Annual Report
and
Financial
Statements
2019
© 2020 XLMedia PLC
Annual Report
and
Financial Statements
2019
Table of Contents
Performance Publisher of Choice
2019 Annual Report
About XLMedia plc
What we do
2019 Highlights
Our Business Model
Improving User Journeys
Wholly owned and operated sites
Case study – Money Under 30
Chairman’s Statement
Chief Executive Officer Review
Chief Financial Officer’s Review
XLMedia’s Board
Advisors
Directors’ Report
Risk Factors
Corporate Governance Report
Audit Committee Report
Remuneration Committee Report
2019 Audited Financial Statements
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7
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About XLMedia plc
Performance Publisher of Choice
XLMedia has a long track record in online performance publishing owns and operates an extensive global
portfolio of websites across numerous sectors. including gambling, sports betting, personal finance and
technology. The Group's core skill is to stimulate active engagement by sending paying customers to our
partners and sharing the revenues associated with these activities.
Our publishing assets, proprietary technology, and data are the unmatched force that helps us serve
highly valuable, engaging, timely, and relevant content to millions of users worldwide. Consumer
engagement and providing an enhanced consumer experience is central to our vision.
Controlling and managing a diverse publishing portfolio puts the Group in a better position to create
higher levels of engagement than other traditional performance marketing, encouraging consumers to
actively choose the content they want to digest, generating both greater value and increased levels of
engagement.
What we do
Technology-Driven Performance Marketing
Publishing, technology, and data constitute the foundation of all XLMedia’s operations, allowing us to
maintain our competitive edge, greater great levels of consumer engagement, and grow our business
successfully.
Digital publishing expertise
The websites, which we own and operate, rank at the top of search results. The success in dominating the
Search Engine Results Pages ('SERPs') comes from our expert understanding of content creation, user
experience, and website management. Such professional know-how also helps us generate maximum
returns on these digital publishing assets. Our dedicated, in-house teams of expert writers, UX/UI
professionals, and editors create content that resonates with consumers, fits their intent, and motivates them
to act.
Data and Programmatic Learning
We are a data driven business and as such, we make the most out of advanced machine
learning algorithms, content management systems, and data platforms.
Our smart tracking tools and advanced content management systems allow for scalability, improved
optimization, and help us match the best advertisers have to offer to users’ preferences. On top of that, these
vast technological capabilities allow us to boost our performance and generate profit margins.
Our websites produce vast amounts of data. Thanks to our statistical and data modeling tools, we can index
millions of unique data points at different stages of the user journey, identify consumer activities, and spot
trends in consumer behavior.
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4
2019 Highlights
Performance Publisher of Choice
Financial summary
Revenues of $79.7 million (2018: $93.5million*)
Gross profit of $53.7 million (2018: $63.4 million*)
Adjusted EBITDA(2) of $33.5 million (2018: $43.6 million*)
Adjusted profit before tax(1) of $25.3 million (2018: $36.4 million*)
Impairment Loss of $81.4 million (2018: $0.3 million)
Follows an independent and comprehensive review of recorded asset values at year end as required by IAS 36
Further reductions follow the demotion of the Group’s websites by Google in January 2020
Income (Loss) from discontinued operations of $2.2 million (2018: ($11.3) million)
Reported profit (Loss) before tax of ($57.7) million (2018: $36.1 million)
Cash and short-term investments of $29.9 million (31 December 2018: $47.6 million) – the Company has
minimal debt (<$1m) which is expected to be fully repaid by the half year
Operating summary
New Executive Management Team joined late 2019/early 2020 bringing significant successful
transformation experience to evolve the Company to reposition for growth markets and territories.
Investment areas:
Operating Model – evolution to support strategic
ambition and growth through significant
transformation program
Data & Programmatic learning – harness
data to create compelling consumer
experiences
US Sports – resources, technology and
expertise to develop US presence
New Markets – resources to develop
existing verticals into new markets
On 18 January 2020, the Company became aware that a number of its casino sites had been manually
de-ranked by Google
Management remains optimistic that a number
of premium sites will be re-ranked and fully
operational during H2 2020
The Company has increased its focus and resources
on premium sites, accelerating planned changes to
business model
The Company made a solid start to 2020 before the Google de-ranking and COVID 19 pandemic effects
The year-end exit trajectory and renewed operating platform will form a strong basis for future growth and
development
Board will not be recommending a dividend or share buyback programme for the foreseeable future
5
2019 Annual Report(*) Reclassified - excluding discontinued operations1 Excluding loss from impairment and reorganization costs 2 Earnings Before interest, Taxes, Depreciation, Amortization and excluding share-based payments, impairment and reorganisation costs
Our Business Model
Driving Consumer Engagement
Improving User Journeys
The Outcome
2019 Annual Report
By controlling and managing a diverse publishing portfolio, XLMedia seeks to generate higher
levels of engagement than other traditional marketing techniques by encouraging consumers to
actively choose the content they want to digest, generating both greater value and increased levels
of engagement.
This is what we call a performance-based business model. It assures everyone involved benefits
from a win-win solution.
Such a business approach adds a level of trust between XLMedia and its partners. On top of that,
it minimizes the financial risk taken on by our partners since we invest our own capital into our
partners’ marketing budget.
Our revenue sharing, CPA, and other business models ensure our partners only pay after users
take meaningful actions.
1
Users search for
specific information
Users search results
4
Revshare/CPA
2
Top-Ranked
XLMedia Asset
3
Users Directed
to Partner
From static to dynamic
Personalized content based on the full user
journey
Optimized brand exposure
Based on browsing history, click-outs,
conversions, and device performance
Maximizing player value
Optimized marketing offers based on audience
segmentation
New monetization opportunity
Cross-selling brands and verticals while optimizing
advertising and content
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XLMedia PLC is a leading performance publishing group that wholly owns and operates diversified digital publishing assets across a wide variety of verticals, including gambling, sports betting, personal finance, tech, and more. Our publishing assets, proprietary technology, and data are the unmatched force that helps us serve highly valuable, engaging, timely, and relevant content to millions of users worldwide. Consumer engagement and providing an enhanced consumer experience is central to our vision. As we move forward, in addition to sustaining our core assets we will also be investing in new and early-stage geographies and business verticals to maximize our impact. Wholly owned and operated sites
Our Assets Portfolio
Our wholly owned and operated content-rich sites rank at the top of search results for thousands
of high-intent keywords. The sites are in 18 languages and attract and engage more than 5 million
users monthly.
Business Verticals
Over the years, XLMedia has exhibited impressive
success in each of the verticals we operate:
The U ltimate Personal Finance Publisher
Our personal finance websites successfully promote a wide
variety of products, such as credit cards, insurance types, loans,
robo-advisors, and more.
The Ultimate Tech Publisher
Continuous innovation and investment in user experience enables us to
provide the most immersive and valuable content for our tech product
review sites. These content-rich websites feature detailed reviews
of tech and utility products in areas ranging from cybersecurity and
antivirus technology to selecting the right VPN.
The Ultimate Gaming Publisher
XLMedia has a stellar reputation in the gambling industry. Our assets
serve several loyal communities of users, providing them with authentic
first-hand user reviews and community generated insights to enable
crowd-wisdom to flourish. The user-generated content platforms also
have diversified offerings and a substantial social media presence
resulting in several awards.
The Ultimate Sports Betting Publisher
XL Media is an authoritative publisher in the sports betting sector.
Our publishing assets harbor unique content written by professional
sports betting thought leaders and tipsters who specialize in areas
such as horse racing, football, boxing, and more.
8
Money Under 30
Case study
moneyunder30.com
In 2017, XLMedia purchased
Money Under 30
which has since become a top personal
Money Under 30 now
ranks first
for all major credit card keywords,
finance site in the United States, offering vital
including on Google, and features over
information on topics ranging from business
100 partners.
and travel credit cards to balance transfer
and low APR.
The site has steadily grown since its purchase, in terms of both traffic and revenue.
In January 2018, we migrated the site to our internal proprietary network.
As a result, by the end of 2019, the site saw double the traffic volume as it previously had.
Money Under 30 continues to draw millions of users and be featured in top-tier global publications
such as Forbes.
Number of
users per
month
9
2019 Annual Report$200k$150k$100k$250k$300k$350k$400k1,200,0001,000,000800,0001,400,0001,600,0001,800,0002,000,000Average 12 months before purchaseAverage 12 months after purchase2019Average$179,689$198,169$378,807+10%+110%812,826+24%1,876,7381,005,184+131%RevenueTraffic$200k$150k$100k$250k$300k$350k$400k1,200,0001,000,000800,0001,400,0001,600,0001,800,0002,000,000Average 12 months before purchaseAverage 12 months after purchase2019Average$179,689$198,169$378,807+10%+110%812,826+24%1,876,7381,005,184+131%RevenueTraffic Chairman’s Statement
Annual Report
2019 was a year of limited financial progress for the Group, as management sought to mitigate
a number of operationally frustrating scenarios and global sector headwinds, predominantly
within our online casino vertical. Greater clarity on the situation with Google is outlined in the Chief
Executive review later in the document.
In February 2019, we made the decision to reduce a significant part of the Group’s advertising and
media activities, reflecting the Board’s desire to limit our exposure to certain gambling and digital
marketing sectors, with a view of becoming a pure play digital publishing operator.
This move was further consolidated with the sale of our advertising media subsidiary in August
2019, which was considered both low margin and non-core to our ongoing activities.
In addition, ongoing gambling regulatory uncertainty, specifically in Sweden and Germany
remained ,and therefore continued to impact our financial performance in territories which have
historically been strong for the Group.
Despite these challenges, the Group delivered a credible performance in FY 2019, producing
revenues of $79.7 million (2018: $93.5 million), gross profit of $53.7 million (2018: $63.4 million) and
an Adjusted EBITDA of $33.5 million (2018: $43.6 million).
It is against this backdrop that we decided to make a number of significant Executive Management
changes. Ory Weihs, who served as Chief Executive Officer since our IPO in 2014, moved to a Non-
Executive Director role, with Stuart Simms appointed as Chief Executive Officer in October 2019,
following an extensive executive search conducted by Egon Zehnder. Since Stuart’s appointment,
he has already made a significant and positive contribution in both the day to day running of
the business and our strategic direction, more of which is covered in his strategic review of the
business.
Also, our Chief Financial Officer, Yehuda Dahan, tendered his resignation and we were pleased
to appoint Iain Balchin as Group CFO in February 2020. Iain has a wealth of transformation
experience having held a number of Group CFO roles, making him ideally placed for our business.
In both Stuart and Iain, we have two highly skilled and experienced senior executives who are
now working tirelessly to reshape and reposition XLMedia for sustainable and long-term growth.
Stuart has also completely restructured his executive team, further rejuvenating our business and
positioning us well for the future.
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2019 Annual Report
In early 2020, the Company became aware that a number of its casino sites had been manually
demoted by Google, impacting their online ranking and therefore significantly reducing their ability
to generate revenues. The Company is continuing to work with Google to restore the rankings of
these sites as soon as possible.
There is no question that the business is now undergoing a significant period of transformation with
our new management team evaluating new geographies and end markets, alongside an improved
focus upon our efforts to generate greater levels of end consumer engagement.
To that end, we remain committed to investing in the core business alongside additional organic
investment initiatives and as a result the Board will not be recommending a dividend or share
buyback programme for the foreseeable future.
We continue to monitor very closely the impact of the COVID-19 virus across the world in relation to
our dedicated colleagues and of course our customers.
The health and safety of our staff is of paramount importance and we have implemented a number
of measures to protect our global workforce aligned with the latest local government and industry
recommendations.
In each of the jurisdictions we operate within, the Board and I would all like to thank all our
colleagues for their persistent dedication during what has been, and continues to be a challenging
period for the business and wish them all a safe and healthy future.
Christopher Bell
Non-Executive Chairman
7 May 2020
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2019 Annual Report
Chief Executive Officer Review
Annual Report
Introduction
Our proposition
I joined XLMedia in October 2019 with both optimism and a defined strategic ambition that
XLMedia has a long track record of success in online performance marketing and currently
necessitated an overhaul of the businesses working practices, executive team and organisation
operates over 2,000 websites across numerous sectors. The Group's core skill is to stimulate
structure. It is clear that the Company’s recent growing pains, coupled with broader industry
active engagement by sending paying customers to our partners and sharing the revenues
changes mean that the Company must evolve and be able to constantly adapt to dynamic market
associated with these activities.
conditions.
In addition, it is evident to the Board and I that there are significant market opportunities for
rich and highly interactive sites, such as moneyunder30.com, to less interactive domains. Typically,
performance marketing companies that can truly activate and engage consumers, whilst also
the Group’s financial services websites utilise a qualitative approach whereby consumers are
cultivating strategic, tenured partnerships with brands and operators alike. Specifically, with brands
encouraged to browse and digest a highly sophisticated level of content. Conversely, the Group’s
increasing their direct-to-consumer marketing activities, and traditional value chains collapsing,
gambling segment utilises a methodology based around quantity, targeting multiple sites across
companies like XLMedia should be thriving in many verticals and markets, offering access to
the same segment or geography. Going forward, we will be focused on a qualitative approach and
consumers and players for an attractive return.
are now prioritising the development of more engaging websites, seeking to develop the Group’s
To date, the Group has managed an extensive portfolio of online websites ranging from content
However, the historical focus of the Group has been on the European gambling segment,
unregulated markets, which as the Group’s FY2019 results show, include some of the most volatile
markets, especially when becoming regulated, such as Sweden. Therefore, it has been paramount
to shift the focus of the Company, its resources, its investment strategy and culture towards a more
global, cross vertical operating model, that thrives in regulated markets, with a particular focus on
the US Sports market opportunity and personal finance.
XLMedia has a strong balance sheet to power the transformation and shift required, providing
both leverage and growth. This also applies to our ability to survive situations that many other
publishing activities and enhancing consumer engagement.
Currently, roughly 50% of Group revenues are generated by 20 sites, underlining the need for a
more consolidated and focused approach. To this end, we have been focused on closing down
older, legacy sites which generate either minimal or no revenue for the Group.
Controlling and managing a diverse publishing portfolio puts the Group in a better position to
create higher levels of engagement than other traditional performance marketing, encouraging
consumers to actively choose the content they want to digest, generating both greater value and
companies might not, such as the Google de-ranking of a number of our websites, which we are
increased levels of engagement.
using as a catalyst to drive and deliver change, faster than anticipated and with a renewed clarity of
purpose and commitment.
I firmly believe that we are defining and building the capabilities to support our future growth,
whilst making hard decisions to restructure our operations and priorities; such as to shut down
or dispose of non-core business groups, refresh the Executive team, focus on premium assets
(removing legacy sites), and re-platform from legacy technology systems and processes.
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Operational Review
Having joined the Group in October 2019, it was clear then that XLMedia was in need of transformation. It
was a typical mid-sized company that had seen dramatic growth but was not fully prepared for the next
phase of development, instead seeking to maximise short-term profits over investing for the future.
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Chief Executive Officer Review
Annual Report
This is not uncommon in many companies of its size and age, and many of the problems are
During the period we also made the decision to focus solely on XLMedia’s core publishing
familiar to me from previous experience. However, there is no ‘quick fix’ and shareholders will
activities. Therefore, we terminated all media activities as of Q1 2020.
have to understand that unpicking years of underinvestment will take time, but when completed,
sustainable, predictable growth will again be possible. The first step for any transformation is
Despite these challenges, the Group delivered a very creditable performance in FY 2019,
People, and I feel confident that I am assembling a team that can lead us through the next phase of
producing revenues of $79.7 million (2018: $93.5 million), gross profit of $53.7 million (2018: $63.4
growth and beyond.
million) and an adjusted EBITDA of $33.5 million (2018: $43.6 million).
To that end, I have prioritised the following key areas of investment:
Going forward, management is focused on becoming a ‘pure play’ global digital performance
Operating Model – business processes and organisation design to support future growth
publisher.
2019 Annual Report
Data & Programmatic learning – using machines to harness data and create compelling
Consumer experiences
US Sports – M&A, US infrastructure and resources with Sport specific technology
New Markets – utilise XLMedia’s expertise and experience to grow existing verticals into new
markets
As our FY 2019 financial performance highlights, the business needs to transform to meet the
future demands of both customers and consumers, and to operate in growth verticals and markets.
Therefore, management will remain focused on further developing the Group’s core publishing
activities, positioning XLMedia for further growth.
Within the Group’s European gambling markets, well documented regulatory headwinds,
specifically in Germany and Sweden, have had an impact on revenue growth in the period, although
the Group has maintained its market share, albeit at lower volumes. A further update on the broader
regulatory landscape is set out below.
The Group’s North American personal finance assets continue to perform well and now account
for 16.5% of Group revenues and continues to be a key growth market. North America as a whole
(Sports and Personal Finance) represents currently 20.3 % of Group revenues.
Regulation
All of XLMedia’s business units in some way are controlled or impacted by regulations. We believe
that, on the whole, regulation offers sustainable revenues and significant market opportunities for
companies such as ourselves, who have the experience, size and maturity to support regulation,
protecting the consumer, brands and operators.
Further to being sustainable, regulation offers market consolidation opportunities and therefore
market share growth as with Sweden, albeit with total revenues diminishing. Therefore, as
gambling markets transform into regulated territories, investors should expect short term revenue
volatility as new regulation impacts volumes, though, this should be followed by more predictable
revenues streams in the longer term.
It is also important to note that micro-verticals often face differences in regulation, for example
slot machines are treated very differently from Bingo. We will continue to operate across a broad
spectrum of micro-verticals and over time intend to provide more commentary on the revenue split
and the opportunities and risks associated with each.
Our plan is to globalise our Personal Finance offering and brands, which currently only operate in
North America.
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15
2019 Annual Report
Chief Executive Officer Review
Annual Report
A key capability in the Group will be to continue to monitor and abide by regulations worldwide,
a consequence of this review and analysis, XLMedia is transferring its premium revenue generating
whilst also investing in technology to quickly respond to changing environments and new
sites impacted by the Google demotion to a new operating environment, that supports improved
compliance needs.
content management, innovative design and more commoditised resources / operational support.
The broader implications for the business will be a shift to a flexible, lower operating cost model,
I passionately believe that XLMedia’s role is to embrace regulations, and, in some instances, help
which supports the Company’s aspirations as a premium performance marketing company.
tighten and control them to further protect consumers. I believe that our future revenues will be
focused predominantly on regulated markets operating in Sports, other gambling segments and
Management remains optimistic that a number of premium de-ranked sites will be fully operational
Personal Finance.
Google update
during H2 2020.
