Annual
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2017
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Annual report and
financial statements
for the year ended
31 December 2017
Corporate governance
34
Board of Directors
Financial statements
Statement of Directors’
responsibilities
49
Contents
Strategic report
Highlights
At a glance
Chairman’s statement
Market overview
Chief Executive
Officer’s review
Our business model
Our strategy for growth
Case studies
Chief Financial
Officer’s review
2
4
6
8
10
16
18
26
30
Corporate
governance report
Audit & Risk
Committee report
Remuneration
Committee report
Directors’ report
36
Independent auditors’ report
50
40
42
45
Consolidated
income statement
Consolidated statement
of comprehensive income
Consolidated statement
of financial position
Consolidated statement
of changes in equity
Consolidated statement
of cash flows
Notes to the consolidated
financial statements
Independent auditors’ report
Company statement
of financial position
Company statement
of changes in equity
Notes to the Company
financial statements
Advisers
Shareholder information
Glossary
56
56
57
58
59
60
94
98
99
100
108
108
IBC
Visit us online at
www.ebiquity.com/en/investors
Creating
clarity
At Ebiquity, our role is ‘creating clarity for
our clients’. In fact, it’s our declared purpose.
This means enabling marketers to work
with their partners to choose the level of
transparency that’s right for them.
It means subjecting marketing
performance to ever-greater scrutiny.
And it means harnessing advances in technology
and data to competitive advantage.
This is how we empower our clients to be sure
that every marketing decision leads to enhanced
effectiveness. To better return on investment.
By creating clarity in the ever-more digital,
increasingly opaque media landscape, we
help drive accountability in marketing.
1
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc Highlights
Michael Karg, PhD
Group Chief Executive Officer
Ebiquity’s long-term ambition
is to be the world’s leading,
tech-enabled independent marketing
and media consultancy, the ‘left brain’
adviser to the CMO.
Final results for
the year ended
31 December 2017
Ebiquity plc, (‘Ebiquity’ or ‘the
Company’) a leading, tech-enabled
independent marketing and media
consultancy, announces final results
for the year ended 31 December 2017.
Ebiquity provides services to over
80 of the top 100 global advertisers,
with 20 offices across 14 countries.
Outlook
Michael Karg, CEO, commented:
Taking advantage of the rapid changes
in media and marketing – driven by
changes in technology, consumer
behaviour, and data – requires players
in the industry to adjust their business
models. As many of our clients and
partners have embarked on this journey,
so have we. The sale of the Advertising
Intelligence business now better
focuses Ebiquity on service areas
offering structural market growth.
The actions that have been taken in
2017, has positioned the business for
faster revenue growth in 2018 and
beyond. With an expectation of a
turnaround in performance in the US in
2018, together with continued revenue
growth outside of the US, we remain
confident of delivering against the
financial goals we set out in the
Growth Acceleration Plan.
“ 2017 was a year of change for Ebiquity.
The planned sale of the Advertising
Intelligence business, in particular,
was significant and resource intensive.
While our financial performance was
held back by disappointing results in the
US, we achieved important milestones
on our multi-year transformational
journey. The underlying changes that
we are driving throughout our business
are designed to align our services with
client-side trends – as well as
competitive dynamics – which provide
mid- to long-term growth
opportunities.
We are positioning Ebiquity to become
the preferred, independent adviser to
marketers at world-leading brands.
We have a clear, focused and
differentiated destination and are
implementing the relevant changes to
get these, now and going forward.”
2
Strategic reportEbiquity plcAnnual report and financial statements for the year ended 31 December 2017
A transformational
year for Ebiquity
Faster revenue growth in H2.
Performance outside of the US
in line with expectations
Anticipated £26m sale of Advertising Intelligence
business to Nielsen Media Research Limited
Revenue up 4.6% to £87.4m (2016: £83.6m),
with like-for-like constant currency revenue growth
of 0.8%
Clear progress against Growth Acceleration Plan,
including expansion of Effectiveness practice in
Continental Europe, US, and Singapore, culminating
in the addition of a significant, multi-market
consumer goods client in Q4 2017
Excluding MI segment, revenue up 6.7% to £64.2m
(2016: £60.2m), with like-for-like1, constant currency2
revenue growth of 2.3%, up 5.5% in the second half
of the year
Announced restructure of our business into three core
service offerings: Ebiquity Media, Ebiquity Analytics
and Ebiquity Tech
On a like-for-like constant currency basis revenue up
5.8% excluding US MVM and MPO practice revenues
As previously reported, revenue performance from
the US MVM and MPO practices was disappointing
and impacted the Group’s revenue performance in
2017. With new practice leadership in place we expect
to see an improved performance in 2018
Underlying3 operating profit at £12.0m (2016: £13.0m),
and underlying PBT of £11.0m (2016: £11.8m)
Statutory operating profit was £5.5m (2016: £7.8m)
and statutory profit before tax was £4.5m
(2016: £6.6m)
Continued service and tool development with launch
of Ebiquity Portfolio Digital, Ebiquity Connect,
Ebiquity Total View Attribution, and Ebiquity Tech
Underlying diluted EPS 9.4p (2016: 11.3p)
Extension of digital analytics capability to Asia
Pacific, with the acquisition of Digital Balance in
September 2017. Acquired the remaining
non-controlling interest in French subsidiary
Underlying cash conversion from underlying operating
profit of 93% (2016: 88%)
Net debt at £28.9m (31 December 2016: £28.1m)
Appointment to the Board of Chairman Designate
Rob Woodward, who will replace Michael Higgins as
Chairman in May 2018
Increase of 10% in proposed dividend to 0.71p
(2016: 0.65p) per share reflecting maintained
progressive dividend policy
Appointment of US-based Chief Operating Officer in
January 2018
1. Like-for-like means prior year results are adjusted to include the results of recent acquisitions as if they had been owned for the same
period in the prior year.
2. Constant currency is calculated by taking current year denominated results restated at last year’s foreign exchange rates.
3. Alternative performance measures are set out in the summary of results section of this report.
3
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc At a glance
Ebiquity is a leading, tech-enabled, independent marketing
and media consultancy.
We help the world’s biggest brands leverage data and analytics
to drive greater transparency in the marketing ecosystem,
to create more impactful customer experiences and to deliver
greater returns on marketing investment.
We go to market with three practice areas
Media Value Measurement (‘MVM’)
Helping clients to increase efficiency and transparency in their media performance
59% revenue
Market Intelligence (‘MI’)
Providing clients with a clear picture of their own and their competitors’ advertising
27% revenue
Marketing Performance Optimisation (‘MPO’)
Enabling clients to decide where to allocate and how to optimise marketing investment
14% revenue
4
Strategic reportEbiquity plcAnnual report and financial statements for the year ended 31 December 2017 Market presence
Our clients
We work with over 80 of the top 100
global advertisers.
Global locations
Global expertise and offices in 14 countries across North America,
Europe, and Asia Pacific.
Our people
Employing over 900 people including data scientists, developers,
modellers, analysts, and digital and media experts.
5
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc Chairman’s statement
“ I have greatly enjoyed being part
of Ebiquity’s evolution over the past
12 years and believe that, with
Rob Woodward’s arrival, we have the
right leadership at the Board’s helm
to support the executive team, led
by Michael Karg, in seizing Ebiquity’s
unique market opportunities.”
Michael Higgins
Non-Executive Chairman
In 2006, when I became Chairman of
Ebiquity (then Thomson Intermedia),
the Company operated from four
offices – three in London and one in
New York. At that time, three-quarters
of our revenue came from clients
headquartered in the UK. I stand
down from the Board this year with
a business that spans the globe, with
20 offices in 14 countries, and proud
to count over 80 of the world’s 100
largest advertisers among its clients.
The marketing industry has been
through a period of substantial change
during this time, bringing with it
extraordinary complexity. In 2006,
Facebook celebrated its second
birthday and Twitter was born.
Meanwhile, eight-year-old Google was
already valued at $50 billion. Now it’s
over 17 times that figure, and these
three companies alone generated over
$130 billion of advertising revenue in
2017. Add to this the ever-evolving
capabilities of technology and the
creation of a totally pervasive online
ecosystem, and the balance of
relationships and the level of
complexity within marketing today
has fundamentally changed.
6
Strategic reportEbiquity plcAnnual report and financial statements for the year ended 31 December 2017 I would also like to thank my Board
colleagues, and welcome Rob
Woodward, my successor, to Ebiquity.
Rob has a set of skills and experience
ideally suited to our business as well as
to today’s opportunities and
challenges.
Ebiquity is now well-positioned at the
heart of the marketing industry.
We have a significant opportunity to
deploy our experience, skills, and talent
for our clients’ benefit from our
uniquely independent position.
Michael Higgins
Non-Executive Chairman
21 March 2018
In 2006, Ebiquity was already focusing
on transparency and accountability.
One key issue then was the need to
verify whether adverts that had been
paid for had actually appeared in
newspapers. We were able, in part,
to apply technology to the old-style
vouching process. From 2007 through
2015, the underlying platform for the
business we have today was
assembled – mainly through
acquisition – and we established our
market-leading position in media
benchmarking internationally. We
acquired additional skills to address
some of the emerging opportunities,
and our Marketing Performance
Optimisation segment was created.
Since 2016, there has been substantial
progress in defining our strategic
direction and delivering a simplified
and streamlined service offering as
One Ebiquity around the world. This
initiative is designed to ensure that our
clients recognise us as one business
with uniform capability and to
reposition our service offering around
our clients’ needs. There have also been
some important new hires of senior
executives, individuals with both
operational and industry-based skills
who will help us capitalise on our
position in the marketplace.
Transparency and accountability
remain the most significant challenges
for the marketing industry. The
revelations and recommendations that
came out of the 2016 ANA report were
pivotal in creating advertisers’
prevailing and enduring mindset.
For Ebiquity, it not only put us at the
heart of the debate. It also increased
awareness of the need for an
independent party with the right skills
to help advertisers create clarity
around the results that their
investments in media deliver, and the
returns they generate.
The Chief Executive Officer’s report
sets out last year’s financial
performance in detail, as well as our
developments and achievements
throughout the year. It explains how
we will be running our business going
forward, by our Media, Analytics, and
Tech practices. This aligns our business
with the challenges that our clients
face, and it follows the planned
divestment of the Advertising
Intelligence business.
On behalf of the Board, I must thank
everyone who works at Ebiquity for the
great commitment they show in
deploying their skills for the benefit
of our clients.
7
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc Market overview
Today’s marketing ecosystem is complex, at times confusing,
and often opaque. It has never been more challenging to be an
effective marketer or marketing procurement professional.
Marketing continues to experience a
period of constant change and dynamic
innovation. Driven by a change in
consumer behaviour, the ongoing and
incremental opportunities that digital
tools, technologies, and social media
platforms can offer, marketers can find
it hard to keep up with this relentless
pace of change. It can feel as if they’re
running to stand still. The rewards for
getting it right can be huge, but the
risks of getting it wrong mean the role
of the Chief Marketing Officer (‘CMO’)
has never been more challenging. At the
same time, CMO tenure is one of the
shortest in the C-suite.
Among big-spending consumer brands,
CMOs are in post for three-and-a-half
years. That’s two years less than
typical CFOs, and less than half as
long as CEOs, The Wall Street Journal
recently reported1. Marketing leaders
are faced with the paradox of needing
to achieve more but having less time in
which to do it.
As a result, executions in promising but
niche areas can often capture
marketers’ attention. At times, too
much activity is focused on short-term,
tactical wins. This is at the expense of
strategic marketing that delivers
business impact and real and tangible
return on investment.
Over the last 12 months, several
marketers have started to get more
involved in the details of how their
marketing spend is allocated. Some
very well-known high-profile marketers
are taking the lead on the issues that
have held the industry back during
digital advertising’s teenage years.
Principal among these issues has been
media transparency. And following the
lead of the two marketers with the
world’s biggest budgets – P&G’s Marc
Pritchard and Unilever’s Keith Weed
– the global marketing community is
now routinely putting transparency
high on the agenda.
In addition to marketers’ growing desire for media transparency across partners and suppliers, we believe that
this change in attitudes and behaviour is driven by three further, interconnected trends.
First
Second
Third
Heightened scrutiny of digital
marketing performance. It is
undeniable that digital
advertising was given too much
of a free pass as it developed.
Many brands overinvested with
insufficient emphasis on ROI. The
exponential increase in data,
algorithms, and data processing
power are now being harnessed
by some leading brands to
measure what matters.
Ever-more complexity in both
technology and data. Before
digital advertising, there were
typically just agencies and
publishers between brands and
their customers. Today, there are
dozens of different links in the
transactional chain; the World
Federation of Advertisers (‘WFA’)
estimates as many as 50. This
poses obvious challenges to
marketers looking to run
impactful campaigns, but the
new ecosystem also offers the
potential for transformational
returns for those who get it right.
Increased focus on evidence-
based marketing, particularly
in leveraging data to drive
better customer experiences
and enhanced marketing
performance. Today’s marketers
operate in a paradoxical
environment, where it’s never
been more challenging and at the
same time never more possible to
use data to drive evidence-based
decision-making.
8
Strategic reportEbiquity plcAnnual report and financial statements for the year ended 31 December 2017 “ My guess is that the biggest challenge for
marketers this year will be GDPR. If 2017
was the year of digital media transparency,
then 2018 may well be the year of data
transparency and ensuring that all of our
data is kept safe and secure.”
David Wheldon
president of the WFA
It is undeniable that the dominant
theme of marketing in 2017 was media
transparency. The practical steps
that everyone can take to secure
greater transparency governed the
tone and content of the debate.
With reference to the arrival of the
EU’s General Data Protection
Regulation in May of this year, the
president of the WFA, David Wheldon,
said in January 20182:
“ My guess is that the biggest challenge
for marketers this year will be GDPR.
If 2017 was the year of digital media
transparency, then 2018 may well be
the year of data transparency and
ensuring that all of our data is kept
safe and secure.”
At Ebiquity, we agree with David’s
analysis, but would go further. Our role
– indeed, our declared purpose – at
Ebiquity is ‘creating clarity for our
clients’. This means ensuring that
marketers work with their partners to
choose the level of transparency which
is right for them. It means subjecting
digital marketing to ever-greater
scrutiny. It means harnessing advances
in technology and data for their
advantage. And it means taking an
evidence-based approach to
measurement and evaluation. It is
encouraging to hear Marc Pritchard,
in his recent address at ISBA, put
increased focus on data and analytics,
but change will take time in an industry
obsessed with shiny new objects often
at the expense of employing rigour to
drive real business impact.
The media industry in general – and
digital media in particular – will never
truly become simple and
straightforward, and the issues that
have dogged marketing for many years
– from ad misplacement to fraud, from
brand safety to non-human traffic
– won’t disappear overnight. It is
encouraging that the industry is taking
steps in the right direction, but we
firmly believe that there is much more
that needs to be done.
1. http://on.wsj.com/2nRrF7g
2. http://bit.ly/2FwEX1h
9
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc Chief Executive Officer’s review
“ I would like to express our deep gratitude
to Michael Higgins for his significant
contribution over the past 12 years, where
his guidance has been invaluable in the
successful development of the Company.
We wish him all the very best
for the future.”
Michael Karg, PhD
Group Chief Executive Officer
2018 starts with two pieces of
significant news.
As previously announced, we have
appointed a new Chairman,
Rob Woodward, who joined Ebiquity
on 1 March. Rob succeeds Michael
Higgins who will retire after 12 years
as Chairman of Ebiquity, following the
AGM on 9 May.
Rob brings a wealth of both media
and senior Board-level experience to
Ebiquity. He was CEO of STV Group
plc for nearly 11 years where he led
their successful transformation into a
pre-eminent digital media group. Prior
to joining STV, Rob was Commercial
Director at Channel 4 Television for
four years and was previously a
Managing Director with UBS
Corporate Finance and lead partner
for Deloitte’s TMT industry group in
Europe. Rob is an experienced leader
who has an inspiring track record in
building teams and delivering
successful outcomes. His approach
and personality are a great fit for
Ebiquity and I am looking forward to
partnering with him.
10
I would like to express our deep
gratitude to Michael Higgins for his
significant contribution over the past
12 years, where his guidance has been
invaluable in the successful
development of the Company. We wish
him all the very best for the future.
Additionally, in February 2018, we
announced that we had entered into
an agreement to sell our Advertising
Intelligence business to Nielsen. The
sale is subject to UK Competition and
Markets Authority (‘CMA’) approval, and
completion is anticipated to take place in
the second quarter of 2018, assuming
the CMA provides clearance following its
high-level Phase 1 examination. If the
CMA instead refer the transaction for a
more detailed Phase 2 investigation, the
completion would likely take place in Q4
2018. The Advertising Intelligence
business represents in excess of 90% of
the reported revenue and underlying
operating profit within the Market
Intelligence (‘MI’) segment, and 25%
of Group revenues and contributed
£4.4 million to operating profit before
allocation of overheads, and for this
reason we refer in places of this report
to revenue growth excluding the
MI segment.
2017 financial
performance overview
Revenues for the year to 31 December
2017 grew 4.6% to £87.4 million. With
the majority of revenue denominated
in non-sterling currencies, revenue was
boosted by sterling being on average
weaker against the euro and the dollar
in 2017 than in 2016. In total, currency
movements benefited revenue by 3.4%,
with acquisitions further increasing
revenue by 0.4%. This resulted in
like-for-like, constant currency revenue
growth of 0.8%.
Excluding performance of the MI
segment, which contains the Advertising
Intelligence business, revenue growth
was 6.7% and 2.3% on a like-for-like,
constant currency basis. Revenue was
more evenly phased across 2017 than
in 2016, when revenue was front-half
weighted. Like-for-like, constant
currency revenue growth was 5.5% in
the second half of 2017 compared with
the second half of 2016.
Strategic reportEbiquity plcAnnual report and financial statements for the year ended 31 December 2017 As previously highlighted, revenue
performance from the US business
was well below management
expectations, and this impacted the
Group’s revenue growth year-on-year.
In our US MVM segment (excluding
FirmDecisions, our contract
compliance business), the trend we
observed in the first half of the year of
clients facing cuts to their marketing
and advertising budgets and
consequently deferring Media
benchmarking spending, continued
into the second half.
In the US MPO business unit, after
delivering greater than 50% revenue
growth between 2014 and 2016,
revenue declined in 2017. The US MPO
business had a high concentration of
revenue with a small number of clients.
The two biggest clients reduced spend
– mainly driven by internal
reorganisations – which caused
revenue to fall by 19.8% in 2017. US
MPO revenues were higher in H2 2017
than H1 2017, through the addition of
new clients in Q4 2017. Given the scale
of the US advertising market, and our
relative size, we feel positive about our
mid- to long-term opportunities. With
new leadership of our US MPO and US
Media business units now in place we
expect to see a sustained turnaround
in 2018. Excluding the performance of
the US MVM and MPO segment (but
including US FirmDecisions), the MVM
and MPO segments grew by 10.0%
and 7.4% respectively on a like-for-like,
constant currency basis.
The MVM segment reported revenue
up 9.2%, an increase of 5.2% on a
like-for-like, constant currency basis.
As clients focused on the issue of
media transparency, this significantly
benefited FirmDecisions, which
recorded exceptional revenue growth
in 2017. Outside of the US, MVM
revenue was in line with management
expectations, with continued good
progress in Europe, South-East Asia,
and Australia offsetting slightly
weaker performance in China, resulting
from a change in management post
the end of the earn-out period.
In the MPO segment, reported revenue
fell by 2.3% compared to 2016 and was
down by 7.7% on a like-for-like,
constant currency basis. Performance
from the MPO segment was impacted
by the significant decline in revenue
from the US MPO segment. Revenue
from the MPO segment outside of the
US grew by 6.4%, with revenues from
MPO Effectiveness services outside of
the UK representing 10% of total
revenue. The year saw a scaling up of
our MPO Effectiveness services in
Continental Europe and our MPO
practice in APAC. The UK MPO
business continued to deliver double-
digit revenue growth of 17.1%, while
revenue from our MPO team in Spain
(acquired as part of Media Value in
February 2016) declined in 2017,
reflecting high staff turnover during
the year.
Revenue from the MI segment declined
by 0.9%, and declined by 3.1% on a
like-for-like constant currency basis.
Revenue from the Advertising
Intelligence business grew by 0.1% on a
like-for-like constant currency basis, with
a slightly weaker second half. Revenues
from our project based Reputation
business declined as expected from
£2.0 million in 2016 to £1.2 million in
2017. In March 2018, we entered into an
agreement to sell the trade and assets
of our Reputation business to Echo
Research Holdings Limited. Completion
will take place on 31 March 2018.
Underlying operating profit was
£12.0 million. This represents a drop in
operating margin from 2016 of 1.7pp
to 13.8%. This reflects lower
profitability from the US MPO
business, combined with planned
investment in our Growth Acceleration
Plan – notably in investing in MPO
Effectiveness resources in new
markets. Investment in the Growth
Acceleration Plan was scaled back
during 2017 and cost control
measures were implemented in the
US MPO business during 2017, but
these were not sufficient to offset
the revenue decline.
Margins in the MVM segment were
consistent with 2016, as strong
performance from our Contract
Compliance business offset lower
profitability from our US Media
benchmarking business. Margins in the
MPO segment declined sharply in 2017,
reflecting the revenue decline in the
US MPO business, together with the
investment in the expansion of the
MPO segment in Europe and APAC.
Central costs, which are not allocated
to a segment, were in line with the
prior year.
Underlying profit before tax was
£11.0 million. Statutory operating
profit was £5.5 million, down from
£7.8 million in 2016, and statutory
profit before tax decreased to
£4.5 million, from £6.6 million in 2016.
The lower statutory operating profit
and profit before tax reflect both
lower underlying profitability as well
as an increase highlighted items.
Highlighted items are detailed in the
CFO’s report.
11
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc Chief Executive Officer’s review continued
Our service offerings.
In the last quarter of 2016, we defined
the core purpose of Ebiquity to be
‘creating clarity for our clients’.
The consequence of the clarity that
we create for marketers – through
independent, impartial advice,
delivered by the most knowledgeable
and experienced consultants in the
industry – is better informed
marketing investment decision-
making. Through our different service
offerings, we empower our clients to
focus on the metrics that matter for
their businesses. We then show them
how to use these to judge what’s
working well for them, what’s not,
and how they should adjust their
media and marketing investment
plans accordingly.
‘Creating clarity’ is the North Star
which guides everything we do. This
includes how we advise and guide our
clients, and is the foundation that
underpins our long-term strategic
ambition to become the leading
media and marketing analytics
consultancy, globally.
For the past few years, we have gone
to market with three, core practice
areas: Media Value Measurement,
Marketing Performance Optimisation,
and Market Intelligence.
12
Media Value
Measurement (‘MVM’)
Ebiquity is the global market leader in
media performance benchmarking,
media agency management, and
contract compliance.
We enable our clients to increase
media efficiency and transparency
through media performance reviews,
benchmarking, and measurement.
Dietmar Kruse
Practice Principal,
Media Performance
“ Advertisers face many challenges in
media today. Transparency,
programmatic, and meaningful
metrics for walled-garden
platforms like Google and Facebook
– to name but three. By defining
digital media benchmarks, we help
our clients to create clarity.”
And we enable them to make the
right, long-term decisions – including
finding and working with the right
agency partners.
Laetitia Zinetti
Practice Principal, Media
Consulting
“ Good relationships between brands
and their agencies need constant
vigilance. With the right support
and a thought-through, end-to-end
process, brands can ensure their
agency relationships – both
well-established and new – deliver
for the long-term future.”
We also assess agencies’ compliance
with contractual terms via our specialist
contract compliance business,
FirmDecisions. In 2017, FirmDecisions
undertook more than 300 contract
compliance audits covering activity
in 70 markets. 40 of the world’s
leading 100 advertisers consulted
with FirmDecisions over the course
of the year.
Stephen Broderick
Global CEO of FirmDecisions
“ It is only through well-written,
regularly-updated contracts that
marketers can secure the level of
transparency they desire. With the
industry changing so fast, brands
need to review and update their
contracts regularly to stay ahead
of the game.”
Strategic reportEbiquity plcAnnual report and financial statements for the year ended 31 December 2017
Marketing
Performance
Optimisation (‘MPO’)
We guide clients to decide how much
they need to spend on marketing,
where to allocate, and how to optimise
their marketing investments. We help
them choose which analytics
technologies to select, and how to
improve digital customer journeys.
Our work in this practice has two
distinct service offerings: econometric
modelling and customer experience
analytics.
Tim Hussain
Practice Principal,
Tech – Europe
“ There are so many options for
marketing technology that many
marketers don’t know where
to turn for simple, clear, and
impartial advice. By building
a team from right across the
industry – and by remaining
staunchly independent – we are
helping our clients make informed
advertising technology decisions.”
Mike Campbell
Head of International Effectiveness
“ Marketers are rewarded by the
C-suite for delivering real and
tangible ROI. And it’s only by
understanding the relative and
absolute contribution of all channels
and platforms – taking and
attributing the Total View, online
and offline – that they can
accomplish this.”
Market Intelligence
(‘MI’)
For almost 20 years, we have provided
clients with a clear picture of their own
and their competitors’ in-market
creative executions, ad spend, and
media strategies. Our market-leading
family of Ebiquity Portfolio media
platforms was joined in 2017 by
Ebiquity Portfolio Digital, providing
comprehensive coverage of creative
and spend data for digital advertising
content. This is supported by specialist
insight, market, and earned media
research experts who combine
automated analytics with native-
language human analysis. The sale
process of the AdIntel business
required significant time investment by
our senior management over the
course of 2017.
Morag Blazey
Managing Principal, Intel
“ With the sale of the Advertising
Intelligence business, the
combined entity will be a strong
global player, with the scale and
strategic focus to continue the
level of investment needed to keep
the business evolving and deliver
better long-term career growth.”
13
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc Chief Executive Officer’s review continued
Changing structure, changing reporting
As the media industry is changing rapidly,
so Ebiquity is transforming and developing
to meet the needs of the world’s
marketers and brand custodians.
Continued transformational change in 2017
Strategic moves
Product & service launches
Talent & organisation
enhancements
• Outlined vision
• Tech Practice
• Moved to matrix organisation
• Developed strategy
• Total View Attribution
• New Managing Director, Media
• Simplified service offering
• Portfolio Digital
• Acquired Digital Balance
• Ebiquity Connect
(Australia)
• Announced sale of AdIntel
business
North America
• Head of Analytics, North
America
• New Managing Director, China
• New Managing Director, France
• Chief Operating Officer
• New Chief Strategy Officer
14
Strategic reportEbiquity plcAnnual report and financial statements for the year ended 31 December 2017 As the media industry is changing
rapidly, so Ebiquity is transforming
and developing to meet the needs of
the world’s marketers and brand
custodians. When I joined Ebiquity
as Group CEO in 2016, we launched
a Growth Acceleration Plan designed
to achieve a compound annual growth
rate of 10% by 2021. This strategy
is designed to make our business
the best-equipped partner to help
our clients to build accountability
into their marketing investments.
The sale of our Advertising Intelligence
business is clear evidence of our
transformation in action. Creating
a more operationally-aligned,
streamlined business will allow us to
respond better to our clients’ needs
and focus on our Growth Acceleration
Plan moving forward.
Accordingly, we have now restructured
our business into three core service
offerings. This restructure better
reflects both advertisers’ needs
and the reality of the media and
marketing ecosystem today and
for the years to come.
Operating under an agile, One Ebiquity consulting model, we have now structured ourselves as:
Ebiquity
Media
covering services such as media
performance benchmarking, media
agency management, and contract
compliance
Ebiquity
Analytics
incorporates areas such as
marketing effectiveness, market
mix modelling, total view
attribution, and data-driven
customer experience optimisation
Ebiquity
Tech
comprising services such as
strategy, vendor selection, and
implementation for ad tech,
martech, and data management
From 2018 onwards, we will also,
therefore, move from segmental
reporting as MPO, MVM, and MI, to
reporting by 1) Media, 2) Analytics and
Tech, and until such time as the sale of
the Advertising Intelligence business is
completed, 3) Intel.
Michael Karg, PhD
Group Chief Executive Officer
Christian Polman
Chief Strategy Officer
“ By creating a three-practice
business that addresses our clients’
needs in Media, Analytics, and Tech,
we’ve made our market offering
both more relevant and more
buyable. We’ve shown our clients
that we understand the challenges
they face in the ever-more complex
media and marketing ecosystem.”
15
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc Our business model
We apply data-driven insights to help
marketers deliver accountability of their
marketing investment.
Our data-driven approach to creating
clarity from complexity is hardwired
into all our different products and
services. It is also central to our
business model.
Our engagements always start with
a strategic review of where our clients
are today, where they want to get to,
and what their motivations are.
This is true both for long-established
and first-time clients. This process
of triage enables us to determine
the most effective order in which to
address specific, priority tasks.
We then capture data; we cleanse,
organise, and harmonise that data;
we generate actionable, data-driven
insights; and, we tell our clients
data-driven stories from which they
can take practical action to achieve
their business and marketing
objectives. In this way, we empower
our clients to take rightful ownership
of their digital marketing strategy,
technology, data, and media spend.
Inputs:
data & insights
• Advertiser data – media, spend,
sales, social media, market
research/polling data
• Consumer data – behavioural,
web-data (1st, 2nd, and 3rd
party), customer profiles,
attitudinal data inferred from
behaviours
• Market data – creative assets,
competitor performance,
third-party demographic data
3
We
organise
data
2
We
capture
data
DEVELOPERS
1
We conduct
strategic
reviews
DATA
SCIENTISTS
IN G
T
A
E
R
C
STRATEGIC
CONSULTANTS
C
L
A
R
IT
Y
> Find out more about our divisions on pages 12 and 13
16
Strategic reportEbiquity plcAnnual report and financial statements for the year ended 31 December 2017
Outcomes:
business impact
•
Improved media and marketing
decision-making
•
Increased sales – e.g. optimised
marketing investments,
enhanced marketing response
• Better cost control – e.g.
ensuring trading partners deliver
against savings claims
4
We apply
advanced
analytics
IN G
T
A
E
R
C
MODELLERS
C
L
A
R
IT
Y
CLIENT
PARTNERS
ANALYSTS
MEDIA EXPERTS
5
We generate
actionable
insights
DIGITAL
EXPERTS
6
We tell
data-driven
stories
> Find out more in our strategy section on pages 22 and 23
17
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc
Our strategy for growth
Everything we do is shaped
by our corporate purpose,
‘creating clarity for our clients’.
It is our ambition to be the world’s
leading, tech-enabled independent
marketing and media consultancy.
Everything we do in pursuit of this
objective is shaped by our corporate
purpose, ‘creating clarity for our
clients’. We have established five-year
goals which are grouped into 5Ps,
covering: People, Product, Process,
Profile, and Performance. And our 5Ps
provides the framework for us to
measure our progress towards our
long-term business objectives.
Ebiquity’s 5P goals
1. People
2. Product
3. Process
4. Profile
Attract, retain, and develop high-calibre talent from the media, analytics
and data science, and consultancy sectors
Launch proprietary products and services that harness our data and insights
and enable us to be trusted advisers for our clients
Shape the organisation and its processes to support broader
and deeper client relationships, locally and globally
Raise our brand profile and broaden the perception of our expertise
to support our growth plans
5. Performance
Deliver our Growth Acceleration Plan resulting in sustainable,
double-digit revenue growth at sustainable operating margins
How we’re doing on our five-year objectives for each strategic pillar of the 5Ps – in terms of progress, priorities, KPIs, and risks
– is summarised on pages 22 and 23. But first, I want to focus on some of the highlights for each of the 5Ps that we’ve delivered
during 2017.
The senior hires we have made and the
roles we have developed and created
during the course of 2017 demonstrate
the scope of our ambitions for Ebiquity.
So, too, do the range and diversity of
backgrounds from which our new team
members come, including media
agencies, digital, consulting, and
technology. For instance, we now have
a global Chief Operating Officer, our
first global chairman of media, and a
new Chief Strategy Officer.
We have new leadership in China and
France, and new leadership for both
Media and Analytics in the US. We
have strengthened our offering across
Europe with the launch of our Tech
practice, and in Australia with the
acquisition of Digital Balance. It is
through talents like these that we
will achieve our objective of becoming
the world’s leading marketing
analytics consultancy.
1. People
For all the great tech, data, and smart
use of analytics, Ebiquity is first and
foremost a people business. During the
course of 2017, the global Talent Team
and our capability leaders have
developed the first iteration of a
Global Competency Framework.
This model allows people at all levels of
the organisation to understand what
behaviours and skills are required – to
do their jobs and to meet targets. By
marrying this with a skills map, we can
systematically assess where we have
skills and what the development needs
for Ebiquity are, at both an individual
and a company level.
