TIDMVID
RNS Number : 5972N
Videndum PLC
26 September 2023
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART
IN, INTO OR FROM ANY JURISDICTION WHERE TO DO THE SAME WOULD
CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH
JURISDICTION.
26 September 2023
Videndum plc
2023 Interim Results
Videndum plc ("the Company" or "the Group"), the international
provider of premium branded hardware products and software
solutions to the content creation market, announces its results for
the half year ended 30 June 2023.
Results H1 2023 H1 2022(1) % change
----------- ----------- ----------
Continuing operations(1)
Revenue GBP165.0m GBP219.4m -25%
Adjusted operating
profit* GBP15.2m GBP32.1m -53%
Adjusted operating
margin* 9.2% 14.6% -5.4%pts
Adjusted profit before
tax* GBP10.1m GBP29.1m -65%
Adjusted basic earnings
per share* 16.6p 49.3p -66%
Free cash flow* GBP(4.4)m GBP23.4m -119%
Net debt* GBP216.1m GBP194.1m +11%
Statutory results from continuing and discontinued
operations(1)
Revenue GBP169.9m GBP223.6m -24%
Operating (loss)/profit GBP(44.3)m GBP19.7m -325%
Operating margin -26.1% 8.8% -34.9%pts
(Loss)/profit before
tax GBP(50.0)m GBP16.4m -405%
Basic (loss)/earnings
per share (100.0)p 28.0p -457%
H1 2023 financial summary
-- As previously highlighted, financial performance significantly
impacted by ongoing macroeconomic headwinds and effects
of destocking, and compounded by the US writers' strike(2)
-- Revenue from continuing operations down 25% year-on-year
-- Executed self-help actions to improve cost base, and
to ensure business well positioned once market recovers
-- Higher-than-expected covenant net debt to EBITDA of 2.9x
reflecting H1 2023 trading conditions, though still within
our lending covenant limits
-- Given the ongoing strikes by the US writers and actors(3)
("the strikes"), no interim dividend declared; plan to resume
dividend payments when appropriate to do so
Current trading, strategic positioning and outlook
-- The Group is experiencing significantly more impact from
the strikes in H2 2023 than anticipated at the time of its
May Update. This is due to the prolonged writers' strike,
the additional impact of the actors' strike, and the fact
that there is less time for a recovery in the current year
-- Additionally, the macroeconomic environment remains challenging.
We are not yet seeing recovery in the consumer or ICC segments,
and retailers are increasingly concerned about interest
rates and working capital, and we are therefore still seeing
some destocking. This is resulting in worse-than-expected
trading conditions
-- The Group has put additional mitigation plans in place to
further reduce costs and conserve cash, and is proactively
working to reduce leverage and recapitalise the business,
which may require an equity raise
-- The Group has strong relationships with its lending banks
-- Agreed further lending covenant amendments for December
2023 to those announced in August
-- Committed lending facilities; GBP200 million RCF currently
matures February 2026
-- Further detail is set out below in the H1 2023 financial
overview
-- Maintaining investment in key strategic initiatives, focusing
more tightly on high-end professional content creation whilst
exiting non-core markets
-- Encouraging news about the strikes, however, it is not clear
when productions will restart, therefore there is a wide
range of potential outcomes for FY 2023, and it is difficult
to provide financial guidance. Nonetheless, when productions
restart, the Group remains well positioned and we expect
to benefit from a significant recovery in revenue
Discontinued operations
The Group is focusing more tightly on the high-end professional
content creation market where it has high market share, sales
channel expertise and compelling growth opportunities.
Consequently, the Board has decided to exit non-core markets,
specifically medical and gaming, to concentrate R&D investment
on the content creation market. As a result, whilst the Creative
Solutions Division as a whole remains a core focus going forward,
two businesses (Lightstream and Amimon) were held for sale at 30
June 2023 and reported as discontinued operations. If a sale of
Amimon were to take place, Videndum would retain the exclusive
rights to deploy its chipset technology in content creation
markets. Intangible assets of the two businesses have been impaired
by GBP46.9 million (Lightstream GBP18.9 million, Amimon GBP28.0
million).
Commenting on the results, Stephen Bird, Group Chief Executive,
said:
"As expected, the first half of 2023 was exceptionally
challenging for Videndum. The ongoing macroeconomic headwinds,
compounded by the US writers' strike, significantly impacted our H1
2023 financial performance.
"The Group is also experiencing significantly more impact from
the strikes in H2 2023 than anticipated at the time of our May
Update. This is due to the prolonged writers' strike, the
additional impact of the actors' strike, and the fact that there is
less time for a recovery in the current year. Additionally, the
macroeconomic environment remains challenging. We are not yet
seeing recovery in the consumer or ICC segments, and retailers are
increasingly concerned about interest rates and working capital,
and we are therefore still seeing some destocking. This is
resulting in worse-than-expected trading conditions.
"Management continues to be focused on tightly managing costs
and preserving cash, while seeking to ensure that we are well
placed to take advantage of the recovery once the strikes are over.
We have excellent relationships with our banks and the Group is
proactively working to reduce leverage and recapitalise the
business, which may require an equity raise.
"Videndum remains well positioned in a content creation market
which has attractive structural growth drivers and strong
medium-term prospects; however, the current macroeconomic
environment remains challenging, and although there is encouraging
news about the strikes, it is not clear when productions will
restart. Therefore, there is a wide range of potential outcomes for
the full year, and it is difficult to provide financial guidance.
Nonetheless, when productions restart, we expect Videndum to
benefit from a significant recovery in revenue."
Notes
Following an extensive review of the Creative Solutions
(1) Division, two businesses (Lightstream and Amimon) were
held for sale at 30 June 2023 and reported as discontinued
operations; H2 2022 has been represented to ensure fair
comparability. Results of discontinued operations can be
found in note 13 to the condensed financial statements.
The Writers' Guild of America ("WGA"), combines two different
(2) US labour unions representing TV and film writers in New
York and Los Angeles, and called a strike on 2 May 2023.
The previous longest writers' strike was in 1988 and lasted
153 days (source: Moody's). 2023 writers' strike has been
ongoing for 148 days so far.
The Screen Actors Guild and the American Federation of
(3) Television and Radio Artists ("SAG-AFTRA"), combines two
US labour unions, and called a strike on 3 July 2023.
H1 2023 average exchange rates: GBP1 = $1.23, GBP1 = EUR1.14,
(4) EUR1 = $1.08, GBP1 = Yen166.
H1 2022 average exchange rates: GBP1 = $1.31, GBP1 = EUR1.19,
(5) EUR1 = $1.10, GBP1 = Yen159.
This announcement contains inside information. The person
(6) responsible for arranging the release of this announcement
on behalf of Videndum plc is Jon Bolton, Group Company
Secretary.
* In addition to statutory reporting, Videndum plc reports
alternative performance measures from continuing operations
("APMs") which are not defined or specified under the requirements
of International Financial Reporting Standards ("IFRS"). The Group
uses these APMs to aid the comparability of information between
reporting periods and Divisions, by adjusting for certain items
which impact upon IFRS measures and excluding discontinued
operations, to aid the user in understanding the activity taking
place across the Group's businesses. APMs are used by the Directors
and management for performance analysis, planning, re4.25porting
and incentive purposes. A summary of APMs used and their closest
equivalent statutory measures is given in the Glossary.
For more information please contact:
Videndum plc Telephone: 020 8332 4602
Stephen Bird, Group Chief Executive
Andrea Rigamonti, Group Chief
Financial Officer
Jennifer Shaw, Group Communications
Director
A video webcast and Q&A for Analysts and Investors will be
held today, starting at 09.00am UK time. The presentation slides
will be available on our website at 7.00am.
Users can pre-register to access the webcast and slides using
the following link:
https://videndum.com/investors/results-reports-and-presentations/
Notes to Editors:
Videndum is a leading global provider of premium branded
hardware products and software solutions to the content creation
market. We are organised in three Divisions: Videndum Media
Solutions, Videndum Production Solutions and Videndum Creative
Solutions.
Videndum's customers include broadcasters, film studios,
production and rental companies, photographers, independent content
creators ("ICC"), gamers, professional musicians and enterprises.
Our product portfolio includes camera supports, video transmission
systems and monitors, live streaming solutions, smartphone
accessories, robotic camera systems, prompters, LED lighting,
mobile power, carrying solutions, backgrounds, motion control,
audio capture, and noise reduction equipment.
We employ around 1,700 people across the world in 11 different
countries. Videndum plc is listed on the London Stock Exchange,
ticker: VID.
More information can be found at: https://videndum.com/
LEI number: 2138007H5DQ4X8YOCF14
H1 2023 financial overview
During H1 2023, the macroeconomic environment remained
challenging, particularly with low business confidence in the US.
This affected our consumer segment (c.10% of Group revenue) as well
as our ICC segment (c.35% of Group revenue), and led to continuing
destocking.
In addition, the Writers' Guild of America ("WGA"), which
combines two different US labour unions representing TV and film
writers in New York and Los Angeles, called a strike on 2 May 2023.
In the months prior, the speculation of a potential strike had
caused some US cine/scripted TV productions to be paused, and from
2 May 2023, the majority of US cine/scripted TV productions were
suspended. This significantly affected demand for our high-end cine
and scripted TV products in the US during the period (c.20% of
Group revenue).
Income and expense
The numbers below are presented on a continuing basis (unless
stated) including H1 2022 re-presented to ensure fair
comparability.
Adjusted* Statutory
from continuing
and discontinued
operations
H1 2023 H1 2022 % change H1 2023 H1 2022
------------------------- ---------- ---------- --------- ----------- ----------
Revenue GBP165.0m GBP219.4m -25% GBP169.9m GBP223.6m
Operating profit/(loss) GBP15.2m GBP32.1m -53% GBP(44.3)m GBP19.7m
Profit/(loss) GBP10.1m GBP29.1m -65% GBP(50.0)m GBP16.4m
before tax
Earnings/(loss)
per share 16.6p 49.3p -66% (100.0)p 28.0p
---------- ---------- --------- ----------- ----------
The headwinds mentioned above resulted in Group revenue from
continuing operations decreasing by 25% compared to H1 2022; a 28%
decline on an organic, constant currency basis: destocking c.GBP20
million, the demand in consumer and ICC segments c.GBP20 million,
and the writers' strike c.GBP20 million. Price rises successfully
implemented in 2022 and again at the beginning of 2023 more than
offset inflation.
The decline in revenue impacted adversely on adjusted gross
margin*, which fell from 43.7% in H1 2022 to 41.8% in H1 2023,
reflecting operating leverage. La Cassa Integrazione Guadagni
Ordinaria ("CIGO"), the Italian government supported furlough
programme, was applied in our Italian facilities to mitigate the
lower demand whilst ensuring our employees were looked after and
retained by the business.
Adjusted operating expenses* decreased by GBP9.9 million to
GBP53.8 million (H1 2022: GBP63.7 million) due to self-help actions
taken to reduce discretionary costs in the short-term, apply CIGO
in Italy, and implement restructuring projects in all Divisions to
ensure we have a lean organisation ready to capitalise once trading
conditions improve.
The actions taken in cost of sales and operating expenses
constrained that revenue drop through to adjusted operating profit*
to c.30% (compared to a marginal contribution of c.50%).
Adjusted profit before tax* included a GBP1.3 million favourable
foreign exchange effect after hedging compared to H1 2022, due to a
stronger US Dollar and Euro than in H1 2022. The impact on H2 2023
adjusted profit before tax* from a one cent stronger/weaker US
Dollar/Euro is expected to be an increase/decrease of approximately
GBP0.2 million in each case. At current spot rates (22 September:
GBP1 = $1.23, GBP1 = EUR1.15) there is expected to be a c.GBP2
million adverse impact on H2 2023 versus H2 2022.
Adjusted net finance expense* of GBP5.1 million was GBP2.1
million higher than in H1 2022. This was driven by higher debt,
following the 2021/22 acquisitions, and rising interest rates;
partly offset by net gains on the translation of intercompany loans
and cash balances. In H2 2023, an average of c.55% of our
borrowings will be fixed through swaps at an average rate of c.5%
(including margin), partly mitigating the risk of further interest
rate increases. Our floating debt currently has an average interest
rate of c.7% (including margin). Net finance expense also includes
interest on the lease liabilities and the defined benefit pension
scheme, amortisation of loan fees, and net currency translation
gains or losses.
Adjusted profit before tax* was GBP10.1 million; GBP19.0 million
lower than H1 2022. On an organic, constant currency basis,
adjusted operating profit* and adjusted profit before tax* were 56%
and 70% down respectively on H1 2022.
Statutory loss before tax from continuing and discontinued
operations of GBP50.0 million (H1 2022: GBP16.4 million profit)
further reflects adjusting items from continuing operations of
GBP7.0 million (H1 2022: GBP6.2 million) and a GBP53.1 million loss
from discontinued operations (H1 2022: GBP6.5 million loss).
The adjusting items from continuing operations primarily relate
to the amortisation of acquired intangibles, acquisition related
charges, and restructuring. These charges were higher compared to
H1 2022 primarily due to an impairment of property in the
Production Solutions Division and restructuring activities across
all Divisions, partly offset by lower transaction costs in relation
to acquisitions compared to those in H1 2022. The loss at
discontinued operations predominantly reflects a GBP46.9 million
impairment of intangible assets (Lightstream GBP18.9 million,
Amimon GBP28.0 million).
The Group's effective tax rate ("ETR") on adjusted profit before
tax* was 23.8% (H1 2022: 22.0%). Statutory ETR from continuing and
discontinued operations was a 7.0% credit on the GBP50.0 million
loss (H1 2022: 21.3% debit of the GBP16.4 million profit before
tax).
Adjusted basic earnings per share* was 16.6 pence. Statutory
basic loss per share from continuing and discontinued operations
was 100.0 pence.
Cash flow and net debt
Cash generated from operating activities was GBP11.5 million (H1
2022: GBP34.2 million) and net cash from operating activities was
GBP0.5 million (H1 2022: GBP28.8 million).
Free cash flow* was GBP27.8 million lower than H1 2022
reflecting the lower adjusted operating profit* and higher
interest, tax and restructuring costs. Cash conversion* was 93%,
and across the last three years has cumulatively been 103%.