As announced in February 2020, management expect a monthly reduction in Group revenues of
between $1 million and $2 million (assuming only a minor fall in its repeat revenues) as a result of the
On 18 January 2020, the Company became aware that a number of its casino sites had been
Google demotions. In addition, management anticipates that any lengthy period of demotion could
manually demoted by Google, impacting their online ranking and therefore significantly reducing
impact the rankings once restored, and that it may take a period of time to re-establish. However,
their ability to generate revenues. The Company is continuing to work with Google to restore their
based on industry experience, we do expect re-ranked sites eventually to outperform any historical
rankings as soon as possible.
results.
Currently, circa. 100 websites have been demoted, ranging from ‘premium’ revenue generating
sites to low grade, typically legacy sites, or low commercial value domains. Of these sites demoted
Transformational strategy
by Google, 23 are ‘premium’ sites and are predominantly within the online casino vertical. Currently,
Google de-ranking and COVID-19 have not changed our strategic ambition or goals for the
Google has not impacted personal finance.
transformation, and in some ways have amplified them, acting as a catalyst to accelerate and drive
Management understands that the large number of low-grade, typically legacy sites, operated
change.
by the Company had a collective negative impact when reviewed by Google. Therefore, we have
I believe with the Executive team we are building – (who have the skills and experience to deliver
removed or de-indexed a large number of these sites.
transformation), and the balance sheet – (to survive the intense market conditions), we will come
out of this period leaner, better operationally structured and driven to grow quickly.
Separately, XLMedia has reviewed its entire online publishing assets, to focus on significantly
reducing the total number of non-revenue generating sites and increasing the focus on ‘premium’
In terms of change, as highlighted above, we are focused on shifting the emphasis of the business
sites, as well as both incubating and developing new sites.
from ‘quantity to the quality’ of websites. We are a performance-based business at heart, and this
Part of this review was to analyse the Groups technology platform strategy, specifically Palcon. As
diverse global portfolio of premium websites that deliver significant intrinsic value for consumers.
will not change. We will continue to be focused on connecting brands to consumers by operating a
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2019 Annual Report
Chief Executive Officer Review
Annual Report
To that end, management are focused on the following strategic goals:
Further investment in regulated (mature) markets – stable revenue growth
Consolidation of publishing assets, focusing of resources
We continue to invest in fully regulated gambling markets which we believe provide a solid
framework from which to generate stable revenue growth, with a specific focus on developing our
Currently the Group operates over 450 online publishing assets globally, ranging from premium
Sports assets and associated technology.
and highly interactive sites to basic, legacy sites. We have therefore decided to reduce the total
number of sites operated by the Company, instead focusing on building strong brand recognition
across a focused number of ‘premium’, highly profitable, online assets.
This process has been accelerated by the de-ranking of circa.100 casino assets by Google, which
Capital allocation / Dividend
Given the current cash balance and lower levels of cash generation from the Group, the Board
is recommending that no final dividend is proposed for the 2019 financial year, with no dividend
has prompted the Company to begin the process of upgrading over 20 ‘premium’ sites.
expected to be proposed until further notice.
Alongside consolidating the Group’s online assets, management are enhancing the focus and
capabilities on consumer experience, putting this at the heart of what we do. Using our rich data
In addition, while we give due consideration to capital allocation activities such as a share buyback
programme or tender offer, in order to accelerate a number of strategic initiatives highlighted
and intelligence capabilities to improve consumer engagement, segmentation and understanding.
above, such initiatives are not expected to be offered for the foreseeable future.
We believe this will be better for the consumer, and as importantly, the customers we represent.
Sites such as moneyunder30.com offer an initial blueprint for how the Group is seeking to develop
existing assets going forward.
US Sports and Personal Finance investment – targeting high growth markets
The US sports betting market represents a significant opportunity for us. As a result, we are firmly
focused on building our US presence to develop organic investment opportunities, partnerships,
acquisitions and use of technology. Earlier this year we opened our first US office in New York and
look to expand further into regional offices.
XLMedia has already established a solid revenue foothold within personal finance and will seek to
further develop growth opportunities by deploying local resources and further increasing editorial
COVID-19 update
XLMedia’s global workforce has been working remotely since March 2020, in line with current regulations
globally and the health and wellbeing of our employees remains of the utmost importance. This required
XLMedia to accelerate a dramatic change to daily operations, technology (laptops) and embracing
more flexible working practices. Previously, only a limited number of staff were provided with laptops and
working from home was prohibited with a clocking in and out system in place to monitor attendance.
Due to the excellent work by the HR function and IT team, to date, we have not seen any negative impact
on our remote working policy and the business remains well placed to weather a prolonged period of self-
isolation, with morale seeming high and the team remaining engaged. Further to this we believe that the
improvements made to how we operate, will continue and evolve further when COVID-19 ends. This will
provide us with a more flexible and agile workforce, supporting one of our key goals to become one of the
localised content. Acquisitions and partnerships remain key vehicles to deliver growth.
most progressive employers in Israel and around the world.
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19
Chief Executive Officer Review
Annual Report
However, Coronavirus is having an impact on a number of our key business verticals and revenue
Therefore, as with many other companies, Q2 2020 looks likely to be a very challenging period, one
streams. Starting in February 2020, many sport events were cancelled around the world which looks
during which significant change is being delivered against a background of increasing one-time
likely to continue for much of the remainder of the year with major championships such as European
costs as we further embed our transformation plans.
2019 Annual Report
While the Google de-ranking impact and the direct impact of COVID 19 are expected to remain,
management are confident that the impact of both taken together will not be in excess of the
previous guidance over the course of the year.
Stuart Simms
Chief Executive Officer
7 May 2020
Football Championship and the Olympics being postponed or cancelled. In addition, personal finance
has also been affected with many banks and financial services organisations pulling back marketing
spend in favour of a “wait and see” strategy. Both Business Groups responsible for Personal Finance and
Sports have been creative in adopting new working practices, improving editorial workflow and finding
new revenue sources.
This decrease should be marginally offset by increases in in other verticals, such as online gambling and
cyber security, but has obviously been hampered by many of the sites remaining de-ranked. The Group
is actively assessing and responding to the potential impact of the outbreak, but since there is uncertainty
regarding the extent of the effects and future events, there is uncertainty regarding the total effect on the
Group revenue.
Outlook
Despite making a solid start to 2020, the Company is still unable to determine the full impact
of Google's demotions, although initial indications are that the previous guidance of a monthly
reduction in Group revenues of between $1 million and $2 million (assuming only a minor fall in its
repeat revenues) is accurate.
In addition, COVID-19 will continue to create uncertainty in the short to medium-term, impacting
a number of our end-customers and verticals. Management continues to monitor this situation
closely and will align the Company’s cost base accordingly.
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21
Chief Financial Officer’s Review
Annual Report
XLMedia revenues in 2019 totalled $79.7m (2018: $93.5 million), a decrease of 15% compared
to the previous year due to expected regulatory headwinds in key Swedish, German and Swiss
markets.
Gross profit for 2019 was $53.7 million and gross margin was 67% (2018: $63.4 million, 68% gross
margin), representing a 15% decrease, proportional to the decrease in revenues.
Operating expenses for 2019 were $27.3 million (2018: $26.4 million), principally in line with 2019.
Adjusted EBITDA for 2019 was $33.5 million or 42% of revenues (2018: $43.6 million, 47%), a
decrease of 23% on the previous year. The decrease in the margin was due entirely to the reduction
$'000
2019
2018 (*)
Change
Revenues
79,695
93,502
-15%
Gross profit
53,693
63,369
-15%
Operating profit
before impairment and
reorganisation costs
26,346
36,985
-29%
in revenues.
Adjusted EBITDA²
33,471
43,571
-23%
Net financing expenses for 2019 were $1.0 million (2018: $0.5 million). The increase in financing
expenses mainly reflects the initial adoption of IFRS 16 in which the Group recognises interest and
Impairment loss
(81,350)
(300)
exchange rate differences on its lease liabilities.
IAS36 requires that a company ensures that its assets are carried at no more than their recoverable
value. Under IAS 36, when the carrying amount of the assets exceeds its recoverable amount an
impairment loss is recorded. Following an independent and comprehensive review of recorded
asset values at year end and further reductions following the demotion of the Group’s websites
by Google in January 2020, XL Media has booked an impairment loss of $81.4 million in its 2019
accounts (2018: $0.3m).
22
Reorganisation costs
(1,682)
Adjusted1 profit
before tax
25,302
36,448
-31%
Income (loss) from
discontinued operations
2,217
(11,284)
Profit (loss) before tax
(57,730)
36,148
(*) Reclassified - excluding discontinued operations
1 Excluding loss from impairment and reorganization costs
2 Earnings Before interest, Taxes, Depreciation, Amortization and excluding share-based payments,
impairment and reorganisation costs
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2019 Annual Report
Chief Financial Officer’s Review
Directors’ Report
In 2019 the Group recorded reorganisation costs of $1.7 million following the commencement of a
Total equity as at 31 December 2019 was $63.5 million or 64% of total assets (2018: $166.8m
significant future restructuring plan of the Group. This program will complete during 2020.
or 85% of total assets). The decrease in the equity was mainly as a result of the net loss for the
Adjusted profit before tax in 2019 was $25.3 million (2018: $36.4 million), a decrease of 31%.
year of $58.7 million, acquisitions of treasury shares of $29.7 million and dividend payments to
In 2019 the Group recorded income from discontinued operations of $2.2 million (2018: loss of $11.3
shareholders of $14.2 million.
million) as result of the Company’s Board decision to reduce certain parts of its Media activities
I joined the Company in February 2020 with a firm belief that under a visionary new Management
which had lower profit margins. In August 2019, the Company completed the sale of Webpals
team with proven turnaround experience, a right sized but strong balance sheet and no debt, the
Mobile Ltd which was a substantial component of the discontinued operation. The gain derived
Company remains poised to deliver strong future returns for its shareholders.
from the sale was $1.8 million.
2020 will undoubtedly be a testing and transformative year for the Group but I fully expect that
As at 31 December 2019, the Company had $29.9 million in cash and short-term investments (2018:
these changes should put us in a strong position as we move into 2021 and beyond.
$47.6 million). The change in cash is a reflection of $40.1 million generated by operating activities
offset by $7.3 million used for investment activity, and $51.0 million used for financing activities
(acquisition of treasury shares of $29.7 million, dividend payments to shareholders of $14.2 million
and repayments of bank loans of $5.5 million).
Current assets as at 31 December 2019 were $42.4 million (31 December 2018: $69.2 million)
The decrease in current assets was predominantly as a result of the decrease in cash and cash-
equivalents mentioned above and a decrease in trade receivables of $8.4 million, mainly as a result
of discontinued operations. Non-current assets as at 31 December 2019 were $57.0 million (31
December 2018: $127.3 million). The decrease in non-current assets is mainly from the impairment
adjustment of $81.4 million.
Current liabilities as at 31 December 2019 were $27.2 million (31 December 2018: $28.1 million).
Non-current liabilities as at 31 December 2019 were $8.6 million (31 December 2018: $1.6 million).
The increase in non-current liabilities is mainly attributable to the lease liability of $8.1 million
recognized as result of the initial adoption of IFRS 16.
Iain Balchin
Chief Financial Officer
7 May 2020
24
25
2019 Annual Report
Xlmedia’s Board
Company Information
Christopher Bell
Independent Non-Executive Chairman
Stuart Simms
Group CEO
Mr. Simms joined XLMedia as Chief Executive
Officer in October 2019. He brings significant
experience in technology companies and
specifically those in the performance marketing
sector.
Mr. Simms has previously held several board
and senior executive positions, including Chief
Executive Officer of Rakuten Marketing, one of
the largest performance marketing companies,
and has also held senior executive positions
with leading technology businesses including
Microsoft, and Rackspace.
Mr. Bell has considerable listed board experience
across a range of sectors. He has, since 2015,
been Senior Independent Director for The Rank
Group PLC, where he also serves on both the Audit
Committee and the Nominations Committee.
Mr. Bell is Non-Executive Chairman of three
AIM-listed companies: Team 17 Group PLC,
TechFinancials Inc and OnTheMarket PLC, all of
which he took to market and on which he serves
on key governance committees.
Mr. Bell joined Ladbroke Group PLC in 1991,
becoming Managing Director of its Racing Division
in 1995. In 2000, he became Chief Executive of
Ladbrokes Worldwide and joined the Board of
the rebranded Hilton Group PLC, becoming Chief
Executive of Ladbrokes PLC, following the sale of
the Hilton International Hotel division, until 2010.
He has also served as Non-Executive Director at
Spirit Pub Company PLC (from 2011 to 2015) and
as Senior Independent Director at Quintain Estates
and Development PLC (from 2010 to 2015). Prior to
joining Ladbrokes PLC (formerly Hilton Group PLC
and Ladbrokes Group PLC), Mr. Bell held senior
marketing positions at Allied Lyons PLC.
26
Richard Rosenberg
Jonas Mårtensson
Independent Non-Executive Director and
Chairman of the Audit Committee
Independent Non-Executive Director and
Chairman of the Remuneration Committee
Mr. Rosenberg is a qualified chartered accountant
and a partner in SRLV, a London-based
multidisciplinary accountancy and consultancy
firm, which he co-founded in 1988. Mr. Rosenberg
is the Non-Executive Chairman of Livermore
Investments Group Limited, an AIM quoted
investment firm.
Amit Ben Yehuda
Non-Executive Director
Mr. Ben Yehuda has over twenty years’ experience
across a number of high-growth industries
focusing on implementing strategic growth
initiatives and executing significant levels of M&A.
Mr. Ben Yehuda has Bachelor’s degrees in
Economics and Political Science and an M.B.A,
all received from Tel Aviv University. Currently,
Mr. Ben Yehuda is the Chief Executive Officer
of Kardan Communications and Kardan
Technologies.
Mr. Mårtensson has substantial experience in both
corporate and capital markets and great experience with
the Nordic countries.
Mr. Mårtensson is currently CEO of Mojang AB
(“Mojang”), the Swedish video game developer and
publisher acquired by Microsoft in 2014, that’s best
known for creating the popular independent game,
Minecraft. Mr. Mårtensson previously founded a betting
operator, Mobilbet.com, and held senior roles at Betsson,
latterly at Betsson Technologies AB, as Head of Mobile.
Mr. Mårtensson holds a Master of Science in Business
Administration, major in entrepreneurship from
Stockholm University School of Economics and
Management, and a Master of Science in Business
Administration, major in Business Development from
Södertörn University College, Sweden.
Ory Weihs
Non-Executive Director
Mr. Weihs is one of the founders of XLMedia and held
the role of Group CEO until October 2019. He is an
entrepreneur who has been deeply involved in the
online gambling and performance marketing industries
for over fifteen years.
27
2019 Annual Report Advisors
Company Information
Registrars:
Link Asset Services The Registry
34 B eckenham, RoadB eckenha m, Ke nt BR3 4 TU
Joint Corporate Broker:
Joh. Berenberg, Gossler & Co.
KG 6 0 Threadneedle Street , London EC2R 8HP
Auditors to the Company:
Kost Forer Gabbay & Kasierer
(a member of Ernst & Young Global)
3 Amin adav Street , Tel Av iv 67067 Israe l
Company Secretary:
Mr. Matan Daniely
6 Agi as Marinas, Yerma s ogeia Limas s ol Cypr us, 40 44
Jersey Law Counsel
Carey Olsen
47 Esplanade, St . Helier, JEI 0R D, Jers ey
w w w.c areyols en.com
Nominated Adviser and Joint
Corporate Broker:
C en ko s Se curit i es pl c, 6.7.8 . To ke nh o us e Yard Lon d on , EC2 R 7 AS
Public Relations advisor:
Vigo Communications
180 P icc adil l y, Lo n do n W1J 9HF
Registered Office:
12 C a st le S t re et S t . H el ier Je rs ey, J E 2 3RT
UK Law Counsel
CMS Cameron McKenna Nabarro Olswang LLP
78 C a nn on St reet , Lo n don , EC 4 N 6A F, U n ite d K i ngd om
w w w.c ms. law
Pinsent Masons LLP
30 C rown Pl ac e, E arl St reet , Lo n do n, EC 2A 4 ES, U n ite d K i ngd o m,
w w w.pi ns e nt m as o n s.c om
28
29
2019 Annual Report
Directors’
Report
The Directors present their report for the year
ended 31 December 2019.
Results and review of the business
The Directors’ Report should be read in conjunction with the full 2019 Annual Report and
financial statements.
Share capital
The authorized and issued share capital of the Company are shown in note 13 of the financial
statements.
Pursuant to the decision passed by shareholders at the last Annual General Meeting, and in
accordance with the Company’s Article of Association, the directors are authorised to allot
up to an aggregate number of 69,967,835 shares, being 33% of the issued share capital of the
Company as of the date of the Annual General Meeting.
Also, the Board was authorized by shareholders to allot and issue, wholly for cash, with
disapplication of pre-emption right, up to 20,990,350 shares representing 10% of the issued
share capital of the Company as if the date of the Annual General Meeting. These authorities
30
will expire on the date of the Annual General Meeting to be held on 27 May 2020 and approval
will be sought for new authorities at the Annual General Meeting.
2019 Annual Report
31
2019 Annual Report Major Shareholders
Directors’ Report
As of 31 December 2019, the following interests of shareholders in
excess of 3%, had been notified to the Company:
Shareholder’s
Name
Number of
shares held
Shares as % of
issued share
capital
Axxion S.A.
18,160,460
9.7%
Buy back & Tender Offer
On 18 December 2018 the Company instigated a share buyback programme with repurchased
shares being held in treasury (the “First Programme”). The First Programme was approved by the
Board pursuant to the general authority to buy back shares provided by the shareholders of the
Company on the annual general meeting held on 23 May 2018.
Under the First Programme the Company has repurchased 11,728,150 shares for an aggregate sum
of £7.3 million,
On 4 June 2019 the Company instigated a second share buyback programme with repurchased
shares being held in treasury (the “Second Programme”). The Second Programme was approved
by the Board pursuant to the general authority to buy back shares provided by the shareholders of
the Company on the annual general meeting held on 29 May 2019.
Under the Second Programme the Company has repurchased 1,820,593 shares for an aggregate
Premier Investissement SAS
16,845,650
9.0%
sum of £1.1 million.
Fidelity Management & Research
Company
11,065,893
5.9%
Hargreaves Lansdown AM
9,368,122
5.0%
Both the First Programme and the Second Program were funded from the Company’s existing
cash balances.
Between 15 July 2019 and 15 August 2019, the Company held a tender offer to repurchase its
own shares at a purchase price of 80 pence per share and up to a total of 19,675,000 Shares with
repurchased shares being held in treasury (the “Tender Offer”). The Tender Offer was approved by
the shareholders of the Company at the special general meeting of shareholders held on 16 August
2019.
River and Mercantile
Asset Management
9,214,987
4.9%
The Company’s issued share capital, as at 31 December 2019, consists of 220,352,402 ordinary
shares of which 33,223,743 were on 31 December 2020 held by the Company as treasury shares
without voting or economic rights. Therefore, the number of ordinary shares in issue as at 31
December 2019 was 187,128,659 (excluding treasury shares).
