11,407)
|
(743)
|
(12,150)
|
1,778
|
(2,430)
|
(652)
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
Equity holders of the
parent
|
|
(11,561)
|
(743)
|
(12,304)
|
1,829
|
(2,430)
|
(601)
|
Non-controlling interests
|
|
154
|
-
|
154
|
(51)
|
-
|
(51)
|
|
|
(11,407)
|
(743)
|
(12,150)
|
1,778
|
(2,430)
|
(652)
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Consolidated Balance
Sheet
As
at 31 December 2023
|
|
As at
31
December
2023
|
As
at
31
December
2022
|
|
|
|
|
|
Note
|
£'000
|
£'000
|
FIXED ASSETS
|
|
|
|
Intangible assets
|
10
|
90,628
|
99,741
|
Property, plant and
equipment
|
|
3,209
|
2,090
|
Right of use assets
|
11
|
16,432
|
9,536
|
Investments, associates and joint
ventures
|
12
|
587
|
437
|
|
|
110,856
|
111,804
|
CURRENT ASSETS
|
|
|
|
Stock
|
|
2,981
|
2,185
|
Trade and other
receivables
|
13
|
44,676
|
41,255
|
Corporation tax
receivable
|
|
447
|
-
|
Cash and short term
deposits
|
|
4,632
|
6,153
|
|
|
52,736
|
49,593
|
CURRENT LIABILITIES
|
|
|
|
Trade and other payables
|
14
|
(45,388)
|
(39,667)
|
Corporation tax payable
|
|
-
|
(794)
|
Bank loans
|
15
|
(21)
|
(27)
|
Acquisition obligations
|
17.1
|
(1,745)
|
(1,371)
|
|
|
(47,154)
|
(41,859)
|
NET
CURRENT ASSETS
|
|
5,582
|
7,734
|
|
|
|
|
TOTAL ASSETS LESS CURRENT LIABILITIES
|
|
116,438
|
119,538
|
NON
CURRENT LIABILITIES
|
|
|
|
Bank loans
|
15
|
(19,973)
|
(17,488)
|
Lease liabilities
|
16
|
(15,768)
|
(8,481)
|
Acquisition obligations
|
17.1
|
(3,720)
|
(2,772)
|
Deferred tax liabilities
|
|
(524)
|
(622)
|
|
|
(39,985)
|
(29,363)
|
NET
ASSETS
|
|
76,453
|
90,175
|
|
|
|
|
CAPITAL AND RESERVES
|
|
|
|
Called up share capital
|
18
|
9,102
|
9,102
|
Share premium account
|
|
45,928
|
45,928
|
Own shares
|
19
|
(942)
|
(994)
|
Share-based incentive
reserve
|
|
1,107
|
1,010
|
Foreign currency translation
reserve
|
|
(888)
|
(610)
|
Retained earnings
|
|
21,967
|
35,558
|
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE
PARENT
|
|
76,274
|
89,994
|
Non-controlling interests
|
|
179
|
181
|
TOTAL EQUITY
|
|
76,453
|
90,175
|
Consolidated Cash Flow Statement
For
the year ended 31 December 2023
|
Continuing operation
2023
|
Discontinued operations
2023
|
Total 2023
|
Continuing operation
2022
|
Discontinued operations
2022
|
Total 2022
|
|
|
|
|
|
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
|
|
|
|
|
|
Operating (loss) / profit
|
(8,589)
|
(1,130)
|
(9,719)
|
4,625
|
(2,996)
|
1,629
|
Depreciation, amortisation and
impairment charges
|
15,343
|
31
|
15,374
|
6,078
|
2,623
|
8,701
|
Increase / (decrease) in the fair
value of contingent consideration
|
434
|
-
|
434
|
(334)
|
-
|
(334)
|
Profit on sale of Pathfindr
Ltd
|
-
|
(308)
|
(308)
|
-
|
-
|
-
|
(Profit) / loss on disposal of
property, plant and equipment and software and intellectual
property
|
94
|
-
|
94
|
(11)
|
21
|
10
|
Non-cash charge for share options,
growth shares and shares awarded, net of awards settled in
cash
|
79
|
-
|
79
|
73
|
-
|
73
|
(Increase) / decrease in
receivables
|
(2,945)
|
(67)
|
(3,012)
|
114
|
35
|
149
|
Increase in stock
|
(1,125)
|
(43)
|
(1,168)
|
(70)
|
(3)
|
(73)
|
Increase / (decrease) in
payables
|
5,803
|
(1,277)
|
4,526
|
995
|
61
|
1,056
|
OPERATING CASH FLOWS
|
9,094
|
(2,794)
|
6,300
|
11,470
|
(259)
|
11,211
|
Net finance costs paid
|
(2,471)
|
-
|
(2,471)
|
(1,002)
|
-
|
(1,002)
|
Tax paid
|
(2,411)
|
637
|
(1,774)
|
(458)
|
(24)
|
(482)
|
Net
cash inflow / (outflow) from operating activities
|
4,212
|
(2,157)
|
2,055
|
10,010
|
(283)
|
9,727
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
Proceeds on disposal of property,
plant and equipment
|
2
|
-
|
2
|
64
|
-
|
64
|
Purchase of property, plant and
equipment
|
(2,340)
|
(3)
|
(2,343)
|
(1,019)
|
(73)
|
(1,092)
|
Investment in software and product
development
|
(111)
|
-
|
(111)
|
(456)
|
(1,396)
|
(1,852)
|
Acquisitions of, or investments in,
businesses
|
(397)
|
-
|
(397)
|
(1,893)
|
-
|
(1,893)
|
Payment relating to acquisitions made
in prior years
|
(393)
|
-
|
(393)
|
(790)
|
-
|
(790)
|
Cash acquired with
subsidiaries
|
71
|
-
|
71
|
271
|
-
|
271
|
Proceeds on disposal of
Pathfindr
|
-
|
1,050
|
1,050
|
-
|
-
|
-
|
Costs of disposal of
Pathfindr
|
-
|
(187)
|
(187)
|
-
|
-
|
-
|
Net
cash (outflow) / inflow from investing activities
|
(3,168)
|
860
|
(2,308)
|
(3,823)
|
(1,469)
|
(5,292)
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
Dividends paid
|
(1,495)
|
-
|
(1,495)
|
(2,180)
|
-
|
(2,180)
|
Dividends paid to non-controlling
interests
|
(156)
|
-
|
(156)
|
(40)
|
-
|
(40)
|
Payment of lease
liabilities
|
(1,820)
|
-
|
(1,820)
|
(1,935)
|
-
|
(1,935)
|
Increase in bank loans
|
2,474
|
-
|
2,474
|
992
|
-
|
992
|
Purchase of own shares held in
EBT
|
-
|
-
|
-
|
(497)
|
-
|
(497)
|
Net
cash outflow from financing activities
|
(997)
|
-
|
(997)
|
(3,660)
|
-
|
(3,660)
|
Increase / (decrease) in cash and cash
equivalents
|
47
|
