Ocean Outdoor Limited
Annual Report and Consolidated Financial Statements
Year ended 31 December 2019
Contents
Key Highlights
Co - Chairmen’s statement
Report of the Directors
Corporate Governance
Independent Auditors’ report to the members of Ocean Outdoor Limited
Consolidated statement of profit and loss and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to financial statements
Appendix
1
2
4
13
16
23
25
26
27
28
71
Ocean Outdoor Limited
Key Highlights
The following headline financial information is on both the audited figures and unaudited proforma1
figures for Ocean Outdoor Limited and its subsidiaries ("Ocean", "the Group" or "the Company"), with
comparisons between FY19 and FY18.
Financial reported highlights
Billings2 recognised by the Group in FY19 were £135.1m (FY18: £70.3m)
Revenue generated by the business in the year totalled £104.0m (FY18: £49.8m)
Group gross profit was £44.9m (FY18: £20.4m)
Reported Adjusted EBITDA3 was £52.7m (FY18: £16.9m)
Cash on balance sheet of £26.9m (FY18: £160.5m), with no external borrowings
Net assets balance of £369.2m (FY18: £387.6m)
Cash generated from operations totalling £46.8m (FY18: £12.8)
Financial unaudited proforma1 highlights
Billings2 increased 14% year on year to £173.4m (FY18: £152.7m)
Revenue rose 14% to £141.3m (FY18: £124.5m)
Gross profit increased by 9% to £57.4m (FY18: £52.6m), with a gross profit margin of 40.6%
(FY18: 42.2%)
Adjusted EBITDA3 up 9% to £33.2m (FY18: £30.4m), with an adjusted EBITDA margin of 23.5%
(FY18: 24.4%)
Operational highlights
Completed five acquisitions:
Ngage
Media
Interbest B.V,
("Ngage")
B.V
"Interbest") for a combined
and
Ocean
Outdoor
Nederland
cash consideration
B.V
of
initial
(Formerly
£44m
called
DKTD Media B.V ("Beyond Outdoor"), adding another 8 screen locations in the
Netherlands
Ocean Outdoor Nordics VA Holding AB (Formerly called Visual Art Sweden Holding
AB, "Visual Art"), a Sweden based media sales and digital signage group operating
25,000 screens across 24 countries, for £58m
AdCityMedia AB (“ACM”), a premium out-of-home operator based in Sweden focussed
on large format digital and high-end city centre locations across the Nordics, for £24m
Purchasing the landlord agreements for the large format displays of Clear Channel across the
Netherlands
Awarded long-term contracts with Glasgow City Council and Southampton City Council, to
redevelop and introduce new large format digital screens
Successful extension of the iconic BFI IMAX and LandSec’s Piccadilly Lights contract
Concluded rollout of 128 roadside digital 6-sheet faces across the Midlands
Exclusive partnership with the UK's largest commercial broadcaster ITV, to broadcast live
content and highlight packages from the Rugby World Cup 2019
Sponsorship deal with DS Automobiles in association with Ocean’s coverage of Formula E
1 Ocean Outdoor Limited was an investment vehicle at the start of FY18. Due to the mid-year acquisitions in FY18 of SCP
Acquisition Topco Limited and Forrest Media (Holdings) Limited and the mid-year acquisition in FY19 of Ngage Media B.V
Ocean Outdoor Nederland B.V, DKTD Media B.V, Ocean Outdoor Nordics VA Holding AB and AdCityMedia AB, the
consolidated statement of profit and loss presented on page 23 does not provide a year on year comparison for the
underlying performance and operations. The financial highlights detailed above are on an unaudited proforma basis for
Ocean Outdoor Limited and all subsidiaries in the Group as at 31 December 2019 as if the same subsidiaries had been
owned from 1 January 2018.
2 Billings represent the advertising spend by the advertiser, including fees directly payable by the advertiser to their
advertising agency, exclusive of sales tax.
3 Adjusted EBITDA is the Earnings Before Interest, Tax, Depreciation, Amortisation and adjusted for one off items.
1
Ocean Outdoor Limited
Co - Chairmen’s Statement
It is with pleasure that we present to you, the shareholders, the Report and audited financial statements
of Ocean Outdoor Limited for the year ended 31 December 2019.
Introduction
2019 was a transformational year for Ocean, one which saw the business progress from being a UK
centric digital out-of-home operator to becoming a significant player across Northern Europe. Whilst
this expansion happened, the business continued to innovate and invest in the portfolio in order to
enhance our ability to deliver the most impactful campaigns and brand experiences, putting it at the
leading edge of the digital out-of-home market.
Following Ocean’s readmission to the London Stock Exchange at the start of the year, we successfully
completed a series of acquisitions in line with our strategy, turning Ocean into a prominent digital out-
of-home operator in its markets. At the same time, we have also met our organic growth targets as a
result of winning new, major city contracts and significantly expanding our portfolio of premium roadside
and city digital networks.
Acquisitions and Developments
Ocean established its presence in the Netherlands following the acquisitions of Interbest and Ngage.
The Group’s Dutch footprint was further expanded in May with the acquisition of Beyond Outdoor.
Collectively these three businesses have been rebranded and relaunched as Ocean Netherlands
following the integration process.
In September, we developed a substantial position in the Nordics through the acquisition of Visual Art,
Sweden's largest pure-play digital out-of-home operator with more than 260 locations across a mix of
retail, rail, airport and leisure destinations in 41 key cities in Sweden including Stockholm, Gothenburg
and Malmö, as well as strong presence in Denmark and Finland, and reach into Germany through its
retail OOH partnership with Unibail-Rodamco-Westfield, covering 15 shopping malls in Germany,
including those in Berlin and Munich.
The Visual Art transaction also included the creation of a digital signage technology business, Visual
Art Technologies, following Ocean’s £13m investment. Visual Art Technologies designs, produces,
installs, broadcasts and operates cutting edge, high tech-enabled digital signage systems and operates
in 24 countries, with over 4,300 locations and over 25,000 screens for clients in all sectors. Some of its
biggest clients include McDonald’s, H&M and the supermarket chain ICA.
In November, we announced the intention to acquire our second Nordic business, ACM, on which we
obtained control in December 2019. The company, based in Sweden, is a premium out-of-home
operator focussed on large format digital and high-end city centre locations in Sweden and Norway with
approximately 1,500 locations and approximately 4,500 digital screens across a mix of retail and leisure
destinations in key cities including Stockholm, Gothenburg, Malmö and Oslo. The integration of Visual
Art and ACM has been expedited in recent months, and combining them has created the leading DOOH
operator in the Nordic region.
The Group has continued to be at the forefront of the sector by enhancing its portfolio with increasingly
engaging products and driving forwards with its “digital cities for digital citizens” philosophy. During
2019, the out-of-home market continued to grow, with UK market spend rising 7.6%, which is testament
to its unique ability to immediately deliver high impact advertising at scale, with brands also focussing
on premium locations to deliver their campaigns. Whilst 2020 is set to be very difficult due to the impact
of COVID-19, the longer-term trends within DOOH provide us with optimism that Ocean will re-emerge
in a strong position as lockdowns are eased across our markets and economies and businesses begin
to rebuild.
During 2019 we also learnt more about the marketing impact of digital out-of-home, which is helping us
with our future innovation and delivery of memorable campaigns. To support the Group's research and
development programme, Ocean commissioned two new ground-breaking Neuroscience based studies
2
Ocean Outdoor Limited
in the year. The research examined the effectiveness of full motion digital out-of-home creativity,
showing that full motion screens with technology are on average over three-times more impactful than
just using full motion, and eight-times more impactful than static advertising.
Covid-19
Whilst we started 2020 with a strong base of assets and were expecting improved margins for the year,
we are now facing unprecedented global events following the spread of Covid-19. Although it is still too
early to form a definitive view on the impact of Covid-19 for the current year, the various lockdown
measures enforced by governments in the countries where we operate has led to a significant slowdown
in the out of home sector and we are not immune from these effects.
In response, the Board and our highly experienced executive teams across our territories have been
focused on implementing all the necessary measures to ensure that we can withstand the significant
impact this will have during 2020. Despite the downturn, our view is that DOOH will bounce-back more
quickly than other mediums due to the very nature of being outdoor, highly versatile and the most
impactful way to deliver messages and campaigns. With the business heavily weighted to digital and
operating prime city and roadside locations, we believe Ocean is best placed to capitalise as business
activity increases.
Whilst we maintain sufficient liquidity for the short term, the impact of COVID-19 has led us to raise the
first debt facility for the Group. This will act as a boost to liquidity to assist the business manage through
the cash flow impact of the significantly reduced revenues across Q2 and likely reduced revenues
across Q3.
We would like to thank our employees for all the hard work and dedication during what has been a busy
and landmark year for the Group. More importantly, we want to take this opportunity to thank all our
employees for their continued commitment to Ocean during these difficult and uncertain times and to
reassure everyone that we are confident that as soon as circumstances permit us to do so, business
will resume as normal.
Tom Goddard and Aryeh Bourkoff
Co-Chairmen
8 June 2020
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Ocean Outdoor Limited
Report of the directors
The directors present their report together with the audited financial statements for the year ended
31 December 2019.
Status and activities
Company
the
Whilst
consolidation
In
FY18
pursue
vehicle.
strategic and complementary acquisitions intended to enhance Ocean's scale, customer offering and
deepen its market leadership.
out-of-home
Company
announced
Ocean's
build
initiatives,
its
organic
to
growth
scale
the
supporting
intention
looking
media
was
a
to
In FY19 the Company, true to its intentions, undertook
its organic growth
initiative.
five
strategic acquisitions, whilst also executing
renamed Ocean
It
completed the double acquisition of Ngage and Interbest
Outdoor Nederland B.V) on 11 March 2019, for a combined
cash consideration of approximately
£44m, providing the Group with a strong foothold in the Dutch Digital Out of Home (DOOH) market.
This was followed by the acquisition of
on 29 May 2019. These acquisitions enhanced
the Ocean portfolio offering by adding 171 screen locations in the Netherlands.
(Interbest
initial
Beyond Outdoor
subsequently
was
2019 the Group executed its next acquisition, that
On 13 September
with a significant presence in the Nordics. The consideration was approximately
sales business within the acquired group.
signage
was
business
Ocean’s investment in the
£58m for the
Following a reorganisation of the acquired group, the
of Visual Art, providing the Group
media
digital
vendors.
Technologies
£13m.
and
new entity
Visual
was
approximately
original
formed
split
with
was
the
out
Art
The
final
approximately
acquisition
of
for
£24m. This strategic acquisition makes Ocean a significant player in the Nordic market.
acquisition
holding
97.4%
public
FY19
offer
ACM
was
and
the
of
in
Unaudited pro forma profit and loss
Ocean Outdoor Limited was an investment vehicle in FY18. Due to the acquisitions in FY18 of SCP
Acquisition Topco Limited and subsidiaries and Forrest Media (Holdings) Limited and subsidiaries at
different dates, and the acquisition in FY19 of Ngage, Interbest, Beyond Outdoor, Visual Art media sales
and ACM, also at different dates, the consolidated statement of profit and loss presented on page 23
does not provide a year on year comparison for the underlying performance and operations. For the
benefit of users of the accounts, unaudited proforma statements of total comprehensive income can be
found in the appendix (refer to page 71), which shows the year on year results on a combined basis
assuming subsidiaries acquired during any given period had been acquired on 1 January 2018.
Included in the appendix is an unaudited proforma profit and loss for the Group, UK operations, Dutch
operations and the Nordic operations for FY18 and FY19. The Group includes all group companies, UK
operations includes what was previously referred to as SCP Acquisition Topco Limited and its
subsidiaries and Forrest Media (Holdings) Limited and subsidiaries, the Dutch operations include
Ngage, Interbest and Beyond Outdoor and the Nordic operations includes Visual Art media sales and
ACM.
Analysis using financial key performance indicators
Directors and managers assess performance using performance indicators at a Group level. The
Group's key performance indicators (KPI) are Billings, Revenue and Adjusted Earnings Before Interest,
Tax, Depreciation and Amortisation excluding one off items (Adjusted EBITDA. This is generated from
the companies within the Group.
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Ocean Outdoor Limited
Please see the table below for KPI’s on the reported numbers
KPI’s on Reported figures
2019
2018
Billings £’000
Revenue £’000
Reported Adjusted EBITDA £’000
(Including IFRS 16 in FY19)1
1 Reported adjusted EBITDA represents the profit from operations of £3.0m plus depreciation and
135,080
104,033
52,744
70,288
49,795
16,888
amortisation costs of £46.4m plus one off non-recurring costs of £3.3m.
Billings, revenue and EBITDA have all seen significant increases in the year. The year on year increase
is due to two main factors:
- UK operations saw growth within its UK business with both billings and revenue up 43%. This
increase reflects improved trading levels within the UK business, however it is important to
disclose the 2018 reported figures only include the results following the acquisition of the two
trading operations in March and June and therefore does not include a full year’s operating
result, as reported for the UK in 2019.
- The Group entered new markets through multiple acquisitions. The Dutch operations acquired
in H1 2019 generated billings of £24.8m and revenue of £23.0m whilst the Nordic operations
acquired in H2 2019 contributed £9.7m to billings and £9.6m to revenue.
Reported EBITDA has seen a large increase in the year, showing a 212% rise year on year. This again
is partly due to timing of the acquisitions and only recording profit and loss financials subsequent to the
subsidiary purchase. There has also been a fundamental change in accounting treatment of leases
under IFRS 16. This has resulted in rent charges being removed from the profit and loss and replaced
by a depreciation charge and interest charge. In 2018, rent would have reduced the reported EBITDA,
compared to 2019 when no rental charge is recognised and interest and depreciation charges are not
part of the reported EBITDA figure resulting in a higher figure than if IFRS 16 had not been adopted in
the year.
The Group has a solid balance sheet with net assets at year-end of £369.2m (2018: £387.6m) including
a cash balance of £26.9m (2018: £160.5m). Cash generated from operations was £46.8m, with the
decrease in the cash balance largely as a result of the subsidiary acquisitions in the year, with a cash
outflow of £126m. The impact of IFRS 16 mentioned above is not limited to the profit and loss statement
with the Group now recognising a right of use asset and liability on the balance sheet. Having adopted
the modified retrospective approach, the asset and liability recognised on the statement of financial
position resulted in a difference of £10.3m. In line with the IFRS 16 standard, this leads to a reduction
in retained earnings which is the key contributor in the reduction of net assets in the year.
As mentioned above, the timing of acquisitions of the Group in FY18 and FY19 make the comparison
of the profit and loss of the underlying performance of Group operations difficult as the reported results
only account for post-acquisition performance. For the benefit of users of the accounts, unaudited
proforma statements of total comprehensive income can be found in the appendix (refer to page 71),
which shows the year on year results on a combined basis assuming subsidiaries acquired during any
given period had been acquired on 1 January 2018.
The unaudited pro forma financial information has been provided for illustrative purposes only and by
its nature addresses a hypothetical situation and does not purport to represent the Company's actual
financial position or results.
5
Ocean Outdoor Limited
The below table shows the KPI’s of the Group on this unaudited proforma basis
KPI’s on unaudited proforma (non-
GAAP measures)
Billings £’000
Revenue £’000
Adjusted EBITDA £’000 (Excluding
the impact IFRS 16)
Results and dividends
2019
2018
173,356
141,314
33,236
152,724
124,504
30,397
The consolidated statement of profit and loss is set out on page 23 and shows the profit for the year.
Dividends are recognised when they become legally payable. In the case of interim dividends to equity
shareholders, this is when declared by the directors. In the case of final dividends, this is when approved
by the shareholders at the AGM. The Company's current intention is to retain any earnings for use in
its business operations, and the Company does not anticipate declaring any dividends in the
foreseeable future.
Directors and their interests
The Directors of the Company who served during the period of this Report are:
Name
Robert D Marcus
Martin HP Söderström
Sangeeta Desai
Aryeh B. Bourkoff
Andrew Barron
Tim Bleakley
Tom Goddard
Thomas Ebeling
Andrew Miller
Position
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Founder and Non-Executive Director
Founder and Non-Executive Director
CEO and Executive Director
Non-Executive Chairman
Independent Non-Executive Director
Independent Non-Executive Director
Date of appointment
22 February 2017
22 February 2017
27 February 2017
22 February 2017
20 January 2017
28 March 2018
28 March 2018
19 October 2018
27 November 2018
Non-Executive Directors or the Company can terminate the appointment by giving three months’ notice.
During the year Andrew Miller resigned as an Independent Non-Executive Director of the Board
effective from 31 December 2019.
As at 31 December 2019 the Directors have the following interests in the Company’s securities:
Director
No. of Ordinary
Shares
Andrew Barron
Andrew Miller
Aryeh B Bourkoff
Robert Marcus
Martin HP Söderström
Sangeeta Desai
Thomas Ebeling
Tom Goddard
Tim Bleakley
528,242
-
1,624,275
119,000
15,000
10,000
7,500
232,703
315,523
Percentage of
issued Ordinary
Shares
0.98%
-
3.01%
0.22%
0.03%
0.02%
0.01%
0.43%
0.58%
No. of Founder
Preferred Shares
128,625
-
349,125
-
-
-
-
-
-
Tim Bleakley also has 1,998,000 hurdle shares, issued by a subsidiary of the Company which will,
except in limited circumstances, be settled in ordinary shares of Ocean Outdoor Limited.
6
Ocean Outdoor Limited
Tom Goddard also has 1,282,050 hurdle shares, issued by a subsidiary of the Company which will,
except in limited circumstances, be settled in ordinary shares of Ocean Outdoor Limited.
Directors’ remuneration
Under the Director’s letter of appointment, Martin HP Söderström, Sangeeta Desai, Thomas Ebeling
and Andrew Miller are entitled to a fee of US$75,000 per annum and Robert Marcus is entitled to receive
a fee of US$90,000 per annum. Robert Marcus, Martin HP Söderström, Sangeeta Desai and Andrew
Miller are also entitled to receive an additional fee of US$10,000 per annum as Committee members.
Tom Goddard, in his role as Chairman, was paid £88,250 for the year ended 31 December 2019 and
Tim Bleakley, CEO, was paid £453,419.
Andrew Barron and Aryeh B Bourkoff did not receive a fee in connection with their appointment as Non-
Executive Directors of the Company.
In addition, all of the Directors are entitled to be reimbursed by the Company for travel, hotel and other
expenses incurred by them in the course of their directors’ duties relating to the Company.
Andrew Miller resigned as an Independent Non-Executive Director effective from 31 December 2019.
Share capital
The full details of share capital information is set out in note 20.
Substantial shareholdings
As at 31 December 2019, the following had disclosed an interest in the issued Ordinary Share capital
of the Company (being 5% or more of the voting rights in the Company) in accordance with the
requirements of the Disclosure and Transparency Rules (the “DTRs”):
Shareholder
Number of
Ordinary Shares (1
Notified percentage of
voting rights (1
Anchorage Capital Group
Senator Investment Group
Permian Investment Partners
Sycomore Asset Management
Bufo Limited
6,633,333
6,184,616
3,732,867
2,909,662
2,700,000
12.37%
11.54%
6.96%
5.43%
5.04%
As at 31 December 2019 the interest of any person listed in the table above in Ordinary Shares may
have increased or decreased without any obligation on the relevant person to make further notification
to the Company pursuant to the DTRs.