GBPm H1 2023 H1 2022 Variance
--------
Statutory operating (loss)/profit
from continuing and discontinued
operations (44.3) 19.7 (64.0)
Add back discontinued operations
adjusted operating loss* 52.9 6.6 46.3
Add back adjusting items from
continuing operations 6.6 5.8 0.8
-------- -------- ---------
Adjusted operating profit* 15.2 32.1 (16.9)
Depreciation(1) 10.5 9.9 0.6
Adjusted working capital (inc)/dec* (4.4) (8.7) 4.3
Adjusted provisions inc/(dec)* (0.1) (0.4) 0.3
Capital expenditure(2) (7.8) (6.7 ) (1.1)
Other(3) 0.8 4.1 (3.3)
Adjusted operating cash flow* 14.2 30.3 (16.1)
Cash conversion* 93% 94 % -1%pts
Interest and tax paid (11.0) (5.3) (5.7)
Earnout and retention bonuses (3.7) (0.3) (3.4)
Restructuring and integration
costs (3.3) (0.5) (2.8)
Transaction costs (0.6) (0.8) 0.2
-------- -------- ---------
Free cash flow* (4.4) 23.4 (27.8)
------------------------------------- -------- -------- ---------
(1) Includes depreciation, amortisation of software and
capitalised development costs
(2) Purchase of Property, Plant & Equipment ("PP&E") and
capitalisation of software and development costs
(3) Includes share-based payments charge (excluding retention)
and other reconciling items to get to the adjusted operating cash
flow*
Net cash from operating activities of GBP0.5 million (H1 2022:
GBP28.8 million) comprises -GBP4.4 million free cash flow* (H1
2022: GBP23.4 million) plus GBP7.8 million capital expenditure from
continuing operations (H1 2022: GBP6.7 million) less GBP0.1 million
proceeds from sale of PP&E and software (H1 2022: nil) plus net
cash from operating activities from discontinued operations of
-GBP2.8 million (H1 2022: -GBP1.3 million)
Adjusted working capital* increased by GBP4.4 million in H1
2023. Inventory increased by GBP1.1 million in H1 as we applied
effective control measures that largely offset the decrease in
demand and the effects of the writers' strike, whilst we maintained
stocks of critical electronic components to support the expected
bounce back once the strikes end. Receivables decreased by GBP12.2
million and payables decreased by GBP15.5 million, both reflecting
the lower level of trading.
Capital expenditure included:
-- GBP1.9 million of property, plant and equipment compared
with GBP3.2 million in H1 2022, reflecting actions to
limit non-essential spend;
-- GBP5.6 million capitalisation of development costs (H1
2022: GBP3.2 million) primarily at Production Solutions
to develop our AI-driven talent tracking and sustainable
portable power solutions based on sodium technology ;
and GBP0.3 million capitalisation of software (H1 2022:
GBP0.3 million). Gross R&D was higher than H1 2022 reflecting
the projects above and inflation. The percentage of revenue
(6.6%) grew (H1 2022: 4.6%) but is a reflection of the
lower revenue and expected to return to c.5% once markets
recover.
GBPm H1 2023 H1 2022 Variance
-------- --------
Gross R&D 10.9 10.0 0.9
Capitalised (5.6) (3.2) (2.4)
Amortisation 2.8 2.3 0.5
-------- -------- ---------
P&L Impact 8.1 9.1 (1.0)
-------------- -------- -------- ---------
'Other' primarily relates to share-based payments.
Interest and tax paid increased by GBP5.7 million compared to H1
2022 mainly due to higher interest costs and the phasing of tax
payments.
Earnout and retention bonuses relate to Audix, Savage and
Quasar. Restructuring cash outflow reflects the exit costs of the
self-help actions taken to restructure in each of the
Divisions.
December 2022 closing
net debt* (GBPm) (193.5)
Continuing free cash flow* (4.4)
Upfront loan fees, net
of amortisation (0.6)
Dividends paid (11.6)
Employee incentive shares (0.4)
Acquisitions (1.6)
Free cash outflow at discontinued
operations (4.4)
Net lease additions (6.2)
FX 6.6
June 2023 closing net
debt* (GBPm) (216.1)
----------------------------------- --------
Net debt* at 30 June 2023 was GBP22.6 million higher than at 31
December 2022 (GBP193.5 million) and GBP22.0 million higher than at
30 June 2022 (GBP194.1 million).
The ratio of net debt to EBITDA was 2.9x at 30 June 2023 (H1
2022: 2.2x), on the basis used for our loan covenants(1) .
Cash outflow on acquisitions relates to deferred consideration
for the purchase of Audix.
Net lease additions mainly consist of the lease renewal for our
Media Solutions headquarters in Cassola.
There was a GBP6.6 million favourable impact from FX, primarily
from the translation of our US dollar debt, following the weakening
of the US dollar against Sterling.
Liquidity at 30 June 2023 totalled GBP62.9 million, comprising
GBP45.0 million unutilised RCF (total facility of GBP200 million
matures in February 2026) and GBP17.9 million of cash. We continue
to have strong relationships with our banks and have agreed further
lending covenant amendments for December 2023 (ratio of net debt to
EBITDA(1) increased from 3.25x to 5.75x and interest cover(2)
lowered from 4.0x to 2.0x) and amendments for June 2024 (ratio of
net debt to EBITDA(1) increased from 3.25x to 3.75x and interest
cover(2) lowered from 4.0x to 3.25x).
ROCE* of 15.8%(3) was lower than the prior year (H1 2022:
25.4%), which mainly reflects the lower adjusted operating
profit*.
Material uncertainty
As a result of there being a plausible scenario whereby
covenants are breached, the Board has determined that a material
uncertainty exists that may cast significant doubt on the Group's
ability to continue as a going concern, such that it may be unable
to realise its assets and discharge its liabilities in the normal
course of business. The key judgements surrounding the material
uncertainty are the length and depth of the ongoing writers' and
actors' strikes, as well as the length of time over how long it
takes to recover once the strikes end, and the recovery from the
broader macroeconomic challenges faced by the Group. Further detail
on the assessment of going concern can be found within note 1 to
the condensed financial statements.
Adjusting items
Adjusting items in profit before tax from continuing operations
were GBP7.0 million versus GBP6.2 million in H1 2022.
GBPm H1 2023 H1 2022
--------
Amortisation of acquired intangible assets
that are acquired in a business combination 2.1 2.9
Acquisition related charges(4) 0.7 2.0
Integration and restructuring costs 2.1 0.9
Impairment of fixed assets 1.7 -
Finance expense - amortisation of loan fees
on borrowings for acquisitions 0.4 0.4
Adjusting items 7.0 6.2
---------------------------------------------- --------
Discontinued operations
The Group is focusing more tightly on the high-end professional
content creation market, where it has high market share, sales
channel expertise and compelling growth opportunities.
Consequently, the Board has decided to exit non-core markets,
specifically medical and gaming, to concentrate R&D investment
on the content creation market. As a result, whilst the Creative
Solutions Division as a whole remains core going forward, two
businesses (Lightstream and Amimon) were held for sale at 30 June
2023 and reported as discontinued operations.
GBPm H1 2023 H1 2022
--------
Revenue 4.9 4.2
Adjusted
PBT* (3.0) (2.0)
Adjusting
items (50.1) (4.5)
Statutory
PBT (53.1) (6.5)
----------- -------- --------
Revenue grew by 17% in discontinued operations, driven by
medical sales at Amimon. Adjusted PBT* declined by GBP1.0 million
partly as a result of increasing amortisation, with adjusted
EBITDA* only declining by GBP0.4 million.
Adjusting items of GBP50.1 million mainly reflects a GBP46.9
million impairment of intangible assets (Lightstream GBP18.9
million, Amimon GBP28.0 million), and GBP2.1 million amortisation
of acquired intangibles at Amimon and at Lightstream prior to the
impairment.
Notes
Net debt is stated before arrangement fees and after leases
(1) of discontinued operations; EBITDA is based on adjusted
EBITDA* for the applicable 12-month period (see Glossary),
before non-cash share-based payment charges; and after
interest on employee benefits and FX movements, and the
amortisation of arrangement fees
Interest cover is calculated as adjusted EBITA for the
(2) applicable 12-month period (being adjusted EBITDA* less
depreciation of PP&E) divided by adjusted net finance expense*
(before interest on employee benefits and FX movements,
and the amortisation of arrangement fees)
Return on capital employed ("ROCE") is as adjusted operating
(3) profit* for the last twelve months divided by the average
total assets (excluding non-trading assets of defined benefit
pension and deferred tax), current liabilities (excluding
current interest-bearing loans and borrowings), and non-current
lease liabilities. H1 2022 has been restated to exclude
the deferred tax asset, which was included in the H1 2022
calculation (see Glossary).
Includes earnout charges, retention bonuses, transaction
(4) costs relating to the acquisition of businesses, and the
effect of fair valuation of acquired inventory.
Market and strategy update, and medium-term prospects
The content creation market continues to have strong medium-term
prospects, with structural growth drivers, and Videndum is uniquely
positioned to benefit with leading, premium brands. Our purpose is
to: "enable the capture and sharing of exceptional content", and
c.90% of our revenue comes from content creators who use our
products to earn their living.
Although the consumer and ICC segments of the market are being
impacted by the challenging macroeconomic environment, and US and
some European cine/scripted TV productions are currently paused due
to the strikes, we expect that the demand for, and investment in,
original content (e.g. for live news, sport, reality and scripted
TV shows, films, digital visual content for e-commerce and
vlogging, etc.) will continue to grow in the medium term.
Our strategic priorities remain unchanged; however, we are
focusing more tightly on our core markets, particularly for the
high-end professional and B2B segments - where we see the greatest
growth potential - and exiting non-core markets. We expect to come
through this period with an enhanced competitive position, well
placed to return to growth once the strikes are over and our
markets recover. Our long-term strategy is to deliver organic
growth, improve margins and to grow through M&A.
1. Organic growth
We are maintaining our investment in key strategic initiatives,
focused more tightly on faster-growing, high-end professional
content creation. Developing technologically advanced products
which improve our customers' productivity, by reducing set up time
and lowering operating costs, drives demand for new and replacement
products. This enables our premium brands to maintain their already
strong market positions and, in places, gain share.
Our key focus areas include robotics and AI-driven technology
for broadcast studio automation, high-end audio capture, wireless
video and transmission systems, and our new range of sustainable
portable power solutions based on sodium technology.
2. Margin improvement, and short-term mitigating actions to
manage costs and cash to offset prolonged strikes
The Group is actively managing the business to cut costs and to
preserve cash while seeking to ensure we are well placed to take
advantage of the recovery once the strikes end and productions
restart. To offset the impact of the prolonged strikes, we are
executing further significant and far-reaching actions to further
reduce costs, whilst Government support in Italy (CIGO) will also
continue to help preserve the long-term capabilities of the
business.
Once the strikes are over and productions restart, we will see
margin improvement as volumes return and we deliver operating
leverage. We will continue to optimise our manufacturing and
assembly portfolio, and to review opportunities to deliver
cross-Divisional synergies to ensure that the business is well set
up for long-term growth.
3. M&A activity
While we remain focused on proactively reducing leverage and
therefore no acquisitions will occur in the near term, we will
continue to review opportunities which could expand our addressable
markets and enhance our technology capabilities.
Businesses held for sale
Following an extensive review of the options for the Creative
Solutions Division, the Board concluded that the Group will deliver
the most long-term shareholder value by retaining the Division but
focusing more tightly on the high-end professional content creation
market, where it has high market share, sales channel expertise and
compelling growth opportunities. Consequently, the Board has
decided to exit non-core markets, specifically medical and gaming,
to concentrate R&D investment on the content creation market.
As a result, whilst the Creative Solutions Division as a whole
remains core going forward, two businesses (Lightstream and Amimon)
were held for sale at 30 June 2023 and reported as discontinued
operations.
Amimon was acquired in 2018, giving Videndum sole and exclusive
access to its chipset with zero delay wireless video transmission
technology. It also enabled us to focus R&D investment on the
4K chipset for the cine/scripted TV industry. The Teradek team
embedded the chipset into our products, which are tailored for the
content creation market. Embedding the core technology is complete,
and this successful strategy has enhanced our competitive
position.
The Amimon team is now focused on adapting its technology and
developing products for other vertical markets. While Videndum has
succeeded in developing its medical business to date, strategically
it is non-core, and we have started the process to seek offers for
the business. If a sale of Amimon were to take place, Videndum
would retain the exclusive rights to deploy its chipset in content
creation markets . This would ensure our customers could continue
to benefit from all future technology development. A disposal would
allow the Creative Solutions' R&D investment and resource to be
focused solely on their core markets of Cine, Broadcast and
high-end Live Production which offer opportunities for significant
organic growth and margin improvement when the strikes are
over.
As previously announced, the Lightstream business is performing
below expectations and is lossmaking, and the carrying value of the
Group's investment in Lightstream has been fully written off. This
2021 acquisition was based on the continued growth in gaming, which
instead declined materially in 2021 and is now flat. To grow this
business would require significant additional investment offering
lower returns than our core high-end markets. Following our
technology conference in H2 2022, we had also planned to utilise
the Lightstream technology in other parts of the Group, however
these plans did not deliver to expectation during H1 2023.
Divisional performances
Media Solutions
The Media Solutions Division designs, manufactures and
distributes premium branded equipment for photographic and video
cameras and smartphones, and provides dedicated solutions to
professional and amateur photographers/videographers, independent
content creators, vloggers/influencers, gamers, enterprises and
professional musicians. This includes camera supports and heads,
smartphone and vlogging accessories, lighting supports and
controls, LED lights, motion control, audio capture and noise
reduction equipment, camera bags and backgrounds, marketed under
the most recognised accessories brands in the industry. Media
Solutions represents c.50% of Group revenue.
Media Solutions' market drivers remain intact, driven by a
mid-term increase in professional content creation, audio capture,
retail commerce and vlogging ; however, they are being impacted in
the short-term by the challenging macroeconomic environment
affecting business confidence.
Our strategy is focused on developing innovative new products to
improve our customers' productivity in order to grow our core
professional business, as well as a focus on high-end audio capture
and return to growth in vlogging accessories when the
macroenvironment improves.
Adjusted* Statutory
------------------ --------------------------------
Media Solutions H1 2023 H1 2022 % change H1 2023 H1 2022
--------- ---------- --------- --------- ----------
Revenue GBP82.3m GBP111.5m -26% GBP82.3m GBP111.5m
Operating profit GBP9.5m GBP18.8m -49% GBP5.9m GBP14.5m
Operating margin 11.5% 16.9% -5.4%pts 7.2% 13.0%
--------- ---------- --------- --------- ----------
* For Media Solutions, before adjusting items of GBP3.6 million
(H1 2022: GBP4.3 million).