(1,297)
|
(1,250)
|
2,527
|
(1,752)
|
775
|
Exchange differences on translation
of foreign subsidiaries
|
|
|
(271)
|
|
|
(688)
|
Cash
and cash equivalents at beginning of year
|
|
|
6,153
|
|
|
6,066
|
Cash
and cash equivalents at end of year
|
|
|
4,632
|
|
|
6,153
|
Consolidated Statement of Changes in Equity
For
the year ended 31 December 2023
For
the year ended 31 December 2023
|
Share
capital
£'000
|
Share
premium
£'000
|
Own
shares
£'000
|
Share-
based incentive
reserve
£'000
|
Foreign
currency translation reserve
£'000
|
Retained
earnings
£'000
|
Total
attributable to equity holders of parent
£'000
|
Non-controlling interest
£'000
|
Total
equity
£'000
|
|
|
|
|
|
|
|
|
|
|
At 1
January 2022
|
9,102
|
45,928
|
(518)
|
868
|
-
|
37,820
|
93,200
|
272
|
93,472
|
Profit for the year
|
-
|
-
|
-
|
-
|
-
|
9
|
9
|
27
|
36
|
Exchange differences on translation
of foreign operations
|
-
|
-
|
-
|
-
|
(610)
|
-
|
(610)
|
(78)
|
(688)
|
Total comprehensive (loss) / income
for the year
|
-
|
-
|
-
|
-
|
(610)
|
9
|
(601)
|
(51)
|
(652)
|
Share option charge
|
-
|
-
|
-
|
33
|
-
|
-
|
33
|
-
|
33
|
Growth share charge
|
-
|
-
|
-
|
109
|
-
|
-
|
109
|
-
|
109
|
Own shares purchased by
EBT
|
-
|
-
|
(497)
|
-
|
-
|
-
|
(497)
|
-
|
(497)
|
Shares awarded and sold from own
shares
|
-
|
-
|
21
|
-
|
-
|
(91)
|
(70)
|
-
|
(70)
|
Dividend paid
|
-
|
-
|
-
|
-
|
-
|
(2,180)
|
(2,180)
|
(40)
|
(2,220)
|
At
31 December 2022
|
9,102
|
45,928
|
(994)
|
1,010
|
(610)
|
35,558
|
89,994
|
181
|
90,175
|
(Loss) / profit for the
year
|
-
|
-
|
-
|
-
|
-
|
(12,026)
|
(12,026)
|
147
|
(11,879)
|
Exchange differences on translation
of foreign operations
|
-
|
-
|
-
|
-
|
(278)
|
-
|
(278)
|
7
|
(271)
|
Total comprehensive (loss) / income
for the year
|
-
|
-
|
-
|
-
|
(278)
|
(12,026)
|
(12,304)
|
154
|
(12,150)
|
Share option charge
|
-
|
-
|
-
|
17
|
-
|
-
|
17
|
-
|
17
|
Growth share charge
|
-
|
-
|
-
|
80
|
-
|
-
|
80
|
-
|
80
|
Shares awarded and sold from own
shares
|
-
|
-
|
52
|
-
|
-
|
(70)
|
(18)
|
-
|
(18)
|
Dividend paid
|
-
|
-
|
-
|
-
|
-
|
(1,495)
|
(1,495)
|
(156)
|
(1,651)
|
At
31 December 2023
|
9,102
|
45,928
|
(942)
|
1,107
|
(888)
|
21,967
|
76,274
|
179
|
76,453
|
Notes to the Consolidated Financial
Statements
1.
Principal Accounting Policies
Basis of preparation
The results for the year to 31
December 2023 have been extracted from the audited consolidated
financial statements, which are expected to be published by 28
March 2024.
The financial information set out
above does not constitute the Company's statutory accounts for the
years to 31 December 2023 or 2022 but is derived from those
accounts. Statutory accounts for the year ended 31 December
2022 were delivered to the Registrar of Companies following the
Annual General Meeting on 20 June 2023 and the statutory accounts
for 2023 are expected to be published on the Group's website
(www.themission.co.uk)
shortly, posted to shareholders at least 21 days ahead of the
Annual General Meeting ("AGM") on 17 June 2024 and, after approval
at the AGM, delivered to the Registrar of
Companies.
The auditors, PKF Francis
Clark, have reported on the accounts for the years ended 31
December 2023 and 31 December 2022; their reports in both years
were (i) unqualified, (ii) did not include a reference to any
matters to which the auditors drew attention by way of emphasis
without qualifying their report and (iii) did not contain a
statement under Section 498 (2) or (3) of the Companies Act 2006 in
respect of those accounts.
2.
Segmental Information
IFRS 15: Revenue from Contracts
with Customers requires the disaggregation of revenue into
categories that depict how the nature, amount, timing and
uncertainty of revenue and cash flows are affected by economic
factors. The Board has considered how the Group's revenue might be
disaggregated in order to meet the requirements of IFRS 15 and has
concluded that the segmentation disclosures set out below represent
the most appropriate categories of disaggregation. The Board
considers that neither differences between sales channels and
markets nor differences between contract duration and the timing of
transfer of goods or services are sufficiently significant to
require further disaggregation.
For management purposes the Board
monitors the performance of its individual agencies and groups them
into service segments based on the sectors in which they operate.
Each reportable segment therefore includes a number of agencies
with similar characteristics.
The Board assesses the performance
of each segment by looking at turnover, operating income and
headline operating profit. The headline operating profit shown
below is after the reallocation to the agencies of certain head
office costs relating to the Shared Services function. These costs
include a significant portion of the total operating costs which
are now centrally managed.