Invesco Advisers, Inc.
6,025,000
3.2%
32
33
2019 Annual Report
Dividends
Directors’ Report
On 1 November 2019 the Company paid an interim dividend for H1 2019 of 5.8 million On 4 February
For more information about the Remuneration Committee, directors remuneration and bonus and
2020 the Company announced that in order to accelerate a number of strategic initiatives,
share option schemes please refer to the Remuneration Committee Report on pages 64-75 of this
alongside evaluating potential acquisition opportunities, no final dividend is proposed for the 2019
Annual Report.
financial year, with no dividend expected to be proposed until further notice.
The Board has established a Risk Committee chaired by Ory Weihs. The other members of
Senior Management Changes
On 29 July 2019, the Company announced the appointment of Stuart Simms as Chief Executive
Officer with effect from 2 October 2019. On 3 October 2019, Mr. Simms was also appointed as a
member of the Board.
On 23 September 2019, the Company announced that Yehuda Dahan had notified the Board of his
decision to step down as Chief Financial Officer with immediate effect and Liat Hellman assumed
the role of interim Chief Financial Officer. On 4 February 2020, Mr. Iain Balchin was appointed as
Chief Financial Officer of the Group.
Directors’ indemnity insurance
The Group has provided to all of its Directors limited indemnities in respect of costs of defending
claims against them and third-party liabilities. The Group has made qualifying third party indemnity
provisions for the benefit of its Directors which were available during the period and remain in force
at the date of this report.
Corporate Governance
In September 2018, the Company adopted the QCA Corporate Governance Code published by
the Quoted Companies Alliance. For more information about Corporate Governance and the
implementation of the QCA Code please refer to the Corporate Governance Report on pages 46-
53 of this Annual Report.
Board Committees
The Board has established an Audit Committee, a Remuneration Committee and a Risk
Committee. For more information about the Audit Committee and for information about the internal
and external auditors please refer to the Audit Committee Report on pages 54-63 of this annual
report.
34
the Committee consist of Richard Rosenberg, Christopher Bell and Stuart Simms. The Risk
Committee receives presentations from management on risk, compliance and regulatory issues
and reviews the related internal control systems.
Our Financial Instruments
The Group’s financial instruments are discussed in note 12 to the financial statements.
Our Procedures
The Group’s Procedures including our Code of Business Conduct, Anti-Bribery and Corruption
Policy, Disclosure Policy, dealing code, Social Media Policy, Whistle-blowing Policy and
Modern Slavery Policy are determined and set out for all employees to review. The Company’s
management is responsible for the implementation of these procedures.
Our Share Dealing Code
The Company has adopted a share dealing code for Directors and applicable employees of the
Group for the purpose of ensuring compliance by such persons with the provisions of the AIM
Rules relating to dealings in the Company’s securities (including, in particular, Rule 21 of the AIM
Rules) and in accordance with the Market Abuse Regulations. The Directors consider that the
share dealing code is appropriate for a company whose shares are admitted to trading on AIM.
Statement of Directors’ responsibilities
in respect of the financial statements
The Directors are responsible for preparing the annual reports and the Group and Company
financial statements in accordance with applicable law and regulations.
Jersey Companies Law requires the Directors to prepare accounts for each financial period. Under
that law, and as required by the AIM Rules for Companies, the Directors have elected to prepare
the Group and Company financial statements in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union (EU).
35
2019 Annual Report Statement of Directors’ responsibilities in
respect of the financial statements
Directors’ Report
In preparing these financial statements, the Directors
are required to:
Directors’ statement as to disclosure of
information to auditors
Directors’ Report
The Directors who were members of the Board at the time of approving the Directors’ Report are
listed on page 26-27. Having made enquiries of fellow Directors and of the Company’s auditors
each of these Directors confirms that:
Present fairly the Group and Company financial position, financial performance and
cash flows;
To the best of each Director’s knowledge and belief, there is no information relevant to
the preparation of their report of which the Company’s auditors are unaware; and
Select suitable accounting policies in accordance with IAS 8 – Accounting Policies,
Changes in Accounting Estimates and Errors and apply them consistently;
Each Director has taken all the steps a Director might reasonably be expected to have
taken to be aware of relevant audit information and to establish that the Company’s
auditors are aware of that information.
Present information, including accounting policies, in a manner that provides relevant,
reliable, comparable and understandable information;
Employees
Make judgments that are reasonable;
Provide additional disclosures when compliance with the specific requirements in
IFRS, as adopted by the EU, is insufficient to enable users to understand the impact
of particular transactions, other events and conditions on the Group’s and Company’s
financial position and financial performance; and
State whether the Group and Company financial statements have been prepared
in accordance with IFRS, as adopted by the EU, subject to any material departures
disclosed and explained in the financial statements.
The Directors recognize the value of involving employees in the business and ensuring that matters
of concern to them, including the Group’s aims and objectives, are communicated in an open
and regular manner. Management frequently briefs employees of the Group’s performance and
activities and discusses matters of concern or interest. Our employees participate in the Global
Share Incentive Plan. Recruitment gives equal opportunity to all employees regardless of age, sex,
color, race, religion or ethnic origin. Training programs are held for all levels of staff. These are aimed
at increasing skills and contribution.
Going concern
The Board is satisfied that the Group has adequate financial resources to continue to operate
for the foreseeable future and is financially sound. For this reason, the going concern basis is
considered appropriate for the preparation of financial statements.
36
37
2019 Annual Report Annual General Meeting of Shareholders
The Company will be holding its 2020 AGM on 27 May 2020.
Shareholders should note the provisions in the notice of Annual General
Meeting with regard to the holding of this year’s Annual General Meeting
in light of the restrictions arising from the COVID-19 outbreak
Auditor
A resolution to reappoint Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global (EY), as
auditors of the Company will be put to the Annual General Meeting. The Directors will also be given
the authority to fix the auditors’ remuneration. For more information about the Auditors please refer
to the Audit Committee Report on pages 54-63 of this Annual Report.
During the year the auditors undertook certain specific pieces of non-audit work (including work
in relation to tax matters and the evaluation of potential acquisition targets). EY were selected
to undertake these tasks due to their familiarity with the online industry and, as regards tax, their
alignment with work carried out under the audit. In order to maintain EY’s independence and
objectivity, EY undertook its standard independence procedures in relation to those engagements.
By Order of the Board
Matan Daniely
Company Secretary
1 2 Castl e Street St Helier Jers ey JE2 3RT
38
39
2019 Annual Report Risk
Factors
The Risk Committee and the Board evaluate the operational risks
facing the Company on an ongoing basis to monitor for changes in
risks and risk impact and to set guidelines for risk mitigation. The
most significant risks identified by the Risk Committee and the Board
are listed below.
40
41
2019 Annual Report Powerful market participants may
intentionally or unintentionally stop or
interrupt our operations
Risk Factors
Search engine providers as well as social networks are continuously changing their platforms.
Unfavourable terms and conditions
We engage with some of our customers through online affiliate program platforms. Such platforms
include terms and conditions for participation which may be unfavourable to us, or which may
require us to rely heavily on the platform for information as to users and revenue streams, and which
may expose us to liability and loss of revenues. We manage this risk by trying to engage with our
customers through direct negotiated agreements which limit our liability and secure our revenue
Because of their powerful market positions, any such changes may adversely affect us, including
stream.
materially disrupting traffic to our websites and decreasing the amount of revenues generated by our
publishing assets.
We seek to manage this risk by regularly reviewing our websites and adapting them to fully comply
with the platforms’ guidelines and ensure our marketing strategies focus on quality, value add
services, usability, relevancy, functionality and testing.
Gambling laws and regulations as well as
online marketing regulations are constantly
evolving and becoming more stringent
Although we do not conduct any online gambling operations, we are dependent on the online
gambling industry, which comprises the majority of our customers. The laws and regulations
surrounding the online gambling industry are complex, constantly changing and in some cases
also subject to uncertainty and interpretation. Moreover, online gambling may become prohibited
and/or highly restricted in countries we operate in.
As publishers of online gambling businesses, we are also subject to advertisement and customer
protection regulations – these are also a complex set of rules which differ between markets and
geographies.
If regulations or enforcement policies in the main markets we operate in change in a manner that
affects us or our customers, then our ability to produce the same stream of revenues in such
markets may be adversely affected. Moreover, if enforcement or other regulatory actions are
brought against us or any of our customers (whether current or future), our revenue streams from
such customers may be adversely affected as well.
Protracted expansion into new
sectors and markets
We are seeking to expand our activities into areas such as personal finance and other new markets
in order to both increase and diversify our revenue streams. In many of these sectors and markets
the Company does not have an established brand or presence which may result in our expansion
taking longer than expected or increased costs as we build market share. We seek to manage
these risks by ensuring a deep understanding of the market and customer base we are seeking to
address and delivering a strong and robust product offering.
Reliance on a clear value proposition
to our clients
We engage with some of our customers through online affiliate program platforms. Such platforms
include terms and conditions for participation which may be unfavourable to us, or which may
require us to rely heavily on the platform for information as to users and revenue streams, and which
may expose us to liability and loss of revenues. We manage this risk by trying to engage with our
customers through direct negotiated agreements which limit our liability and secure our revenue
stream.
Protracted expansion into new
sectors and markets
We are seeking to expand our activities into areas such as personal finance and other new markets
in order to both increase and diversify our revenue streams. In many of these sectors and markets
We manage this risk by closely monitoring regulatory developments throughout the territories we
the Company does not have an established brand or presence which may result in our expansion
operate in to allow planning, adapting and preparation of our business for the upcoming changes.
taking longer than expected or increased costs as we build market share. We seek to manage
We engage with external advisors in various territories to provide us with periodical regulatory
these risks by ensuring a deep understanding of the market and customer base we are seeking to
reviews in such territories and their possible effects on our business.
address and delivering a strong and robust product offering.
42
43
2019 Annual Report
Reliance on a clear value proposition to our
clients
Risk Factors
We are reliant on establishing a competitive advantage in a highly competitive and fragmented
market. We seek to manage this risk by ensuring we have a market leading product offering and
value proposition and by increasing presence in high growth markets.
Revenues mainly derive from top 10
customers
In 2019, $38.7 million of our revenues derived from our top 10 customers.
Failure to adapt to changing business
practices, competitors and client behaviour
and changing technology may result in
becoming less competitive
Our continued success will partly depend on our ability to enhance and improve our websites
and the marketing of such sites. We need to respond to technological advancements in digital
We seek to manage this risk by diversifying our business to reduce reliance on key customers and
marketing and the development of alternative platforms for gambling used by operators such as
by attempting to win more customers in existing and new territories.
Large portion of gambling revenues
deriving from non-regulated gambling
markets
Large portion of our gambling revenues derive from non-regulated gambling markets, where the
future of regulation and enforcement is uncertain. Regulatory changes and increased enforcement
may result in volatility and unpredictable revenues and may result in loss of business and revenues.
We seek to mitigate this risk by diversifying into regulated markets, non gambling markets, and by
keeping up with regulatory developments.
Heavy reliance on third party systems to
validate commission payments
We engage with some of our customers through online affiliate program platforms. Such platforms
include terms and conditions for participation which may be unfavourable to us, or which may
require us to rely heavily on the platform for information as to users and revenue streams, and which
may expose us to liability and loss of revenues. We manage this risk by trying to engage with our
customers through direct negotiated agreements which limit our liability and secure our revenue
stream.
44
Mobile and Social. If we were unable to adapt and enhance our content and marketing skills to
meet market demand in a timely manner, we could lose existing customers and struggle to attract
new customers.
To mitigate this risk we seek to ensure our innovation and evolution by designing and implementing
a structure that follows the developments of business practices and supports innovation, we
ensure core capabilities are present to harness data, and ensure structures and roles are well
documented and we acquire new technologies through M&A, internal developments, or sourcing
and acquiring.
Coronavirus/COVID-19
While the COVID-19 pandemic is not directly affecting the ability to conduct online advertisement, it
has led to the cancellation of major sporting events around the world and a reduction in advertising
spending by many banks and financial services organisations. As a result, our sports betting and
personal finance businaesses are likely to see less activity until there is some degree of re-opening
of economies and events. We seek to manage the risks posed by the COVID-19 pandemic through
continuous monitoring of the markets and adapting to the resulting effects, seeking alternative
revenue sources, improving editorial content and adopting improved working practices.
45
2019 Annual Report 2019 Annual Report
Corporate
Governance
Report
As an AIM listed company working within highly regulated markets, our Board recognizes the
report below how we apply the ten principles of the Code, using the disclosures indicated by the
importance of applying sound and consistent governance principles appropriate to the nature,
Code.
scale and business of the Company and the need to apply best practices wherever possible to help
manage risk within the business. Our Board is committed to upholding high standards of corporate
The Board believes that the Group complies with the principles of the Code as far as possible and
governance throughout the Group. Our Board acknowledges its role in setting the culture, values
has explained below where it does not comply. The Board will continue to monitor how the Code is
and ethics of the Group and in ensuring good corporate governance principles are maintained for
interpreted in practice to ensure we can continue to comply with the principles of the Code as far
the long-term benefit of the Group.
as possible.
In line with the requirement in the AIM Rules requiring all AIM quoted companies to adopt and
comply with a recognized corporate governance code and detail how they comply with that code,
in September 2018 the Board formally adopted the QCA Corporate Governance Code (the “Code”)
and reports annually on the Company’s compliance with the Code and any exceptions.
The Code is constructed around ten key governance principles that the QCA has identified as
focusing on the pursuit of medium to long-term value for shareholders. We have set out in the
46
47
2019 Annual Report Deliver Growth
Corporate Governance Report
Principle 1
Establish a strategy and
business model which
promote long-term value for
shareholders
Our strategy and business operations are set out
in pages 4-21 of this annual report. That section
other matters.
We nominated our CEO, Mr. Stuart Simms and
our CFO, Mr. Iain Balchin as the responsible
officers for shareholder engagement and have
in place a mailbox to address investor feedback
(ir@Xlmedia.com).
We also operate a free newsletter tool on our
website, which allows subscribers to receive
breaking news about the Company and the
covers our business model, our strategy and how
Group via e-mail. Registration to the newsletter
we aim to drive long-term value for shareholders.
can be made here:
The risk sections of this Annual Report are on
https://www.xlmedia.com/investor-relations/rns-
pages 40-45 of this Annual Report and deal with
news-alerts/#alerts.
the major challenges the business faces and how
Additional information about the ways in
these challenges are addressed and mitigated.
For more information about our strategy please
see: https://www.xlmedia.com/what-we-do/.
Principle 2
Seek to understand and meet
shareholders’ needs and
expectations
We are committed to listening and
communicating openly with our shareholders
to ensure that our strategy, business model and
performance are understood.
One or more senior representatives of the
Company and the Board are present in the
Annual General Meetings of the Company to
answer questions from shareholders who attend
the meetings.
Additionally, our Chairman of the Board and the
Chief Executive Officer meet and talk regularly
with shareholders and potential investors directly
and through analysts and brokers in order to
receive feedback on market expectations or
48
which the Group is communicating with its
shareholders is available on our website:
https://www.xlmedia.com/investor-relations/
significant-shareholders/ and on https://www.
xlmedia.com/about-us/corporate-governance/
Principle 3
Take into account wider
stakeholder and social
responsibilities and their
implications for long-term
success
We are mindful of our corporate social
responsibilities and the need to build and
maintain strong relationships across a range
of stakeholder groups. Our key stakeholders
are our shareholders, customers and their end
customers, suppliers, employees and regulators.
We nominated our CEO, Mr. Stuart Simms, as the
responsible officer for stakeholder engagement
and set up a mailbox to address stakeholders’
feedback (ir@Xlmedia.com). The specific needs
of each stakeholder group are considered when
the Company reviews and responds to that
feedback.
We are committed to ensuring a high level of
customer service. We frequently correspond
with, and seek feedback from, key customers
to improve our services. All customer feedback
and requests are handled carefully and promptly.
Our executives also regularly meet with key
customers at professional conventions and other
events to improve customer relations and to better
understand customers’ needs.
We are catering our end customers’ needs and
always endeavor to provide them with highest
quality services and products to tailor fit their
needs and expectations.
We view highly trained and satisfied employees
as another essential part of business growth. As
such, we strive to train and develop our employees
to ensure professionalism, excellence and
personal development and progression. We recruit
employees who fit our open and dynamic working
environment and our employees are encouraged
to provide feedback on ongoing matters through
informal discussions with managers and
executives at all levels and during their annual
meetings with their managers. Managers are
simultaneously encouraged to act on the feedback
received. We have established an anonymous
mailbox and telephone line handled by Mr. Richard
Rosenberg, chair of the audit committee of the
Board, to allow employees to provide feedback to
the Board in a discreet manner.
We believe that excellent suppliers are key to
providing long term excellency in services and are
therefore essential for supporting our long-term
success. Many of our suppliers rank at the top
of their services category. Suppliers are asked
by the relevant functions in our Group to provide
feedback about their services and expertise. Any
feedback is discussed by us and further action, if
required, is considered.
Principle 4
Embed effective risk
management, considering
both opportunities and
threats, throughout the
organization
The Board has embedded an effective risk
management framework to identify, evaluate,
manage and mitigate risks, in order to ensure
the Company is well positioned to execute its
strategy and achieve its business objectives. The
Company’s risk register is compiled with input
from our executives and other employees.
The Risk Committee of the Board is responsible
for reviewing the risk register and other
risks facing the Company and discussing all
compliance issues and regulatory developments
based on the risk register and other periodical
management updates designed to highlight any
new or developing risks.
In addition, we have an internal audit function
performed by Chaikin Cohen Rubin & Co. which
conducts audits periodically pursuant to an
internal audit plan.
The specific internal audit plan is established
each year based on the issues identified by the
Audit Committee and the Board as most relevant
to such year.
Each report published by the internal auditors is
discussed by the Audit Committee and action
items identified in such reports are handled by
the Company.
Further details on the risk management process,
the key risks and challenges facing the business
and how they are mitigated are set out in pages
40-45 of this Annual Report.
49
2019 Annual Report Maintain a Dynamic Management Framework
Corporate Governance Report
Principle 5
Maintain the board as a
well-functioning, balanced
team led by the chair
The Board is charged with the responsibility of
directing and governing the Company’s affairs,
including: the formulation and approval of the
Company’s long-term objectives, mission and
strategy; the approval of budgets; the oversight
of the Company’s operations and delegation of
authority to management; the establishment and
monitoring of sound internal controls and risk
management systems; and the evaluation of the
implementation of the Company’s policies and
business plan.
The Board operates formally through meetings
of both the full Board and of its sub-committees,
and informally through regular contact between
Directors. The Board convenes at least once
every quarter to review and monitor the
implementation of the Company’s strategy,
budgets and progress and more frequently if
necessary.