As expected, market conditions continued to be tough for Media
Solutions, with demand in the consumer segment (c.20%) remaining
low and ICCs (c.55%) deferring spend. This was compounded by the
destocking effect that impacted H2 2022 continuing into H1 2023 as
retail and distribution partners looked to reduce cash tied up in
stock.
The writers' strike impacted the high-end professional segment
(c.25%) although there was still significant growth in Avenger
lighting supports, with the Buccaneer and Long John Silver stands
continuing to gain market share to more than offset the pause in
the cine market due to the strikes.
CIGO was applied both at the Feltre factory and the Cassola
divisional head office, which allowed us to reduce inventory and
operating expenses. Short term actions were also taken to minimise
discretionary spend, whilst wider restructuring actions helped
reduce the cost base but will have more of an impact in H2.
We restructured our operations to take advantage of location
synergies following recent acquisitions. In the UK, our Rycote
windshield production is now operating out of our Ashby-de-la-Zouch
factory. This has expanded our manufacturing capacity by c.50% and
enables us to upgrade our operations. Audio R&D and microphones
production moved to our US audio centre of excellence in Portland,
and Media Solutions' US distribution moved out of New Jersey to our
Savage facilities in Arizona.
In addition to completing the restructuring, we successfully
launched the new high-end Audix voice recording and podcasting
microphone which has been extremely well received globally.
Adjusted operating margin* was down to 11.5% (H1 2022: 16.9%)
reflecting operating leverage on the revenue decline, partly
mitigated by the cost savings.
Statutory operating profit was GBP5.9 million (H1 2022: GBP14.5
million) reflecting GBP3.6 million of adjusting items (H1 2022:
GBP4.3 million).
Production Solutions
The Production Solutions Division designs, manufactures and
distributes premium branded and technically advanced products and
solutions for broadcasters, film and video production companies,
independent content creators and enterprises. Products include
video heads, tripods, LED lighting, batteries, prompters and
robotic camera systems. It also supplies premium services including
equipment rental and technical solutions. Production Solutions
represents c.30% of Group revenue.
Production Solutions' market drivers remain intact, driven by
demand for automated production, on-location news and original
content; however, they are being impacted in the short-term by the
strikes.
Our strategy is focused on growth in professional equipment for
on-location news and sporting events, innovative new technology
like robotic camera systems and Voice prompting to enable
automation and cost efficiencies in TV studios, and high-end
products for original content creation in cine/scripted TV,
including a new range of sustainable power solutions based on
sodium technology.
Adjusted* Statutory
----------------------
Production Solutions H1 2023 H1 2022 % change H1 2023 H1 2022
--------- --------- --------- --------- ---------
Revenue GBP51.7m GBP67.5m -23% GBP51.7m GBP67.5m
Operating profit GBP7.3m GBP15.0m -51% GBP4.6m GBP14.9m
Operating margin 14.1% 22.2% -8.1%pts 8.9% 22.1%
--------- --------- --------- --------- ---------
* For Production Solutions, before adjusting items of GBP2.7
million (H1 2022: GBP0.1 million).
Continuing destocking also impacted Production Solutions, as did
the writers' strike. The H1 2022 comparative includes the Winter
Olympics, whereas 2023 does not have an event on the same scale.
Overall, revenue was down 23%. Demand remains high for our flowtech
tripods and systems, and we have recently upgraded our carbon cell
facility in Bury St Edmunds to increase our capacity by up to 40%.
Autoscript Voice prompting revenue continued to grow, driven by AI
speech recognition.
We launched two exciting new products at the 2023 National
Association of Broadcasters Show in Las Vegas ("NAB") and the
CineGear Expo 2023 in LA ("CineGear"): the Anton/Bauer Salt-E Dog,
a sustainable portable power solution based on sodium technology
went into production in H2 in our Costa Rica facility; and the
Vinten VEGA Control System, a robotics control system that can also
be automated with AI-driven talent tracking.
Costs continued to be controlled closely albeit starting from a
very lean cost base in 2022. The revenue decline subsequently
resulted in the adjusted operating margin* falling to 14.1% (H1
2022: 22.2%).
Statutory operating profit was GBP4.6 million (H1 2022: GBP14.9
million) reflecting GBP2.7 million of adjusting items (H1 2022:
GBP0.1 million).
Creative Solutions
The Creative Solutions Division develops, manufactures and
distributes premium branded products and solutions for film and
video production companies, independent content creators,
enterprises and broadcasters. Products include wired and wireless
video transmission and lens control systems, live streaming
solutions, monitors and camera accessories. Creative Solutions
represents c.20% of Group revenue.
Creative Solutions' market drivers remain intact, driven by
streaming and demand for original content; however, they are being
impacted in the short-term by the strikes.
Our strategy is focused on continuing to deliver the 4K/HDR
replacement cycle as well as developing innovative new technology
to improve our customers' productivity in the growing areas of
remote monitoring, collaboration and streaming in the cine/scripted
TV, high-end Live Production and Broadcast markets.
Adjusted* Statutory
from continuing
and discontinued
operations
-------------------------
Creative Solutions H1 2023 H1 2022 % change H1 2023 H1 2022
--------- --------- --------- ----------- ----------
Revenue GBP31.0m GBP40.4m -23% GBP35.9m GBP44.6m
Operating profit/(loss) GBP3.7m GBP7.0m -47% GBP(49.3)m GBP(0.7)m
Operating margin 11.9% 17.3% -5.4%pts (137.5)% (1.6)%
--------- --------- --------- ----------- ----------
* For Creative Solutions, before adjusting items from continuing
operations of GBP0.1 million (H1 2022: GBP1.1 million) and
operating loss from discontinued operations of GBP52.9 million (H1
2022: GBP6.6 million loss)
The writers' strike had the largest effect on Creative
Solutions, as expected, where the majority of products are used in
cine/scripted TV. Live production revenue was significantly down as
we repositioned our brand towards the higher margin, higher end of
the live production market.
However, orders with Raytheon Technologies, a subcontractor for
NASA, and Smart Video Group, our new European partner, saw sales of
our Prism encoders and decoders nearly double compared to H1 2022.
Our Prism product will further be improved by our ultra-low latency
video over IP, known as Teradek Reliable Transport ("TRT", the
evolution of the ART protocol), enabling us to take market share in
the high-end live production market. At NAB we announced Ranger,
our next generation licensed band zero delay wireless video system
for live production and broadcast applications, which is now being
shipped to customers.
Following the restructuring announced in 2022, the reduced cost
base helped to mitigate the decline in revenue.
Adjusted operating margin* was down to 11.9% (H1 2022: 17.3%)
reflecting operating leverage on the revenue decline, partly
mitigated by the cost savings.
Statutory operating loss was GBP49.3 million (H1 2022: GBP0.7
million loss), which reflects GBP0.1 million of adjusting items
from continuing operations (H1 2022: GBP1.1 million) and a GBP52.9
million loss from discontinued operations (H1 2022: GBP6.6 million
loss) which includes GBP46.9 million impairment of intangible
assets.
Corporate costs
Corporate costs include Long Term Incentive Plan ("LTIP") and
Restricted Share Plan ("RSP") charges used to incentivise and
retain employees across the Group, as well as payroll and bonus
costs for the Executive Directors and head office team,
professional fees, property costs and travel costs.
Adjusted* Statutory
-----------------
Corporate costs H1 2023 H1 2022 % change H1 2023 H1 2022
Operating (loss) GBP(5.3)m GBP(8.7)m -39% GBP(5.5)m GBP(9.0)m
---------- ---------- --------- ---------- ----------
* For corporate costs, before adjusting items of GBP0.2 million
(H1 2022: GBP0.3 million).
Corporate costs were below those in H1 2022 on an adjusted*
basis mainly due to a decrease in charge for LTIPs as a result of a
decreased EPS vesting expectations.
Interim dividend
Given the current circumstances, no interim dividend has been
declared; the Board recognises the importance of dividends to the
Group's shareholders and intends resuming dividend payments when
appropriate to do so.
Responsibility
Videndum aims to be a sustainable business, minimising our
impact on the environment and working to improve the societies in
which we operate. Our strategy includes clear objectives and
targets, prioritising actions that will deliver the greatest
impact. We continue to focus on four key areas: the environment;
our people; responsible practices; and giving back. Key focus areas
for 2023 include continuing with the energy reduction pathways,
better tracking of waste, a heavier focus on product sustainability
and developing new/sustainable products, and expanding the supply
chain programme.
The Videndum Board provides oversight and has overall
responsibility for the Group's ESG programme, while the ESG
Committee, chaired by the Group CEO and comprising senior
executives from across the Group, is responsible for driving ESG
performance. ESG Governance has been integrated into our existing
processes and a percentage of the Group CEO's remuneration is tied
to the Group's ESG performance.
The environment
Climate change scenario analysis is performed annually in
respect of our main sites and supply chain activities in order to
model the impact of climate change for three different warming
scenarios. This year, we included more suppliers in our climate
scenario analysis. Potential supply chain routes were also
analysed, leading to discussions on alternative transport routes to
be considered, where needed.
Reducing the Group's carbon footprint is a clear priority for
Videndum. We have developed and set near-term targets as we journey
to be carbon neutral for Scope 1 and 2 by 2025, net zero for Scope
1 and 2 by 2035, and for Scope 3 by 2045. We have identified
quantifiable measures to achieve these objectives. By implementing
smarter ways of working and investing in infrastructure, we have
already achieved a significant reduction across the Group's scope 1
and 2 emissions since 2019, excluding the impact of recently
acquired businesses.
In H1 2023, we continued to install energy saving technology
across our sites, such as further LED lighting installations, a
power saving initiative in IT server rooms and conversion of
company vehicles to electric or hybrid models. Compressed air
efficiency improvements were completed in Cartago, Costa Rica, with
intelligent controls installed, minimising wasted energy. Other
carbon reduction initiatives include the installation of solar
panels at Feltre, Italy; implementation started in July 2023 and we
expect the system to be fully operational by the end of 2023. This
will reduce the Group's CO(2) emissions by c.15% and Feltre annual
electricity costs by c.10%. The ISO50001 certification for our
Cartago, Costa Rica site passed the first stage, with stage two
planned for October.
The Group is committed to reducing packaging and waste. We have
improved our data capture systems to begin collating mass-based
data relating to the purchase of packaging materials. Not only does
this allow us to utilise more accurate emissions factors due to an
improvement in the quality of activity-data, but also ensures that
all packaging is being accounted for in Scope 3 Category 12
(end-of-treatment of sold products).
In H1 2023, we continued working towards eliminating single-use
plastic and improving the recyclability of packaging and other
product components. For example, Production Solutions has recently
removed solvent waste from carbon cells, reducing waste output, and
is now planning to start trials to replace plastic with paper
packaging for spare parts. The Group aims to eliminate or replace
50% of current cardboard packaging consumption with sustainable,
FSC grade cardboard.
We continue to focus on developing more sustainable products. In
May this year, the Group's Production Solutions Division launched
Salt-E Dog - a sustainable portable power source, in the form of a
sodium battery designed and built for the cine/scripted TV
industry. We have also made further progress in embedding product
Life Cycle Assessment ("LCA") methodology into our top emitting
products to identify opportunities to reduce the environmental
impact, with our Production Solutions Division due to commence LCAs
in H2 2023 for specific product groups (aktiv and flowtech).
Responsible practices
As part of our focus on formalising the integrity of our entire
supply chain, we conducted a review and gap analysis of existing
supply chain assessment processes across the Group. Using the
information gathered, we have developed a Group-wide Supply Chain
Assessment process to engage with our top suppliers on their carbon
emissions and wider ESG credentials.
Positively impacting the communities in which we operate
Despite the market challenges, the Group remains fully engaged
in a range of community programmes. Production Solutions is well
underway with their "Action-4-Good" initiative, having already
delivered a careers fair, family walks and a movie makers club. As
part of their "Creativity for Life" programme, Media Solutions
launched a photography and videomaking educational course aimed at
disadvantaged teenagers, focused on documenting sustainability
success stories; whilst Creative Solutions donated equipment to
Outlast's summer programming - an organisation that facilitates
film education for Indigenous youth from rural communities in South
Dakota, US.
2023 reporting
We will produce our third standalone ESG Report for our 2023
reporting period in accordance with the Global Reporting Initiative
("GRI"). We will also develop our third Task Force on
Climate-related Financial Disclosures ("TCFD") report, widening our
climate scenario analysis and data collection processes to include
recently acquired businesses and analysing a greater number of top
suppliers, based on spend, than in 2022.
Both ESG and TCFD reports will be available on our website at
the end of March 2024.
Outlook
The Group is experiencing significantly more impact from the
strikes in H2 2023 than anticipated at the time of our May Update.
This is due to the prolonged writers' strike, the additional impact
of the actors' strike, and the fact that there is less time for a
recovery in the current year. Additionally, the macroeconomic
environment remains challenging. We are not yet seeing recovery in
the consumer or ICC segments, and retailers are increasingly
concerned about interest rates and working capital, and we are
therefore still seeing some destocking. This is resulting in
worse-than-expected trading conditions.
Management continues to be focused on tightly managing costs and
preserving cash, while seeking to ensure that we are well placed to
take advantage of the recovery once the strikes are over. We have
excellent relationships with our banks and the Group is proactively
working to reduce leverage and recapitalise the business, which may
require an equity raise.
Videndum remains well positioned in a content creation market
which has attractive structural growth drivers and strong
medium-term prospects; however, the current macroeconomic
environment remains challenging, and although there is encouraging
news about the strikes, it is not clear when productions will
restart. Therefore, there is a wide range of potential outcomes for
the full year, and it is difficult to provide financial guidance.
Nonetheless, when productions restart, we expect Videndum to
benefit from a significant recovery in revenue.
Risks and Uncertainties
Videndum is exposed to a number of risk factors which may affect
its performance. The Group has a well-established framework for
reviewing and assessing these risks on a regular basis; and has put
in place appropriate processes and procedures to mitigate against
them. However, no system of control or mitigation can completely
eliminate all risks.