18
Strategic reportEbiquity plcAnnual report and financial statements for the year ended 31 December 2017 2. Product
To stay relevant and anticipate
our clients’ needs in the constantly-
evolving digital marketing ecosystem,
it’s critical that we continually innovate
our products and services. At Ebiquity,
we encourage and facilitate innovation
from the ground up, based on the
opportunities our teams know can help
advertisers to meet their business and
marketing objectives.
During 2017, our Media practice has
completed development of and rolled
out a new media data management
platform called Ebiquity Connect.
This platform is designed to help
agencies upload our advertiser clients’
media data consistently, efficiently,
and securely. Designed to drive data
security and efficiency, Ebiquity
Connect saves both our clients and
media agencies partners’ time and
resource and enables us to produce
even more relevant and insightful
media measurement.
3. Process
In part as a legacy of a business that
has grown through acquisition, and
in part because operational efficiency
across our network had not
– historically – been identified as a
strategic priority, a comprehensive
analysis of operations has identified
scope for enhanced delivery of products
and services. This programme was
started in Q4 2016 by the recruitment
of new team members whose purpose
is to drive operational efficiency and
synergies across practices. And it has
been strengthened considerably by the
appointment of Jason Bailis at the
start of 2018 as Global Chief Operating
Officer, following a 10-year stint in
senior operations roles at Publicis
Groupe, for Sapient Nitro, Razorfish,
and DigitasLBi.
Our Media Consulting team has
codified and standardised an
end-to-end Ebiquity Agency Selection
approach. Using this approach, we
provided pitch management services
to almost 100 national and global
brands in 2017, with total, combined
media billings of almost £9 billion.
This makes Ebiquity the biggest and
most experienced agency relationship
management business.
Our Media practice in Australia has
developed an innovative methodology
to benchmark and analyse online video
advertising performance. With
advertisers following audiences who
are shifting their viewing habits from
broadcast TV towards online video,
this methodology enables us to assess
performance of online video
advertising per se, and compared to
the cost and efficiency of traditional
TV advertising.
To help clients navigate the complexity
of programmatic advertising, and the
myriad choices of martech and ad tech
providers, we launched a new Ebiquity
Tech practice area, including hiring a
European ad tech team based out of
our London office. The team’s remit
includes helping advertisers select,
implement, and manage their digital
programmatic trading technology.
Our Analytics practice has developed
and launched our pioneering Ebiquity
Total View Attribution solution.
Ebiquity Total View is a multi-channel
attribution model that considers and
weights the relative impact of all
relevant inputs on consumer behaviour,
online and offline. Combining top-down
econometrics with bottom-up digital
attribution, the Ebiquity Total View
approach is a clear-box solution that
lets the data decide cause and effect.
Jason Bailis
Chief Operating Officer
“ Operational excellence is a win-win.
A win for clients, who get great
services, delivered smarter. A win
for our people, who do what they do
brilliantly, but in a systematised and
streamlined fashion.”
We have also started to put in place a
group of senior global client partners
to service the needs of some of our
biggest clients better and more
holistically. Our client partners are
specialists in our clients’ businesses
and generalists in the full spectrum of
marketing and media consultancy
advice our different practices offer.
This enables them to bring forward the
right service to the right client at the
right time.
Andrew Challier
Chief Client Officer
“ Our clients are at the heart of
everything we do. They face very
real challenges in securing optimal
return on their marketing
investments. By addressing these
challenges directly, our teams can
help our clients deliver real value.”
19
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc Our strategy for growth continued
4. Profile
Ebiquity’s profile is now higher than it
ever has been. Our thought leadership
content is sought and widely used
around the world. Our leaders have
spoken at more industry events than
ever, and they are now regularly
contacted for comment. These
approaches are from both specialist
marketing media and generalist
business media, from Campaign to
The Financial Times. Our research is
now quoted in the analyst reports
commentating on marketing, including
Liberum and Bank of America.
In 2017, we published a first-of-its-kind
study of programmatic media buying in
the US marketplace. The study analysed
16.4 billion impressions from 445
completed campaigns, making it the
most comprehensive study of its kind.
It was conducted and published with
the US and Canadian Associations of
Advertisers, and AD/FIN.
Two studies on the long-term value
and return on investment delivered
by TV were published during the year,
one in the UK in association with
ThinkBox, the other in Australia in
partnership with ThinkTV.
Our partnership with global and
national trade bodies, including the
ANA, World Federation of Advertisers
(‘WFA’), and I-COM, strengthens and
deepens. These partnerships generate
joint research, drive client
conversations, and result in leads.
A sample of our thought leadership
research in 2017 is summarised on
page 21.
Andreas Cohen
Chairman of I-COM Global
“ Ebiquity have continued to plant
their credentials on the world stage
of marketing analytics and play a
growing and important role within
the I-COM community. Whether
speaking at our annual Global
Summit, serving on our numerous
boards and councils, or as
frontrunners in our Data Science
Hackathon, Ebiquity is partnering
with us in our mission to help clients
achieve competitive advantage in
data-driven marketing.”
How each dollar moves through the programmatic supply chain.
Data from Programmatic: Seeing through the financial fog report, produced with AD/FIN
Demand side
Sell side
Advertisers
100%
Agencies
6%
Execution
12%
Other Fees
1%
Targeting Data
9%
Exchange/SSP
11-18%
(Avg. 15%)
Publishers
61-54%
(Avg. 58%)
$0.06
$0.12
$0.01
$0.09
$0.72
$1.00
All-in
20
$0.06
$0.12
$0.01
$0.09
$0.11
$0.18
$0.94
$0.82
$0.81
$0.72
Inventory
$0.11 $0.18
$0.61 – $0.54
Strategic reportEbiquity plcAnnual report and financial statements for the year ended 31 December 2017 Summary of major research studies by Ebiquity and partners in 2017
Month
Partner(s)
Title and scope of study
Short link
http://bit.
ly/2qj3YrN
April
May
World Federation of
Advertisers (‘WFA’)
“ Online advertising effectiveness”. Research among world’s
leading advertisers on attitudes, aspirations, and behaviours for
online advertising.
US Association of National
Advertisers (‘ANA’)
“ Seeing through the programmatic fog”. First-of-its-kind study
into programmatic media buying in the US marketplace.
http://bit.
ly/2q0oSZo
Canadian Association of
National Advertisers
AD/FIN
Study investigated costs and economics of programmatic.
16.4 billion impressions from 445 completed campaigns analysed.
June
ThinkTV
“ Payback Australia”. Econometric study demonstrating how and
how much different media channels deliver in terms of ROI.
http://bit.
ly/2Ey0qL6
October
WFA
November
Thinkbox, Gain Theory
Multi-category (FMCG, automotive, e-commerce, finance).
TV, online search, and radio the most effective media.
“ Global Ad Viewability & Ad Fraud Levels”. By aggregating data
from six leading verification companies (comScore, DoubleVerify,
Integral Ad Science, Meetrics, Moat and Pixalate), we produced
the industry’s first collective view of viewability and fraud levels
across more than 20 markets.
(WFA
members
only)
“ Profit Ability: the business case for advertising”. Total profit
generated by different types of advertising quantified. ROI of
£3.24 for every pound spent over three years, £4.20 for TV which
accounts for 71% of profit. TV shown to deliver best return.
http://bit.
ly/2Hlzmg3
Stephan Loerke
CEO of the World Federation
of Advertisers
“ As our longest standing partner,
Ebiquity has been instrumental in
helping us understand market
dynamics. They have allowed us to
surface global marketplace issues
before they become mainstream
discussion topics. They have also
provided practical solutions and
steps that our members can take
to help get ahead of these
challenges and improve their
marketing effectiveness.”
Richard Basil-Jones, Managing Director of Ebiquity Asia-Pacific
shares findings of ‘Payback Australia’ study for ThinkTV
21
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc Our strategy for growth continued
5. Performance
The performance of Ebiquity in 2017
is summarised in more detail in the
CEO review.
Total revenue growth in 2017 was 4.6%,
and 0.8% on a like-for-like, constant
currency basis. Performance in our US
Media and US MPO business units
provided a drag on revenue growth.
Outside of the US, we made progress
against our revenue growth goal in
both the MPO and MVM segments.
During 2017, we achieved a series of
key milestones of our Growth
Acceleration Plan set out in September
2016. Further detail of both revenue
growth in 2017 and progress against
the Growth Acceleration Plan is
detailed below.
GOAL
PROGRESS
PRIORITIES
KPIs
RISKS
22
PEOPLE
PRODUCT
PROCESS
PROFILE
PERFORMANCE
Attract, retain and develop high calibre
talent from the media, data science
and consultancy sectors.
Launch proprietary products and
services that harness our data and
insights and enable us to be trusted
advisers to our clients.
Shape the organisation and its
processes to support broader
and deeper client relationships.
Raise our brand profile and broaden the
Delivery of our Growth Acceleration
perception of our expertise to support
Plan resulting in sustainable double
our growth plans.
digit revenue growth at sustainable
operating margins.
• Launched first iteration of Global
• Launched Ebiquity Connect
• Embedded operational tools
• More press mentions in trade and
• Continued growth of Marketing
Competency Framework
• Kicked off Future Leaders
Training programme
• Expanded Marketing
Effectiveness footprint in Europe
and APAC
• Rolled out Portfolio Digital
• Launched Total View Attribution
(e.g. Salesforce) to improve
management information
(e.g. FT)
business publication than ever before
Effectiveness practice in the UK
• Delivered strong growth in our
• Hired a Global Chief
Operating Officer
• Expanded presence at key industry
Contract Compliance business
events such as I-COM, WFA, ISBA,
globally
• Appointed Global Client Partners
ANA, ProcureCon
• Organising global sales meeting
• Roll-out Phase I of digital paid
•
Improve sales forecasts
• Publication of thought leadership
• Delivery against the milestones
• Raising digital skill levels
media measurement tool, Optix
• Grow Marketing Effectiveness
internationally
• Continue expansion of
FirmDecisions internationally
• Harmonise core methodologies
used in our Media practice
• Target voluntary attrition rate
•
below 20%
Increase proportion of revenue
generated from new/enhanced
products and services
• Our talent continues to be highly in
demand due to the breadth of
experience that it gains through our
unique positioning. There is a risk of
an industry-wide talent shortage for
data scientists in particular as
demand by clients, agencies, internet
platforms and publishers increases.
We work hard on a number of
initiatives to make Ebiquity a great
place to work and foster retention
• The media landscape is constantly
changing, resulting in increasing
pressure to develop/refine
products and services faster.
Through evolving our delivery
methods and creating product
owners we aim to stay highly
relevant to our clients
• Streamline hiring process
•
Introduce stage gate process for key
investments in innovations
articles providing insightful and
published within our Growth
actionable points
Acceleration Plan
• Roll-out a refreshed brand identity
• Launch of marketing analytics
across all key brand touchpoints,
and tech services in new markets
including website
• Percentage of clients taking two
• Publish quoted thought leadership
• Revenue CAGR of +10% between
or more products/services
pieces
2016-2021
• Average billings per employee
• Medium term underlying
operating profit margin target
of 12-13%
• Our clients often have complex
•
Inability to capitalise on the
•
Identifying key talent to enable
decentralised management structures
opportunities arising from the
expansion of Marketing Analytics
requiring considerable investment of
focus on media transparency
and Tech businesses could take
• Some of the industry trends become
less important or are resolved
longer than expected due to
scarcity in the market
time to negotiate global commercial
agreements. We ensure we devote
appropriate commercial and senior
client facing resource to expedite the
negotiation of commercial
agreements
• Clients may be slower to respond to
issues in media transparency and
data driven marketing causing a
delay in potential revenue growth.
We leverage our relationships with
clients and industry bodies to
influence change
Strategic reportEbiquity plcAnnual report and financial statements for the year ended 31 December 2017 GOAL
PROGRESS
KPIs
RISKS
PEOPLE
PRODUCT
PROCESS
PROFILE
PERFORMANCE
Attract, retain and develop high calibre
Launch proprietary products and
talent from the media, data science
services that harness our data and
and consultancy sectors.
insights and enable us to be trusted
advisers to our clients.
Shape the organisation and its
processes to support broader
and deeper client relationships.
Raise our brand profile and broaden the
perception of our expertise to support
our growth plans.
Delivery of our Growth Acceleration
Plan resulting in sustainable double
digit revenue growth at sustainable
operating margins.
PRIORITIES
• Organising global sales meeting
• Roll-out Phase I of digital paid
• Raising digital skill levels
• Launched first iteration of Global
• Launched Ebiquity Connect
Competency Framework
• Expanded Marketing
• Kicked off Future Leaders
Effectiveness footprint in Europe
Training programme
and APAC
• Rolled out Portfolio Digital
• Launched Total View Attribution
media measurement tool, Optix
• Grow Marketing Effectiveness
internationally
• Continue expansion of
FirmDecisions internationally
• Harmonise core methodologies
used in our Media practice
• Embedded operational tools
(e.g. Salesforce) to improve
management information
• More press mentions in trade and
business publication than ever before
(e.g. FT)
• Hired a Global Chief
Operating Officer
• Appointed Global Client Partners
• Expanded presence at key industry
events such as I-COM, WFA, ISBA,
ANA, ProcureCon
• Continued growth of Marketing
Effectiveness practice in the UK
• Delivered strong growth in our
Contract Compliance business
globally
•
Improve sales forecasts
• Streamline hiring process
•
Introduce stage gate process for key
investments in innovations
• Publication of thought leadership
articles providing insightful and
actionable points
• Delivery against the milestones
published within our Growth
Acceleration Plan
• Roll-out a refreshed brand identity
across all key brand touchpoints,
including website
• Launch of marketing analytics
and tech services in new markets
• Target voluntary attrition rate
•
Increase proportion of revenue
• Percentage of clients taking two
• Publish quoted thought leadership
• Revenue CAGR of +10% between
below 20%
generated from new/enhanced
products and services
or more products/services
pieces
2016-2021
• Average billings per employee
• Medium term underlying
• Our talent continues to be highly in
• The media landscape is constantly
• Our clients often have complex
demand due to the breadth of
changing, resulting in increasing
experience that it gains through our
pressure to develop/refine
unique positioning. There is a risk of
products and services faster.
an industry-wide talent shortage for
Through evolving our delivery
data scientists in particular as
methods and creating product
demand by clients, agencies, internet
owners we aim to stay highly
platforms and publishers increases.
relevant to our clients
We work hard on a number of
initiatives to make Ebiquity a great
place to work and foster retention
decentralised management structures
requiring considerable investment of
time to negotiate global commercial
agreements. We ensure we devote
appropriate commercial and senior
client facing resource to expedite the
negotiation of commercial
agreements
•
Inability to capitalise on the
opportunities arising from the
focus on media transparency
• Some of the industry trends become
less important or are resolved
operating profit margin target
of 12-13%
•
Identifying key talent to enable
expansion of Marketing Analytics
and Tech businesses could take
longer than expected due to
scarcity in the market
• Clients may be slower to respond to
issues in media transparency and
data driven marketing causing a
delay in potential revenue growth.
We leverage our relationships with
clients and industry bodies to
influence change
23
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc Strategic report
Our strategy for growth continued
The focus for our practices in 2018
For each of our three practice areas
Media, Analytics, and Tech we have a
clear and distinct plan to drive growth.
In Media, we are the global market
leader for media performance
benchmarking, agency selection, and
contract compliance. For 2018, we plan
to cement our leading position, helping
our clients to attain the levels of
transparency they desire.
In Analytics, we will accelerate. In
2018, we plan to scale and grow across
existing and selected new territories,
as well as across existing and new
categories. We will do this through a
combination of our best-in-class,
integrated modelling engine capable of
running more complex models than our
competitors; through machine-
learning; and, through cloud-based
data processing of Big Data sets.
And for our Tech practice, our strategy
is ignite. This newly-codified practice
brings together products and services,
team members and leadership who
were already in the business before
the practice was created, together
with a series of senior hires with
strong ad tech, martech, and media
agency backgrounds. Our combined
experience, tools, and approach is
designed to help advertisers secure
optimal return on investment on digital
advertising and technologies. We have
particular expertise and a growing
client base in programmatic.
10-year ambition
to be the world’s leading tech-enabled
marketing consultancy
Our purpose
creating clarity
for our clients
24
Ebiquity plcAnnual report and financial statements for the year ended 31 December 2017 In summary
In summary
Across each of our three practices, we help
our clients tackle today’s critical challenges in
marketing, delivered through a comprehensive
service offering.
In Media, we help achieve greater
transparency of media spend and
performance.
In Analytics, we help build evidence-
based marketing programmes rooted
in data and analytics.
And in Tech, we help deploy the right
technology – effectively – to create
a unified, single customer view.
And so, with our purpose and values,
10-year mission, five-year goals and
strategy in place and active; with clear
progress against each of our 5Ps; and,
with our company structure
reorganising around client needs, we
are in the right position to ultimately
achieve our mission of becoming the
trusted adviser of the Chief Marketing
Officer. Naturally, our approach and
offer will continue to evolve as both the
media and marketing ecosystems, and
as such CMO needs, change.
To do this, we will work as One
Ebiquity, ensuring that our clients
recognise us as one business with
uniform capability. By developing
deeper relationships with our clients,
we introduce them to the full array of
products and services we can offer.
By working across practices, across
geographies, and across boundaries,
we deliver more to our clients and
more to their bottom line.
The One Ebiquity mindset encourages a
truly holistic view of marketing services.
This enables our clients to ensure that
their marketing is strategic marketing,
designed to optimise the value and
utility of their brands to their customers,
and it will enable us to deliver against
our Growth Acceleration Plan.
Our values
Clear
pragmatic
down-to-earth
straightforward
Agile
always-on
adaptable
collaborative
Curious
inquisitive
engaging
driven
Objective
informed
knowledgeable
honest
25
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc Annual report and financial statements for the year ended 31 December 2017
Strategic report
Case study
Enhancing media
investment ROI
Achieved continuous and
sustained improvements
in ROI from media
investments
Leveraged halo effects
of specific product lines
across entire product
portfolio
Client objectives
Ebiquity approach
Outcomes
Mazda Spain wanted to understand
how its media investments were
performing. As the decision to buy a
car is long and complex, the analysis
needed to show not just impact on
sales, but impact all along the
purchase funnel; from web visits to
dealer/showroom visits, and on to final
orders. By knowing what was working
– and what was not – Mazda was
looking to optimise its media buying.
We conducted a comprehensive
assessment of Mazda’s media
investment, price discounts, new car
releases, competitor activity, and PR
activations along the whole purchase
lifecycle. Our marketing effectiveness
team built bespoke econometric
models to identify Mazda’s most
impactful sales drivers. We helped the
company to deploy the optimal media
mix, phase spend appropriately, and
support the right product lines that
work hardest for the company overall.
We used our learnings to develop
forecasts and simulations to enhance
future media planning and decision-
making.
Our analysis enabled Mazda Spain to
understand with absolute clarity that
TV advertising is fundamental to
driving ROI for them. Conventional TV
advertising was shown to be
more effective than programme
sponsorship. And we identified which
creative executions were the most
effective, not only in generating sales
for specific models shown but also in
driving sales across the portfolio.
“By understanding the impact that our media spend has right
across the purchase funnel for different models of our cars, we’ve
been able to fine tune our media plans with precision.
Econometric modelling is a powerful tool. It’s enabled to do more
of what works brilliantly, less of what we were already doing
more than enough of, and to drop altogether what’s not relevant
or impactful in our category or for our company.”
José Manuel Loscos
Marketing Director, Spain
26
Ebiquity plc
Strategic report Annual report and financial statements for the year ended 31 December 2017
Case study
Paid, earned, owned
social media modelling
Achieved best-in-class
social media engagement
in the quick-service
restaurant category
Fine-tuned content
strategies to optimise
impact of specific
channels and platforms
Client objectives
Ebiquity approach
Outcomes
Subway needed to understand the
effectiveness of its social media
activity. The marketing leadership
team wanted to give the Board a
rationale for what they should invest in
which channels, based on actual social
media impact. And as Subway is a
franchised operation, the team needed
to address franchisee questions about
what central marketing delivered
through social.
We analysed all paid, earned, and
owned social media content generated
by and about Subway in the UK &
Ireland, compared with the other three
big players in the category. We found
Subway generated the most positive
and neutral sentiment across Twitter
and Facebook. The company also
experienced the largest percentage
growth in fans and followers on both
platforms, despite much less offline
advertising. Our Effectiveness team
found that TV and radio drove earned
media coverage, while out-of-home
had minimal impact.
The analysis of peaks and troughs
of activity enabled Subway to plan
social better as a properly integrated
component of marketing. It joined
up messaging across social and other
channels, making best use of different
channels to optimise engagement:
Facebook to entertain, Twitter to give
healthy lifestyle advice, and Instagram
to feature product and packaging.
This allowed Subway to outperform
its competitors on significantly
leaner budgets.
“Before we assessed the impact of social, we found it hard to
make a solid business case – to the company or our franchisees
– about how we were performing and what we should do as a
result. By understanding what topics, issues, and types of content
drive conversation and engagement, we’ve been able to fine-tune
our content and engagement strategies.”
Sacha Clark
Country Marketing Director at Subway UK & Ireland
Ebiquity plc
27
Strategic reportCorporate governanceFinancial statements Annual report and financial statements for the year ended 31 December 2017
Strategic report
Case study
Agency selection
and management
Identified and appointed
new agency partner
following best-in-class
Agency Selection process
Engaged cross-
functional teams of
internal stakeholders
from five divisions, five
departments
Client objectives
Ebiquity approach
Outcomes
L’Oréal France has now gone through
a best-in-class process for AOR and
search agency review and secured
new partners for both. The company
has confidence that they have ideal
partners – not just for today,
but for several years to come.
L’Oréal France is one of the biggest
advertisers in the country, and France
is one of L’Oréal’s top three markets
worldwide. After more than 10 years
in partnership with its media agency
of record (‘AOR’), the beauty giant
decided to benchmark the service, cost
performance, and thinking it received
from its agency against the market.
Ebiquity Paris worked with L’Oréal
France to understand motivations for
and expectations of agency review. We
interviewed 30 internal stakeholders to
shape the tender and review
requirements. We ran workshops with
multiple teams in different divisions to
design the optimal review process.
Five of the six global media agency
groups participated in the Request for
Information (‘RFI’) stage, answering
10 critical questions in writing and
discussing three questions in a
one-hour chemistry meeting. The
request for proposals (‘RFP’) was split
into two lots, one for all paid media
except search, the second for search.
“Reviewing agencies is a major undertaking and shouldn’t be
entered lightly or with insufficient time, energy, and resource. It’s
important that everyone relevant in an advertiser business – across
multiple functions and levels of responsibility – is involved. And a
clear and methodical process should be followed, giving prospective
partners enough time and scope to demonstrate why they’re the
right fit – not just for today, but for the medium-term future.”
Celine Largy
Marketing Director, L’Oréal France
28
Ebiquity plc
Strategic report Annual report and financial statements for the year ended 31 December 2017
Case study
Bespoke training in media
planning and strategy
Improved understanding
of media planning
process across the
business
Enhanced media ROI
through improved
knowledge and expertise
in all relevant functions
Client objectives
Ebiquity approach
Outcomes
The Britvic marketing and insight
team has established a new working
framework with its media agency.
The agency provides planning
information in a report format
of Britvic’s design that shows the
various media choices and provides
full visibility of costs and reach.
Soft-drink manufacturer Britvic runs a
broad-ranging education programme,
but the company’s marketing and
insight teams needed to increase their
understanding of media planning and
strategy to challenge agency
recommendations. Specifically,
the teams wanted help ensuring that
agency plans successfully extended
Britvic’s reach to the broadest possible
audience to optimise sales.
Our media experts ran a series of
workshops with Britvic’s marketing
leadership to develop a best-in-class
media planning and strategy training
course. We helped them to plot their
vision for better media planning and
how to build knowledge across the
marketing department.
Britvic has delivered its new course
to dozens of marketing and insight
colleagues. The course covers how the
agency planning process works, with
a special focus on digital planning
practices. Real strategy documents
and media plans were reviewed to
identify improvements, and the
strength of Britvic’s own data was also
addressed. The course addresses best
practice in briefing agencies, what they
should expect in return, and how to
ensure KPIs are applied to track
improvements over time.
“The training’s been a big help and has increased the marketing
team’s focus on where we’re spending our media budget –
one of Britvic’s biggest annual investments. Everyone now has
far more confidence to ask the right questions, especially around
value for money on digital. The session itself was really brought to
life and made real by analysing our own historic strategy
documents and media plans.”
Fiona Graham
Senior Capability Manager, Britvic Soft Drinks
Ebiquity plc
29
Strategic reportCorporate governanceFinancial statements Chief Financial Officer’s review
Performance outside of the US
in line with expectations
Highlights
• 4.6% revenue growth, 6.7% revenue growth
excluding the Market Intelligence segment
• Underlying operating profit margin of 13.8%
• Underlying diluted EPS of 9.4p
• 10% increase in proposed dividend to 0.71p per share
• Underlying cash conversion of 93%
Andrew Noble
Chief Financial Officer
Alternative
Performance Measures
In these results we refer to ‘underlying’
and ‘statutory’ results, as well as other
non-GAAP Alternative Performance
Measures.
Alternative Performance Measures
(‘APMs’) used by the Group are:
• constant currency like-for-like
revenue growth;
• underlying operating profit;
• underlying operating margin;
• underlying profit before tax;
• underlying effective rate of tax;
• underlying fully dilutive EPS; and
• underlying operating cash
flow conversion.
Underlying results are not intended to
replace statutory results but are
presented by removing the impact of
highlighted items in order to provide a
better understanding of the underlying
performance of the business. The
above APMs are consistent with how
business performance is measured
internally by the Group.
30
Underlying profit is not recognised
under IFRS and may not be
comparable with underlying profit
measures used by other companies.
Highlighted items comprise non-cash
charges and non-recurring items which
are highlighted in the consolidated
income statement as separate
disclosure is considered by the
Directors to be relevant in
understanding the underlying
performance of the business. The
non-cash charges include share option
charges and amortisation of
purchased intangibles.
The non-recurring items include the
costs associated with potential
acquisitions (where formal discussion
is undertaken), completed acquisitions
and their subsequent integration into
the Group, adjustments to the
estimates of contingent consideration
on acquired entities, asset impairment
charges, management restructuring
and other significant one-off items.
Costs associated with ongoing market
landscaping, acquisition identification
and early stage discussions with
acquisition targets are reported in
underlying administrative expenses.
Further detail of highlighted items
are set out below as well as within
the consolidated income
statement and notes 1 and 3
of the financial statements.
Disposal of
Advertising Intelligence
and Reputation businesses
On 13 February 2018, the Company
announced the disposal of its
Advertising Intelligence business to
Nielsen Media Research Limited for
consideration of £26 million plus
customary adjustments for working
capital. The disposal is subject to certain
conditions, including approval from the
Competition and Markets Authority.
The Directors consider that as at
31 December 2017 the sale of the
Advertising Intelligence business did
not meet the definition of being highly
probable, and therefore the division is
not reported as a business held for sale
in the financial statements.
Strategic reportEbiquity plcAnnual report and financial statements for the year ended 31 December 2017 Headline financials
Revenue £m
Operating profit £m
Diluted EPS pence
FY2017
FY2016
87.4
FY2017
12.0
FY2017
9.4
83.6
FY2016
13.0
FY2016
11.3
The Advertising Intelligence business
represents in excess of 90% of the
revenue and operating profit of the MI
segment. On a pro-forma basis, the
impact of the disposal on the 2017
results would be to reduce revenue by
£21.9 million with a reduction of
operating profit of £4.4 million reflecting
the contribution to profit from the
business before allocated overheads.
On 19 March 2018, the Company
entered into an agreement to sell
the trade and assets of its Reputation
business to Echo Research Holdings
Limited. Completion will take place on
31 March 2018. The consideration
payable is dependent upon the revenue
performance of the business during
the 12 months following completion.
During 2017 the business contributed
£1.2 million of revenue and generated
a £0.2 million operating loss.
Acquisitions
On 1 September 2017, the Group
completed the acquisition of Digital
Balance Pty (‘Digital Balance’),
an independent digital analytics
consultancy located in Perth, Australia.
The acquisition of Digital Balance
further extends the MPO segment in
Asia Pacific, bringing capabilities in
Tech and Analytics.
Digital Balance was acquired for an
initial cash consideration of AU$475,000
in cash. The maximum total
consideration is AU$5 million payable
in cash depending on the performance
of the acquired business up to
31 December 2020. Digital Balance
contributed revenue of £424,000 and
operating profit £123,000 in the period
since acquisition.
P&L overview
Commentary on segmental
revenues are set out within the
Chief Executive Officer’s report.
Revenues grew to £87.4 million which
represents 4.6% revenue growth over
£83.6 million recorded over the
12 months ended 31 December 2016
(‘2016’). Revenue grew by 1.2% on a
constant currency basis and, removing
the impact of acquisitions, by 0.8% on
a constant currency like-for-like basis.
Underlying operating profit was
£12.0 million compared with
£13.0 million in 2016 reflecting a
decrease in underlying operating profit
margin from 15.5% to 13.8%.
Operating profit margin declined in
both the MPO and MI segments.
Lower margins in the MPO segment
reflect investment in the expansion of
our Marketing Effectiveness services
– as set out in the Growth Acceleration
Plan – together with weaker revenue
performance from our US analytics
business. The MI segment operating
profit margin decline reflects both a
revenue decline from our project-based
Reputation business and investment in
our Portfolio platform within our
Advertising Intelligence business.
Statutory operating profit decreased
by £2.3 million from £7.8 million in 2016
to £5.5 million in 2017, reflecting a
£1.0 million reduction in underlying
operating profit and a £1.3 million
increase in highlighted items.
Highlighted items increased in 2017
reflecting costs associated with the
sale of the Advertising Intelligence
business together with severance costs
and reorganisation changes.
Highlighted items are set out in more
detail below.
Net finance costs were £1.0 million
in the year to December 2017
(2016: £1.1 million), the reduction
reflects lower average gross debt
in 2017 compared with 2016.
Underlying profit before tax was
£11.0 million in the year to
December 2017 (2016: £11.8 million).
Reported profit before was £4.5 million
in the year to December 2017
(2016: £6.6 million), due to lower
underlying operating profit and an
increase in highlighted items compared
with 2016.
Highlighted items
Highlighted items total £6.5 million
in the year to December 2017,
(2016: £5.2 million). Highlighted items
comprised the following:
• £2.0 million related to purchased
intangible asset amortisation
(2016: £1.9 million);
• £0.7 million share-based payment
expenses (2016: £0.6 million);
• £2.4 million of severance and
reorganisation costs including
the cost of post-earnout
management change in China,
leadership change in France and
severance costs across a number
of markets in Europe; and
• £1.4 million in relation to acquisition
and strategic costs including
£1.0 million of costs in relation to
the disposal of the Advertising
Intelligence business, £0.2 million
in respect of adjustments to
contingent deferred consideration,
and £0.1 million associated to the
acquisition of Digital Balance.
31
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc Chief Financial Officer’s review continued
Taxation
The total tax charge for the year ended December 2017 is £2.0 million (FY2016: £2.2 million) representing a current tax charge
of £1.6 million (FY2016: £1.8 million) and a deferred tax charge of £20,000 (FY2016: £0.5 million).
The effective rate of tax on underlying profit before tax for the year ended 31 December 2017 is 26.4% (FY2016: 21.7%). The
effective rate of tax is increased by a deferred tax liability booked in 2017 of £0.4 million arising from differences between IFRS
and German GAAP. Excluding the impact of the above deferred tax liability, the underlying effective tax rate for the year ended
31 December 2017 is 22.6% which is broadly in line with the prior year.
Earnings per share
Underlying diluted earnings per share was 9.4p in the year to 31 December 2017 (2016: 11.3p), reflecting a decrease in underlying
profit before tax combined with an increase in the effective tax rate to 26.4% (2016: 21.7%). Statutory diluted earnings per
share was 2.6p in the year to 31 December 2017 (2016: 5.2p).
Revenue
Media Value Measurement
Marketing Performance Optimisation
Market Intelligence
Total revenue
Underlying operating profit
Media Value Measurement
Marketing Performance Optimisation
Market Intelligence
Central costs
Total underlying operating profit
Highlighted items
Reported operating profit
Net finance costs
Reported profit before tax
Underlying profit before tax
Underlying diluted earnings per share
Dividend
FY2017
for the
year ended
FY2016
for the
year ended
31 December 31 December
2016
£’000
2017
£’000
51,482
12,746
23,146
87,374
14,037
1,646
3,163
47,161
13,048
23,360
83,569
12,124
3,739
3,902
(6,820)
(6,806)
12,026
12,959
(6,491)
(5,202)
5,535
(1,044)
4,491
10,982
9.4p
7,757
(1,132)
6,625
11,827
11.3p
It is the Board’s intention to pay a dividend of 0.71p per share for the 12 months ended 31 December 2017, (FY2016: 0.65p per
share). This would represent an increase in dividend per share of 10% and would also represent the continuation of a
progressive dividend policy which commenced with our maiden dividend paid in October 2015. The dividend will be
recommended as a final dividend at the Company’s AGM on 9 May 2018. If shareholders approve this payment, the dividend
will be paid on 15 May 2018 to all shareholders who were on the Register of Members at close of business on 12 April 2018.