Whilst the Board may delegate responsibilities,
there are formal matters specifically reserved for
decision by the Board. Such reserved matters
include, amongst other things, the approval
of significant capital expenditures, material
business contracts and major co rporate
transactions. A formal schedule of Matters
Reserved for the Board was adopted by the
Company.
The Board comprises six directors, one of
whom is an Executive Director and five of whom
are Non-executive Directors, including the
Chairman. The Board views Christopher Bell,
Richard Rosenberg, and Jonas Mårtensson as
independent directors. Members of the Board
50
must be re-elected by the shareholders of the
Company at the Company’s annual general
meeting at least once every three years.
The Board consists of directors presenting an
appropriate balance of skills and experience
to effectively operate and control the business
and, where deemed necessary, the Board
also consults with external advisors or with
executive officers of the Company. The Board
is an independent unit acting for the benefit of
the Company and its composition ensures that
no individual (or a small group of individuals) can
dominate its decision making.
The Board has established an Audit Committee,
a Remuneration Committee and a Risk
Committee, each with formally delegated duties
and responsibilities. More information about the
composition and the duties and responsibilities
of each Board Committee is available in the
Company’s website on:
https://www.xlmedia.com/about-us/corporate-
governance/.
At this stage of the Company’s development the
Board does not consider it necessary to establish
a Nominations Committee and the Board will
take decisions regarding the appointment of
new directors and senior employees following a
thorough assessment of a potential candidate’s
skill and suitability for the role.
Non-executive directors are expected to devote
as much time as is necessary for the proper
performance of their duties. Executive directors
are full-time employees or services providers and
expected to devote as much time as is necessary
for the proper performance of their duties.
During 2019 the Board held ten (10) meetings.
all directors attended all ten (10) meetings other
than Jonas Martensson and Amit Ben Yehuda
who attended 9 meetings each. Additionally,
the board also passed 16 unanimous written
Resolutions.
Principle 6
Ensure that between
them, the directors have
the necessary up-to-date
experience, skills and
capabilities
The Board considers its current composition to
be appropriate and suitable with the adequate
and up-to-date experience, skills and capabilities
to make informed decisions.
Each member of the Board brings a different set
of skills, expertise and experience, making the
Board a diverse unit equipped with the necessary
set of skills required to create maximum value for
the Company.
The Board is fully committed to ensuring its
members have the right skills. Members of the
Board must be re-elected by the shareholders
of the Company if they have not been re-elected
at the previous two annual general meetings
in accordance with the Company’s Articles of
Association, thereby providing shareholders the
ability to decide on the election of the Company’s
Board.
The Directors’ biographical details and relevant
experience can be found on pages 26-27 of
This Annual Report and on the following URL:
https://www.xlmedia.com/about-us/board-
management/#board
Throughout the year, members of the Board
receive updates on corporate governance
matters from either the General Counsel, the
Company Secretary and/or the Company’s
Nominated Advisor.
During the year the Directors receive regular
updates of our business from the CEO and CFO
and regular comprehensive regulatory updates
from the General Counsel.
More information about the Group’s
management and the relevant internal functions
can be found here: https://www.xlmedia.com/
about-us/board-management/#management.
The Board also consults with external advisors
and with executives of the Company on various
matters as deemed necessary and appropriate
by the Board.
51
2019 Annual Report Maintain a Dynamic Management Framework
Corporate Governance Report
Principle 7
Evaluate board performance
based on clear and
relevant objectives, seeking
continuous improvement
In order to ensure that the Board as a whole and
its members collectively function in an efficient
and productive manner, a formal external Board
evaluation was carried out in November 2018
by Board Eventuation Ltd., a company with
vast experience in evaluating boards of UK
public companies. Evaluation questionnaires
were circulated to and completed by all Board
members and a thorough analysis of members’
responses conducted by Board Evaluation.
The evaluation took into consideration various
criteria such as the effectiveness of the
composition of the Board, the Board’s approach
to its work, its culture and dynamics, its structure
and processes, its accessibility to information, its
ongoing training, its success in achieving its goals
and the need for succession planning.
The Board evaluation characterized discussions
at the Board level as an open boardroom
culture, with good level of debate and without
conflict of interests and found that the Board
and its committees work well. The evaluation
further found the Board members to be highly
qualified, experienced and with the right set of
skills to lead the Group, noting that while legal
and HR skills were not represented within skills
of current members of the Board, the Company
does seek advice as needed in relation to such
and other areas. Some issues were identified
as requiring improvement, such as improving
communication and Board information. The
learnings from this process have been and will
continue to be addressed on a regular basis.
52
Given the thoroughness of the 2018 process, no
external review was carried out in 2019 but one
is expected to be carried out during calendar
year 2020. The method of assessing Board
effectiveness and performance will be reviewed
on a continuing
Principle 8
Promote a corporate culture
that is based on ethical
values and behaviors
We are committed to acting ethically and with
integrity. We expect all employees, officers,
directors and other persons associated with us
to conduct their day-to-day business activities in
a fair, honest and ethical manner.
For that purpose, we have adopted a Code of
Business Conduct (“Code”) which applies to
all our workforce personnel. Pursuant to the
Code, employees, directors and other relevant
stakeholders are required to comply with all
laws, rules and regulations applicable to us.
These include, without limitation, laws covering
anti-bribery, copyrights, trademarks and trade
secrets, data privacy, insider trading, illegal
political contributions, antitrust prohibitions,
rules regarding the offering or receiving of
gratuities, environmental hazards, employment
discrimination or harassment, occupational
health and safety, false or misleading financial
information or misuse of corporate assets. The
Code also includes provisions for disclosing,
identifying and resolving conflicts of interest
of employees and Board members The Code
includes provisions requiring all employees
to report any known or suspected violation
and ensures that all reports of violations of
the Code will be handled sensitively and with
the CEO and the directors to discuss matters for
discretion. We also recognize the benefits of
the Board.
a diverse workforce and are committed to
We will continue to review our governance
providing a working environment that is free from
structures with the QCA Code in mind and are
discrimination.
committed to the evolution of our corporate
We have also adopted a share dealing code,
governance in line with best practices, to
regulating trading by persons discharging
the extent the directors judge it appropriate
managerial responsibility and persons closely
considering the Company’s size, stage of
associated with them (“PDMRs”).
We take all reasonable steps to ensure
compliance by PDMRs and any relevant
employees with the terms of the Dealing Code.
Principle 9
Maintain governance
structures and processes
that are fir for purpose and
support good decision-
making by the board
The Board Committees are comprised of a
majority of independent Board members to
development and resources.
Build Trust
Principle 10
Communicate how the group
is governed and is performing
by maintaining a dialogue
with shareholders and other
relevant stakeholders
We are committed to an open communication
and dialogue with our stakeholders. Our main
stakeholder groups are our shareholders, our
customers, our suppliers and our employees.
ensure that resolutions adopted are conflict-free.
We communicate with stakeholders inter alia
Further details of the composition and meetings
through the Annual Report, the annual general
of these Committees can be found on pages
meeting of shareholders, the full-year, half-year
34-35 and 54-75 of this Annual Report. Each
and other regulatory market announcements,
of the Board Committees has the ability to use
investor roadshows and through the Group’s
external advisors as it sees fit in the furtherance
website.
of its duties.
Our website is regularly updated, and users
The Company’s CEO is responsible for the
can register to be alerted via email when
leadership and day-to-day management
announcements are posted on the website.
of the Group. This includes formulating and
Annual reports and notices of annual general
recommending the Group’s strategy for Board
meetings from admission can be found on our
approval and then executing the approved
website.
strategy. The Chairman’s main responsibility is
As of 2019 we publish on the Company’s website
the leadership and management of the Board’s
in a clear and transparent manner the outcomes
business and its governance and acting as its
of the general meetings of shareholders,
facilitator. He meets regularly and separately with
including a breakdown of votes cast.
53
2019 Annual Report
2019 Annual Report
Audit
Committee
Report
General and Composition of the Audit Committee
The Audit Committee is a sub-committee of the Board. The Audit Committee chairman reports
formally to the Board on all matters within the Committee’s duties and responsibilities and on
how the Audit Committee discharges its responsibilities. The Audit Committee members are
Christopher Bell, Richard Rosenberg and Amit Ben Yehuda. The Committee is chaired by Mr.
Rosenberg.
All members of the Audit Committee are independent directors. For further information about the
qualifications of the Audit Committee members please refer to pages 26-27 of this Annual Report
and the Company’s website on https://www.xlmedia.com/about-us/board-management/.
The Audit Committee meets at least four times a year at appropriate times in the reporting and audit
cycle and otherwise as required. The Audit Committee also meets regularly with the Company’s
internal and external auditors.
54
55
2019 Annual Report Purpose and Responsibilities of Audit
Committee
Audit Committee Report
The purpose of the Audit Committee is to assist the
Board to carry out the following functions:
Oversight of the integrity of the Group’s formal reports, statements and
announcements relating to the Group’s financial performance;
Reviewing compliance with internal guidelines, policies and procedures and
other prescribed internal standards of behaviour;
To achieve such purposes, the Audit Committee has been assigned with the
following responsibilities;
Reviewing the half-year and full-year financial statements with management
and with the external auditors as necessary prior to their approval by the
Board;
Reviewing financial results announcements of the Group and any other
formal announcements relating to the Group’s financial performance and
recommending them to the Board for approval;
Reviewing recommendations from the CFO and the external auditors on the
key financial and accounting principles to be adopted by the Group in the
preparation of the financial statements;
Reviewing the Group’s systems for internal financial control;
Approving the appointment and termination of appointment of the Group’s
internal auditors, reviewing and approving the Group’s internal audit plan and
ensuring the internal auditors have the necessary resources and access to
information to enable them to fulfil their mandate;
Considering and making recommendations to the Board, to put to
shareholders for approval at the AGM, the appointment, re-appointment and
removal of the Company’s external auditors and oversee the relationship
with the external auditors;
Reviewing and approving the external audit plan and regularly monitoring the
progress of implementation of the plan
Determining and monitoring the effectiveness and independence of the
internal and external auditors;
Monitoring the level of resources related to the management of audit
functions across the Group.
56
57
2019 Annual Report Main Activities in 2019
Audit Committee Report
25
March 2019
8
May 2019
3
June 2019
The Audit Committee
The Audit Committee
The Audit Committee
reviewed and approved
reappointed Ernst & Young
reviewed the financial
the financial statements for
as the external auditors
results of the Company for
FY2018 and discussed the
and discussed the internal
Q1 2019.
internal auditors report.
auditors’ reports.
22
September 2019
18
December 2019
The Audit Committee
The Audit Committee
reviewed and approved the
reviewed the external
financial statements of the
auditors' plans for the
Company for H1 2019
annual report of FY2019
and reviewed the financial
results of the Company for
Q3 2019.
58
59
2019 Annual Report201920182020 Internal Auditors
Audit Committee Report
The internal auditors of the Company are Chaikin Cohen Rubin & Co. The internal auditors provide
their audit based on an audit plan. Each year specific topics are identified by the Audit Committee
for audit during such year. Each report of the internal auditors is discussed by the Audit Committee
and if necessary by the Board and its results are learned and implemented as required.
External Auditors
The external auditors of the Company are Kost Forer Gabbay & Kasierer (Ernst & Young
Israel) (“EY”). The appointment of EY as auditors by the Audit Committee was based on their
performance during past years and their offer for auditing the reports for 2019. The Audit
Committee review of the external auditors confirmed the appropriateness of their reappointment
and included assessment of their independence, qualification, expertise and resources, and
effectiveness of their audit process.
Both the Board and the external auditors have safeguards in place to avoid the possibility that
the auditors’ objectivity and independence could be compromised. The services provided by the
external auditors include the Audit-related services and tax consulting. In recognition of public
concern over the effect of consulting services on auditors’ independence, the external auditors
are not invited to provide general consulting work which can affect their independence as external
auditors.
60
The total remuneration of the external auditors for 2019 and for 2018 was as
listed in the table below
USD in thousands
External Auditors’ remuneration
2019
2018
Audit services
184
Acquisition and
assurance services
186
35
Tax compliance
112
168
The Audit Committee and the auditors found that the external audit plan for 2019, the work of the
external auditors for 2019 and the remuneration of the external auditors for 2019 did not undermine
the independence of the external auditors.
Whistleblowing
The Group has a Whistleblowing Policy permitting each employee of the Group to raise concerns
in confidence about possible improperness in various aspects and matters. Issues raised will be
handled appropriately by the management of the Group.
61
2019 Annual Report
2019 Annual Report
Financial Reporting
Audit Committee Report
The Group’s trading performance is monitored on an ongoing basis.
An annual budget is prepared, and specific objectives and targets
are set. The budget is reviewed and approved by the Board. The
key trading aspects of the business are monitored constantly and
internal management and financial accounts are prepared monthly.
The results are compared to budget and prior year performance.
The Audit Committee has taken and will continue to take further
steps to ensure the Group’s control environment is working
effectively and efficiently.
Richard Rosenberg
Chairman of the Committee
62
63
2019 Annual Report Remuneration
Committee
Report
General
The Remuneration Committee is responsible for determining and recommending to the Board the
framework for the remuneration of the Board chairman, executive directors and other designated
senior executives and, within the terms of the agreed framework, determining the total individual
remuneration packages of such persons including, where appropriate, bonuses, incentive
payments and share options or other share awards.
The Remuneration Committee consists of three members, all of whom are independent non-
executive directors. Currently the Remuneration Committee comprises Christopher Bell, Richard
Rosenberg and Jonas Mårtensson. Until 3 June 2019 Mr. Ben Yehuda was a member of and chaired
the committee and since then Mr. Jonas Mårtensson has been a member of and the chairman
of the committee. The Remuneration Committee meets at least twice a year and otherwise as
required.
64
2019 Annual Report
65
2019 Annual Report Key Elements in Remuneration
Remuneration Committee Report
As an AIM-listed company, the Company is not
required to comply with the remuneration reporting
requirements applicable to fully listed companies in
the UK. However, set out below are certain disclosures
relating to directors’ remuneration:
Responsibilities of the Remuneration
Committee
Remuneration Committee Report
The responsibilities of the Remuneration Committee
include the below and other responsibilities as set
forth in the Charter of the Committee:
The remuneration of executive directors and certain other senior executives is set by
Setting the remuneration policy for all executive directors, including pension rights, and
comparison to market rates at levels aimed to attract, retain and motivate the best staff,
compensation payments;
recognizing that they are key to the ongoing success of the business.
The remuneration of non-executive directors is a matter for the Chairman and the CEO
management personnel;
to determine.
Recommending and monitoring the level and structure of remuneration for senior
No Director is involved in any decision as to his or her own remuneration.
The remuneration and grant of bonuses to senior management are linked to their
performance and to their achievement of predefined targets.
The remuneration of senior management includes equity-based payments vested over
time to retain their employment.
Approving the design of, and determining targets for, any performance-related pay
schemes operated by the Group and approving the total amount of payments made
under such schemes;
Reviewing the design of all share incentive plans for approval by the Board and
shareholders. For any such plans, determining each year whether award will be made, and
if so, the overall amount of such awards, the individual awards to executive directors and
other designated senior executives and the performance targets to be used; and working
and liaising, as necessary, with all other Board committees.
66
67
2019 Annual Report Share Option Schemes
Remuneration Committee Report
The Company operates a Global Share Incentive Plan (the “GSIP”)
approved by the Board which deals with the grant of options to
Group employees. IBI Capial (formally known as Tamir Fishman
Management Ltd.), is the appointed trustee under the GSIP (the
“Trustee”).
Non-Executive Directors’ Interests in Share
Options and Shares
As of 31 December 2019, the Directors’ interests in the Ordinary
Share capital of the Company were:
In connection with the share options granted to date, on 21 January 2015 and on 14 July 2017, the
Number of Ordinary Shares
Trustee has subscribed for 14,000,000 ordinary shares of US$0.000001 each in the Company
at par. The shares held by the Trustee will be used to satisfy future obligations of the Company
under the GSIP. Under the terms of the agreement entered into by the Company and the
Trustee, the Trustee has agreed to waive its voting rights and all entitlements to dividends paid
by the Company, in each case, in respect of such shares prior to the transfer of those shares
to satisfy the exercise of options pursuant to the terms of the GSIP. On 31 December 2019 the
balance of the Trustee’s shares was 3,315,521.
31.12.2019
31.12.2018
A new Share Incentive Plan (the “LTIP”) is being put forward for shareholder approval. The LTIP
Christopher Bell
357,000
357,000
is a discretionary share plan that will be administered by the Remuneration Committee and
will allow awards to take the form of share options with an exercise price determined by the
Remuneration Committee, contingent rights to acquire shares for no consideration (Restricted
Stocks Units or RSUs), contingent rights to acquire shares for no consideration subject to the
achievement of performance conditions (Performance Stocks Units or PSUs), other share-
based awards r contingent awards of cash. Deferred bonus awards may also be granted in the
form of contingent rights to acquire shares for no consideration or options with an exercise price
equal to the par value of a share or nil.
Richard Rosenberg
51,000
51,000
Ory Weihs
7,012,444
4,556,735
68
69
2019 Annual Report Non-Executive Directors’ Interests in Share
Options and Shares
Remuneration Committee Report
As of 31 December 2019, non-executive directors’ interests in the
Company’s share options were as follows:
Options granted
Exercise price
Expiry date
Vested at the
end of 2019
Cancelled
Amit Ben Yehuda
180,000
69.7p
27/07/2024
180,000
Christopher Bell
270,000
57.75p
21/01/2023
270,000
Richard Rosenberg
180,000
57.75p
21/01/2023
180,000
Ory Weihs
900,000
196.8p
31/1/2026
225,000
As of 31 December 2019, executive directors’ interests in the
Company’s share options were as follows:
Stuart Simms*
920,223
nominal value
per share
31/1/2026
0
*The options are subject to performance conditions.
For further information, see note 14 to the consolidated financial statements.
70
71
2019 Annual Report Directors’ Remuneration in 2019
Remuneration Committee Report
The Directors’ remuneration for the year ended 31 December 2019
is set out in the table below.
Management
Costs of share
fees/salary and
bonus-based
related
payments
USD
Stuart Simms
158,770
35,082
Christopher Bell
139,307
Richard Rosenberg
61,636
Amit Ben Yehuda
92,484
3,308
Jonas Mårtensson
62,000
Ory Weihs
302,612
-159,556
Total 2019
193,852
139,307
61,636
95,792
62,000
143,056
72
For further information, see note 19 to the consolidated financial statements.
73
2019 Annual Report 2019 Annual Report
Historical Pay and Share Performance
Remuneration Committee Report
For historical pay and share performance please see our previous
annual reports and on our website: https://www.xlmedia.com/
investor-relations/share-price-information/.price-information/.