The principal risks and uncertainties that may affect our
performance are set out in the 2022 Annual Report and in summary
are around:
-- Demand for Videndum's products
-- Cost pressure
-- Dependence on key suppliers (including component shortages)
-- Dependence on key customers
-- People (including health and safety)
-- Laws and regulations
-- Reputation of the Group
-- Foreign exchange and interest rates
-- Business continuity including cyber security
-- Climate change
-- Restructuring
-- Acquisitions
At half-year, a material going concern uncertainty existed as a
result of the ongoing US writers' strike, the ultimate impact of
which is dependent on the duration of the strike, which is not
known, and casts a significant doubt upon the Group's ability to
specifically meet its loan covenant obligations. This issue is
further compounded by macroeconomic headwinds, and destocking by
some of our key retail customers. Therefore, a number of the
Group's principal risks have increased since the 2022 Annual Report
and additional actions implemented to mitigate the impact /
likelihood:
-- The risk relating to Demand for Videndum's products has
significantly increased in the last 6 months. The macroeconomic
environment remains challenging, particularly with low business
confidence in the US. This affected our consumer segment
(c.10% of Group revenue) as well as our ICC segment (c.35%
of Group revenue), and led to continuing destocking. In
addition, the WGA called a strike on 2 May 2023. In the
months prior, the speculation of a potential strike had
caused some US cine/scripted TV productions to be suspended,
and from 2 May 2023, the majority of US cine/scripted TV
productions were paused. This strike, which has been compounded
by the US actors' union strike action, has significantly
affected demand for our high-end cine and scripted TV products
in the US during the period (c.20% of Group revenue). While
a number of specific segments (e.g. Lighting controls, flowtech,
Audio) continue to perform strongly, the uncertainty regarding
the duration of the strikes, and shape of any subsequent
recovery, creates a material uncertainty for the going concern
of the business.
-- The risk relating to Foreign Exchange and Interest Rates
continues to increase due to a higher interest charge and
performance issues in 2023 impacting the Group's ability
to reduce its debt. We are mitigating this through further
restructuring and cost cutting activity (see below).
-- The risk related to Restructuring is higher in 2023, due
to several actions already underway to reduce costs and
preserve cash. This includes short and long-term actions
to increase purchasing synergies between the Divisions,
combine site operations where possible, and other initiatives
to reduce manufacturing costs, such as relocation of production
and in-sourcing initiatives. The CIGO furlough initiative
for Media Solutions in Italy has been extended to the end
of October 2023. The Creative Solutions Division has implemented
shorter hours for up to 100 employees to mitigate the financial
impact of reduced activity levels.
-- People risk is higher due to the increased pressure linked
to restructuring initiatives and also measures to contain
costs given pressures on the business including short time
working which may affect morale, and lead to greater employee
turnover. Our transformation programmes are supported by
strong communication and employee engagement plans.
-- Reputation risk is greater as a result of increased external
pressure and scrutiny. We remain committed to high standards
of governance and compliance.
-- Cyber Security risk remains elevated in view of the high
number of cyber security breaches and ransomware activity
affecting the corporate sector. We continue to focus on
strengthening our cyber security defences and have increased
budgets allocated to security. We keep our framework under
review.
Audit Tender 2023
As set out in the Annual Report 2022, the Audit Committee on
behalf of the Board had undertaken to conduct a formal audit tender
process during the second quarter of 2023. Following the completion
of this process and the recommendation of the Audit Committee, the
Board will appoint PricewaterhouseCoopers LLP ("PwC") as the
Company's independent auditor for the financial year ending 31
December 2024, subject to approval by shareholders at the next
Annual General Meeting ("AGM") to be held in 2024. Videndum's
current external auditor, Deloitte LLP has confirmed that they will
conduct the audit for the year ending 31 December 2023 which was
approved by shareholders at the AGM on 11 May 2023.
Board Changes
The Board of Videndum plc announces that Ian McHoul, Chairman,
has informed the Board of his intention not to seek re-election at
the Company's 2024 AGM due to personal reasons. The Board respects
Ian's wishes and thanks him for his service and his leadership over
the last four years, navigating the Group through the pandemic, the
strategic development of its portfolio, and more recently, the
challenging macroeconomic environment and the strikes by the US
writers and actors.
The Board has commenced a search process for a replacement that
will be led by Richard Tyson, Senior Independent Director.
Ian McHoul was appointed to the Board on 25 February 2019 and
succeeded as Chairman on 21 May 2019.
Forward- looking statements
This announcement contains forward-looking statements with
respect to the financial condition, performance, position,
strategy, results and plans of the Group based on Management's
current expectations or beliefs as well as assumptions about future
events. These forward-looking statements are not guarantees of
future performance. Undue reliance should not be placed on
forward-looking statements because, by their very nature, they are
subject to known and unknown risks and uncertainties and can be
affected by other factors that could cause actual results, and the
Group's plans and objectives, to differ materially from those
expressed or implied in the forward-looking statements. The Company
undertakes no obligation to publicly revise or update any
forward-looking statements or adjust them for future events or
developments. Nothing in this announcement should be construed as a
profit forecast.
The information in this announcement does not constitute an
offer to sell or an invitation to buy shares in the Company in any
jurisdiction or an invitation or inducement to engage in any other
investment activities. The release or publication of this
announcement in certain jurisdictions may be restricted by law.
Persons who are not resident in the United Kingdom or who are
subject to other jurisdictions should inform themselves of, and
observe, any applicable requirements.
This announcement contains brands and products that are
protected in accordance with applicable trademark and patent laws
by virtue of their registration.
Responsibility statement of the Directors in respect of the Half
Year Results to 30 June 2023
We confirm that, to the best of our knowledge:
-- The condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting;
-- The interim management report includes a fair review of
the information required by DTR 4.2.7R (indication of
important events during the first six months and description
of principal risks and uncertainties for the remaining
six months of the year); and
-- The interim management report includes a fair review of
the information required by DTR 4.2.8R (disclosure of
related parties' transactions and changes therein).
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
company's website. Legislation in the United Kingdom governing the
preparation and dissemination of financial information differs from
legislation in other jurisdictions.
Adoption of going concern basis
The Directors have made appropriate enquiries and challenge of
the forecasts, judgements and mitigating actions available to the
Group, and consider that the Group has adequate resources to
continue in operational existence for the foreseeable future, being
a period of at least 12 months from the date of approval of these
financial statements. However, as a result of there being a
plausible scenario whereby covenants are breached, the Board has
determined that a material uncertainty exists that may cast
significant doubt on the Group's ability to continue as a going
concern, such that it may be unable to realise its assets and
discharge its liabilities in the normal course of business. The key
judgements surrounding the material uncertainty are the length and
depth of the ongoing writers' and actors' strikes, as well as the
length of time over how long it takes to recover once the strikes
end, and the recovery from the broader macroeconomic challenges
faced by the Group. Further detail on the assessment of going
concern can be found within note 1 to the condensed financial
statements.
For and on behalf of the Board
Stephen Bird Andrea Rigamonti
Group Chief Executive Group Chief Financial Officer
INDEPENT REVIEW REPORT TO VIDUM PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2023 which comprises the condensed
consolidated income statement, the condensed consolidated balance
sheet, the statement of changes in equity, the condensed
consolidated statement of cash flows and related notes 1 to 14.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2023 is not prepared, in all material respects, in accordance
with United Kingdom adopted International Accounting Standard 34
and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council for use in the
United Kingdom (ISRE (UK) 2410). A review of interim financial
information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with United Kingdom adopted
international accounting standards. The condensed set of financial
statements included in this half-yearly financial report has been
prepared in accordance with United Kingdom adopted International
Accounting Standard 34, "Interim Financial Reporting".
Material Uncertainty Related to Going Concern
We draw attention to note 1 in the condensed set of financial
statements, which indicates there is a plausible downside scenario
considered by the Board, which would result in both the covenants
being breached in one of the next couple of test dates and whereby
liquidity drops to GBPnil in July 2024. As stated in note 1, these
events or conditions, along with the other matters as set forth in
note 1 to the condensed set of financial statements, indicate that
a material uncertainty exists that may cast significant doubt on
the company's ability to continue as a going concern. Our overall
review conclusion is not modified in respect of this matter.
Notwithstanding the material uncertainty discussed above, based
on our review procedures, which are less extensive than those
performed in an audit as described in the Basis for Conclusion
section of this report, nothing has come to our attention to
suggest that the directors have inappropriately adopted the going
concern basis of accounting or that the directors have identified
material uncertainties relating to going concern that are not
appropriately disclosed.
This Conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410; however future events or conditions
may cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the group's ability to continue as a
going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly financial report, we are
responsible for expressing to the company a conclusion on the
condensed set of financial statements in the half-yearly financial
report. Our Conclusion, including our Conclusion relating to Going
Concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
ISRE (UK) 2410. Our work has been undertaken so that we might state
to the company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company, for our review work, for this
report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
25 September 2023
Condensed Consolidated Income Statement
For the half year ended 30 June 2023
Half year Half year Year to
to 30 to 30 31 December
June 2023 June 2022(1)
2022(1)
Unaudited Unaudited Audited
Notes GBPm GBPm
--------------------------------------------- ---------------- ---------------- ----------- -----------------
Continuing operations
Revenue 2 165.0 219.4 442.5
Cost of sales (96.9) (123.7) (251.8)
Other Income 0.4 - -
--------------------------------------------- ---------------- ---------------- ----------- -----------------
Gross profit 68.5 95.7 190.7
Operating expenses 3 (59.9) (69.4) (143.8)
--------------------------------------------- ---------------- ---------------- ----------- -----------------
Operating profit 8.6 26.3 46.9
--------------------------------------------- ---------------- ---------------- ----------- -----------------
Comprising
* Adjusted operating profit 15.2 32.1 64.2
* Adjusting items in operating profit 4 (6.6) (5.8) (17.3)
--------------------------------------------- ---------------- ---------------- ----------- -----------------
Finance Income 2.7 0.7 3.0
Finance Expense (8.2) (4.1) (9.8)
--------------------------------------------- ---------------- ---------------- ----------- -----------------
Net finance expense 5 (5.5) (3.4) (6.8)
--------------------------------------------- ---------------- ---------------- ----------- -----------------
Profit before tax 3.1 22.9 40.1
--------------------------------------------- ---------------- ---------------- ----------- -----------------
Comprising
* Adjusted profit before tax 10.1 29.1 58.2
* Adjusting items in profit before tax 4 (7.0) (6.2) (18.1)
--------------------------------------------- ---------------- ---------------- ----------- -----------------
Taxation (0.7) (4.6) 5.3
Comprising taxation on
* Taxation on adjusted profit 6 (2.4) (6.4) (15.0)
* Adjusting items in taxation 6 1.7 1.8 20.3
--------------------------------------------- ---------------- ---------------- ----------- -----------------
Profit for the period from continuing
operations 2.4 18.3 45.4
--------------------------------------------------------------- ---------------- ----------- -----------------
Loss for the period from
discontinued operations 13 (48.9) (5.4) (12.5)
--------------------------------------------- ---------------- ---------------- ----------- -----------------
(Loss)/Profit for the period attributable
to owners of the parent (46.5) 12.9 32.9
--------------------------------------------------------------- ---------------- ----------- -----------------
(1) 2022 has been re-stated to present discontinued operations
separately from the continuing operations. See note 13
"Discontinued operations and non-current assets classified
as held for sale"
Earnings per share from continuing operations
Basic earnings per share 7 5.2p 39.8p 98.6p
Diluted earnings per share 7 5.1p 38.4p 94.8p
Earnings per share from discontinued operations
Basic earnings per share 7 (105.2)p (11.8)p (27.1)p
Diluted earnings per share 7 (105.2)p (11.8)p (27.1)p
Earnings per share from continuing and discontinued operations
Basic earnings per share 7 (100.0)p 28.0p 71.5p
Diluted earnings per share 7 (100.0)p 27.0p 68.7p
Average exchange rates
Euro 1.14 1.19 1.17
US$ 1.23 1.31 1.24
Consolidated Statement of Comprehensive Income
For the half year ended 30 June
2023
Half year Half year Year to
to 30 June to 30 31 December
2023 June 2022 2022
Unaudited Unaudited Audited
GBPm GBPm GBPm
---------------------------------------------------- ---------------------- ----------- -----------------
(Loss)/Profit for the period (46.5) 12.9 32.9
Other comprehensive income/(expense):
Items that will not be reclassified subsequently to profit
or loss:
Remeasurements of defined benefit
schemes 0.8 7.2 9.1
Related tax (0.2) (1.8) (2.1)
Items that are or may be reclassified subsequently to
profit or loss:
Currency translation differences
on foreign currency subsidiaries (14.0) 19.6 22.6
Net investment hedges - net
gain/(loss) 2.4 (4.0) (5.8)
Cash flow hedges - reclassified
to the Income Statement, net
of tax (1.5) 0.6 1.6
Cash flow hedges - effective
portion of changes in fair value,
net of tax 2.2 0.2 2.4
---------------------------------------------------- ---------------------- ----------- -----------------
Other comprehensive (loss)/income,
net of tax (10.3) 21.8 27.8
Total comprehensive (loss)/income
for the period attributable
to owners of the parent (56.8) 34.7 60.7
---------------------------------------------------- ---------------------- ----------- -----------------
Condensed Consolidated
Balance Sheet
As at 30 June 2023
30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
Notes GBPm GBPm GBPm
-------------------------------------------- ------ --------------------- ---------------- -----------------
Assets
Non-current assets
Intangible assets 155.8 221.8 217.9
Property, plant and equipment 60.2 69.7 66.6