Equity
During the 12 months to December 2017, 397,710 shares were issued upon the exercise of employee share options and a further
600,000 were issued as deferred consideration for the acquisition of Stratigent LLC. As a result our share capital increased to
78,197,461 ordinary shares (31 December 2016: 77,199,751).
Cash conversion
Reported cash from operations
Underlying cash from operations
Underlying operating profit
Cash conversion
32
Year ended
Year ended
31 December 31 December
2016
2017
£’000
7,948
11,203
12,026
93.2%
£’000
10,782
11,342
12,959
87.5%
Strategic reportEbiquity plcAnnual report and financial statements for the year ended 31 December 2017
Underlying cash from operations represents the cash flows from operations excluding the impact of highlighted items.
The underlying net cash inflow from operations was £11.2 million in the year ended 31 December 2017 (FY2016: £11.3 million).
After highlighted items are considered, reported net cash inflow from operations for 2017 was £8.0 million (FY2016: £10.8 million).
Underlying cash conversion has improved over 2016 by 6 percentage points. We continue to improve policies and processes to
further improve the management of working capital. This will become particularly important following the disposal of the
subscription based Advertising Intelligence business.
Net debt and banking facilities
Net cash
Bank debt1
Net debt
31 December 31 December
2016
£’000
2017
£’000
4,325
4,600
(33,250)
(32,750)
(28,926)
(28,150)
1. Bank debt in the statement of financial position at 31 December 2017 is shown net of £0.2 million (31 December 2016: £0.1 million) of loan
arrangement fees that have been paid and which are amortised over the life of the facility. The bank debt stated above excludes these costs.
All bank borrowings are held jointly with Barclays and Royal Bank of Scotland (‘RBS’). The committed facility, totalling
£45,000,000, comprises a term loan of £10,000,000 (of which £1,250,000 remains outstanding at 31 December 2017
(31 December 2016: £3,750,000)), and a revolving credit facility of £35,000,000 (of which £32,000,000 was drawn down at
31 December 2017 (31 December 2016: £29,000,000)).
During the year the Group extended the revolving credit facility through to 30 June 2019, and increased the facility to
£35,000,000. The term loan remains repayable by 30 June 2018.
During the period, the Group continued to trade within each of its banking facilities and associated covenants. Net debt to
EBITDA ratio was 2.10x at 31 December 2017 (31 December 2016: 1.94x).
Statement of financial position and net assets
A summary of the Group’s balance sheet as at 31 December 2017 and 31 December 2016 is set out below:
Goodwill and intangible assets
Other non-current assets
Net working capital
Other current liabilities
Other non-current liabilities
Deferred consideration
Net debt
Net assets
31 December 31 December
2016
£’000
2017
£’000
72,440
3,331
12,443
(2,014)
(2,288)
(2,094)
72,079
3,776
10,607
(1,855)
(2,522)
(2,015)
(28,926)
(28,015)
52,982
52,055
Net assets as at 31 December 2017 increased by £0.9 million to £53.0 million (2016: £52.1 million) due to an increase in goodwill
and intangible assets of £0.4 million following the acquisition of Digital Balance and an increase in net working capital of
£1.8 million resulting from an increase in net trade receivables of £1.7 million. These increases in asset values were offset by an
increase in net debt of £0.9 million.
Outlook
The actions that have been taken in 2017, has positioned the business for faster revenue growth in 2018 and beyond. With an
expectation of a turnaround in performance in the US in 2018, together with continued revenue growth outside of the US,
we remain confident of delivering against the financial goals we set out in the Growth Acceleration Plan.
By order of the Board
Andrew Noble
Chief Financial Officer
21 March 2018
33
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc
Board of Directors
The Board of Directors has overall responsibility for the Group and aims
to represent the interests of shareholders and provide leadership and
control in order to ensure the growth and development of the business.
Michael Higgins
Non-Executive Chairman
Michael, in addition to chairing
the Ebiquity Board, chairs the
Nomination Committee and
sits on the Remuneration
Committee and the Audit &
Risk Committee.
Experience
Michael qualified as an
accountant at Price
Waterhouse (now PwC).
He then worked at Saudi
International Bank and
Charterhouse before becoming
a partner at KPMG in 1996,
from which he retired in 2006.
Michael is currently senior
independent director of Plant
Health Care plc, a leading
provider of novel patent
protected biological products
to the global agricultural
market, and a non-executive
director of Premier Technical
Services Group PLC, a niche
specialist service provider and
non-executive Chairman of
IPSX UK. He is an alternate
member of the Panel on
Takeovers and Mergers on
behalf of the Quoted
Companies Alliance.
Committees
Michael Karg, PhD
Group Chief Executive Officer
Michael joined Ebiquity plc as
CEO on 1 January 2016 and is
a member of the Nomination
Committee.
Experience
Michael was previously CEO
International for Razorfish, the
digital business transformation
agency of Publicis Groupe, and
held senior international
leadership positions with
both Razorfish and Digitas
over a 15-year career. A native
of Austria, he has been based
in Boston, Paris and London.
He advised clients globally
across industries on marketing
and digital strategies, worked
closely with technology
partners, and led the
integration of acquired
businesses. Michael holds a
degree in Finance and
Accounting and a doctorate
in Management from the
University in St Gallen,
Switzerland and was a visiting
Fellow at Harvard University
from 1999 to 2000.
Committees
Andrew Noble
Chief Financial Officer
Andrew joined Ebiquity early in
2015 as Group Finance Director,
before becoming Chief Financial
Officer in September 2016.
Experience
Having obtained his degree
in Politics, Philosophy and
Economics from Oxford
University he joined PwC
where he spent four years
before joining market research
company Synovate where he
held a number of finance roles,
culminating in his appointment
as Director of Financial
Reporting and Control.
Following the acquisition of
Synovate by Ipsos in 2011, he
became Global Chief Financial
Officer within their marketing
division, overseeing financial
performance and
developing strategy.
Morag Blazey
Managing Principal,
Market Intelligence
In 2016 Morag took up the
role of Managing Principal
for Ebiquity’s Market
Intelligence practice.
Morag is a fellow of the IPA.
Experience
Morag spent more than 20
years in ad agencies as a TV
buyer, planner and account
director. She became Managing
Director of PHD in 1999 and
served as CEO from 2006 to
2008. She assisted PwC and
Fishburn Hedges in the
development of a
communications strategy for
the pensions reform bill, and
worked with the Olympic
Delivery Authority before
joining Ebiquity in 2009 as
International Practice Leader
for Advertising Intelligence.
In 2012 Morag became CEO
of Ebiquity’s UK business and
in 2015 she was appointed as
an Executive Director.
34
Corporate governanceEbiquity plcAnnual report and financial statements for the year ended 31 December 2017
Richard Nichols
Non-Executive Director
Richard is Chairman of
Ebiquity’s Audit & Risk
Committee and also sits on
the Nomination Committee.
Experience
Richard is Chief Executive
of Instinctif Partners, the
international business
communications consultancy
and Non-Executive Chairman
of the Digital Innovation Group.
Prior to joining Instinctif
Partners, Richard was Chief
Executive of Huntsworth plc,
following the merger with
Incepta Group plc where he was
the Chief Executive and
formerly Group Finance
Director. An economics
graduate from Cambridge
University, Richard
subsequently qualified as a
chartered accountant with
Price Waterhouse (now PwC)
in London.
Committees
Julie Baddeley
Non-Executive Director
Julie is Chairman of Ebiquity’s
Remuneration Committee and
sits on the Nomination
Committee.
Experience
Julie has served in both
executive and non-executive
capacities on the boards of
leading companies in the
FTSE100 and FTSE250 as well
as a number of major public
sector organisations. She has
chaired the remuneration
committee of several company
boards and been chairman of
Harvey Nash plc since June
2013. She is currently Senior
Independent Director of
Marshall of Cambridge and a
director of Chrysalis VCT plc.
Julie has broad experience of
businesses in professional
services like Ebiquity, and of
those in the consumer industry
sectors Ebiquity serves,
including The Woolwich,
Camelot and Greggs. She was
Associate Fellow at Oxford
University Said Business School
from 2000 to 2010, having
previously run a global team
as a partner at Accenture.
Committees
Tom Alexander
Non-Executive Director
Tom sits on Ebiquity’s
Nomination Committee,
Remuneration Committee, and
Audit & Risk Committee.
Experience
Following senior sales positions
with Telia and BT Cellnet, Tom
founded Virgin Mobile in 1999
and subsequently built the
business to revenues of £1 billion
and 4.3 million customers in
eight years. He led the
company’s IPO in 2004 and
eventual sale to NTL in 2006.
From 2007 he was Chief
Executive Officer of Orange,
leading its turnaround and
subsequent successful merger
in 2010 with T-Mobile to create
Everything Everywhere. After
running EE for a further year he
left to pursue private equity
opportunities and
non-executive roles. Tom brings
a wealth of international
business experience and
consumer instinct to Ebiquity.
Committees
Rob Woodward
Non-Executive Director,
Chairman Designate
Rob joined the Board as a
Non-Executive Director on
1 March 2018 and Chairman
Designate. He will succeed
Michael Higgins who will retire
following the Company’s AGM
on 9 May 2018. Rob currently
sits on the Remuneration
Committee, the Audit & Risk
Committee and the
Nomination Committee.
Experience
Prior to joining Ebiquity, Rob
was CEO of STV Group plc for
nearly 11 years where he led
their successful transformation
into a pre-eminent digital media
group and oversaw a dramatic
increase in shareholder value.
Prior to STV, Rob was
Commercial Director at
Channel 4 Television for four
years and was previously a
Managing Director with UBS
Corporate Finance and the lead
partner for Deloitte’s TMT
Industry Group in Europe. He is
currently Chairman of the
AIM-listed data services
provider Blancco Technology
Group plc.
Committees
Audit & Risk Committee
Nomination Committee
Remuneration Committee
Denotes Chairperson
35
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc
Corporate governance report
Michael Higgins
Chairman
We are committed to maintaining
appropriate standards of corporate
governance across the Group to
complement our aim to deliver long-term
success on behalf of our stakeholders.
Chairman’s governance overview
I am pleased to present the corporate
governance report for the year ended
31 December 2017.
The corporate governance report
describes the framework for corporate
governance and internal control that
the Directors have established.
Ebiquity is committed to robust
standards of corporate governance
which are appropriate to the nature
and size of the business.
Corporate governance code
As a company listed on AIM, Ebiquity
is not required to comply with the
UK Corporate Governance Code but
considers the UK Code as part of its
overall corporate governance
strategy, taking into account the
Group’s size and complexity.
Ebiquity seeks to comply with the
Corporate Governance Code for
Small and Mid-Size Quoted Companies
2013 produced by the Quoted
Companies Alliance (the ‘QCA Code’).
The Quoted Companies Alliance is the
membership organisation which
represents the interests of small and
mid-size quoted companies, of which
Ebiquity is a member.
The QCA Code contains minimum
disclosure requirements for a company
to meet in order for that company to
state that it complies with the QCA
Code. The Directors are of the opinion
that the Company complies with these
minimum disclosure obligations save to
the extent referred to in the report.
My role as Chairman
It is my principal responsibility as
Chairman to ensure that the Board is
effective in interrogating, approving
and monitoring the Company’s
direction and strategy. As Chairman
I am also responsible, in consultation
with the Company Secretary, for
ensuring proper information is supplied
to the Board in a timely fashion, that
Board meetings are conducted
effectively and that proper debate
is had at Board meetings. We
acknowledge that shareholders look to
the Board to promote the long-term
success of the Company and, as
Chairman, I recognise it is my role to
provide the leadership to the Board
to do so.
Michael Higgins
Chairman
21 March 2018
36
Corporate governanceEbiquity plcAnnual report and financial statements for the year ended 31 December 2017 Board of Directors
Role of the Board
The Board is responsible to
shareholders for the strategic direction
and proper management of the affairs
of the Group. The Directors are also
collectively responsible for acting in the
way which they consider, in good faith,
is most likely to promote the success of
the Company for the benefit of
Ebiquity’s shareholders as a whole.
In doing so, the Directors have regard
(amongst other matters) to the
interests of the Company’s employees
and the need to foster the Company’s
business relationships with suppliers,
customers and other stakeholders.
A statement of the Directors’
responsibilities with regards to
the annual report and financial
statements is set out on page 49.
Composition of the Board
and roles of the Directors
Nick Manning stood down as a Director
of the Company on 31 December 2017.
On 1 March 2018, Rob Woodward
joined the Board as a Non-Executive
Director and Chairman Designate. He
will succeed Michael Higgins who will
retire as Chairman following the AGM
on 9 May 2018. The Board of Directors
now comprises an independent
Non-Executive Chairman, four further
independent Non-Executive Directors
and three Executive Directors.
Michael Higgins (independent
Non-Executive Chairman) is a qualified
chartered accountant. He brings to the
Board significant experience of
advising smaller quoted companies
and is a director of a number of such
companies. The Directors are of the
view that Michael Higgins retains his
independence notwithstanding that he
chairs the Board.
Michael Karg, PhD (Group Chief
Executive Officer) is responsible for
setting long-term strategy, developing
appropriate annual business plans,
agreeing management KPIs and
leading the Executive Directors and
the senior Executive team in the
day-to-day running of the Group’s
business, including chairing the
management committees and
communicating their decisions/
recommendations to the Board.
He is also responsible for shareholder
communication and ongoing
relationships with investors.
Andrew Noble (Chief Financial Officer)
is responsible for the Group’s
worldwide functions in finance,
treasury and taxation. He has
responsibility for the Group’s finance
systems, accounting policies and
controls. Andrew also works closely
with the practice principals, regional
managing directors and finance
leaders across Ebiquity.
Morag Blazey (Managing Principal,
Market Intelligence) leads the Market
Intelligence capability globally. Her
principal responsibilities are to raise
Ebiquity’s profile, drive renewals and
new business, and develop and execute
service and product developments and
growth strategies. In light of the
Company’s announcement that it is
selling its Advertising Intelligence
business, Morag is part of this business
and will transfer with the business.
Richard Nichols (independent
Non-Executive Director) is a qualified
chartered accountant. His previous
experience includes serving as Finance
Director and Chief Executive Officer of
a number of listed and private
companies. Richard is currently Chief
Executive Officer of Instinctif
Partners, who provide Ebiquity with
financial PR advice. Richard is not part
of the Instinctif team which advises
Ebiquity and in the event that the
Board formally discusses Instinctif’s
instruction by the Company, Richard
would recuse himself from those
discussions. Accordingly, the Board
considers Richard to be independent.
Julie Baddeley (independent
Non-Executive Director) has significant
experience of serving on the boards of
listed companies, both as an executive
and as a non-executive director, and of
serving on and chairing board
committees. Julie has experience
across industry sectors, including in
professional services organisations
such as Accenture. She is currently
chairman of Harvey Nash plc, which is
listed on AIM. Julie brings valuable
governance experience to Ebiquity.
Tom Alexander (independent
Non-Executive Director) has enjoyed a
highly successful career in the telecoms
industry. The commercialism and
business instinct developed by Tom
during his career is of great value to
the Board. The Board also draws upon
Tom’s experience of an industry
undergoing rapid technological change
in guiding Ebiquity’s management
through similar changes in the sectors
in which the Company operates.
Rob Woodward (independent
Non-Executive Director and Chairman
Designate) brings a wealth of
Board-level experience to Ebiquity. He
was CEO of STV Group plc for nearly
11 years and is currently Chairman of
the AIM-listed data services provider
Blancco Technology Group plc. Prior to
STV, Rob was Commercial Director at
Channel 4 for four years and previously
a Managing Director for UBS
Corporate Finance.
Further biographical details regarding
the Directors are contained on pages
34 and 35.
Each of the Non-Executive Directors
has a written letter of appointment
with the Company. These are available
for inspection on Ebiquity’s website.
Each of the Executive Directors has a
written service agreement with the
Company. None of these service
agreements entitles a director to
receive more than six months’ notice
terminating his/her employment.
37
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc Corporate governance report continued
Advisers to the Board and its
committees
The Board seeks advice from external
advisers, including legal, tax and
financial advisers, on various matters
as and when appropriate. The
Company Secretary attends all Board
meetings and is available to advise on
any corporate governance issues which
may arise.
The Company’s auditors,
PricewaterhouseCoopers LLP, attend
meetings of the Audit & Risk Committee.
Directors may take independent
professional advice at the Company’s
expense as and when necessary to
support the performance of their
duties as Directors of the Company.
Risk management
The Board retains ultimate control and
direction over appropriate strategic,
financial, organisational and
compliance issues. The Board has put
in place an organisational structure
with defined lines of responsibility.
The Company has adopted an
authority matrix which sets out the
delegation of authority to individual
business units and members of staff.
The internal control system put in place
by the Company is designed to provide
reasonable assurance against material
misstatement or loss. Commercial
risks are an inherent part of business
and as such the internal control system
cannot provide absolute assurance
against these risks. There is an internal
Risk Committee which regularly meets
to review existing risks and discuss new
risks. The output of this is fed into the
Audit and Risk Committee of the Board.
Board committees
The Board has constituted several
committees to help it in the
performance of its functions. The
principal committees are the Audit &
Risk Committee, the Remuneration
Committee and the Nomination
Committee. The roles of these
committees are set out below.
Audit & Risk Committee
The Audit & Risk Committee, which
meets at least three times a year, is
chaired by Richard Nichols. The Audit &
Risk Committee currently comprises
Richard Nichols, Michael Higgins, Rob
Woodward and Tom Alexander. The
Board considers Richard Nichols to have
recent and relevant financial experience.
Richard is a qualified chartered
accountant and has served as the
Finance Director and Chief Executive
Officer of listed and private companies.
Richard currently serves as the Chief
Executive Officer of a private-equity
backed company. The purpose of the
Audit & Risk Committee is to ensure the
preservation of good financial practices
throughout the Group; to monitor that
controls are in force to ensure the
integrity of financial information; to
review the interim and annual financial
statements; to assess the adequacy
and effectiveness of the Company’s risk
management systems and consider the
Group’s risks and to provide a line of
communication between the Board
and the external auditors.
The Audit & Risk Committee is
responsible for reviewing the
performance of the external auditors
on an annual basis, and for agreeing
the scope of their work. The Audit &
Risk Committee also monitors the level
of non-audit work conducted by the
external auditors to ensure that
independence and objectivity are
safeguarded. Details of non-audit fees
paid to the external auditors are set
out in note 4 to the consolidated
financial statements.
The Audit & Risk Committee report can
be found on pages 40 and 41.
Matters reserved for the Board
As part of good governance there
are certain matters which are not
appropriate to be delegated to
management or a committee of the
Board and should be reserved for
consideration by the Board as a whole.
The Board has formally approved a
written list of such matters (which is
available on Ebiquity’s website) and
which include:
• approving the annual budget and
quarterly reforecasts;
• changes to the Group’s capital
structure;
• approving the Company’s dividend
policy;
• reviewing non-routine regulatory
news service announcements made
by the Company; and
• approving material contracts to be
entered into by the Group.
Board meetings
During the year the Board met
formally on 10 occasions. In addition,
there were a small number of meetings
convened on short notice to consider
ad hoc matters.
The Board receives monthly
management accounts and other
relevant information as appropriate in
advance of each Board meeting. This
information is made available
electronically via an online Board
portal. Directors are able to access
this information at any time, including
following Board meetings.
There are a number of standing
agenda items reviewed by the Board
at each regular Board meeting,
including a business update, current
trading and outlook. Other items are
considered by the Board as
appropriate, including as a minimum,
an annual review of the Company’s
governance arrangements.
Detailed minutes are taken of all Board
meetings. Minutes are circulated to the
Board and approved at the following
Board meeting.
38
Corporate governanceEbiquity plcAnnual report and financial statements for the year ended 31 December 2017 Remuneration Committee
The Remuneration Committee, which
meets at least twice a year, is chaired
by Julie Baddeley. The Remuneration
Committee currently comprises Julie
Baddeley, Michael Higgins, Rob
Woodward and Tom Alexander.
The Remuneration Committee is
responsible for the Executive Directors’
remuneration and other benefits and
terms of employment, including
performance-related bonuses and
share options.
The Remuneration Committee report
can be found on pages 42 to 44.
Nomination Committee
The Nomination Committee is chaired
by Michael Higgins. The Nomination
Committee currently comprises
Michael Higgins, Rob Woodward,
Richard Nichols, Julie Baddeley,
Tom Alexander and Michael Karg.
The Nomination Committee meets
as necessary and has responsibility
for nominating candidates to the
Board for appointment as Directors,
bearing in mind the need for diversity
and a broad representation of skills
across the Board.
Attendance at meetings
Details of the Directors’ attendance at each regular Board and Committee meeting in the year is as set out below (number of
meetings attended by each Director/the maximum number of meetings each Director was entitled to attend):
Michael Higgins
Michael Karg, PhD
Andrew Noble
Nick Manning
Morag Blazey
Richard Nichols
Julie Baddeley
Tom Alexander
Board
10/10
10/10
10/10
9/10
10/10
10/10
10/10
10/10
Audit &
Risk Remuneration Nomination
3/3
4/4
—
—
—
—
3/3
—
3/3
—
—
—
—
—
4/4
4/4
1/1
1/1
—
—
—
1/1
1/1
1/1
Management committees
Shareholders
Additionally, and not formal
committees of the Board, the
Company’s management has
constituted a number of executive
committees which comprise the
principal vehicles for directing the
Group’s business at an operational level.
The Executive Directors meet regularly
with institutional shareholders to
discuss the Company’s performance
and future prospects. The views of
institutional shareholders as presented
at these meetings are reported by the
Executive Directors to the Board.
An important vehicle for
communications with private
shareholders is the Company’s Annual
General Meeting. The information
displayed on the Investor Relations
pages of the Company’s website is
regularly refreshed in order to provide
accurate and up-to-date information
to all shareholders.
39
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc
Audit & Risk Committee report
Introduction
The Audit & Risk Committee is a key
component of the Group’s governance
framework. The Board has delegated to
the Committee oversight of the Group’s
financial reporting and the Group’s risk
management process which aims to
identify and mitigate significant risks.
All of the members of the Committee
are independent Non-Executive
Directors with a combination of
accounting, financial and commercial
experience. The Board considers
Richard Nichols, who chairs the
Committee, to have recent and
relevant financial experience. Richard
is a chartered accountant with
significant financial and commercial
experience in both listed and unquoted
companies. Richard’s biography and
appointments are set out on page 35.
The Committee met on three
occasions during the year. The
attendance of its members is set out in
the table on page 39. Meetings of the
Committee are commonly comprised
of three sections. The first section of
meetings of the Committee are also
normally attended by the Group Chief
Executive Officer, the Chief Financial
Officer, the Company Secretary and
other members of the senior
management together with
representatives from the external
auditors, PricewaterhouseCoopers LLP
(‘PwC’) which ensures the Committee
and the external auditors have access
to all financial and operational
knowledge. Subsequently, Committee
members also meet with the external
auditors without the Executive
Directors and other senior
management in attendance, which
ensures that the Committee maintains
an independent view. Finally, there is a
section of the meeting attended solely
by the members of the Committee.
Role and responsibility of the
Audit & Risk Committee
The Committee’s terms of reference
can be found on the Company’s
website. The principal responsibilities
of the Committee include:
• monitoring the integrity of the
Group’s financial statements,
including a review of significant
financial reporting issues and
judgements;
• reviewing the external auditors’
independence and objectivity, the
effectiveness of the external audit
process and the appointment,
reappointment and removal of the
external auditors;
• reviewing the Group’s financial
controls and other internal
reporting systems;
• reviewing progress on implementing
control improvements; and
• keeping under review the adequacy
and effectiveness of the Company’s
risk management systems.
Activities during the year
The key matters the Committee
considered during the year are
listed below.
In respect of the Group’s financial
statements and interim accounts:
• the assessment of the carrying
value of goodwill and intangible
assets: the Committee assesses on
a twice-yearly basis whether there
are any indicators of impairment to
the carrying value of any
cash-generating unit. The
Committee reviewed the key
assumptions in the assessment of
goodwill and the sensitivity of these
assumptions and impact on the
carrying value of goodwill and
intangible assets. On this basis the
Committee makes recommendations
to the Board in this regard;
• going concern: the Committee
reviews, in particular,
management’s forecasts of the
Group’s performance including
performance against the covenants
contained in the credit agreement
with Barclays and RBS;
• presentation of highlighted items:
the Committee reviews the nature
and quantum of the items proposed
by management to be classified as
highlighted to ensure they are
consistent with the Group’s
accounting policies;
• capitalisation of intangibles: the
Committee reviews the nature and
quantum of the items proposed by
management to be capitalised,
together with the period over which
the capitalised items will be
amortised, to ensure they are
consistent with the Group’s
accounting policies;
• revenue recognition: the Committee
reviews the quantum of accrued/
deferred income and the judgement
applied by management in
calculating revenue recognition cut
off. The Committee reviews the
quality of evidence available to
support revenue recognition. The
Committee reviewed the impact of
IFRS15 on the Group’s revenue
recognition policy;
• sale of Advertising Intelligence
business: the Committee reviews
the disclosure relating to the sale of
the Advertising Intelligence business
in relation to whether the assets of
the business should be treated as
held for sale and the carrying value
of goodwill; and
• taxation: the Committee reviews
the significant components of the
tax charge and provision and the
overall effective tax rate of the
Group as a whole.
40
Corporate governanceEbiquity plcAnnual report and financial statements for the year ended 31 December 2017 In respect of risk management:
External auditors
• the Committee undertook
significant work reviewing the
output of management’s exercise
preparing a register of the principal
risks relevant to the Group and its
business together with the
mitigation steps taken to date by
management and planned to be
undertaken in the future;
• the Committee reviewed and
approved the risk management
framework prepared by
management which outlined how
risk would be identified and
managed across the business; and
• the Committee included risk as a
standing agenda item at each
meeting for management to
update the Committee on
significant changes to the risk
register and mitigating actions.
With regard to Ebiquity’s external
auditors, the Committee’s principal
activities were to:
• approve the terms of engagement
and fees to be paid to the external
auditors;
• approve the annual audit plan;
• review the findings of the auditors
and management’s response; and
• evaluate the independence and
objectivity of the external auditors.
PwC have been the external auditors
of the Group since 2012, when a full
tender process was carried out.
The original audit partner served from
PwC’s appointment until completion
of the audit for the year ended
31 December 2016 when he rotated
off the audit. A new partner was
appointed for the audit of the
Company’s financial statements for
the year commenced 1 January 2017.
A review of PwC’s independence is
carried out each year before a
recommendation is made to the Board
to propose PwC for re-election at the
AGM. In assessing PwC’s independence,
the Committee received confirmation
that, in PwC’s professional judgement,
PwC is independent within the
meaning of relevant UK regulatory
and professional requirements.
Provision of non-audit services
The Committee reviews with
management the engagement of the
external auditors for non-audit services
and the level of associated non-audit
fees. Details of fees paid to PwC during
the year are outlined in note 4 to the
financial statements. Non-audit fees
of approximately £46,000 were paid
to PwC during the year in connection
with Group restructuring activities.
The Committee does not consider that
auditor independence has been
impacted by this matter.
Richard Nichols
Chair of the Audit & Risk Committee
21 March 2018
41
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc Remuneration Committee report
Remuneration policy
The Board recognises the role of appropriate remuneration in attracting and retaining people with the industry-leading skills,
knowledge and experience needed to develop and grow the business, and incentivising them to perform.
The Remuneration Committee has maintained the policy set out in the annual report for the period ended 31 December 2015,
which is used to determine Executive Directors’ remuneration and as a guide for the Executive Committee in setting
organisation-wide remuneration.
In summary, the policy is as follows:
Element
Base salary
Objective and
link to strategy
Provides an appropriate level
of fixed income –
commensurate with the role
– to attract and retain the
individual with the required
capability.
Militates against excessive
risk-taking and/or focus on
short-term metrics by
establishing sufficient
balance against variable
remuneration elements.
Operation
Paid monthly.
Used as basis for pension
contributions and
performance-related
pay eligibility.
Reviewed annually, normally
effective 1 April.
Set at role commencement.
Updated via review against
market comparators
as needed.
Opportunity
The Committee has not set a
maximum salary.
The Committee ensures base
salaries are equitable across
all variables.
The Committee aims to
maintain alignment between
increases for the Directors
and the wider workforce. It
retains discretion to deviate
in order to address specific
circumstances, for example,
but not limited to:
• an increase in the
individual’s scope and
responsibilities; and
•
the need to retain
specialist expertise
within a competitive
talent market.
Benefits
(including
pension)
Provides the necessary
current and future health
and security (for the
individual and their
dependents) to enable the
individual to focus maximum
attention on their role.
Private medical, life and
critical illness insurances.
Defined contributions to
personal pension.
Other benefits as considered
appropriate by the
Committee.
The Committee has not set
maximum levels for benefits.
It aims to ensure that
individual arrangements for
Directors are in line with
policies applicable to the
wider workforce.
Performance
bonus
Incentivises achievement of
short-term financial and
strategic performance goals.
On-target expectations
expressed as a percentage
of salary, relative to role.
Individual participation is set
with respect to the role
performed.
Group financial targets set
annually in relation to
management expectations.
Personal goals are set
annually for each Executive
Director in relation to
strategy.
Standard LTIP, with nominal
price options subject to a
minimum three-year vesting
period with performance
conditions.
Long-Term
Incentives
(equity)
Incentivises longer-term
growth and value creation
through shareholder returns
Individual on-target
expectation capped at 50%
of base salary.
Maximum award of 200% of
on-target amount in any one
year i.e. a maximum of 100%
of base salary for any one
Director.
Performance conditions
and assessment
Not applicable.
Not applicable.
Measured over a one-year
period.
Minimum thresholds of the
Group’s annual financial
performance determine the
extent to which individuals
may attain on-target
expectation, which is also
judged on individual
performance against
personal goals.
Extent of individual awards
determined with reference to
role, performance and
perceived future value.
Uses appropriate targets for
growth in earnings per share
(and/or total shareholder
return) over vesting period.
Awards made in respect of
each financial year typically
do not exceed 100% of
salary, subject to a maximum
of 200% of salary in
exceptional circumstances.
This policy reflects the Company’s current stage of development and anticipated growth, and balances risk and reward.
42
Corporate governanceEbiquity plcAnnual report and financial statements for the year ended 31 December 2017 The Remuneration Committee consulted with its largest institutional investors during 2016/17 with the intention of amending
its Long-Term Incentive (‘LTI’) plans to better align Directors’ (and other Executives’) interests with those of shareholders and
with the longer-term strategy of the Group. The Company did not issue LTIs to executives during 2016 or 2017 due to this
ongoing consultation with shareholders and the strategic review which resulted in the decision to sell the Advertising
Intelligence business. The Company was unable to attain consensus amongst its major institutional investors and – given the
need to retain and incentivise management – has since granted LTIs to Executives under the previously established executive
incentive plan, details of which were shared with major institutional shareholders and are presented below.
The Remuneration Committee relies from time-to-time on advice and benchmarking from third parties in setting specifics of
the Executive Directors’ remuneration.
Directors’ remuneration in the year ended 31 December 2017
Executive
Michael Karg, PhD
Andrew Noble
Nick Manning
Morag Blazey
Andrew Beach3
Michael Greenlees4
Non-Executive
Michael Higgins
Richard Nichols
Julie Baddeley
Tom Alexander
Salary/fees
£’000
Taxable
benefits
£’000
400
170
300
250
—
—
70
35
35
35
27
8
—
9
—
—
—
—
—
—
1. Michael Karg was in receipt of a £120,000 sign-on bonus in the financial year ended 2016.
2. Andrew Noble was appointed as Chief Financial Officer and a Director with effect from 9 September 2016.
3. Andrew Beach (previously Chief Financial Officer) left the Company on 14 October 2016.
4. Michael Greenlees (previously Chief Executive Officer) left the Company on 30 April 2016.
1,295
44
FY2017
year ended
FY2016
year ended
31 December 31 December
2016
Total
£’000
2017
Total
£’000
Bonus
£’000
—
—
—
—
—
—
—
—
—
—
—
427
178
300
259
—
—
70
35
35
35
5291
542
300
243
172
110
68
35
35
35
1,339
1,581
Long-Term Incentives
During the year, a total of 79,425 share options that were previously granted to Directors under the Company’s Executive Incentive
Plan vested (FY2016: 311,355) as follows:
Beneficiary
Grant date
Volume
Morag Blazey
15 May 2014
150,000
Nick Manning
15 May 2014
200,000
£0.25
Andrew Noble
15 May 2014
25,000
Exercise
price
Performance
conditions
Achievement vs
condition
% vested
Growth in
adjusted diluted
EPS vs 2013/14
11.2p/share vs
10.7p – 4.12%
compound
growth
21.18%
Number
vested
31,770
42,360
5,295
During the fiscal period, no options were granted to any Directors under the Group’s Executive Incentive Plan (FY2016: nil).