The Board does not review the
assets and liabilities of the Group on a segmental basis. A
segmental breakdown of assets and liabilities is therefore not
disclosed.
|
Business &
Corporate
|
Consumer &
Lifestyle
|
Health &
Wellness
|
Property
|
Sports &
Entertainment
|
Technology &
Mobility
|
MISSION Advantage &
Central
|
Investments
|
Total
|
Year to 31 December 2023
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Turnover
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
67,215
|
26,128
|
4,438
|
30,983
|
10,373
|
40,876
|
15,437
|
-
|
195,450
|
Discontinued operations
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
438
|
438
|
Total Group
|
67,215
|
26,128
|
4,438
|
30,983
|
10,373
|
40,876
|
15,437
|
438
|
195,888
|
Operating income
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
20,785
|
18,195
|
3,949
|
15,038
|
6,675
|
15,084
|
6,594
|
-
|
86,320
|
Discontinued operations
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
230
|
230
|
Total Group
|
20,785
|
18,195
|
3,949
|
15,038
|
6,675
|
15,084
|
6,594
|
230
|
86,550
|
Headline operating profit / (loss)
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
2,831
|
1,322
|
712
|
2,303
|
1,368
|
165
|
(2,221)
|
-
|
6,480
|
Discontinued operations
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,438)
|
(1,438)
|
Total Group
|
2,831
|
1,322
|
712
|
2,303
|
1,368
|
165
|
(2,221)
|
(1,438)
|
5,042
|
|
Business &
Corporate
|
Consumer &
Lifestyle
|
Health &
Wellness
|
Property
|
Sports &
Entertainment
|
Technology &
Mobility
|
MISSION Advantage &
Central
|
Investments
|
Total
|
Year to 31 December 2022
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Turnover
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
62,134
|
24,880
|
4,694
|
26,505
|
6,040
|
48,527
|
9,544
|
-
|
182,324
|
Discontinued operations
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
361
|
361
|
Total Group
|
62,134
|
24,880
|
4,694
|
26,505
|
6,040
|
48,527
|
9,544
|
361
|
182,685
|
Operating income
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
20,637
|
18,243
|
3,891
|
13,353
|
3,352
|
17,295
|
2,786
|
-
|
79,557
|
Discontinued operations
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
257
|
257
|
Total Group
|
20,637
|
18,243
|
3,891
|
13,353
|
3,352
|
17,295
|
2,786
|
257
|
79,814
|
Headline operating profit / (loss)
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
2,459
|
1,182
|
953
|
1,895
|
654
|
3,369
|
(1,720)
|
-
|
8,792
|
Discontinued operations
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(135)
|
(135)
|
Total Group
|
2,459
|
1,182
|
953
|
1,895
|
654
|
3,369
|
(1,720)
|
(135)
|
8,657
|
As contracts typically have an
original expected duration of less than one year, the full amount
of the accrued income balance at the beginning of the year is
recognised in revenue during the year. The vast majority of
turnover is recognised over time.
Geographical segmentation
The following table provides an
analysis of the Group's operating income by region of
activity:
|
Year to 31
|
Year to
31
|
|
December
2023
|
December
2022
|
|
£'000
|
£'000
|
|
|
|
UK
|
75,278
|
67,766
|
USA
|
7,688
|
9,156
|
Asia
|
3,340
|
2,667
|
Rest of Europe
|
244
|
225
|
|
86,550
|
79,814
|
3.
Reconciliation of Headline Profit to Reported
Profit
The Board believes that headline
profits, which eliminate certain amounts from the reported figures,
provide a better understanding of the underlying trading of the
Group.
|
Year ended
31
December
2023
|
Year
ended
31
December
2022
|
|
|
PBT
|
PAT
|
PBT
|
PAT
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
|
|
|
|
|
|
| |
From continuing and discontinued operations
|
|
|
|
|
Headline profit
|
2,720
|
1,855
|
7,771
|
6,130
|
Goodwill, business and intangible
impairment
|
(10,409)
|
(10,381)
|
(5,257)
|
(4,697)
|
Profit on sale of Pathfindr (Note
17.3)
|
308
|
355
|
-
|
-
|
Start-up costs
|
(1,818)
|
(1,363)
|
(776)
|
(629)
|
Acquisition-related items (Note
4)
|
(1,652)
|
(1,453)
|
(593)
|
(443)
|
Restructuring costs
|
(715)
|
(536)
|
(402)
|
(325)
|
Bank refinancing costs
|
(475)
|
(356)
|
-
|
-
|
Reported (loss) / profit
|
(12,041)
|
(11,879)
|
743
|
36
|
From continuing operations
|
|
|
|
|
Headline profit
|
4,158
|
2,953
|
7,906
|
6,229
|
Goodwill, business and intangible
impairment
|
(10,409)
|
(10,381)
|
(2,396)
|
(2,366)
|
Start-up costs
|
(1,818)
|
(1,363)
|
(776)
|
(629)
|
Acquisition-related items (Note
4)
|
(1,652)
|
(1,453)
|
(593)
|
(443)
|
Restructuring costs
|
(715)
|
(536)
|
(402)
|
(325)
|
Bank refinancing costs
|
(475)
|
(356)
|
-
|
-
|
Reported (loss) / profit
|
(10,911)
|
(11,136)
|
3,739
|
2,466
|
From discontinued operations
|
|
|
|
|
Headline loss
|
(1,438)
|
(1,098)
|
(135)
|
(99)
|
Goodwill, business and intangible
impairment
|
-
|
-
|
(2,861)
|
(2,331)
|
Profit on sale of Pathfindr (Note
17.3)
|
308
|
355
|
-
|
-
|
Reported loss
|
(1,130)
|
(743)
|
(2,996)
|
(2,430)
|
In 2022 goodwill, business and
intangible impairment costs related to Splash goodwill and the
impairment of Pathfindr fixed assets and stock, following a review
of the valuation of these cash generating units and assets, and the
loss on disposal of the Fenturi investment in associate and
write-off of intercompany balance. In 2023, goodwill, business and
intangible impairment costs relate to the impairment of
Story UK Ltd, Story Agency Ltd, Krow Agency Ltd
and Krow Communications Ltd goodwill and
the write off of the Mission Brand Bonding Index intangible
asset.
Start-up costs derive from
organically started businesses or loss-making businesses acquired
and comprise the trading losses of such entities until the earlier
of two years from commencement or when they show evidence of
becoming sustainably profitable. Start-up costs in 2022 related to
the trading losses of the new Livity youth-marketing offer as well
as costs associated with the early-stage foundation of performance
marketing and data science capabilities. Start-up costs in 2023
relate to Livity, the launch of Turbine, an integrated Growth Media
agency, specialising in owned, earned and paid media for consumer
facing brands, the trading losses of BLS China launched in 2023, as
well as costs associated with the early-stage foundation of
performance marketing and data science capabilities.
Restructuring costs in 2022
comprised costs associated with the major fundamental restructuring
of the Splash business. In 2023, restructuring costs consist of
costs of closing down the April Six Singapore office, and
redundancy, PILON and TUPE related costs associated with
restructuring and right sizing of various business units in the
last quarter of the year following the downgraded full year profit
expectation announced to the market.
Bank refinancing costs in 2023
consist of fees from various consulting and legal firms used to
assist and advise the bank in the refinancing process, and other
related costs associated with this process.
4.