Employee benefit asset 8 4.7 2.6 3.9
Trade and other receivables 5.0 6.2 7.4
Derivative financial instruments 10 3.6 3.0 3.8
Non-current tax assets 6 3.1 3.0 3.0
Deferred tax assets 6 43.7 37.0 51.2
276.1 343.3 353.8
-------------------------------------------- ------ --------------------- ---------------- -----------------
Current assets
Inventories 102.0 111.0 107.3
Trade and other receivables 54.3 66.4 68.9
Derivative financial instruments 10 2.8 0.1 2.3
Current tax assets 5.3 3.6 4.1
Cash and cash equivalents 9 17.9 31.3 15.8
Assets of the disposal group
classified as held for sale 13 22.6 - -
204.9 212.4 198.4
-------------------------------------------- ---------- ----------------- ---------------- -----------------
Total assets 481.0 555.7 552.2
-------------------------------------------- ---------- ----------------- ---------------- -----------------
Liabilities
Current liabilities
Bank overdrafts 4.3 - -
Interest-bearing loans and
borrowings 9 30.7 28.7 36.0
Lease liabilities 9 5.7 6.2 6.0
Trade and other payables 56.0 90.6 81.3
Derivative financial instruments 10 0.1 2.0 0.9
Current tax liabilities 13.8 18.7 16.7
Provisions 3.5 3.8 5.5
Liabilities of the disposal
group classified as held
for sale 13 6.5 - -
120.6 150.0 146.4
-------------------------------------------- ---------- ----------------- ---------------- -----------------
Non-current liabilities
Interest-bearing loans and
borrowings 9 162.8 159.1 138.5
Lease liabilities 9 30.5 31.4 28.8
Derivative financial instruments 10 - 0.3 -
Other payables 0.8 0.8 1.8
Employee benefit liabilities 2.7 3.6 3.1
Provisions 0.8 0.9 2.4
Deferred tax liabilities 7.2 7.7 7.5
-------------------------------------------- ----------
204.8 203.8 182.1
-------------------------------------------- ---------- ----------------- ---------------- -----------------
Total liabilities 325.4 353.8 328.5
-------------------------------------------- ---------- ----------------- ---------------- -----------------
Net assets 155.6 201.9 223.7
-------------------------------------------- ---------- ----------------- ---------------- -----------------
Equity
Share capital 11 9.4 9.4 9.4
Share premium 24.4 23.2 24.3
Translation reserve (12.4) (2.0) (0.8)
Capital redemption reserve 1.6 1.6 1.6
Cash flow hedging reserve 4.6 0.7 3.9
Retained earnings 128.0 169.0 185.3
-------------------------------------------- ---------- ----------------- ---------------- -----------------
Total equity 155.6 201.9 223.7
-------------------------------------------- ---------- ----------------- ---------------- -----------------
Balance Sheet exchange
rates
Euro 1.17 1.16 1.13
US$ 1.27 1.21 1.21
Consolidated Statement of Changes in Equity
For the half year ended 30 June 2023 (Unaudited)
Share Share Translation Capital Cash Retained Total
capital premium reserve redemption flow earnings equity
reserve hedging
reserve
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 January
2022 9.3 23.1 (17.6) 1.6 (0.1) 157.6 173.9
Profit for the
period - - - - - 12.9 12.9
Other comprehensive
income for the period - - 15.6 - 0.8 5.4 21.8
------------------------- --------- --------- ------------ ------------ --------- ---------- --------
Total comprehensive
income for the period - - 15.6 - 0.8 18.3 34.7
Contributions by and distributions to owners
Dividends paid - - - - - (11.1) (11.1)
Own shares purchased - - - - - (2.4) (2.4)
Own shares sold - - - - 1.7 1.7
New shares issued 0.1 0.1 - - - - 0.2
Share-based payment
charge, net of tax - - - - - 4.9 4.9
Balance at 30 June
2022 9.4 23.2 (2.0) 1.6 0.7 169.0 201.9
------------------------- --------- --------- ------------ ------------ --------- ---------- --------
Share Share Translation Capital Cash Retained Total
capital premium reserve redemption flow earnings equity
reserve hedging
reserve
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 January
2023 9.4 24.3 (0.8) 1.6 3.9 185.3 223.7
Loss for the period - - - - - (46.5) (46.5)
Other comprehensive
(expense)/income
for the period - - (11.6) - 0.7 0.6 (10.3)
------------------------- --------- --------- ------------ ------------ --------- ---------- --------
Total comprehensive
(expense)/income
for the period - - (11.6) - 0.7 (45.9) (56.8)
Contributions by and distributions to owners
Dividends paid - - - - - (11.6) (11.6)
Own shares purchased - - - - - (1.6) (1.6)
Own shares sold - - - - - 1.1 1.1
New shares issued - 0.1 - - - - 0.1
Share-based payment
charge, net of
tax - - - - - 0.7 0.7
Balance at 30 June
2023 9.4 24.4 (12.4) 1.6 4.6 128.0 155.6
------------------------- --------- --------- ------------ ------------ --------- ---------- --------
Condensed Consolidated Statement of Cash Flows
For the half year ended 30 June 2023
Half Half Year to
year to year 31 December
30 June to 30 2022
2023 June
2022
Unaudited Unaudited Audited
Notes GBPm GBPm GBPm
--------------------------------------- ------ ---------- ---------- -------------
Cash flows from operating activities
(Loss)/Profit for the period (46.5) 12.9 32.9
Adjustments for:
Taxation (3.5) 3.5 (8.2)
Depreciation 7.5 7.5 15.3
Impairment of intangible and
fixed assets 4 48.6 - 1.9
Amortisation of intangible assets 8.7 8.5 18.3
Net loss on disposal of property, 0.2 - -
plant and equipment and software
Fair value (gains)/losses on
derivative financial
instruments (0.3) 0.2 0.1
Foreign exchange losses/(gains) - 0.3 0.6
Share-based payment charge 1.2 4.6 8.9
Earnout charges and retention
bonuses 0.7 2.0 4.5
Net finance expense 5.7 3.3 6.8
--------------------------------------- ------ ---------- ---------- -------------
Cash generated from operating
activities before change in working
capital, including provisions 22.3 42.8 81.1
Increase in inventories (0.8) (12.1) (8.0)
Decrease/(increase) in receivables 10.3 (1.9) (5.0)
(Decrease)/Increase in payables (18.6) 5.5 (5.6)
Decrease/(increase) in provisions (1.7) (0.1) 2.8
--------------------------------------- ------ ---------- ---------- -------------
Cash generated from operating
activities 11.5 34.2 65.3
Interest paid (6.2) (4.4) (9.4)
Tax paid (4.8) (1.0) (7.2)
--------------------------------------- ------ ---------- ---------- -------------
Net cash from operating activities 0.5 28.8 48.7
--------------------------------------- ------ ---------- ---------- -------------
Cash flows from investing activities
Proceeds from sale of property, 0.1 - -
plant and equipment and software
Purchase of property, plant and
equipment (2.0) (3.3) (7.1)
Capitalisation of software and
development costs (7.5) (6.2) (13.1)
Acquisition of businesses, net
of cash acquired (1.6) (33.3) (33.2)
Net cash used in investing activities (11.0) (42.8) (53.4)
--------------------------------------- ------ ---------- ---------- -------------
Cash flows from financing activities
Proceeds from the issue of shares 0.1 0.2 1.3
Proceeds from the sale of own
shares 1.1 1.7 3.1
Own shares purchased (1.6) (2.4) (5.8)
Principal lease repayments 9 (3.5) (3.3) (6.4)
Repayment of interest-bearing
loans and borrowings 9 (62.8) (27.5) (93.8)
Borrowings from interest-bearing
loans and borrowings 9 85.7 79.8 130.3
Dividends paid (11.6) (11.1) (18.0)
--------------------------------------- ------ ---------- ---------- -------------
Net cash from financing activities 7.4 37.4 10.7
--------------------------------------- ------ ---------- ---------- -------------
(Decrease)/Increase in cash
and cash equivalents (3.1) 23.4 6.0
Cash and cash equivalents at
1 January 15.8 7.9 7.9
Effect of exchange rate fluctuations
on cash held 0.9 - 1.9
--------------------------------------- ------ ---------- ---------- -------------
Cash and cash equivalents at
the end of the period 9 13.6 31.3 15.8
--------------------------------------- ------ ---------- ---------- -------------
1 Accounting policies
Reporting entity
Videndum plc (the "Company) is a public company limited by
shares incorporated in the United Kingdom under the Companies Act.
The Company is registered in England and Wales and its registered
address is Bridge House, Heron Square, Richmond TW9 1EN, United
Kingdom. These condensed consolidated interim financial statements
("Financial Statements") as at and for the half year ended 30 June
2023 comprise the Company and its subsidiaries (together referred
to as the "Group").
Basis of preparation and statement of compliance
The half year financial information covers the six-month period
ended 30 June 2023 and has been prepared in accordance with IAS 34
'Interim Financial Reporting' as issued by the International
Accounting Standards Board (IASB) and as adopted by the United
Kingdom (UK); and the Disclosure and Transparency Rules of the
Financial Conduct Authority. This condensed set of financial
statements comprises the unaudited financial information for the
half years ended 30 June 2023 and 2022, together with the audited
consolidated statement of financial position as at 31 December
2022. The half year financial information has been prepared
applying consistent accounting policies to those applied by the
Group for the year ended 31 December 2022 and are expected to be
applicable for the year ending 31 December 2023. The annual
financial statements will be prepared in accordance with United
Kingdom adopted International Financial Reporting Standards.
The re-stated comparative figures for the year ended 31 December
2022 do not constitute statutory accounts for the purpose of
section 434 of the Companies Act 2006. The auditor has reported on
the 2022 accounts, and these have been filed with the Registrar of
Companies; their report was unqualified, did not include a
reference to any matters to which the auditor drew attention by way
of emphasis, and did not contain a statement under section 498(2)
or (3) of the Companies Act 2006. The half year amounts as at and
for the half years ending 30 June presented in these condensed
consolidated interim financial statements have been reviewed in
accordance with International Standard on Review Engagements (UK
and Ireland) 2410 but have not been audited.
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates.
In preparing these condensed consolidated interim financial
statements, the significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the
consolidated financial statements as at and for the year ended 31
December 2022. In addition to these, we have identified the
following for the purpose of these half year accounts.
Estimates:
Impairment of discontinued operations: Non-current assets held
for sale are measured at the lower of carrying amount and fair
value less costs to sell. There was estimation and assumptions
applied by Management in determining the recoverable amount of
these assets.
Judgements:
Going concern assessment: There were material judgements made by
the Board to determine if the Group is a going concern and the
material uncertainty surrounding it. These judgements are disclosed
under "going concern" in note 1 "Accounting policies". The key
judgements surrounding the material uncertainty relate to the
length and depth of the ongoing writers' and actors' strikes, as
well as the length of time over how long it takes to recovery once
the strikes end and the recovery from the broader macroeconomic
challenges faced by the Group.
Asset held for sale and discontinued operations: The critical
judgement is in relation to determining if the assets held for sale
meet the criteria to be classified as a discontinued operation
under IFRS 5 "Non-current assets held for sale and discontinued
operations", particularly if they represent either a separate major
line of business or a geographical area of operations. Management
has deemed that both assets have met this requirement. See note 13
"Discontinued operations and non-current assets classified as held
for sale".
In reporting financial information, the Group presents
alternative performance measures ("APMs") which are not defined or
specified under the requirements of IFRS. The Group believes that
these APMs, which are not considered to be a substitute for, or
superior to, IFRS measures, provide stakeholders with additional
helpful information and enable an alternative comparison of
performance over time. A glossary in note 14 provides a
comprehensive list of APMs that the Group uses, including an
explanation of how they are calculated, why they are used and how
they can be reconciled to an IFRS measure where relevant.
These condensed consolidated interim financial statements were
approved by the Board of Directors on 25 September 2023.
Impact of adoption of new accounting standards
There has been no material impact on the Group's consolidated
financial statements of adopting new standards or amendments.
New standards and interpretations not yet adopted
Amended standards and interpretations not yet effective are not
expected to have a significant impact on the Group's consolidated
financial statements.
Going concern
Background and context
Following a record breaking 2022 financial year, Videndum
entered 2023 facing headwinds. From late in 2022, the Group began
to feel the impact of the pressure that consumers were facing on a
macroeconomic level. The knock-on effect of this was that our
customers began destocking the levels of inventory that they were
holding from late in 2022. During the early part of the first half
of 2023, contract renewal negotiations started between the Writers
Guild of America ("WGA") and Alliance of Motion Picture and
Television Producers ("AMPTP") which subsequently broke down and
the WGA called a writers' strike for the first time since 2007.
Whilst the strike officially commenced on 2 May 2023, the impact
from the decline in orders received by Videndum was noticed in the
months leading up to May 2023.
On 14 July 2023, the Screen Actors Guild - American Federation
of Television and Radio Artists ("SAG-AFTRA"), the actors' union
who had also been conducting its own contract renewal negotiations
with the AMPTP, entered into a strike. The WGA announced on Sunday
24 September that it had reached a tentative agreement with AMPTP
on a new 2023 Minimum Basic Agreement ("MBA"), which is to say an
agreement in principle on all deal points, subject to drafting
final contract language and could end the writers' strike subject
to approval from various stakeholders.
It is due to this challenging market that the Board has had a
heightened level of interaction with Management, and as a result
with the Divisions, and is monitoring scenarios around the Group's
ability to meet its covenants and liquidity requirements. As part
of the Directors' consideration of the appropriateness of adopting
the going concern basis in preparing the half year 2023 financial
statements, a range of scenarios have been modelled through to the
end of December 2024. For this, the Directors have considered base
case projections and a number of severe, but plausible, downside
scenarios. The most material judgements made relate to the length
of the ongoing writers' and actors' strikes and the length of time
it will take to recover from both the strikes and the challenging
macroeconomic trading market conditions.
Borrowing facilities and financial position as at 30 June
2023
The Group has the following committed facilities (see note 9
"Analysis of net debt"):
- GBP200 million Multicurrency Revolving Credit Facility ("RCF")
with a syndicate of five banks until 14 February 2026;
- $55.0 million (GBP43.3 million) in total relating to two Term
Loans amortising at six monthly intervals until November 2024 and
January 2025 respectively. $25.0 million (GBP19.7 million) is
repayable in February 2024, $15.0 million (GBP11.8 million) in June
2024, and $15.0 million (GBP11.8 million) across November 2024 and
January 2025; and
- GBP0.6 million relating to an Italian government loan repayable from 2024 to 2027.
As at 30 June 2023:
- total committed facilities were therefore GBP243.9 million.
- net borrowings, being gross borrowings net of cash, were GBP181.0 million.
- liquidity was therefore GBP62.9 million, comprising GBP45.0
million unutilised RCF and GBP17.9 million of cash.
The Group's liquidity position as at 31 August 2023 is currently
materially in line with its base case forecast at c.GBP42
million.
The covenants against all of the above committed facilities,
except for the GBP0.6 million loan, which does not have covenants,
relate to Net debt to EBITDA ("leverage") and EBITA to net interest
("interest cover"), (see note 14 "Glossary on Alternative
Performance Measures from continuing operations ("APMs")) for the
definition of these measures as defined by the lending agreements),
which are tested at June and December each year, to be no higher
than 3.25x and at least 4.0x respectively ("Existing Covenants").
At 30 June 2023 these ratios were 2.9x and 5.9x respectively (31
December 2022: 2.1x and 9.8x respectively).