The totals above are inclusive of
annual performance bonuses
(FY2016: £8,000). Directors were
eligible for cash bonuses as a
percentage of base salary,
dependent on individual and
Company performance against
established financial targets in
excess of analyst expectations.
No Director was a member of
a Company pension scheme
(FY2016: nil). Contributions totalling
£26,301 (FY2016: £28,127) were made
to Directors’ private pension schemes
(£14,010 to the highest paid Director,
FY2016: £14,000) during the year.
Directors exercised share options
during the year (FY2016: nil). The
highest paid Director exercised
no share options, (FY2016: nil).
43
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc
Remuneration Committee report continued
Termination payments
to Directors
Implementation of remuneration
policy in 2018
One Director, Nick Manning, left
the Company in the year ended
31 December 2017 and has since been
paid six months’ pay in lieu of notice
and pension entitlements (£150,000)
and an ex-gratia termination payment
of £50,000 (2016: no directors, £nil).
The Executive Directors’ remuneration
for the year that commenced on
1 January 2018 includes base salary
and benefits and an annual cash
bonus in line with the Company’s
remuneration policy.
The target bonus is 50% of base salary
for the Group CEO and 30% for the
other Executive Directors. Each
individual must achieve the personal
performance targets (‘KPIs’) set for
them by the Board, and the Company
must achieve its target levels of
pro-forma (i.e. excluding that derived
from in-year acquisitions) revenue and
operating profit – which have been
agreed by the Board and which are in
excess of analyst expectations – for
full 100% achievement of the
theoretical bonus.
Thresholds below target levels of
revenue (minimum 97.5% of budget)
and operating profit (minimum 90%
of operating profit post-bonus) have
been set to allow for pro-rata payment
of bonuses at a level which protects
operating profit margins and overall
Group performance. Each Director has
the potential to achieve up to a
maximum of 200% of their theoretical
target bonus as a result of exceptional
individual and Company performance.
Share options have been granted to Directors since the period end in respect of the financial years 2016 and 2017 when no LTIs
were granted to the executive management. These were as follows:
Beneficiary
Grant date
Volume
Exercise
price
Performance conditions
Michael Karg
13 February 2018
350,000
Andrew Noble
13 February 2018
150,000
Michael Karg
13 February 2018
350,000
£0.25
Andrew Noble
13 February 2018
150,000
Gender pay reporting
Growth in adjusted diluted EPS over five-year
period to 31 December 2020 vs 2015; 4%=20%
vesting, 8%=60% vesting, 10%+=100% vesting.
A quarter of the total may vest early if Total
Shareholder Return from 1 January 2016-
31 December 2018 is in top quartile of AIM
Media Index.
Growth in adjusted diluted EPS over five-year
period to 31 December 2021 vs 2015; 4%=20%
vesting, 8%=60% vesting, 10%+=100% vesting.
A quarter of the total may vest early if Total
Shareholder Return from 1 January 2017-
31 December 2019 is in top quartile of AIM
Media Index.
Vesting
Date
30 April
2021
30 April
2022
The Company has published and reported its UK business Gender Pay Gap for the first time under the UK Government’s new
reporting guidelines in relation to the snapshot date of 5 April 2017 and the year to that date. This is available on our website
at https://www.ebiquity.com/media/187419/ebiquity-gender-pay-gap.pdf.
Julie Baddeley
Chair of the Remuneration Committee
21 March 2018
44
Corporate governanceEbiquity plcAnnual report and financial statements for the year ended 31 December 2017 Directors’ report
The Directors present their report
and the audited consolidated financial
statements for the year ended
31 December 2017.
Ebiquity plc is incorporated in England
and Wales under registered number
3967525. Its registered address and
principal office is at CityPoint, One
Ropemaker Street, London EC2Y 9AW.
The Company is the ultimate parent of
the Group. Its overseas operations are
subsidiaries (see note 12).
Future developments
The future developments of the Group
are considered in the strategic report
on pages 2 to 33.
Dividends
The Board is recommending the
payment of a final dividend of
0.71p per share for the year ended
31 December 2017. If shareholders
approve this payment at the AGM on
9 May 2018, the dividend will be paid
on 15 May 2018 to all shareholders who
were on the Register of Members at
close of business on 12 April 2018.
Research and development
Events after the reporting period
On 13 February 2018, the Company
announced the disposal of its
Advertising Intelligence business to
Nielsen Media Research Limited for
consideration of £26 million plus
customary adjustments for working
capital. The disposal is subject to
certain conditions, including approval
from the Competition and Markets
Authority (‘CMA’). Completion is
anticipated to take place during the
second quarter of 2018, assuming the
CMA provides clearance following its
high-level Phase 1 examination. In the
event the CMA should instead refer the
transaction for a more detailed
Phase 2 investigation, then Completion
is unlikely to take place before the
fourth quarter of 2018.
On 19 March 2018, the Company
entered into an agreement to sell the
trade and assets of its Reputation
business to Echo Research Holdings
Limited. Completion will take place on
31 March 2018. The consideration
payable is dependent upon the revenue
performance of the business during
the 12 months following completion.
During 2017 the business contributed
£1.2 million of revenue and generated a
£0.2 million operating loss.
The Group continues to invest in the
development of products. During
the period a total of £1.2 million was
capitalised in relation to development
projects. This has resulted in the
development of a number of
new products and services.
Political donations
and political expenditure
No political donations were made and
no political expenditure was incurred in
the period (2016: nil).
Modern Slavery Act 2015
Ebiquity’s statement regarding the
Modern Slavery Act 2015 can be
viewed on its website (ebiquity.com).
Acquisitions
On 1 September 2017, the Group
completed the acquisition of Digital
Balance Pty (‘Digital Balance’), an
independent digital analytics
consultancy located in Perth, Australia.
Digital Balance is one of a small
number of consultancies who are
certified sales and implementation
partners of both Google and Adobe.
Digital Balance will provide an
important extension to Ebiquity’s
digital analytics services in Australia.
Digital Balance was acquired for an
initial cash consideration of
AU$475,000 in cash. The maximum
total consideration is AU$5,000,000
payable in cash depending on the
performance of the acquired business
up to 31 December 2020.
45
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc Directors’ report continued
Directors and Directors’ interests
The Directors in office during the period and until the date of this report were as follows:
Michael Higgins
Rob Woodward
Michael Karg, PhD
Andrew Noble
Nick Manning
Morag Blazey
Richard Nichols
Julie Baddeley
Tom Alexander
Non-Executive Chairman
Non-Executive Director and Chairman Designate
Executive Director Chief Executive Officer
Executive Director Chief Financial Officer
Executive Director Chief Strategy Officer
Executive Director Managing Principal, Market Intelligence
Non-Executive Director
Non-Executive Director
Non-Executive Director
Nick Manning stood down as a Director on 31 December 2017.
Mark Sanford, General Counsel, acts as the Company Secretary to the Board and its Committees.
The beneficial interests of Directors, who were Directors at the period end, in the ordinary shares of the Company and options
to purchase such shares at the beginning and end of the financial period comprised:
Michael Higgins
Michael Karg
Andrew Noble
Morag Blazey
Richard Nichols
Julie Baddeley
Tom Alexander
31 December 2017
31 December 2016
Ordinary
shares
64,500
Options
Ordinary
shares
—
64,500
—
—
—
500,000
40,295
483,199
—
—
—
100,000
—
—
—
—
—
100,000
—
—
Options
—
500,000
60,000
601,429
—
—
—
No Director has any direct interest in the shares of any subsidiary company between 31 December 2017 and the date of this
report. Michael Karg has been awarded options over a further 700,000 ordinary shares and Andrew Noble has been awarded
options over a further 300,000 ordinary shares.
Further information about the Directors’ interests is provided in the Remuneration Committee report on pages 42 to 43.
46
Corporate governanceEbiquity plcAnnual report and financial statements for the year ended 31 December 2017
Directors’ third-party and pension
scheme indemnity provisions
The Company purchased and
maintained throughout the period and
up to the date of this report, directors’
and officers’ liability insurance in
respect of its Directors and officers
and those of its subsidiaries and a
deed if indemnity is in place between
the Company and each of the
Directors. There were no pension
scheme indemnity provisions in place
during the period.
Employees
Ebiquity is committed to the continuous
development of its employees. The
Group’s employees are integral to the
success of the business and as a result
the Group pursues employment
practices which are designed to
attract, retain and develop this talent
to ensure the Group retains its market
leading position with motivated and
satisfied employees. The Group has
continued this year with its employee
engagement programme, initiated in
2011, measuring engagement levels
and drivers through an annual survey
and taking actions to further develop
the leadership and organisation on the
back of these findings.
During 2017, the Company launched
the Future Leaders programme which
was created to ensure that the Group
develops a pipeline of the leaders of
tomorrow and supports the careers of
high-potential individuals. We also
developed and deployed a Global
Competency Framework which is
supporting our annual Talent Review
process and the continuous
development of our people’s
behaviours, skills and knowledge.
The Group has continued its practice
of using formal and informal
communication channels to provide
employees with the information they
need to understand and achieve the
objectives of the Group and to keep
employees informed of matters
affecting them as employees and the
financial and economic factors
affecting the performance of the
Group.
The Group seeks to recruit, develop
and employ throughout the
organisation suitably qualified, capable
and experienced people, irrespective of
sex, age, race, disability, religion or
belief, marital or civil partnership
status or sexual orientation. The Group
gives full and fair consideration to all
applications for employment made by
people with disabilities, having regard
to their particular aptitudes and
abilities. Where existing employees
become disabled it is the Group’s policy
to provide continuing employment
wherever practicable in the same or an
alternative position and to provide
appropriate training. It is the policy
of the Group that training, career
development and promotion
opportunities should be available
to all employees.
Employees are encouraged to own
shares in the Company, and many
employees are shareholders and/or
hold options under the Company’s
share option schemes.
Financial instruments
The Group’s principal financial
instruments comprise bank loans and
cash. The main purpose of these
financial instruments is to provide
finance for the Group’s operations.
The Group has various other financial
assets and liabilities such as trade
receivables and trade payables, which
arise directly from its operations. The
operations of the Group generate cash
and the planned growth of activities is
cash generative. Full details of financial
instruments are included in note 24 to
the financial statements.
Substantial shareholdings
At the date of this report the
Company’s issued share capital
consisted of 78,367,690 ordinary
shares of 25p each and a total of
74,167,690 voting rights. The Ebiquity
plc 2010 Employee Benefit Trust (the
‘EBT’) held 4,200,000 issued ordinary
shares to satisfy awards for the
Company’s senior management team.
At the date of this report, these
awards had not been exercised. The
trustee has agreed not to vote the
ordinary shares held by it. As such
4,200,000 ordinary shares are treated
as not carrying voting rights.
At the date of this report, the following
had notified the Company that they
held more than 3% of the Company’s
ordinary share capital, other than the
shareholdings held by Directors and
the EBT. No other person has reported
an interest of more than 3% in the
Company’s ordinary shares.
47
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc Directors’ report continued
Number of % of issued
% of total
shares share capital voting rights
12,142,282
8,557,742
15.49%
10.92%
8,093,228
10.33%
7,384,944
5,374,876
5,341,125
5,139,200
3,992,500
9.42%
6.86%
6.82%
6.56%
5.09%
16.37%
11.54%
10.91%
9.96%
7.25%
7.20%
6.93%
5.38%
The auditors, PricewaterhouseCoopers
LLP, have indicated their willingness to
continue in office, and a resolution that
they be reappointed will be proposed
at the Annual General Meeting.
By order of the Board
Mark Sanford
Company Secretary
21 March 2018
Independent auditors and
disclosure of information
to auditors
All of the current Directors have taken
all the steps that they ought to have
taken to make themselves aware of
any information needed by the Group’s
auditors for the purposes of their audit
and to establish that the auditors are
aware of that information.
The Directors are not aware of any
relevant audit information of which
the auditors are unaware.
Financial instruments continued
Substantial shareholdings continued
Name
Artemis Investment Management
T Rowe Price Global Investments
Kabouter Management
JO Hambro Capital Management
Invesco Perpetual
Herald Investment Management
Legal & General Investment Management
Hargreave Hale
AGM notice
The notice of the Company’s Annual
General Meeting accompanies this
document and is also available for
inspection on the Company’s website.
Going concern
The Board is responsible for
considering whether it is appropriate
to prepare the financial statements
on a going concern basis. After making
appropriate enquiries, the Board
concluded that the Group has
adequate resources to continue in
operation for the foreseeable future
and operate within banking facilities
and the covenants therein.
Furthermore, the anticipated proceeds
from the sale of the Advertising
Intelligence business would allow the
Group to repay a significant proportion
of its outstanding bank facility. For
these reasons the Group continues to
adopt the going concern basis in
preparing the financial statements.
48
Corporate governanceEbiquity plcAnnual report and financial statements for the year ended 31 December 2017
Statement of Directors’ responsibilities
The Directors are responsible for
keeping adequate accounting records
that are sufficient to show and explain
the Company’s transactions and
disclose with reasonable accuracy at
any time the financial position of the
Company and enable them to ensure
that the financial statements comply
with the Companies Act 2006. They
are also responsible for safeguarding
the assets of the Company and the
Group and hence for taking reasonable
steps for the prevention and detection
of fraud and other irregularities.
The Directors are responsible for the
maintenance and integrity of the
Company’s website. Legislation in
the United Kingdom governing the
preparation and dissemination of
financial statements may differ
from legislation in other jurisdictions.
The Directors are responsible for
preparing the annual report and the
financial statements in accordance
with applicable law and regulations.
Company law requires the Directors to
prepare financial statements for each
financial year. Under that law the
Directors have prepared the Group
financial statements in accordance
with International Financial Reporting
Standards (‘IFRSs’) as adopted by the
European Union, and the parent
company financial statements in
accordance with United Kingdom
Generally Accepted Accounting
Practice (United Kingdom Accounting
Standards, comprising Financial
Reporting Standard 101 Reduced
Disclosure Framework (‘FRS 101’), and
applicable law). Under company law
the Directors must not approve the
financial statements unless they are
satisfied that they give a true and fair
view of the state of affairs of the
Group and the Company and of the
profit or loss of the Group for that
period. In preparing these financial
statements, the Directors are required
to:
• select suitable accounting policies
and then apply them consistently;
• make judgements and accounting
estimates that are reasonable and
prudent;
• state whether IFRSs as adopted by
the European Union and applicable
UK Accounting Standards
comprising FRS 101 have been
followed, subject to any material
departures disclosed and explained
in the Group and parent company
financial statements respectively;
and
• prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Company will continue in business.
49
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc Independent auditors’ report
to the members of Ebiquity plc
Report on the audit of the group
financial statements
Opinion
In our opinion, Ebiquity plc’s
group financial statements
(the “financial statements”):
• give a true and fair view of the
state of the group’s affairs as at
31 December 2017 and of its
profit and cash flows for the
year then ended;
• have been properly prepared in
accordance with IFRSs as adopted
by the European Union; and
• have been prepared in accordance
with the requirements of the
Companies Act 2006.
We have audited the financial
statements, included within the Annual
Report and Financial Statements
(the “Annual Report”), which comprise:
the consolidated statement of
financial position as at 31 December
2017; the consolidated income
statement and statement of
comprehensive income, the
consolidated statement of cash flows,
and the consolidated statement of
changes in equity for the year then
ended; and the notes to the financial
statements, which include a
description of the significant
accounting policies.
Basis for opinion
We conducted our audit in accordance
with International Standards on
Auditing (UK) (“ISAs (UK)”) and
applicable law. Our responsibilities
under ISAs (UK) are further described
in the Auditors’ responsibilities for the
audit of the financial statements
section of our report. We believe that
the audit evidence we have obtained is
sufficient and appropriate to provide a
basis for our opinion.
Independence
We remained independent of the
group in accordance with the ethical
requirements that are relevant to our
audit of the financial statements in the
UK, which includes the FRC’s Ethical
Standard, as applicable to listed
entities, and we have fulfilled our other
ethical responsibilities in accordance
with these requirements.
Our audit approach
Overview
Materiality
Audit
Scope
• Overall group materiality: £547,000 (2016: £587,000), based on 5% of profit before tax
and highlighted items.
• Eight reporting units were audited as full scope entities. These units were located in the U.K.,
Germany, USA and Australia.
• The USA entities in scope were visited and audited by the group engagement team.
• Australian and German components were audited by local audit teams.
Key Audit
Matters
• Risk of impairment of goodwill and intangible assets.
• Accounting for contract revenue recognition.
the audit; and directing the efforts of
the engagement team. These matters,
and any comments we make on the
results of our procedures thereon, were
addressed in the context of our audit
of the financial statements as a whole,
and in forming our opinion thereon,
and we do not provide a separate
opinion on these matters. This is not a
complete list of all risks identified by
our audit.
The scope of our audit
Key audit matters
Key audit matters are those matters
that, in the auditors’ professional
judgement, were of most significance
in the audit of the financial statements
of the current period and include the
most significant assessed risks of
material misstatement (whether or
not due to fraud) identified by the
auditors, including those which had the
greatest effect on: the overall audit
strategy; the allocation of resources in
As part of designing our audit, we
determined materiality and assessed
the risks of material misstatement in
the financial statements. In particular,
we looked at where the directors made
subjective judgements, for example in
respect of significant accounting
estimates that involved making
assumptions and considering future
events that are inherently uncertain.
As in all of our audits we also
addressed the risk of management
override of internal controls, including
evaluating whether there was evidence
of bias by the directors that
represented a risk of material
misstatement due to fraud.
50
Financial statementsEbiquity plcAnnual report and financial statements for the year ended 31 December 2017 Key audit matter
How our audit addressed the key audit matter
Risk of impairment of goodwill and intangible assets
We focused on this area because management’s assessment
of the carrying value of goodwill and intangible assets
involves complex and subjective judgements about the future
results of the business.
No impairment was recognised during the year.
We focused on those Cash Generating Units (CGUs) we
considered to carry more judgement because of current year
losses or historical underperformance against budgets, or for
which management’s impairment assessment model gave
lower headroom relative to other CGUs.
The value in use calculations in relation to the Group’s China
CGU (goodwill of £4,839k) was most sensitive to changes in
key assumptions. The key judgements involved were future
revenue growth, cost assumptions and the discount rate
applied as set out in Note 9 to the Group financial
statements.
We have evaluated management’s future cash flow
forecasts, which were prepared to a sufficiently detailed
level, including comparing them to the latest Board approved
budgets, testing the integrity of the underlying calculations
and assessing how both internal and external drivers of
performance were incorporated into the projections.
We also challenged the discount rates used by independently
recalculating the cost of capital.
Given the China CGU has seen a weaker performance in
2017, new management has been put in place to address
this and the carrying value of the goodwill is dependent on
the CGUs ability to generate profits from 2019 onwards.
We compared 2017 financial performance to budget and
understood the reasons for the differences from the
forecasts prepared for the 31 December 2016 financial
statements and their impact on the future drivers of
improvement in profitability.
For the Group’s China CGU, we also performed sensitivity
analysis around the key drivers of the cash flow forecasts,
in particular the revenue, growth, cost assumptions and
discount rate. Having ascertained the extent of change in
those assumptions that either individually or collectively
would be required for the goodwill and intangible assets
to be impaired, we considered the likelihood of such
movement arising in those key assumptions.
Management has built increased profitability into their
forecasts for the CGU and we challenged them on the
realistic impact of the actions they have taken, and intend
to take, to improve the profitability.
Although we considered management’ expectations of the
impact of the their actions to be reasonable in light of the
evidence available, failure to meet these forecasts and to
generate a profit may result in impairment of the goodwill
associated with the China CGU.
Therefore we also examined the disclosures made in
the financial statements and concluded that they are
appropriate.
51
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc Independent auditors’ report continued
to the members of Ebiquity plc
Key audit matter
How our audit addressed the key audit matter
We understood management’s policies and their controls for
recording revenue.
We performed detailed end-to-end walkthroughs of the
finance and operational processes, utilising our
understanding from the prior years to reassess the design
effectiveness of the key internal controls and identify
changes, if any.
We reviewed a sample of the terms and conditions attached
to revenue contracts and evaluated management’s
judgements used to determine the timing of recognition
of revenue.
We selected a number of contracts:
• with significant revenue recognised in the year or
• with significant accrued income
• a further sample on a random basis.
To assess whether revenue and profit is accurately recorded,
we tested the hours complete on a sample of contracts by
obtaining an understanding from project managers as to
how they had estimated these hours, challenging the
assumptions, evaluating the outturn of previous estimates
and agreeing the actual hours incurred post-year end to the
forecast for the period.
We also assessed how the project managers determined
that the stage of completion was correctly calculated by
obtaining their calculations and agreeing the inputs to
supporting evidence and correspondence with customers.
We found that revenue was recorded appropriately.
To test the timing of contract revenue, we challenged
management’s judgements on the completeness of work
for our sample of contracts by checking original contracts,
amendments to contracts, where applicable (e.g. due to
agreed changes in scope), and checking that the contractual
milestones had been reached.
No significant issues were noted from our work.
Accounting for contract revenue recognition
Income is recognised evenly over the period of the contract
for Market Intelligence businesses, and in accordance with the
stage of completion of the contract activity for the Media
Value Measurement and Marketing Performance
Optimisation businesses. The stage of completion is
determined relative to the total number of hours expected
to complete the work or provision of services.
Where recorded revenue exceeds amounts invoiced to clients,
the excess is classified as accrued income and where recorded
revenue is less than amounts invoiced to clients, the
difference is classified as deferred income.
Where services are performed by an indeterminate number
of acts over a specific period, revenue is recognised on a
straight-line basis over the specific period unless there is
evidence that some other method better represents the
stage of completion.
If the outcome of a contract cannot be estimated reliably, the
contract revenue is recognised to the extent of contract costs
incurred that it is probable would be recoverable. Costs are
recognised as an expense in the period in which they are
incurred.
Careful consideration needs to be given to projects open at
year end requiring significant judgement in respect of the
stage of completion and the associated revenue and profit to
be recognised.
The total amount of revenue and profit to be recognised
under a contract can be affected by changes in conditions
and circumstances over time, such as:
• variations to the original contract terms
• cost overruns
• scope changes that require further negotiation and
settlement.
Variations can arise from changing client specifications,
changes to the job based on unforeseen circumstances
(e.g. macroeconomic factors), as well as from inefficiencies
on the part of either party. There can be some uncertainties,
therefore, in determining the amounts to be recovered from
any additional work performed.
The risk is, therefore, that contract revenue is not recognised
in the correct period or that revenue and associated profit is
misstated.
52
Financial statementsEbiquity plcAnnual report and financial statements for the year ended 31 December 2017 We also considered locations visited
and those out of scope in the prior
three years. The scoping calculation
is based upon obtaining sufficient
coverage of each financial statement
line item, which varies depending on
the risk assessment.
The Group operates through
subsidiaries in the US, Australia, China,
UK, France, Germany and other
European countries. There are three
financially significant components
being: Ebiquity plc, Ebiquity Associates
Ltd, and Ebiquity Germany GmbH; for
the purpose of obtaining required
coverage over the group balances, we
have also included in our scope Firm
Decision Ltd and Ebiquity Russia Ltd
(both incorporated in UK), Ebiquity Inc
and Stratigent LLC (both incorporated
in USA) and Ebiquity Pty Ltd
(incorporated in Australia).
The scoping calculation is based
upon obtaining sufficient coverage
of each financial statement line
item, which varies depending on
the risk assessment.
The Group audit is performed in the
UK by the same engagement leader
and team; the German and Australia
components have been audited by
other network firms. As part of our
audit procedures we have obtained
access to the audit files of the
components not directly audited by
PwC UK and have reviewed the work
performed. In the current year we
visited the component in Germany and
Australia and attended the clearance
meeting with the local management.
Materiality
The scope of our audit was influenced
by our application of materiality. We
set certain quantitative thresholds for
materiality. These, together with
qualitative considerations, helped us to
determine the scope of our audit and
the nature, timing and extent of our
audit procedures on the individual
financial statement line items and
disclosures and in evaluating the effect
of misstatements, both individually
and in aggregate on the financial
statements as a whole.
How we tailored the audit scope
We tailored the scope of our audit to
ensure that we performed enough
work to be able to give an opinion on
the financial statements as a whole,
taking into account the structure of
the group, the accounting processes
and controls, and the industry in which
it operates.
The following matters are considered
when determining the scope of the
audit by component:
• We identify components which are
financially significant to the Group;
• We identify components considered
likely to include a significant risk of
material misstatement to the
Group financial statements;
• We consider the findings from prior
year audits and assess whether it
would provide further insight to the
Group to revisit certain territories to
provide an update; and
• We consider if there are any
other components that contribute
a significant amount to key income
statement and balance sheet
measures and ensure sufficient
coverage of each material line
item in the financial statements
is obtained through components
in scope.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall group materiality
How we determined it
Rationale for benchmark applied
£547,000 (2016: £587,000).
5% of profit before tax and highlighted items.
Based on the benchmarks used in the annual report, profit
before tax and highlighted items is the primary measure used
by the shareholders in assessing the performance of the
group, and is a generally accepted auditing benchmark.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality.
The range of materiality allocated across components was £46,000 and £489,000. Certain components were audited to a
local statutory audit materiality that was also less than our overall group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £10,000
(2016: £10,000) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
53
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc Independent auditors’ report continued
to the members of Ebiquity plc
Conclusions relating to
going concern
We have nothing to report in respect
of the following matters in relation to
which ISAs (UK) require us to report to
you when:
• the directors’ use of the going
concern basis of accounting in the
preparation of the financial
statements is not appropriate; or
• the directors have not disclosed in
the financial statements any
identified material uncertainties
that may cast significant doubt
about the group’s ability to continue
to adopt the going concern basis of
accounting for a period of at least
twelve months from the date when
the financial statements are
authorised for issue.
However, because not all future events
or conditions can be predicted, this
statement is not a guarantee as to
the group’s ability to continue as a
going concern.
Reporting on other information
Strategic Report and Directors’ Report
The other information comprises all of
the information in the Annual Report
other than the financial statements
and our auditors’ report thereon. The
directors are responsible for the other
information. Our opinion on the
financial statements does not cover
the other information and, accordingly,
we do not express an audit opinion or,
except to the extent otherwise
explicitly stated in this report, any
form of assurance thereon.
In connection with our audit of the
financial statements, our responsibility
is to read the other information and, in
doing so, consider whether the other
information is materially inconsistent
with the financial statements or our
knowledge obtained in the audit, or
otherwise appears to be materially
misstated. If we identify an apparent
material inconsistency or material
misstatement, we are required to
perform procedures to conclude
whether there is a material
misstatement of the financial
statements or a material
misstatement of the other
information. If, based on the work
we have performed, we conclude that
there is a material misstatement of
this other information, we are required
to report that fact. We have nothing
to report based on these
responsibilities.
With respect to the Strategic Report
and Directors’ Report, we also
considered whether the disclosures
required by the UK Companies Act
2006 have been included.
Based on the responsibilities described
above and our work undertaken in the
course of the audit, ISAs (UK) require
us also to report certain opinions and
matters as described below.
In our opinion, based on the work
undertaken in the course of the audit,
the information given in the Strategic
Report and Directors’ Report for the
year ended 31 December 2017 is
consistent with the financial
statements and has been prepared
in accordance with applicable legal
requirements.
In light of the knowledge and
understanding of the group and its
environment obtained in the course of
the audit, we did not identify any
material misstatements in the
Strategic Report and Directors’ Report.
Responsibilities for the financial
statements and the audit
Responsibilities of the directors
for the financial statements
As explained more fully in the
Directors’ Responsibilities Statement
set out on page 49, the directors are
responsible for the preparation of the
financial statements in accordance
with the applicable framework and for
being satisfied that they give a true
and fair view. The directors are also
responsible for such internal control as
they determine is necessary to enable
the preparation of financial
statements that are free from
material misstatement, whether
due to fraud or error.
In preparing the financial statements,
the directors are responsible for
assessing the group’s ability to
continue as a going concern, disclosing
as applicable, matters related to going
concern and using the going concern
basis of accounting unless the
directors either intend to liquidate the
group or to cease operations, or have
no realistic alternative but to do so
54
Financial statementsEbiquity plcAnnual report and financial statements for the year ended 31 December 2017 Other required reporting
Companies Act 2006
exception reporting
Under the Companies Act 2006 we
are required to report to you if, in our
opinion:
• we have not received all the
information and explanations
we require for our audit; or
• certain disclosures of directors’
remuneration specified by law are
not made.
We have no exceptions to report
arising from this responsibility.
Other matter
We have reported separately on
the company financial statements
of Ebiquity plc for the year ended
31 December 2017.
Richard Porter
(Senior Statutory Auditor)
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants
and Statutory Auditors
London
21 March 2018
Auditors’ responsibilities for the audit
of the financial statements
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from
material misstatement, whether due to
fraud or error, and to issue an auditors’
report that includes our opinion.
Reasonable assurance is a high level of
assurance, but is not a guarantee that
an audit conducted in accordance with
ISAs (UK) will always detect a material
misstatement when it exists.
Misstatements can arise from fraud
or error and are considered material if,
individually or in the aggregate, they
could reasonably be expected to
influence the economic decisions of
users taken on the basis of these
financial statements.
A further description of our
responsibilities for the audit of the
financial statements is located on the
FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description
forms part of our auditors’ report.
Use of this report
This report, including the opinions,
has been prepared for and only for the
company’s members as a body in
accordance with Chapter 3 of Part 16
of the Companies Act 2006 and for no
other purpose. We do not, in giving
these opinions, accept or assume
responsibility for any other purpose
or to any other person to whom this
report is shown or into whose hands
it may come save where expressly
agreed by our prior consent in writing.
55
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc Consolidated income statement
for the year ended 31 December 2017
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit/(loss)
Finance income
Finance expenses
Net finance costs
Year ended
31 December 2017
Year ended
31 December 2016
Before Highlighted
items
(note 3)
£’000
highlighted
items
£’000
Before Highlighted
items
(note 3)
£’000
highlighted
items
£’000
Total
£’000
Note
2
87,374
(45,130)
42,244
—
—
—
87,374
83,569
(45,130)
(38,282)
42,244
45,287
—
—
—
Total
£’000
83,569
(38,282)
45,287
(30,218)
(6,491)
(36,709)
(32,328)
(5,202)
(37,530)
4
6
6
12,026
(6,491)
5,535
12,959
(5,202)
17
(1,061)
(1,044)
—
—
—
17
(1,061)
(1,044)
18
(1,150)
(1,132)
—
—
—
7,757
18
(1,150)
(1,132)
6,625
Profit/(loss) before taxation
10,982
(6,491)
4,491
11,827
(5,202)
Taxation (charge)/credit
Profit/(loss) for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
Earnings per share
Basic
Diluted
7
(2,897)
854
(2,043)
(2,570)
340
(2,230)
8,085
(5,637)
2,448
9,257
(4,862)
4,395
7,522
563
(5,458)
2,064
(179)
384
8,085
(5,637)
2,448
8,987
270
9,257
(4,837)
(25)
(4,862)
8
8
2.65p
2.57p
4,150
245
4,395
5.38p
5.20p
The notes on pages 60 to 93 are an integral part of these financial statements.
Consolidated statement of comprehensive income
for the year ended 31 December 2017
Year ended
Year ended
31 December 31 December
2016
£’000
2017
£’000
Profit for the year
Other comprehensive income/(expense):
Items that will not be reclassified subsequently to profit or loss
Exchange differences on translation of overseas subsidiaries
Total other comprehensive income/(expense) for the year
Total comprehensive income for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
The notes on pages 60 to 93 are an integral part of these financial statements.