The Committee remains committed to a fair and responsible
approach to executive pay whilst ensuring it remains in line with best
practice and appropriately incentivizes executive directors over the
longer term to deliver the Group’s strategy.
Jonas Mårtensson,
Chairman of the Committee
74
75
2019 Annual Report
2019 Audited
Financial
Statements
76
77
2019 Annual Report Independent Auditor’s Report
To the Shareholders of XLMedia PLC
(cid:3)
(cid:3)
Kost Forer Gabbay & Kasierer
77 Haenergia st.
Advanced Technologies Park
Beer Sheva 8470912, Israel
Tel: +972-8-6261300
Fax: +972-3-5622555
ey.com
Report on the audit of the consolidated financial statements
Opinion
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our
responsibilities under those standards are further described in the Auditor’s responsibilities for
the audit of the consolidated financial statements section of our report. We are independent of the
Group in accordance with the International Code of Ethics for Professional Accountants (including
International Independence Standards)(IESBA Code), and we have fulfilled our other ethical
responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
We have audited the consolidated financial statements of XLMedia PLC and its subsidiaries (the
Group), which comprise the consolidated statements of financial position as of 31 December 2019
Key audit matters
and 2018 and the consolidated statements of profit or loss and other comprehensive income,
Key audit matters are those matters that, in our professional judgment, were of most significance
consolidated statements of changes in equity and consolidated statements of cash flows for each
in our audit of the consolidated financial statements of the year ended 31 December 2019. These
of the years then ended, and notes to the consolidated financial statements, including a summary
matters were addressed in the context of our audit of the consolidated financial statements as
of significant accounting policies.
a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these
matters. For each matter below, our description of how our audit addressed the matter is provided
In our opinion, the accompanying consolidated financial statements present fairly, in all material
in that context.
respects, the financial position of the Group as of 31 December 2019 and 2018 and its financial
performance and its cash flows for each of the years then ended in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European Union.
78
79
2019 Annual Report
Independent Auditor’s Report
To the Shareholders of XLMedia PLC continued
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the
consolidated financial statements section of our report, including in relation to these matters.
Accordingly, our audit included the performance of procedures designed to respond to our
assessment of the risks of material misstatement of the consolidated financial statements. The
results of our audit procedures, including the procedures performed to address the matters below,
provide the basis for our audit opinion on the accompanying consolidated financial statements.
Description of Key Audit Matter and
why a matter of most significance in
the audit
Description of Auditor’s Response
Revenue
recognition
In 2019 in order to gain the required
level of assurance, we performed
Revenues which amounted to
substantive audit procedures relating
79.7 million in 2019 are significant
to the recognition and recording
to the consolidated financial
of revenues, including tests of
statements based on their
reconciliations from underlying
quantitative materiality. As such,
data to the financial accounts. IT
there is inherent risk that revenues
audit specialists were deployed to
may be improperly recognised,
assist in understanding the design
inflated or misstated
and operation of the relevant IT
Recognition of revenues in the
accounts of the Group is a highly
automated process. The Group
is heavily reliant on the reliability
systems and in performing various
data analyses in order to test
completeness, accuracy and timing
of the recognition of revenues.
and continuity of its in-house IT
We also evaluated the adequacy of
platform to support automated data
the disclosures provided in relation
processing in its recognition and
to revenue in Notes 2 and 17 to the
recording of revenues.
consolidated financial statements.
Goodwill
Domains and
Websites and
other intangible
assets –
impairment test
Our audit procedures included,
among others evaluating the
assumptions and methodologies
used by the Group. In particular, we
tested the Group’s determination of
the recoverability of these assets by
As of 31 December 2019, the total net
reviewing management’s forecasts
carrying amount (before impairment)
of revenues and profitability. We
of goodwill, domains and websites
assessed the reliability of these
with indefinite useful life and other
forecasts through, among others, a
intangible was approximately USD
review of actual performance against
128 million. In accordance with IFRSs
previous forecasts. We evaluated
as adopted by the European Union,
and tested the discount rates and
the Group is required to annually
attribution of expenses, and we
test these assets for impairment.
considered the reasonableness of
As result of the impairment test
management’s other assumptions.
the Group recorded an impairment
We also verified the adequacy of
loss for the amount of USD 81,350
the disclosure of the assumptions
thousands, which is included in the
and other data in Note 8 to the
statement of profit or loss.
consolidated financial statements.
We included in our team tax
specialists to analyse and evaluate
the assumptions used to determine
The Group’s operations are subject
tax provisions. We evaluated and
to income tax in various jurisdictions.
tested the underlying support,
Taxation is significant to our audit
such as transfer price studies, for
because the assessment process
the calculation of income taxes in
is complex and judgmental and the
the various jurisdictions. We also
amounts involved are material to the
assessed the adequacy of the
consolidated financial statements as
Group’s disclosures in Note 16 to the
a whole.
consolidated financial statements.
Taxation
80
81
2019 Annual Report Independent Auditor’s Report
To the Shareholders of XLMedia PLC continued
Emphasis of matter – Subsequent event
We draw attention to Note 22 of the consolidated financial statements, which describes the
uncertainties of the potential impact of Coronavirus on the Company’s operation subsequent to the
reporting period. Our opinion is not modified in respect of this matter.
Other information included in the Group’s 2019 Annual Report
Other information consists of the information included in the Group’s 2019 Annual Report other
than the consolidated financial statements and our auditor’s report thereon. Management is
responsible for the other information. The Group’s 2019 Annual Report is expected to be made
available to us after the date of this auditor’s report.
Our opinion on the consolidated financial statements does not cover the other information and we
will not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read
the other information identified above when it becomes available and, in doing so, consider whether
the other information is materially inconsistent with the consolidated financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
Responsibilities of management and the board of directors for the
consolidated financial statements
In preparing the consolidated financial statements, management is 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 management either intends to
liquidate the Group or to cease operations, or has no realistic alternative but to do so.
The board of directors is responsible for overseeing the Group’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial
statements
Our objectives are to obtain reasonable assurance about whether the consolidated 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 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 consolidated financial
statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain
professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error, design and perform audit procedures responsive
to those risks, and obtain audit evidence that is sufficient and appropriate to provide a
Management is responsible for the preparation and fair presentation of the consolidated financial
basis for our opinion. The risk of not detecting a material misstatement resulting from fraud
statements in accordance with IFRS as adopted by the European Union, and for such internal
is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional
control as management determines is necessary to enable the preparation of consolidated
omissions, misrepresentations, or the override of internal control.
financial statements that are free from material misstatement, whether due to fraud or error.
82
Obtain an understanding of internal control relevant to the audit in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Group’s internal control.
83
2019 Annual Report
Independent Auditor’s Report
To the Shareholders of XLMedia PLC continued
Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the Group’s
ability to continue as a going concern. If we conclude that a material uncertainty exists,
we are required to draw attention in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditors’ report. However, future events or conditions may cause the Group to cease to
continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial statements
represent the underlying transactions and events in a manner that achieves fair
presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group to express an opinion on the consolidated
financial statements. We are responsible for the direction, supervision and performance of
the group audit. We remain solely responsible for our audit opinion.
We communicate with the board of directors regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide the board of directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
84
From the matters communicated with the board of directors, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the year ended
31 December 2019 and are therefore the key audit matters. We describe these matters in our
auditor’s report unless law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be communicated in our
report because the adverse consequences of doing so would reasonably be expected to outweigh
the public interest benefits of such communication.
Report on other legal and regulatory requirements
The consolidated financial statements have been prepared in accordance with the requirements of
the Companies (Jersey) Law 1991.
21 April 2020
Beer Sheva, Israel
Albert Perez
For and on behalf of
KOST FORER GABBAY & KASIERER
A Member of Ernst & Young Global
85
2019 Annual Report
Consolidated Statements
of Financial Position
As of 31 December
2019
2018
As of 31 December
2019
2018
Note
USD in thousands
Note
USD in thousands
Assets
Current assets:
Cash and cash equivalents
Short-term investments
Trade receivables
Other receivables
Financial derivatives
Non-current assets:
Long-term investments
Property and equipment
Goodwill
Domains and websites
Other intangible assets
Deferred taxes
Other assets
5 (a)
6 (a)
6 (b)
12(b)
5 (b)
7
8
8
8
15
27,108
2,785
7,755
4,522
222
44,627
2,996
16,112
4,697
805
Liabilities and equity
Current liabilities:
Trade payables
Other liabilities and accounts payable
Income tax payable
Financial derivatives
Current maturities of long-term bank loans
42,392
69,237
Current maturities of lease liabilities
682
9,431
–
40,215
6,428
–
278
57,034
99,426
633
1,296
23,652
92,053
9,146
99
435
127,314
196,551
Non-current liabilities:
Long- term bank loans
Lease liability
Deferred taxes
Other liabilities
Total liabilities
9
15
12 (b)
10
11
10
11
15
3,028
9,625
11,874
79
1,465
1,161
6,416
6,967
9,049
91
5,585
–
27,232
28,108
–
8,067
516
65
8,648
35,880
1,380
–
–
248
1,628
29,736
The accompanying notes are an integral part of the consolidated financial statements.
86
87
2019 Annual Report Consolidated Statements
of Financial Position continued
Consolidated Statements
of Profit or Loss and other Comprehensive Income
As of 31 December
2019
2018
USD in thousands
Note
13
*)
112,624
2,276
(2,445)
(30,159)
(19,041)
63,255
291
63,546
99,426
*)
112,224
2,590
(2,445)
(468)
54,623
166,524
291
166,815
196,551
Equity
Share capital
Share premium
Capital reserve from share-based transactions
Capital reserve from transaction with
non-controlling interests
Treasury shares
Retained earnings (accumulated deficit)
Equity attributable to equity holders of
the Company
Non-controlling interests
Total equity
*) Lower than USD 1 thousand.
The accompanying notes are an integral part of the consolidated financial statements.
21 April 2020
Date of approval of the
financial statements
Chris Bell
Chairman of the Board of
Directors
Stuart Simms
Chief Executive Officer
Iain Balchin
Chief Financial Officer
88
Revenues
Cost of revenues
Gross profit
Research and development expenses
Sale and marketing expenses
General and administrative expenses
Operating profit before Impairment and
Reorganisation costs
Impairment loss
Reorganisation costs
Operating profit (Loss)
Finance expenses
Finance income
Finance expenses, net
Profit (loss) before taxes on income
Taxes on income
Income (loss) from continuing operations
Income (loss) from discontinued operations, net
Net income (loss)
Note
17
8
2(a)
15
16
Year ended 31 December
2019
2018 (*)
USD in thousands
79,695
26,002
53,693
1,554
4,579
21,214
27,347
26,346
81,350
1,682
93,502
30,133
63,369
1,043
5,044
20,297
26,384
36,985
300
–
(56,686)
36,685
(1,879)
835
(1,044)
(57,730)
3,188
(60,918)
2,217
(58,701)
(837)
300
(537)
36,148
4,089
32,059
(11,284)
20,775
89
2019 Annual Report Consolidated Statements
of Profit or Loss and other Comprehensive Income continued
Consolidated Statements
of Changes in Equity
Year ended 31 December
2019
2018 (*)
Note
USD in thousands
Net income (loss) and other
comprehensive income
Attributable to:
Equity holders of the Company
Non-controlling interests
Earnings per share attributable to equity holders
of the Company:
13 (e)
Basic and Diluted earnings (loss) per share from
continuing operation (in USD)
Basic and Diluted earnings (loss) per share from
discontinued operation (in USD)
(*) Reclassified for discontinued operations – See Note 16.
(58,701)
20,775
(59,474)
773
(58,701)
19,818
957
20,775
(0.31)
0.14
0.01
(0.05)
The accompanying notes are an integral part of the consolidated financial statements.
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2019 Annual Report
Consolidated Statements
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31 December
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2018
USD in thousands
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Adjustments to reconcile net income (loss) to net cash
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2019 Annual Report
Consolidated Statements
of Cash Flows continued
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Cash received (paid) during the year for:
Interest paid
Interest received
Taxes paid
Taxes received
Net cash provided by operating activities
Year ended
31 December
2019
2018
USD in thousands
(183)
8,896
(752)
101
(2,859)
2,061
(1,449)
40,121
47
(5,592)
(469)
196
(5,544)
557
(5,260)
31,785
The accompanying notes are an integral part of the consolidated financial statements.
94
Cash flows from investing activities:
Purchase of property and equipment
Proceeds from sale of assets and property
Acquisition of and additions to domains, websites and other
intangible assets
Acquisition of and additions to technology
Proceeds from the sale of discontinued operation *)
Short- term and long-term investments, net
Net cash used in investing activities
Cash flows from financing activities:
Year ended 31 December
2019
2018
USD in thousands
(260)
–
(406)
(8,447)
1,547
281
(7,285)
(553)
270
(47,306)
(8,210)
–
1,735
(54,064)
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(14,190)
(14,362)
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Exercise of options
Repayment of long and short-term liability
Repayment of lease liabilities
Receipt of long-term loan from bank
Net cash provided by (used in) financing activities
Exchange differences on balances of cash and cash equivalents
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
*) net of cash balance of discontinued operation.
–
(29,691)
(652)
270
(5,500)
(1,253)
–
(51,016)
661
(17,519)
44,627
27,108
42,618
(468)
(1,285)
976
(4,000)
–
5,965
29,444
(954)
6,211
38,416
44,627
95
2019 Annual Report Notes to the Consolidated
Financial Statements
Note 1: General
(a) General description of the Group and its operations:
The Group is a leading global digital performance publisher. The Group attracts traffic from
multiple online channels and directs them to online businesses who, in turn, convert such
traffic into paying customers.
Online traffic is attracted by the Group’s publications and are then directed, by the Group, to its
customers in return for mainly a share of the revenue generated by such user, a fee generated
per user acquired, fixed fees or a hybrid of any of these models.
(c) Assessment of going concern:
As part of their ongoing responsibilities, the Directors have recently undertaken a thorough
review of the Group’s cash flow forecast and potential liquidity risks. Forecasts of operating
results and cash flow projections have been prepared for 2020 and 2021 which show that the
Group’s will have sufficient liquidity for its operations during the period. The Directors have
determined that the Group is likely to continue in business for at least 12 months from the date
of the consolidated financial statements. Accordingly, the Board of Directors applied the going
concern basis of accounting in preparing the consolidated financial statements.
Note 2: Significant Accounting Policies
The Company is incorporated in Jersey and commenced its operations in 2012.
The following accounting policies have been applied consistently in the financial statements for all
Since March 2014, the Company’s shares are traded on the London Stock Exchange’s
Alternative Investment Market (AIM).
(a) Basis of presentation of the consolidated financial statements:
periods presented, unless otherwise stated.
(b) Definitions:
In these financial statements:
The Company
The Group
–
–
XLMedia PLC.
The Company and its consolidated subsidiaries
Subsidiaries
Entities that are controlled (as defined in IFRS 10) by the Company and
These financial statements have been prepared in accordance with International Financial
Reporting Standards as adopted by the European Union (“IFRS as adopted by the EU”) and in
accordance with the requirements of the Companies (Jersey) Law 1991.
The financial statements have been prepared on a cost basis, except for financial assets and
liabilities (derivatives) that are presented at fair value through profit or loss.
whose accounts are consolidated with those of the Company.
The Company has elected to present profit or loss items using the function of expense
–
For a list of the main subsidiaries see Note 23.
method.
Related parties –
as defined in IAS 24
Dollar/USD
–
U.S. dollar
In 2019 new Standards and amendments became effective, regarding the effect on the
consolidated financial statements, see Note 2(t).
96
97
2019 Annual Report Notes to the Consolidated
Financial Statements continued
Classification of expenses in profit or loss
Cost of revenues- includes mainly compensation of personnel, media buying costs, affiliates
network costs and websites promotion and content.
Research and development and sale and marketing- includes primarily compensation of
personnel.
General and administrative- includes primarily compensation and related costs of personnel,
amortisation and depreciation expenses, costs related to the Group’s facilities and fees for
professional services.
Reorganisation costs – includes primarily termination benefits to former key management
personnel and various consulting fees.
(b) Consolidated financial statements:
The consolidated financial statements comprise the financial statements of companies that
are controlled by the Company (subsidiaries). Control is achieved when the Company is
exposed, or has rights, to variable returns from its involvement with the investee and has the
ability to affect those returns through its power over the investee. Potential voting rights are
considered when assessing whether an entity has control. The consolidation of the financial
statements commences on the date on which control is obtained and ends when such control
ceases.
The financial statements of the Company and of the subsidiaries are prepared as of the
same dates and periods. The consolidated financial statements are prepared using uniform
accounting policies by all companies in the Group. Significant intragroup balances and
transactions and gains or losses resulting from intragroup transactions are eliminated in full in
the consolidated financial statements.
Non-controlling interests in subsidiaries represent the equity in subsidiaries not attributable,
directly or indirectly, to a parent. Non-controlling interests are presented in equity
separately from the equity attributable to the equity holders of the Company. Profit or loss
and components of other comprehensive income are attributed to the Company and to
non-controlling interests. Losses are attributed to non-controlling interests even if they result
in a negative balance of non-controlling interests in the consolidated statement of financial
position.
A change in the ownership interest of a subsidiary without a change of control is accounted
for as an equity transaction in accordance with IFRS 10.
(c) Business combinations and goodwill:
Business combinations are accounted for by applying the acquisition method. The cost of
the acquisition is measured at the fair value of the consideration transferred on the date of
acquisition with the addition of non-controlling interests in the acquiree. In each business
combination, the Company chooses whether to measure the non-controlling interests in the
acquiree based on their fair value on the date of acquisition or at their proportionate share in
the fair value of the acquiree’s net identifiable assets.
Direct acquisition costs are expensed as incurred.
Contingent consideration is recognised at fair value on the acquisition date and classified as
a financial asset or liability in accordance with IAS 39. Subsequent changes in the fair value of
the contingent consideration are recognised in profit or loss. If the contingent consideration is
classified as an equity instrument, it is measured at fair value on the acquisition date without
subsequent remeasurement.
98
99
2019 Annual Report
Notes to the Consolidated
Financial Statements continued
Goodwill is initially measured at cost, which represents the excess of the acquisition
(e) Cash equivalents:
consideration and the amount of non-controlling interests over the net identifiable assets
acquired and liabilities assumed. If the resulting amount is negative, the acquirer recognises
the resulting gain on the acquisition date.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses.
For purposes of evaluation of impairment of goodwill, goodwill purchased in a business
combination is evaluated and attributed to the cash-generating units to which it had been
allocated.
(d) Functional currency, presentation currency and foreign currency:
1.
Functional currency and presentation currency:
Cash equivalents are considered as highly liquid investments, including unrestricted
short-term bank deposits with an original maturity of three months or less from the date
of acquisition or with a maturity of more than three months, but which are redeemable on
demand without penalty and which form part of the Group’s cash management.