Change of control
The Company is not party to any significant contracts that are subject to change of control provisions
in the event of a takeover bid. There are no agreements between the Company and its Directors or
employees providing compensation for loss of office or employment that occurs because of a takeover
bid.
Independent Auditors
The Board appointed BDO LLP as the company auditors during the prior year. The Board have reason
to believe that BDO LLP conducted an effective audit and have provided the auditors with full access
to all of the books and records of the Company and its subsidiaries.
7
Ocean Outdoor Limited
Relations with Shareholders
The Directors are always available for communication with Shareholders and all Shareholders will have
the opportunity, and are encouraged, to attend and vote at the Annual General Meetings of the
Company during which the Board will be available to discuss issues affecting the Company.
Statement of going concern
In consideration of the company’s current financial position and review of its budgets and forecasts, on
which sensitivity analyses have been performed to reflect possible downside scenarios, the Directors
have a reasonable expectation that the company has adequate resources to continue in operational
existence for at least 12 months from the approval of the financial statements. The Directors therefore
believe it remains appropriate to continue to prepare the accounts on the going concern basis.
On 11 March 2020, the World Health Organisation announced the pandemic status of COVID-19.
Subsequent to this announcement, significant measures have been taken by Governments across
Europe, restricting the movement of the people and the forced closure of non-essential business. Given
the company operates in the DOOH market, this has impacted on the company’s performance in FY20.
The effect COVID-19 will have on the global economy and the knock-on effect that it has on the medium
to long term on consumer and business behaviour cannot yet be quantified.
The main priority of the Group is to safeguard its employees, customers and its stakeholders. Across
each jurisdiction in which the company operates government guidance is being followed. From an
operational perspective, this has not affected the play out and availability of the majority of its portfolio
given the Group’s large digital portfolio, but the appetite of brands to advertise on DOOH assets has
declined significantly. Various scenarios assessing the impact of the sales decline over the next 12
months, and beyond, have been modelled and subsequently what the implications would be on the
Group cash flow. The Directors of the company recognise COVID-19 has, and will have, a significant
effect on the results of the business in FY20. However, it is their belief the company is able to navigate
through the impact of COVID-19 due to the strength of its market position, its robust balance sheet,
current cash surplus and the securing of new credit facilities providing additional financing of up to £35m
to draw down, subject to customary covenants related to minimum quarterly adjusted EBITDA and cash
balances.
Following the decline in sales as a result of the pandemic, the Group addressed its cost base as a
matter of urgency in order to reduce cash outflows from the business. Staff costs were reduced through
a structured reduction in working hours and government reimbursement schemes have been utilised
where strictly necessary. All landlords have been contacted with a view to negotiating rent holidays,
deferrals and reductions wherever possible. Capital expenditure has been frozen on all new projects
and the site maintenance program has been reduced to the performance of only essential maintenance.
Credit terms have been optimised and extensions agreed with key suppliers. Cash inflows have been
aided with sales teams chasing up any unpaid balances and ensuring any invoice queries are resolved
ensuring that debtors continue to be settled in a timely fashion.
The swift actions taken by the Group enable it to deal with the short-term impact that COVID-19 is
having on the business. These steps will allow the business to resume to full working capacity once
business returns to the new normal. There is however some uncertainty when this will be and what the
lasting impacts of the pandemic will be on businesses and the economy. Should the impact be worse
than predicted, there are further cost savings that could be utilised. The Group however feel at this point
in time, the medium and long-term benefits of not implementing these changes outweighs the short-
term cost savings that could be realised.
The Group retains sufficient liquidity in the short term, however the impact of COVID-19 has resulted in
the Group raising its first debt facility with a rolling credit facility agreed with the Group’s banking
partners on 28 May 2020, securing new credit facilities providing additional financing of up to £35m,
subject to customary covenants related to minimum quarterly adjusted EBITDA and cash balances.
This will boost liquidity to assist the business manage through the cash flow impact of the significantly
reduced revenues suffered in Q2 and likely reduced revenues in Q3. The Group believes this is
8
Ocean Outdoor Limited
sufficient liquidity to ensure the Group is able to meet its obligations as and when they fall due. In the
event additional liquidity is required, there are a variety of funding options available to the company.
The impact on FY20 cannot as yet be fully assessed. Accordingly, the Board believes it would be
inappropriate to provide forward looking financial guidance to investors and analysts at this time.
Internal control
The Board is responsible for determining the nature and extent of the significant risks it is willing to take
in achieving its strategic objectives. The Board maintains sound risk management and internal control
systems. The Board has reviewed the Company’s risk management and control systems and believes
that the controls are satisfactory given the nature and size of the Company and its subsidiaries.
Financial Risk Profile
The Company’s and Group’s financial instruments comprise mainly of cash and cash equivalents, and
various items such as payables and receivables that arise directly from the Group’s operations. Details
of the risks relevant to the Group are included in the notes to the financial statements.
Management Report
For the purposes of compliance with DTR 4.1.5R(2), DTR 4.1.8R and DTR4.1.11R, the required content
of the “Management Report” can be found in this Report of Directors.
Principal Risk and Uncertainties
The main risks and uncertainties identified by the Group are as follows:
The Group operates in a highly competitive market
The Group operates in a highly competitive industry and may not be able to maintain or increase
its current advertising and sales revenues or market share. The Group competes for advertising
revenue with other outdoor advertising operators, as well as with other media, such as radio,
newspapers, magazines, television, direct mail, mobile devices and internet-based services.
Competitive pressures could cause the Group to lose market share, require it to lower prices,
increase marketing expenditures and increase the use of discounting or promotional campaigns,
and restrict its ability to increase prices. These or other developments could materially affect the
Group's sales volumes and margins and result in a decrease in its operating results, which could
have a material adverse effect on the Group's business, financial condition and results of
operations.
The Group is heavily reliant on its relationships with media agencies
The Group is heavily reliant on its relationships with four main media specialist buyers to sell the
out-of-home advertising space which it owns and/or manages. Accordingly, the loss of these
relationships, a significant change in the terms of these relationships, or any of these agencies
encountering financial difficulties could have a materially adverse effect on the Group's business,
financial condition and results of operations.
A loss of sites or a failure to renew relevant site agreements may reduce the Group's revenue
The Group gains access to advertising sites through short, medium and long-term contracts or
concessions (being comprised of (i) leases, (ii) licences; and (iii) certain commercial site
agreements) with asset owners such as local municipalities and commercial landlords. There is no
guarantee that such site agreements, including those relating to the Group's iconic sites, will be
renewed at all or renewed on terms which are favourable to the Group. If sufficient numbers of site
agreements are cancelled, not renewed or sufficient numbers of sites become impaired, it could
have an adverse effect on the Group's business, financial condition and results of operations.
9
Ocean Outdoor Limited
The Group's sites and other technology systems and operations could be exposed to damage or
interruption
The Group's sites and other technology systems and operations could be exposed to damage or
interruption from system failures, computer viruses, cyber-attacks, power or telecommunication
providers' failure, fire, natural disasters, terrorist acts, war, or human error. Any interruptions would
impact the Group's ability to operate and could result in business interruption, the loss of customers
and revenue, damaged reputation and weakening of competitive position and could have a material
adverse effect on the Group's business, financial condition and results of operations. There is a risk
that, if a cyber-attack is successful, any data security breaches or the Group's inadvertent failure to
protect confidential information could result in a loss of information integrity. Breaches of the Group's
obligations under applicable laws or client agreements and system outages may potentially have a
material adverse impact on the Group's reputation and financial performance.
Changes in technology may impact consumer and advertiser behaviour
The advertising industry will continue to be affected by changes in technology, with these changes
likely leading to increasing media options for consumers. If these changes drive advertising away
from DOOH advertising, this could have a material adverse effect on the Group's business, financial
condition and results of operations.
The Group's operations are vulnerable to any adverse developments to the UK, Dutch and Nordic
economies, market conditions and the corresponding legal and regulatory environment
The Group's operations are exposed to the prevailing economic and market conditions, as well as
the legal and regulatory environment. Periods of a slowing economy or recession, or periods of
economic uncertainty, may be accompanied by a decrease in advertising which would reduce the
Group's advertising revenues and have an adverse effect on the Group's revenue, profit margins,
cash flow and liquidity. There has also been an increase in political uncertainty as a result of the UK
vote in favour of exiting the EU. These will impact the Group (including its business, employees,
operations and assets) and may have a materially adverse effect on the business, financial condition
and results of operations of the Group in the future. Material decreases in revenue could result in
fixed costs exceeding contribution and the Group suffering losses and resulting in operating cash
outflows.
Following multiple acquisitions in new markets, the integration of acquired subsidiaries may not result
in the expected returns and the Group synergies may not be realised.
The Group has undertaken a number of acquisitions and entered new overseas markets.
Consideration for these businesses is based on a number of factors including past performance and
expected future returns. This acquisition strategy is to allow the Group to benefit from the growth
potential in these new markets and generate synergies arising from being a large operator in the
market. There is no guarantee the potential of these new markets will be realised; the returns may
be lower than expected and that expected Group synergies may not arise as expected. This could
have a material adverse effect on the Group's business, financial condition and results of operations.
The Group's operations could be significantly affected by COVID-19
The Group's operations are exposed to the prevailing economic and market conditions and these
are expected to be impacted in the short term by COVID-19, however the medium and long-term
implications are not known. Periods of economic uncertainty, may be accompanied by a decrease
in advertising which would reduce the Group's advertising revenues and have an adverse effect on
the Group's revenue, profit margins, cash flow and liquidity. It may have a materially adverse effect
on the business, financial condition and results of operations of the Group in the future. Material
decreases in revenue could result in fixed costs exceeding contribution and the Group suffering
losses and resulting in operating cash outflows.
10
Ocean Outdoor Limited
Directors’ Responsibilities
The directors are responsible for preparing the Directors’ report and the financial statements for the
Group. The Directors have prepared the financial statements for each financial year which give a true
and fair view of the state of affairs of the Group and of the profit or loss of the Group for that year.
The Directors have chosen to use the international financial reporting standards (“IFRS”) as adopted
by the European Union in preparing the Group’s financial statements.
International Accounting Standard 1 requires financial statements present fairly for each financial year
the Company’s financial position, financial performance and cash flows. This requires the faithful
representation of the effects of transactions, other events and conditions in accordance with the
definitions and recognition criteria for assets, liabilities, income and expenses set out in the International
Accounting Standards Board’s ‘Framework for the preparation and presentation of financial statements.
In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable IFRS.
A fair presentation also requires the Directors to:
consistently select and apply appropriate accounting policies;
present information, including accounting policies, in a manner that provides relevant, reliable,
comparable and understandable information;
provide additional disclosures when compliance with the specific requirements in IFRS is
insufficient to enable users to understand the impact of particular transactions, other events
and conditions on the entity’s financial position and financial performance; and
state that the group has complied with IFRS, subject to any material departures disclosed and
explained in the financial statements.
The Directors are also required to prepare financial statements in accordance with the rules of the
London Stock Exchange for companies trading securities on the Stock Exchange. The Directors are
responsible for keeping proper accounting records which disclose with reasonable accuracy at any time
the financial position of the Group, for safeguarding the assets, for taking reasonable steps for the
prevention and detection of fraud and other irregularities and for the preparation of financial statements.
Financial information is published on
the company’s website, www.oceanoutdoor.com. The
maintenance and integrity of this website is the responsibility of the Directors; the work carried out by
the auditors does not involve consideration of these matters and, accordingly, the auditors accept no
responsibility for any changes that may occur to the financial statements after they are initially presented
on the website, www.oceanoutdoor.com. Legislation in the BVI governing the preparation and
dissemination of financial statements may differ from legislation in other jurisdictions.
Directors’ Responsibilities Pursuant to UK Data and Transparency Regulations
The directors confirm to the best of their knowledge:
The group financial statements have been prepared in accordance with IFRS adopted by the
European Union and article 4 of the IAS regulation and give a true and fair view of the assets,
liabilities, financial position and profit and loss of the Group.
The annual report includes a fair review of the development and performance of the business
and the financial position of the group and the parent company, together with a description of
the principal risks and uncertainties that they face.
Disclosure of information to Auditors
Each of the persons who is a Director at the date of approval of this Report confirms that:
so far as the director is aware, there is no relevant audit information of which the Company’s
auditors are unaware; and
each director has taken all the steps that he/she ought to have taken as a director in order to make
himself/herself aware of any relevant audit information and to establish that the Company’s auditors
are aware of that information.
11
Ocean Outdoor Limited
Directors’ indemnities
As at the date of this Report, indemnities granted by the Company to the Directors are in force to the
extent permitted under BVI law. The Company also maintains Directors’ and Officers’ liability insurance,
the level of which is reviewed annually.
Subsequent events
Further details of subsequent events are disclosed in note 24 of the financial statements.
By order of the Board
Tom Goddard
Co-chairman
8 June 2020
12
Ocean Outdoor Limited
Corporate Governance Statement
Ocean is committed to maintaining the highest standards of business conduct and ethics, as well as full
compliance with all applicable laws, rules and regulations, corporate reporting and disclosure, and all
other matters deemed to protect the best interests of the company’s shareholders.
At the date of this report, the Company complies with the corporate governance regime applicable to
the Company pursuant to the laws of the British Virgin Islands.
In addition, the Company strives for compliance with the U.K. Corporate Governance Code (“the Code”)
to the greatest extent possible to facilitate effective and prudent management that can contribute to the
long-term success of the Company, however it is not currently compliant with the Code.
Full details of the corporate governance measures adopted by the Group can be found on the Group
website: (https://investors.oceanoutdoor.com/investors/corporate-governance/)
Strategic decisions
The Directors are responsible for carrying out the Company’s objectives, implementing its business
strategy and conducting its overall supervision. Acquisition, divestment and other strategic decisions
are considered and determined by the Board. The Board provides leadership within a framework of
prudent and effective controls. The Board has established the corporate governance values of the
Company and has overall responsibility for setting the Company’s strategic aims, defining the business
plan and strategy and managing the financial and operational resources of the Company.
Through the publication of regular announcements, corporate presentations posted to the company
website, and face to face meetings, the board has sought to communicate its strategy, objectives and
performance to all shareholders on a timely basis. When shareholders raise concerns with the board
over the Group’s strategy, objectives or performance, the Board endeavours to actively engage with
the shareholders in dialogue.
Board process
The full Board meets formally at regular intervals throughout the year and at such other times as may
be necessary to address any significant matters that may arise. The Board communicates regularly
between these meetings. On a regular basis the Board is provided with appropriate and timely
information relating to all aspects of the Group. In addition, the Directors are free to seek any further
information or request specific presentation on matters that they consider necessary in order to
discharge their duties effectively. The collective responsibility of the Board ensures that all Directors
are involved in the process of arriving at significant decisions.
Nomination Committee
The Nomination Committee is responsible for considering and making recommendations to the Board
in respect of appointments to the Board. In carrying out its duties, the Nomination Committee is primarily
responsible for identifying and nominating candidates to fill Board vacancies; evaluating the structure
and composition of the Board with regard to the balance of skills, knowledge and experience and
making recommendations accordingly; giving full consideration to succession planning; and reviewing
the leadership of the Group.
13
Ocean Outdoor Limited
Audit and Risk Committee
The Audit and Risk Committee assists the Board in discharging its responsibilities with regard to
financial reporting, external and internal controls, including reviewing and monitoring the integrity of the
Group’s annual and interim financial statements, reviewing and monitoring the extent of the non-audit
work undertaken by the Group’s external auditors, advising on the appointment of such external
auditors, overseeing the Group’s relationship with its external auditors, reviewing the effectiveness of
the external audit process, and reviewing the effectiveness of the Group’s internal control and review
function.
The Audit and Risk Committee gives due consideration to laws and regulations, the provisions of the
UK Corporate Governance Code and the requirements of the Listing Rules whilst it continues to monitor
the integrity of published financial information and review significant financial reporting issues and
judgements. The Audit and Risk Committee also has responsibility for, among other things, oversight
of the Group’s risk appetite, risk monitoring and capital management, reviewing the manner in which
the members of the Group implement and monitor the adequacy of the Group’s risk management
framework and ensuring that the Group maintains appropriate levels of capital, as well as advising the
Board on its overall risk appetite. The Audit and Risk Committee also reviews the adequacy of security
measures, anti-money laundering systems, anti-bribery controls and procedures in place for detecting
fraud.
At each period end the financial reporting process commences with individual CGU’s submitting their
financial information to Group management. These CGU’s are consolidated into a Group financial
reporting pack which is reviewed by Group management and compared to monthly management
accounts for consistency. Following this review, the reports are presented to the audit and risk
committee for a subsequent review and approval.
Remuneration Committee
The Remuneration Committee has responsibility for determination of specific remuneration and benefits
packages for each of the executive directors and certain senior management of the Group, including
pension rights and any compensation payments, and recommending and monitoring the level and
structure of remuneration for senior management and the implementation of share options, share
incentive plans or other performance related schemes.
Independence of the Board
Tom Goddard, Tim Bleakley, Aryeh B. Bourkoff and Andrew Barron are not considered to be
Independent Directors.
The Board considers the Independent Non-Executive Directors to be independent in character and
judgment and free from relationships or circumstances which are likely to affect or could appear to
affect, their judgment. In addition, when determining the independence of the Independent Non-
Executive Directors, the Board had regard to their Letters of Appointment and Initial Option Deeds and,
in the case of Mr Marcus, his prior role as Chairman of the Company and his holding of 119,000 Ordinary
Shares. The Board believes that the aforementioned factors are not sufficient to have an impact on their
independence.
Ethical standards
All Directors, managers and employees are expected to act with the utmost integrity and objectivity,
striving at all times to enhance the reputation and performance of the Group.
External auditors
The Board and the Audit Committee review the performance of the external auditors on an annual basis
and normally meet with them during the year to:
- Discuss the external audit plans, identifying any significant changes in structure, operations,
14
Ocean Outdoor Limited
internal controls or accounting policies likely to impact on the financial statements and to review
the fees proposed for the audit work to be performed.
- Review the periodic reports prior to lodgement and release, and any significant adjustments
required as a result of the auditor’s findings, and to recommend board approval of these
documents, prior to announcement of results.
- Review the results and findings of the auditor, the adequacy of accounting and financial
controls, and to monitor the implementation of any recommendations made.
- Review the draft financial report and recommend board approval of the financial report.
- As required, to organise, review and report on any special reviews or investigations deemed
necessary by the board.
The Board and Audit Committee specifically assess the independence of the Group’s external auditors
and in doing so consider the level and nature of non-audit services provided and associated fees, the
auditor’s rotation arrangements for key audit personnel and areas of potential conflicts of interest.