Given the current macroeconomic climate, destocking, the
uncertainty relating to ongoing strikes and the uncertainty
relating to the timing and pace of the market recovery, the Group
has been proactively discussing with its banks and considering
options available to manage these risks.
The Group has had and continues to have very good and
constructive dialogues with its lending banks who have been
supportive throughout. As a result of this relationship, the Group
has successfully managed to:
- obtain an extension of GBP35 million of its RCF from February
2025 to February 2026, which was confirmed on 19 July 2023 and
brings this commitment to be in line with the remainder of the RCF
which matures at the same time in February 2026 (the total RCF
facility is GBP200 million);
- amend the "Existing Covenants" in August 2023 for the December
2023 and June 2024 testing periods; and
- further amend, in September 2023, the covenants relating to
the December 2023 testing period.
The "New Covenants" are as follows:
- net debt:EBITDA to be no higher than 5.75x (December 2023) and 3.75x (June 2024); and
- EBITA:net interest of at least 2.0x (December 2023) and 3.25x (June 2024).
No restrictions apply to these New Covenants but new testing
dates for March 2024 (net debt:EBITDA to be no higher than 4.25x
and EBITA:net interest of at least 2.0x) and September 2024 (net
debt:EBITDA to be no higher than 3.75x and EBITA:net interest of at
least 3.25x) have been agreed alongside a requirement to prepare a
deleveraging plan by February 2024 if certain conditions have not
been met.
Severe but plausible downside assessment
The Directors have reviewed the trading performance of the Group
for the first half of 2023, as well as forecast scenarios as set
out below. Due to the challenges being faced by the Group,
including the strikes lasting longer than originally anticipated,
during August 2023 the Board requested a reassessment of the full
year forecast for both 2023 and 2024. The base forecast developed
following the reassessment acknowledges the continued pressures
facing the Group through the rest of 2023, however there is some
level of recovery forecast in Q4 2023. This is partly offset by
forecasting less destocking than H1 2023 coupled with a slight
market improvement in Q4 2023. The forecast sees improvement in
2024, resulting from a recovery from both the strikes ending and an
improvement to the overall worldwide economic environment.
Several plausible downside scenarios have been considered. The
material judgements considered in these scenarios are:
- the length and quantum of the recovery from the challenging trading conditions,
- determining when the strikes are likely to end; and
- estimating the recovery from the strikes, both in terms of the
length of the recovery and the quantum thereof.
The plausible downside scenarios consider the strikes ending at
various stages in 2023.
The Group's latest forecast and most of the plausible downside
scenarios modelled do not result in a breach of the New Covenants
in respect of December 2023 or June 2024 as well as at the new
testing dates of March 2024 and September 2024. These scenarios
show sufficient liquidity (cash headroom) to continue in
operational existence for the foreseeable future, being a period of
at least 12 months from the date of approval of these financial
statements.
The lowest point of cash headroom over the next 12 months within
the severe but plausible scenario would be at July 2024 . However,
there is a plausible downside scenario which would result in both
covenants being breached in one of the next couple of test dates
and whereby liquidity drops to GBPnil in July 2024. This scenario
assumes that the strikes last until December 2023, there is
continued destocking, and no improvement in macroeconomic
environment.
Mitigation plans
Resulting from the above, the Board is proactively managing the
options available to the Group to mitigate these risks. Some of the
key levers being discussed are detailed below:
- entering into a new committed lending facility;
- cost saving measures factored in the forecast and also exploring other potential options;
- disposal proceeds of discontinued operations;
- non-recourse factoring of receivables; and
- deleveraging the balance sheet through an equity raise.
Material uncertainty
To summarise, as a result of there being a plausible scenario
whereby covenants are breached, the Board has determined that a
material uncertainty exists that may cast significant doubt on the
Group's ability to continue as a going concern such that, it may be
unable to realise its assets and discharge its liabilities in the
normal course of business. The key judgements surrounding the
material uncertainty are the length and depth of the ongoing
writers' and actors' strikes, as well as the length of time over
how long it takes to recover once the strikes end, and the recovery
from the broader macroeconomic challenges faced by the Group.
2 Segment reporting
For the half year ended 30 June 2023
The Group has three reportable segments which are reported in a
manner that is consistent with the internal reporting provided to
the Chief Operating Decision Maker on a regular basis to assist in
making decisions on capital allocated to each segment and to assess
performance.
The Lightstream and Amimon businesses, part of the Creative
Solutions Division, have been classified as discontinued operations
in the current period. Their performance in this period and
comparative periods are therefore part of discontinued operations
as presented in note 12 and are excluded from segmental
performances below.
For the half year to 30 June
Media Solutions Production Creative Corporate Group
Solutions Solutions and unallocated
2023 2022 2023 2022 2023 2022 2023 2022 2023 2022
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------- -------- ------ ------ ------ ------ --------- -------- ------ ------
From continuing operations:
Analysis of revenue from external customers, by location of
customer
United Kingdom 6.9 8.6 5.7 7.1 1.8 2.6 - - 14.4 18.3
The rest of Europe 26.8 37.7 11.8 18.2 4.0 4.0 - - 42.6 59.9
North America 29.9 40.8 24.8 30.6 20.9 29.2 - - 75.6 100.6
Asia Pacific 15.5 20.0 7.2 8.3 3.8 4.2 - - 26.5 32.5
The rest of the
World 3.2 4.4 2.2 3.3 0.5 0.4 - - 5.9 8.1
-------- -------- ------ ------ ------ ------ --------- -------- ------ ------
Total revenue
from external
customers 82.3 111.5 51.7 67.5 31.0 40.4 - - 165.0 219.4
Inter-segment
revenue (1) 0.1 - 0.3 0.3 - 0.1 (0.4) (0.4) - -
-------- -------- ------ ------ ------ ------ --------- -------- ------ ------
Total revenue 82.4 111.5 52.0 67.8 31.0 40.5 (0.4) (0.4) 165.0 219.4
-------- -------- ------ ------ ------ ------ --------- -------- ------ ------
Adjusted operating
profit/(loss) 9.5 18.8 7.3 15.0 3.7 7.0 (5.3) (8.7) 15.2 32.1
Amortisation
of intangible
assets that are
acquired in a
business combination (2.0) (2.2) (0.1) (0.1) - (0.6) - - (2.1) (2.9)
Impairment of
fixed assets - - (1.7) - - - - - (1.7) -
Acquisition related
charges (0.1) (2.0) (0.4) - - - (0.2) - (0.7) (2.0)
Integration and
restructuring
costs (1.5) (0.1) (0.5) - (0.1) (0.5) - (0.3) (2.1) (0.9)
-------- -------- ------ ------ ------ ------ --------- -------- ------ ------
Operating profit/(loss) 5.9 14.5 4.6 14.9 3.6 5.9 (5.5) (9.0) 8.6 26.3
Net finance expense (5.5) (3.4)
-------- -------- ------ ------ ------ ------ --------- -------- ------ ------
Profit before
tax 3.1 22.9
Taxation (0.7) (4.6)
------ ------
Profit for the
period 2.4 18.3
-------- -------- ------ ------ ------ ------ --------- -------- ------ ------
Segment assets 215.3 241.8 115.0 112.5 46.2 52.9 12.0 10.4 388.4 417.6
Unallocated assets
Cash and cash
equivalents 17.9 31.3 17.9 31.3
Non-current tax
assets 3.1 3.0 3.1 3.0
Current tax assets 5.3 3.6 5.3 3.6
Deferred tax
assets 43.7 31.5 43.7 31.5
------ ------
Total assets 458.4 487.0
-------- -------- ------ ------ ------ ------ --------- -------- ------ ------
Segment liabilities 50.9 69.3 31.2 37.6 13.8 19.0 4.2 8.2 100.1 134.1
Interest-bearing
loans and borrowings 0.6 0.6 - - - - 192.9 186.8 193.5 187.4
Unallocated liabilities
Bank overdrafts 4.3 - 4.3 -
Current tax liabilities 13.8 18.7 13.8 18.7
Deferred tax
liabilities 7.2 6.1 7.2 6.1
------ ------
Total liabilities 318.9 346.3
-------- -------- ------ ------ ------ ------ --------- -------- ------ ------
(1) Inter-segment pricing is determined on an arm's length
basis. These are eliminated in the corporate and unallocated
column.
The Group's operations are located in several geographic
locations and sell products and services to external customers
around the world.
3 Operating expenses
Half year Half year Year to
to 30 June to 30 June 31 December
2023 2022 2022
GBPm GBPm GBPm
-------------------------------------------- ------------ ------------ -------------
Analysis of operating expenses
- Adjusting items in operating expenses(1) 6.1 5.7 14.8
- Other administrative expenses 24.3 30.1 59.1
-------------------------------------------- ------------ ------------ -------------
Adjusting items and administrative
expenses 30.4 35.8 73.9
Marketing, selling and distribution
costs 21.4 24.5 51.7
Research, development and engineering
costs 8.1 9.1 18.2
Total from continuing operations 59.9 69.4 143.8
-------------------------------------------- ------------ ------------ -------------
- Adjusting items in operating expenses(1) 49.9 4.5 11.1
- Other administrative expenses 1.6 1.6 2.8
-------------------------------------------- ------------ ------------ -------------
Adjusting items and administrative
expenses 51.5 6.1 13.9
Marketing, selling and distribution
costs 0.7 0.9 2.0
Research, development and engineering
costs 3.1 1.8 4.3
-------------------------------------------- ------------ ------------ -------------
Total from discontinued operations 55.3 8.8 20.2
-------------------------------------------- ------------ ------------ -------------
(1) Adjusting items in operating profit from continuing
operations are GBP7.0 million (2022: GBP6.2 million) of which
GBP6.1 million (2022: GBP5.7 million) are recognised in operating
expenses, GBP0.5 million (2022: GBP0.1 million) in cost of sales,
and GBP0.4 million (2022: GBP0.4 million) in finance expense.
Adjusting items in operating loss from discontinued operations
are GBP50.1 million (2022: GBP4.5 million) of which GBP49.9 million
(2022: GBP4.5 million) are recognised in operating expenses and
GBP0.2 million (2022: GBPnil) in finance expense.
4 Adjusting items
The Group presents alternative performance measures ("APMs") in
addition to its statutory results. These are presented in
accordance with the Guidelines on APMs issued by the European
Securities and Markets Authority ("ESMA").
APMs used by the Group and, where relevant, a reconciliation to
statutory measures are set out in the glossary to these financial
statements. Adjusting items are described below along with more
detail of the specific adjustment and the Group's rationale for the
adjustment.
The Group's key performance measures, such as adjusted operating
profit, exclude adjusting items.
The following are the Group's principal adjusting items when
determining adjusted operating profit:
Amortisation of acquired intangible assets and capitalised
development costs:
Acquired intangibles are measured at fair value, which takes
into account the future cash flows expected to be generated by the
asset rather than past costs of development. Additionally, acquired
intangibles include assets such as brands, know-how and
relationships which the Group would not normally recognise as
assets outside of a business combination. The amortisation of the
fair value of acquired intangibles is not considered to be
representative of the normal costs incurred by the business within
the Group on an ongoing basis. On an ongoing basis, the Group
capitalises development costs of intangible assets and the costs of
purchasing software. These intangible assets are recognised at cost
and the amortisation of these costs are included in adjusted
operating profit.
Impairment charges:
The impairment of disposed entities or groups of asset(s) shall
be adjusted for to ensure consistency between periods. No such
impairments existed in the prior year.
Acquisition related charges:
Earnout charges and retention bonuses agreed as part of the
acquisition:
Under IFRS 3, most of the Group's earnout charges and retention
bonuses are treated as post combination remuneration, although the
levels of remuneration generally do not reflect market rates and do
not get renewed as a salary (or other remuneration) might. The
Group considers this to be inconsistent with the economics
reflected in the deals because other consideration for the
acquisition is effectively included in goodwill rather than in the
Income Statement. Retention agreements are generally entered into
with key management at the point of acquisition to help ensure an
efficient integration.
Transaction costs:
Transaction costs related to the acquisition of a business do
not reflect its trading performance and so are adjusted to ensure
consistency between periods.
Effect of fair valuation of acquired inventory:
As part of the accounting for business combinations, the Group
measures acquired inventory at fair value as required under IFRS 3.
This results in the carrying value of acquired inventory being
higher than its original cost-based measure. The impact of the
uplift in value has the effect of increasing cost of sales thereby
reducing the Group's gross profit margin which is not
representative of ongoing performance.
Effect of fair valuation of property, plant and equipment:
Under IFRS 3, acquired fixed assets are measured at fair value.
This measure does not reflect the undepreciated cost of the
acquired asset from the perspective of the acquiree and as such
alters the depreciation cost from the Group's perspective after the
acquisition. This does not reflect the ongoing profitability of the
acquired business.
Grant payments in excess of the liability recognised on
acquisition:
These are costs relating to pre-acquisition funding activity. As
they are not relevant to understanding the in-year performance of
the business, they are adjusted to ensure consistency between
periods.
Integration and restructuring costs:
For an acquired business, the costs of integration, such as
termination of third-party distributor agreements, severance and
other costs included in the business's defined integration plan, do
not reflect the business's trading performance and so are adjusted
to ensure consistency between periods.
Restructuring and other associated costs arising from
significant strategy changes that are not considered by the Group
to be part of the normal operating costs of the business.
Finance expense - amortisation of loan fees on borrowings for
acquisitions:
Upfront borrowing fees related to funding for acquisitions do
not reflect the ongoing funding cost of the investment and so are
adjusted to ensure consistency between periods.
Other adjusting items:
- profit/(loss) on disposal of businesses;
- past service charges associated with defined benefit pensions,
such as gender equalisation of guaranteed minimum pension ("GMP")
for occupational schemes; and
- other significant initiatives not related to trading.
No such items arose in the current or prior year.
- In addition to the above, the current and deferred tax effects
of adjusting items are taken into account in calculating post-tax
APMs. In addition, the following are treated as adjusting items
when considering post tax APMs:
- significant adjustments to current or deferred tax which have
arisen in previous periods but are accounted for in the current
period; and
- the net effect of significant new tax legislation changes.
The APMs reflect how the business is measured and managed on a
day-to-day basis including when setting and determining the
variable element of remuneration of senior management throughout
the Group (notably cash bonus and the Long Term Incentive Plan
("LTIP")).
Adjusted operating profit, adjusted profit before tax and
adjusted profit after tax are not defined terms under IFRS and may
not be comparable with similarly titled profit measures reported by
other companies. They are not intended to be a substitute for IFRS
measures. All APMs relate to the current year results and
comparative periods where provided.