(f) Short-term and long-term deposits:
Short-term bank deposits are deposits with an original maturity of more than three months
and less than twelve months from the date of acquisition. Long-term deposits are deposits
with maturity of more than twelve months from the reporting date. The deposits are presented
according to their terms of deposit.
The functional and presentation currency of the Company and of its subsidiaries is the
(g) Revenue recognition:
U.S. dollar (“USD”).
2.
Transactions, assets and liabilities in foreign currency:
On January 1, 2018, the Company first adopted IFRS 15, “Revenue from Contracts with
Customers” (“the Standard”).
Transactions denominated in foreign currency are recorded upon initial recognition
Revenue from contracts with customers is recognised when the control over the services is
at the exchange rate at the date of the transaction. After initial recognition, monetary
transferred to the customer. The transaction price is the amount of the consideration that is
assets and liabilities denominated in foreign currency are translated at the end of each
expected to be received based on the contract terms.
reporting period into the functional currency at the exchange rate at that date. Exchange
rate differences, other than those capitalised to qualifying assets or recorded in equity in
Revenue from rendering of services:
hedges, are recognised in profit or loss. Non-monetary assets and liabilities measured at
cost in foreign currency are translated at the exchange rate at the date of the transaction.
Non-monetary assets and liabilities denominated in foreign currency and measured at
fair value are translated into the functional currency using the exchange rate prevailing at
the date when the fair value was determined.
Revenue from rendering of services is recognized over time, during the period the
customer simultaneously receives and consumes the benefits provided by the Company’s
performance. The Company charges its customers based on payment terms agreed upon in
specific agreements.
100
101
2019 Annual Report
Notes to the Consolidated
Financial Statements continued
In determining the amount of revenue from contracts with customers, the Group evaluates
Taxes that would apply in the event of the disposal of investments in investees have
whether it is a principal or an agent in the arrangement. The Group is principal when the
not been taken into account in computing deferred taxes, as long as the disposal of
Group controls the promised services before transferring them to the customer. In these
the investments in investees is not probable in the foreseeable future. Also, deferred
circumstances, the Group recognises revenue for the gross amount of the consideration.
taxes that would apply in the event of distribution of earnings by investees as dividends
When the Group is an agent, it recognises revenue for the net amount of the consideration,
have not been taken into account in computing deferred taxes, since the distribution of
after deducting the amount due to the principal.
dividends does not involve an additional tax liability or since it is the Group’s policy not
to initiate distribution of dividends from a subsidiary that would trigger an additional tax
(h) Taxes on income:
liability.
Current or deferred taxes are recognised in profit or loss, except to the extent that they relate
to items which are recognised in other comprehensive income or equity.
1.
Current taxes:
The current tax liability is measured using the tax rates and tax laws that have been
enacted or substantively enacted by the reporting date as well as adjustments required
in connection with the tax liability in respect of previous years.
2. Deferred taxes:
Deferred taxes are computed in respect of temporary differences between the carrying
amounts in the financial statements and the amounts attributed for tax purposes.
Deferred taxes are measured at the tax rate that is expected to apply when the asset
is realised or the liability is settled, based on tax laws that have been enacted or
substantively enacted by the reporting date.
Deferred tax assets are reviewed at each reporting date and reduced to the extent that
it is not probable that they will be utilised. Deductible temporary differences for which
deferred tax assets had not been recognised are reviewed at each reporting date and a
respective deferred tax asset is recognised to the extent that their utilisation is probable.
Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset
against a current tax liability and the deferred taxes relate to the same taxpayer and the
same taxation authority.
(i)
Leases:
As detailed in paragraph 2 (t) below regarding the initial adoption of IFRS 16, “Leases” (“the
Standard”), the Group elected to apply the provisions of the Standard using the modified
retrospective approach (without restatement of comparative data).
The accounting policy for leases applied effective from 1 January 2019, is as follows:
The Group accounts for a contract as a lease when the contract terms convey the right to
control the use of an identified asset for a period of time in exchange for consideration.
1.
Recognition of assets and liabilities:
For leases in which the Group is the lessee, the Group recognizes on the
commencement date of the lease a right-of-use asset and a lease liability, excluding
leases whose term is up to 12 months and leases for which the underlying asset is of
low value. For these excluded leases, the Group has elected to recognize the lease
payments as an expense in profit or loss on a straight-line basis over the lease term.
102
103
2019 Annual Report
Notes to the Consolidated
Financial Statements continued
In measuring the lease liability, the Group has elected to apply the practical expedient
3.
Lease extension and termination options:
in the Standard and does not separate the lease components from the non-lease
components (such as management and maintenance services, etc.) included in a single
contract.
On the commencement date, the lease liability includes all unpaid lease payments
discounted at the interest rate implicit in the lease, if that rate can be readily determined,
or otherwise using the Group’s incremental borrowing rate. After the commencement
date, the Group measures the lease liability using the effective interest rate method.
On the commencement date, the right-of-use asset is recognized in an amount equal to
the lease liability plus lease payments already made on or before the commencement
date and initial direct costs incurred. The right-of-use asset is measured applying the
cost model and depreciated over the shorter of its useful life or the lease term (see Note
2(j) below). The Group tests for impairment of the right-of-use asset whenever there are
indications of impairment pursuant to the provisions of IAS 36.
2.
Variable lease payments that depend on an index:
On the commencement date, the Group uses the index rate prevailing on the
commencement date to calculate the future lease payments.
For leases in which the Group is the lessee, the aggregate changes in future lease
payments resulting from a change in the index are discounted (without a change in the
discount rate applicable to the lease liability) and recorded as an adjustment of the lease
liability and the right-of-use asset, only when there is a change in the cash flows resulting
from the change in the index (that is, when the adjustment to the lease payments takes
effect).
104
A non-cancellable lease term includes both the periods covered by an option to extend
the lease when it is reasonably certain that the extension option will be exercised and
the periods covered by a lease termination option when it is reasonably certain that the
termination option will not be exercised.
In the event of any change in the expected exercise of the lease extension option or
in the expected non-exercise of the lease termination option, the Group remeasures
the lease liability based on the revised lease term using a revised discount rate as of
the date of the change in expectations. The total change is recognized in the carrying
amount of the right-of-use asset until it is reduced to zero, and any further reductions are
recognized in profit or loss.
4.
Lease modifications:
If a lease modification does not reduce the scope of the lease and does not result in a
separate lease, the Group remeasures the lease liability based on the modified lease
terms using a revised discount rate as of the modification date and records the change in
the lease liability as an adjustment to the right-of-use asset.
If a lease modification reduces the scope of the lease, the Group recognises a gain or
loss arising from the partial or full reduction of the carrying amount of the right-of-use
asset and the lease liability. The Group subsequently remeasures the carrying amount of
the lease liability according to the revised lease terms, at the revised discount rate as of
the modification date and records the change in the lease liability as an adjustment to the
right-of-use asset.
105
2019 Annual Report
Notes to the Consolidated
Financial Statements continued
The accounting policy for leases applied before 1 January 2019 is as follows:
The criteria for classifying leases as finance or operating leases depend on the substance of
the agreements and are made at the inception of the lease in accordance with the following
principles as set out in IAS 17.
Operating leases - the Group as lessee:
Lease agreements are classified as an operating lease if they do not transfer substantially
all the risks and benefits incidental to ownership of the leased asset. Lease payments are
recognised as an expense in profit or loss on a straight-line basis over the lease term.
(j)
Property and equipment:
Property and equipment are measured at cost, including directly attributable costs, less
accumulated depreciation.
Depreciation is calculated on a straight-line basis over the useful life of the assets at annual
rates as follows:
Office furniture and equipment
Computers and peripheral equipment
Right of use leased assets and leasehold improvement
(over the lease term)
mainly %
10
33
10–15
Right of use leased assets and leasehold improvements are depreciated on a straight-line
basis over the shorter of the lease term (including any extension option held by the Group and
intended to be exercised) and the expected life of the asset.
106
The useful life, depreciation method and residual value of an asset are reviewed at least
each year-end and any changes are accounted for prospectively as a change in accounting
estimate.
Depreciation of an asset ceases at the earlier of the date that the asset is classified as held
for sale and the date that the asset is derecognised. An asset is derecognised on disposal or
when no further economic benefits are expected from its use.
(k)
Intangible assets:
Separately acquired intangible assets are measured on initial recognition at cost including
directly attributable costs. Intangible assets acquired in a business combination are measured
at fair value at the acquisition date. Expenditures relating to internally generated intangible
assets, excluding capitalised development costs, are recognised in profit or loss when
incurred.
Intangible assets with a finite useful life are amortised over their useful life and reviewed for
impairment whenever there is an indication that the asset may be impaired. The amortisation
period and the amortisation method for an intangible asset are reviewed at least at each year
end.
Intangible assets (domains and websites) with indefinite useful lives are not systematically
amortised and are tested for impairment annually or whenever there is an indication that the
intangible asset may be impaired. Since the content of the domains and websites is being
updated on a current basis management believes that these assets have indefinite useful
lives. The useful life of these assets is reviewed annually to determine whether their indefinite
life assessment continues to be supportable. If the events and circumstances do not continue
to support the assessment, the change in the useful life assessment from indefinite to finite is
accounted for prospectively as a change in accounting estimate and on that date the asset is
tested for impairment. Commencing from that date, the asset is amortised systematically over
its useful life.
107
2019 Annual Report Notes to the Consolidated
Financial Statements continued
Research and development expenditures:
(l)
Impairment of non-financial assets:
Research expenditures are recognised in profit or loss when incurred. An intangible asset
The Group evaluates the need to record an impairment of the carrying amount of non-
arising from a development project or from the development phase of an internal project is
financial assets whenever events or changes in circumstances indicate that the carrying
recognised if the Group can demonstrate: the technical feasibility of completing the intangible
amount is not recoverable.
asset so that it will be available for use or sale; the Company’s intention to complete the
intangible asset and use or sell it; the Company’s ability to use or sell the intangible asset;
If the carrying amount of non-financial assets exceeds their recoverable amount, the assets
how the intangible asset will generate future economic benefits; the availability of adequate
are reduced to their recoverable amount. The recoverable amount is the higher of fair value
technical, financial and other resources to complete the intangible asset; and the Company’s
less costs of sale and value in use. In measuring value in use, the expected future cash flows
ability to measure reliably the expenditure attributable to the intangible asset during its
are discounted using a pre-tax discount rate that reflects the risks specific to the asset. The
development.
recoverable amount of an asset that does not generate independent cash flows is determined
for the cash-generating unit to which the asset belongs. Impairment losses are recognised in
The asset is measured at cost less any accumulated amortisation and any accumulated
profit or loss.
impairment losses. Amortisation of the asset begins when development is completed, and the
asset is available for use. The asset is amortised over its useful life. Testing of impairment is
An impairment loss of an asset, other than goodwill, is reversed only if there have been
performed annually over the period of the development project.
Software:
The Group’s assets include computer systems comprising hardware and software. Software
forming an integral part of the hardware to the extent that the hardware cannot function
without the programs installed on it is classified as property and equipment. In contrast,
software that adds functionality to the hardware is classified as an intangible asset.
changes in the estimates used to determine the asset’s recoverable amount since the last
impairment loss was recognised. Reversal of an impairment loss, as above, shall not be
increased above the lower of the carrying amount that would have been determined (net of
depreciation or amortisation) had no impairment loss been recognised for the asset in prior
years, and its recoverable amount. The reversal of impairment loss of an asset presented at
cost is recognised in profit or loss.
The following criteria are applied in assessing impairment of these specific assets:
Systems and software (purchased and in- house development cost) are amortised on a
straight-line basis over the useful life of three years
1.
Goodwill
Non-competition is amortised on a straight-line basis over the agreement term (between 2 to
frequently if events or changes in circumstances indicate that there is impairment need
The Company reviews goodwill for impairment once a year as of 31 December or more
3 years).
108
for such review.
109
2019 Annual Report
Notes to the Consolidated
Financial Statements continued
Goodwill is tested for impairment by assessing the recoverable amount of the cash-
The Company classifies and measures debt instruments in the financial statements
generating unit (or group of cash-generating units) to which the goodwill has been
based on the following criteria:
allocated. An impairment loss is recognised if the recoverable amount of the cash-
generating unit (or group of cash-generating units) to which goodwill has been allocated
–
The Company’s business model for managing financial assets; and
is less than the carrying amount of the cash-generating unit (or group of cash-generating
units). Any impairment loss is allocated first to goodwill. Impairment losses recognised
for goodwill cannot be reversed in subsequent periods.
2.
Domains and websites - Intangible assets with an indefinite useful life that are not
systematically amortised.
The impairment test is performed annually, on 31 December, or more frequently if events
or changes in circumstances indicate that there is an impairment.
(m) Financial instruments:
On January 1, 2018, the Company first adopted IFRS 9, “Financial Instruments” (“the
Standard”). The Company elected to adopt the provisions of the Standard retrospectively
without restatement of comparative data.
The accounting policy for financial instruments applied commencing from January 1, 2018, is
as follows:
1.
Financial assets:
–
The contractual cash flow terms of the financial asset.
a) Debt instruments are measured at amortized cost when:
The Company’s business model is to hold the financial assets in order to collect
their contractual cash flows, and the contractual terms of the financial asset
give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding. After initial recognition, the
instruments in this category are measured according to their terms at amortised
cost using the effective interest rate method, less any provision for impairment.
b) Financial assets held for trading:
Financial assets held for trading (derivatives) are measured through profit or loss
unless they are designated as effective hedging instruments.
2.
Impairment of financial assets:
The Company reviews at the end of each reporting period the provision for loss of
financial debt instruments which are measured at amortized cost. The Company has
Financial assets are measured upon initial recognition at fair value plus transaction costs
short-term trade receivables in respect of which the Company applies a simplified
directly attributable to the acquisition of the financial assets, except for financial assets
approach and measures the loss allowance in an amount equal to the lifetime expected
measured at fair value through profit or loss in respect of which transaction costs are
credit losses.
recorded in profit or loss.
An impairment loss on debt instruments measured at amortized cost is recognized in
profit or loss with a corresponding loss allowance that is offset from the carrying amount
of the financial asset.
110
111
2019 Annual Report
Notes to the Consolidated
Financial Statements continued
3. Derecognition of financial assets:
(n) Fair value measurement:
A financial asset is derecognized when the contractual rights to the cash flows from the
Fair value is the price to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
Fair value measurement is based on the assumption that the transaction will take place in the
asset’s or the liability’s principal market, or in the absence of a principal market, in the most
advantageous market.
The fair value of an asset or a liability is measured using the assumptions that market
participants would use when pricing the asset or liability, assuming that market participants
act in their economic best interest.
The Group uses valuation techniques that are appropriate in the circumstances and for which
sufficient data are available to measure fair value, maximising the use of relevant observable
inputs and minimising the use of unobservable inputs.
financial asset expire.
4.
Financial liabilities:
a)
Financial liabilities measured at amortized cost:
Financial liabilities are initially recognized at fair value less transaction costs that are
directly attributable to the issue of the financial liability.
After initial recognition, the Company measures all financial liabilities at amortized
cost using the effective interest rate method, except for:
–
Financial liabilities at fair value through profit or loss such as derivatives;
–
Contingent consideration recognized by the buyer in a business combination
within the scope of IFRS 3.
b)
Financial liabilities measured at fair value through profit or loss:
At initial recognition, the Company measures financial liabilities that are not measured at
amortized cost at fair value. Transaction costs are recognised in profit or loss.
After initial recognition, changes in fair value are recognized in profit or loss.
5. Derecognition of financial liabilities:
A financial liability is derecognised only when it is extinguished, that is when the
obligation is discharged or cancelled or expires.
112
113
2019 Annual Report
Notes to the Consolidated
Financial Statements continued
All assets and liabilities measured at fair value or for which fair value is disclosed are
(p) Employee benefit liabilities:
categorised into levels within the fair value hierarchy based on the lowest level input that is
significant to the entire fair value measurement:
Level 1
–
quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2
inputs other than quoted prices included within Level 1 that are observable
–
either directly or indirectly.
Level 3
inputs that are not based on observable market data (valuation techniques
–
which use inputs that are not based on observable market data).
(o) Provisions:
A provision in accordance with IAS 37 is recognised when the Group has a present obligation
(legal or constructive) as a result of a past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation and a reliable estimate
can be made of the amount of the obligation. When the Group expects part or all of the
expense to be reimbursed, for example under an insurance contract, the reimbursement is
recognised as a separate asset but only when the reimbursement is virtually certain. The
expense is recognised in profit or loss net of the reimbursed amount.
The Group has several employee benefit plans:
1.
Short-term employee benefits:
Short-term employee benefits include salaries, paid annual leave, paid sick leave,
recreation and social security contributions and are recognised as expenses as the
services are rendered. A liability in respect of a cash bonus or a profit-sharing plan is
recognised when the Group has a legal or constructive obligation to make such payment
as a result of past service rendered by an employee and a reliable estimate of the
amount can be made.
2.
Post-employment benefits:
The plans are financed by contributions to insurance companies or pension funds and
classified as defined contribution plans.
The Israeli subsidiaries of the Group have defined contribution plans pursuant to Section
14 to the Severance Pay Law under which the subsidiary pays fixed contributions and
will have no legal or constructive obligation to pay further contributions if the fund does
not hold sufficient amounts to pay all employee benefits relating to employee service in
the current and prior periods. Contributions to the defined contribution plan in respect
of severance or retirement pay are recognised as an expense when contributed
concurrently with performance of the employee’s services.
114
115
2019 Annual Report
Notes to the Consolidated
Financial Statements continued
(q) Share-based payment transactions:
(s) Earnings (loss) per share:
The Group’s employees and officers are entitled to remuneration in the form of equity-settled
Earnings per share are calculated by dividing the net income (loss) attributable to equity
share-based payment transactions.
Equity-settled transactions:
The cost of equity-settled transactions with employees and officers is measured at the fair
value of the equity instruments granted at grant date. The fair value is determined using an
acceptable option pricing model - additional details are given in Note 14.
In estimating fair value, the vesting conditions (consisting of service conditions and
performance conditions other than market conditions) are not taken into account.
The cost of equity-settled transactions is recognised in profit or loss together with a
corresponding increase in equity during the period which the performance is to be satisfied
ending on the date on which the relevant employees or officers become entitled to the award
(“the vesting period”). The cumulative expense recognised for equity-settled transactions at
holders of the Company by the weighted average number of Ordinary Shares outstanding
during the period. The Company’s share of earnings of investees is included based on the
earnings per share of the investees multiplied by the number of shares held by the Company.
If the number of Ordinary Shares outstanding increases as a result of a capitalisation, bonus
issue, or share split, the calculation of earnings per share for all periods presented are
adjusted retrospectively.