Communication with shareholders and continuous disclosure
The directors attach importance to the provision of clear and timely information to shareholders and the
broader investment community. Information about the company is available on its website
(www.oceanoutdoor.com).
Financial reporting – the Company reports to shareholders half-yearly and annually, as required by the
LSE rules. The Chairman states to the Board that the company’s financial reports present a true and
fair view in all material respects of the company’s financial condition and operational results and are in
accordance with relevant accounting standards.
Equal access policy – the Company has a policy, based on existing policies and practices as a company
quoted on the LSE market, that all shareholders and investors have equal access to the company’s
information, and has procedures to ensure that all price sensitive information will be disclosed to the
LSE in accordance with the continuous disclosure requirements of the LSE rules, these procedures
include:
- A comprehensive process to identify matters that may have a material effect on the price of the
company’s shares, notifying them to the LSE, posting them on the company’s website, and
issuing media releases.
- All information provided to the LSE, and related information (including information provided to
the company’s website
immediately posted
the media), being
to
analysts and
https://investors.oceanoutdoor.com/investors/
- The Annual Report is made available to all shareholders. The Board ensures that the annual
report includes relevant information about the operations of the Group during the year, changes
in the state of affairs of the Group and details of future developments, as well as all required
disclosures.
issued
throughout
the year and
News releases are
the company maintains a website
(https://investors.oceanoutdoor.com/investors/) on which press releases, corporate presentations and
the annual report and financial statements are available to view together with the half-yearly financial
statements. Enquiries from individual shareholders on matters relating to the business of the company
are welcomed. Shareholders and other interested parties can subscribe to receive notification of news
updates and other documents from the company via email. In addition, the Executive Directors meet
with major shareholders to discuss the progress of the company and provide periodic feedback to the
board following meetings with shareholders.
15
Ocean Outdoor Limited
Independent auditor’s report to the members of Ocean Outdoor Limited
Opinion
We have audited the financial statements of Ocean Outdoor Ltd (the ‘parent company’) and its
subsidiaries (the ‘Group’) for the year ended 31 December 2019 which comprise the consolidated
statement of profit and loss and other comprehensive income, the consolidated statement of financial
position, the consolidated statement of changes in equity, the consolidated statement of cash flows,
and notes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the group financial
statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by
the European Union.
In our opinion:
-
-
the financial statements give a true and fair view of the state of the group’s affairs as at 31
December 2019 and of the group’s loss for the year then ended; and
the group financial statements have been properly prepared in accordance with IFRSs as
adopted by the European Union.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our report. We are independent of the
group in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with International
Standards on Auditing (UK) (ISAs UK). Our audit work has been undertaken so that we might state to
the company’s members those matters we are required to state to them in an auditor’s report and for
no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require
us to report to you where:
-
-
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.
16
Ocean Outdoor Limited
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
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) we identified, including those which had the greatest
effect on the overall audit strategy, the allocation of resources in the audit and directing the efforts of
the engagement team. These matters 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.
Matter
How we addressed the matter in our audit
Revenue recognition- Cut-off
judgements
As detailed in note 2.11, Management make
certain
revenue
in
recognition for the treatment of contractual
arrangements entered into by trading entities in
the group.
relation
to
include determining
the Group’s
These
performance obligations in its contracts with
customers and whether as at the reporting date,
the group has completed
its performance
obligations. Where Ocean Outdoor has not
completed its performance obligations prior to
the reporting date, revenues are not recognised,
with the appropriate balance deferred.
Revenues are invoiced normally in 2-week block
periods. This results in a cut off risk at the
reporting date in relation to the existence of
recognised and completeness of
revenue
deferred revenue. We therefore considered this
to be a key audit matter.
We assessed whether the revenue recognition
policies adopted by the Group comply with
accounting standards.
We reviewed a sample of invoices to assess
whether:
the
revenue had been
-
in
accordance with the Group’s accounting policy
and accounting standards;
recognised
- appropriate cut off was observed with Ocean
its performance
Outdoor having completed
obligations as stated in the customer invoices
and supporting evidence of delivery of the
campaigns prior to the reporting date, and if not
completed at the reporting date, appropriate
revenue was deferred; and
- where the revenue had not yet been earned at
year end, the amounts which should be deferred
were agreed to the deferred revenue schedule.
In relation to other adjustments to revenue, such
as rebates and commissions, we checked the
methodology/basis and re-calculated the amount
by reference to the contractual terms and we
checked if there are any material accounting or
disclosure implications.
In relation to deferred revenue balances, we
tested a sample of invoices and cash receipts for
the period 2-weeks pre and post year end and
checked whether the revenue and deferred
revenue was appropriately recognised for the
campaigns in the correct accounting periods.
Key observations noted:
Based on the work performed we consider that
revenue has been recognised appropriately and
in accordance with
revenue
recognition policy and the accounting standards.
the Group’s
17
Ocean Outdoor Limited
Acquisition Accounting
As detailed in notes 13 and 14 to the financial
statements, the Group made a number of
acquisitions during the year.
Consequently, management had to exercise
judgement in considering the fair value of the
assets and liabilities acquired.
identifiable
recognised
acquisition
Management
in
separately
respect of acquired rights over advertising sites,
exercising judgement, as detailed in note 2.9 in
estimating their fair value.
intangible assets
on
The judgements and estimates in this area
include:
• underlying cash flow projections,
• discount rates applied, and
long-term growth rates.
•
There is a risk that the fair values of these
intangible assets may be materially misstated.
Additionally, there is significant judgement, as
detailed in note 14, around whether the digital
signage investment (the “investee”) acquired as
part of the acquisition of Ocean Outdoor Nordics
VA Holding AB, and subject to restructuring
following acquisition, should be accounted for as
an acquisition of a subsidiary business or the
acquisition of an associate and therefore there is
a risk that the accounting treatment adopted by
management is not appropriate.
challenged
the methodology
underpinning
and
the
estimates made
and
We
significant
assumptions
judgements
by
management in the assessment of the fair value
of the separately identifiable intangible assets
acquired by comparison to industry data and our
knowledge of the business.
In addition, with the assistance of our valuations
specialists, we checked
the methodology
deployed.
We also considered the completeness of the
separately identifiable intangible assets with
reference to our understanding of the business
and the key reasons for executing the transaction
from the acquirer’s perspective.
We assessed and challenged management’s
methodology on the accounting treatment for the
investment
in Ocean Outdoor Nordics VA
Holding AB.
In particular, we assessed whether the Group
had control of the investee during the year and at
the reporting date.
We assessed the powers and rights of Ocean
and the third party investor to determine whether
the investment should be recognised as a
subsidiary or an associate at the initial date of
purchase.
Following the restructure of the investee we
checked the share subscription transactions, to
assess whether
investee should be
accounted for as an associate with effect from 23
December 2019
the
Key observations noted:
by management
Based on the work performed, we consider the
judgements made
in
determining the fair values of the intangible
assets acquired, and
the classification of
businesses acquired during the year to be
appropriate, and have been recognised
in
accordance with the group’s accounting policy for
business combinations.
18
Ocean Outdoor Limited
IFRS 16 – First year application
to
the
in note 2.19
financial
As detailed
statements, the Group has applied, for the first
time, IFRS 16 Leases, which requires, under the
modified retrospective approach, a restatement
to opening retained earnings. IFRS 16 has a
material impact for the Group with significant
values being recognised on balance sheet for
right of use leasehold assets (“ROU”) and lease
liabilities. As such there is a risk the ROU asset,
lease liability and depreciation/interest costs are
not accounted for appropriately.
There are also judgements required, as detailed
in note 2.9 by management when calculating the
ROU lease liabilities which are subjective in
nature,
lease
contracts, other terms within the lease contracts,
and incremental borrowing rates (“IBR”) used in
the valuation models.
length of
including
the
the
We assessed whether the IFRS 16 policies
adopted by the Group comply with accounting
standards.
We considered the adequacy of the disclosure
made
the appropriate
accounting standards.
in comparison with
the Group
We performed tests on a sample of contracts to
check whether the accounting treatment adopted
is appropriate. We critically
by
assessed management's discounted cash flow
models and ensured the model is mechanically
sound and an appropriate basis for recognising
the ROU asset and lease liabilities.
We checked the completeness of the leases
schedule by reference to test checking the
group’s property, plant, and equipment registers
for revenue generating sites.
We engaged our valuation specialist to check the
reasonableness of the IBR rate by reference to
free borrowing rates,
the
financing factors, and asset specific adjustments.
term, risk
lease
Based on tests performed on a sample of
contracts we critically assessed any judgements
made in relation to the length of the lease
including the extension terms and the probability
of renewal by the Group, and other terms within
the
to
modifications including the treatment of profit
share arrangements,
fixed
payments, changes to the lease payments based
on RPI and CPI, and rent review terms.
lease contracts, which give
variable and
rise
We also checked and assessed management's
discounted cash flow models and ensured that
the model was mechanically sound and an
appropriate basis for recognising the ROU asset
and lease liabilities.
Key observations noted:
Based on the work performed, we consider the
judgements made by management in applying
IFRS 16 are appropriate and the disclosures
comply with the relevant accounting standard.
19
Ocean Outdoor Limited
Going concern
resulted
As detailed in note 2.2, the unprecedented
impact of COVID-19 on the business and the
wider world economies has
in
uncertainties on the ability of companies to
continue operating as going concerns, and has
raised additional audit risks. Indeed, the Group
has itself seen a significant reduction in revenues
from mid-March 2020. As a result, the directors
have considered the impact of the recent COVID-
19 outbreak as part of the Group’s going concern
analysis and have modelled a
range of
reasonably possible outcomes as a result of the
including an extreme
COVID-19 pandemic,
stress test scenario.
As a consequence of considering the impact of
the recent COVID-19 outbreak and the potential
impact on the group, subsequent to the year end
the directors have secured new credit facilities,
providing additional financing of up to £35m,
subject
to
minimum quarterly adjusted EBITDA and cash
balances.
to customary covenants related
Because of the significance of this matter we
determined that it was a key audit matter.
We
considered management’s modelled
scenarios including the stress test scenario,
which was based on significantly reduced trading
for a period of 12 months.
We reviewed outcome of the mitigating actions
already undertaken by directors to manage and
conserve cash.
We confirmed the cash at hand within the Group
as at 28th May 2020.
We assessed the additional mitigating options
that management have at their disposal to
manage and conserve cash and challenged
management on the key assumptions included
and confirmed management’s mitigating actions
are within their control.
We examined the terms of the new credit facilities
secured by the group, focusing on the covenants
per the agreements, to check that the Group
could remain compliant for the next 12 months,
when considering the stress test model prepared.
We assessed management’s disclosures
in
relation to the COVID-19 pandemic and its
potential impact and to check that these are
consistent with management’s stress
test
scenario and the Board’s view of the current
market conditions.
Key observations noted:
Our observations in respect of going concern are
set out in the Conclusions relating to going
concern section above.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the
effect of misstatements. We consider materiality to be the magnitude by which misstatements, including
omissions, could influence the economic decisions of reasonable users that are taken on the basis of
the financial statements. In order to reduce to an appropriately low level the probability that any
misstatements exceed materiality, we use a lower materiality level, performance materiality, to
determine the extent of testing needed. Importantly, misstatements below these levels will not
necessarily be evaluated as immaterial as we also take account of the nature of identified
misstatements, and the particular circumstances of their occurrence, when evaluating their effect on
the financial statements as a whole.
Level of materiality applied and rationale
We consider revenue to be the critical performance measure for the Group. Using this benchmark, we
set materiality at £1,000,000 (2018 - £500,000) which represents 1% of revenues.
20
Ocean Outdoor Limited
Performance materiality
The application of materiality at the individual account or balance level is set at an amount to reduce to
an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds materiality.
On the basis of our risk assessment together with the Group’s overall control environment, our
judgement was that overall performance materiality for the Group should be 70%. As such, performance
financial statement materiality was set at £700,000 (2018 - £350,000).
Component materiality
We set materiality for each component of the Group based on a percentage of materiality dependent
on the size and our assessment of the risk of material misstatement of that component. Component
materiality ranged from £114,000 to £602,000 (2018 - £120,000 to £350,000).
Reporting Threshold
We agreed with the Audit Committee that we would report to them all audit differences individually in
excess of £30,000 (2018 - £15,000). We also agreed to report audit differences below those thresholds
that, in our view, warranted reporting on qualitative grounds.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including
Group-wide controls, and assessing the risks of material misstatement at the Group level. The group
has 5 significant components, which represented the main trading entities in the group, being Ocean
Outdoor UK Limited, Signature Outdoor Limited, Mediaco Outdoor Limited, Forrest Outdoor Media
Limited and Ocean Outdoor Netherlands B.V (formerly Interbest B.V.).
Ocean Outdoor Limited (the Parent Company) and the significant components were subject to full scope
audits which were performed by BDO LLP except for Ocean Outdoor Netherlands B.V, which was
performed by a local firm.
The remaining 22 subsidiaries of the group were considered non-significant and such components were
subject to analytical review procedures together with substantive testing on group audit risk areas
applicable to that component, carried out by the group audit team and local audit firms.
As part of our Group audit strategy, as Group auditors:
- We held planning meetings with the component auditor and local management;
- Members of the Group audit team visited the component auditors at the planning and fieldwork
phases of the audit;
- Detailed Group reporting instructions were sent to the component auditors, which included the
significant areas to be covered by their audit, and set out the information to be reported to the
Group audit team;
- We reviewed Group reporting submissions and performed reviews of the component auditors’
files; and
- We held a clearance meeting with the component auditor and local management to discuss
significant audit and accounting issues and judgements.
As a result of this approach, 90.2% of the Group’s Revenue, 92.5% of the Total Assets and 94.5% of
the Adjusted Profit before Tax were subject to audit.
21
Ocean Outdoor Limited
Other information
The directors are responsible for the other information. The other information comprises the information
included in the annual report and consolidated financial statements, other than the financial statements
and our auditor’s report thereon. Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our report, we do not express any
form of assurance conclusion 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 such material inconsistencies or apparent material misstatements, we are required to
determine whether there is a material misstatement in 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 in this regard.
Responsibilities of directors
As explained more fully in the directors’ responsibilities set out on page 11, the directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair view,
and for such internal control as the directors 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 the parent
company or to cease operations, or have no realistic alternative but to do so.
Auditor’s 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 auditor’s 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
Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditor’s report.
Use of our report
This report is made solely to the Parent Company’s members, as a body, in accordance with our
engagement letter dated 1 June 2020. Our audit work has been undertaken so that we might state to
the Parent Company’s members those matters we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Parent Company and the Parent Company’s members as a
body, for our audit work, for this report, or for the opinions we have formed.
Nicole Martin (Senior Statutory Auditor)
For and on behalf of BDO LLP, London, UK Statutory Auditor
8 June 2020
BDO LLP is a limited liability partnership registered in England and Wales (registered number
OC305127).
22
Ocean Outdoor Limited
Consolidated statement of profit or loss and other comprehensive income
for the year ended 31 December 2019
Billings
Revenue
Cost of sales
Gross profit
Administrative expenses
Profit from operations
Finance expense
Finance income
(Loss) / profit before tax
Tax expense
(Loss) / profit from continuing operations
Other comprehensive income
Items which will or may be reclassified to profit or loss:
Exchange (loss) / gain on translation of foreign operations
Total comprehensive (loss) / income
Note
2019
£'000
135,080
______
2018
£'000
70,288
______
4
104,033
49,795
6,7
9
9
10
(59,154)
_______
(29,355)
_______
44,879
20,440
(41,869)
_______
(15,165)
_______
3,010
5,275
(8,234)
518
_______
(4)
1,658
_______
(4,706)
6,929
(541)
_______
(5,247)
_______
(530)
_______
(5,777)
_______
(306)
_______
6,623
_______
-
_______
6,623
_______
The notes on pages 28 to 70 form an integral part of these financial statements.
23
Ocean Outdoor Limited
Consolidated statement of profit or loss and other comprehensive income
for the year ended 31 December 2019 (Continued)
Note
2019
£'000
2018
£'000
(Loss) / profit for the year attributable to:
Shareholders of the parent
Total comprehensive (loss) / income attributable to:
Shareholders of the parent
Earnings per share
Basic earnings per share (pence)
Diluted earnings per share (pence)
21
21
(5,247)
_______
6,623
_______
(5,777)
_______
6,623
_______
(9.8p)
_______
(9.8p)
_______
13.0p
_______
13.0p
_______
The notes on pages 28 to 70 form an integral part of these financial statements.
24
Ocean Outdoor Limited
Consolidated statement of financial position
As at 31 December 2019
Assets
Non-current assets
Property, plant and equipment
- Site assets, equipment and motor vehicles
- Right of use asset
Intangible assets
Investment in associate
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Lease liability
Tax payable
Non-current liabilities
Other payables
Lease liability
Deferred tax liability
Total liabilities
NET ASSETS
Equity
Founder Preferred Share Capital
Treasury shares
Share Premium
Foreign exchange reserve
Retained (deficit) / earnings
TOTAL EQUITY
Note
2019
£'000
2018
£'000
11
11
12
14
15
16
2.19
16
2.19
17
20
20
22
22
22
47,352
148,630
367,407
13,297
_______
576,686
_______
55,471
26,917
_______
82,388
_______
659,074
_______
76,391
24,187
5,159
_______
105,737
_______
10,501
136,210
37,469
_______
289,917
_______
369,157
_______
4,561
(2,417)
376,246
(530)
(8,703)
_______
369,157
_______
31,971
-
230,024
-
_______
261,995
_______
36,718
160,503
_______
197,221
_______
459,216
_______
44,729
-
3,278
_______
48,007
_______
-
-
23,579
_______
71,586
_______
387,630
_______
5,213
-
375,594
-
6,823
_______
387,630
_______
The financial statements were approved by the Board of Directors and authorised for issue on 8 June 2020.
T Bleakley
Director
The notes on pages 28 to 70 form an integral part of these financial statements.
25
Ocean Outdoor Limited
Consolidated statement of changes in equity
For the year ended 31 December 2019
Ordinary Share
capital
£'000
Treasury
shares
£'000
Ordinary Share
premium
£'000
Founder Preferred
Share Capital
£'000
Foreign exchange
reserve
£'000
Retained
earnings / (deficit)
£'000
Total
equity
£'000
Balance at 01 January 2018
Issue of shares
Share-based compensation
Director options
Comprehensive income for the period
Profit for the period
31 December 2018
-
-
-
-
-
-
-
______
-
______
-
______
-
______
288,906
86,688
-
-
______
375,594
______
Balance at 01 January 2019
-
-
375,594
IFRS 16 restatement (Note 2.19)
-
______
-
______
-
______
Balance at 01 January 2019 restated
Conversion of Founder preferred to ordinary shares
Share repurchase
Comprehensive income for the period
Loss for the period
Other comprehensive income
Total comprehensive income for the period
31 December 2019
-
-
-
-
-
______
-
______
-
______
-
375,594
-
(2,417)
-
-
______
-
______
(2,417)
______
652
-
-
-
______
-
______
376,246
______
The notes on pages 28 to 70 form an integral part of these financial statements.