Acquisition Adjustments
|
|
Year to
31 December
2023
|
Year
to
31
December 2022
|
|
|
£'000
|
£'000
|
Movement in fair value of contingent
consideration
|
(434)
|
334
|
|
|
|
Amortisation of other intangibles
recognised on acquisitions
|
(942)
|
(519)
|
|
|
|
Acquisition transaction costs
expensed
|
(276)
|
(408)
|
|
|
(1,652)
|
(593)
|
|
|
| |
The movement in fair value of
contingent consideration relates to a net upward (2022: downward)
revision in the estimate payable to vendors of businesses
acquired. Acquisition transaction costs
relate to professional fees in connection with acquisitions made or
contemplated.
5.
Net Finance Costs
|
Year to
31 December
2023
|
Year
to
31
December 2022
|
|
£'000
|
£'000
|
Interest on bank loans and
overdrafts, net of interest on bank deposits
|
(1,795)
|
(656)
|
Amortisation of bank debt
arrangement fees
|
(45)
|
(48)
|
Interest expense on lease
liabilities
|
(632)
|
(342)
|
Net
finance costs
|
(2,472)
|
(1,046)
|
6.
Profit Before Taxation
Profit or loss on ordinary
activities before taxation is stated after
charging / (crediting):
|
Year to
31 December
2023
|
Year
to
31
December 2022
|
|
£'000
|
£'000
|
|
|
|
Depreciation of owned tangible fixed
assets
|
1,171
|
1,068
|
Depreciation expense on right of use
assets
|
2,612
|
1,918
|
Amortisation of intangible assets
recognised on acquisitions
|
942
|
519
|
Amortisation of other intangible
assets
|
353
|
337
|
Expense relating to short term
leases
|
388
|
376
|
Expense relating to low value
leases
|
29
|
12
|
Income from subleasing right of use
assets
|
(153)
|
(194)
|
Staff costs
|
63,095
|
55,032
|
Bad debts and net movement in
provision for bad debts
|
(5)
|
386
|
Auditors' remuneration
|
267
|
238
|
Loss / (profit) on foreign
exchange
|
589
|
(411)
|
7.
Taxation
|
Year to
31 December
2023
|
Year
to
31
December 2022
|
|
£'000
|
£'000
|
Current tax:
|
|
|
UK corporation tax at 23.52% (2022:
19.00%)
|
(123)
|
380
|
Adjustment for prior
periods
|
45
|
(36)
|
Foreign tax on profits of the
period
|
135
|
364
|
|
57
|
708
|
Deferred tax:
|
|
|
Current year originating temporary
differences
|
(219)
|
(1)
|
Tax charge for the year
|
(162)
|
707
|
Factors Affecting the Tax Charge for the Current
Year:
The tax assessed for the year is
higher (2022: higher) than the standard rate of corporation tax in
the UK. The differences are:
|
Year to
31 December
2023
|
Year
to
31
December 2022
|
|
|
|
|
£'000
|
£'000
|
Profit before taxation
|
(12,041)
|
743
|
|
|
|
Profit on ordinary activities before
tax at the standard rate of corporation tax of 23.52% (2022:
19.00%)
|
(2,832)
|
141
|
|
|
|
Effect of:
|
|
|
Rate changes
|
(11)
|
(99)
|
Non-deductible expenses / income not
taxable
|
2,696
|
562
|
Depreciation (lower than) / in
excess of capital allowances
|
(5)
|
(76)
|
Differences in overseas tax
rates
|
(23)
|
190
|
Adjustments in respect of prior
periods
|
45
|
(36)
|
Other differences
|
(32)
|
25
|
Actual tax charge for the year
|
(162)
|
707
|
8.
Dividends
|
Year to
31 December
2023
|
Year
to
31
December 2022
|
|
£'000
|
£'000
|
Amounts recognised as distributions
to equity holders in the year:
|
|
|
Interim dividend of nil (2022: 0.83
pence) per share
|
-
|
743
|
Final dividend of 1.67 pence (2022:
1.60 pence) per share
|
1,495
|
1,437
|
|
1,495
|
2,180
|
The Board has made the decision to
pause further dividend payments until balance sheet strength is
restored.
9.
Earnings Per Share
The calculation of the basic and
diluted earnings per share is based on the following data,
determined in accordance with the provisions of IAS 33: Earnings
Per Share.
|
Year to
|
Year
to
|
|
31
December
2023
|
31
December
2022
|
|
|
|
|
£'000
|
£'000
|
|
|
|
Earnings
|
|
|
|
|
|
Reported (loss) / profit for the year
|
|
|
From continuing and discontinued operations
|
(11,879)
|
36
|
Attributable to:
|
|
|
Equity holders of the
parent
|
(12,026)
|
9
|
Non-controlling interests
|
147
|
27
|
|
(11,879)
|
36
|
|
|
|
From continuing operations
|
(11,136)
|
2,466
|
Attributable to:
|
|
|
Equity holders of the
parent
|
(11,283)
|
2,439
|
Non-controlling interests
|
147
|
27
|
|
(11,136)
|
2,466
|
|
|
|
From discontinued operations
|
(743)
|
(2,430)
|
Attributable to:
|
|
|
Equity holders of the
parent
|
(743)
|
(2,430)
|
Non-controlling interests
|
-
|
-
|
|
(743)
|
(2,430)
|
|
|
|
Headline earnings (Note 3)
|
|
|
From continuing and discontinued operations
|
1,855
|
6,130
|
Attributable to:
|
|
|
Equity holders of the
parent
|
1,708
|
6,103
|
Non-controlling interests
|
147
|
27
|
|
1,855
|
6,130
|
|
|
|
From continuing operations
|
2,953
|
6,229
|
Attributable to:
|
|
|
Equity holders of the
parent
|
2,806
|
6,202
|
Non-controlling interests
|
147
|
27
|
|
2,953
|
6,229
|
|
|
|
From discontinued operations
|
(1,098)
|
(99)
|
Attributable to:
|
|
|
Equity holders of the
parent
|
(1,098)
|
(99)
|
Non-controlling interests
|
-
|
-
|
|
(1,098)
|
(99)
|
|
|
|
|
|
|
Number of shares
|
|
|
Weighted average number of Ordinary
shares for the purpose of basic earnings per share
|
89,549,143
|
89,906,999
|
Dilutive effect of
securities:
|
|
|
Employee share options
|
341,144
|
617,992
|
Weighted average number of Ordinary
shares for the purpose of diluted earnings per share
|
89,890,287
|
90,524,991
|
|
|
|
|
|
|
Reported basis
|
|
|
From continuing and discontinued operations
|
|
|
Basic earnings per share
(pence)
|
(13.4)
|
0.0
|
Diluted earnings per share
(pence)
|
(13.4)
|
0.0
|
|
|
|
From continuing operations
|
|
|
Basic earnings per share
(pence)
|
(12.6)
|
2.7
|
Diluted earnings per share
(pence)
|
(12.6)
|
2.7
|
|
|
|
From discontinued operations
|
|
|
Basic earnings per share
(pence)
|
(0.8)
|
(2.7)
|
Diluted earnings per share
(pence)
|
(0.8)
|
(2.7)
|
|
|
|
|
|
|
Headline basis:
|
|
|
From continuing and discontinued operations
|
|
|
Basic earnings per share
(pence)
|
1.9
|
6.8
|
Diluted earnings per share
(pence)
|
1.9
|
6.7
|
|
|
|
From continuing operations
|
|
|
Basic earnings per share
(pence)
|
3.1
|
6.9
|
Diluted earnings per share
(pence)
|
3.1
|
6.9
|
|
|
|
From discontinued operations
|
|
|
Basic earnings per share
(pence)
|
(1.2)
|
(0.1)
|
Diluted earnings per share
(pence)
|
(1.2)
|
(0.1)
|
A reconciliation of the profit
after tax on a reported basis and the headline basis is given in
Note 3.