2,448
4,395
(623)
(623)
1,825
1,441
384
1,825
4,844
4,844
9,239
8,994
245
9,239
56
Financial statementsEbiquity plcAnnual report and financial statements for the year ended 31 December 2017
Consolidated statement of financial position
as at 31 December 2017
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Deferred tax asset
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Accruals and deferred income
Financial liabilities
Current tax liabilities
Provisions
Deferred tax liability
Total current liabilities
Non-current liabilities
Financial liabilities
Provisions
Deferred tax liability
Total non-current liabilities
Total liabilities
Total net assets
Equity
Ordinary shares
Share premium
Other reserves
Retained earnings
Equity attributable to the owners of the parent
Non-controlling interests
Total equity
31 December 31 December
2016
£’000
2017
£’000
Note
9
10
11
19
13
14
15
16
17
18
19
17
18
19
59,317
13,123
1,829
1,502
58,045
14,034
2,438
1,338
75,771
75,855
32,509
4,732
37,241
113,012
28,416
6,662
35,078
110,933
(7,401)
(5,919)
(12,665)
(11,890)
(2,473)
(1,598)
—
(412)
(6,253)
(1,841)
(9)
—
(24,549)
(25,912)
(33,193)
(30,448)
(393)
(1,895)
(393)
(2,125)
(35,481)
(32,966)
(60,030)
(58,878)
52,982
52,055
21
19,549
19,300
21
4,877
27,495
51,942
1,040
—
6,134
25,860
51,294
761
52,982
52,055
The notes on pages 60 to 93 are an integral part of these financial statements. The financial statements on pages 56 to 59
were approved and authorised for issue by the Board of Directors on 21 March 2018 and were signed on its behalf by:
Michael Karg, PhD
Director
Andrew Noble
Director
57
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc
Consolidated statement of changes in equity
for the year ended 31 December 2017
Note
Ordinary
shares
£’000
Share
premium
£’000
19,290
11,764
31 December 2015
Profit for the year
Other comprehensive income
Total comprehensive
income for the year
Shares issued for cash
Share premium reduction2
Shares issued to employees3
Share options charge
Deferred tax on share options
Dividends paid to shareholders
Dividends paid to
non-controlling interests
31 December 2016
Profit for the year
Other comprehensive income
Total comprehensive
income for the year
Shares issued for cash
Shares issued to employees3
Share options charge
Deferred tax on share options
Acquisition of
non-controlling interest
21
3
19
25
21
3
19
Dividends paid to shareholders
25
Dividends paid to
non-controlling interests
31 December 2017
—
—
—
10
—
—
—
—
—
—
19,300
—
—
—
99
150
—
—
—
—
—
19,549
—
—
—
16
(11,780)
—
—
—
—
—
—
—
—
—
21
—
—
—
—
—
—
21
Equity
attributable
Retained to owners of
the parent
earnings
£’000
£’000
Non-
controlling
interests
£’000
9,891
4,150
—
41,601
4,150
4,844
808
245
—
Other
reserves1
£’000
656
—
4,844
Total
equity
£’000
42,409
4,395
4,844
4,844
4,150
8,994
245
9,239
—
—
634
—
—
—
—
—
11,780
—
652
(321)
(292)
26
—
634
652
(321)
(292)
—
—
—
—
—
—
26
—
634
652
(321)
(292)
—
—
(292)
(292)
6,134
25,860
—
2,064
51,294
2,064
(623)
—
(623)
761
384
—
52,055
2,448
(623)
(623)
2,064
1,441
384
1,825
—
(634)
—
—
—
—
—
—
484
729
(61)
120
—
729
(61)
(1,107)
(1,107)
(474)
(474)
—
—
—
—
—
—
120
—
729
(61)
(1,107)
(474)
—
—
(105)
(105)
4,877
27,495
51,942
1,040
52,982
1. Includes £3,667,000 (31 December 2016: £3,667,000) in the merger reserve; a debit balance of £1,478,000 (31 December 2016: £1,478,000) in
the ESOP reserve; a share-based payment reserve of £nil (31 December 2016: £634,000); and a gain of £2,688,000 (31 December 2016:
£3,311,000 gain) recognised in the translation reserve. Refer to note 22 for further details.
2. On 8 June 2016, the Group announced the cancellation of the share premium account (the ‘Capital Reduction’) effective 9 June 2016
following registration of the Court order confirming the Capital Reduction by the Registrar of Companies.
3. A share-based payment reserve of £634,000 was created during the year ended 31 December 2016 and settled during the year ended
31 December 2017.
The notes on pages 60 to 93 are an integral part of these financial statements
58
Financial statementsEbiquity plcAnnual report and financial statements for the year ended 31 December 2017
Consolidated statement of cash flows
for the year ended 31 December 2017
Cash flows from operating activities
Cash generated from operations
Finance expenses paid
Finance income received
Income taxes paid
Net cash generated from operating activities
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired
Payments to acquire non-controlling interest
Payments in respect of contingent consideration
Purchase of property, plant and equipment
Purchase of intangible assets
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of share capital (net of issue costs)
Proceeds from bank borrowings
Repayment of bank borrowings
Dividends paid to shareholders
Dividends paid to non-controlling interests
Capital repayment of finance leases
Net cash flow generated by/(used in) financing activities
Net decrease in cash, cash equivalents and bank overdrafts
Cash, cash equivalents and bank overdraft at beginning of year
Effects of exchange rate changes on cash and cash equivalents
Cash, cash equivalents and bank overdraft at end of year
The notes on pages 60 to 93 form part of these financial statements.
Year ended
Year ended
31 December 31 December
2016
£’000
2017
£’000
Note
26
7,948
10,782
(938)
(1,092)
17
(2,207)
4,820
(176)
(1,107)
(1,799)
(642)
(1,589)
(5,313)
160
3,000
(2,500)
(474)
(21)
(5)
160
(333)
4,600
58
18
(166)
9,542
—
—
(4,431)
(479)
(1,872)
(6,782)
26
3,336
(6,411)
(292)
(546)
(4)
(3,891)
(1,131)
6,364
(633)
4,325
4,600
27
11
10
24
24
25
14
14
59
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc
Notes to the consolidated financial statements
for the year ended 31 December 2017
1. Accounting policies
General information
Ebiquity plc (the ‘Company’) and its
subsidiaries (together, the ‘Group’)
provide independent data-driven
insights to the global media and
marketing community. The Group
has 22 offices across 14 countries.
The Company is a public limited
company, which is listed on the London
Stock Exchange’s AIM Market and is
incorporated and domiciled in the UK.
The address of its registered office is
CityPoint, One Ropemaker Street,
London EC2Y 9AW.
Basis of preparation
The consolidated financial statements
have been prepared in accordance with
International Financial Reporting
Standards, International Accounting
Standards and IFRS IC Interpretations
(collectively ‘IFRSs’) issued by the
International Accounting Standards
Board (‘IASB’) as adopted by European
Union (‘Adopted IFRSs’) and with those
parts of the Companies Act 2006
applicable to companies preparing
their financial statements under
Adopted IFRSs. The consolidated
financial statements have been
prepared on a going concern basis.
The Group meets its day-to-day
working capital requirements through
its cash reserves and borrowings,
described in note 17. The Group’s
forecasts and projections, taking
account of reasonably possible
changes in trading performance, show
that the Group should be able to
operate within the level of its current
cash reserves and borrowings,
including continuing to meet the bank
covenants therein. The Group
therefore continues to adopt the going
concern basis in preparing its financial
statements. The consolidated financial
statements have been prepared under
the historical cost convention, as
modified by the revaluation of financial
assets and financial liabilities at fair
value through profit or loss.
The consolidated financial statements
are presented in pounds sterling and
rounded to the nearest thousand.
60
The principal accounting policies
adopted in these consolidated financial
statements are set out below. These
policies have been consistently applied
to all periods presented, unless
otherwise stated.
Basis of consolidation
The consolidated financial statements
incorporate the financial statements of
the Company and entities controlled by
the Company (its subsidiaries). Control
is achieved where the Company has the
power to govern the financial and
operating policies of an investee entity
so as to obtain benefits from its
activities. The results of each subsidiary
are included from the date that control
is transferred to the Group until the
date that control ceases.
Where necessary, adjustments are
made to the financial statements of
subsidiaries to bring the accounting
policies used in line with those used by
the Group. All intra-group
transactions, balances, income
and expenses are eliminated on
consolidation.
Non-controlling interests represent
the portion of the results and net
assets in subsidiaries that is not held
by the Group.
Business combinations
and goodwill
The Group applies the acquisition
method to account for business
combinations. The cost of the
acquisition is measured at the
aggregate of the fair values, at the
date of exchange, of assets given,
liabilities assumed, and equity
instruments issued by the Group in
exchange for control of the acquiree.
The acquiree’s identifiable assets,
liabilities and contingent liabilities are
recognised initially at their fair value at
the acquisition date. Goodwill is initially
measured at cost, being the excess of
the aggregate of the consideration
transferred over the fair value of net
identifiable assets acquired and
liabilities assumed. The determination
of the fair values of acquired assets
and liabilities is based on judgement
and the Directors have 12 months from
the date of the business combination
to finalise the allocation of the
purchase price.
Goodwill is allocated to each of the
Group’s cash-generating units expected
to benefit from the synergies of the
combination. Following initial
recognition, goodwill is measured at cost
less any accumulated impairment losses.
Goodwill is reviewed for impairment
at least annually or whenever there is
evidence that it may be required. Any
impairment is recognised immediately
in the income statement and is not
subsequently reversed.
Goodwill arising on the acquisition of
the Group’s interest in an associate
being the excess of the cost of
acquisition over the Group’s share of
the fair values of the identifiable net
assets of the associate, is included
within the carrying amount of the
investment. The non-controlling
shareholders interest in the acquiree
is initially measured at the
non-controlling interest’s proportion
of the net fair value of the assets,
liabilities and contingent liabilities
recognised.
Where transactions with non-controlling
parties do not result in a change in
control, the difference between the
fair value of the consideration paid or
received and the amount by which the
non-controlling interest is adjusted, is
recognised in equity.
Where the consideration for the
acquisition includes a contingent
consideration arrangement, this is
measured at fair value at the
acquisition date. Any subsequent
changes to the fair value of the
contingent consideration are adjusted
against the cost of the acquisition if
they occur within the measurement
period and only if the changes relate
to conditions existing at the acquisition
date. Any subsequent changes to
the fair value of the contingent
consideration after the measurement
period are recognised in the income
statement within administrative
expenses as a highlighted item.
The carrying value of contingent
consideration at the statement of
financial position date represents
management’s best estimate of the
future payment at that date, based on
historical results and future forecasts.
Financial statementsEbiquity plcAnnual report and financial statements for the year ended 31 December 2017 All costs directly attributable to the
business combination are expensed as
incurred and recorded in the income
statement within highlighted items.
Revenue recognition
Revenue is measured at the fair value of
the consideration received or receivable
and represents amounts receivable for
services provided in the normal course
of business, net of discounts, VAT and
other sales-related taxes. Income is
recognised evenly over the period of
the contract for our Market Intelligence
businesses, and in accordance with the
stage of completion of the contract
activity for our Media Value
Measurement and Marketing
Performance Optimisation businesses.
The stage of completion is determined
relative to the total number of hours
expected to complete the work or
provision of services. Where recorded
revenue exceeds amounts invoiced to
clients, the excess is classified as
accrued income and where recorded
revenue is less than amounts invoiced
to clients, the difference is classified as
deferred income.
Where services are performed by an
indeterminate number of acts over a
specific period, revenue is recognised
on a straight-line basis over the
specific period unless there is evidence
that some other method better
represents the stage of completion.
If the outcome of a contract cannot
be estimated reliably, the contract
revenue is recognised to the extent of
contract costs incurred that it is
probable would be recoverable. Costs
are recognised as an expense in the
period in which they are incurred.
Finance income and expenses
Finance income and expense
represents interest receivable and
payable. Finance income and expense
is recognised on an accruals basis,
based on the interest rate applicable
to each bank or loan account.
Foreign currencies
For the purposes of the consolidated
financial statements, the results and
financial position of each Group
company are expressed in pounds
sterling, which is the functional
currency of the Company, and the
presentation currency for the
consolidated financial statements.
In preparing the financial statements
of the individual companies,
transactions in currencies other than
the entity’s functional currency
(foreign currencies) are recorded at
the rates of exchange prevailing on
the dates of transactions. At each
year-end date, monetary assets
and liabilities that are denominated
in foreign currencies are retranslated
at the rates prevailing on the
year-end date.
For the purpose of presenting
consolidated financial statements,
the assets and liabilities of the Group’s
foreign operations are translated at
exchange rates prevailing on the
year-end date. Income and expense
items are translated at the average
exchange rate for the period, which
approximates to the rate applicable
at the dates of the transactions.
The exchange differences arising
from the retranslation of the year end
amounts of foreign subsidiaries and
the difference on translation of the
results of those subsidiaries into the
presentational currency of the Group
are recognised in the translation
reserve. All other exchange differences
are dealt with through the
consolidated income statement.
Highlighted items
Highlighted items comprise non-cash
charges and non-recurring items which
are highlighted in the consolidated
income statement as separate
disclosure is considered by the
Directors to be relevant in
understanding the underlying
performance of the business.
The non-cash charges include share
option charges and amortisation of
purchased intangibles.
The non-recurring items include the
costs associated with potential
acquisitions (where formal discussion
is undertaken), completed acquisitions
and their subsequent integration into
the Group, adjustments to the
estimates of contingent consideration
on acquired entities, asset impairment
charges, management restructuring
and other significant one-off items.
Costs associated with ongoing market
landscaping, acquisition identification
and early stage discussions with
acquisition targets are reported in
underlying administrative expenses.
Taxation
The tax expense included in the
consolidated income statement
comprises current and deferred tax.
Current tax is the expected tax payable
on the taxable income for the period,
using tax rates enacted or substantively
enacted by the year-end date.
The Group is subject to corporate
taxes in a number of different
jurisdictions and judgement is required
in determining the appropriate
provision for transactions where
the ultimate tax determination is
uncertain. In such circumstances,
the Group recognises liabilities for
anticipated taxes based on the best
information available and where the
anticipated liability is both probable
and estimable. Where the final
outcome of such matters differs from
the amount recorded, any differences
may impact the income tax and
deferred tax provisions in the period in
which the final determination is made.
Tax is recognised in the consolidated
income statement except to the extent
that it relates to items recognised
directly in equity or other
comprehensive income, in which case
it is recognised in equity.
61
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc Notes to the consolidated financial statements continued
for the year ended 31 December 2017
1. Accounting policies continued
Taxation continued
Using the liability method, deferred tax
is provided on all temporary
differences between the carrying
amounts of assets and liabilities for
financial reporting purposes and their
tax bases, except for differences
arising on:
• the initial recognition of goodwill;
• the initial recognition of an asset or
liability in a transaction which is not
a business combination and at the
time of the transaction affects
neither accounting or taxable profit;
and
•
investments in subsidiaries and
jointly controlled entities where the
Group is able to control the timing
of the reversal of the difference and
it is probable that the difference will
not reverse in the foreseeable future.
Recognition of deferred tax assets is
restricted to those instances where it
is probable that taxable profit will be
available against which the difference
can be utilised. The recognition of
deferred tax assets is reviewed at each
year-end date.
The amount of the asset or liability is
determined using tax rates that have
been enacted or substantively enacted
by the year-end date and are expected
to apply when the deferred tax
liabilities/assets are settled/recovered.
Deferred tax assets and liabilities are
offset when the Group has a legally
enforceable right to offset current tax
assets and liabilities and the deferred
tax assets and liabilities relate to taxes
levied by the same tax authority on
either:
• the same taxable Group company;
or
• different Group entities which
intend either to settle current tax
assets and liabilities on a net basis,
or to realise the assets and settle
the liabilities simultaneously, in each
future period in which significant
amounts of deferred tax assets or
liabilities are expected to be settled
or recovered.
62
Property, plant and equipment
Property, plant and equipment is
stated at cost less accumulated
depreciation and any recognised
impairment loss.
Depreciation is charged so as to write
off the cost of assets over their
estimated useful economic lives.
The rates applied are as follows:
Motor vehicles
25% per annum
reducing balance
Fixtures, fittings Five to 14 years
and equipment
straight-line;
or 25% per annum
reducing balance
Computer
equipment
Two to four years
straight-line
Leasehold
land and
buildings
improvements
Over the shorter of
the life or the
estimated useful
life of the lease
Other intangible assets
Internally generated intangible assets
– development expenditure
Internally generated intangible assets
relate to bespoke computer software
and technology developed by the
Group’s internal software development
team. During the year, the Group
generated £1,202,000 of internally
generated intangible assets
(31 December 2016: £1,091,000).
An internally generated intangible
asset arising from the Group’s
development expenditure is recognised
only if all of the following conditions
are met:
•
it is technically feasible to develop
the asset so that it will be available
for use or sale;
• adequate resources are available to
complete the development and to
use or sell the asset;
• there is an intention to complete the
asset for use or sale;
• the Group is able to use or sell the
intangible asset;
•
it is probable that the asset created
will generate future economic
benefits; and
• the development cost of the asset
can be measured reliably.
Internally generated intangible assets
are amortised on a straight-line basis
over their useful lives. Amortisation
commences when the asset is available
for use and useful lives range from one
to five years. The amortisation expense
is included within administrative
expenses. Where an internally
generated intangible asset cannot be
recognised, development expenditure
is recognised as an expense in the
period in which it is incurred.
Purchased intangible assets
Externally acquired intangible assets
are initially recognised at cost and
subsequently amortised on a
straight-line basis over their useful
economic lives, which vary from three
to 10 years. The amortisation expense
is included as a highlighted item within
the administrative expenses line in the
income statement.
Intangible assets recognised on
business combinations are recorded at
fair value at the acquisition date using
appropriate valuation techniques
where they are separable from the
acquired entity or give rise to other
contractual/legal rights. The significant
intangibles recognised by the Group are
customer relationships which are
amortised on a straight-line basis over
a typical useful life of eight to 10 years.
Computer software
Purchased computer software
intangible assets are amortised on a
straight-line basis over their useful lives
which vary from two to eight years.
Impairment
Assets that have an indefinite useful
life are not subject to amortisation and
are tested annually for impairment.
For the purpose of impairment testing,
goodwill is grouped at the lowest levels
for which there are separately
identifiable cash flows, known as
cash-generating units. If the
recoverable amount of the
cash-generating unit is less than the
carrying amount of the unit, the
impairment loss is allocated first to
reduce the carrying amount of any
goodwill allocated to the unit and then
to the other assets of the unit pro-rata
on the basis of the carrying amount of
each asset in the unit.
Financial statementsEbiquity plcAnnual report and financial statements for the year ended 31 December 2017 Assets that are subject to
amortisation or depreciation are
reviewed for impairment whenever
events or changes in circumstances
indicate that the carrying amount may
not be recoverable. If any such
condition exists, the recoverable
amount of the asset is estimated in
order to determine the extent, if any,
of the impairment loss. Where the
asset does not generate cash flows
that are independent from other
assets, estimates are made of the
cash flows of the cash-generating
unit to which the asset belongs.
Recoverable amount is the higher of fair
value, less costs to sell, and value in use.
In assessing value in use, estimated
future cash flows are discounted to
their present value using a pre-tax
discount rate appropriate to the
specific asset or cash-generating unit.
If the recoverable amount of an asset
or cash-generating unit is estimated
to be less than its carrying amount,
the carrying value of the asset or
cash-generating unit is reduced to
its recoverable amount. Impairment
losses are recognised immediately
in highlighted items in the
income statement.
In respect of assets other than
goodwill, an impairment loss is
reversed if there has been a change in
the estimates used to determine the
recoverable amount. An impairment
loss is reversed only to the extent that
the asset’s carrying amount does not
exceed the carrying amount that
would have been determined, net of
depreciation or amortisation, if the
impairment loss had been recognised.
Cash and cash equivalents
Cash and cash equivalents comprise
cash in hand and short-term deposits.
Cash and cash equivalents and bank
overdrafts are offset when there is a
legally enforceable right to offset.
Financial instruments
Financial liabilities
Financial assets and financial liabilities
are recognised in the Group’s statement
of financial position when the Group
becomes a party to the contractual
provisions of the instrument.
Financial assets
The Group classifies its financial assets
as ‘loans and receivables’. Loans and
receivables are non-derivative financial
assets with fixed or determinable
payments that are not quoted in an
active market. They arise principally
through the provision of goods and
services to customers (trade
receivables), but also incorporate other
types of contractual monetary assets.
They are initially recognised at fair
value plus transaction costs that are
directly attributable to their
acquisition or issue, and are
subsequently carried at amortised
cost using the effective interest rate
method, less provision for impairment.
Impairment provisions are recognised
when there is objective evidence (such
as significant financial difficulties on
the part of the counterparty or default
or significant delay in payment) that
the Group will be unable to collect all
of the amounts due, the amount of
such a provision being the difference
between the net carrying amount and
the present value of the future
expected cash flows associated with
the impaired receivable. For trade
receivables, which are reported net, such
provisions are recorded in a separate
allowance account with the loss being
recognised within administrative
expenses in the income statement. On
confirmation that the trade receivable
will not be collectable, the gross
carrying value of the asset is written
off against the associated provision.
Borrowings consisting of
interest-bearing secured and
unsecured loans and overdrafts are
initially recognised at fair value net of
directly attributable transaction costs
incurred and subsequently measured
at amortised cost using the effective
interest method. The difference
between the proceeds received net of
transaction costs and the redemption
amount is amortised over the period
of the borrowings to which they relate.
The revolving credit facility is
considered to be a long-term loan.
Trade and other payables are initially
recognised at their nominal value which
is usually the original invoiced amount.
Leases
Where substantially all of the risks and
rewards incidental to ownership of a
leased asset have been transferred to
the Group (a ‘finance lease’), the asset
is treated as if it had been purchased
outright. The amount initially
recognised as an asset is the lower of
the fair value of the leased property
and the present value of the minimum
lease payments payable over the term
of the lease. The corresponding lease
commitment is shown as a liability.
Lease payments are analysed between
capital and interest. The interest
element is charged to the income
statement over the period of the lease
and is calculated so that it represents
a constant proportion of the lease
liability. The capital element reduces
the balance owed to the lessor.
Where substantially all of the risks and
rewards incidental to ownership are
retained by the lessor (an ‘operating
lease’), the total rentals payable under
the lease are charged to the income
statement on a straight-line basis over
the lease term. The aggregate benefit
of lease incentives is recognised as a
reduction of the rental expense over
the lease term on a straight-line basis.
The land and buildings elements of
property leases are considered
separately for the purposes of
lease classification.
63
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc Notes to the consolidated financial statements continued
for the year ended 31 December 2017
1. Accounting policies continued
Share capital
Equity instruments issued by the
Group are recorded at the amount of
the proceeds received, net of direct
issuance costs.
Employee Share Ownership Plan
(‘ESOP’)
As the Company is deemed to have
control of its ESOP trust, it is treated
as a subsidiary and consolidated for
the purposes of the Group financial
statements. The ESOP’s assets (other
than investments in the Company’s
shares), liabilities, income and expenses
are included on a line-by-line basis in
the Group financial statements. The
ESOP’s investment in the Company’s
shares is deducted from shareholders’
equity in the Group statement of
financial position as if they were
treasury shares.
Share-based payments
Where equity-settled share options are
awarded to employees, the fair value
of the options at the date of grant is
charged to the income statement over
the vesting period with a
corresponding increase recognised in
retained earnings. Fair value is
measured using an appropriate
valuation model. Non-market vesting
conditions are taken into account by
adjusting the number of equity
investments expected to vest at each
year-end date so that, ultimately, the
cumulative amount recognised over
the vesting period is based on the
number of options that eventually vest.
A charge is made irrespective of
whether the market vesting conditions
are satisfied. The cumulative expense
is not adjusted for failure to achieve a
market vesting condition.
Where there are modifications to
share-based payments that are
beneficial to the employee then as well
as continuing to recognise the original
share-based payment charge, the
incremental fair value of the modified
share options as identified at the date
of the modification is also charged to
the income statement over the
remaining vesting period. Where the
Group cancels share options and
identifies replacement options, this
arrangement is also accounted for as
a modification.
The grant by the Company of options
over its equity instruments to the
employees of subsidiary undertakings
in the Group is treated as a capital
contribution. The fair value of
employee services received, measured
by reference to the grant date fair
value, is recognised over the vesting
period as an increase to investment in
subsidiary undertakings, with a
corresponding credit to equity in the
parent entity financial statements.
Provisions
Provisions, including provisions for
onerous lease costs, are recognised
when the Group has a present legal
or constructive obligation as a result
of past events, it is probable that an
outflow of resources will be required
to settle that obligation and the
amount can be reliably estimated.
Provisions are not recognised for
future operating losses.
Provisions are measured at the
Directors’ best estimate of the
expenditure required to settle the
obligation at the year-end date. If the
effect of the time value of money is
material, provisions are determined by
discounting the expected future cash
flows at a pre-tax rate which reflects
current market assessments of the
time value of money and, where
appropriate, the risks specific to
the obligations.
Retirement benefits
For defined contribution pension
schemes, the Group pays contributions
to privately administered pension plans
on a voluntary basis. The Group has no
further payment obligations once the
contributions have been paid.
Contributions are charged to the
income statement in the year to
which they relate.
Dividend distribution
Dividend distribution to the Company’s
shareholders is recognised as a liability
in the Group’s financial statements in
the period in which the dividends are
approved by the Company’s
shareholders.
Critical accounting estimates
and judgements
In preparing the consolidated financial
statements, the Directors have made
certain estimates and judgements
relating to the reporting of results of
operations and the financial position
of the Group. Actual results may
significantly differ from those
estimates often as a result of the need
to make assumptions about matters
which are uncertain. The estimates
and judgements discussed below are
considered by the Directors to be those
that have a critical accounting impact
to the Group’s financial statements.
Critical accounting estimates include
the terminal growth rate used in
impairment assessments, inputs to
share option accounting fair value
models and amounts to capitalise as
intangible assets. These estimates are
reached with reference to historical
experience, supporting detailed
analysis and, in the case of impairment
assessments and share option
accounting, external economic factors.
Critical accounting judgements include
the treatment of events after the
reporting period as adjusting or
non-adjusting and the determination
of segments for segmental reporting,
based on the reports reviewed by the
Executive Directors that are used to
make strategic decisions. These
judgements are determined at a Board
level based on the status of strategic
initiatives of the Group.
64
Financial statementsEbiquity plcAnnual report and financial statements for the year ended 31 December 2017 Revenue recognition
Taxation
The Group is required to make an
estimate of the project completion
levels in respect of contracts which
straddle the year end for revenue
recognition purposes. This involves
a level of judgement and therefore
differences may arise between the
actual and estimated result.
Carrying value of goodwill
and other intangible assets
Impairment testing requires
management to estimate the value in
use of the cash-generating units to
which goodwill and other intangible
assets have been allocated. The value
in use calculation requires estimation
of future cash flows expected to arise
from the cash-generating unit and the
application of a suitable discount rate
in order to calculate present value. The
sensitivity around the selection of
particular assumptions including
growth forecasts and the pre-tax
discount rate used in management’s
cash flow projections could
significantly affect the Group’s
impairment evaluation and therefore
the Group’s reported assets and
results. Further details, including a
sensitivity analysis, are included in
notes 9 and 10 to the consolidated
financial statements.
Contingent consideration
The Group has recorded liabilities for
contingent consideration on
acquisitions made in the current and
prior periods. The calculation of the
contingent consideration liability
requires judgements to be made
regarding the forecast future
performance of these businesses for
the earn-out period. Any changes to
the fair value of the contingent
consideration after the measurement
period are recognised in the income
statement within administrative
expenses as a highlighted item.
The Group is subject to income taxes in
all the territories in which it operates,
and judgement and estimates of
future profitability are required to
determine the Group’s deferred tax
position. If the final tax outcome is
different to that assumed, resulting
changes will be reflected in the income
statement, unless the tax relates to an
item charged to equity in which case
the changes in the tax estimates will
also be reflected in equity. The Group
believes that its accruals for tax
liabilities are adequate for all open
audit years based on its assessment of
many factors including past experience
and interpretations of tax law. This
assessment relies on estimates and
assumptions and may involve a series
of complex judgements about future
events. To the extent that the final tax
outcome of these matters is different
than the amounts recorded, such
differences will impact income tax
expense in the period in which such
determination is made.
Provisions
The Group provides for certain costs of
reorganisation that has occurred due
to the Group’s acquisition and disposal
activity. When the final amount
payable is uncertain, these are
classified as provisions. These
provisions are based on the best
estimates of management.
Adoption of new standards
and interpretations
On 1 January 2018, the Group will
adopt the following amendments
which are effective for accounting
periods on or after 1 January 2018 and
which have not yet been endorsed by
the EU. Management is currently
assessing the impact of these new
pronouncements on the financial
statements, which are not expected to
be significant.
•
IFRS 9 ‘Financial Instruments’. This
standard addresses the
classification, measurement and
recognition of financial assets and
financial liabilities. It replaces the
guidance in IAS 39 that relates to
the classification and measurement
of financial instruments. IFRS 9
retains but simplifies the mixed
measurement model and
establishes three primary
measurement categories for
financial assets: amortised cost; fair
value through other comprehensive
income; and fair value through
profit or loss. The basis of
classification depends on the
entity’s business model and the
contractual cash flow
characteristics of the financial
asset. Investments in equity
instruments are required to be
measured at fair value through
profit or loss with the irrevocable
option at inception to present
changes in fair value in other
comprehensive income, not
recycling. An expected credit losses
model replaces the incurred loss
impairment model used in IAS 39.
For financial liabilities, there are no
changes to classification and
measurement, except for the
recognition of changes in own credit
risk in other comprehensive income,
for liabilities designated at fair
value through profit or loss. IFRS 9
relaxes the requirements for hedge
effectiveness by replacing the
bright-line hedge effectiveness
tests. To qualify for hedge
accounting, it requires an economic
relationship between the hedged
item and hedging instrument, and
for the ‘hedged ratio’ to be the
same as the one that management
actually uses for risk management
purposes. Contemporaneous
documentation is still required, but
it is different from that currently
prepared under IAS 39. There is an
accounting policy choice to continue
to account for all hedges under
IAS 39. IFRS 9 is effective for
accounting periods beginning on or
after 1 January 2018. The Group is
implementing IFRS 9 during the first
half of 2018. The classification and
measurement basis for the Group’s
financial assets and liabilities is
expected to be largely unchanged
by adoption of IFRS 9.
Management’s preliminary view
based on work performed to date
is that no material impact on profit
for future periods is expected.
Management is in the process of
assessing the impact on credit
losses on receivables and past
refinancings and this assessment
is expected to be concluded during
the first half of 2018.
65
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc Notes to the consolidated financial statements continued
for the year ended 31 December 2017
The following new standard has been
published that is mandatory to the
Group’s future accounting periods but
has not been adopted early in these
financial statements.
•
IFRS 16, ‘Leases’ (effective on or
after 1 January 2019). This standard
replaces IAS 17 ‘Leases’ and related
interpretations and sets out the
principles for the recognition,
measurement, presentation and
disclosure of leases for both the
lessee and the lessor. The standard
addresses the definition of a lease,
recognition and measurement of
leases, and it establishes principles
for reporting useful information to
users of financial statements about
the leasing activities of both lessees
and lessors. A key change arising
from IFRS 16 is that most operating
leases will be accounted for on
balance sheet for lessees. In future
periods, the operating lease charge
would be replaced by a depreciation
charge that, whilst lower over the
life of the lease than the current
operating lease charge, is not
expected to be materially different.
The Directors are in the process of
reviewing contracts to identify any
additional lease arrangements that
would need to be recognised under
IFRS 16. IFRS 16 eliminates the two
lease classifications that IAS 17 has
(operating and finance leases) for
the lessee, and instead all leases
will have the same classification.
Management will assess the impact
on the Group of IFRS 16 prior to the
effective date of implementation.
• Although the detailed impact
has not yet been quantified,
management expects that the
adoption of IFRS 16 will impact the
accounting for those leases currently
classified as operating leases.
The Group will apply IFRS 16 from
1 January 2019 and the quantitative
impact will be included in the Group’s
2018 interim results announcement.
1. Accounting policies continued
Adoption of new standards
and interpretations continued
IFRS 15 ‘Revenue from Contracts
with Customers’. This standard
deals with revenue recognition and
establishes principles for reporting
useful information to users of
financial statements about the
nature, amount, timing and
uncertainty of revenue and cash
flows arising from an entity’s
contracts with customers. Revenue
is recognised when a customer
obtains control of a good or service
and thus has the ability to direct the
use and obtain the benefits from the
good or service. Variable
consideration is included in the
transaction price if it is highly
probable that there will be no
significant reversal of the cumulative
revenue recognised when the
uncertainty is resolved. The
standard replaces IAS 18 ‘Revenue’,
and IAS 11 ‘Construction Contracts’,
and related interpretations.
The standard is effective for
annual periods beginning on or
after 1 January 2018, and earlier
application is permitted. The
Group implemented IFRS 15 on
1 January 2018 and has carried out
a review of existing contractual
arrangements as part of this
process. The Directors anticipate
there will be no material impact for
the Media Value Measurement,
Market Intelligence and Marketing
Performance Optimisation revenue
streams, based on the outputs of
that contract review in the context
of IFRS 15’s five step revenue
recognition model. Under the
existing accounting policy, revenue
is recognised when the amounts can
be reliability measured, which is
considered to be when project
milestones are reached. Under IFRS
15, revenue can only be recognised
when the Group has an enforceable
right to be paid for work completed.