Potential Ordinary shares are included in the computation of diluted earnings per share when
their conversion decreases earnings per share from continuing operations. Potential Ordinary
shares that are converted during the period are included in diluted earnings per share only
until the conversion date and from that date in basic earnings per share.
(t)
Initial adoption of new financial reporting and accounting standards and amendments to
existing financial reporting and accounting standards:
the end of each reporting period until the vesting date reflects the extent to which the vesting
1.
Initial adoption of IFRS 16, “Leases”:
period has expired and the Group’s best estimate of the number of equity instruments that
will ultimately vest. No expense is recognised for awards that do not ultimately vest, except
for awards where vesting is conditional upon a market condition, which are treated as vesting
irrespective of whether the market condition is satisfied, provided that all other vesting
conditions (service and/or performance) are satisfied.
(r) Discontinued operations:
In January 2016, the IASB issued IFRS 16, “Leases” (“the Standard”), which supersedes
IAS 17, “Leases” (“the old Standard”), IFRIC 4, “Determining Whether an Arrangement
Contains a Lease”, and SIC-15, “Operating Leases - Incentives”.
The Standard has been applied for the first time in these financial statements. As
permitted by the Standard, the Group elected to adopt the provisions of the Standard
using the modified retrospective method whereby the carrying amount of the right-of-
A discontinued operation is a component of the Company that either has been disposed of
use assets is identical to the carrying amount of the lease liability.
or is classified as held for sale. The operating results relating to the discontinued operation
(including comparative data) are presented separately in profit or loss, net of the tax effect.
116
117
2019 Annual Report
Notes to the Consolidated
Financial Statements continued
According to this approach, comparative data has not been restated. The carrying
b)
The Group determined the appropriate interest rate for discounting its leases
amount of the lease liability as of the date of initial adoption of the Standard is calculated
based on credit risk, the weighted average term of the leases and other economic
using the Group’s incremental borrowing rate on the date of initial adoption of the
variables. A weighted average incremental borrowing rate of 6% was used to
Standard.
a)
Following are data relating to the initial adoption of the Standard as of 1 January
2019, in respect of existing leases as of that date:
According to
the previous
accounting policy
The change
USD in thousands
As presented
according to
IFRS 16
Non-current assets:
Property and equipment:
Right-of-use assets
Current liabilities:
Lease liabilities
Non-current liabilities:
Lease liabilities
–
–
–
10,470
10,470
1,223
1,223
9,247
9,247
Reconciliation of total commitment for future minimum lease payments to lease
liability as of 1 January 2019:
discount future lease payments in the calculation of the lease liability on the date of
initial adoption of the Standard.
c)
Practical expedients applied in the initial adoption of the Standard- The Company
elected to apply a single discount rate to a portfolio of leases with reasonably
similar characteristics.
2.
IFRIC 23, “Uncertainty over Income Tax Treatments”:
In June 2017, the IASB issued IFRIC 23, “Uncertainty over Income Tax Treatments”
(“the Interpretation”). The Interpretation clarifies the accounting for recognition and
measurement of assets or liabilities in accordance with the provisions of IAS 12,
“Income Taxes”, in situations of uncertainty involving income taxes. The Interpretation
provides guidance on considering whether some tax treatments should be considered
collectively, examination by the tax authorities, measurement of the effects of
uncertainty involving income taxes on the financial statements and accounting for
changes in facts and circumstances in respect of the uncertainty.
The Interpretation has been initially applied in these financial statements.
USD in thousands
The initial adoption of the Interpretation did not have a material effect on the Group’s
Total future minimum lease payments for non-cancellable leases
as per IAS 17 according to the financial statements as of 31 December
31 2018
Effect of discount of future lease payments at the Group’s
incremental borrowing rate on initial date of adoption
Total lease liabilities as per IFRS 16 as of 1 January 2019
13,008
(2,538)
10,470
financial statements.
118
119
2019 Annual Report
Notes to the Consolidated
Financial Statements continued
Note 3: Significant Accounting Judgments, Estimates and
Assumptions used in the Preparation of the Financial Statements
Note 4: Disclosure of New Standards in the Period Prior to their
Adoption
Estimations and assumptions:
IFRS 3, “Business Combinations”:
The preparation of the financial statements requires management to make estimates and
In October 2018, the IASB issued an amendment to the definition of a “business” in IFRS 3,
assumptions that have an effect on the application of the accounting policies and on the reported
“Business Combinations” (“the Amendment”). The Amendment is intended to assist entities in
amounts of assets, liabilities, revenues and expenses. Changes in accounting estimates are
determining whether a transaction should be accounted for as a business combination or as an
reported in the period of the change in estimate.
acquisition of an asset.
The key assumptions made in the financial statements concerning uncertainties at the end of the
The Amendment is to be applied prospectively to all business combinations and asset acquisitions
reporting period and the critical estimates computed by the Group that may result in a material
for which the acquisition date is on or after the beginning of the first annual reporting period
adjustment to the carrying amounts of assets and liabilities within the next financial year are
beginning on or after January 1, 2020, with earlier application permitted.
discussed below.
–
Impairment of goodwill, domains and websites:
The Group reviews goodwill, domains and websites for impairment at least once a year.
This requires management to make an estimate of the projected future cash flows from the
continuing use of the cash-generating units to which the assets are allocated and also to
choose a suitable discount rate for those cash flows. See also Note 8.
–
Income taxes
The Group is subject to income tax in various jurisdictions and judgment is required in
determining the provision for income taxes. During the ordinary course of business, there
are transactions and calculations for which the ultimate tax determination may be uncertain.
The Group recognises tax liabilities based on assumptions supported by, among others,
Note 5: Short-Term and Long-Term Investments
(a) Short-term investments:
Short-term bank deposits (2):
In USD
In NIS
In EURO
(b) Long-term financial assets:
Bank deposits- in NIS (2)
Annual
interest
rate (1)
As of 31 December
2019
2018
USD in thousands
0.8
0.4
0.6
1,308
1,470
7
2,785
682
1,307
1,497
192
2,996
633
transfer price studies. The Group believes that its accruals for tax liabilities are adequate for
(1)
The above interest rates are the weighted average rates as of 31 December 2019.
all open audit years based on its assessment of many factors including past experience and
interpretations of tax law. See also Note 15.
120
(2)
Includes deposits for the amount of USD 3,467 thousand with fixed liens recorded as security for credit card
transactions in connection with advertising campaigns and other online purchasing over the internet as well
as for financial derivative transactions and bank guarantee provided in connection with a lease agreement on
property.
121
2019 Annual Report
Notes to the Consolidated
Financial Statements continued
Note 6: Trade and Other Receivables
Note 7: Property and Equipment
a.
Trade receivables:
Open accounts
Less - allowance for doubtful accounts
Trade receivables, net
As of 31 December,
2019
2018
USD in thousands
8,666
911
7,755
17,800
1,688
16,112
1.
As of 31 December 2019, the Group has no material amounts that are past due and not
impaired.
2.
Doubtful accounts expenses included in general and administrative expenses USD 211
thousands (2018- USD 530 thousands).
3.
See Note 12 (b) (2) on credit risk of trade receivables.
b. Other receivables:
Prepaid expenses
Government authorities
Other receivables
122
As of 31 December
2019
2018
USD in thousands
2,391
2,012
119
4,522
2,407
1,536
754
4,697
Computers,
furniture,
office
equipment
and others
Leasehold
improvements
Right of use
leased assets –
Offices (2)
Total
USD in thousands
Cost:
Balance as of 1 January 2018
Acquisitions during the year
Disposals during the period
Balance as of 31 December 2018
Initial application of IFRS 16
Acquisitions during the year
Adjustments for indexation
Decreases during the year:
Discontinued operation (1)
Termination of leases
Balance as of 31 December 2019
Accumulated depreciation:
Balance as of 1 January 2018
Depreciation during the year
Disposals during the period
Balance as of 31 December 2018
Depreciation during the year
Decreases during the year:
Discontinued operation (1)
Termination of leases
Balance as of 31 December 2019
Depreciated cost as of 31 December 2019
Depreciated cost as of 31 December 2018
(1)
(2)
See Note 16.
See Note 11.
2,530
489
(27)
2,992
–
208
–
(384)
–
2,816
1,584
425
(17)
1,992
337
(321)
–
2,008
808
1,000
442
64
–
506
–
52
–
(20)
–
538
158
52
–
210
59
(10)
–
259
279
296
–
–
–
–
10,470
47
33
–
(879)
9,671
–
–
–
–
1,402
–
(75)
1,327
8,344
–
2,972
553
(27)
3,498
10,470
307
33
(404)
(879)
13,025
1,742
477
(17)
2,202
1,798
(331)
(75)
3,594
9,431
1,296
123
2019 Annual Report Notes to the Consolidated
Financial Statements continued
Note 8: Intangible Assets
a. Composition and movement:
Domains
and
websites
Non-
competition
Systems,
software and
other
Total
Goodwill
USD in thousands
Cost:
Balance as of 1 January 2018
30,052
Acquisitions during the year
Costs capitalised during the year
(in-house development cost)
–
–
47,367
46,591
4,240
715
–
–
Balance as of 31 December 2018
30,052
93,958
4,955
Acquisitions during the year
Costs capitalised during the year
(in-house development cost)
–
–
408
–
–
–
17,037
1,195
7,015
25,247
1,342
98,696
48,501
7,015
154,212
1,750
7,105
7,105
Balance as of 31 December 2019
30,052
94,366
4,955
33,694
163,067
Accumulated amortisation and
impairment:
Balance as of 1 January 2018
Amortisation during the year
Impairment loss from discontinued
operation (1)
Other impairment loss
–
–
6,400
–
Balance as of 31 December 2018
6,400
–
23,652
30,052
Amortisation during the year
Impairment loss (2)
Balance as of 31 December 2019
Amortised cost as of 31 December
2019
Amortised cost as of 31 December
2018
(1)
(2)
See Note 16.
See Note b below.
1,605
–
–
300
1,905
–
52,246
54,151
3,467
733
174
–
4,374
477
104
4,955
9,225
4,993
2,464
–
16,682
5,236
5,348
27,266
14,297
5,726
9,038
300
29,361
5,713
81,350
116,424
b.
Additional information on impairment:
In January 2020, 107 of the Group’s sites were demoted in search results by Google, of which
23 were premium sites. The demotion of the sites is expected to have a material impact on the
Group’s future revenues.
Based on the value in use of the Publishing operations of the Group performed by an
independent valuation specialist, the carrying amount of the goodwill was written down to
nil. The remaining amount of the impairment loss was allocated to the other intangible assets
based on their relative carrying amounts.
As result the Company recorded an impairment loss for the amount of USD 81,350 thousands,
which is included in the statement of profit or loss.
The pre-tax discount rate applied to the cash flow projection is 15.5% (2018-13.1%). The
projected cash flows are estimated using mainly fixed growth rate of 4.5% for the years 2021-
2024 and terminal growth rate of 3% (2018-3%).
The key assumptions used in calculating the value in use:
Revenues and operational profit - the revenues and the profit rate assumptions are based
on management expectations and forecasts for the coming year and the management’s
forecasted cash flows for the following three years. These forecasts included an evaluation
of those specific sites that suffered a demotion or other factors which could adversely affect
–
40,215
–
6,428
46,643
revenues and profitability
23,652
92,053
581
8,565
124,851
Discount rate - the discount rate reflects management’s assumptions regarding the Group’s
specific risk premium.
124
125
2019 Annual Report Notes to the Consolidated
Financial Statements continued
Growth rate - the growth rate applied for the period beyond the four-year forecasted period is
based on the long-term average growth rate as customary in similar industries.
Sensitivity analyses of changes in assumptions:
With respect to the assumptions used in determining the value in use, management believes
that a significant change in key assumptions, in particular, a decrease in forecasted revenues,
would result in a further impairment of the intangible assets.
Note 9: Other Liabilities and Accounts Payable
Employees and payroll accruals
Government authorities
Accrued expenses
Other liabilities
As of 31 December
2019
2018
USD in thousands
5,073
724
3,043
785
9,625
3,750
741
1,513
963
6,967
Note 10: Loans From Bank
a. Composition:
Long-term bank loans
Less - current maturities
b.
Loan terms:
As of 31 December
2019
2018
USD in thousands
1,465
1,465
–
6,965
5,585
1,380
In December 2017, a subsidiary of the Company received a loan from a bank for the amount of
USD 5 million. The loan was repayable in 24 equal instalments and carried an interest rate of
USD Libor +4.45%.
The loan was repaid fully in 2019.
In June 2018, a subsidiary of the Company received a loan from a bank for the amount of USD
6 million. The loan is repayable in 24 equal instalments and carries an interest rate of USD
Libor +4.4% (as of 31 December 2019 – 6.36 %).
The Company’s subsidiary committed towards the bank, amongst others, to maintain financial
covenants, which will be measured on a quarterly basis.
As of 31 December 2019, the Company’s subsidiary is meeting the financial covenants.
c.
Liens- see Note 18.
126
127
2019 Annual Report
Notes to the Consolidated
Financial Statements continued
Note 11: Lease Liabilities
a. Composition:
Lease liabilities
Less - current maturities
31 December
2019
U.S. dollars in
thousands
9,228
1,161
8,067
b.
Information on leases in which the Company is a lessee:
Depreciation expense for right-of-use assets
Finance expense (including exchange rate differences) for lease liability
Total cash outflow for leases
Note 12: Financial Instruments
Year ended
December 31 2019
U.S. dollars in
thousands
1,402
1,310
1,697
Group companies (as lessee) have entered into commercial real estate lease agreements.
a. Classification of financial assets and liabilities:
The leases include an exit point in December 2020 (with extension option periods) with
annual lease fees of approximately USD 1.6 million. As of 31 December 2019, these extension
options have been taken into consideration in the determination of the lease liabilities.
The Group recorded fixed liens on long-term bank deposit in connection with these
agreements (see Note 5).
The financial assets and financial liabilities in the statement of financial position are classified
by groups of financial instruments as follows:
Financial assets
Financial assets at fair value through profit or loss:
As of 31 December
2019
2018
USD in thousands
As more fully described in Note 2(t), on adoption of IFRS 16 the Group recognised lease
Financial derivatives
222
805
liabilities in relation to these leases which previously were classified as operating leases under
Financial assets measured at amortised cost:
IAS 17. See Note 7 for the related right of use assets and Note 12b for details of lease liability
maturities.
In September 2019 the Company terminated, without penalty, a lease of office space which was
originally leased till 2028 with an annual lease payment of USD 83 thousand. As a result, the
Company derecognised the right-of-use leased asset for the net amount of USD 804 thousand
and the related liability for the amount of USD 893 thousands.
128
Cash and cash equivalents
Short-term and long-term investments
Trade receivables
Other receivables
Total financial assets measured at amortised cost
Total financial assets
Total current
Total non-current
27,108
3,467
7,755
25
38, 355
38,577
37,895
682
44,627
3,629
16,112
754
65,122
65,927
65,294
633
129
2019 Annual Report Notes to the Consolidated
Financial Statements continued
Financial liabilities
Financial assets at fair value through profit or loss:
As of 31 December
2019
2018
USD in thousands
For the year ended 31 December 2019 the Group recorded foreign exchange rate
differences income, net for the amount of USD 619 thousand (net of gain on forward
transactions, see below) (2018- expenses of USD 95 thousand).
Financial derivatives
79
91
The open positions as of 31 December 2019, all for period until end of June 2020:
Financial liabilities measured at amortised cost:
Trade payables
Other liabilities and account payables
Lease liabilities
Bank loan
Total financial liabilities measured at amortised cost
Total financial liabilities
Total current
Total non-current
b.
Financial risks factors:
The Group’s activities expose it to various financial risks.
1. Market risk - Foreign exchange risk:
3,028
8,480
9,228
1,465
22,201
22,280
14,213
8,067
6,416
5,637
–
6,965
19,018
19,109
17,729
1,380
A significant portion of the Group’s revenues are received in EURO. The Group also
has revenues that are received in GBP. A significant portion of the Israeli subsidiaries
expenses are paid in New Israeli Shekels (“NIS”). Therefore, the Group is exposed to
fluctuations in the foreign exchange rates in EURO, GBP and NIS against the USD.
The Company entered into forward contracts with the intention to reduce the foreign
exchange risk of forecasted cash flows. These contracts are not designated as hedges
for accounting purposes and are measured at fair value through profit or loss.
Forward transactions for the sale of EURO in exchange for USD totaling
EURO 9.3 million (USD 10.7 million).
Forward transactions for the sale of GBP in exchange for USD totaling GBP 2.6 million
(USD 3.4 million).
As of 31 December 2019, the total fair value of the above forward transactions amounted
to USD 79 thousand (liabilities) and USD 222 thousand (assets).
2. Credit risk:
The Group usually extends 30-60 day term to its customers. The Group regularly
monitors the credit extended to its customers and their general financial condition but
does not require collateral as security for these receivables.
The Group maintains cash and cash equivalents and short-term investments and long-
term investments in various financial institutions. These financial institutions are located
in the EU, Israel, Europe and US.
130
131
2019 Annual Report
Notes to the Consolidated
Financial Statements continued
3.
Liquidity risk:
c.
Fair value:
The table below summarises the maturity profile of the Group’s financial liabilities based
The carrying amounts of the Group’s financial assets and liabilities approximate their fair
on contractual undiscounted payments (including interest payments):
value.
As of 31 December 2019:
The fair value of financial derivatives is categorised within level 2 of fair value hierarchy.
Less than
one year
1 to 2
years
2 to 3
years
3 to 4
years
Above 4
years
Trade payables
3,028
Other liabilities and
account payables
Financial derivatives
Lease liabilities
Bank loan
8,480
79
1,586
1,465
–
–
–
–
–
–
–
–
–
–
–
–
1,650
1,650
1,676
4,629
–
–
–
–
Total
3,028
8,480
79
11,191
1,465
14,638
1,650
1,650
1,676
4,629
24,243
As of 31 December 2018:
Trade payables
Other liabilities and account
payables
Financial derivatives
Bank loan
Less than one year
1 to 2 years
Total
USD in thousands
6,416
5,637
91
5,786
17,930
–
–
–
1,529
1,529
6,416
5,637
91
7,315
19,459
132
d.
Sensitivity tests relating to changes in market factors:
As of 31 December
2019
2018
USD in thousands
Sensitivity test to changes in Euro to Dollar
exchange rate:
Gain (loss) from the change:
Increase of 10% in exchange rate
Decrease of 10% in exchange rate
Sensitivity test to changes in NIS to Dollar exchange rate:
Gain (loss) from the change:
Increase of 10% in exchange rate
Decrease of 10% in exchange rate
Sensitivity test to changes in GBP to Dollar exchange
rate:
Gain (loss) from the change:
Increase of 10% in exchange rate
Decrease of 10% in exchange rate
(295)
295
299
(299)
(184)
184
(765)
765
(1,318)
1,421
583
(583)
The sensitivity tests reflect effects of reasonably possible changes in exchange rates on
hedging position of the Group for the above currencies as of the end of the year. As described
in (b) 1 above, these contracts are intended to reduce the Group’s exposure to fluctuations
in exchange rates on future revenues and expenses. Therefore, although it is expected
the above effects will be offset by contra effects upon the recording of the revenues and
expenses, the timing of these effects may not coincide in the same reporting period.