26
5,213
-
-
-
______
5,213
______
5,213
-
______
5,213
(652)
-
-
-
______
-
______
4,561
______
-
-
-
-
______
-
______
126
294,245
-
86,688
74
74
6,623
______
6,823
______
6,623
______
387,630
______
-
6,823
387,630
-
______
(10,279)
______
(10,279)
______
-
-
-
-
(530)
______
(530)
______
(530)
______
(3,456)
377,351
-
-
-
(2,417)
(5,247)
-
______
(5,247)
______
(8,703)
______
(5,247)
(530)
______
(5,777)
______
369,157
______
Ocean Outdoor Limited
Consolidated statement of cash flows
For the year ended 31 December 2019
Cash flows from operating activities
(Loss) / profit for the year
Adjustments for:
Depreciation of site assets, equipment and motor vehicles
Depreciation on right of use asset
Amortisation of intangible fixed assets
Profit on disposal of site assets, equipment and motor vehicles
Charge related to Director options
Finance income
Finance expense
Increase in trade and other receivables
Increase / (decrease) in trade and other payables
Increase in provisions
Cash generated from operations
Interest paid
Income taxes paid
Net cash flows from operating activities
Investing activities
Acquisition of subsidiaries, net of cash acquired
Investment in associate
Purchases of site assets, equipment and motor vehicles
Interest received
Net cash used in investing activities
Financing activities
Issue of Ordinary shares and warrants
Share buy back
Payment of lease liability
Interest paid on loans and borrowings
Net cash (used in) / from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Note
11
11
12
9
9
14
14
11
9
20
20
2.19
2019
£'000
Restated
2018
£'000
(5,247)
6,623
6,953
19,706
19,753
(22)
-
(518)
8,234
_______
3,195
-
10,087
-
74
(1,658)
6
_______
48,859
18,327
(6,651)
4,543
-
_______
(574)
(5,276)
301
_______
46,751
12,778
(38)
(2,369)
_______
44,344
_______
(125,999)
(13,297)
(12,095)
518
_______
(150,873)
_______
-
(2,417)
(24,640)
-
_______
(27,057)
_______
-
(1,010)
_______
11,768
_______
(228,945)
-
(5,236)
1,658
_______
(232,523)
_______
86,688
-
-
(6)
_______
86,682
_______
(133,586)
(134,073)
160,503
_______
26,917
_______
294,576
_______
160,503
_______
There were non-cash transactions in the year which are disclosed in note 18.
The notes on pages 28 to 70 form an integral part of these financial statements.
27
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
1.
General information
The Company was incorporated with limited liability under the laws of the British Virgin Islands
under the BVI Companies Act on 20 January 2017. The address of the Company's registered
office is Kingston Chambers, PO Box 173, Road Town, Tortola, British Virgin Islands. The
Ordinary Shares and Warrants were admitted for trading on the Main Market of the London
Stock Exchange on 13 March 2017, after raising gross proceeds of US$425,250,000 for a
potential acquisition (an Acquisition).
2.
Principal accounting policies
The principal accounting policies applied in these financial statements are set out below.
2.1
Basis of preparation
These financial statements are prepared under the historical cost convention and are in
accordance with International Financial Reporting Standards and its interpretations as issued
by the European Union (“EU”) and those parts of the BVI Business Companies Act applicable
under IFRS.
The financial statements are presented in GBP. On 28 March 2018 and for FY18 the Company
changed its presentational and functional currency from USD to GBP.
Amounts are rounded to the nearest thousand, unless otherwise stated.
The financial statements are prepared on the historical cost basis with the exception of certain
financial instruments which are stated at fair value.
Accounting policies have been consistently applied throughout the periods presented.
This is the first set of the Group’s financial statements where IFRS 16 and IFRIC 23 have been
applied. As required by IAS 8, the nature and effect of these changes and significant changes
in accounting policies have been disclosed in note 2.10. The Group has not early adopted any
other standard, interpretation or amendment that has been issued but is not yet effective.
Non-GAAP performance measures
Billings represent the advertising spend by the advertiser, including fees directly payable by the
advertiser to their advertising agency, exclusive of sales tax.
Billings is the standard metric used by the out of home advertising industry body “Outsmart” to
measure the market size and industry trends. Management consider Billings to be an important
metric to assess the performance of the underlying business against industry trends and
therefore presents Billings as a Non-GAAP performance measure. Billings is presented for the
benefit for users of the accounts but is not a substitute for other standard GAAP measures
presented.
28
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
2.2
Going concern
The Directors have, at the time of approving the financial statements, a reasonable expectation
that the Company has adequate resources to continue in operational existence for the
foreseeable future.
The Director’s assessment has considered the Group’s current financial position, a review of
its budgets and forecasts, the principal risks and uncertainties including the impact of COVID-
19 and loan facilities available to the Group, with it having recently secured new credit facilities
providing additional financing of up to £35m, subject to customary covenants related to
minimum quarterly adjusted EBITDA and cash balances.
On 11 March 2020, the World Health Organisation announced the pandemic status of COVID-
19. Subsequent to this announcement, significant measures have been taken by Governments
across Europe, restricting the movement of the people and the forced closure of non-essential
business. Given the company operates in the DOOH market, this has impacted on the
company’s performance in FY20. The effect COVID-19 will have on the global economy and
the knock-on effect that it has on the medium to long term on consumer and business behaviour
cannot yet be quantified.
The Directors of the company recognise COVID-19 has had and will have a significant effect
on the results of the business in FY20, with the total impact not yet known. Various scenarios
assessing the impact of the sales decline over the next 12 months from the date of approval of
the financial statements and beyond, have been modelled, including additional downside stress
testing, in line with the FRC guidance issued on 26th March 2020, and what the subsequent
implications would be on the Group cash flow. The modelling demonstrates that, given the
existing level of cash held by the Group of £32.7m at 28 May 2020, in conjunction with the new
credit facilities secured, providing additional finance subsequent to the year end, and the
mitigating actions taken by the directors, being;
- Staff costs were reduced through a structured reduction in working hours and
government reimbursement schemes have been utilised where strictly necessary
- All landlords have been contacted with a view to negotiating rent holidays, deferrals
and reductions wherever possible
- Capital expenditure has been frozen on all new projects and the site maintenance
program has been reduced to the performance of only essential maintenance
- Credit terms have been optimised and extensions agreed with key suppliers
that even in the most extreme downside conditions considered reasonably possible, the Group
will continue to be able to meet its obligations as they fall due.
On this basis, whilst acknowledging there is significant uncertainty regarding the future impacts
of COVID-19, the Directors are satisfied the Group remains well placed to manage its business
risks successfully. Therefore, they have a reasonable expectation that the Group has adequate
resources to continue in operational existence for a period of 12 months from the date of
approval of the financial statements. Accordingly, the financial statements continue to be
prepared on a going concern basis.
29
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
2.3
Foreign currency translation
Functional and presentation currency
The Company is listed on the main market of the London Stock Exchange. The performance of
the Company is measured and reported to the shareholders in GBP, which is the Company’s
functional currency. The Directors consider GBP as the currency of the primary economic
environment in which the Company operates and the one that most faithfully represents the
economic effects of the underlying transactions, events and conditions.
Transactions and balances
Transactions entered into by Group entities in a currency other than the functional currency are
recorded at the rates ruling when the transactions occur. Foreign currency monetary assets
and liabilities are translated at the rates ruling at the reporting date. Exchange differences
arising on the retranslation of unsettled monetary assets and liabilities are recognised
immediately in profit or loss. Exchange differences arising on the retranslation of the foreign
operation are recognised in other comprehensive income and accumulated in the foreign
exchange reserve.
On consolidation, the results of overseas operations are translated into GBP at the average
exchange rate for the year. All assets and liabilities of overseas operations, including goodwill
arising on the acquisition of those operations, are translated at the rate ruling at the reporting
date. Exchange differences arising on translating the opening net assets at opening rate and
the results of overseas operations at actual rate are recognised in other comprehensive income
and accumulated in the foreign exchange reserve.
2.4
Financial assets
The Group classifies its financial assets into one of the categories discussed below, depending
on the business model and cash flow type under which the assets are held. The Group has not
classified any of its financial assets as fair value through other comprehensive income. The
Group's accounting policy for each category is as follows:
Amortised cost
These assets are non-derivative financial assets held under the ‘hold to collect’ business model
and attracting cash flows that are solely payments of principal and interest. They comprise
trade and other receivables and cash and cash equivalents. 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 for trade and other receivables are calculated using an expected credit
loss model. Under this model, impairment provisions are recognised to reflect expected credit
losses based on a combination of historic and forward-looking information, 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 consolidated statement of
comprehensive income. On confirmation that the trade receivable will not be collectable, the
gross carrying value of the asset is written off against the associated provision.
Cash and cash equivalents include cash in hand, deposits held at call with banks, other short
term highly liquid investments with maturities of three months or less.
30
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
2.5
Financial liabilities
The Group classifies its financial liabilities into one of two categories, depending on the purpose
for which the liability was acquired. The Group's accounting policy for each category is as
follows:
Other financial liabilities
Other financial liabilities include the following items:
- Trade payables and other short-term monetary liabilities, which are initially recognised
at fair value and subsequently carried at amortised cost using the effective interest
method
2.6
Share-based payments
The Founder Preferred Shares (and attached warrants) and director options represent equity-
settled share-based arrangements under which the Company receives services as a
consideration for the additional rights attached to these equity shares, over and above their
nominal price. In addition, the Company has granted options to the non-executive directors.
The management team have been incentivised via the issue of hurdle shares which aligns the
long-term interest of the company to deliver shareholder wealth. The hurdle shares represent
equity-settled share-based arrangements under which the Group receives services as a
consideration for equity shares, over and above their nominal price. The fair value of the grant
of Founder Preferred Shares (and attached warrants), and hurdle shares in excess of any
purchase price received is recognised as an expense. In addition, the Company has granted
options to the non-executive directors. The management team have been incentivised via the
issue of hurdle shares which aligns the long-term interest of the company to deliver shareholder
wealth. The fair value of the Founder Preferred Shares (and attached warrants), the options
and the hurdle shares is determined using a valuation model.
2.7
Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided
to the chief operating decision-maker. The chief operating decision-maker, who is responsible
for allocating resources and assessing performance of the operating segments, has been
identified as the Board of Directors as it is the body that makes strategic decisions. The Board
are of the opinion that there was only a single operational segment for FY18 being the provision
of DOOH services to the UK market.
For FY19, following the acquisition of foreign subsidiaries in the Netherlands and the Nordics,
the Board is now of the opinion that the company operates in three distinct markets: The United
Kingdom, The Netherlands and The Nordics. Accordingly, the group has been treated as three
operational segments for FY19 and the results of the group presented in the financial
statements are disaggregated accordingly. Each operational segment provides DOOH
services to their local market.
2.8
Share capital
Founder Preferred Shares, Ordinary Shares, and Warrants are classified as equity.
Incremental costs directly attributable to the issue of new ordinary shares are shown in equity
as a deduction, net of tax, from the proceeds.
2.9
Critical accounting judgements and key sources of estimation uncertainty
The Group makes certain estimates and assumptions regarding the future. Estimates and
judgements are continually evaluated based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from these estimates and
assumptions.
31
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
Estimates and assumptions
In preparing the financial statements for the year ended 31 December 2019, management
and the directors made certain estimates and judgements in the following areas:
Accounting treatment for the digital signage investment acquired as part of the
acquisition of Ocean Outdoor Nordics VA Holding AB which was restructured following
acquisition. The directors needed to exercise judgement on whether the investment
should be accounted for as an acquisition of a subsidiary business or the acquisition of
an associate. See note 14 for further details;
Impairment of goodwill and other intangible assets – Estimation of future cash flows
and determination of discount rates (see note 13);
Depreciation of property, plant and equipment – Estimation of useful lives and residual
values (see note 2.18);
The determination of incremental borrowing rates used and expected lease lengths in
the application of IFRS 16 Leases (see note 2.19);
The application of IFRS 9 when measuring expected credit losses and the assessment
of expected credit loss provisions required for accounts receivable balances (see note
15);
The determining of fair value of the intangible assets in respect of acquired rights over
advertising sites for the acquisitions made in the year. The estimates and assumptions
include underlying cash flow projections, discount rates applied and long-term growth
rates; and
The valuation of contingent consideration based on the probability of earn-out targets
being satisfied for entities acquired during the year (see note 2.21)
COVID-19 has had a significant negative impact on the OOH market and the Group’s
performance during FY2020. Refer to note 24 for the potential impact of COVID-19 on
EBITDA results and cash flows which could lead to an indicator of impairment of non-
current assets held by the group. At this time, due to the uncertainty regarding how long
COVID-19 will impact the OOH market and the Group’s results and cash flows, the
directors have assessed that there could be a significant risk of material adjustment to the
carrying amounts of non-current assets within the next financial year.
2.10 New accounting standards and interpretations
The Company applied all applicable standards and applicable interpretations published by the
EU for the year ended 31 December 2019 for the consolidated financial statements.
a) New standards, interpretations and amendments effective from 1 January 2019
New standards impacting the Group that were adopted in the annual financial statements
for the year ended 31 December 2019, and which have given rise to changes in the Group’s
accounting policies are:
IFRS 16 Leases (IFRS 16); and
IFRIC 23 Uncertainty over Income Tax Treatments (IFRIC 23)
Detail
s of the impact these two standards have had are given in note 2.19 and 2.20 below. Other
new and amended standards and Interpretations issued by the IASB that will apply for the first
time in the next annual financial statements are not expected to impact the Group as they are
32
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
either not relevant to the Group’s activities or require accounting which is consistent with the
Group’s current accounting policies.
b)
New standards, interpretations and amendments not yet effective
There are a number of standards, amendments to standards, and interpretations which
have been issued by the IASB that are effective in future accounting periods that the group
has decided not to adopt early. The most significant of these is are as follows, which are
all effective for the period beginning 1 January 2020:
IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors
IFRS 3 Business Combinations
Revised Conceptual Framework for Financial Reporting
The Group is currently assessing the impact of these new accounting standards and
amendments.
2.11 Revenue
Substantially all of the Group’s contracts with customers contain a single performance
obligation, being the provision of advertising space, and are subject to fixed prices. Revenue
is recognised on an over time basis. This is because the customer simultaneously receives
and consumes the economic benefits provided under the contract by the Group’s performance.
Amounts invoiced in advance of the performance of the advertising services are recognised
as performance obligations and released to revenue as the group performs the advertising
space under the contract.
Payment terms extended to customers depend on the country of operation, the size of the
booking and the credit risk posed by the customer. Credit terms vary from up-front payment to
60 days.
Revenue represents the amounts (excluding the value added tax) derived from the provision
of advertising space to customers during the 52-week period ended 29 December 2019 (2018:
52-week period ended 30 December 2018) net of commissions and discounts. Revenue is
recognised on a 52-week period to reflect the period of customer bookings, normally in 2-week
blocks. The difference on this basis to recognition of turnover for a full year is immaterial.
2.12 Basis of consolidation
Where Ocean Outdoor Limited (“the Company”) has control over an investee, it is classified as
a subsidiary. The Company controls an investee if all three of the following elements are
present: power over the investee, exposure to variable returns from the investee, and the ability
of the investor to use its power to affect those variable returns. Control is reassessed whenever
facts and circumstances indicate that there may be a change in any of these elements of control.
The Consolidated Financial Statements presents the results of the Company and its
subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and
balances between group companies are therefore eliminated in full.
The Consolidated Financial Statements incorporates the results of business combinations
using the acquisition method. In the statement of financial position, the acquiree's identifiable
assets, liabilities and contingent liabilities are initially recognised at their fair values at the
acquisition date. The results of acquired operations are included in the consolidated statement
of comprehensive income from the date on which control is obtained. They are derecognised
from the date on which control ceases.
33
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
Where the Group has the power to participate in (but not control) the financial and operating
policy decisions of another entity, it is classified as an associate. Associates are initially
recognised in the consolidated statement of financial position at cost. Subsequently associates
are accounted for using the equity method, where the Group's share of post-acquisition profits
and losses and other comprehensive income is recognised in the consolidated statement of
profit and loss and other comprehensive income (except for losses in excess of the Group's
investment in the associate unless there is an obligation to make good those losses).
Profits and losses arising on transactions between the Group and its associates are recognised
only to the extent of unrelated investors' interests in the associate. The investor's share in the
associate's profits and losses resulting from these transactions is eliminated against the
carrying value of the associate.
2.13 Goodwill
Goodwill represents the excess of the cost of a business combination over the total acquisition
date fair value of the identifiable assets, liabilities and contingent liabilities acquired.
Cost comprises the fair value of assets given, liabilities assumed and equity instruments issued,
plus the amount of any non-controlling interests in the acquiree plus, if the business
combination is achieved in stages, the fair value of the existing equity interest in the acquiree.
Direct costs of acquisition are recognised immediately as an expense.
Goodwill is capitalised as an intangible asset with any impairment in carrying value being
charged to the statement of comprehensive income. Where the fair value of identifiable assets,
liabilities and contingent liabilities exceed the fair value of consideration paid, the excess is
credited in full to the statement of comprehensive income on the acquisition date.
2.14 Other intangible assets
Intangible assets are recognised on business combinations if they are separable from the
acquired entity or arise from other contractual/legal rights. The amounts ascribed to such
intangibles are arrived at by using appropriate valuation techniques.
The Group has recognised acquired rights over advertising sites on business combinations as
intangible assets. These are amortised over the contractual life of the advertising sites on a
straight-line basis, which are typically 5 to 15 years. The amortisation charge is included within
administrative expenses in the consolidated statement of profit and loss.
The Group has recognised intangible asset in relation to the Ocean brand acquired as part of
the business combination. This is amortised over 10 years on a straight-line basis. The
amortisation charge is included within administrative expenses in the consolidated statement
of profit and loss.
2.15
Impairment of non-financial assets (excluding deferred tax assets)
Impairment tests on goodwill and other intangible assets with indefinite useful economic lives
are undertaken annually at the financial year end. Other non-financial assets are subject to
impairment tests whenever events or changes in circumstances indicate that their carrying
amount may not be recoverable. Where the carrying value of an individual asset or cash
generating units ('CGU’) exceeds its recoverable amount (i.e. the higher of value in use and fair
value less costs to sell), the asset is written down accordingly. Impairment charges are included
in profit or loss, except to the extent they reverse gains previously recognised in other
comprehensive income. An impairment loss recognised for goodwill is not reversed.
2.16 Defined contribution schemes
Contributions to defined contribution pension schemes are charged to the consolidated
statement of comprehensive income in the year to which they relate.
34
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
2.17 Deferred taxation
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or
liability in the consolidated statement of financial position differs from its tax base, 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 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 near 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 amount of the asset or liability is determined using tax rates that have been enacted or
substantively enacted by the reporting date and are expected to apply when the deferred tax
liabilities/(assets) are settled/(recovered).