Management assessed the
likelihood of contract cancellation
mid-flight, noting minimal instances
of this occurring in prior periods.
The classification and measurement
of revenue is largely unchanged
following the adoption of IFRS 15.
No material impact on profit for
future periods is expected.
•
66
Financial statementsEbiquity plcAnnual report and financial statements for the year ended 31 December 2017 2. Segmental reporting
In accordance with IFRS 8 the Group’s operating segments are based on the reports reviewed by the Executive Directors that
are used to make strategic decisions.
Certain operating segments have been aggregated to form three reportable segments, Media Value Measurement, Market
Intelligence and Marketing Performance Optimisation:
• Media Value Measurement includes our media benchmarking, financial compliance and associated services;
• Market Intelligence includes our advertising monitoring, reputation management and research/insight services; and
• Marketing Performance Optimisation consists of our marketing effectiveness and multi-channel analytics services.
The Executive Directors are the Group’s chief operating decision-maker. They assess the performance of the operating
segments based on operating profit before highlighted items. This measurement basis excludes the effects of non-recurring
expenditure from the operating segments such as restructuring costs and purchased intangible amortisation. The measure
also excludes the effects of equity-settled share-based payments. Interest income and expenditure are not allocated to
segments, as this type of activity is driven by the central treasury function, which manages the cash position of the Group.
The segment information provided to the Executive Directors for the reportable segments for the year ended
31 December 2017 is as follows:
Year ended 31 December 2017
Revenue
Operating profit/(loss) before highlighted items
Total assets
51,482
14,037
58,334
23,146
3,163
33,715
Year ended 31 December 2016
Media Value
Measurement
£’000
Marketing
Market Performance
Intelligence Optimisation
£’000
£’000
Reportable
segments Unallocated
£’000
£’000
12,746
1,646
87,374
18,846
—
(6,820)
13,547
105,596
7,416
113,012
Total
£’000
87,374
12,026
Revenue
Operating profit/(loss) before highlighted items
Media Value
Measurement
£’000
Marketing
Market Performance
Intelligence Optimisation
£’000
£’000
Reportable
segments Unallocated
£’000
£’000
Total
£’000
47,161
12,124
23,360
13,048
3,902
3,739
83,569
19,765
—
83,569
(6,806)
12,959
Total assets
56,948
32,469
11,868
101,285
9,648
110,933
A reconciliation of segment operating profit before highlighted items to total profit before tax is provided below:
Year ended
Year ended
31 December 31 December
2016
£’000
2017
£’000
Reportable segment operating profit before highlighted items
18,846
19,765
Unallocated costs1:
Staff costs
Property costs
Exchange rate movements
Other administrative expenses
Operating profit before highlighted items
Highlighted items (note 3)
Operating profit
Net finance costs
Profit before tax
1. Unallocated costs comprise central costs that are not considered attributable to the segments.
(5,770)
(5,219)
(322)
65
(793)
(786)
(158)
(643)
12,026
12,959
(6,491)
(5,202)
5,535
(1,044)
4,491
7,757
(1,132)
6,625
67
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc
Notes to the consolidated financial statements continued
for the year ended 31 December 2017
2. Segmental reporting continued
A reconciliation of segment total assets to total consolidated assets is provided below:
Total assets for reportable segments
Unallocated amounts:
Property, plant and equipment
Other intangible assets
Other receivables
Cash and cash equivalents
Deferred tax asset
Total assets
The table below presents revenue and non-current assets by geographical location:
31 December 31 December
2016
£’000
2017
£’000
105,596
101,285
1,153
1,574
1,953
2,056
680
1,900
1,517
1,015
3,989
1,227
113,012
110,933
United Kingdom
Rest of Europe
North America
Rest of world
Deferred tax assets
Total
Year ended
31 December 2017
Year ended
31 December 2016
Revenue by
location of Non-current
assets
customers
£’000
£’000
Revenue by
location of Non-current
assets
customers
£’000
£’000
26,050
31,451
18,680
11,193
87,374
—
87,374
45,611
9,654
6,591
12,413
74,269
1,502
75,771
22,627
31,586
20,032
9,324
83,569
—
46,617
9,378
7,257
11,265
74,517
1,338
83,569
75,855
No single customer (or group of related customers) contributes 10% or more of revenue.
3. Highlighted items
Highlighted items comprise items which are highlighted in the income statement because separate disclosure is considered
relevant in understanding the underlying performance of the business.
Administrative expenses
Share option charge/(credit)
Amortisation of purchased intangibles
Severance and reorganisation costs
Acquisition, integration and strategic costs
Total highlighted items before tax
Taxation credit
Total highlighted items after tax
Year ended
31 December 2017
Year ended
31 December 2016
Cash
£’000
Non-cash
£’000
Total
£’000
Cash
£’000
Non-cash
£’000
Total
£’000
9
—
2,052
1,650
3,711
(460)
3,251
729
1,952
312
(213)
2,780
(394)
2,386
738
1,952
2,364
1,437
6,491
(854)
5,637
(92)
—
—
2,777
2,685
(252)
2,433
652
1,865
—
—
2,517
(88)
2,429
560
1,865
—
2,777
5,202
(340)
4,862
Amortisation of purchased intangibles relates to acquisitions made in the current financial year of £28,000 and to acquisitions
made in prior years of £1,924,000 (31 December 2016: £26,000 in the current financial year and £1,839,000 in prior years).
Separate disclosure is considered relevant because amortisation of purchased intangibles has no correlation to underlying
profitability of the Group.
In the current year, a non-cash IFRS 2 charge of £729,000 (31 December 2016: £652,000) was recorded. Separate disclosure
is considered relevant to isolate charges and credits which are subject to volatility as a result of non-trading factors.
Total severance and reorganisation costs of £2,364,000 (31 December 2016: £nil) were recognised during the year, primarily
consisting of £2,061,000 in relation to severances in the UK, France, Spain and China as part of one-off management
restructuring in those countries. The remaining £303,000 relates to settlement of a client dispute. Separate disclosure is
considered relevant as these charges are non-recurring and not reflective of the underlying operating costs of the business.
68
Financial statementsEbiquity plcAnnual report and financial statements for the year ended 31 December 2017
Total acquisition, integration and strategic costs of £1,437,000 (31 December 2016: £2,777,000) were recognised during the
year, primarily consisting of £981,000 in relation to costs associated with the sale of the Ad Intel business (refer to note 30
for further detail); £330,000 in relation to earn-out costs associated with the CMCG acquisition and other contingent
consideration adjustments, net of foreign exchange differences; £68,000 in relation to the Digital Balance Australia Pty Ltd
acquisition; and £58,000 in relation to financial restructuring costs. Separate disclosure is considered relevant as these charges
are non-recurring and not reflective of the underlying operating costs of the business.
Contingent consideration adjustments, within acquisition, integration and strategic costs, are included as a cash item.
Current tax arising on the highlighted items is included as a cash item, while deferred tax on highlighted items is included as a
non-cash item. Refer to note 7 for more detail.
As at 31 December 2017, £2,860,000 of the £3,711,000 cash highlighted items had been settled (31 December 2016: £1,197,000
of the £2,685,000 cash highlighted items had been settled).
4. Operating profit after highlighted items
Operating profit after highlighted items is stated after charging/(crediting):
Year ended
Year ended
31 December 31 December
2016
£’000
2017
£’000
Operating lease rentals
– other
– land and buildings
Depreciation and amortisation (notes 10 and 11)
Loss on disposal of fixed assets
Research costs – expensed
Foreign exchange gain
38
1,603
3,961
51
608
(285)
90
1,739
3,682
11
870
(79)
Operating lease rentals – land and buildings includes a credit of £406,000 in respect of a lease amendment incentive
(31 December 2016: £nil).
Auditors’ remuneration
During the year the Group (including its overseas subsidiaries) obtained the following services from the Group’s auditors at
costs as detailed below:
Year ended
Year ended
31 December 31 December
2016
£’000
2017
£’000
Fees payable to the Company’s auditors for the audit of the parent company
and consolidated financial statements
Fees payable to the Company’s auditors and its associates for other services:
– the audit of the Company’s subsidiaries, pursuant to legislation
– other audit-related assurance services
– other assurance services
– tax compliance services
107
123
27
16
30
303
97
96
24
10
9
236
69
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc
Notes to the consolidated financial statements continued
for the year ended 31 December 2017
5. Employee information
The monthly average number of employees employed by the Group during the year, including Executive Directors, was as follows:
Year ended
Year ended
31 December 31 December
2016
Number
2017
Number
Media Value Measurement
Market Intelligence
Marketing Performance Optimisation
IT development and support
Administration
Directors
At 31 December 2017, the total number of employees of the Group was 932 (31 December 2016: 919).
Staff costs for all employees, including Executive Directors, consist of:
340
338
103
49
94
8
932
305
340
88
60
107
9
909
Year ended
Year ended
31 December 31 December
2016
£’000
2017
£’000
Wages and salaries
Social security costs
Other pension costs
Share options charge (note 23)
Directors’ remuneration
39,537
5,808
1,013
738
41,571
3,502
925
652
47,096
46,650
Total Directors’ remuneration was £1,339,000 including £427,000 to the highest paid Director (31 December 2016: £1,474,000
including £426,000 to the highest paid Director). Directors are eligible for cash bonuses as a percentage of base salary,
dependent on individual and Company performance against established financial targets. No performance bonuses were
paid during the year (31 December 2016: £nil).
No Directors were a member of a Company pension scheme as at 31 December 2017 (31 December 2016: none). Contributions
totalling £26,000 (31 December 2016: £28,000) were made to Directors’ private pension schemes during the year including
£14,000 to the highest paid Director (31 December 2016: £14,000).
No Directors exercised share options during the year (31 December 2016: nil). In the period to 31 December 2017, the highest
paid Director exercised no share options (31 December 2016: nil).
During the year, nil (31 December 2016: 500,000) share options were granted to Directors under the Group’s Executive
Incentive Plan scheme. Vesting is subject to the satisfaction of certain performance criteria (see note 23 for further details).
Further details on Directors’ remuneration can be found in the Remuneration Committee report on pages 42 to 44.
6. Finance income and expenses
Finance income
Bank interest
Finance income
Finance expenses
Bank loans and overdraft interest
Loan fee amortisation
Finance lease interest
Finance expenses
70
Year ended
Year ended
31 December 31 December
2016
£’000
2017
£’000
17
17
(941)
(118)
(2)
18
18
(1,058)
(90)
(2)
(1,061)
(1,150)
Financial statementsEbiquity plcAnnual report and financial statements for the year ended 31 December 2017
7. Taxation charge/(credit)
UK tax
Current year
Adjustment in respect of prior year
Foreign tax
Current year
Adjustment in respect of prior year
Total current tax
Deferred tax
Origination and reversal of temporary differences
(note 19)
Adjustment in respect of prior year
Year ended
31 December 2017
Year ended
31 December 2016
Before
Before
highlighted Highlighted
items
£’000
items
£’000
Total
£’000
highlighted Highlighted
items
£’000
items
£’000
786
(65)
721
1,827
(64)
1,763
2,484
(60)
—
(60)
726
(65)
661
912
(205)
707
(401)
1,426
1,409
—
(401)
(461)
(64)
(94)
1,362
2,023
1,315
2,022
(187)
—
(187)
(65)
—
(65)
(252)
Total
£’000
725
(205)
520
1,344
(94)
1,250
1,770
413
—
(393)
—
20
—
160
388
(88)
—
72
388
Total tax charge/(credit)
2,897
(854)
2,043
2,570
(340)
2,230
The difference between tax as charged/(credited) in the financial statements and tax at the nominal rate is explained below:
Year ended
Year ended
31 December 31 December
2016
£’000
2017
£’000
Profit before tax
Corporation tax at 19.25% (31 December 2016: 20%)
Non-deductible taxable expenses
Overseas tax rate differential
Overseas losses not recognised
Losses utilised not previously recognised
Adjustment in respect of prior years
Effect of change in statutory tax rates
Total tax charge/(credit)
4,491
876
819
77
400
—
(129)
—
6,625
1,325
559
189
66
(7)
89
9
2,043
2,230
Reductions in the UK corporation tax rate to 19% (effective from 1 April 2017) and to 18% (effective 1 April 2020) were
substantively enacted on 26 October 2015. Further reductions to 17% (effective 1 April 2020) were substantively enacted on
6 September 2016. As these changes have been substantively enacted at the statement of financial position date, their effects
are included in these financial statements.
Management considers that US tax reform substantively enacted by the date of these financial statements has not caused
any material effect to the Group’s financial statements.
71
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc
Notes to the consolidated financial statements continued
for the year ended 31 December 2017
8. Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
Year ended
Year ended
31 December 31 December
2016
£’000
2017
£’000
Earnings for the purpose of basic earnings per share being net profit
attributable to equity holders of the parent
Adjustments:
Impact of highlighted items (net of tax)1
Earnings for the purpose of underlying earnings per share
Number of shares:
Weighted average number of shares during the year
– basic
– dilutive effect of share options
– diluted
Basic earnings per share
Diluted earnings per share
Underlying basic earnings per share
Underlying diluted earnings per share
1. Highlighted items attributable to equity holders of the parent (see note 3), stated net of their total tax impact.
9. Goodwill
Cost
At 1 January 2016
Additions1
Foreign exchange differences
At 31 December 2016
Additions1
Foreign exchange differences
At 31 December 2017
Accumulated impairment
At 1 January 2016
At 31 December 2016
Impairment
At 31 December 2017
Net book value
At 31 December 2017
At 31 December 2016
2,064
4,150
5,458
7,522
4,837
8,987
77,876,427
77,186,127
2,499,656
2,598,806
80,376,083 79,784,933
2.65p
2.57p
9.66p
9.36p
5.38p
5.20p
11.64p
11.26p
£’000
57,956
426
2,792
61,174
1,552
(280)
62,446
(3,129)
(3,129)
—
(3,129)
59,317
58,045
1. £1,552,000 of goodwill was recognised following the acquisition of Digital Balance Australia Pty Limited. Refer to note 27 for further details.
72
Financial statementsEbiquity plcAnnual report and financial statements for the year ended 31 December 2017
Goodwill has been allocated to the following segments:
Media Value Measurement
Market Intelligence
Marketing Performance Optimisation
Year ended
Year ended
31 December 31 December
2016
£’000
2017
£’000
28,957
22,299
8,061
59,317
28,778
22,360
6,907
58,045
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill may be potentially
impaired. Goodwill is allocated to the Group’s cash-generating units (‘CGUs’) in order to carry out impairment tests.
The Group’s remaining carrying value of goodwill by CGU at 31 December was as follows:
Cash-generating unit
Reporting segment
Advertising UK/US/International Market Intelligence
Media UK and International
Media Value Measurement
Stratigent
China
Media Germany
Media Value Group
FirmDecisions
Media Australia
Marketing Performance Optimisation
Media Value Measurement
Media Value Measurement
Media Value Measurement/Marketing Performance Optimisation
Media Value Measurement
Media Value Measurement
Advertising Germany
Market Intelligence
Effectiveness
Digital Balance1
Marketing Performance Optimisation
Marketing Performance Optimisation
Advertising Australia
Market Intelligence
Media America
Media France
Media Italy
Russia
Media Value Measurement
Media Value Measurement
Media Value Measurement
Media Value Measurement
Year ended
Year ended
31 December 31 December
2016
£’000
2017
£’000
19,114
9,265
4,774
4,839
4,325
3,162
2,981
2,478
2,429
1,678
1,609
756
604
569
397
337
19,114
9,238
5,229
4,966
4,319
3,035
2,981
2,506
2,333
1,678
—
764
604
559
382
337
59,317
58,045
1. At 31 December 2017, the balance included £1,552,000 of acquired goodwill recognised following the acquisition of Digital Balance Australia
Pty Limited. Refer to note 27 for further details.
The impairment test involves comparing the carrying value of the CGU to which the goodwill has been allocated to the
recoverable amount. The recoverable amount of all CGUs has been determined based on value in use calculations.
Under IFRS, an impairment charge is required for goodwill when the carrying amount exceeds the recoverable amount, defined
as the higher of fair value less costs to sell and value in use. No impairment of goodwill was recognised in the year ended
31 December 2017 (year ended 31 December 2016: £nil).
Value in use calculations
The key assumptions used in management’s value in use calculations are budgeted operating profit, pre-tax discount rate
and the long-term growth rate. The Directors prepare a three-year pre-tax cash flow forecast based on the following financial
year’s budget as approved by the Board, with revenue and cost forecasts for the following two years adjusted by segment
and geography. The forecast takes account of actual results from previous years combined with management expectations
of market developments.
73
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc
Notes to the consolidated financial statements continued
for the year ended 31 December 2017
9. Goodwill continued
Value in use calculations continued
Budgeted operating profit assumptions
To calculate future expected cash flows, management has taken the Board approved budgeted operating profit (‘EBIT’) for
each of the CGUs for the 2018 financial year. Additionally, management charges have been allocated from the unallocated
central costs budget back into the CGUs and thereby reducing Board approved EBIT in each CGU by this amount.
The management charge is allocated based on 2017 actual management charges.
For the 2019 and 2020 financial years, the forecast EBIT is as per management’s three-year plan. The forecast 2020 balances
are taken to perpetuity in the model. Management’s three-year plan uses certain assumptions to forecast revenue and
operating costs within the Group’s operating segments beyond the 2018 budget.
Discount rate assumptions
The Directors estimate discount rates using rates that reflect current market assessments of the time value of money and risk
specific to the CGUs. The three-year pre-tax cash flow forecasts have been discounted at between 7.0% and 8.6%
(31 December 2016: between 7.2% and 8.7%).
Growth rate assumptions
Cash flows beyond the three-year period are extrapolated at a rate of 2.25% (31 December 2016: 2.25%), which does not
exceed the long-term average growth rate in any of the markets in which the Group operates.
The excess of the value in use to the goodwill carrying values for each CGU gives the level of headroom in each CGU.
The estimated recoverable amounts of the Group’s operations in all CGUs significantly exceed their carrying values with the
exception of China.
Sensitivity analysis
The Group’s calculations of value in use for its respective CGUs are sensitive to a number of key assumptions. Other than
disclosed below, management does not consider a reasonable possible change, in isolation, of any of the key assumptions, to
cause the carrying value of any CGU to exceed its value in use. The considerations underpinning why management believes no
impairment is required in respect of China are as follows, specifically what change in key assumptions would result in an
impairment:
Budgeted revenue growth
Budgeted cost growth
Pre-tax discount rate
Current %
15.0
—
10.03
% change leading
to impairment
(0.6) to 14.4
1
0.32 to 10.35
74
Financial statementsEbiquity plcAnnual report and financial statements for the year ended 31 December 2017
10. Other intangible assets
Cost
At 1 January 2016
Additions
Acquisitions2
Disposals
Foreign exchange differences
At 31 December 2016
Additions2
Foreign exchange differences
At 31 December 2017
Amortisation and impairment5
At 1 January 2016
Charge for the year3
Disposals
Foreign exchange differences
At 31 December 2016
Charge for the year3
Foreign exchange differences
At 31 December 2017
Net book value
At 31 December 20174
At 31 December 2016
Capitalised
development
costs
£’000
Computer
software
£’000
Purchased
intangible
assets1
£’000
Total
intangible
assets
£’000
3,638
1,091
—
(453)
68
4,344
1,202
(16)
2,383
23,299
781
—
(260)
147
3,051
412
9
—
225
—
1,414
24,938
420
(25)
29,320
1,872
225
(713)
1,629
32,333
2,034
(32)
5,530
3,472
25,333
34,335
(1,544)
(1,320)
(12,929)
(15,793)
(256)
425
(1)
(1,376)
(573)
—
(330)
260
(127)
(1,865)
(2,451)
—
(612)
685
(740)
(1,517)
(15,406)
(18,299)
(370)
(1,952)
(2,895)
(9)
(9)
(18)
(1,949)
(1,896)
(17,367)
(21,212)
3,581
2,968
1,576
1,534
7,966
9,532
13,123
14,034
1. Purchased intangible assets consist principally of customer relationships with a typical useful life of eight to 10 years.
2. Customer relationships of £420,000 were recognised during the year ended 31 December 2017 as part of the Digital Balance Australia Pty
Limited acquisition referred to in note 27. Customer relationships of £142,000 and a brand valuation of £83,000 were recognised during
the year ended 31 December 2016 as part of the acquisition of Fairbrother Marsh Company Limited.
3. Amortisation of £1,924,000 is charged within administrative expenses so as to write off the cost of the intangible assets over their
estimated useful lives. The amortisation of purchased intangible assets is included as a highlighted administrative expense.
4. Of the net book value of capitalised development costs £870,000 remains in development at 31 December 2017.
5. No impairment charge is required for the year ended 31 December 2017 (year ended 31 December 2016: £nil) following management’s
review of the carrying value of other intangible assets.
75
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc
Notes to the consolidated financial statements continued
for the year ended 31 December 2017
11. Property, plant and equipment
Motor
vehicles
£’000
Fixtures,
fittings and
equipment1
£’000
Leasehold land
Computer and building
equipment improvements
£’000
£’000
Cost
At 1 January 2016
Reclassification2
Additions
Acquisitions
Disposals
Foreign exchange differences
At 31 December 2016
Additions
Acquisitions
Disposals
Foreign exchange differences
At 31 December 2017
Accumulated depreciation
At 1 January 2016
Reclassification2
Charge for the year
Disposals
Foreign exchange differences
At 31 December 2016
Charge for the year
Acquisitions
Disposals
Foreign exchange differences
At 31 December 2017
Net book value
At 31 December 2017
At 31 December 2016
38
1,490
4,942
—
104
—
(192)
102
1,504
347
8
(6)
1
Total
£’000
7,620
384
530
10
(698)
638
—
398
10
(454)
403
1,150
384
28
—
(52)
127
5,299
1,637
8,484
258
22
(90)
(181)
7
—
(17)
(28)
612
30
(113)
(206)
1,854
5,308
1,599
8,807
(753)
3,366
—
(140)
192
(64)
(765)
(150)
(4)
1
1
—
(826)
454
(311)
(4,049)
(661)
—
44
59
(567)
(384)
(260)
52
(60)
(1,219)
(250)
—
17
19
(4,692)
(384)
(1,231)
698
(437)
(6,046)
(1,066)
(4)
62
76
(917)
(4,607)
(1,433)
(6,978)
937
739
701
1,250
166
418
1,829
2,438
—
—
—
—
6
44
—
—
—
2
46
(6)
—
(5)
—
(2)
(13)
(5)
—
—
(3)
(21)
25
31
1. The Group holds assets under finance leases within fixtures, fittings and equipment with cost of £21,000 (31 December 2016: £21,000) and
accumulated depreciation of £17,000 (31 December 2016: £13,000).
2. During the year ended 31 December 2016, an amount of leasehold land and buildings improvements previously included within the net book
value of leasehold land and building improvements and netted against depreciation, was reclassified to cost.
76
Financial statementsEbiquity plcAnnual report and financial statements for the year ended 31 December 2017
12. Subsidiaries
Details of the Company’s subsidiaries are set out below.
Subsidiary undertaking
Adtrack Limited
AMMO Limited
Axiology Limited
Barsby Rowe Limited
BCMG Acquisitions Limited
BCMG Limited
Billetts Consulting Limited
Billetts International Limited
Billetts Limited
Billetts Marketing Investment Management Limited
Billetts Marketing Sciences Limited
Billetts Media Consulting Limited
Brief Information Limited
Checking Advertising Services Limited
Proportion of
nominal value of
issued ordinary
shares held
Country of
incorporation
100%3
100%3
100%3
100%3
100%3
100%
100%3
100%3
100%3
100%3
100%3
100%3
100%3
100%
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
China Media (Shanghai) Management Consulting Company Limited2 100%3
China
China Media Consulting Group Limited
Data Management Services Group Limited
100%3 Hong Kong
100%3
UK
Nature
of business
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Holding company
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Media consultancy
Holding company
Non-trading
Digital Balance Australia Pty Limited1,2
100%3
Australia
Multi-channel analytics
Digireels Limited UK
Ebiquity Asia Pacific Limited
Ebiquity Associates Limited2
Ebiquity Germany GmbH2
Ebiquity Holdings Inc.
Ebiquity Inc.2
Ebiquity Italia S.r.l.2
Ebiquity Marsh Limited
Ebiquity Pte. Limited2
Ebiquity Pty Limited2
Ebiquity Russia Limited2
Ebiquity Russia OOO2
Ebiquity SAS1,2
Ebiquity US Financing Limited
Ebiquity US Holdings Limited
Ebiquity US Holdings LLC
Echo Group Limited
Echo Research Limited2
Efficiency Elements SL2
100%3
100%3
100%
UK
UK
Non-trading
Holding company
UK Media monitoring and consultancy
94.03%3
Germany Media monitoring and consultancy
100%
100%3
US
Holding company
US Media monitoring and consultancy
and reputation management
51%3
Italy
Media consultancy
100%
Ireland Media monitoring and consultancy
100%3
Singapore
Media consultancy
100%3
50.1%3
50.1%3
100%3
100%
100%3
100%3
100%
100%3
100%3
Australia Media monitoring and consultancy
UK
Russia
France
UK
UK
US
UK
UK
Media consultancy
Media consultancy
Media consultancy
Non-trading
Holding company
Holding company
Holding company
Reputation management
Spain
Marketing effectiveness
77
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc
Notes to the consolidated financial statements continued
for the year ended 31 December 2017
12. Subsidiaries continued
Subsidiary undertaking
Fairbrother Lenz Eley Limited
Fairbrother Marsh Company Limited1, 2
Faulkner Group Pty Limited
FirmDecisions ASJP Germany GmbH
FirmDecisions Group Limited
FirmDecisions ASJP LLC2
FirmDecisions Pty Limited2
FirmDecisions Limited2
FLE Holdings Limited
Fouberts Place Subsidiary No. 4 Limited
Freshcorp Limited
Media Value SL2
Mediaadvantage Consulting L.d.a2
Nova Vision Europe S.A.
Prominent Pages Limited
Shots Limited
Stratigent LLC2
Telefoto Monitoring Services Limited
The Billett Consultancy Limited
The Communication Trading Company Limited
The Press Advertising Register Limited
The Register Group Limited
Worldwide Media Management Limited
Xtreme Information Limited
Proportion of
nominal value of
issued ordinary
shares held
100%3
100%3
Country of
incorporation
UK
Nature
of business
Non-trading
Ireland Media monitoring and consultancy
100%3
Australia
100%3
Germany
100%
100%3
UK
US
100%3
Australia
100%3
100%
100%3
100%3
100%3
100%3
100%3
100%3
100%3
100%3
100%3
100%3
100%3
100%3
100%3
100%3
100%3
UK
UK
UK
UK
Spain
Portugal
Belgium
UK
UK
US
UK
UK
UK
UK
UK
UK
UK
Non-trading
Media consultancy
Holding company
Media consultancy
Media consultancy
Media consultancy
Holding company
Non-trading
Non-trading
Media consultancy
Media consultancy
Non-trading
Non-trading
Non-trading
Multi-channel analytics
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Holding company
Non-trading
Non-trading
Xtreme Information Services (Australia) Pty Limited
100%3
Australia
Xtreme Information Services Limited
Xtreme Information Services SPRL
Xtreme Information (USA) Limited
100%
100%3
100%3
UK
Belgium
UK
1. On 1 September 2017, the Group’s wholly-owned subsidiary Digital Balance Australia Pty Limited acquired the assets and liabilities of Digital
Balance Pty Limited. On 18 December 2017, the Group acquired the outstanding 20% interest in its French media consultancy associate,
Ebiquity France SAS. On 11 March 2016, the Group acquired the outstanding 50% interest in its Irish media consultancy associate, Fairbrother
Marsh Company Limited. Refer to note 27 for further details.
2. Principal trading entity.
3. Shares held by an intermediate holding company.
78
Financial statementsEbiquity plcAnnual report and financial statements for the year ended 31 December 2017
13. Trade and other receivables
Trade and other receivables due within one year
Net trade receivables (note 24)
Other receivables
Prepayments
Accrued income
31 December 31 December
2016
£’000
2017
£’000
20,978
1,693
1,132
8,706
19,291
845
1,207
7,073
32,509
28,416
The Directors consider that the carrying amount of trade and other receivables are reasonable approximations of their fair value.
14. Cash and cash equivalents
Cash and cash equivalents
31 December 31 December
2016
£’000
2017
£’000
4,732
6,662
The Group has certain legally enforceable rights of offset for cash and cash equivalents and bank overdrafts. Cash and cash
equivalents earn interest at between 0% and 0.5%.
Cash and cash equivalents include the following for the purposes of the cash flow statement:
Cash and cash equivalents
Bank overdrafts (note 17)
Cash, cash equivalents and bank overdrafts
15. Trade and other payables
Trade payables
Other taxation and social security
Other payables
31 December 31 December
2016
£’000
2017
£’000
4,732
6,662
(407)
(2,062)
4,325
4,600
31 December 31 December
2016
£’000
2017
£’000
4,229
2,281
891
7,401
3,071
2,281
567
5,919
The Directors consider that the carrying amount of trade and other payables are reasonable approximations of their fair value.
16. Accruals and deferred income
Accruals
Deferred income
31 December 31 December
2016
£’000
2017
£’000
5,560
7,105
4,827
7,063
12,665
11,890
79
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc
Notes to the consolidated financial statements continued
for the year ended 31 December 2017
31 December 31 December
2016
£’000
2017
£’000
407
1,161
4
901
2,473
2,062
2,410
4
1,777
6,253
32,000
30,205
—
1,193
33,193
35,666
5
238
30,448
36,701
Bank
overdrafts
£’000
Bank Finance lease Contingent
liabilities consideration
£’000
£’000
borrowings
£’000
Total
£’000
2,391
35,025
—
—
—
—
—
—
—
—
90
—
—
3,336
(329)
(6,410)
—
—
574
—
2,062
32,615
—
—
—
—
—
—
—
46
—
3,000
(1,655)
(2,500)
—
407
—
33,161
13
—
(4)
4,853
42,282
557
557
(5,110)
(5,114)
—
—
—
—
—
—
—
9
—
—
—
—
—
(5)
—
4
638
155
(39)
—
—
808
153
2,015
1,483
728
155
(39)
3,336
(6,739)
1,382
153
36,701
1,483
(1,799)
(1,799)
413
52
—
—
(70)
459
52
3,000
(4,160)
(70)
2,094
35,666
31 December 31 December
2016
£’000
2017
£’000
33,161
33,161
32,615
32,615
17. Financial liabilities
Current
Bank overdraft
Bank borrowings
Finance lease liabilities
Contingent consideration
Non-current
Bank borrowings
Finance lease liabilities
Contingent consideration
Total financial liabilities
At 1 January 2016
Recognised on acquisition
Paid
Charged to the income statement
Discounting charged to the income statement
Discounting charged to the statement of financial position
Borrowings
Repayments
Foreign exchange released to the income statement
Foreign exchange released to reserves
At 31 December 2016
Recognised on acquisition
Paid
Charged to the income statement
Discounting charged to the income statement
Borrowings
Repayments
Foreign exchange released to the income statement
At 31 December 2017
A currency analysis for the bank borrowings is shown below:
Pounds sterling
Total bank borrowings
80
Financial statementsEbiquity plcAnnual report and financial statements for the year ended 31 December 2017
All bank borrowings are held jointly with Barclays and Royal Bank of Scotland (‘RBS’). The committed facility, totalling
£44,000,000, comprises a term loan of £10,000,000 (of which £1,250,000 remains outstanding at 31 December 2017
(31 December 2016: £3,750,000), and a revolving credit facility (‘RCF’) of £34,000,000 of which £32,000,000 was drawn down
at 31 December 2017 (31 December 2016: £29,000,000). The term loan has a maturity date of 2 July 2018 and the RCF has
a maturity date of 30 June 2019. The £10,000,000 term loan is being repaid on a quarterly basis to maturity, and the drawn
RCF and any further drawings under the RCF are repayable on maturity of the facility. The facility may be used for contingent
consideration payments on past acquisitions, to fund future potential acquisitions, and for general working capital requirements.
Loan arrangement fees of £90,000 (31 December 2016: £135,000) are offset against the term loan, and are being amortised
over the period of the loan.
The facility bears variable interest of LIBOR plus a margin of 2.50%. The margin rate is able to be lowered each quarter end
depending on the Group’s net debt to EBITDA ratio.
The undrawn amount of the revolving credit facility is liable to a fee of 40% of the prevailing margin, which is set depending on
the Group’s net debt to EBITDA ratio, as referred to above. The Group may elect to prepay all or part of the outstanding loan
subject to a break fee, by giving five business days’ notice.