133
2019 Annual Report
Notes to the Consolidated
Financial Statements continued
Sensitivity tests and principal assumptions:
The selected changes in the relevant risk variables were determined based on management’s
estimate as to reasonable possible changes in these risk variables.
The Group has performed sensitivity tests of principal market risk factors that are liable to
affect its reported operating results or financial position. The sensitivity tests present the
effects (before tax) on profit or loss and equity in respect of each financial instrument for the
relevant risk variable chosen for that instrument as of each reporting date.
The test of risk factors was determined based on the materiality of the exposure of the
operating results or financial condition of each risk with reference to the functional currency
and assuming that all the other variables are constant.
Note 13: Equity
a. Composition of share capital:
As of 31 December 2019
Authorised
Issued and
outstanding *)
Number of shares
Ordinary Shares of USD 0.000001 par value
100,000,000,000
183,813,138
As of 31 December 2018
Authorised
Issued and
outstanding*)
Number of shares
The Group does not have significant exposure to interest rate risk.
Ordinary Shares of USD 0.000001 par value
100,000,000,000
216,106,363
e. Changes in liabilities arising from financial activities:
Long term
loans
Leases
liabilities
USD in thousands
Total liabilities
arising from
financing activities
Balance as of 1 January, 2018
Cash flows
Balance as of 31 December, 2018
New finance lease obligation
recognized
Cash flows
Effect of changes in exchange rate
Termination of leases
Other changes
5,000
1,965
6,965
–
(5,500)
–
–
–
Balance as of 31 December, 2019
1,465
–
–
–
10,517
(1,697)
33
(893)
1,268
9,228
5,000
1,965
6,965
10,517
(7,197)
33
(893)
1,268
10,693
*) Net of treasury shares, see below.
In addition to the above issued shares, as of 31 December 2019, 3,315,521 Ordinary Shares are
held in trust to satisfy the Company’s share based payment plan.
b. Movement in share capital:
1.
In January 2018 the Company issued 16,000,000 Ordinary Shares in a placing to
institutional investors at a price of 198 pence per Ordinary share. The total gross funds
raised were approximately GBP 31.7 million (USD 44.2 million) and the related costs
amounted to approximately GBP 1.1 million (USD 1.6 million)
2.
In 2018 the Company issued 1,069,010 Ordinary shares upon the exercise of options.
3.
In 2019 the Company issued 438,216 Ordinary shares upon the exercise of options.
134
135
2019 Annual Report
Notes to the Consolidated
Financial Statements continued
c.
The board of the Company had approved a buyback programme (the “Programme”) to buy
e. Net earnings per share:
back up to USD 10 million of the Company’s Ordinary shares (the “Shares”).
Details of the number of shares and income used in the computation of earnings per share:
The Programme ran from 18 December 2018 to the conclusion of the 2019 annual general
meeting of the Company. At the 2019 annual general meeting another buyback programme
was approved to buy back up to additional USD 10 million of the Company’s Shares.
On 16 July 2019 the Company ceased the buyback programme and published a tender offer,
which was accepted on 16 August 2019. As a result, the Company purchased 19,675,000
Shares at 80 pence per share at a cost of USD 20,034 thousand including transaction
expenses. During 2019 the Company acquired 32,731,441 Shares at a total cost of USD 29,691
thousands. (2018- 492,302 shares for USD 468 thousands).
d. Dividends paid to equity holders of the Company:
Date
13 March 2018
23 September 2018
5 April 2019
4 October 2019
Total amount
Per share
USD in millions
8.0
6.5
8.4
5.8
USD
0.037
0.030
0.040
0.031
Year ended 31 December
2019
Net
loss from
continuing
operating
attributable
Net income
2018
Net
income from
continuing
operating
attributable
Weighted
number of
to equity
holders of the
from
discontinued
Weighted
number of
to equity
holders of the
Net loss from
discontinued
shares
Company
operations
shares
Company
operations
In
In
thousands
USD in thousands
thousands
USD in thousands
Number of shares and
income (loss) for the
computation of basic
net earnings
198,396
(61,691)
2,217
215,441
31,102
(11,284)
Effect of potential
dilutive Ordinary
shares *)
For the computation of
–
–
–
1,889
–
–
diluted net earnings
198,396
(61,691)
2,217
217,330
31,102
(11,284)
*) Options, see Note 14. In 2019 all options have been excluded because their effect on loss per share is
antidilutive.
136
137
2019 Annual Report Notes to the Consolidated
Financial Statements continued
Note 14: Share-based Payment
The expense (income) recognised in the financial statements for services received is shown in the
following table:
Total expense (income) arising from share-based payment
transactions
Year ended December 31,
2019
2018
USD in thousands
(218)
1,667
a.
In August 2013 the Company adopted a Share Option Plan. In December 2017 the Company
adopted an additional plan. According to the plans, the Company’s Board of Directors are
entitled to grant certain employees, officers and other service providers (together herein
“employees”) of the Group remuneration in the form of equity-settled share-based payment
transactions.
Pursuant to the plans, the Company’s employees may be granted options to purchase the
Company’s Ordinary shares. These options may be exercised, subject to the continuance of
engagement of such employees with the Company, within a period of eight years from the
grant date, at an exercise price to be determined by the Company’s Board of Directors at the
grant date.
All grants to Israeli employees were made in accordance with Section 102 of the Income Tax
Ordinance, capital-gains track (with a trustee).
2019 grants
In March and November 2019, the Company granted 323,500 options to employees
exercisable to 323,500 Ordinary shares at an exercise price subject to adjustment for
dividends. The options vest over a period of 4 years from the grant date and are exercisable
for a period of up to 8 years.
The following table specifies the inputs used for the fair value measurement of the grant:
Option pricing model
Exercise price GBP (USD)
Dividend yield (%)
Expected volatility of the share price (%)
Risk- free interest rate (GBP curve)
Expected life of share options (years)
Black–Scholes–Merton formula
0.6–0.63 (0.84–.0.78)
0
50.67% ,52.94%
,0.76% 0.53%
5.2
Share price GBP (USD)
0.56 (0.74), 0.69 (0.89)
The total fair value of the options granted was calculated at USD 123 thousand at the grant
date (average of USD 0.37 per option).
In November 2019, the Company granted the Group’s CEO 920,223 options exercisable
to 920,223 Ordinary shares with nill exercise price. The number of options granted was
determined as 150% of the CEO’s annual remuneration divided by the share price at the grant
date. The vesting of the option is subject to a performance target comparing the average net
return achieved by the Company relative to the net return achieved by the constituents of the
FTSE AIM 100 during the three-year period ending in November 2022.
The total fair value of the options granted was calculated at approximately USD 600
thousands at the grant date.
138
139
2019 Annual Report
Notes to the Consolidated
Financial Statements continued
2018 grants
The following table specifies the inputs used for the fair value measurement of the grant:
In January 2018, the Company granted 3,000,000 options to employees (including to the
Company’s former CEO and other former key management personnel), exercisable to
3,000,000 Ordinary shares at an exercise price adjusted for dividends. The options vest over
a period of 4 years from the grant date and are exercisable for a period of up to 8 years.
The following table specifies the inputs used for the fair value measurement of the grant:
Option pricing model
Exercise price GBP (USD)
Dividend yield (%)
Expected volatility of the share price (%)
Risk- free interest rate (GBP curve)
Expected life of share options (years)
Share price GBP (USD)
Black–Scholes–Merton formula
2.0 (2.85)
0
47.3%
1.13%
5.2
1.9 (2.71)
The total fair value of the options granted was calculated at USD 3,413 thousand at the grant
date (USD 1.14 per option).
In September 2018, the Company granted 415,000 options to employees, exercisable to
415,000 Ordinary shares at an exercise price adjusted for dividends. The options vest over a
period of 4 years from the grant date and are exercisable for a period of up to 8 years.
140
Option pricing model
Exercise price GBP (USD)
Dividend yield (%)
Expected volatility of the share price (%)
Risk- free interest rate (GBP curve)
Expected life of share options (years)
Share price GBP (USD)
Black–Scholes–Merton formula
1.1 (1.44)
0
52.0%
1.23%
5.2
1.0 (1.3)
The total fair value of the options granted was calculated at USD 270 thousand at the grant
date (USD 0.63 per option).
b. Movement during the year:
2019
2018
Number of
options
Weighted
average
exercise price
Number of
options
Weighted
average
exercise price
in thousands
USD
in thousands
USD
Share options outstanding at
beginning of year
Share options granted during
the year
8,110
1,244
Share options forfeited during
the year
(3,390)
Share options exercised
during the year
Share options outstanding at
end of year
Share options exercisable at
end of year
(438)
5,526
3,490
1.56
0.21
2.24
0.69
0.99
1.09
6,788
3,415
(1,024)
(1,069)
8,110
3,194
1.01
2.68
1.24
0.83
1.56
0.84
141
2019 Annual Report
Notes to the Consolidated
Financial Statements continued
c.
The weighted average remaining contractual life for the options outstanding as of
Technological preferred enterprise - an enterprise for which total consolidated revenues
31 December 2019 was 5 years (2018- 6 years).
of its parent company and all subsidiaries are less than NIS 10 billion. A technological
preferred enterprise, as defined in the Law, which is located in the center of Israel will be
d.
The range of exercise prices for options outstanding as of 31 December 2019 was
subject to tax at a rate of 12% on profits deriving from intellectual property.
USD 0.65-2.52 (2018- USD 0.66- USD 2.85).
Note 15: Taxes on Income
Any dividends distributed to “foreign companies”, as defined in the Law, deriving from
income from the technological enterprises will be subject to a withholding tax at a rate
of 4%.
a.
Starting 2018 the Company is subject to Cyprus tax at the standard corporate income tax rate
of 12.5%.
The above amendments apply for one of the Group’s subsidiaries.
b.
Tax law applicable to the Company’s Israeli subsidiaries is the Israeli tax law- Income Tax
c.
The applicable U.S. federal statutory income tax rate for the Company’s subsidiary for 2019 is
Ordinance (new version) 1961.
21% (2018- same). In addition, state and city taxes are applicable.
–
The general Israeli corporate tax rate applicable in 2019 is 23% (2018- 23%).
d.
Final tax assessments:
–
Amendments to the Law for the Encouragement of Capital Investments, 1959:
Tax Authorities in Israel for the years 2012 – 2015.
In 2017 two subsidiaries in Israel reached a final tax assessment agreement with the Income
According to Amendment 71 to the Law, the tax rate for certain preferred enterprises is
e.
Losses carried forward for tax purposes:
reduced to a flat tax rate of 16%.
The Amendment also prescribes that any dividends distributed to individuals or foreign
residents from the preferred enterprise’s earnings as above will be subject to withholding
tax at a rate of 20%.
–
Amendment 73 to the Law also prescribes special tax tracks for technological
enterprises, which became effective in 2017, as follows:
As of 31 December 2019, carry-forward capital tax losses of a subsidiary company total
approximately USD 19 million. The tax benefit in respect of losses has not been recorded in
the financial statements due to the uncertainty of their utilization.
142
143
2019 Annual Report Notes to the Consolidated
Financial Statements continued
f.
Taxes on income included in profit or loss:
Current taxes
Deferred taxes
Taxes in respect of previous years
Total
g.
Theoretical tax:
Year ended 31 December
2019
2018
USD in thousands
3,991
615
(1,418)
3,188
3,979
523
(413)
4,089
The reconciliation between the tax expense, assuming that all the income and expenses were
taxed at the statutory tax rate in Cyprus and the taxes on income recorded in profit or loss is
as follows:
Year ended 31 December
2019
2018
USD in thousands
Profit (Loss) from continuing operation before taxes on
income
Statutory tax rate
Tax computed at the statutory tax rate
Adjustment due to the difference between the Company’s
statutory tax rate and tax rates applicable to the
subsidiaries
Non-deductible expenses for tax purposes
Tax benefit of net additional deduction
Taxes in respect of previous years
Unrecognized temporary differences and others
Total taxes
(57,730)
12.5%
(7,216)
24
10,246
(1,527)
(1,418)
3,079
3,188
36,148
12.5%
4,519
59
184
(2,371)
(413)
2,111
4,089
h. Deferred taxes:
Composition:
Statements of
financial position
Statements of
profit or loss
December 31,
Year ended December 31,
2019
2018
2019
2018
USD in thousands
Deferred tax liabilities:
Domains and websites
Other intangible assets
Property and equipment
Deferred tax assets:
Property and equipment
Lease liability
Other intangible assets
Allowance for
doubtful account
Employee benefits
Deferred tax expenses
Deferred tax assets
(liabilities), net
608
173
–
781
8
122
–
7
128
265
221
–
6
227
–
–
213
15
98
326
(516)
99
387
173
(6)
(8)
(122)
213
8
(30)
615
221
(42)
6
4
–
329
29
(24)
523
The deferred taxes are computed at the tax rates of 12% based on the tax rates that are
expected to apply upon realization (2018- same).
144
145
2019 Annual Report
Notes to the Consolidated
Financial Statements continued
Note 16: Discontinued Operations
a.
In February 2019, the Company’s board of directors decided to reduce certain parts of its
Media activities (comprising one CGU) which had lower profit margins. In August 2019,
the Company completed the sale of Webpals Mobile Ltd (“Mobile”) which is a substantial
component of the CGU. Under the terms of the agreement Mobile paid the inter-company
balances to the Group on completion. The gain derived from the sale is USD 1.8 million.
Prior to the classification of the CGU as a disposal group, the recoverable amount of the
assets sold was calculated as fair value less expected sale costs. Based on that calculation
the Group recorded in 2018, an impairment loss for the amount of USD 9,038 thousands.
b.
Below is data of the operating results attributed to the discontinued operation:
Year ended
31 December
2019
2018
USD in thousands
Revenues from sales
Cost of sales
Gross profit
Sale, general and administrative expenses and research
and development expenses
Impairment loss and other non-recurring cost of the
discontinued operation
Operating income (loss)
Financial income (expenses), net
Gain from sale of discontinued operation
Income (loss) before income taxes from discontinued
operation
Taxes on income *)
Income (loss) from discontinued operation, net
*)
Tax on income on discontinued operation
9,752
7,733
2,019
1,610
–
409
37
1,811
2,257
40
2,217
24,364
19,789
4,575
5,573
9,938
(10,936)
(50)
–
(10,986)
298
(11,284)
c.
Below is data of the net cash flows provided by (used in) the discontinued operation:
Year ended
31 December
2019
2018
USD in thousands
1,109
80
(9)
(1,407)
Operating activities
Investing activities
Note 17: Operating Segments
a. General:
The operating segments are identified on the basis of information that is reviewed by the chief
operating decision maker (“CODM”) to make decisions about resources to be allocated and
assess its performance.
In 2019 the main part of the Group’s Media activities was classified a discontinued activity
and sold. Other Media activities which provided complementary activities to the Publishing
activities were integrated into the Publishing segment activities. Subsequent to this
integration the Group has one operating segment – Publishing, which consists the operation
of over 2,300 owned informational websites in 18 languages. These websites refer potential
customers to online businesses. The sites’ content, written by professional writers, is designed
to attract online traffic which the Group then directs to its customers online businesses.
146
147
2019 Annual Report
Notes to the Consolidated
Financial Statements continued
b. Geographic information:
Revenues classified by geographical areas based on user location:
Year ended 31 December
2019
2018
USD in thousands
34,667
21,458
16,162
224
1,375
104
73,990
5,705
79,695
42,362
26,804
14,510
56
1,668
2,191
87,591
5,911
93,502
Scandinavia
Other European countries
North America
Asia
Oceania
Other countries
Total revenues from identified locations
Revenues from unidentified locations
Total revenues
Note 18: Liens
Note 19: Balances and Transactions with Related Parties
a.
Balances:
As of 31 December
2019
2018
USD in thousands
Current liabilities:
Management fees and other short–term payables
Non–current liability
785
3
106
185
b.
Benefits to key management personnel: *)
Short–term benefits
Termination benefits
Cost (income) of share–based payments
As of 31 December
2019
2018
USD in thousands
1,749
739
(205)
2,283
1,962
–
1,050
3,012
As collateral for subsidiary’s bank loans, fixed charges have been placed on the subsidiary’s share
*) Includes directors.
capital and goodwill and floating charges on the subsidiary’s assets.
148
149
2019 Annual Report
Notes to the Consolidated
Financial Statements continued
Note 20: Post-employment Benefits
Note 22: Subseqeunt Events
The post-employment employee benefits are financed by contributions classified as defined
The spread of Coronavirus will have an impact on the Group’s operations. The Group has a well-
contribution plans.
Expenses in respect of defined contribution plans *)
1,739
1,824
Year ended 31 December
2019
2018
USD in thousands
balanced portfolio of assets, however in February 2020 many sport events were cancelled around
the world which will have a negative effect on the Group’s revenue. A similar effect is expected
in the Finance and Technology units. It is expected that these decreases will be offset, at least in
part, by increases in other verticals, namely Casino and New Business. The Group is continually
monitoring and responding to the potential impact of the outbreak, but as there is uncertainty
regarding the duration of the impact and future events there is uncertainty regarding the total effect
*)
Including discontinued operation for the amount of USD 95 thousand and USD 283 thousand for 2019 and
on the Group’s operations.
2018 accordingly.
Note 21: Supplementary Information to the Statements of Profit
or Loss
Employee benefit expenses are included in: (1) (2)
Cost of revenues
Research and development before capitalization
Sale and marketing
General and administrative
Reorganisation costs
Year ended 31 December
2019
2018
USD in thousands
11,980
8,828
5,027
6,229
918
32,982
11,846
7,334
6,766
6,788
–
32,734
(1)
Includes cost of share based payment.
(2)
Including discontinued operation for the amount of USD 1,750 thousand and USD 4,985 thousand for 2019
and 2018 accordingly.
Note 23: List of Main Subsidiaries
2019
2018
Shares
conferring
voting rights
Shares
conferring
rights to profits
Shares
conferring
voting rights
Shares
conferring
rights to profits
%
%
100
100
100
100
–
100
100
100
100
100
100
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
XLMedia Finance Limited
XLMedia Publishing Limited
Webpals Holdings Ltd
Webpals Systems S.C Ltd
Webpals Mobile Ltd
Marmar Media Ltd
Webpals, Inc.
150
151
2019 Annual Report Annual Report
and
Financial
Statements
2019
© 2020 XLMedia PLC