Half Half year Year to
year to to 30 31 December
30 June June 2022 2022
2023
GBPm GBPm GBPm
----------------------------------------- ----------- ------------- -------------
Continuing operations
Amortisation of intangible assets that
are acquired in a business combination (2.1) (2.9) (6.0)
Impairment of fixed assets (1.7) - -
Acquisition related charges (0.7) (2.0) (4.4)
Integration and restructuring costs (2.1) (0.9) (6.9)
----------------------------------------- ----------- ------------- -------------
Adjusting items in operating profit
from continuing operations (6.6) (5.8) (17.3)
----------------------------------------- ----------- ------------- -------------
Finance expense - amortisation of loan
fees on borrowings for acquisitions
and other interests (0.4) (0.4) (0.8)
----------------------------------------- ----------- ------------- -------------
Adjusting items in profit before tax
from continuing operations (7.0) (6.2) (18.1)
----------------------------------------- ----------- ------------- -------------
Discontinued operations
----------------------------------------- ----------- ------------- -------------
Amortisation of intangible assets that
are acquired in a business combination (2.1) (2.3) (4.9)
Impairment of intangible assets(1) (46.9) - -
Acquisition related charges (0.9) (2.2) (4.9)
Integration and restructuring costs - - (1.4)
----------------------------------------- ----------- ------------- -------------
Adjusting items in operating loss from
discontinued operations (49.9) (4.5) (11.2)
Finance expense - unwind of discount (0.2) - -
on liabilities and other interest
----------------------------------------- ----------- ------------- -------------
Adjusting items in profit before tax
from discontinued operations (50.1) (4.5) (11.2)
----------------------------------------- ----------- ------------- -------------
Adjusting items in profit before tax (57.1) (10.7) (29.3)
----------------------------------------- ----------- ------------- -------------
See note 7 "Earnings per share" for the above, net of tax.
(1) Following an impairment review just prior to their
classification as held for sale, intangible assets were impaired by
GBP46.9 million (2022: GBPnil) relating to Lightstream GBP18.9
million and Amimon GBP28.0 million.
5 Net finance expense
Half year Half year Year to
to 30 June to 30 31 December
2023 June 2022 2022
GBPm GBPm GBPm
------------------------------------------- ------------ ----------- -------------
Finance income
Fair value gain on interest rate swaps
designated as cash flow hedges 1.7 - 0.7
Other interest income 0.1 - -
Interest income on net defined benefit 0.1 - -
pension scheme
Net currency translation gains 0.8 0.7 2.3
------------------------------------------- ------------ ----------- -------------
2.7 0.7 3.0
Finance expense
Interest expense on lease liabilities (0.8) (0.7) (1.4)
Interest expense on interest-bearing
loans and borrowings(1) (7.4) (3.3) (8.3)
Interest expense on net defined benefit
pension scheme - (0.1) (0.1)
------------------------------------------- ------------ ----------- -------------
(8.2) (4.1) (9.8)
------------------------------------------- ------------ ----------- -------------
Net finance expense from continuing
operations (5.5) (3.4) (6.8)
------------------------------------------- ------------ ----------- -------------
Finance income - net currency translation
gains from discontinued operations - 0.1 0.1
------------------------------------------- ------------ ----------- -------------
Finance expense
Interest expense on lease liabilities - - (0.1)
Other interest expense (0.1) - -
Unwind of discount on liabilities (0.1) - -
------------------------------------------- ------------ ----------- -------------
(0.2) - (0.1)
------------------------------------------- ------------ ----------- -------------
Net finance expense from discontinued
operations (0.2) 0.1 -
------------------------------------------- ------------ ----------- -------------
(1) Interest expense on interest-bearing loans and borrowings of
GBP7.4 million (2022: GBP3.3 million) from continuing operations
includes an amount of GBP0.3 million (2022: GBP0.4 million)
relating to amortisation of loan fees on borrowings for
acquisitions. See note 4 "Adjusting items".
6 Taxation
Income tax expense is recognised at an amount determined by
multiplying the profit before tax for the interim reporting period
by management's best estimate of the weighted-average annual income
tax rate for the full financial year, adjusted for the tax effect
of certain items recognised in full in the interim period. As such,
the effective tax rate in the interim financial statements may
differ from management's estimate of the effective tax rate for the
annual financial statements.
Half Half year Year to
year to to 30 31 December
30 June June 2022 2022
2023
GBPm GBPm GBPm
The total taxation charge/(credit) in the Income Statement
is analysed as follows:
Summarised in the Income Statement
as follows:
Continuing operations
Current tax 1.4 4.2 8.5
Deferred tax (0.7) 0.4 (13.8)
---------------------------------------- --------- ----------- -------------
0.7 4.6 (5.3)
---------------------------------------- --------- ----------- -------------
Discontinued operations
Current tax - - -
Deferred tax (4.2) (1.1) (2.9)
---------------------------------------- --------- ----------- -------------
(4.2) (1.1) (2.9)
---------------------------------------- --------- ----------- -------------
Continuing and discontinued operations
Current tax 1.4 4.2 8.5
Deferred tax (4.9) (0.7) (16.7)
---------------------------------------- --------- ----------- -------------
(3.5) 3.5 (8.2)
---------------------------------------- --------- ----------- -------------
Adjusting items
Continuing operations
Current tax (0.5) (0.8) (1.7)
Deferred tax (1.2) (1.0) (18.6)
---------------------------------------- --------- ----------- -------------
(1.7) (1.8) (20.3)
---------------------------------------- --------- ----------- -------------
Discontinued operations
Current tax - - -
Deferred tax (3.6) (0.9) (0.4)
---------------------------------------- --------- ----------- -------------
(3.6) (0.9) (0.4)
---------------------------------------- --------- ----------- -------------
Continuing and discontinued operations
Current tax (0.5) (0.8) (1.7)
Deferred tax (4.8) (1.9) (19.0)
---------------------------------------- --------- ----------- -------------
(5.3) (2.7) (20.7)
---------------------------------------- --------- ----------- -------------
Before adjusting items
Continuing operations
Current tax 1.9 5.0 10.2
Deferred tax 0.5 1.4 4.8
---------------------------------------- --------- ----------- -------------
2.4 6.4 15.0
---------------------------------------- --------- ----------- -------------
Discontinued operations
Current tax - - -
Deferred tax (0.6) (0.2) (2.5)
---------------------------------------- --------- ----------- -------------
(0.6) (0.2) (2.5)
---------------------------------------- --------- ----------- -------------
Continuing and discontinued operations
Current tax 1.9 5.0 10.2
Deferred tax (0.1) 1.2 2.3
---------------------------------------- --------- ----------- -------------
1.8 6.2 12.5
---------------------------------------- --------- ----------- -------------
EU State Aid investigation
In October 2017, the European Commission (EC) opened a State Aid
investigation into the Group Financing Exemption in the UK
controlled foreign company ("CFC") rules (an exemption introduced
into the UK tax legislation in 2013). In common with other UK-based
international companies whose intra-group finance arrangements are
in line with current controlled foreign company rules, Videndum is
affected by this decision.
In June 2019, the UK government submitted an appeal to the EU
Commission against its decision. In common with a number of other
affected taxpayers, Videndum has also filed its own annulment
application.
In 2021 the Group received a Charging Notice and Interest
Charging Notice from HMRC, and accordingly paid GBP3.0 million. The
Group considers it probable that its appeal against the Charging
Notice and/or its annulment application against the European
Commission's ("EC") State Aid decision will be successful and as
such has recorded a non-current asset in relation to the payment on
the basis that it will ultimately be refunded.
It is considered possible, however, that the appeal and/or
annulment might be unsuccessful which would result in a liability
contingent on the outcome.
In 2022, the General Court of the European Union upheld the EC's
original decision to the Court of Justice of the European Union
("CJEU"). The applicants in both of the lead cases making
applications for annulment of which the Group's own annulment
application is currently stood behind have appealed against this
judgement. Notwithstanding this development, management remain of
the view that it is probable that its appeal and/or its annulment
application will be successful based on the technical facts of the
case.
The non-current tax asset at 30 June 2023 is GBP3.1 million
which represents the GBP3.0 million described above plus GBP0.1
million interest receivable.
Deferred Tax Assets
Deferred tax assets are recognised to the extent it is probable
that future taxable profit will be available against which the
unused tax losses, unused tax credits and deductible temporary
differences can be utilised in the relevant jurisdictions. As of 30
June 2023, Videndum has recognised deferred tax assets of GBP43.7
million (2022: GBP37.0 million)
7 Earnings per ordinary share
Earnings per share ("EPS") is the amount of post-tax profit
attributable to each share.
Basic EPS is calculated on the profit for the period divided by
the weighted average number of ordinary shares in issue during the
period.
Diluted EPS is calculated on the profit for the period divided
by the weighted average number of ordinary shares in issue during
the period, but adjusted for the effects of dilutive share
options.
The adjusted EPS measure is calculated based on adjusted profit
and is used by management to set performance targets for employee
incentives and to assess performance of the businesses.
The calculation of basic, diluted and adjusted EPS is set out
below:
Half year Half year
to 30 June to 30 June
2023 2022
GBPm GBPm
------------------------------------------------------ ------------ ------------
Profit for the financial period from continuing
operations
Add back adjusting items, all net of tax: 2.4 18.3
Amortisation of intangible assets that are
acquired in a business combination, net of
tax 1.6 2.2
Impairment of fixed assets, net of tax 1.3 -
Acquisition related charges, net of tax 0.5 1.7
Integration and restructuring costs, net of
tax 1.6 0.7
Finance expense - amortisation of loan fees
on borrowings for acquisitions and other interest,
net of tax 0.3 0.3
Current tax credit - (0.5)
------------------------------------------------------ ------------ ------------
Add back adjusting items from continuing operations,
all net of tax 5.3 4.4
------------------------------------------------------ ------------ ------------
Adjusted profit after tax from continuing
operations 7.7 22.7
------------------------------------------------------ ------------ ------------
Loss for the financial period from discontinued
operations
Add back adjusting items, all net of tax: (48.9) (5.4)
Amortisation of intangible assets that are
acquired in a business combination, net of
tax 1.8 1.9
Impairment of intangible assets 43.8 -
Acquisition related charges, net of tax 0.7 1.7
Finance expense - unwind of discount on liabilities 0.2 -
and other interest and other interest, net
of tax
------------------------------------------------------ ------------ ------------
Add back adjusting items from discontinued
operations, all net of tax 46.5 3.6
------------------------------------------------------ ------------ ------------
Adjusted loss after tax from discontinued
operations (2.4) (1.8)
------------------------------------------------------ ------------ ------------
(Loss)/profit for the financial period (46.5) 12.9
------------------------------------------------------ ------------ ------------
Adjusted profit after tax 5.3 20.9
------------------------------------------------------ ------------ ------------
Weighted average Adjusted earnings Earnings per
number of shares per share share
'000
----------------------------- ---------------------------------
Half year to Half year to Half year to
30 June 30 June 30 June
------------------------------ ----------------------------- ---------------------------------
2023 2022 2023 2022 2023 2022
Number Number pence pence pence pence
-------------------- --------------- ------------- ---------- ----------------- -------------- -----------------
From continuing
operations
Basic 46,485 46,003 16.6 49.3 5.2 39.8
Dilutive potential
ordinary shares 1,006 1,700 (0.4) (1.7) (0.1) (1.4)
Diluted 47,491 47,703 16.2 47.6 5.1 38.4
---------- --------------
From discontinued
operations(1)
Basic 46,485 46,003 (5.2) (3.9) (105.2) (11.8)
Dilutive potential - - - - - -
ordinary shares
Diluted 46,485 46,003 (5.2) (3.9) (105.2) (11.8)
---------- --------------
From continuing and
discontinued
operations
(2)
Basic 46,485 46,003 11.4 45.4 (100.0) 28.0
Dilutive potential
ordinary shares - - (0.2) (1.6) - (1.0)
Diluted 46,485 46,003 11.2 43.8 (100.0) 27.0
---------- --------------
(1) 1,006,000 (2022: 1,700,000) potential ordinary shares are
antidilutive for both statutory earnings per share and adjusted
earnings per share.
(2) Potential ordinary shares are antidilutive for half year to
30 June 2023 statutory earnings per share but 1,006,000 (2022:
1,700,000) are dilutive for the purposes of adjusted earnings per
share and half year to 30 June 2022 statutory earnings per
share.
8 Employee benefit asset
The Group has employee benefit schemes in the UK, Italy,
Germany, Japan and France. In the UK it is a defined benefit scheme
which was closed to future accruals with effect from 31 July
2010.
The UK defined benefit scheme is in an actuarial surplus
position of GBP4.7 million at 30 June 2023 (31 December 2022:
GBP3.9 million) measured on an IAS 19 "Employee Benefits" basis).
This surplus is as a result of actuarial movements during the
period, including an increase in the discount rate from 4.8% at 31
December 2022 to 5.2% at 30 June 2023. The surplus has been
recognised on the basis that the Group has an unconditional right
to a refund, assuming the gradual settlement of Scheme liabilities
over time until all members have left the Scheme.
9 Analysis of net debt
The table below analyses the Group's components of net debt and
their movements in the period:
Interest Leases Liabilities Other Half year
bearing from financing Cash to 30
loans sub-total and cash June 2023
and borrowings equivalents(2)
(1)
GBPm GBPm GBPm GBPm GBPm
---------------------- ------------------- --------------- ----------------- ------------------- ----------------
Opening at 1 Jan 2023 (174.5) (34.8) (209.3) 15.8 (193.5)
Other cash flows - - - (22.5) (22.5)
Business combinations - - - - -
Repayments 62.8 3.5 66.3 (66.3) -
Borrowings (85.7) - (85.7) 85.7 -
Leases entered into
during the year - (6.8) (6.8) - (6.8)
Leases - early
termination - 0.1 0.1 - 0.1
Fees incurred - - - - -
Amortisation of fees (0.6) - (0.6) - (0.6)
Foreign exchange
differences 4.5 1.3 5.8 0.9 6.7
Discontinued
operations - 0.5 0.5 - 0.5
Closing at 30 June
2023 from continuing
operations (193.5) (36.2) (229.7) 13.6 (216.1)
---------------------- ------------------- --------------- ----------------- ------------------- ----------------
(1) Interest bearing loans and borrowings are stated after
deduction of unamortised loan fees of GBP1.1 million (31 December
2022: GBP1.7 million, 30 June 2022: GBP2.0 million).