10.
Intangible Assets
|
31
December
2023
|
31
December
2022
|
|
|
|
|
£'000
|
£'000
|
|
|
|
Goodwill
|
87,857
|
96,213
|
Other intangible assets
|
2,771
|
3,528
|
|
90,628
|
99,741
|
In accordance with the Group's
accounting policies, an annual impairment test is applied to the
carrying value of goodwill. The review performed assesses whether
the carrying value of goodwill is supported by the net present
value of projected cash flows derived from the underlying assets
for each cash-generating unit ("CGU"), discounted using an
appropriate discount rate. It is the Directors' judgement that each
distinct Agency represents a CGU. The initial projection period of
four years includes the annual budget for each CGU, based on
insight into Clients' planned marketing expenditure and targets for
net new business growth derived from historical experience, and
extrapolations of the budget in subsequent years based on known
factors and estimated trends. The key assumptions used by each CGU
concern revenue growth and staffing levels and different
assumptions are made by different CGUs based on their individual
circumstances. These assumptions are arrived at after considering
factors such as historical client spend and levels of client
retention, client wins secured and historical ratios of staff costs
to revenue. Beyond this initial projection period, a generic long
term growth rate of 1.0% is assumed for all units based on
information published by market analysts. The resulting pre-tax
cash flow forecasts were discounted using the Group's estimated
pre-tax Weighted Average Cost of Capital ("WACC"), which is 9.9%
(2022: 8.4%).
As a result of the performance and
restructuring of the operations of Story Agency Ltd, Story UK Ltd,
Krow Agency Ltd and Krow Communications Ltd, and having calculated
the net present value of projected cash flows derived from these
operations, the Directors considered it prudent to impair
£10,296,000 of goodwill relating to these CGUs. No other
impairments in goodwill were required.
The long-term growth rate assumed
of 1.0% is lower than past UK averages and that historically used
(2022: 2.0%), so provides natural headroom in the
calculations. For example, an increase to the historical
level used of 2% results in combined headroom of £2m for the
impaired CGUs and £16m higher value in use across all
operations. Any adverse movement in the assumptions used
results in further impairment to goodwill due to the nature of the
calculations, which record the operations at their forecast
recoverable amounts (using the assumptions set out
above).
11. Right of Use Assets
The Group leases several assets
including property, office equipment, computer equipment and motor
vehicles.
|
Property
|
Office equipment, computer
equipment and motor vehicles
|
Total
|
|
|
|
|
|
£'000
|
£'000
|
£'000
|
Cost
|
|
|
|
At
1 January 2022
|
15,551
|
2,169
|
17,720
|
Acquisition of
subsidiaries
|
123
|
-
|
123
|
Additions
|
1,704
|
478
|
2,182
|
Disposals
|
(2,210)
|
(248)
|
(2,458)
|
At
31 December 2022
|
15,168
|
2,399
|
17,567
|
Additions
|
9,256
|
252
|
9,508
|
Disposals
|
(1,540)
|
(243)
|
(1,783)
|
At
31 December 2023
|
22,884
|
2,408
|
25,292
|
|
|
|
|
Depreciation
|
|
|
|
At
1 January 2022
|
6,736
|
1,835
|
8,571
|
Charge for the year
|
1,638
|
280
|
1,918
|
Disposals
|
(2,210)
|
(248)
|
(2,458)
|
At
31 December 2022
|
6,164
|
1,867
|
8,031
|
Charge for the year
|
2,259
|
353
|
2,612
|
Disposals
|
(1,540)
|
(243)
|
(1,783)
|
At
31 December 2023
|
6,883
|
1,977
|
8,860
|
|
|
|
|
Net
book value at 31 December 2023
|
16,001
|
431
|
16,432
|
Net
book value at 31 December 2022
|
9,004
|
532
|
9,536
|
The increase in Right of Use
Assets in 2023 relates to the entering into of new leases, most
notably the new long term London office lease.
12.
Investments, Associates and Joint Ventures
|
Year to
|
Year
to
|
|
31
December
2023
|
31
December
2022
|
|
£'000
|
£'000
|
|
|
|
At
1 January
|
437
|
517
|
Profit during the year
|
150
|
160
|
Disposal of Fenturi
|
-
|
(240)
|
At
31 December
|
587
|
437
|
13. Trade and Other Receivables
|
31 December
2023
|
31
December 2022
|
|
£'000
|
£'000
|
|
|
|
Trade receivables
|
26,858
|
25,052
|
Accrued income
|
13,476
|
13,273
|
Prepayments
|
3,005
|
2,051
|
Other receivables
|
1,337
|
879
|
|
44,676
|
41,255
|
An allowance has been made for
estimated irrecoverable amounts from the provision of services of
£25,000 (2022: £228,000). In 2022, one specific debtor was provided
for which accounted for the majority of the allowance. This debtor
was partially recovered in 2023 and the remaining balance written
off, resulting in the decrease in provision for irrecoverable
amounts in 2023. The estimated irrecoverable amount is arrived at
by considering the historical loss rate and adjusting for current
expectations, Client base and economic conditions. Both historical
losses and expected future losses being very low, the Directors
consider it appropriate to apply a single average rate for expected
credit losses to the overall population of trade receivables and
accrued income. Accrued income relates to unbilled work in progress
and has substantially the same risk characteristics as the trade
receivables for the same types of contracts. The Directors consider
that the carrying amount of trade and other receivables
approximates their fair value.
|
31 December
2023
|
31
December 2022
|
|
£'000
|
£'000
|
|
|
|
Gross trade receivables
|
26,883
|
25,280
|
Gross accrued income
|
13,476
|
13,273
|
Total trade receivables and accrued
income
|
40,359
|
38,553
|
|
|
|
Expected loss rate
|
0.1%
|
0.6%
|
Provision for doubtful
debts
|
25
|
228
|
|
|
|
|
| |
Trade receivables include £8.8m
(2022: £6.5m) that is past due but not impaired, of which £1.0m
(2022: £1.0m) is greater than 3 months past due.