2.18
Property, plant and equipment
Items of property, plant and equipment are initially recognised at cost. As well as the purchase
price, cost includes directly attributable costs.
Depreciation is provided on all items of property, plant and equipment so as to write off their
carrying value over their expected useful economic lives according to the method of
depreciation prevailing in the relevant countries in accordance with local regulations and
economic conditions. It is provided at the following rates:
Site assets
Site build costs
Digital signage
Light boxes
-
-
-
Over the length of the lease
3 -10 years
10 years
Assets under the course of construction are only depreciated once ready for use.
Equipment
Fixtures and fittings
Computer equipment
Motor vehicles
-
-
-
4 years straight line
2 years straight line
4 years straight line
2.19
IFRS 16 Leases
The Group applies, for the first time, IFRS 16 Leases (“IFRS 16”). The nature and effect of
these changes are disclosed below.
IFRS 16 supersedes IAS 17 Leases. The standard sets out the principles for the recognition,
measurement, presentation and disclosure of leases and requires lessees to account for most
leases under a single on-balance sheet model.
Lessor accounting under IFRS 16 is substantially unchanged from IAS 17. Lessors will continue
to classify leases as either operating or finance leases using similar principles as in IAS 17.
Therefore, IFRS 16 did not have an impact for leases where the Group is the lessor.
The Group adopted IFRS 16 using the modified retrospective approach, with recognition of
35
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
transitional adjustments on the date of initial application of 1 January 2019, without restatement
of comparative figures. Under this method, the standard is applied with the cumulative effect of
initially applying the standard recognised at the date of initial application. The Group elected to
apply the practical expedient to not reassess whether a contract is, or contains a lease at the
date of initial application. In compliance with the standard, IFRS 16 has only been applied to
contracts that were previously identified as leases applying IAS 17 and IFRIC 4 at the date of
initial application. The definition of a lease under IFRS 16 was applied only to contracts entered
into or changed on or after 1 January 2019. The Group also elected to use the recognition
exemptions for lease contracts that, at the commencement date, have a lease term of 12
months or less and do not contain a purchase option (‘short-term leases’), and lease contracts
for which the underlying asset is of low value (‘low-value assets’).
The leases entered into by the Group relate to rental of office space, advertising space and
equipment in order to generate revenue.
The effect of adoption IFRS 16 as at 1 January 2019, increase/(decrease) is as follows:
Assets
Right-of-use asset
Prepayments
Total assets
Liabilities
Lease liability
Accruals
Total liabilities
Total adjustment to equity; IFRS 16 Restatement
£'000
88,520
856
________
89,376
99,719
(64)
________
99,655
(10,279)
________
The transition figures above differ to those presented in the interim financial statements as a
result of a reassessment of the incremental borrowing rates used on the leases.
a) Nature of the effect of adoption of IFRS 16
The Group has lease contracts for various items of site assets, equipment and motor vehicles.
Before the adoption of IFRS 16, the Group classified each of its leases (as lessee) at the
inception date as either a finance lease or an operating lease.
A lease was classified as a finance lease if it transferred substantially all of the risks and rewards
incidental to ownership of the leased asset to the Group; otherwise it was classified as an
operating lease.
Finance leases were capitalised at the commencement of the lease at the inception date fair
value of the lease or, if lower, at the present value of the minimum lease payments. Lease
payments were apportioned between interest (recognised as finance costs) and reduction of
the lease liability.
In an operating lease, the site asset was not capitalised and the lease payments were
recognised as rent expense in profit or loss on a straight-line basis over the lease term. Any
prepaid rent and accrued rent were recognised under Prepayments and Trade and other
payables, respectively.
36
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
The standard provides specific transition requirements and practical expedients, which have
been applied by the Group.
-
Leases previously accounted for as operating leases
The Group recognised right-of-use assets and lease liabilities for those leases
previously classified as operating leases, except for short-term leases and leases of
low-value assets. The right-of-use assets were recognised based on the carrying
amount as if the standard had always been applied. Lease liabilities were recognised
based on the present value of the remaining lease payments, discounted using the
incremental borrowing rate at the date of initial application.
The Group also applied the available practical expedients wherein it:
- Used a single discount rate to a portfolio of leases with reasonably similar
characteristics;
- Relied on its assessment of whether leases are onerous immediately before the date
of initial application;
- Applied the short-term leases exemptions to leases with terms that end within 12
months of the date of initial application;
- Excluded the initial direct costs from the measurement of the right-of-use asset at the
date of initial application; and
- Used hindsight in determining the lease term where the contract contains options to
extend or terminate the lease
Based on the above, as at 1 January 2019;
- A right-of-use asset of £89m was recognised and presented separately in the statement
of financial position. No lease assets, previously recognised as finance leases, have
been reclassified from Property, plant and equipment.
Lease liabilities of £100m were recognised.
-
- Prepayments of £1m related to previous operating leases were derecognised.
The lease liabilities as at 1 January 2019 can be reconciled to the operating lease commitments
as of 31 December 2018 as follows:
Operating lease commitments as at 31 December 2018
Weighted average incremental borrowing rate as at 1 January 2019
Discounted operating lease commitments at 1 January 2019
Current liability
Non-current liability
Lease liability recognised at 1 January 2019
£'000
125,360
5.5%
99,719
________
16,250
83,469
________
99,719
________
37
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
b) Summary of new accounting policies
Set out below are the new accounting policies of the Group upon adoption of IFRS 16, which
have been applied from the date of initial application:
- Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease.
Right-of-use assets are measured at cost, less any accumulated depreciation and
impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of
right-of-use assets includes the amount of lease liabilities recognised, initial direct costs
incurred, and lease payments made at or before the commencement date less any
lease incentives received. Unless the Group is reasonably certain to obtain ownership
of the leased asset at the end of the lease term, the recognised right-of-use assets are
depreciated on a straight-line basis over the shorter of its estimated useful life and the
lease term. Right-of-use assets are subject to impairment.
-
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities
measured at the present value of lease payments to be made over the lease term. The
lease payments include fixed payments (including in substance fixed payments) less
any lease incentives receivable, variable lease payments that depend on an index or a
rate, and amounts expected to be paid under residual value guarantees. The lease
payments also include the exercise price of a purchase option reasonably certain to be
exercised by the Group and payments of penalties for terminating a lease, if the lease
term reflects the Group exercising the option to terminate. The variable lease payments
that do not depend on an index or a rate are recognised as expense in the period on
which the event or condition that triggers the payment occurs.
- Recognition of right of use assets and lease liabilities on business combinations
In the case of lease assets and lease liabilities acquired in a business combination, the
Group measures the lease liability at the present value of the remaining lease payments
as if the acquired lease were a new lease at the acquisition date. The group measures
the right-of-use asset at the same amount as the lease liability, adjusted to reflect
favourable or unfavourable terms of the lease when compared with market terms.
In calculating the present value of lease payments, the Group uses the incremental borrowing
rate at the lease commencement date if the interest rate implicit in the lease is not readily
determinable. After the commencement date, the lease liability is increased to reflect the
accretion of interest and reduced for the lease payments made. In addition, the carrying amount
of lease liabilities is remeasured if there is a modification, a change in the lease term, a change
in the in-substance fixed lease payments or a change in the assessment to purchase the
underlying asset.
- Significant judgement in determining the lease term of contracts with renewal options
The Group determines the lease term as the non-cancellable term of the lease, together
with any periods covered by an option to extend the lease if it is reasonably certain to
be exercised, or any periods covered by an option to terminate the lease if it is
reasonably certain not to be exercised. The Group applies judgement in evaluating
whether it is reasonably certain to exercise the option to renew. That is, it considers all
relevant factors that create an economic incentive for it to exercise the renewal. After
the commencement date, the Group reassesses the lease term if there is a significant
event or change in circumstances that is within its control and affects its ability to
exercise (or not to exercise) the option to renew (e.g., a change in business strategy).
38
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
The Group has leases that can be modified in subsequent periods based on contractual
performance. These are accounted for in the accounting period as a lease modification. When
the group renegotiates the contractual terms of a lease with the lessor, the accounting depends
on the nature of the modification:
-
-
-
If the renegotiation results in one or more additional assets being leased for an amount
commensurate with the standalone price for the additional rights-of-use obtained, the
modification is accounted for as a separate lease in accordance with the above policy.
In all other cases where the renegotiated terms increase the scope of the lease
(whether that is an extension to the lease term, or one or more additional assets being
leased), the lease liability is remeasured using the discount rate applicable on the
modification date, with the right-of use asset being adjusted by the same amount.
If the renegotiation results in a decrease in the scope of the lease, both the carrying
amount of the lease liability and right-of-use asset are reduced by the same proportion
to reflect the partial or full termination of the lease with any difference recognised in
profit or loss. The lease liability is then further adjusted to ensure its carrying amount
reflects the amount of the renegotiated payments over the renegotiated term, with the
modified lease payments discounted at the rate applicable on the modification date.
The right-of-use asset is adjusted by the same amount.
c) Amounts recognised in the statement of financial position and profit or loss
Set out below, are the carrying amounts of the Group’s right-of-use assets and lease liabilities
and the movements during the period:
As at 1 January 2019
- Cost
- Accumulated depreciation
Additions:
Lease additions
Lease modification
Subsidiary acquisition
Disposals
Depreciation expense
Foreign exchange difference
As at 31 December 2019
Non-current
Sites right of
use asset
£'000
Office right
of use asset
£'000
Total right
of use asset
£'000
135,577
(47,972)
10,204
1,259
69,400
(816)
(19,426)
(1,087)
________
2,587
(816)
138,164
(48,788)
-
-
-
-
(280)
-
________
10,204
1,259
69,400
(816)
(19,706)
(1,087)
________
147,139
________
1,491
________
148,630
________
147,139
________
1,491
________
148,630
________
39
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
As at 1 January 2019
Additions:
Lease additions
Lease modification
Subsidiary acquisition
Disposals
Finance expense
Foreign exchange difference
Payments
As at 31 December 2019
Current
Non-current
Site liability
£'000
Office
liability
£'000
Total Lease
liabilities
£'000
97,759
1,960
99,719
10,204
1,259
69,400
(766)
6,819
(1,695)
(24,271)
________
-
-
-
-
97
-
(369)
________
10,204
1,259
69,400
(766)
6,916
(1,695)
(24,640)
________
158,709
________
1,688
________
160,397
________
23,923
134,786
________
158,709
________
264
1,424
________
24,187
136,210
________
1,688
________
160,397
________
Short-term leases entered into by the Group, not accounted for under IFRS 16, totalled £65,000
and there were no low value leases. Variable lease payments not included in the lease liability
totalled £13.9m.
2.20
IFRIC 23 Uncertainty over Income Tax Treatments
IFRIC 23 provides guidance on the accounting for current and deferred tax liabilities and assets
in circumstances in which there is uncertainty over income tax treatments. The Interpretation
requires:
- The Group to determine whether uncertain tax treatments should be considered
separately, or together as a group, based on which approach provides better
predictions of the resolution;
- The Group to determine if it is probable that the tax authorities will accept the uncertain
tax treatment; and
-
If it is not probable that the uncertain tax treatment will be accepted, measure the tax
uncertainty based on the most likely amount or expected value, depending on
whichever method better predicts the resolution of the uncertainty. This measurement
is required to be based on the assumption that each of the tax authorities will examine
amounts they have a right to examine and have full knowledge of all related information
when making those examinations.
The Group elected to apply IFRIC 23 retrospectively with the cumulative effect recorded in
retained earnings as at the date of initial application, 1 January 2019. The adoption of IFRIC
23 resulted in no change to corporate tax liabilities and no change to retained earnings.
40
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
2.21 Contingent and deferred consideration on acquisitions
The Group recognises contingent consideration payable on satisfaction of performance targets
being achieved over certain time periods, based on the probability of the targets being
achieved. At inception, the balance is discounted using the acquisition internal rate of return
(IRR) to present value. Interest on the unwinding of the balance is charged to the profit and
loss over the period of the performance targets. The probability of targets being achieved is
reviewed and any changes to the expected consideration payable are also charged to the profit
and loss.
The Group recognises deferred consideration at the present value at inception. The balance
payable in a future period is discounted using a discount rate based on a lender borrowing rate
at acquisition to present value and interest on the unwinding of the balance is charged to the
profit and loss up to the point the balance is payable.
3.
Financial instruments - Risk Management
The Group is exposed through its operations to the following financial risks:
- Credit risk;
-
Liquidity risk; and
- Foreign currency risk
In common with all other businesses, the Group is exposed to risks that arise from its use of
financial instruments. This note describes the Group's objectives, policies and processes for
managing those risks and the methods used to measure them. 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.
(i) Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk
arises, are as follows:
- Trade and other receivables
- Cash and cash equivalents
- Trade and other payables
(ii) Financial instruments by category
Financial assets
Cash and cash equivalents
Trade receivables
Total financial assets
41
Amortised cost
2019
£'000
26,917
54,124
_______
81,041
_______
2018
£'000
160,503
32,970
_______
193,473
_______
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
Financial liabilities
Trade and other payables - current
Other payables - non-current
Total financial liabilities
Amortised cost
2019
£'000
46,980
10,501
_______
57,481
_______
2018
£'000
9,170
-
_______
9,170
_______
(iii) Financial instruments not measured at fair value
Financial instruments not measured at fair value include certain cash and cash equivalents, trade
and other receivables and trade and other payables.
Due to their short-term nature, the carrying value of cash and cash equivalents, trade and other
receivables, trade and other payables approximates their fair value.
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group's risk management
objectives and policies. The Board receives monthly reports from the Group Financial Controller
through which it reviews the effectiveness of the processes put in place and the appropriateness
of the objectives and policies it sets.
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. Further details regarding
these policies are set out below:
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial
instrument fails to meet its contractual obligations. The Group is mainly exposed to credit risk
from credit sales. It is Group policy, implemented locally, to assess the credit risk of new
customers before entering contracts. The Group's review includes external ratings, when
available, and in some cases bank references. Purchase limits are established for each
customer. Trade receivables contain receivables due from customers to which we may also owe
volume rebates that are contained within our trade payables and accruals. Credit risk also arises
from cash and cash equivalents and deposits with banks and financial institutions. For banks and
financial institutions, only independently rated parties with minimum rating "A" are accepted. In
respect of the year and period ends presented, £20.9m (2018: £18.2) was held on current
account with HSBC Bank plc, £1.1 m (2018: £142.3m) was held on current account with Barclays
Bank plc, £2.5m (2018: £Nil) was held on current account with ABN AMRO, £1.2m (2018: £Nil)
was held on current account with Rabobank and £1.2m (2018: £Nil) was held on current account
with Skandinaviska Enskilda Banken.
Liquidity risk
Liquidity risk arises from the Group's management of working capital and the finance charges
and principal repayments on its debt instruments. It is the risk that the Group will encounter
difficulty in meeting its financial obligations as they fall due.
42
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its
liabilities when they become due. To achieve this aim, it seeks to maintain cash balances (or
agreed facilities) to meet expected requirements for a period of at least 90 days.
The Board receives rolling 12-month cash flow projections on a monthly basis as well as
information regarding cash balances. At the end of the financial year, these projections indicated
that the Group expected to have sufficient liquid resources to meet its obligations under all
reasonably expected circumstances.
Total
£'000
Up to 3
months
£'000
160,503
32,970
9,170
_______
160,503
32,970
6,855
_______
Total
£'000
Up to 3
months
£'000
26,917
54,124
206,790
46,980
10,501
_______
26,917
54,124
7,701
44,606
-
_______
Between
3 and 12
months
£'000
-
-
764
_______
Between
3 and 12
months
£'000
-
-
23,910
2,374
-
_______
Between
1 and 2
years
£'000
-
-
1,280
_______
Between
1 and 2
years
£'000
-
-
29,544
-
7,423
_______
Between
2 and 5
years
£'000
-
-
271
_______
Between
2 and 5
years
£'000
-
-
76,615
-
3,078
_______
Over
5 years
£'000
-
-
-
_______
Over
5 years
£'000
-
-
69,020
-
-
_______
At 31 December 2018
Cash and cash equivalents
Trade receivables
Trade and other payables
At 31 December 2019
Cash and cash equivalents
Trade receivables
Lease liability
Trade and other payables
Other payables
Currency risk
Following the acquisition of foreign subsidiaries in the year, the Group is exposed to risk from
movements in foreign currency exchange rates, interest rates and market prices that affect its
assets, liabilities and anticipated future transactions. The Group is exposed to foreign currency
risk from transactions other than functional currency. Transaction exposure arises because
affiliated companies undertake transactions in foreign currencies. The Group does not use
forward foreign exchange rate contracts to hedge exchange rate risk. Its exposure is as follows:
At 31 December 2019
Financial assets
Cash and cash equivalents
Trade receivables
Financial liabilities
Trade and other payables
Other payables
USD
in GBP
£'000
EURO
in GBP
£'000
SEK
in GBP
£'000
GBP
in GBP
£'000
Total
GBP
£'000
1,560
-
_______
4,848
4,516
_______
2,030
8,222
_______
18,479
41,386
_______
26,917
54,124
_______
-
-
_______
7,694
-
_______
12,435
-
_______
26,851
10,501
_______
46,980
10,501
_______
43
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
Capital Disclosures
The Group's objectives when maintaining capital are:
-
-
to safeguard the entity's ability to continue as a going concern, so that it can continue
to provide returns for shareholders and benefits for other stakeholders, and
to provide an adequate return to shareholders by pricing products and services
commensurately with the level of risk.
The Group sets the amount of capital it requires in proportion to risk. The Group manages its
capital structure and makes adjustments to it in the light of changes in economic conditions. In
order to maintain or adjust the capital structure, the Group may adjust the amount of dividends
paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce
debt.
4.
Revenue
All revenue is recognised on an over time basis from advertising space provided to its
customers.
Analysis of revenue by service type and region:
Provision of advertising space – United Kingdom
Provision of advertising space – Netherlands
Provision of advertising space – Nordics
5.
Segmental reporting
2019
£'000
71,668
22,800
9,565
_______
104,033
_______
2018
£'000
49,795
-
-
_______
49,795
_______
2019
UK Group
£'000
Netherlands
£'000
Nordics
£'000
Total
£'000
Revenue
Interest
Depreciation and amortisation
(Loss) / profit for the period
Total assets
Total liabilities
71,668
(6,508)
(37,475)
(9,450)
549,316
(199,584)
_______
22,800
(1,411)
(6,385)
3,365
56,283
(49,007)
_______
9,565
(315)
(2,552)
838
53,475
(41,326)
_______
104,033
(8,234)
(46,412)
(5,247)
659,074
(289,917)
_______
44
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
5.
Segmental reporting (continued)
2018
UK Group
£'000
Netherlands
£'000
Nordics
£'000
Total
£'000
Revenue
Interest
Depreciation and amortisation
Profit for the period
Total assets
Total liabilities
49,795
(4)
(13,282)
6,623
459,216
(71,586)
_______
-
-
-
-
-
-
_______
-
-
-
-
-
-
_______
49,795
(4)
(13,282)
6,623
459,216
(71,586)
_______
6.