All amounts owing to the bank are guaranteed by way of fixed and floating charges over the current and future assets of the
Group. As such, a composite guarantee has been given by all significant subsidiary companies in the UK, US and Germany.
Contingent consideration represents additional amounts that are expected to be payable for acquisitions made by the Group
and is held at fair value at the statement of financial position date. All amounts are expected to be fully paid by April 2021.
All finance lease liabilities fall due within five years. The minimum lease payments and present value of the finance leases are
as follows:
Amounts due:
Within one year
Between one and five years
Less: finance charges allocated to future periods
Present value of lease obligations
The minimum lease payments approximate the present value of minimum lease payments.
18. Provisions
At 1 January 2016
Utilisation of provision
Unused amounts released to income statement
Arising on acquisition
Foreign exchange
At 31 December 2016
Unused amounts released to income statement
At 31 December 2017
Current
Non-current
Minimum lease payments
31 December 31 December
2016
£’000
2017
£’000
6
—
6
(2)
4
6
6
12
(3)
9
Onerous
property
leases1 Dilapidations2
£’000
£’000
7
(7)
—
—
—
—
—
—
—
—
568
—
(175)
8
1
402
(9)
393
—
393
Total
£’000
575
(7)
(175)
8
1
402
(9)
393
—
393
1. The onerous property lease obligations in the prior year related to properties that the Group has vacated where there is a shortfall between
the head lease costs and sub-lease income, properties with excess vacant space and certain property leases, held in acquired companies upon
acquisition, where lease payments are payable above a fair market rate. The provision was fully utilised by January 2016.
2. The dilapidations provision relates to the expected costs of vacating various properties. The provision is expected to be fully utilised by
December 2020.
81
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc
Notes to the consolidated financial statements continued
for the year ended 31 December 2017
19. Deferred tax
At 1 January 2016
Credit/(charge) to income
Credit to equity
Acquisitions
At 31 December 2016
Credit/(charge) to income
At 31 December 2017
Tangible
assets
£’000
Intangible Share-based
payments
£’000
assets
£’000
Tax Other timing
differences
£’000
losses
£’000
—
225
—
—
225
42
267
(2,244)
1,569
146
—
(28)
(188)
(321)
—
(2,126)
1,060
228
(1,898)
(61)
999
631
(631)
—
—
—
220
220
67
(13)
—
—
54
(447)
(393)
Total
£’000
23
(461)
(321)
(28)
(787)
(18)
(805)
Certain non-current deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax
balance (after offset) for financial reporting purposes:
Deferred tax assets – non-current
Deferred tax liabilities – current
Deferred tax liabilities – non-current
31 December 31 December
2016
£’000
2017
£’000
1,502
(412)
(1,895)
(805)
1,338
—
(2,125)
(787)
At the year end, the Group had tax losses of £282,000 (31 December 2016: £nil) available for offset against future profits.
A deferred tax asset of £220,000 (31 December 2016: £nil) has been recognised in respect of such losses.
The Group has unrecognised tax losses of £34,000 (31 December 2016: £548,000) and unrecognised deferred tax assets of
£76,000 (31 December 2016: £110,000) in relation to tax losses.
Deferred tax on unremitted earnings has not been recognised as management do not intend to pay dividends from jurisdictions
where a tax charge would be incurred and dividends received are not taxed in the UK.
20. Operating leases
Lessee
The Group leases various offices under non-cancellable operating leases with the majority of these expiring within one to five
years. The leases have varying terms, break clauses and renewal rights.
The Group has future aggregate minimum lease payments under non-cancellable operating leases which fall due as follows:
No later than one year
Later than one year but no later than five years
Later than five years
Lessor
31 December 2017
31 December 2016
Land and
buildings
£’000
1,671
4,243
1,978
7,892
Other
£’000
Land and
buildings
£’000
44
44
—
88
1,410
3,055
7
4,472
Other
£’000
76
202
—
278
There is no minimum aggregate future rent receivable under non-cancellable operating leases as at 31 December 2017
(2016: £nil).
82
Financial statementsEbiquity plcAnnual report and financial statements for the year ended 31 December 2017
21. Ordinary shares
At 31 December 2015 – ordinary shares of 25p
Share options exercised
At 31 December 2016 – ordinary shares of 25p
Share options exercised
Shares issued
At 31 December 2017 – ordinary shares of 25p
Number
of shares
Nominal
value
£’000
77,161,688
19,290
38,063
10
77,199,751
19,300
397,710
600,000
99
150
78,197,461
19,549
Ordinary shares carry voting rights and are entitled to share in the profits of the Company (dividends). At the year end,
3,956,066 shares were held by the ESOP (31 December 2016: 4,201,504). The Company does not have a limited amount of
authorised capital.
22. Reserves
Share premium
The share premium reserve of £21,000 (31 December 2016: £nil) shows the amount subscribed for share capital in excess of
the nominal value.
Other reserves
Other reserves consists of the merger reserve, ESOP reserve and translation reserve.
Merger reserve
The merger reserve of £3,667,000 (31 December 2016: £3,667,000) arose on the issuance of shares at a premium on a Group
restructure, where the premium on issue qualified for merger relief. There has been no movement in the period.
Share-based payment reserve
On 29 March 2016, the Group agreed to increase the total cap on consideration payable on the Stratigent LLC (‘Stratigent’)
acquisition. The Group acquired Stratigent on 19 August 2013. Stratigent’s management held a 7% economic interest in
Stratigent which was acquired by the Group for a total consideration to be determined by the financial performance of Stratigent
over the three financial years ending 30 April 2016 and capped at $1.5 million. Stratigent’s financial performance over the first
two financial years resulted in consideration of $1.1 million being paid to Stratigent’s management. In order to ensure that
management remains incentivised to continue to drive and generate the financial performance achieved over the first two
financial years, the Group agreed to increase the total cap on consideration payable to management. Accordingly, in March 2016,
the cap on consideration was increased by an amount of $1.5 million, with any excess over and above the existing cap on
consideration payable 25% in cash and 75% in new ordinary shares in Ebiquity plc (capped at 600,000 new shares). A share-based
payment reserve amounting to £634,000 was created in equity representing 600,000 new shares in the Company.
The share-based payment reserve was settled on 17 November 2017 through the issuance of 600,000 new shares.
ESOP reserve
The ESOP reserve of £1,478,000 debit (31 December 2016: £1,478,000 debit) represents the cost of own shares acquired in the
Company by the Employee Benefit Trust (‘EBT’). The purpose of the EBT is to facilitate and encourage the ownership of shares by
employees, by acquiring shares in the Company and distributing them in accordance with employee share schemes. The EBT may
operate in conjunction with the Company’s existing share option schemes and other schemes that may apply from time to time.
Translation reserve
The translation reserve of £2,688,000 (31 December 2016: £2,688,000) arises on the translation into sterling of the net assets
of the Group’s foreign operations, offset by any changes in fair value of financial instruments used to hedge this exposure.
At this time there are no hedges in place.
Retained earnings
The retained earnings reserve shows the cumulative net gains and losses recognised in the consolidated income statement.
For detailed movements on each of the above reserves, refer to the consolidated statement of changes in equity.
83
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc
Notes to the consolidated financial statements continued
for the year ended 31 December 2017
23. Share-based payments
The Group operates a number of equity-settled share incentive schemes used to award employees of the Group. A charge
based on the fair value of the award on the grant date is taken to the consolidated income statement over the vesting period
to recognise the cost of these.
Options outstanding at 31 December 2017:
Life of
option
Weighted
average
exercise
price
(pence)
Exercise
price
(pence)
Exercise
period
Number
10 years
January 2016 – January 2026
25.0
25.0
500,000
10 years
May 2011 – May 2020
35.0
35.0 4,200,000
10 years
January 2019 – January 2020
nil
nil
460,000
10 years
May 2018 – October 2025
25.0
25.0
1,270,295
10 years
May 2017– April 2024
25.0
25.0
775,869
10 years
May 2016 – January 2024
25.0
25.0
338,829
10 years
May 2016 – May 2023
25.0
25.0
95,524
Name of share option scheme
Executive Incentive Plan
– 27 January 2016
Executive Incentive Plan
– 12 May 2010
Executive Incentive Plan
– 24 July 2017
Executive Share Option Plan
– 01 October 2015
Executive Share Option Plan
– 15 May 2014
Executive Share Option Plan
– 17 January 2014
Executive Share Option Plan
– 23 May 2013
Executive Share Option Plan
– 27 September 2012
EMI and UCSOP Scheme
10 years
May 2004 – August 2021
nil – 72.0
10 years
September 2012 – September 2022 25.0 – 98.0
97.5
38.3
135,002
668,282
8,443,801
Executive Incentive Plan (‘EIP’)
This is a discretionary scheme for the Directors of the Company.
On 12 May 2010, 4,200,000 options with an exercise price of 35p each were awarded under the EIP to two Directors. Vesting
of the options was subject to the satisfaction of performance criteria designed to achieve growth of the business while at the
same time maintaining and enhancing underlying earnings per share over the period to 30 April 2013.
On 27 January 2016, 200,000 options with an exercise price of 25p each were awarded under the EIP to an Executive Director.
100,000 of these options will vest after six months’ service and the remaining 100,000 options will vest after 12 months’
service, in each case subject to the Executive Director remaining in the employment of the Company.
Also on 27 January 2016, an additional 300,000 options with an exercise price of 25p each were granted under the EIP to an
Executive Director. These options will vest conditionally on the satisfaction of performance criteria relating to the growth of
the Company’s diluted adjusted earnings per share (‘EPS’) as described below. 100,000 options (‘tranche two’) will vest
conditionally on the satisfaction of EPS growth. Any options from tranche one which do not vest will be rolled over into
tranche two and will be capable of vesting along with the options granted as part of tranche two.
EPS growth, over the relevant performance period for each tranche, of 10% or more will result in all of the options in that
tranche vesting. EPS growth of 4% over the relevant performance period will vest one-fifth of the options in that tranche.
None of the options in a tranche will vest if EPS growth over the relevant performance period is less than 4%. Three-fifths
of the options in a tranche will vest if EPS growth over the relevant performance period is 8%. The options in a tranche will
vest on a straight-line basis where EPS growth over the relevant performance period is between 4% and 8% or between
8% and 10%.
84
Financial statementsEbiquity plcAnnual report and financial statements for the year ended 31 December 2017
Executive share option plan (‘ESOP’)
This is a discretionary scheme, comprised of an HMRC approved schedule and an unapproved schedule. The ESOP provides a
lock-in incentive to Executive Directors and key management. Vesting of these options is subject to the satisfaction of certain
performance criteria and typically around the rate of growth of diluted adjusted earnings per share over a three-year period.
Rights to ESOP options lapse if the employee leaves the Company.
Options awarded in the 2015 and May 2014 grants vest based on a sliding scale of compound growth rates of between 4% and
10% whilst options awarded in the January 2014 and 2013 grants vest based on a sliding scale of compound growth rates of
between 5% and 15%. In May 2014, a one-off award was made to an Executive Director in recognition of his continued service
through to retirement. These options vest according to the rate of annual growth, in the range between 4% and 12%, in the
total shareholder returns (‘TSR’) over a three-year period. The remaining options issued in the 2012 grant have no performance
conditions attached.
460,000 (31 December 2016: nil) share options have been granted to employees under the ESOP in the year ended
31 December 2017.
Enterprise management incentive scheme (‘EMI scheme’)
The EMI scheme is a discretionary share option scheme which provides that options with a value at the date of grant of up to
£120,000, may be granted to employees. The EMI scheme provides a lock-in incentive to key management and is also utilised to
attract key staff. Rights to EMI share options lapse if the employee leaves the Company. There are no further performance
conditions.
No share options have been granted under this scheme since 13 April 2010 as the Group was, from that date, too large to
qualify under the HMRC EMI scheme rules.
Unapproved company share option plan (‘UCSOP’)
This is a discretionary scheme, which provides that options may be granted where employees were not eligible to join the EMI
scheme. The UCSOP provides a lock-in incentive to key management. Rights to UCSOP options lapse if the employee leaves
the Company.
No share options have been granted to any employees under the UCSOP in the year ended 31 December 2017.
Movements in outstanding ordinary share options:
Outstanding at beginning of year
Granted during the year
Exercised during the year
Forfeited during the year
Performance criteria not expected to be met
Outstanding at the end of the year
Exercisable at the end of the year
31 December 2017
31 December 2016
Weighted
Number
average
of share exercise price
(pence)
options
Weighted
Number
average
of share exercise price
(pence)
options
9,563,786
460,000
(397,711)
(65,001)
32.1 10,280,037
—
500,000
40.1
39.7
(38,063)
(297,000)
(1,117,273)
25.0
(881,188)
8,443,801
30.9
9,563,786
6,718,801
32.9
6,236,286
31.9
25.0
69.6
29.1
25.0
32.1
35.9
85
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc
Notes to the consolidated financial statements continued
for the year ended 31 December 2017
23. Share-based payments continued
Movements in outstanding ordinary share options: continued
During the year, share options were granted with a weighted average fair value of 110.0p (31 December 2016: 119.1p). These fair
values were calculated using the Black-Scholes model with the following inputs:
Weighted average share price
Exercise price
Expected volatility1
Vesting period
Risk-free interest rates
31 December
2017
110.0p
—
13.1%
31 December
2016
143.4p
25p
17.4%
2 to 2.5 years
0.5 to 2 years
0.33% to 0.40%
0.18% to 0.35%
1. Expected volatility is based on historical volatility of the Company over the period commensurate with the expected life of the options.
Options exercised in the period resulted in 397,711 shares (31 December 2016: 38,063 shares) being issued at a weighted average
price of 40.1p each (31 December 2016: 69.6p). The weighted average share price on the dates of exercise for options exercised
during the year was 117.9p (31 December 2016: 126.5p).
The options outstanding at the end of the year have a weighted average remaining contractual life of 4.5 years (31 December
2016: 5.4 years), with a range of exercise prices being between nil and 97.5p.
The total charge in respect of share option schemes recognised in the consolidated income statement during the period
amounted to £738,000 (31 December 2016: £92,000 credit).
24. Capital and financial risk management
General objectives, policies and processes
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the
Group’s competitiveness and flexibility. The Board has overall responsibility for the determination of the Group’s risk
management policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and
operating the processes that ensure the effective implementation of the financial risk management objectives and policies, to
the Group’s finance function. The Board receives monthly reports from the Group’s finance function through which it monitors
the effectiveness of the processes put in place and the appropriateness of the policies it sets. Further details regarding these
policies are set out on pages 86 to 91.
Capital and other reserves
The Group considers its capital to comprise of its cash and cash equivalents, borrowings, ordinary share capital, share premium,
non-controlling interests, reserves and accumulated retained earnings.
The Group’s objective when maintaining capital is to safeguard the entity’s ability to continue as a going concern so that it can
continue to invest in the growth of the business and ultimately to provide an adequate return to its shareholders. The Directors
believe the Group has sufficient capital to continue trading in the foreseeable future.
86
Financial statementsEbiquity plcAnnual report and financial statements for the year ended 31 December 2017
The following table summarises the capital of the Group:
Financial assets:
Cash and cash equivalents
Financial liabilities held at amortised cost:
Bank overdraft
Bank borrowings
Net debt
Equity
Capital
Financial risk management
31 December 31 December
2016
£’000
2017
£’000
4,732
6,662
(407)
(2,062)
(33,161)
(32,615)
(28,836)
(28,015)
(52,982)
(52,055)
(81,818)
(80,070)
The Group is exposed to risks that arise from its use of financial instruments. The Group’s objectives, policies and processes for
managing those risks and the methods used to measure them are described below. Further quantitative information in respect
of these risks is presented throughout these financial statements.
There have been no substantive changes in the Group’s exposure to financial instrument risks, its objectives, policies and
processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated
in this note.
The Group is exposed through its operations to a variety of financial risks: credit risk; market risk (including interest rate and
currency risk); and liquidity risk.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or a counterparty to a financial instrument fails to meet its
contractual obligations.
Trade receivables
The Group operates in an industry where most of its customers are reputable and well-established multinational or large
national businesses. When the credit worthiness of a new customer is in doubt, credit limits and payment terms are established
and authorised by the Territory Finance Director. The Group will suspend the services provided to customers who fail to meet
the terms and conditions specified in their contract where it is deemed necessary.
There is no concentration of credit risk within the Group. The maximum credit risk exposure relating to financial assets is
represented by the carrying values as at the year end.
The credit control function of the Group monitors outstanding debts of the Group. Debtor reports are reviewed and analysed
on a regular basis. Trade receivables are analysed by the ageing and value of the debts. Customers with any overdue debts are
contacted for payment and progress is tracked on a credit control report. Based on these procedures, management assessed
the credit quality of those receivables that are neither past due nor impaired as low risk. There have been no significant
changes to the composition of receivables counterparties within the Group that indicate this would change in the future.
The Directors consider that the carrying amount of trade and other receivables are reasonable approximations of their
fair value.
87
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc
Notes to the consolidated financial statements continued
for the year ended 31 December 2017
24. Capital and financial risk management continued
Credit risk continued
Financial assets past due but not impaired
The following is an analysis of the Group’s trade receivables identifying the totals of trade receivables which are past due but
not impaired:
At 31 December 2017
At 31 December 2016
The following is an analysis of the Group’s provision against trade receivables:
Total
£’000
7,460
5,855
Past due
+ 30 days
£’000
Past due
+ 60 days
£’000
3,775
2,130
3,685
3,725
Trade receivables
31 December 2017
31 December 2016
Gross
value
£’000
Provision
£’000
Carrying
value
£’000
21,240
(262)
20,978
Gross
value
£’000
19,491
Provision
£’000
Carrying
value
£’000
(200)
19,291
The Group records impairment losses on its trade receivables separately from the gross amounts receivable. Impaired
receivables are provided against based on expected recoverability. The movements on this allowance during the year are
summarised below:
Opening balance
Increase in provision
Written off against provision
Recovered amount reversed
Foreign exchange
Closing balance
Market risk
31 December 31 December
2016
£’000
2017
£’000
200
115
(53)
—
—
262
189
138
(15)
(119)
7
200
Market risk arises from the Group’s use of interest bearing, tradable and foreign currency financial instruments. There is a risk
that the fair value of future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest
rate risk), foreign exchange rates (currency risk) or other market factors (other price risk).
Interest rate risk
The Group is exposed to interest rate risk from bank loans and a revolving credit facility.
To illustrate the Group’s exposure to interest rate risk, a 0.5% increase/decrease in the rate applied to the Group’s borrowings
would have resulted in a post-tax movement of £129,000 (31 December 2016: £139,000).
Currency risk
The Group is exposed to currency risk on foreign currency trading and intercompany balances, and also on the foreign currency
bank accounts which it holds. These risks are offset by the holding of certain foreign currency bank borrowings. The translation
of the assets and liabilities of the Group’s overseas subsidiaries represents a risk to the Group’s equity balances.
The Group’s exposure to currency risk at the year end can be illustrated by the following:
31 December 2017
31 December 2016
Increase
in profit
before tax1
£’000
Increase in
equity1
£’000
Increase
in profit
before tax1
£’000
Increase in
equity1
£’000
179
72
77
4,270
1,979
1,010
59
465
(51)
4,342
1,530
964
10% strengthening of US dollar
10% strengthening of euro
10% strengthening of Australian dollar
1. An equal weakening of any currency would broadly have the opposite effect.
88
Financial statementsEbiquity plcAnnual report and financial statements for the year ended 31 December 2017
The currency profile of the financial assets at 31 December 2017 is as follows:
Cash and cash equivalents
Gross trade receivables
31 December 31 December 31 December 31 December
2016
£’000
2016
£’000
2017
£’000
2017
£’000
Pounds sterling
US dollar
Euro
Australian dollar
Russian rouble
Singapore dollar
Chinese renminbi
New Zealand dollar
South African rand
Other price risks
461
1,203
1,286
1,114
404
23
241
—
—
1,937
1,626
1,667
438
272
75
647
—
—
5,083
6,169
8,096
750
287
47
518
24
4
5,091
6,005
7,064
749
259
10
291
22
—
4,732
6,662
20,978
19,491
The Group does not have any material exposure to other price risks.
Liquidity risk
Liquidity risk arises from the Group’s management of working capital and the finance charges and principal repayments on its
debt instruments, the risk being that the Group may not meet its financial obligations as they fall due.
The liquidity risk of each Group company is managed centrally by the Group. All surplus cash in the UK is held centrally to
maximise the returns on deposits through economies of scale. The type of cash instrument used and its maturity date will
depend on the Group’s forecast cash requirements. Throughout the year, the Group maintained a draw down facility with
Barclays and Royal Bank of Scotland (‘RBS’) (see note 17) to manage any short-term cash requirements. At 31 December 2017:
£2,000,000 (31 December 2016: £nil) was undrawn. The facility expires in June 2019 at which point drawn down amounts will
be repayable.
It is a condition of the borrowings that the Group pass various covenant tests on a quarterly basis and the Group finance team
regularly monitors the Group forecasts to ensure they are not breached.
Categories of financial assets and liabilities
The following tables set out the categories of financial instruments held by the Group. All of the Group’s financial assets
and liabilities are measured at amortised cost.
Financial assets
Current financial assets
Loans and receivables:
Trade and other receivables1 (note 13)
Cash and cash equivalents (note 14)
Total financial assets
31 December 31 December
2016
£’000
2017
£’000
20,978
4,732
25,710
20,136
6,662
26,798
1. Trade and other receivables includes net trade receivables and other receivables and excludes prepayments and accrued income.
89
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc
Notes to the consolidated financial statements continued
for the year ended 31 December 2017
24. Capital and financial risk management continued
Financial liabilities
Current financial liabilities
Other financial liabilities at amortised cost:
Trade and other payables1
Accruals
Bank overdrafts
Finance lease liabilities
Loans and borrowings
Liabilities at fair value through profit and loss:
Contingent consideration
Non-current financial liabilities
Other financial liabilities at amortised cost:
Loans and borrowings
Finance lease liabilities
Liabilities at fair value through profit and loss:
Contingent consideration
Total financial liabilities
31 December 31 December
2016
£’000
2017
£’000
5,119
5,560
407
4
1,161
901
13,152
3,638
4,827
2,062
4
2,410
1,777
14,718
32,000
30,205
—
5
1,193
33,193
46,345
238
30,448
45,166
1. Trade and other payables includes trade payables and other payables and excludes other taxation and social security and deferred income.
The following table illustrates the contractual maturity analysis of the Group’s financial liabilities:
Within
one year
£’000
One to
five years
£’000
5,119
5,560
4
—
—
—
3,286
33,774
901
1,193
14,870
34,967
Total
£’000
5,119
5,560
4
37,060
2,094
49,837
(1,718)
13,152
(1,774)
(3,492)
33,193
46,345
3,638
4,827
6
5,484
1,777
15,732
—
—
6
33,285
238
33,529
3,638
4,827
12
38,769
2,015
49,261
(1,014)
(3,081)
(4,095)
14,718
30,448
45,166
At 31 December 2017
Trade and other payables
Accruals
Finance lease liabilities
Bank loans and overdrafts
Contingent consideration
Total financial liabilities
Less: finance charges allocated to future periods
Present value
At 31 December 2016
Trade and other payables
Accruals
Finance lease liabilities
Bank loans and overdrafts
Contingent consideration
Total financial liabilities
Less: finance charges allocated to future periods
Present value
90
Financial statementsEbiquity plcAnnual report and financial statements for the year ended 31 December 2017
Fair value measurement
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair
value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:
• Level 1 fair value measurements are those derived from quoted prices in active markets for identical assets or liabilities;
• Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly; and
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability
that are not based on observable market data.
At 31 December 2017
Financial liabilities
Contingent consideration
At 31 December 2016
Financial liabilities
Contingent consideration
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
—
—
—
—
—
—
—
—
2,094
2,094
2,094
2,094
2,015
2,015
2,015
2,015
Refer to note 17 for a reconciliation of movements during the year.
The fair value of the contingent consideration of £2,094,000 (31 December 2016: £2,015,000), was estimated by applying the
income approach. The fair value estimates are based on a discount rate of 3% forecast EBIT of FMC Ireland and Digital Balance
Australia. This is a level 3 fair value measurement. The key assumptions in calculating the contingent consideration payable are
the EBIT of the businesses acquired and the discount rate.
25. Dividends
Dividend in respect of the prior year
Total dividend paid
31 December 31 December
2016
£’000
2017
£’000
474
474
292
292
A dividend of £474,000 was paid during the current financial year (31 December 2016: £292,000). Dividends were paid to
non-controlling interests as shown in the consolidated statement of changes in equity.
26. Cash generated from operations
Profit before taxation
Adjustments for:
Depreciation (note 11)
Amortisation (note 10)
Loss on disposal
Unrealised foreign exchange gain
Share option charges (note 3)
Finance income (note 6)
Finance expenses (note 6)
Contingent consideration revaluations
Increase in trade and other receivables
Increase in trade and other payables
Movement in provisions
Cash generated from operations
31 December 31 December
2016
£’000
2017
£’000
4,491
6,625
1,066
2,895
51
(610)
738
(17)
1,061
275
9,950
1,231
2,451
33
(107)
652
(18)
1,150
1,599
13,616
(4,094)
(3,968)
2,111
(9)
1,313
(179)
7,958
10,782
91
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc
Notes to the consolidated financial statements continued
for the year ended 31 December 2017
27. Acquisitions
Digital Balance Australia Pty Limited
On 1 September 2017, the Group’s wholly-owned subsidiary Digital Balance Australia Pty Limited acquired the assets and
liabilities of Digital Balance Pty Limited, a trust of the Digital Balance Unit Trust. The acquisition was for an initial cash
consideration of AU$475,000 (£278,000) and a further cash payment of AU$75,000 (£45,000) on 1 December 2017.
AU$2,725,000 (£1,596,000) of contingent consideration was preliminarily recognised at acquisition however, the maximum
total purchase consideration is up to AU$5,000,000 (£2,928,000), payable in cash, depending on the performance of the
Digital Balance business during the period ending 31 December 2020.
The fair value of the purchase consideration for the acquisition of acquired the assets and liabilities of Digital Balance Pty
Limited is as follows:
Cash
Net present value of contingent consideration1
Total purchase consideration
£’000
323
1,596
1,919
1. The fair value of contingent consideration payable is based on EBIT for the years ending 31 December 2017, 31 December 2018, 31 December 2019
and 31 December 2020 with stage payments each year from 2018 onwards based on EBIT growth. The potential range of future payments that
Ebiquity plc could be required to make under the contingent consideration arrangement is between £nil and £2,928,000 and will be paid in cash.
All contingent consideration payments are expected to be paid by June 2021.
The carrying value and the provisional fair value of the net assets recognised at the date of acquisition are as follows:
Carrying
Fair value
value adjustments1
£’000
£’000
Customer relationships
Property, plant and equipment
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Net liabilities acquired
Goodwill arising on acquisition2
Total purchase consideration
—
15
133
147
(348)
(53)
420
—
—
—
—
420
Fair value
£’000
420
15
133
147
(348)
367
1,552
1,919
1. The fair value adjustments relate to the finalisation of the allocation of the purchase consideration accounting for intangible assets
(customer relationships) and deferred tax liabilities.
2. The goodwill recognised of £1,552,000 is attributable to the assembled workforce, expected synergies and other intangible assets,
which do not qualify for separate recognition. None of the goodwill arising from the acquisition is expected to be tax deductible.
Ebiquity SAS
On 18 December 2017, the Group acquired the outstanding 20% interest in its subsidiary undertaking, Ebiquity SAS, from the
minority shareholder for cash consideration of €1,500,000 (£1,322,000).
Fairbrother Marsh Company Limited
On 11 March 2016, the Group acquired the outstanding 50% interest in its Irish media consultancy associate, Fairbrother Marsh
Company Limited (‘FMC’). The 50% interest in FMC was acquired for an initial cash consideration of €150,000 (£118,000).
€643,000 (£500,000) in contingent consideration was recognised at acquisition however, the maximum total purchase
consideration is up to €2,000,000 (£1,559,000), payable in cash, depending on the performance of the FMC business
during the year ended 31 December 2020.
28. Contingent liabilities
The Group is subject to claims and litigation arising in the ordinary course of business and provision is made where liabilities are
considered likely to arise on the basis of current information and legal advice.
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Financial statementsEbiquity plcAnnual report and financial statements for the year ended 31 December 2017
29. Related party transactions
The Group has a related party relationship with its subsidiaries (refer to note 12) and key management personnel including
Directors and Executive Committee members.
Transactions between the Company and its subsidiaries, or between subsidiaries, have been eliminated on consolidation and
are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.
Compensation of key management personnel
The remuneration of the Directors, who are considered to be the key management personnel of the Group, is set out in note 5.
There were no post-employment or other long-term benefits other than contributions to private pension schemes.
Transactions with companies related to key management personnel
Revenue of £nil (31 December 2016: £14,000) was recognised by the Group from Travelzoo Inc., a company of which
Michael Karg is a director.
Costs of £nil (31 December 2016: £1,500) for a membership subscription were charged to the Company by the
Quoted Companies Alliance, a company of which Michael Higgins is a director.
Costs of £60,000 (31 December 2016: £79,000) for public relations consultancy were charged to the Company by
Instinctif Partners Limited, a company of which Richard Nichols is a director.
As at the year end, £400 (31 December 2016: £16,000) was owed to Instinctif Partners Limited, a company of which
Richard Nichols is a director.
30. Events after the reporting period
On 13 February 2018, the Group agreed to sell its Advertising Intelligence business to Nielsen Media Research Limited for
£26,000,000 in cash. This has been treated as a non-adjusting event since the Advertising Intelligence business was not
available for sale in its present condition, nor was a transaction highly probable, as of 31 December 2017. This determination
was made based on the status of the potential sale as of 31 December 2017, with no agreement reached, legal terms not
finalised and several external regulatory and other approvals not having been cleared.
The sale is subject to approval by the UK Competition & Markets Authority which, if the regulator does not refer the
transaction to a phase two investigation, management expects will be completed during the second quarter of 2018.
On 19 March 2018, the Group entered into an agreement to sell the business assets of its Reputation division to Echo Research
Holdings Limited. This is the remaining part of its Group’s Marketing Intelligence segment in addition to the Advertising
Intelligence business. Completion will take place on 31 March 2018. The consideration payable is dependent upon the revenue
performance of the business during the 12 months following completion.
93
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc Independence
We remained independent of the
group in accordance with the ethical
requirements that are relevant to our
audit of the financial statements in the
UK, which includes the FRC’s Ethical
Standard, as applicable to listed
entities, and we have fulfilled our other
ethical responsibilities in accordance
with these requirements.
Independent auditors’ report
to the members of Ebiquity plc
Report on the audit of the
company financial statements
Opinion
In our opinion, Ebiquity plc’s
company financial statements
(the “financial statements”):
• give a true and fair view of the state
of the company’s affairs as at 31
December 2017;
• have been properly prepared in
accordance with United Kingdom
Generally Accepted Accounting
Practice (United Kingdom
Accounting Standards, comprising
FRS 101 “Reduced Disclosure
Framework”, and applicable law);
and
• have been prepared in accordance
with the requirements of the
Companies Act 2006.
We have audited the financial
statements, included within the Annual
Report and Financial Statements
(the “Annual Report”), which comprise:
the statement of financial position as
at 31 December 2017 and the
statement of changes in equity for the
year then ended; and the notes to the
financial statements, which include a
description of the significant
accounting policies.
Basis for opinion
We conducted our audit in accordance
with International Standards on
Auditing (UK) (“ISAs (UK)”) and
applicable law. Our responsibilities
under ISAs (UK) are further described
in the Auditors’ responsibilities for the
audit of the financial statements
section of our report. We believe that
the audit evidence we have obtained is
sufficient and appropriate to provide a
basis for our opinion.
Our audit approach
Overview
Materiality
Audit
Scope
Key Audit
Matters
• Overall materiality: £1,027,000 (2016: £912,000), based on 1% of total assets.
• To the extent balances were audited to support the Group audit opinion, materiality has been
capped at an amount below the overall Group materiality.
• Each financial statement line item is based scoped based on the materiality level.
• Qualitative factors are also taken into account as well as the risk of understatement.
• All work is performed by PwC UK.
•
Impairment of investments.
the audit; and directing the efforts of
the engagement team. These matters,
and any comments we make on the
results of our procedures thereon, were
addressed in the context of our audit
of the financial statements as a whole,
and in forming our opinion thereon,
and we do not provide a separate
opinion on these matters. This is not a
complete list of all risks identified by
our audit.