14. Trade and Other Payables
|
31 December
2023
|
31
December 2022
|
|
|
|
|
£'000
|
£'000
|
|
|
|
Trade creditors
|
14,026
|
14,454
|
Deferred income
|
8,533
|
8,903
|
Other creditors and
accruals
|
11,163
|
10,771
|
Other tax and social security
payable
|
9,683
|
3,957
|
Lease liabilities (Note
16)
|
1,983
|
1,582
|
|
45,388
|
39,667
|
Other tax and social security
increased as a result of delayed VAT and PAYE payments, with a
payment plan having been agreed with HMRC whereby all delayed
payments will be repaid by the end of May 2024.
15. Bank Overdrafts, Loans and
Net Bank Debt
|
31 December
2023
|
31
December 2022
|
|
£'000
|
£'000
|
|
|
|
Bank loan outstanding
|
20,049
|
17,575
|
Unamortised bank debt arrangement
fees
|
(55)
|
(60)
|
Carrying value of loan
outstanding
|
19,994
|
17,515
|
Less: Cash and short term
deposits
|
(4,632)
|
(6,153)
|
Net bank debt
|
15,362
|
11,362
|
|
|
|
The borrowings are repayable as
follows:
|
|
|
Less than one year
|
21
|
27
|
In one to two years
|
20,023
|
17,521
|
In two to three years
|
5
|
22
|
In three to four years
|
-
|
5
|
|
20,049
|
17,575
|
|
|
|
Unamortised bank debt arrangement
fees
|
(55)
|
(60)
|
|
19,994
|
17,515
|
Less: Amount due for settlement
within 12 months (shown under current liabilities)
|
(21)
|
(27)
|
Amount due for settlement after 12
months
|
19,973
|
17,488
|
Bank debt arrangement fees, where
they can be amortised over the life of the loan facility, are
included in finance costs. The unamortised portion is reported as a
reduction in bank loans outstanding.
Included in the above is £49,000
of bank loans owing by Populate Social Ltd, one of the companies
acquired during 2022. These borrowings are repayable over a three
year period.
At 31 December 2023, the Group's
committed bank facilities comprised a revolving credit facility of
£20.0m, with an option to increase the facility by £5.0m. On 8
March 2023 the Group exercised the option to extend by one year,
the facility now expiring on 5 April 2025. Interest on the facility
is based on SONIA (sterling overnight index average) plus a margin
of between 1.50% and 2.25% depending on the Group's debt leverage
ratio, payable in cash on loan rollover dates. On 27 March 2024, the Group agreed a new revolving credit
facility of £20m, expiring on 5 April 2026. Interest on the new
facility is based on SONIA (sterling overnight index average) plus
a margin of between 2.25% and 4.90% depending on the Group's debt
leverage ratio, payable in cash on loan rollover dates.
In addition to its committed
facilities, the Group has available an overdraft facility of up to
£9.0m with interest payable by reference to National Westminster
Bank plc Base Rate plus 2.25%.
At 31 December 2023, there was a
cross guarantee structure in place with the Group's bankers by
means of a fixed and floating charge over all of the assets of the
Group companies in favour of National Westminster Bank
plc.
All borrowings are in
sterling.
16. Lease Liabilities
Obligations under leases are due as
follows:
|
31 December
2023
|
31
December 2022
|
|
|
|
|
£'000
|
£'000
|
|
|
|
In one year or less (shown in trade
and other payables)
|
1,983
|
1,582
|
In more than one year
|
15,768
|
8,481
|
|
17,751
|
10,063
|
17.
Acquisitions
17.1 Acquisition Obligations
The terms of an acquisition
provide that the value of the purchase consideration, which may be
payable in cash or shares at a future date, depends on uncertain
future events such as the future performance of the acquired
company. The Directors estimate that the liability for contingent
consideration payments is as follows:
|
31 December
2023
|
31
December 2022
|
|
Cash
£'000
|
Shares
£'000
|
Total
£'000
|
Cash
£'000
|
Shares
£'000
|
Total
£'000
|
Less than one year
|
1,745
|
-
|
1,745
|
1,371
|
-
|
1,371
|
Between one and two years
|
2,830
|
-
|
2,830
|
53
|
-
|
53
|
In more than two years but less than
three years
|
890
|
-
|
890
|
1,820
|
-
|
1,820
|
In more than three years but less
than four years
|
-
|
-
|
-
|
899
|
-
|
899
|
|
|
|
|
|
|
|
|
5,465
|
-
|
5,465
|
4,143
|
-
|
4,143
|
A reconciliation of acquisition
obligations during the period is as follows:
|
Cash
£'000
|
Shares
£'000
|
Total
£'000
|
|
|
|
|
At 31 December 2022
|
4,143
|
-
|
4,143
|
Obligations settled in the
period
|
(393)
|
-
|
(393)
|
Adjustments to estimates of
obligations
|
434
|
-
|
434
|
New acquisitions
|
1,281
|
-
|
1,281
|
At
31 December 2023
|
5,465
|
-
|
5,465
|
|
|
|
| |
17.2 Acquisition of Mezzo Labs Ltd
On 13 February 2023, the Group
acquired the entire issued share capital of Mezzo Labs Ltd
("Mezzo"). Mezzo is a leading provider of innovative data
services with over 16 years' experience in data strategy and
architecture, web analytics, CX analytics, marketing automation,
insights generation, data science, Conversion Rate Optimisation
(CRO) and personalisation. Headquartered in London, the
company also has operations in Singapore. The fair value of
the consideration given for the acquisition was £1,678,000,
comprising initial cash consideration and deferred contingent
consideration. The deferred contingent consideration is to be
satisfied by the issue of new ordinary shares up to a maximum of
40% at MISSION's discretion, with the balance payable in
cash. Costs relating to the acquisition amounted to £81,000 and
were expensed.
Maximum contingent consideration of
£4,000,000 is dependent on Mezzo achieving a profit target over the
period 1 January 2023 to 31 December 2024. The Group has provided
for contingent consideration of £1,466,000 to date.