Expenses by nature
Employee benefit expenses (note 7)
Depreciation of site assets, equipment and motor vehicles
(note 11)
Depreciation of right of use asset (note 11)
Amortisation of intangible assets (note 12)
Operating site lease expense
Site profit share, rates, utilities and maintenance
Profit on disposal of site assets, equipment and motor
vehicles
Foreign exchange
Acquisition and relisting fees
Auditor remuneration – audit fees
Ocean Outdoor Limited Group audit
Auditor remuneration – other non-audit services
7.
Employee benefit expenses
Wages and salaries
Social security contributions and similar taxes
Management incentive scheme
Defined contribution pension cost
2019
£'000
8,657
6,953
19,706
19,753
-
22,015
22
482
1,854
2018
£'000
4,614
3,195
-
10,087
10,853
13,660
1
2
5,607
366
-
_______
220
95
_______
2019
£'000
7,604
909
-
144
_______
8,657
_______
2018
£'000
4,001
479
68
66
_______
4,614
_______
45
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
8.
Key management personnel compensation
Key management personnel are those persons having authority and responsibility for planning,
directing and controlling the activities of the Group, including the directors.
Wages and salaries
Benefits in kind
Management incentive scheme (hurdle shares)
Defined contribution pension cost
9.
Finance expense and finance income
Finance expense
Interest payable on lease liability
Interest on contingent consideration
Other Interest payable
Finance income
Interest receivable on cash and cash equivalents
10. Tax
Current tax expense
Current tax charge for the year
Adjustments in respect of prior periods
Total current tax
Deferred tax expense
Deferred tax credit for the year (see note 17)
Total tax expense
2019
£'000
1,941
67
-
38
_______
2,046
_______
2019
£'000
6,915
1,281
38
_______
8,234
_______
2018
£'000
1,234
35
68
21
_______
1,358
_______
2018
£'000
-
-
4
_______
4
_______
518
_______
1,658
_______
2019
£'000
2018
£'000
4,250
-
_______
2,002
(2)
_______
4,250
2,000
(3,709)
_______
541
_______
(1,694)
_______
306
_______
The Group’s trading subsidiaries operated in the UK, the Netherlands and in the Nordics in FY19.
The group pays corporation tax on profits in the corresponding tax jurisdiction in which the
company operates. The reasons for the difference between the actual tax charge for the year
and the standard rate of corporation tax in the United Kingdom applied to the loss for the year
are as follows:
46
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
10. Tax (continued)
(Loss) / profit before tax
Tax using the Company's domestic tax rate of 19%
(2018: 19%)
Foreign subsidiary tax rate difference
Expenses not deductible for tax purposes
Total tax expense
Expenses not deductible for tax purposes
2019
£'000
2018
£'000
(4,706)
_______
6,929
_______
(894)
220
1,215
_______
541
_______
1,317
-
(1,011)
_______
306
_______
The key contributor to the expenses not deductible for tax purposes is interest disallowable per
the corporate interest restrictions rules.
Changes in tax rates and factors affecting the future tax charge
A reduction in the UK corporation tax rate from 20% to 19% (effective from 1 April 2017) was
substantively enacted on 26 October 2015, and an additional reduction to 17% (effective 1 April
2020) was substantively enacted on 6 September 2016. On 11 March 2020, the UK corporation
tax rate was confirmed as being maintained at 19% from 1 April 2020 onwards. Deferred tax
assets and liabilities at 31 December 2019 have been calculated taking into consideration the
applicable rates when the temporary differences are expected to reverse.
11. Property, plant and equipment
Cost or valuation
Site
assets Equipment
£'000
£'000
Motor
vehicles
£'000
Total
£'000
At 1 January 2018
Acquired through business combinations
Additions
Disposals
-
24,461
10,349
(23)
_______
-
227
56
(72)
_______
-
73
-
(12)
_______
-
24,761
10,405
(107)
_______
At 31 December 2018
34,787
_______
211
_______
61
_______
35,059
_______
At 1 January 2019
34,787
211
61
35,059
Acquired through business combinations
Additions
Disposals
FX variance
9,630
11,922
(91)
(250)
_______
579
278
-
(3)
_______
117
-
(13)
(1)
_______
10,326
12,200
(104)
(254)
_______
At 31 December 2019
55,998
_______
1,065
_______
164
_______
57,227
_______
47
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
11. Property, plant and equipment (continued)
Accumulated depreciation
At 1 January 2018
Charge in the year
Disposals
Site
assets
£'000
Equipment
£'000
Motor
vehicles
£'000
Total
£'000
-
3,111
(23)
_______
-
59
(72)
_______
-
25
(12)
_______
-
3,195
(107)
_______
At 31 December 2018
3,088
_______
(13)
_______
13
_______
3,088
_______
At 1 January 2019
Charge in the year
Disposals
FX variance
3,088
6,737
(121)
(40)
_______
(13)
161
-
(1)
_______
13
55
(4)
-
_______
3,088
6,953
(125)
(41)
_______
At 31 December 2019
9,664
_______
147
_______
64
_______
9,875
_______
Net Book Value
At 31 December 2019
At 31 December 2018
Site
assets
£'000
Equipment
£'000
Motor
vehicles
£'000
Total
£'000
46,334
_______
31,699
_______
918
_______
100
_______
47,352
_______
224
_______
48
_______
31,971
_______
Included within site assets is £3.95m (2018: £8.10m) related to assets under course of
construction.
48
Right of
use asset
£'000
138,164
69,400
11,463
(1,429)
(1,214)
_______
216,384
_______
48,788
19,706
(613)
(127)
_______
67,754
_______
148,630
_______
-
_______
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
11. Property, plant and equipment (continued)
Cost
At 1 January 2019
Acquired through business combinations
Additions
Disposals
FX variance
At 31 December 2019
Accumulated depreciation
At 1 January 2019
Charge in the year
Disposals
FX variance
At 31 December 2019
Net Book Value
At 31 December 2019
At 31 December 2018
49
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
12.
Intangible assets
Cost or valuation
Brand
£'000
Acquired
rights over
advertising
sites
£'000
Goodwill
Total
£'000
£'000
At 1 January 2018
Acquired through business combinations
-
6,725
_______
-
136,715
_______
-
96,671
_______
-
240,111
_______
At 31 December 2018
6,725
_______
136,715
_______
96,671
_______
240,111
_______
At 1 January 2019
Acquired through business combinations
FX variance
6,725
-
-
_______
136,715
74,167
(264)
_______
96,671
83,785
(552)
_______
240,111
157,952
(816)
_______
At 31 December 2019
6,725
_______
210,618
_______
179,904
_______
397,247
_______
Accumulated amortisation
and impairment
At 1 January 2018
Charge in the year
At 31 December 2018
At 1 January 2019
Charge in the year
At 31 December 2019
Net Book Value
At 31 December 2019
At 31 December 2018
-
500
_______
-
9,587
_______
-
-
_______
-
10,087
_______
500
_______
9,587
_______
-
_______
10,087
_______
500
673
_______
9,587
19,080
_______
-
-
_______
10,087
19,753
_______
1,173
_______
28,667
_______
-
_______
29,840
_______
5,552
_______
181,951
_______
179,904
_______
367,407
_______
6,225
_______
127,128
_______
96,671
_______
230,024
_______
The remaining period over which amortisation is to be charged on acquired rights over advertising
sites is between 4 and 15 years. The remaining period over which amortisation is to be charged
on the Ocean brand is 9 years.
50
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
13. Goodwill and impairment
The Group is required to test, on an annual basis, whether goodwill has suffered any impairment.
The recoverable amount is determined based on value in use calculations. The use of this
method requires the estimation of future cash flows and the determination of a discount rate in
order to calculate the present value of the cash flows.
The Company made five acquisitions in FY19, that of Ngage, Interbest, Beyond Outdoor, Visual
Art and ACM. It made two in FY18; that of SCP Acquisition Topco Limited and its subsidiaries
and Forrest Media (Holdings) Limited and its subsidiaries. For the purpose of impairment testing
each acquisition was measured on the basis of its value in use based on financial forecasts
covering a five-year period. The key assumptions for the value in use calculation are:
- Discount rates
- Growth rates in revenue and costs
- Free cash flow
Pre-tax discount rates used in the SCP Acquisition Topco Group impairment review were 16.4%,
for Forrest Media (Holdings) Group 13.1%, for Ngage 14.6%, Interbest 15.4%, Beyond Outdoor
15.4%, Visual Art 13.7% and for ACM 11.0%.
A long-term growth rate of 2% was used to extrapolate cash flows beyond the five-year forecast
period in calculating a terminal value assuming the sale of the business.
The free cash flows used are based on revenue projections less direct and allocated costs
established using management approved budgets and forecasts less working capital
movements.
These metrics are based on past performance and expectations of future changes in the market.
They have been assessed and consideration given to any reasonable possible changes to these
assumptions, including the undertaking of a sensitivity analysis.
The surplus of cash flows at 31 December 2019 was assessed as reasonable based on the
headroom level over the carrying value of non-current assets and working capital being in the
ranges of 10%-37%.
No instances have been identified that could cause the carrying amount of goodwill to exceed its
recoverable amount and therefore no impairment has been recognised.
The carrying amount of goodwill is allocated to the cash generating units (CGUs) as follows:
UK Operations
Ocean Netherlands
Ocean Nordics
2019
£'000
96,671
23,520
59,713
_______
179,904
_______
2018
£'000
96,671
-
-
_______
96,671
_______
51
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
14. Subsidiaries, investments and business combinations
On 26 February 2018, Ocean Outdoor Limited formed Ocean Jersey Topco Limited (formerly
Ocelot Partners Bidco Limited), a wholly owned subsidiary, incorporated in Jersey.
On 28 March 2018 the Ocean Outdoor Limited acquired 100% of the share capital and voting
rights of SCP Acquisition Topco Limited and its subsidiaries, through Ocean Jersey Topco
Limited. The acquired company and its subsidiaries specialise in the development and sale of
Out of Home (OOH) displays in the UK. The transaction was funded using cash on hand.
On 2 June 2018 the Ocean Group acquired 100% of the share capital and voting rights of Forrest
Media (Holdings) Limited and its subsidiaries, registered in Scotland, through Ocean Bidco
Limited. The acquired company and its subsidiaries specialise in the development and sale of
Out of Home (OOH) displays in Scotland. The transaction was funded using cash on hand.
On 11 March 2019 the Ocean Group acquired 100% of the share capital and voting rights of
Ngage Media B.V, registered in the Netherlands, through Ocean Bidco Limited. The acquired
company specialises in the development and sale of Out of Home (OOH) displays in the
Netherlands. The transaction was funded using cash on hand.
On 11 March 2019 the Ocean Group acquired 100% of the share capital and voting rights of
Ocean Outdoor Nederland B.V, registered in the Netherlands, through Ocean Bidco Limited. The
acquired company specialises in the development and sale of Out of Home (OOH) displays in
the Netherlands. The transaction was funded using cash on hand.
On 29 May 2019 the Ocean Group acquired 100% of the share capital and voting rights of DKTD
Media B.V, (aka Beyond Outdoor) registered in the Netherlands, through Ocean Bidco Limited.
The acquired company specialises in the development and sale of Out of Home (OOH) displays
in the Netherlands. The transaction was funded using cash on hand.
On 13 September 2019 the Ocean Group acquired 100% of the share capital and voting rights
of Ocean Outdoor Nordics VA Holding AB and its subsidiaries, registered in Sweden, through
Ocean Bidco Limited. The acquired company and its subsidiaries specialise in the development
and sale of Out of Home (OOH) displays in Sweden, Denmark, Finland and Germany. The
transaction was funded using cash on hand. The acquired Group consisted of a Media Sales
business and a Digital signage business. It was always the intention of Ocean to acquire 100%
of the Media Sales business and to form a separate entity with the vendors for the Digital Signage
business. Accordingly, the digital signage business was recognised as a subsidiary held-for-sale
at the acquisition date and the media sales business was recognised as a business combination.
The acquired group was restructured following the acquisition resulting in Ocean Bidco Limited
holding 49.99% of the share capital and voting rights of Visual Art Technologies (the Digital
signage business), a company registered in Sweden. The restructure was formalised on 23
December 2019 at which point Visual Art Technologies was de-recognised as a subsidiary and
was subsequently recognised as an associate in accordance with IAS 28. The Group does not
exercise control over Visual Art Technologies with effect from 23 December 2019 because
another party holds the remaining share capital and voting rights. The fair value of the associate
at 23 December 2019 was £13.3m. The carrying value of the investments at 31 December 2019
is also £13.3m.
On 9 December 2019 the Ocean Group acquired 80.13% of the share capital and voting rights
of AdCityMedia AB and its subsidiaries, registered in Sweden, through Ocean Bidco Limited. On
18 December 2019 a further 17.33% of the share capital and voting rights were acquired taking
the total holding to 97.46%. The acquired company and its subsidiaries specialise in the
development and sale of Out of Home (OOH) displays in Sweden and Norway. The transaction
was funded using cash on hand. On 4 February 2020 a further 1.94% holding in the company
was acquired. Under Swedish law the remaining shares not owned can be acquired via a
compulsory purchase.
52
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
14. Subsidiaries, investments and business combinations (continued)
The principal subsidiaries and associates of the Group which have been included in these
Consolidated Financial Statements, are as follows:
Name
Subsidiary companies
Country of
incorporation
and principal
place of business
Nature of business
Ownership
2019
Ownership
2018
Ocean Jersey Topco Limited
SCP Acquisition Topco Limited1, 3
SCP Acquisition Midco Limited1, 3
SCP Acquisition Bidco Limited1
Ocean Topco Limited1
Ocean Bidco Limited1
Ocean Outdoor UK Limited1
Signature Outdoor Limited1
Mediaco Outdoor Limited1
Forrest Media (Holdings) Limited1, 3
Forrest Media Limited1, 3
Forrest Outdoor Media Limited1
Ocean Brands Limited1
Ngage Media B.V1
Ocean Outdoor Nederland B.V1,2
DKTD Media B.V1
Ocean Outdoor Nordics VA Holding AB1 Sweden
Sweden
Ocean Outdoor Sweden AB1
Sweden
Global Agencies Stockholm AB1
Denmark
Ocean Outdoor Denmark A/S1
Finland
Ocean Outdoor Finland Oy1
Sweden
Gudfar & Son AB1
Germany
Ocean Outdoor Germany GmbH1
Sweden
AdCityMedia AB1
Sweden
GM-Gruppen Moving Message AB1
Norway
Ocean Outdoor Norway A/S1
Sweden
All in Media Sverige AB1
Sweden
ACM AB1
Holding co.
Holding co.
Holding co.
Holding co.
Holding co.
Holding co.
Jersey
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales OOH Media Owner
England & Wales OOH Media Owner
England & Wales OOH Media Owner
Scotland
Scotland
Scotland
Scotland
Netherlands
Netherlands
Netherlands
Holding co.
Holding co.
OOH Media Owner
Dormant subsidiary
OOH Media Owner
OOH Media Owner
OOH Media Owner
Holding co.
Holding co.
OOH Media Owner
OOH Media Owner
OOH Media Owner
OOH Media Owner
OOH Media Owner
OOH Media Owner
OOH Media Owner
OOH Media Owner
OOH Media Owner
OOH Media Owner
Associate companies
Visual Art Sweden AB
Visual Art International Holding AB
Visual Art Germany GmbH
Visual Art USA Inc.
Visual Art Norway AS
Sweden
Sweden
Germany
USA
Norway
Holding co.
OOH Media Owner
OOH Media Owner
OOH Media Owner
OOH Media Owner
1 The shares held in these entities are held indirectly.
2 Formerly called Interbest B.V
3 Company dissolved after the reporting date
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
68%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
97.46%
97.46%
97.46%
97.46%
97.46%
49.99%
49.99%
47.49%
49.99%
49.99%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
68%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The registered address for Ocean Jersey Topco Limited is 3rd Floor, 44 Esplanade, St Helier, Jersey,
JE4 9WG.
The registered address for entities incorporated in England & Wales is 25 Argyll Street, London, W1B
5QB, United Kingdom, with the exception of SCP Acquisition Midco Limited and SCP
53
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
14. Subsidiaries, investments and business combinations (continued)
Acquisition Topco Limited which had a registered address of 25 Kingly Street, London, W1B
5QB.
The registered address for entities incorporated in Scotland is 7 Seaward Street, Paisley Road,
Glasgow, G41 1HJ, United Kingdom.
The registered address for Ocean Outdoor Nederland B.V and DKTD Media B.V is Kastanjelaan
400 Verdieping 4, 5616LZ, Eindhoven, Netherlands.
The registered address for Ngage Media B.V. is Locatellikade 1, 1076AZ, Amsterdam,
Netherlands.
The registered address for Ocean Outdoor Nordics VA Holding AB, Ocean Outdoor Sweden AB,
Global Agencies Stockholm AB, Visual Art Sweden AB, Visual Art International Holding AB and
Gudfar & Son AB is Hälsingegatan 45, 113 31 Stockholm, Sweden.
The registered address for Ocean Outdoor Germany GmbH and Visual Art Germany GmbH is
Winterstraße 2, 22765 Hamburg, Germany.
The registered address for Visual Art USA Inc is 20 West Kinzie Street, 17th floor Chicago, IL
60654, USA.
The registered address for Ocean Outdoor Denmark A/S is Gammel Mønt 2, 1. sal 1117
København K, Denmark.
The registered address for Ocean Outdoor Finland Oy is Pursimiehenkatu 29-31 E 00150
Helsinki, Finland.
The registered address for AdCityMedia AB and ACM AB is Frihamnsgatan 22, Magasin 3, 115
56 Stockholm.
The registered address for GM-Gruppen Moving Message AB is Strömslundsgatan 4, 507 62
Borås, Sweden.
The registered address for All in Media Sverige AB is Kopparbergsvägen 27, 722 13 Västerås,
Sweden.
The registered address for Visual Art Norway AS and Ocean Outdoor Norway A/S is Martin
Linges Vei 25 1364 Fornebu, Norway.