The scope of our audit
Key audit matters
Key audit matters are those matters
that, in the auditors’ professional
judgement, were of most significance
in the audit of the financial statements
of the current period and include the
most significant assessed risks of
material misstatement (whether or
not due to fraud) identified by the
auditors, including those which had the
greatest effect on: the overall audit
strategy; the allocation of resources in
As part of designing our audit, we
determined materiality and assessed
the risks of material misstatement in
the financial statements. In particular,
we looked at where the directors made
subjective judgements, for example in
respect of significant accounting
estimates that involved making
assumptions and considering future
events that are inherently uncertain.
As in all of our audits we also
addressed the risk of management
override of internal controls, including
evaluating whether there was evidence
of bias by the directors that
represented a risk of material
misstatement due to fraud.
94
Financial statementsEbiquity plcAnnual report and financial statements for the year ended 31 December 2017 Key audit matter
Impairment of investments
Given the Company is the ultimate parent of the group it
holds investments in many subsidiaries.
The value of these investments is material to the accounts
and there is a risk of impairment if the carrying values are
deemed to be in excess of the recoverable amount.
How our audit addressed the key audit matter
We have reviewed investments for indicators of impairment.
Where indicators of impairment exist, for example where
the investment’s carrying value is in excess of its net assets
we have obtained management’s impairment assessment.
We have challenged management’s assumptions in
their impairment assessment, recalculated models
and agreed inputs.
We agree that no impairment is necessary.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the company, the accounting processes and controls, and the
industry in which it operates.
The Company operates from location and is corporate cost centre. Based on the materiality level identified, financial
statement line items which are considered material both on a qualitative and quantitative basis are selected as in the scope
of our testing.
The audit work performed over the Company was conducted by PwC UK, the group audit team; component auditors were
not used.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and
extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of
misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality
How we determined it
Rationale for benchmark applied
£1,027,000 (2016: 912,000).
1% of total assets.
Based on total assets as the entity holds a majority of the
Group’s assets and is not a profit generating entity.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £10,000
(2016: £10,000) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
95
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc Independent auditors’ report continued
to the members of Ebiquity plc
Conclusions relating
to going concern
We have nothing to report in respect
of the following matters in relation
to which ISAs (UK) require us to
report to you when:
• the directors’ use of the going
concern basis of accounting in the
preparation of the financial
statements is not appropriate; or
• the directors have not disclosed in
the financial statements any
identified material uncertainties
that may cast significant doubt
about the company’s ability to
continue to adopt the going concern
basis of accounting for a period of
at least twelve months from the
date when the financial statements
are authorised for issue.
However, because not all future events
or conditions can be predicted, this
statement is not a guarantee as to the
company’s ability to continue as a
going concern.
Reporting on other information
The other information comprises all of
the information in the Annual Report
other than the financial statements
and our auditors’ report thereon. The
directors are responsible for the other
information. Our opinion on the
financial statements does not cover
the other information and, accordingly,
we do not express an audit opinion or,
except to the extent otherwise
explicitly stated in this report,
any form of assurance thereon.
In connection with our audit of the
financial statements, our responsibility
is to read the other information and, in
doing so, consider whether the other
information is materially inconsistent
with the financial statements or our
knowledge obtained in the audit, or
otherwise appears to be materially
misstated. If we identify an apparent
material inconsistency or material
misstatement, we are required to
perform procedures to conclude
whether there is a material
misstatement of the financial
statements or a material misstatement
of the other information. If, based on the
work we have performed, we conclude
that there is a material misstatement of
this other information, we are required
to report that fact. We have nothing to
report based on these responsibilities.
With respect to the Strategic Report
and Directors’ Report, we also
considered whether the disclosures
required by the UK Companies Act
2006 have been included.
Based on the responsibilities described
above and our work undertaken in the
course of the audit, ISAs (UK) require
us also to report certain opinions and
matters as described below.
Strategic Report and Directors’ Report
In our opinion, based on the work
undertaken in the course of the audit,
the information given in the Strategic
Report and Directors’ Report for the
year ended 31 December 2017 is
consistent with the financial statements
and has been prepared in accordance
with applicable legal requirements.
In light of the knowledge and
understanding of the company and its
environment obtained in the course of
the audit, we did not identify any
material misstatements in the
Strategic Report and Directors’ Report.
Responsibilities for the financial
statements and the audit
Responsibilities of the directors for the
financial statements
As explained more fully in the
Directors’ Responsibilities Statement
set out on page 49, the directors are
responsible for the preparation of the
financial statements in accordance
with the applicable framework and for
being satisfied that they give a true
and fair view. The directors are also
responsible for such internal control as
they determine is necessary to enable
the preparation of financial
statements that are free from
material misstatement, whether
due to fraud or error.
In preparing the financial statements,
the directors are responsible for
assessing the company’s ability to
continue as a going concern, disclosing
as applicable, matters related to going
concern and using the going concern
basis of accounting unless the directors
either intend to liquidate the company
or to cease operations, or have no
realistic alternative but to do so.
Auditors’ responsibilities for the audit
of the financial statements
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from
material misstatement, whether due to
fraud or error, and to issue an auditors’
report that includes our opinion.
Reasonable assurance is a high level of
assurance, but is not a guarantee that
an audit conducted in accordance with
ISAs (UK) will always detect a material
misstatement when it exists.
Misstatements can arise from fraud or
error and are considered material if,
individually or in the aggregate, they
could reasonably be expected to
influence the economic decisions of
users taken on the basis of these
financial statements.
A further description of our
responsibilities for the audit of the
financial statements is located on the
FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description
forms part of our auditors’ report.
96
Financial statementsEbiquity plcAnnual report and financial statements for the year ended 31 December 2017 Use of this report
Other matter
We have reported separately on the
group financial statements of Ebiquity
plc for the year ended 31 December 2017.
Richard Porter
(Senior Statutory Auditor)
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants
and Statutory Auditors
London
21 March 2018
This report, including the opinions, has
been prepared for and only for the
company’s members as a body in
accordance with Chapter 3 of Part 16
of the Companies Act 2006 and for
no other purpose. We do not, in giving
these opinions, accept or assume
responsibility for any other purpose
or to any other person to whom this
report is shown or into whose hands
it may come save where expressly
agreed by our prior consent in writing.
Other required reporting
Companies Act 2006
exception reporting
Under the Companies Act 2006
we are required to report to you if,
in our opinion:
• we have not received all the
information and explanations we
require for our audit; or
• adequate accounting records have
not been kept by the company, or
returns adequate for our audit have
not been received from branches
not visited by us; or
• certain disclosures of directors’
remuneration specified by law are
not made; or
• the financial statements are not in
agreement with the accounting
records and returns.
We have no exceptions to report
arising from this responsibility.
97
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc Company statement of financial position
as at 31 December 2017
Fixed assets
Intangible assets
Property, plant and equipment
Investments in subsidiaries
Total fixed assets
Current assets
Trade and other receivables
Cash at bank and in hand
Total current assets
Creditors: amounts falling due within one year
Net current liabilities
Total assets less current liabilities
Creditors: amounts falling due after more than one year
Net assets
Equity
Ordinary shares
Share premium
Other reserves
Retained earnings
Total shareholders’ funds
31 December 31 December
2016
£’000
2017
£’000
Note
6
7
8
1,239
—
74,890
76,129
990
21
74,890
75,901
9
26,558
15,290
178
—
26,736
15,290
10
(47,745)
(35,599)
(21,009)
(20,309)
55,120
55,592
11
(32,000)
(30,205)
23,120
25,387
12
13
13
13
19,549
19,300
21
(733)
4,283
23,120
—
(99)
6,186
25,387
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 not to present its
own income statement in these financial statements.
The movement in reserves of the Company includes a loss for the year of £1,913,000 (31 December 2016: loss for the year of
£1,380,000).
The notes on pages 100 to 107 are an integral part of the financial statements of the Company. The financial statements on
pages 98 to 99 were approved and authorised for issue by the Board of Directors on 21 March 2018 and were signed on its
behalf by:
Michael Karg, PhD
Director
Andrew Noble
Director
98
Financial statementsEbiquity plcAnnual report and financial statements for the year ended 31 December 2017
Company statement of changes in equity
for the year ended 31 December 2017
At 31 December 2015
Loss for the year
Other comprehensive (loss)/income for the year
Total comprehensive loss for the year
Proceeds from shares issued
Share premium reduction1
Shares issued to employees2
Share-based payments credit
Capital contribution relating to share-based payments
Dividends to shareholders
At 31 December 2016
Loss for the year
Other comprehensive (loss)/income for the year
Total comprehensive loss for the year
Proceeds from shares issued
Shares issued to employees2
Dividends to shareholders
At 31 December 2017
Note
Share
capital
£’000
19,290
Share
premium
£’000
Other
reserves
£’000
Retained
earnings
£’000
Total
£’000
11,764
(733)
(4,576)
25,745
12
14
8
12
—
—
—
10
—
—
—
—
—
19,300
—
—
—
99
150
—
19,549
—
—
—
16
(11,780)
—
—
—
—
—
—
—
—
21
—
—
21
—
—
—
—
—
634
—
—
—
(99)
—
—
—
—
(634)
—
(1,380)
(1,380)
—
—
(1,380)
(1,380)
—
11,780
—
474
180
26
—
634
474
180
(292)
6,186
(292)
25,387
(1,913)
(1,913)
—
—
(1,913)
(1,913)
—
484
(474)
120
—
(474)
(733)
4,283
23,120
1. On 8 June 2016, the Group announced the cancellation of the share premium account (the ‘Capital Reduction’) effective 9 June 2016
following registration of the Court order confirming the Capital Reduction by the Registrar of Companies.
2. A share-based payment reserve of £634,000 was created during the year ended 31 December 2016 and settled during the year ended
31 December 2017. Refer to note 13 for further details.
The notes on pages 100 to 107 are an integral part of the financial statements of the Company.
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Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc
Notes to the Company financial statements
for the year ended 31 December 2017
1. General information
b. the requirements of IFRS 7
‘Financial Instruments: Disclosures’;
c. the requirements of paragraphs
91 to 99 of IFRS 13 ‘Fair Value
Measurement’ (disclosure of
valuation techniques and inputs
used for ‘Fair Value Measurement’
of assets and liabilities);
d. the requirement in paragraph 38 of
IAS 1 ‘Presentation of Financial
Statements’ to present
comparative information in respect
of:
i. paragraph 79(a)(iv) of IAS 1;
ii. paragraph 73(e) of IAS 16
‘Property, Plant and Equipment’;
iii. paragraph 118(E) of IAS 38
‘Intangible Assets’
(reconciliations between the
carrying amount at the
beginning and end of the period);
The following paragraphs of IAS 1
‘Presentation of Financial
Statements’:
i. 10D (statement of cash flows);
ii. 16 (statement of compliance
with all IFRS);
iii. 38A (requirement for minimum
of two primary statements,
including cash flow statements);
iv. 38B-D (additional comparative
information);
v. 111 (cash flow statement
information); and
vi. 134–136 (capital management
disclosures).
e. IAS 7 ‘Statement of Cash Flows’;
f. paragraphs 30 and 31 of IAS 8
‘Accounting Policies’, changes in
accounting estimates and errors
(requirement for the disclosure of
information when an entity has not
applied a new IFRS that has been
issued but is not yet effective);
g. paragraph 17 of IAS 24 ‘Related
Party Disclosures’ (key
management compensation); and
h. the requirements in IAS 24 ‘Related
Party Disclosures’ to disclose
related party transactions entered
into between two or more members
of a group.
Ebiquity plc (the ‘Company’) acts as a
holding company and is incorporated
and domiciled in the UK. The address
of its registered office is CityPoint,
One Ropemaker Street, London EC2Y
9AW.
The financial statements of the
Company represent the results for the
year ended 31 December 2017 whilst
the comparatives represent the results
for the year ended 31 December 2016.
The financial statements present
information about the Company as an
individual undertaking and not about
its group.
2. Basis of preparation
The financial statements of the
Company have been prepared in
accordance with Financial Reporting
Standard 101 ‘Reduced Disclosure
Framework’ (‘FRS 101’). The financial
statements have been prepared on a
going concern basis. The Company
meets its day-to-day working capital
requirements through its cash reserves
and borrowings, described in note 17 to
the consolidated financial statements.
The Company’s forecasts and
projections, taking account of
reasonably possible changes in trading
performance, show that the Company
should be able to operate within the
level of its current cash reserves and
borrowings, including continuing to
meet the bank covenants therein. The
Company therefore continues to adopt
the going concern basis in preparing its
financial statements. The financial
statements have been prepared under
the historical cost convention and in
accordance with the Companies Act
2006. The Company has taken
advantage of the following disclosure
exemptions under FRS 101:
a. the requirements of paragraphs
45(b) and 46-52 of IFRS 2
‘Share-based Payment’ (details of
the number of weighted-average
exercise prices of share options, and
how the fair value of goods and
services received was determined);
100
Summary of significant
accounting policies
The principal accounting policies
adopted are set out below. These
policies have been consistently applied
to all periods presented, unless
otherwise stated.
Finance income and expenses
Finance income and expenses
represents interest receivable and
payable. Finance income and expense
is recognised on an accruals basis,
based on the interest rate applicable
to each bank or loan account.
Foreign currency transactions
The results and financial position of
the Company are expressed in pounds
sterling, which is the functional
currency of the Company and the
presentation currency for the
Company financial statements.
Trading transactions denominated in
foreign currencies are translated into
sterling at the exchange rate ruling
when the transaction was entered
into. Assets and liabilities expressed in
foreign currencies are translated into
sterling at rates of exchange ruling at
the end of the financial period.
All transactions involving foreign
exchange gains and losses are dealt
with through the income statement
as and when they arise.
Share-based payments
The Company issues equity-settled
share-based payments to its
employees and employees of
subsidiaries using the Company’s
equity instruments. These are
measured at fair value (excluding the
effect of non-market-based vesting
conditions) at the date of grant and
expensed on a straight-line basis over
the vesting period, based on the
Group’s estimate of shares that will
eventually vest and adjusted for the
effect of non-market-based vesting
conditions. A corresponding credit is
recorded in equity.
Financial statementsEbiquity plcAnnual report and financial statements for the year ended 31 December 2017
For share options without performance
conditions, fair value is measured by use
of the Black–Scholes Model. The
expected life used in the model has
been adjusted, based on management’s
best estimates, for the effects of
non-transferability, exercise restrictions,
and behavioural considerations.
The grant by the Company of options
over its equity instruments to the
employees of subsidiary undertakings
in the Group is treated as a capital
contribution. The fair value of
employee services received, measured
by reference to the grant date fair
value, is recognised over the vesting
period as an increase to investment in
subsidiary undertakings, with a
corresponding credit to equity in the
parent entity financial statements.
Retirement benefits
For defined contribution pension
schemes, the Company pays
contributions to privately administered
pension plans on a voluntary basis. The
Company has no further payment
obligations once the contributions have
been paid. Contributions are charged
to the income statement in the period
to which they relate.
Dividend income
Dividend income is recognised when
the right to receive payment is
established.
Dividend distribution
Dividend distribution to the
Company’s shareholders is recognised
as a liability in the Company’s financial
statements in the period in which the
dividends are approved by the
Company’s shareholders.
Intangible assets
Computer software
Purchased computer software
intangible assets are amortised on a
straight-line basis over their useful lives
which vary from four to five years.
Property, plant and equipment
Property, plant and equipment is
stated at cost less accumulated
depreciation and any recognised
impairment loss.
Depreciation is charged so as to write
off the cost of assets over their
estimated useful lives and is recognised
in the income statement within
administrative expenses. The rates
applied are as follows:
Fixtures, fittings 20% per annum
and equipment
straight-line
Computer
equipment
25% straight-line
Investments in subsidiaries
Investments in subsidiaries are held
at cost less accumulated impairment
losses.
Where the purchase consideration
for the acquisition of an interest in a
subsidiary is contingent on one or more
future events, the cost of investment
includes a reasonable estimate of the
fair value of the amounts of
consideration that are expected to
be payable in the future. The cost of
investment and the contingent
consideration liability is adjusted
until the ultimate payable is known.
Cash and cash equivalents
Cash and cash equivalents comprise
cash in hand and short-term deposits.
In the statement of financial position,
bank overdrafts are shown within
borrowings in current liabilities.
Share capital
Equity instruments issued by the
Company are recorded at the amount
of the proceeds received, net of direct
issuance costs.
Deferred taxation
Recognition of deferred tax assets is
restricted to those instances where it
is probable that taxable profit will be
available against which the difference
can be utilised. The recognition of
deferred tax assets is reviewed at each
year-end date.
The amount of the asset or liability is
determined using tax rates that have
been enacted or substantively enacted
by the year-end date and are expected
to apply when the deferred tax
liabilities/assets are settled/recovered.
Financial instruments
Financial assets and financial liabilities
are recognised in the Company’s
statement of financial position when
the Company becomes a party to the
contractual provisions of the
instrument.
Financial assets
The Company classifies its financial
assets as ‘loans and receivables’. Loans
and receivables are non-derivative
financial assets with fixed or
determinable payments that are not
quoted in an active market. They arise
principally through the provision of
goods and services to customers
(trade receivables), but also
incorporate other types of contractual
monetary asset. They are initially
recognised at fair value plus
transaction costs that are directly
attributable to their acquisition or
issue, and are subsequently carried
at amortised cost using the effective
interest rate method, less provision
for impairment.
101
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc Notes to the Company financial statements continued
for the year ended 31 December 2017
Employee Share Ownership Plan
(‘ESOP’)
4. Operating loss
Auditors’ remuneration
The ESOP’s investment in the
Company’s shares is deducted from
shareholders’ equity in the statement
of financial position as if they were
treasury shares, except that profits
on the sale of ESOP shares are not
credited to the share premium account.
Fees for the audit of the Company are
£3,000 (31 December 2016: £3,000).
Fees paid to the Company’s auditors
for services other than the statutory
audit of the Company are disclosed in
note 4 to the consolidated financial
statements.
Directors’ remuneration
Fees paid to the Company’s Directors
are disclosed in note 5 to the
consolidated financial statements.
Critical accounting estimates
and judgements
In preparing the Company financial
statements in conformity with FRS
101, the Directors are required to make
certain estimates and judgements
relating to the reported results of
revenue and expenses during the
period and the financial position of the
Company at the reporting date. Actual
results may differ from those
estimates.
Due to the nature of operations, the
key area of judgement that has the
most significant effect on the amounts
recognised in the Company financial
statements, is the review for
impairment of the carrying value of
investments in subsidiaries.
3. Company results for the year
The Company has taken advantage of
the exemption allowed under section
408 of the Companies Act 2006 not to
present its own income statement in
these financial statements.
The movement in reserves of the
Company includes a loss for the year of
£1,913,000 (31 December 2016: loss for
the year of £1,380,000).
2. Basis of preparation continued
Financial instruments continued
Financial liabilities
Borrowings consisting of
interest-bearing secured and
unsecured loans and overdrafts are
initially recognised at fair value net of
directly attributable transaction costs
incurred and subsequently measured
at amortised cost using the effective
interest method. The difference
between the proceeds received net of
transaction costs and the redemption
amount is amortised over the period of
the borrowings to which they relate.
The revolving credit facility is
considered to be a long-term loan.
Trade and other payables are initially
recognised at their nominal value which
is usually the original invoiced amount.
Provisions
Provisions are recognised when the
Company has a present legal or
constructive obligation as a result
of past events, it is probable that an
outflow of resources will be required
to settle that obligation and the
amount can be reliably estimated.
Provisions are not recognised for
future operating losses.
Provisions are measured at the
Directors’ best estimate of the
expenditure required to settle the
obligation at the year-end date. If the
effect of the time value of money is
material, provisions are determined by
discounting the expected future cash
flows at a pre-tax rate which reflects
current market assessments of the
time value of money and, where
appropriate, the risks specific to
the obligations.
102
Financial statementsEbiquity plcAnnual report and financial statements for the year ended 31 December 2017 5. Tax on loss on ordinary activities
The tax charge is made up as follows:
Current tax
Deferred tax
Origination and reversal of timing differences
Taxation on ordinary activities
Year ended
Year ended
31 December 31 December
2016
£’000
2017
£’000
—
—
—
—
—
—
—
—
The tax assessment for the year differs to the standard rate of corporation tax in the UK of 19.25% (31 December 2016: 20%).
The differences are explained below:
Year ended
Year ended
31 December 31 December
2016
£’000
2017
£’000
Loss on ordinary activities before taxation
Loss on ordinary activities at the standard rate of corporation tax in the UK of 19.25%
(31 December 2016: 20%)
Effects of:
Expenses not deductible for tax purposes
Capital allowances for year in excess of depreciation
Additions to intangibles
Relieved to other Group companies
Losses carried forward
Current tax charge for the year
(1,913)
(1,380)
(368)
(276)
—
—
76
292
—
—
31
(1)
41
205
—
—
Deferred tax on unremitted earnings has not been recognised as management do not intend to pay dividends from jurisdictions
where a tax charge would be incurred and dividends received are not taxed in the UK.
6. Intangible assets
Cost
At 1 January 2017
Additions
At 31 December 2017
Amortisation
At 1 January 2017
Charge for the year
At 31 December 2017
Net book value
At 31 December 2017
At 31 December 2016
Computer
software
£’000
1,197
393
1,590
(207)
(144)
(351)
1,239
990
Total
£’000
1,197
393
1,590
(207)
(144)
(351)
1,239
990
103
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc
Notes to the Company financial statements continued
for the year ended 31 December 2017
7. Property, plant and equipment
Fixtures,
fittings and
equipment
£’000
Computer
equipment
£’000
Cost
At 1 January 2017
Disposals
At 31 December 2017
Depreciation
At 1 January 2017
Charge for the year
Disposals
At 31 December 2017
Net book value
At 31 December 2017
At 31 December 2016
8. Investments in subsidiaries
Cost and net book value
At 31 December 2016
Additions
At 31 December 2017
1
(1)
—
—
—
—
—
—
1
Total
£’000
47
(47)
—
46
(46)
—
(26)
(26)
—
26
—
—
20
—
26
—
—
21
£’000
74,890
—
74,890
The Company’s principal trading subsidiaries and associated undertakings are listed in note 12 to the consolidated financial
statements. The Directors believe that the carrying value of the remaining investments is supported by their underlying
net assets, based on the impairment assessment carried out, as described in note 9.
9. Trade and other receivables
Amounts owed by Group undertakings
Other receivables
Prepayments
31 December 31 December
2016
£’000
2017
£’000
26,062
14,989
22
474
6
295
26,558
15,290
Included within the amounts owed by Group undertakings above is an amount which is unsecured, earns interest at 3% above
EURIBOR, has no fixed date of repayment and is repayable on demand.
Also included within the amounts owed by Group undertakings above is an amount which is unsecured, earns interest at 2.65%
above LIBOR, has no fixed date of repayment and is repayable on demand.
The residual amounts owed by Group undertakings are unsecured, non-interest bearing, have no fixed date of repayment and
are repayable on demand.
104
Financial statementsEbiquity plcAnnual report and financial statements for the year ended 31 December 2017
10. Creditors: amounts falling due within one year
Bank loans and overdrafts
Trade creditors
Other taxation and social security
Other creditors
Accruals
Amounts owed to Group undertakings1
31 December 31 December
2016
£’000
2017
£’000
1,568
1,148
51
—
1,070
43,908
47,745
4,472
844
34
20
669
29,560
35,599
1. Included within amounts owed to Group undertakings is an amount which is unsecured, incurs interest at 5.5% plus Bank of England base
rate, has no fixed date of repayment and is repayable on demand. The residual amounts owed to Group undertakings are unsecured, interest
free, have no fixed date of repayment and are repayable on demand.
11. Creditors: amounts falling due after more than one year
Bank loans – between two and five years
31 December 31 December
2016
£’000
2017
£’000
32,000
32,000
30,205
30,205
All bank borrowings are held jointly with Barclays and Royal Bank of Scotland (‘RBS’). The committed facility, totalling
£44,000,000, comprises a term loan of £10,000,000 (of which £1,250,000 remains outstanding at 31 December 2017
(31 December 2016: £3,750,000)), and a revolving credit facility (‘RCF’) of £34,000,000, (of which £32,000,000 was drawn down
at 31 December 2017 (31 December 2016: £29,000,000)). The term loan has a maturity date of 2 July 2018 and the RCF has a
maturity date of 30 June 2019. The £10,000,000 term loan is being repaid on a quarterly basis to maturity, and the drawn RCF
and any further drawings under the RCF are repayable on maturity of the facility. The facility may be used for contingent
consideration payments on past acquisitions, to fund future potential acquisitions, and for general working capital requirements.
Loan arrangement fees of £90,000 (31 December 2016: £135,000) are offset against the term loan, and are being amortised
over the period of the loan.
The facility bears variable interest of LIBOR plus a margin of 2.50%. The margin rate is able to be lowered each quarter end
depending on the Group’s net debt to EBITDA ratio.
The undrawn amount of the revolving credit facility is liable to a fee of 40% of the prevailing margin. The Group may elect to
prepay all or part of the outstanding loan subject to a break fee, by giving five business days’ notice.
All amounts owing to the bank are guaranteed by way of fixed and floating charges over the current and future assets of the
Group. As such, a composite guarantee has been given by all significant subsidiary companies in the UK, US and Germany.
12. Ordinary shares
Allotted, called up and fully paid
At 31 December 2015 – ordinary shares of 25p
Share options exercised
At 31 December 2016 – ordinary shares of 25p
Share options exercised
Shares issued
At 31 December 2017 – ordinary shares of 25p
Number
of shares
Nominal
value
£’000
77,161,688
19,290
38,063
10
77,199,751
19,300
397,710
600,000
99
150
78,197,461
19,549
Ordinary shares carry voting rights which are entitled to share in the profits of the Company. During the year, the Company
paid a dividend of 0.65p per share, a total of £474,000 (31 December 2016: 0.4p with a total of £292,000) to shareholders.
105
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc
Notes to the Company financial statements continued
for the year ended 31 December 2017
13. Reserves
Share premium
The share premium reserve shows the amount subscribed for share capital in excess of the nominal value. On 8 June 2016,
the Company announced the cancellation of the Company’s share premium account (the ‘Capital Reduction’) effective
9 June 2016 following registration of the Court order confirming the Capital Reduction by the Registrar of Companies.
Other reserves
Other reserves consists of the merger reserve and ESOP reserve.
Merger reserve
The merger reserve arose on the issuance of shares at a premium on a Group restructure, where the premium on issue qualified
for merger relief. There has been no movement in the year.
Share-based payment reserve
On 29 March 2016, the Group agreed to increase the total cap on consideration payable on the Stratigent LLC (‘Stratigent’)
acquisition. The Group acquired Stratigent on 19 August 2013. Stratigent’s management held a 7% economic interest in
Stratigent which was acquired by the Group for a total consideration to be determined by the financial performance of
Stratigent over the three financial years ended 30 April 2016 and capped at $1.5 million. Stratigent’s financial performance
over the first two financial years resulted in consideration of $1.1 million being paid to Stratigent’s management. In order
to ensure that management remains incentivised to continue to drive and generate the financial performance achieved
over the first two financial years, the Group agreed to increase the total cap on consideration payable to management.
Accordingly, in March 2016, the cap on consideration was increased by an amount of $1.5 million, with any excess over
and above the existing cap on consideration payable 25% in cash and 75% in new ordinary shares in Ebiquity plc (capped
at 600,000 new shares). A share-based payment reserve amounting to £634,000 was created in equity representing
600,000 new shares in the Company.
The share-based payment reserve was settled on 17 November 2017 through the issuance of 600,000 new shares.
ESOP reserve
The ESOP reserve represents the cost of own shares acquired in the Company by the Employee Benefit Trust (‘EBT’). The
purpose of the EBT is to facilitate and encourage the ownership of shares by employees, by acquiring shares in the Company
and distributing them in accordance with employee share schemes. The EBT may operate in conjunction with the Company’s
existing share option schemes and other schemes that may apply from time to time.
The ESOP trusts were created to award shares to certain employees at less than market value. The trusts in aggregate hold
unallocated shares costing £1,471,000 (31 December 2016: £1,471,000) funded by the Company. The sponsoring company
is responsible for the administration and maintenance of the trust. The number of shares held by the trust is 4,201,504
(31 December 2016: 4,201,504), all of which are under option to the employees of the Group. As at the statement of financial
position date, all of the shares in the ESOP had vested (31 December 2016: all had vested).
Retained earnings
The retained earnings reserve shows the cumulative net gains and losses recognised in the income statement. For detailed
movements on each of the above reserves, refer to the statement of changes in equity.
The distributable reserves of the Company total £4,283,000 (31 December 2016: £6,186,000).
14. Share-based payments
Full disclosure of share-based payments is included in the consolidated financial statements (see note 23 to the consolidated
financial statements).
15. Commitments
Capital commitments contracted but not provided for by the Company amount to £nil (31 December 2016: £nil). The Company
has no operating lease commitments (31 December 2016: none).
106
Financial statementsEbiquity plcAnnual report and financial statements for the year ended 31 December 2017 16. Contingent liabilities
The Company is subject to claims and litigation arising in the ordinary course of business and provision is made where liabilities
are considered likely to arise on the basis of current information and legal advice.
17. Related party transactions
Under FRS 101.8(k), the Company is exempt from the requirement to disclose transactions with entities that are part of the
Ebiquity plc Group, or investees of the Group qualifying as related parties, as all of the Company’s voting rights are controlled
within the Group. The Company has no other material related parties. Related party transactions are detailed in note 30 to the
consolidated financial statements.
Transactions with key management personnel
FRS 101.8(j) exempts entities from the disclosures in respect of the compensation of key management personnel.
107
Strategic reportCorporate governanceFinancial statementsAnnual report and financial statements for the year ended 31 December 2017Ebiquity plc Advisers
Independent auditors
PricewaterhouseCoopers LLP
Chartered Accountants
and Statutory Auditors
1 Embankment Place
London WC2N 6RH
Nominated adviser and broker
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London EC4M 7LT
Registrars
Computershare Investor Services plc
PO Box 82
The Pavilions
Bridgwater Road
Bristol BS99 7NH
Shareholder information
Country of incorporation
Ebiquity plc is registered and incorporated
in England and Wales.
Number of securities in issue
As of 21 March 2018, the Company’s
issued share capital consists of 78,367,690
ordinary shares of 25p each. The Company
has no treasury shares.
Details of any restrictions
on the transfer of securities
There are no restrictions on any of the
Company’s AIM securities.
Securities not in public hands
As of 21 March 2018, the percentage of the
Company’s issued share capital that is not
in public hands is 43.72%.
Company registration
Registered office
CityPoint
One Ropemaker Street
London EC2Y 9AW
Company number 03967525
108
Financial statementsEbiquity plcAnnual report and financial statements for the year ended 31 December 2017 Glossary
ANA
AOR
APAC
APMs
CAGR
Association of National Advertisers
agency of record
Asia Pacific
Alternative Performance Measures
compound annual growth rate
Capital
Reduction
the cancellation of
the share premium account
IASB
IFRS
IPA
ISAs
ISBA
KPIs
International Accounting Standards Board
International Financial Reporting
Standards
Institute of Practitioners in Advertising
International Standards on Auditing
Incorporated Society of British Advertisers
key performance indicators
CGUs
CMA
cash-generating units
LIBOR
London Interbank Offered Rate
Competition and Markets Authority
Like‑for‑like
the Company
Ebiquity plc
Constant
currency
EBIT
EBITDA
calculated by taking current year
denominated results restated at last
year’s foreign exchange rates
earnings before interest and tax
earnings before interest, tax, depreciation
and amortisation
EBT
EIP
Employee Benefit Trust
Executive Incentive Plan
EMI scheme
enterprise management incentive scheme
EPS
ESOP
FMC
FRS 101
earnings per share
Executive Share Option Plan
Fairbrother Marsh Company Limited
Financial Reporting Standard 101 ‘Reduced
Disclosure Framework’
the Group
Ebiquity plc and its subsidiaries
prior year results are adjusted to include
the results of recent acquisitions as if they
had been owned for the same period in the
prior year
Long-Term Incentive
Market Intelligence
Marketing Performance Optimisation
Media Value Measurement
long-term borrowings, short-term
borrowings less cash and cash equivalents
LTI
MI
MPO
MVM
Net debt
PwC
PricewaterhouseCoopers LLP
QCA Code
Quoted Companies Alliance – Corporate
Governance Code for Small and Mid-Size
Quoted Companies 2013
RBS
RCF
Royal Bank of Scotland
revolving credit facility
Stratigent
Stratigent LLC
TSR
total shareholder returns
Highlighted
items
highlighted items comprise non-cash
charges and non-recurring items which are
highlighted in the income statement
because separate disclosure is considered
relevant in understanding the underlying
performance of the business
UCSOP
unapproved company share option plan
Underlying
performance
underlying performance refers
to the results of operations before
highlighted items
WFA
World Federation of Advertisers
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CityPoint
One Ropemaker Street
London
EC2Y 9AW
www.ebiquity.com
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