The book value of the net
identifiable liabilities acquired was £594,000 resulting in
goodwill and previously unrecognised other intangible assets of
£2,272,000. Goodwill arises on consolidation and is not
tax-deductible. Management carried out a review to assess whether
any other intangible assets were acquired as part of the
transaction. Management concluded that both a brand name and
customer relationships were acquired and attributed a value to each
of these by applying commonly accepted valuation methodologies. The
goodwill arising on the acquisition is attributable to the
anticipated profitability of Mezzo.
|
Book
value
|
Fair
value adjustments
|
Fair
value
|
|
£'000
|
£'000
|
£'000
|
Net
assets acquired:
|
|
|
|
Intangible assets
|
49
|
-
|
49
|
Fixed assets
|
19
|
-
|
19
|
Trade and other
receivables
|
368
|
-
|
368
|
Cash and cash equivalents
|
71
|
-
|
71
|
Trade and other payables
|
(1,088)
|
-
|
(1,088)
|
Deferred tax
|
(13)
|
-
|
(13)
|
|
(594)
|
-
|
(594)
|
Other intangibles recognised at
acquisition
|
-
|
470
|
470
|
Deferred tax adjustment
|
-
|
(118)
|
(118)
|
|
(594)
|
352
|
(242)
|
Goodwill
|
|
|
1,920
|
Total consideration
|
|
|
1,678
|
Satisfied by:
|
|
|
|
Cash
|
|
|
397
|
Deferred contingent
consideration
|
|
|
1,281
|
|
|
|
1,678
|
|
|
|
| |
Mezzo contributed turnover of
£2,536,000, operating income of £2,369,000 and headline operating
profit of £583,000 to the results of the Group in 2023.
17.3 Sale of Pathfindr Ltd
During the year, the Group
considered different strategies to reduce leverage, including
divestments of non-core operations. As a result of this review, on
29 December 2023, the Group disposed of its 80% share in Pathfindr
Ltd. The consideration, assets disposed of and costs of disposal
were as follows:
|
|
|
£'000
|
|
|
|
|
Upfront cash consideration
received
|
|
|
1,050
|
Working capital surplus payment to
be received
|
|
|
250
|
Total consideration
|
|
|
1,300
|
|
|
|
|
Net
assets disposed of:
|
|
|
|
Fixed assets
|
|
|
68
|
Trade and other
receivables
|
|
|
204
|
Stock
|
|
|
372
|
Corporation and deferred
tax
|
|
|
366
|
Trade and other payables
|
|
|
(206)
|
|
|
|
804
|
Disposal costs
|
|
|
188
|
Total cost of disposal
|
|
|
992
|
|
|
|
|
Profit on sale of Pathfindr
|
|
|
308
|
|
|
|
| |
17.4 Pro-forma results including
acquisitions
The Directors estimate that, had
the Group consolidated the results of acquisitions made during the
year, from the beginning of the year, the turnover, operating
income and headline operating profit of the Group would not have
been materially different to the numbers presented in the
consolidated income statement.
18.
Share Capital
|
31 December
2023
|
31
December 2022
|
|
£'000
|
£'000
|
Allotted and called up:
|
|
|
91,015,897 Ordinary shares of 10p
each (2022: 91,015,897 Ordinary shares of 10p each)
|
9,102
|
9,102
|
Share-based incentives
The Group has the following
share-based incentives in issue:
|
At start of
year
|
Granted/
acquired
|
Waived/
lapsed
|
Exercised
|
At end of
year
|
TMMG Long Term Incentive
Plan
|
393,221
|
-
|
-
|
(133,029)
|
260,192
|
Growth Share Scheme
|
3,200,000
|
-
|
(578,766)
|
-
|
2,621,234
|
The TMMG Long Term Incentive Plan
("LTIP") was created to incentivise senior employees across the
Group. Nil-cost options are awarded at the discretion of, and vest
based on criteria established by, the Remuneration Committee.
During the year, 133,029 options were exercised at an average share
price of 29.3p and at the end of the year 260,192 of the
outstanding options are exercisable.
Shares held in an Employee Benefit
Trust (see Note 19) will be used to satisfy share options exercised
under the Long Term Incentive Plan.
A Growth Share Scheme was
implemented in June 2021. Participants in the
scheme subscribed for Ordinary B shares in The Mission Marketing
Holdings Limited (the "growth shares") at a nominal value. These
growth shares can be exchanged for an equivalent number of Ordinary
Shares in MISSION if
MISSION's share price
equals or exceeds 150p for at least 15 consecutive days during the
period ending on the date the Company's financial results for the
year ended 31st December 2023 are announced; if not, they will have
no value.
19.
Own Shares
|
No. of
shares
|
£'000
|
At
31 December 2021
|
718,138
|
518
|
Own shares purchased
|
827,937
|
497
|
Awarded or sold during the
year
|
(50,537)
|
(21)
|
At
31 December 2022
|
1,495,538
|
994
|
Awarded or sold during the
year
|
(98,317)
|
(52)
|
At
31 December 2023
|
1,397,221
|
942
|
Shares are held in an Employee
Benefit Trust to meet certain requirements of the Long Term
Incentive Plan.
20.
Post Balance Sheet Events
Debt Refinancing
On 20 December 2023, MISSION
confirmed that it was in constructive dialogue with its
long-standing lender, NatWest, with respect to the covenants and
maturity of its banking facilities and that NatWest had agreed to
waive the December 2023 covenant.
MISSION has now secured a new debt
facility with NatWest, to replace its existing debt facility and
extending the facility for a year to 5 April 2026. The Board is
pleased with the ongoing support from NatWest.
The previous NatWest debt facility
was a £20m Revolving Credit Facility and a £9m overdraft
terminating in 2025. The new NatWest debt facility is a £20m
Revolving Credit Facility, and a £9m overdraft which will reduce to
£3m in the event there is a deleveraging event achieved by 30 June
2024 (the "New Debt Facility").
A deleveraging event is an equity
raise (or other such deleveraging event to be agreed reasonably by
NatWest) resulting in cash proceeds of no less than £4m to be
undertaken by no later than 30 June 2024 (the "Deleveraging
Event"). If the Deleveraging Event is not achieved by this
deadline, this would not constitute an event of default under the
New Debt Facility and the New Debt Facility would remain in
place.
21.
Further Information
Contingent Consideration
The Group has certain outstanding
contingent deferred payment obligations in relation to past
acquisitions subject to their post-completion financial
performance.
A total of £1.75m in aggregate is
due in late March and early April 2024 in relation to the previous
acquisitions of Populate, Influence and Mezzo. In relation to the
Mezzo and Influence acquisitions, the Board has determined that the
split of consideration between cash and shares is up to £0.55m in
MISSION shares, with the balance in cash. The final split of
consideration will be announced once agreed with relevant sellers.
The share element is expected to be part funded by shares held in
MISSION's employee benefit trust with the balance as a new issue of
shares by MISSION.