Ocean Outdoor Nederland B.V
Fair value of assets at 11 March 2019
Intangible fixed assets
Tangible fixed assets
Right of use asset
Debtors
Cash and cash equivalents
Creditors
Lease liability
Deferred tax
Net assets acquired
Purchase consideration:
Cash
Contingent consideration
Goodwill arising on acquisition
54
Fair value
£'000
26,000
4,093
28,017
1,691
282
(3,642)
(28,017)
(6,136)
________
22,288
________
32,647
5,012
________
37,659
________
15,371
________
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
14. Subsidiaries, investments and business combinations (continued)
Ngage Media B.V
Fair value of assets at 11 March 2019
Intangible fixed assets
Tangible fixed assets
Right of use asset
Debtors
Cash and cash equivalents
Creditors
Lease liability
Deferred tax liability
Net assets acquired
Purchase consideration:
Cash
Deferred consideration paid during the year
Contingent consideration
Total purchase consideration
Goodwill arising on acquisition
DKTD Media B.V
Fair value of assets at 29 May 2019
Intangible fixed assets
Tangible fixed assets
Right of use asset
Debtors
Cash and cash equivalents
Creditors
Lease liability
Deferred tax liability
Net assets acquired
Purchase consideration settled in cash
Goodwill arising on acquisition
55
Fair value
£'000
12,130
2,233
4,222
1,331
1,177
(2,906)
(4,222)
(2,863)
________
11,102
________
8,815
2,596
6,470
________
17,881
________
6,779
________
Fair
value
£'000
1,849
1,744
8,299
763
112
(2,793)
(8,299)
(436)
________
1,239
________
2,609
________
1,370
________
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
14. Subsidiaries, investments and business combinations (continued)
Ocean Outdoor Nordics VA Holding AB and subsidiaries
Fair value of assets at 13 September 2019
Intangible fixed assets
Tangible fixed assets
Right of use asset
Debtors
Other assets
Cash and cash equivalents
Creditors
Lease liability
Deferred tax liability
Net assets acquired
Purchase consideration settled in cash
Goodwill arising on acquisition
AdCityMedia AB and subsidiaries
Fair value of assets at 09 December 2019
Intangible fixed assets
Tangible fixed assets
Right of use asset
Debtors
Cash and cash equivalents
Creditors
Lease liability
Deferred tax liability
Net assets acquired
Purchase consideration:
Settled in cash
Accrued consideration
Total purchase consideration
Goodwill arising on acquisition
56
Fair
value
£'000
27,049
1,463
25,883
3,502
11
210
(7,718)
(25,883)
(5,789)
________
18,728
________
57,565
________
38,837
________
Fair
value
£'000
7,139
793
2,979
3,766
630
(7,424)
(2,979)
(1,528)
________
3,376
________
24,177
627
________
24,804
________
21,428
________
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
14. Subsidiaries, investments and business combinations (continued)
In line with IFRS3, Business Combinations, the above intangibles have been calculated using
the information currently available. These values may be adjusted to reflect new information
obtained about facts and circumstances that existed as of the acquisition date during the
measurement period which shall not exceed one year from the acquisition date. For each
acquisition, the carrying amount of assets and liabilities acquired approximates their fair value.
Goodwill arising on acquisition relates to a number of factors. Group synergies are expected to
be achieved and the Group will benefit from economies of scale. Preferential supplier terms can
be negotiated and bringing these companies under the Ocean brand will create additional value
as the Group establishes itself as a major DOOH player across Northern Europe.
Ocean Outdoor Nederland B.V contributed £15.05m in revenue and £2.02m profit to the total
group loss from the date of acquisition.
The contingent consideration for Ocean Outdoor Nederland B.V relates to performance-based
cash pay-outs payable on the satisfaction of targets set at the date of acquisition over the next
two financial years. The contingent consideration has been provided for in full and discounted
using the IRR at acquisition.
Ngage Media B.V contributed £6.92m in revenue and £1.30m profit to the total group loss from
the date of acquisition.
The contingent consideration for Ngage Media B.V relates to performance-based cash pay-outs
payable on the satisfaction of targets set at the date of acquisition over the next two financial
years. The contingent consideration has been provided for in full and discounted using the IRR
at acquisition.
DKTD Media B.V contributed £1.06m in revenue and £0.1m profit to the total group loss from the
date of acquisition.
Ocean Outdoor Nordics VA Holding AB and subsidiaries contributed £8.45m in revenue and
£0.42m profit to the total group loss from the date of acquisition.
AdCityMedia AB and subsidiaries contributed £1.12m in revenue and £0.02m profit to the total
group loss from the date of acquisition.
Had all the acquisitions listed above been completed on 1 January 2019 Group revenue would
have been £141.1m and Group loss would have been £4.3m
The unaudited trading results for these entities by region and as part of the Group can be found
in the appendix beginning on page 71.
Cash flows from acquisition transactions
Ocean Outdoor Nederland B.V
Purchase consideration settled in cash
Cash balances acquired
Net cash outflow
2019
£'000
32,647
(282)
________
32,365
________
Direct acquisition costs of £0.28m were incurred during the course of the transaction.
57
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
14. Subsidiaries, investments and business combinations (continued)
Ngage Media B.V
Purchase consideration settled in cash
Cash balances acquired
Net cash outflow
2019
£'000
11,412
(1,177)
________
10,235
________
Direct acquisition costs of £0.28m were incurred during the course of the transaction.
DKTD Media B.V
Purchase consideration settled in cash
Cash balances acquired
Net cash outflow
2019
£'000
2,609
(112)
________
2,497
________
Direct acquisition costs of £0.22m were incurred during the course of the transaction.
Ocean Outdoor Nordics VA Holding AB and subsidiaries
Purchase consideration settled in cash
Cash balances acquired
Net cash outflow
2019
£'000
57,565
(210)
________
57,355
________
Direct acquisition costs of £0.51m were incurred during the course of the transaction.
AdCityMedia AB and subsidiaries
Purchase consideration settled in cash
Cash balances acquired
Net cash outflow
2019
£'000
24,177
(630)
________
23,547
________
Direct acquisition costs of £0.56m were incurred during the course of the transaction.
Investment in associate
Visual Art Sweden AB and subsidiaries became an associate investment with effect from 23
December 2019. The cost of investment and the latest available unaudited financial information
for that Group as at 31 Dec 2019 and the period ended 31 December 2019 is as follows:
58
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
14. Subsidiaries, investments and business combinations (continued)
Visual Art Sweden AB and subsidiaries
Cost as at 23 December 2019 and 31 December 2019
Visual Art Sweden AB and subsidiaries
unaudited financial information
Current liabilities
Current assets
Non-current assets
15. Trade and other receivables
Trade receivables
Prepayments and other receivables
Total trade and other receivables - Current
2019
£'000
13,297
_______
2019
£'000
(4,725)
4,324
975
_______
2019
£'000
54,124
1,347
_______
55,471
_______
2018
£'000
-
_______
2018
£'000
-
-
-
_______
2018
£'000
32,970
3,748
_______
36,718
_______
The carrying value of trade and other receivables classified as financial assets at amortised
cost approximates fair value. The Group does not hold any collateral as security.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a
lifetime expected credit loss provision for trade receivables and contract assets. To measure
expected credit losses on a collective basis, trade receivables and contract assets are grouped
based on similar credit risk and aging. The contract assets have similar risk characteristics to the
trade receivables for similar types of contracts.
The expected loss rates are based on the Group’s historical credit losses experienced over the
three-year period prior to the period end. The historical loss rates are then adjusted for current
and forward-looking information on macroeconomic factors affecting the Group’s customers.
The Group has identified the gross domestic product (GDP), unemployment rate and inflation
rate as the key macroeconomic factors in the countries where the Group operates.
Opening provision for impairment of trade receivables
Increase during the year
Balances acquired on acquisition
Closing provision for impairment of trade receivables
59
2019
£'000
246
532
-
_______
778
_______
2018
£'000
-
113
133
_______
246
_______
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
15. Trade and other receivables (continued)
31 December 2019
Current
Up to 3 months past due
More than 3 months past due
31 December 2018
Current
Up to 3 months past due
More than 3 months past due
16. Trade and other payables
Due within one year:
Trade payables
Other payables
Contingent consideration
Accrued consideration
Accruals
Due after more than one year:
Other payables
Contingent consideration
Estimated
Default
rate
Gross carrying
amount
£'000
Credit loss
allowance
£'000
0.50%
1.00%
4.80%
29,138
15,040
9,946
_______
54,902
_______
146
151
481
_______
778
_______
Estimated
Default
rate
Gross carrying
amount
£'000
Credit loss
allowance
£'000
0.50%
0.66%
2.30%
18,795
11,009
3,412
_______
33,216
_______
94
73
79
_______
246
_______
2019
£'000
2018
£'000
33,854
8,056
5,070
627
28,784
_______
76,391
_______
2,956
7,545
_______
10,501
_______
8,791
379
-
-
35,559
_______
44,729
_______
-
-
_______
-
_______
The accruals balance contains accruals for site rates, profit shares and volume rebates, including
estimates for such items where necessary.
60
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
17. Deferred tax
A reduction in the UK corporation tax rate from 20% to 19% (effective from 1 April 2017) was
substantively enacted on 26 October 2015, and an additional reduction to 17% (effective 1 April
2020) was substantively enacted on 6 September 2016. This would reduce the company's future
current tax charge accordingly. Deferred tax assets and liabilities at 31 December 2019 have
been calculated taking into consideration the applicable rates when the temporary differences
are expected to reverse. On 11 March 2020, the UK corporation tax rate was confirmed as being
maintained at 19% from 1 April 2020 onwards. This will result in the UK deferred tax balances
being reassessed at 19% rather than 17% from FY20 onwards.
Details of the deferred tax liability, amounts recognised in profit or loss and amounts recognised
in other comprehensive income are as follows:
Asset
£'000
Liability
£'000
-
-
-
-
-
24,386
(1,715)
887
-
_______
21
_______
-
_______
23,579
_______
Asset
£'000
Liability
£'000
-
-
-
-
23,579
16,752
(3,736)
847
-
_______
27
_______
-
_______
37,469
_______
Charged/
(credited)
to profit
or loss
£'000
-
-
(1,715)
-
21
_______
(1,694)
_______
Charged/
(credited)
to profit
or loss
£'000
-
-
(3,736)
-
27
_______
(3,709)
_______
At 1 January 2018
Arising on business combinations
Reversal of temporary timing differences on
business combinations
Fixed asset and other differences
Reversal of temporary timing differences on fixed
asset and other differences
At 31 December 2018
At 1 January 2019
Arising on business combinations
Reversal of temporary timing differences on
business combinations
Fixed asset and other differences
Reversal of temporary timing differences on fixed
asset and other differences
At 31 December 2019
61
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
18. Notes supporting the cash flow
Significant non-cash transactions are as follows:
Purchases of site assets, equipment and motor vehicles unpaid
at year end
Contingent consideration on business combination
IFRS 16 right of use asset recognised (note 2.19)
IFRS 16 prepayments adjustment (note 2.19)
IFRS 16 right of use asset and lease liability disposal
IFRS 16 right of use liability recognised (note 2.19)
IFRS 16 new operating leases (note 2.19)
IFRS 16 interest payable
Accrued consideration
Interest payable in contingent consideration
2019
£'000
105
11,334
88,520
856
816
99,719
11,463
6,915
627
1,281
_______
2018
£'000
5,169
-
-
-
-
-
-
-
-
-
_______
19. Restatement of prior year consolidated statement of cash flows
Subsequent to the approval of the financial statements for the year ended 31 December 2018,
the directors determined that there was a £5,169k non-cash movement within site assets,
equipment and motor vehicle additions, which was not previously identified and resulted in an
error in the 2018 cash flow statement in relation to the amounts reported for purchases of site
assets, equipment and motor vehicles (investing activities), and within the increase in trade and
other payables (cash generated from operations). In addition, upon review of the cash flow
statement an additional reclassification error was identified due to the inclusion of a £5,839k
deduction for acquisition costs paid (cash generated from operations) in the reconciliation
between profit for the year and operating cash flows, and a corresponding £5,839k increase in
the change in working capital for trade and other payables (cash generated from operations).
There is no impact on the disclosure of the profit before tax, and no impact on the cash position,
as this is a reclassification within the cash generated from operations.
The following amendments have been made to the comparatives reported in the current year’s
financial statements:
Year ended 31 December 2018
(All amounts in £’000)
As Restated
As previously
reported
Acquisition costs paid
(Decrease)/Increase in trade and
other payables
Cash generated from operations
Net cash flows from operating
activities
Net cash used in investing activities
-
(5,276)
12,778
11,768
(5,839)
5,732
17,947
16,937
Change
5,839
(11,008)
(5,169)
(5,169)
(232,523)
(237,692)
5,169
In addition, a non-cash movement for an increase in capital expenditure payables of £5.2m
should have been disclosed in the 2018 financial statements.
There was no impact on the amounts reported for “net decrease in cash and cash equivalents”
or “cash and cash equivalents” at the end of 2018.
62
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
20
Share capital
The authorised shares of the Company are as follows:
Authorised
Unlimited number of Ordinary Shares
Founder Preferred Shares, no par value
Balance at beginning of period
Converted during the period
Balance at end of period
Ordinary Shares, no par value
Balance at beginning of period
Issued and fully paid during the period
Balance at end of period
Shares held in treasury, no par value
Balance at beginning of period
Shares acquired
Balance at end of period
2019
£'000
2018
£'000
-
_______
-
________
2019
Number
‘000
2019
£'000
2018
Number
‘000
2018
£'000
700
(88)
_______
5,213
(652)
_______
700
-
_______
5,213
-
_______
612
_______
4,561
_______
700
_______
5,213
_______
2019
Number
‘000
2019
£'000
2018
Number
‘000
2018
£'000
53,921
88
_______
375,594
652
_______
41,790
12,131
_______
288,906
86,688
_______
54,009
_______
376,246
_______
53,921
_______
375,594
_______
2019
Number
‘000
2019
£'000
2018
Number
‘000
2018
£'000
-
396,730
_______
-
2,417
_______
-
-
_______
-
-
_______
396,730
_______
2,417
_______
-
_______
-
_______
147,000 Founder Preferred Shares were issued on 20 January 2017 at US$10.50 per share and
a further 553,000 issued on 8 March 2017, also at US$10.50 per share. 87,500 Founder
Preferred Shares were converted on 15 January 2019 into Ordinary shares on a one-for-one
basis. There are no Founder Preferred Shares held in Treasury. Each Founder Preferred Share
was issued with a Warrant as described below.
41,790,000 Ordinary Shares were issued on 8 March 2017 (41,765,000 were issued in the IPO
at US$10.00 per share and 25,000 were issued to the non-founder directors in conjunction with
the IPO). Each Ordinary Share was issued with a Warrant as described below. Issue costs of
US$10,543,094 were deducted from the proceeds of issue.
63
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
20
Share capital (continued)
Following the acquisition of SCP Acquisition Topco Limited on 28 March 2018, 12,046,994
ordinary shares were issued. 11,171,150 shares were issued as a result of Warrants issued being
exercised, 875,844 shares were issued for cash.
Following the acquisition of Forrest Media (Holdings) Limited on 2 June 2018, 59,850 ordinary
shares were issued for cash.
In 2018, 24,000 Ordinary Shares were issued to three Non-Executive Directors for remuneration
in the year.
On 19 March 2019, the Company announced a discretionary share buyback programme through
its investment bank to purchase up to an aggregate amount of US$25.0m (circa £18.8m) of
Ordinary Shares. The arrangement allows the investment bank to purchase up to 5,000,000
Ordinary Shares in the Company during open periods of the Company until 30 September 2019.
The price limits of Regulation (EU) No 596/2014 of 16 April 2014 (as amended) in relation to
market abuse apply. The sole purpose of the share purchases was to reduce the Company's
share capital. Any Ordinary Shares purchased by the Company were held in treasury. At 31
December 2019 there were 396,730 Ordinary Shares held in Treasury purchase for a total
consideration of US$3.1m (circa £2.4m).
As at 31 December 2019, the company had in issue 53,611,614 Ordinary Shares and 612,000
Founder Preferred Shares. The company had 396,730 Ordinary Shares held in Treasury. All
Warrants previously issued have expired.
Ordinary Shares
Ordinary Shares confer upon the holders (in accordance with the Articles):
a) Subject to the BVI Companies Act, on a winding-up of the Company the assets of the
Company available for distribution shall be distributed, provided there are sufficient assets
available, to the holders of Ordinary Shares and Founder Preferred Shares pro rata to the
number of such fully paid up shares held by each holder relative to the total number of
issued and fully paid up Ordinary Shares as if such fully paid up Founder Preferred Shares
had been converted into Ordinary Shares immediately prior to the winding-up;
b)
c)
the right, together with the holders of the Founder Preferred Shares, to receive all amounts
available for distribution and from time to time to be distributed by way of dividend or
otherwise at such time as the Directors shall determine, pro rata to the number of fully paid
up shares held by the holder, as if the Ordinary Shares and Founder Preferred Shares
constituted one class of share and as if for such purpose the Founder Preferred Shares
had been converted into Ordinary Shares immediately prior to such distribution; and
the right to receive notice of, attend and vote as a member at any meeting of members
except in relation to any Resolution of Members that the Directors, in their absolute
discretion (acting in good faith) determine is: (i) necessary or desirable in connection with
a merger or consolidation in relation to, in connection with or resulting from the Acquisition
(including at any time after the Acquisition has been made); or (ii) to approve matters in
relation to, in connection with or resulting from the Acquisition (whether before or after the
Acquisition has been made).
Founder Preferred Shares
The Founder Preferred Shares have US$nil par value and carry the same rights, including the
right to receive dividends, as Ordinary Shares. At the discretion of the holder, the Founder
Preferred Shares can be converted into Ordinary Shares on a one-for-one basis.
The Founder Preferred Shares are structured to provide a dividend based on the future
appreciation of market value of the Ordinary Shares, thus aligning the interests of the founders
64
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
20
Share capital (continued)
(as defined in the Prospectus) with Ocean Outdoor Limited (formerly Ocelot Partners Limited)
investors on a long-term basis. This dividend payment is calculated as follows: the Founder
Preferred Shares are divided into eight equal tranches, pro rata to the number of Founder
Preferred Shares held by each holder. On each Enhancement Date, the rights which are
comprised in one such tranche (the “Enhanced Tranche”) shall be enhanced by increasing the
holders of the Enhanced Tranche’s proportionate entitlement to: (a) any assets of the Company
which are distributed to members on a winding up of the Company; and (b) any amounts which
are distributed by way of dividend or otherwise if and to the extent necessary to ensure that on
such Enhancement Date, the Enhanced Tranche has a market value which is at least equal to
the market value of the Relevant Number of Ordinary Shares at such time (which for these
purposes shall be determined in accordance with sub-section (1) of section 421 of the United
Kingdom Income Tax (Earnings and Pensions) Act 2003. So far as possible, any such
enhancement shall be divided between the holders of the Enhanced Tranche pro rata to the
number of Founder Preferred Shares which are held by them and comprised in the Enhanced
Tranche.
As at each Enhancement Date, the Relevant Number of Ordinary Shares means:
a) a number of Ordinary Shares equal to the aggregate number of Founder Preferred
Shares comprised in the Enhanced Tranche (subject to adjustment in accordance with
the Articles); plus
b)
c)
if the conditions for the Additional Annual Enhancement have been met, such number
of Ordinary Shares as is equal to the Additional Annual Enhancement Amount divided
by the Additional Annual Enhancement Price (any increase in the calculation of the
Relevant Number of Ordinary Shares pursuant to this paragraph (b) being referred to
as the “Additional Annual Enhancement”); plus
if any dividend or other distribution has been made to the holders of Ordinary Shares
in the relevant Enhancement Year, such number of Ordinary Shares as is equal to the
Ordinary Share Dividend Enhancement Amount at the Ordinary Share Dividend
Payment Price (any increase in the calculation of the Relevant Number of Ordinary
Shares pursuant to this paragraph (c) being referred to as the “Ordinary Share Dividend
Enhancement”).