The Directors estimate that the
additional contingent consideration payable in relation to previous
acquisitions will be (i) 2025 - £2.8m; and (ii) 2026 - £0.9m. No
contingent consideration in relation to previous acquisitions is
payable after 2026. Certain of the contingent consideration
payments may include an element of MISSION shares, which is subject
to negotiation between the parties subject to certain contractual
parameters.
Debt Refinancing
The following table sets out the
interest margin above the Sterling Overnight Index Average
("SONIA") on the Revolving Credit Facility as part of the Current
Debt Facility and the New Debt Facility at different leverage
levels.
Senior Adjusted
|
Current
Debt Facility
|
New Debt
Facility
|
Leverage
|
<£10m used
|
>£10m used
|
<£10m used
|
>£10m used
|
3x-3.7x
|
2.00
|
2.25
|
4.65
|
4.90
|
2.5x-3x
|
2.00
|
2.25
|
3.50
|
3.75
|
2x-2.5x
|
2.00
|
2.25
|
3.25
|
3.50
|
1.5x-2x
|
1.75
|
2.00
|
3.00
|
3.25
|
1x-1.5x
|
1.75
|
2.00
|
2.50
|
2.75
|
<1x
|
1.50
|
1.75
|
2.25
|
2.50
|
The Group has received a covenant
waiver for the March 2024 covenant test, and thereafter the
covenants will be based on (i) senior adjusted leverage; (ii)
adjusted leverage; and (iii) senior interest
cover.
Senior adjusted leverage is
calculated as Net debt (excluding acquisition obligations) / EBITDA
(on a pre-IFRS 16 basis). Adjusted leverage is calculated as Net
debt (including acquisition obligations) / EBITDA (on a pre-IFRS 16
basis). Senior interest cover is the ratio of EBITDA to finance
charges (interest costs).
The covenant tests under the New
Debt Facility before a Deleveraging Event are as
follows:
|
Senior Adjusted Leverage
|
Adjusted Leverage
|
Senior Interest Cover
|
March 2024
|
waived
|
waived
|
waived
|
June 2024
|
below 3.50:1
|
below 4.00:1
|
above 2.90:1
|
September 2024
|
below 3.70:1
|
below 4.20:1
|
above 3.20:1
|
thereafter
|
below 2.00:1
|
below 2.50:1
|
above 4.00:1
|
The covenant tests under the New
Debt Facility after a Deleveraging Event are as follows:
|
Senior Adjusted Leverage
|
Adjusted Leverage
|
Senior Interest Cover
|
March 2024
|
waived
|
waived
|
waived
|
June 2024
|
below 3.00:1
|
below 3.50:1
|
above 2.90:1
|
September 2024
|
below 3.00:1
|
below 3.50:1
|
above 3.20:1
|
thereafter
|
below 2.00:1
|
below 2.50:1
|
above 4.00:1
|
Engagement with shareholders and potential
investors
In conjunction with the debt
refinancing, MISSION engaged in discussions with certain
shareholders and potential new investors in relation to a potential
equity fundraising. Having considered the feedback from these
discussions the Board has decided that now is not the appropriate
time to raise additional equity capital, however the Board was
pleased with the level of engagement and support from a number of
investors.
Future Strategy
Following the 23 October 2023
trading update, the Board commenced a detailed operational review
of the Group, including an immediate reassessment of financial
expectations and resource allocation and the development and
implementation of the Value Restoration Plan. The Group's operating
model is focussed on the Group's key brand Agencies.
The Directors believe that
focusing on the Group's key brand Agencies in 2024 and 2025 should
improve profitability and enable a faster reduction in the Group's
net debt. By 2026, the Group will look to accelerate earnings
growth as enhanced offers and greater collaboration gain market
share.
Five Year Financial Objectives
In conjunction with the work
undertaken on the Value Restoration Plan and future strategy, the
Board have developed some longer-term targets, and the following
five-year financial objectives have been adopted.
The target for the end of the 2028
financial year is to deliver £120m of revenue, £20m of adjusted
EBITDA and the repayment of the Group's net debt, which the
Directors believe will be driven by organic revenue growth at a
compound annual growth rate of 6-7%, and the delivery of
efficiencies by MISSION Advantage and MISSION Commercial, targeting
a 14% operating margin in 2028, underpinned by careful cash
management and capital allocation (the "2028 Target").
The Directors have considered the
financial objectives comprised in the 2028 Group Target, which have
been formulated by them after due and careful enquiry and confirm
that they remain valid as at the date of this Announcement and that
they have been properly compiled on the basis of the assumptions
and accounting policies adopted by the Group.
Previous Approaches
The Board received a number of
unsolicited preliminary takeover approaches from a potential
offeror, both prior to and after the 23 October 2023 trading
update, to acquire the Group. These proposals were considered
thoroughly by the Directors, having sought independent financial
advice, but were unanimously rejected as the Board felt that the
proposals materially undervalued Mission, its business and
prospects.
Non-Core Disposal
As announced on 20 December 2023,
the Group has been in discussions regarding the potential disposal
of two non-core business units, and on 5 January 2024 the Group
confirmed the disposal of its 80% interest in Pathfindr for an
initial consideration of £1m in cash.
In relation to the second non-core
business unit, the Board believe that the terms offered by the
potential acquirer of the business unit significantly undervalue
the business unit and they do not believe that a disposal on these
terms is in the best interests of the Group or its shareholders.
Accordingly, discussions have now formally ceased with the
potential acquirer.
CERTAIN INFORMATION CONTAINED
ABOVE IN NOTE 21 "FURTHER INFORMATION" OF THIS ANNOUNCEMENT
CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE
MARKET ABUSE REGULATION (EU) 596/2014 AS IT FORMS PART OF UK
DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018
("MAR"), AND IS DISCLOSED IN ACCORDANCE WITH THE COMPANY'S
OBLIGATIONS UNDER ARTICLE 17 OF MAR.
IN ADDITION, MARKET SOUNDINGS (AS
DEFINED IN UK MAR) WERE TAKEN IN RESPECT OF CERTAIN OF THE MATTERS
CONTAINED WITHIN THIS ANNOUNCEMENT, WITH THE RESULT THAT CERTAIN
PERSONS BECAME AWARE OF INSIDE INFORMATION (AS DEFINED UNDER MAR).
UPON THE PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY
INFORMATION SERVICE, THOSE PERSONS THAT RECEIVED INSIDE INFORMATION
IN A MARKET SOUNDING ARE NO LONGER IN POSSESSION OF SUCH INSIDE
INFORMATION, WHICH IS NOW CONSIDERED TO BE IN THE PUBLIC
DOMAIN.