The conditions for the Additional Annual Enhancement referred to in paragraph (b) above are
as follows:
I.
II.
no Additional Annual Enhancement will occur until such time as the Average Price per
Ordinary Share for any ten consecutive Trading Days following Admission is at least
$11.50;
following the first Additional Annual Enhancement, no subsequent Additional Annual
Enhancement will occur unless the Additional Annual Enhancement Price for the
relevant Enhancement Year
the highest Additional Annual
Enhancement Price in any preceding Enhancement Year.
is greater
than
In the first Enhancement Year in which the Additional Annual Enhancement is eligible to occur,
the Additional Annual Enhancement Amount will be equal to (i) 20 per cent. of the difference
between $10.00 and the Additional Annual Enhancement Price, multiplied by (ii) the number of
Ordinary Shares outstanding immediately following the Acquisition including any Ordinary Shares
issued pursuant to the exercise of Warrants but excluding any Ordinary Shares issued to
shareholders or other beneficial owners of a company or business acquired pursuant to or
in connection with the Acquisition (the “Preferred Share Enhancement Equivalent”).
65
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
20
Share capital (continued)
Thereafter, the Additional Annual Enhancement Amount will be equal in value to 20 per cent. of
the increase in the Additional Annual Enhancement Price over the highest Additional
Annual Enhancement Price in any preceding Enhancement Year multiplied by the Preferred
Share Enhancement Equivalent.
For the purposes of determining the Additional Annual Enhancement Amount, the Additional
Annual Enhancement Price is the Average Price per Ordinary Share for the last 30 consecutive
Trading Days in the relevant Enhancement Year (the “Enhancement Determination Period”).
Warrants
In 2018 the Company issued 42,490,000 Warrants to the purchasers of both Ordinary Shares
and Founder Preferred Shares (including the 25,000 Warrants that were issued to non-founder
directors in connection with their appointment). Each Warrant had a term of 3 years following an
Acquisition and entitled a Warrant holder to subscribe for one-third of an Ordinary Share upon
exercise. Warrants were exercisable in multiples of three for one Ordinary Share at a price of
US$11.50 per whole Ordinary Share.
On 28 February 2018, an amendment was made to the Warrant subscription price, reducing the
cost from US$11.50 per whole ordinary share, to US$10.00 per whole ordinary share. The
subscription period was also reduced, resulting in the Warrants expiring prior to the closing of the
Share Acquisition on 28 March 2018. As a result, all Warrants previously issued, not exercised
at the acquisition date, have expired.
Hurdle shares
Ocean Jersey Topco Limited, a subsidiary of the Company, issued shares to management which
can be converted to shares in Ocean Outdoor Limited under certain circumstances. 6,660,000 of
these hurdle shares were issued on 28 March 2018. The hurdle shares will only accrue value
when the price of Ordinary Shares has increased by at least 10 per cent on a compound basis
over a base price of $10.00 per share, for each financial year since the date that the participants
acquired the shares (including the financial year in which the Ocean Transaction was completed).
3,330,000 of these shares vest over a four-year period and 3,330,000 vest over a five-year
period.
The hurdle shares do not have a right to receive dividend payments, except in the event of a
winding-up of Ocean Jersey Topco Limited, or other unusual circumstances. The hurdle shares
do not carry voting rights.
Securities carrying special rights:
Save as disclosed above in relation to the Founder Preferred Shares, no person holds securities
in the Company carrying special rights with regard to control of the Company.
Voting rights:
Holders of Ordinary Shares will have the right to receive notice of and to attend and vote at any
meetings of members. Each holder of Ordinary Shares being present in person or by proxy at a
meeting will, upon a show of hands, have one vote and upon a poll each such holder of Ordinary
Shares present in person or by proxy will have one vote for each Ordinary Share held by them.
In the case of joint holders of a share, if two or more persons hold shares jointly each of them
may be present in person or by proxy at a meeting of members and may
speak as a member, if only one of the joint owners is present, they may vote on behalf of all joint
owners, and if two or more joint holders are present at a meeting of members, in person or by
proxy, they must vote as one.
66
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
20
Share capital (continued)
Restrictions on voting:
No member shall, if the Directors so determine, be entitled in respect of any share held by them
to attend or vote (either personally or by proxy) at any meeting of members or separate class
meeting of the Company or to exercise any other right conferred by membership in relation to
any such meeting if they or any other person appearing to be interested in such shares has failed
to comply with a notice requiring the disclosure of shareholder interests and given in accordance
with the Company’s articles of association (the “Articles”) within 14 calendar days, in a case
where the shares in question represent at least 0.25% of their class, or within seven days, in any
other case, from the date of such notice. These restrictions will continue until the information
required by the notice is supplied to the Company or until the shares in question are transferred
or sold in circumstances specified for this purpose in the Articles.
Rights to appoint and remove Directors
Subject to the BVI Companies Act and the Articles, the Directors shall have power at any time,
and from time to time, without sanction of the members, to appoint any person to be a Director,
either to fill a casual vacancy or as an additional Director. Subject to the BVI Companies Act and
the Articles, the members may by a Resolution of Members appoint any person as a Director and
remove any person from office as a Director.
For so long as an initial holder of Founder Preferred Shares (being a Founding Entity together
with its affiliates) holds 20% or more of the Founder Preferred Shares in issue, such holder shall
be entitled to nominate a person as a Director of the Company and the Directors shall appoint
such person. In the event such holder notifies the Company to remove any Director nominated
by them the other Directors shall remove such Director, and in the event of such a removal the
relevant holder shall have the right to nominate a Director to fill such vacancy.
21
Earnings per share
Numerator
(Loss) /Earnings used in basic and diluted EPS
Denominator
Weighted average number of shares used in basic EPS
Weighted average number of shares used in diluted EPS
Basic EPS (pence)
Diluted EPS (pence)
2019
£'000
2018
£'000
(5,247)
_______
6,623
_______
'000
'000
53,590
_______
50,862
_______
53,590
_______
50,862
_______
(9.8p)
_______
13.0p
_______
(9.8p)
_______
13.0p
_______
At 31 December 2019, the warrants had expired and the directors’ share options, the founder
preferred shares and the hurdle shares were currently considered to be non-dilutive. They are
expected to become dilutive once in the money.
67
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
22
Reserves
The following describes the nature and purpose of each reserve within equity:
Reserve
Description and purpose
Treasury share reserve
Share premium
Amount paid by the company to purchase shares its
own shares.
Amount subscribed for share capital in excess of
nominal value.
Retained earnings
All other net gains and losses and transactions with
owners (e.g. dividends) not recognised elsewhere.
Foreign exchange reserve
Foreign exchange gains and losses on translation of
subsidiary undertakings into the presentational
currency of the Group.
23
Related party disclosures
During the period the Company issued the following Shares, Warrants and Options to directors
of the Company:
2019
Founder
Ordinary Preferred
Shares
Number
‘000
Shares Warrants Options
Number Number Number
'000
'000
‘000
Andrew Barron
Aryeh B. Bourkoff
18
50
_______
(18)
(50)
-
-
_______ _______
-
-
_______
68
_______
(68)
-
_______ _______
-
_______
2018
Founder
Ordinary Preferred
Andrew Barron
Andrew Miller
Aryeh B. Bourkoff
Robert Marcus
Martin HP Söderström
Sangeeta Desai
Thomas Ebeling
Tom Goddard
Tim Bleakley
Shares
Number
‘000
164
-
493
9
8
3
8
233
311
_______
Shares Warrants Options
Number Number Number
'000
'000
‘000
-
-
-
-
-
-
-
-
-
_______ _______
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
_______
1,229
_______
-
_______ _______
-
-
_______
68
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
23
Related party disclosures (continued)
The fees paid to directors during the period to 31 December 2019 were as follows:
Andrew Barron
Andrew Miller
Aryeh B. Bourkoff
Robert Marcus
Martin HP Söderström
Sangeeta Desai
Thomas Ebeling
Tom Goddard
Tim Bleakley
2019
£'000
-
67
-
78
67
67
59
88
453
_______
879
_______
2018
£'000
-
5
-
64
54
54
9
54
270
_______
510
_______
In FY18 Robert D Marcus, Martin HP Söderström and Thomas Ebeling opted to have their annual
remuneration settled by the issue of shares at $10 per share. Robert D Marcus received 9,000
Ordinary Shares and Martin HP Söderström and Thomas Ebeling, 7,500 Ordinary Shares each.
In FY18 the Group paid a transaction fee of £1.0m to LionTree Advisors UK LLP in relation to the
acquisition of Forrest Media (Holdings) Limited. Aryeh B. Bourkoff, a Founder and Non-Executive
Director of Ocean Outdoor Limited, is the founder and CEO of LionTree LLC, a connected
company to LionTree Advisors UK LLP.
24
Events after the reporting date
In accordance with the London Stock Exchange Admission and Disclosure Standards, the
Company announced, pursuant to its articles of association, a tranche of 87,500 founder
preferred shares have been automatically re-designated as ordinary shares on a one for one
basis. This re-designation became effective on 15 January 2020 and admission of the ordinary
shares occurred on 21 January 2020.
On 4 February 2020, the Group acquired a further 1.94% of the ordinary shares of ACM taking
its holding in the subsidiary to 99.41%.
On 11 March 2020, the UK corporation tax rate was confirmed as being maintained at 19% from
1 April 2020 onwards. This will result in the UK deferred tax balances being reassessed at 19%
rather than 17% from FY20 onwards.
On 11 March 2020, the World Health Organisation announced the pandemic status of COVID-
19. Subsequent to this announcement, significant measures have been taken by Governments
across Europe, restricting the movement of the population and the forced closure of non-essential
business. Given the company operates in the DOOH market, this has impacted on the company’s
performance in FY20. The effect COVID-19 will have on the economy and the company cannot
yet be quantified. The Directors recognise it will affect the operations of the business but feel the
Group is able to navigate through the impact of COVID-19 due to the strength of its market
position, its robust balance sheet and cash surplus.
69
Ocean Outdoor Limited
Notes forming part of the Consolidated Financial Statements
for the year ended 31 December 2019
24
Events after the reporting date (continued)
There are a number of factors that will determine the overall impact COVID-19 will have on the
Group. At the balance sheet date there were no indicators of impairment on any of the Group
assets. The Group has undertaken a number of acquisitions in the last two years, with the
consideration paid often derived from a multiple of the entity’s EBITDA. Given the impact of
COVID-19 on EBITDA, this could lead to an indicator of impairment of intangible assets held by
the Group. The Group will continue to assess the impact of COVID-19 on the business
combinations, and all other Group assets, for any indicators that they are held at carrying values
in excess of their fair value. The Group however remain confident that any short-term impact
does not impact the medium and long-term value of the assets held.
The Group retains sufficient liquidity in the short term, however the impact of COVID-19 has
resulted in the Group raising its first debt facility with a rolling credit facility agreed with the
Group’s banking partners on 28 May 2020 for up to £35m, subject to customary covenants related
to minimum quarterly adjusted EBITDA and cash balances. This will boost liquidity to assist the
business manage through the cash flow impact of the significantly reduced revenues suffered in
Q2 and likely reduced revenues in Q3.
70
Ocean Outdoor Limited
Appendix (unaudited)
The following pages present unaudited proforma financial information for entities owned by the Group
as at 31 December 2019. This allows analysis and assessment of the underlying performance of
operations, ignoring timing differences relating to the date of acquisition.
Current year and prior year financials are provided for comparison. FY19 financials are presented
applying the new IFRS 16 accounting standard which came in to effect 1 January 2019, and also under
the previous accounting standard which is consistent with FY18. Note, the IFRS 16 FY19 financials are
proforma from 1 January 2019, which differs from reported IFRS 16 which is adopted from the
acquisition date.
There is also a reconciliation of Profit from operations to Adjusted EBITDA.
Ocean Group
Ocean Group Reported Adjusted EBITDA to Proforma Adjusted EBITDA reconciliation
Ocean Outdoor Limited and UK operating subsidiaries
Ocean Netherlands
Ocean Nordics
72
73
74
75
76
71
Ocean Outdoor Limited
Appendix (unaudited)
Ocean Outdoor Limited and subsidiaries
The results below present the Group on an unaudited proforma basis. The unaudited proforma basis
comprises all Group subsidiaries as if they were owned from 1 January 2018.
Billings
Revenue
Cost of sales
Gross profit
Administrative and other expenses
IFRS 16
FY19
£'000
173,356
_______
FY19
£'000
FY18
£'000
173,356
_______
152,724
_______
141,314
141,314
124,504
(76,526)
_______
(83,925)
_______
(71,878)
_______
64,788
57,389
52,626
(55,275)
_______
(55,663)
_______
(43,627)
_______
Profit from operations
9,513
1,726
8,998
Finance expense
Finance income
Profit before tax
Tax expense
(Loss) / profit from continuing operations
Total comprehensive (loss) / income
(10,222)
521
_______
(1,684)
521
_______
(6,044)
1,658
_______
(188)
563
4,612
(4,861)
_______
(4,861)
_______
(4,186)
_______
(5,049)
_______
(4,298)
_______
426
_______
(5,049)
_______
(4,298)
_______
426
_______
IFRS 16
FY19
£'000
FY19
£'000
FY18
£'000
Profit from operations
9,513
1,726
8,998
Depreciation
Profit on disposal
Amortisation
Deal fees
Private equity and listed company expenses
Currency movements
Other one-off costs
Adjusted EBITDA
72
35,580
(31)
19,753
2,237
236
638
586
_______
68,512
_______
8,060
-
19,753
2,237
236
638
586
_______
33,236
_______
7,078
(2)
11,364
4,058
60
(2,704)
1,545
_______
30,397
______
Ocean Outdoor Limited
Appendix (unaudited)
Ocean Outdoor Limited and subsidiaries
The table below reconciles the reported profit from operations to Reported Adjusted EBITDA and then
reconciles Reported Adjusted EBITDA to the Proforma Adjusted EBITDA.
Reported profit from operations
Depreciation on right of use asset
Depreciation of site assets, equipment and motor vehicles
Amortisation
Post-acquisition add-backs
Reported Adjusted EBITDA
Deduct site rents
Add acquisitions' pre acquisition profit from operations
Add pre acquisition add-backs
Proforma Adjusted EBITDA
FY19
£'000
FY18
£'000
3,010
5,275
19,706
6,953
19,753
3,322
_______
-
3,195
10,087
(1,669)
_______
52,744
16,888
(24,495)
4,612
375
_______
-
8,790
4,719
_______
33,236
_______
30,397
______
73
Ocean Outdoor Limited
Appendix (unaudited)
Ocean Outdoor Limited and UK operating subsidiaries
The results below present the Ocean Outdoor Limited and UK operating subsidiaries on an unaudited
proforma basis.
Billings
Revenue
Cost of sales
Gross profit
Administrative and other expenses
IFRS 16
FY19
£'000
FY19
£'000
FY18
£'000
101,631
_______
101,631
87,843
_______ _______
71,668
71,668
62,218
(40,710)
_______
(43,938)
(37,055)
_______ _______
30,958
27,730
25,163
(35,320)
_______
(35,698)
(23,816)
_______ _______
(Loss) / profit from operations
(4,362)
(7,968)
1,347
Finance expense
Finance income
Loss before tax
Tax expense
Loss from continuing operations
Total comprehensive income
Profit from operations
Depreciation
Profit on disposal
Amortisation
Deal fees
Private equity and listing fees
Currency movements
Other one-off costs
Adjusted EBITDA
74
(6,570)
509
_______
(1,278)
509
(5,553)
1,658
_______ _______
(10,423)
(8,737)
(2,548)
(2,856)
_______
(2,856)
(2,303)
_______ _______
(13,279)
_______
(11,593)
(4,851)
_______ _______
(13,279)
_______
(11,593)
_______
(4,851)
______
IFRS 16
FY19
£'000
FY19
£'000
FY18
£'000
(4,362)
(7,968)
1,347
17,723
(21)
19,753
2,237
236
638
211
______
5,009
-
19,753
2,237
236
638
211
______
4,205
(2)
11,364
4,058
60
(2,704)
739
______
36,415
______
20,116
______
19,067
______
Ocean Outdoor Limited
Appendix (unaudited)
Ocean Netherlands
The results below present Ocean Netherlands (Interbest, Ngage and Beyond Outdoor) on an
unaudited proforma basis, translated in GBP using constant currency.
IFRS 16
FY19
£'000
FY19
£'000
FY18
£'000
Billings
Revenue
Cost of sales
Gross profit
Administrative and other expenses
28,695
26,372
_______ _______ _______
28,695
26,616
26,616
23,777
(13,680)
(14,827)
(14,226)
_______ _______ _______
12,936
11,789
9,551
(6,665)
(6,477)
_______ _______ _______
(6,675)
Profit from operations
6,271
5,114
3,074
Finance expense
Finance income
Profit before tax
Tax expense
Profit from continuing operations
Total comprehensive income
Profit from operations
Depreciation
Profit on disposal
Other one-off costs
Adjusted EBITDA
(2,127)
12
(242)
-
_______ _______ _______
(177)
12
4,156
4,949
2,832
(1,107)
(923)
_______ _______ _______
(1,107)
3,049
1,909
_______ _______ _______
3,842
3,049
1,909
_______ _______ _______
3,842
IFRS 16
FY19
£'000
FY19
£'000
FY18
£'000
6,271
5,114
3,074
9,114
(10)
375
_______
2,073
-
375
2,032
-
806
_______ _______
15,750
_______
7,562
5,912
_______ _______
75
Ocean Outdoor Limited
Appendix (unaudited)
Ocean Nordics
The results below present Ocean Nordics (Visual Art media sales and ACM) on an unaudited
proforma basis, translated in GBP using constant currency.
IFRS 16
FY19
£'000
FY19
£'000
FY18
£'000
43,030
_______
43,030
38,509
_______ _______
43,030
43,030
38,509
(22,136)
_______
(25,160)
(20,597)
_______ _______
20,894
17,870
17,912
(13,290)
_______
(13,290)
(13,334)
_______ _______
7,604
4,580
4,577
(1,525)
-
_______
(229)
-
(249)
-
_______ _______
6,079
4,351
4,328
(898)
_______
(898)
(960)
_______ _______
5,181
_______
3,453
3,368
_______ _______
5,181
_______
3,453
3,368
_______ _______
IFRS 16
FY19
£'000
FY19
£'000
FY18
£'000
7,604
4,580
4,577
8,743
_______
978
841
_______ _______
16,347
_______
5,558
5,418
_______ _______
Billings
Revenue
Cost of sales
Gross profit
Administrative and other expenses
Profit from operations
Finance expense
Finance income
Profit before tax
Tax expense
Profit from continuing operations
Total comprehensive income
Profit from operations
Depreciation
Adjusted EBITDA
76