(2) Other cash and cash equivalents include bank overdrafts of
GBP4.3 million.
Interest bearing Leases Liabilities from Other Year to 31
loans and financing Cash and cash December 2022
borrowings sub-total equivalents
GBPm GBPm GBPm GBPm GBPm
------------------- ------------------ -------------- ------------------- ------------------- -------------------
Opening at 1 Jan
2022 (122.8) (30.3) (153.1) 7.9 (145.2)
Other cash flows - - - (24.3) (24.3)
Business
combinations - (4.4) (4.4) 0.2 (4.2)
Repayments 93.8 6.4 100.2 (100.2) -
Borrowings (130.3) - (130.3) 130.3 -
Leases entered
into during the
year - (4.8) (4.8) - (4.8)
Leases - early
termination - 0.6 0.6 - 0.6
Fees incurred 1.0 - 1.0 - 1.0
Amortisation of
fees (1.3) - (1.3) - (1.3)
Foreign currency (14.9) (2.3) (17.2) 1.9 (15.3)
Closing at 31
December 2022 (174.5) (34.8) (209.3) 15.8 (193.5)
------------------- ------------------ -------------- ------------------- ------------------- -------------------
Interest Leases Liabilities Other Half
bearing from financing Cash year to
loans sub-total and cash 30 June
and borrowings equivalents 2021
GBPm GBPm GBPm GBPm GBPm
------------------------------ ----------------- -------- ----------------- -------------- ----------
Opening at 1 Jan 2022 (122.8) (30.3) (153.1) 7.9 (145.2)
Other cash flows - - - (25.8) (25.8)
Business combinations - (4.4) (4.4) 0.2 (4.2)
Repayments 27.5 3.3 30.8 (30.8) -
Borrowings (79.8) - (79.8) 79.8 -
Leases entered into
during the year - (4.1) (4.1) - (4.1)
Leases - early termination - 0.2 0.2 - 0.2
Fees incurred 0.5 - 0.5 - 0.5
Amortisation of fees (0.7) - (0.7) - (0.7)
Foreign exchange differences (12.5) (2.3) (14.8) - (14.8)
------------------------------ ----------------- -------- ----------------- -------------- ----------
Closing at 30 June
2022 (187.8) (37.6) (225.4) 31.3 (194.1)
------------------------------ ----------------- -------- ----------------- -------------- ----------
On 14 February 2020, the Group signed a new GBP165.0 million
five-year (with one optional one-year extension) multicurrency RCF
with a syndicate of five banks. On 12 November 2021, the Group
signed an amendment and restatement agreement to change the
underlying benchmark from LIBOR to the relevant risk-free rates
(SONIA, SOFR, TONA), due to the cessation of LIBOR on 31 December
2021. The one-year extension was agreed with four syndicate banks
in January 2022 and the fifth syndicate bank extended in July 2023,
increasing the RCF maturity to 14 February 2026. In December 2022,
a GBP35.0 million accordion was agreed with four syndicate banks,
resulting in the total commitments increasing to GBP200 million.
The Group was utilising 78% of the RCF as at 30 June 2023. Under
the terms of the RCF the Group expects to and has the discretion to
roll over the obligation for at least 12 months from the balance
sheet date, and as a result, these amounts are reported as
non-current liabilities in the balance sheet.
On 14 November 2021, the Group signed a new US$53.0 million
(GBP43.8 million) three-year amortising Term Loan with a syndicate
of four banks to facilitate the acquisition of Savage. This
facility will expire on 14 November 2024. Following the payment of
25% of the original amount during 2022 and 20% in June 2023, the
outstanding balance of this Term Loan was US$29.1 million (GBP22.9
million) as at 30 June 2023. A further 25% of the original amount
is due in February 2024, 15% due in June 2024 and the remaining 15%
due November 2024.
On 7 January 2022, the Group signed a new US$47.0 million
(GBP38.8 million) three-year amortising Term Loan with a syndicate
of four banks to facilitate the acquisition of Audix. This facility
will expire on 7 January 2025. Following the payment of 25% of the
original amount during 2022 and 20% in June 2023, the outstanding
balance of this Term Loan was US$25.9 million (GBP20.4 million) as
at 30 June 2023. A further 25% of the original amount is due in
February 2024, 15% due in June 2024 and the remaining 15% due
January 2025.
Two financial covenants, Net Debt to EBITDA ("leverage") and
EBITA to net interest ("interest cover"), (see note 14 "Glossary on
Alternative Performance Measures from continuing operations
("APMs")) for the derivation of these measures as defined by the
lending agreements, are applicable for the RCF and term loans.
These are tested at June and December each year, to be no higher
than 3.25x and at least 4.0x respectively ("Existing Covenants").
At 30 June 2023 these ratios were 2.9x and 5.9x respectively (31
December 2022: 2.1x and 9.8x respectively).
During August and September 2023, the Group has agreed "New
Covenants" with its lending banks that apply instead of the
Existing Covenants for the following testing periods: net
debt:EBITDA to be no higher than 5.75x (December 2023) and 3.75x
(June 2024); and EBITA:net interest of at least 2.0x (December
2023) and 3.25x (June 2024). No restrictions apply to these New
Covenants but new testing dates for March 2024 (net debt:EBITDA to
be no higher than 4.25x and EBITA:net interest of at least 2.0x)
and September 2024 (net debt:EBITDA to be no higher than 3.75x and
EBITA:net interest of at least 3.25x) have been agreed.
10 Derivative financial instruments
The fair value of forward exchange contracts and interest rate
swap contracts is determined by estimating the market value of that
contract at the reporting date. Derivatives are presented as
current or non-current based on their contracted maturity
dates.
Forward exchange contracts
The following table shows the forward exchange contracts in
place at the Balance Sheet date. These contracts mature in the next
eighteen months, therefore the cash flows and resulting effect on
the Income Statement are expected to occur within the next eighteen
months.
Nominal Weighted Nominal Weighted
amounts average amounts average
Currency as at exchange as at exchange
30 June rate of 30 June rate of
2023 contracts 2022 contracts
millions millions
---------------------------- ------------ ---------- ----------- ---------- -----------
Forward exchange contracts
(buy/sell)
GBP/USD forward exchange
contracts USD 18.3 1.20 26.6 1.28
EUR/USD forward exchange
contracts USD 41.1 1.04 33.3 1.11
GBP/EUR forward exchange
contracts EUR 7.6 1.14 25.3 1.16
GBP/JPY forward exchange
contracts JPY 144.0 154.0 27.0 156.1
EUR/JPY forward exchange
contracts JPY 263.0 137.0 246.6 130.4
CHF/GBP forward exchange
contracts CHF 0.5 1.11 - -
---------------------------- ------------ ---------- ----------- ---------- -----------
During the period ended 30 June 2023 a net gain of GBP0.4
million (2022: GBP0.2 million net loss) relating to forward
exchange contracts was reclassified to the Income Statement, to
match the crystallisation of the hedged forecast cash flows which
affects the Income Statement.
Interest rate swaps
The following table shows the interest rate swap contracts in
place at the Balance Sheet date. The interest is payable quarterly
on 31 March, 30 June, 30 September and 31 December.
Nominal Weighted Maturity Nominal
amounts average amounts
as at fixed as at
30 June rate(1) 30 June
2023 2022 millions
millions
Currency
------------------------------ ---------- ---------- --------- --------- -----------------
Interest rate swap contracts
USD Interest rate swaps
float (SOFR) to fix(2) USD 55.0 1.01% Sep-23 90.0
USD Interest rate swaps
float (SOFR) to fix(2) USD 35.0 4.89% Sep-23 -
GBP Interest rate swaps
float (SONIA) to fix GBP 47.0 1.74% Jan-25 37.0
------------------------------ ---------- ---------- --------- --------- -----------------
( (1) In addition to these fixed rates, the margin relating to
the interest swapped of the underlying Revolving Credit Facility or
the term loans continues to apply.
(2) The two USD swaps maturing in September 2023 will be
replaced by a $75m interest rate swap fixing at 5.19%, maturing 30
September 2024.
During the period ended 30 June 2023 a net gain of GBP1.7
million (2022: net loss of GBP0.2 million) relating to interest
rate swaps was reclassified to the Income Statement, to match the
crystallisation of the hedged forecast cash flows which affects the
Income Statement.
Fair value hierarchy
The carrying values of the Group's financial instruments
approximate their fair values.
The Group's financial instruments measured at fair value are
Level 2.
11 Share capital
Share capital as at 30 June 2023 amounted to GBP9.4 million.
During the period, the Group issued 12,977 shares as part of a
capitalisation issue to its shareholders. The capitalisation issue
increased the number of shares in issue from 46,585,333 to
46,598,310.
12 Subsequent events
Other than as described below, there were no events after the
Balance Sheet date that require disclosure.
On 14 February 2020, the Group signed a new GBP165.0 million
five-year (with one optional one-year extension) multicurrency RCF
with a syndicate of five banks. On 12 November 2021, the Group
signed an amendment and restatement agreement to change the
underlying benchmark from LIBOR to the relevant risk-free rates
(SONIA, SOFR, TONA), due to the cessation of LIBOR on 31 December
2021. The one-year extension was agreed with four syndicate banks
in January 2022 and the fifth syndicate bank extended in July 2023,
increasing the RCF maturity to 14 February 2026. In December 2022,
a GBP35.0 million accordion was agreed with four syndicate banks,
resulting in the total commitments increasing to GBP200
million.
The $25 million (GBP19.7 million) amortisation payment relating
to the two term loans is amended from December 2023 to February
2024. This amendment was agreed in September 2023.
During August and September 2023, the Group has agreed "New
Covenants" with its lending banks that apply instead of the
Existing Covenants for the following testing periods: net
debt:EBITDA to be no higher than 5.75x (December 2023) and 3.75x
(June 2024); and EBITA:net interest of at least 2.0x (December
2023) and 3.25x (June 2024). No restrictions apply to these New
Covenants but new testing dates for March 2024 (net debt:EBITDA to
be no higher than 4.25x and EBITA:net interest of at least 2.0x)
and September 2024 (net debt:EBITDA to be no higher than 3.75x and
EBITA:net interest of at least 3.25x) have been agreed.
13 Discontinued operations and non-current assets classified as
held for sale
Discontinued operations
In accordance with IFRS 5 "Non-current assets held for sale and
discontinued operations", the assets and liabilities of the
Lightstream and Amimon businesses which are part of the Creative
Solutions Division, and certain property, plant and equipment of
the Production Solutions division have been classified as a
disposal group held for sale within the period.
Discontinued operations are businesses that have been sold, or
which are held for sale.
The Group is focusing more tightly on the high-end professional
content creation market, where it has high market share, sales
channel expertise and compelling growth opportunities.
Consequently, the Board has decided to exit non-core markets,
specifically medical and gaming, to concentrate R&D investment
on the content creation market. As a result, whilst the Creative
Solutions Division as a whole remains core going forward, two
businesses (Lightstream and Amimon) were held for sale at 30 June
2023 and reported as discontinued operations.
Both Lightstream and Amimon have been classified as discontinued
operations in the current period. These operations meet the
definition as a discontinued operation due to them both being
separate major lines of business and are part of single coordinated
plan to dispose of.
The table below shows the results of the discontinued operations
which are included in the Condensed Consolidated Income Statement,
Condensed Consolidated Statement of Cash Flows and Condensed
Consolidated Balance Sheet respectively.
a) Income Statement - discontinued operations
Half year Half year Year to
to 30 June to 30 June 31 December
2023 2022 2022
Notes GBPm GBPm GBPm
------------------------------------------- ------ ------------ ------------ -------------
Revenue 4.9 4.2 8.7
Expenses (57.8) (10.8) (24.1)
------------------------------------------- ------ ------------ ------------ -------------
Operating loss (52.9) (6.6) (15.4)
------------------------------------------- ------ ------------ ------------ -------------
Comprising
* Adjusted operating loss (3.0) (2.1) (4.2)
* Adjusting items in operating loss 4 (49.9) (4.5) (11.2)
------------------------------------------- ------ ------------ ------------ -------------
Finance expense/(income) (0.2) 0.1 -
------------------------------------------- ------ ------------ ------------ -------------
Loss before tax (53.1) (6.5) (15.4)
------------------------------------------- ------ ------------ ------------ -------------
Comprising
* Adjusted loss before tax (3.0) (2.0) (4.2)
* Adjusting items in loss before tax 4 (50.1) (4.5) (11.2)
------------------------------------------- ------ ------------ ------------ -------------
Taxation 4.2 1.1 2.9
------------------------------------------- ------ ------------ ------------ -------------
Comprising taxation
on
- Taxation on adjusted
loss 0.6 0.2 2.5
- Adjusting items
in taxation 3.6 0.9 0.4
Loss after tax from discontinued
operations attributable to owners
of parent (48.9) (5.4) (12.5)
--------------------------------------------------- ------------ ------------ -------------
b) Statement of Cash Flows - discontinued operations
Half year Half year Year to
to 30 June to 30 31 December
2023 June 2022 2022
GBPm GBPm GBPm
Net cash used in operating activities (2.8) (1.4) (4.3)
Net cash used in investing activities (1.6) (2.8) (4.9)
Net cash from financing activities 4.4 4.2 9.2
------------------------------------------ ------------ ----------- -------------
Net cash used in discontinued operations - - -
------------------------------------------ ------------ ----------- -------------
c) Effect of the disposal group on the Group Balance Sheet
Half year to
30 June 2023
GBPm
--------------------------------------------------------------- --------------
Assets of the disposal group classified as held for sale
Intangible assets 5.4
Property, plant and equipment 3.6
Deferred tax assets 8.9
Inventories 1.6
Trade and other receivables 3.1
--------------
22.6
--------------------------------------------------------------- --------------
Liabilities of the disposal group classified as held for sale
Interest-bearing loans and borrowings -
Deferred tax liability -
Lease liabilities (0.5)
Trade and other payables (4.4)
Provisions (1.6)
--------------
(6.5)
--------------------------------------------------------------- --------------
14 Glossary on Alternative Performance Measures ("APMs")
The Group believes that these APMs, which are not considered to be a substitute for or superior
to IFRS measures, provide stakeholders with additional helpful information and enable an alternative
comparison of performance over time.
APM Closest equivalent Definition & Purpose
IFRS measure
--------------------- ----------------------------------------------------------------------------
The Group uses APMs to aid the comparability of information between reporting periods and
Divisions, by adjusting for certain items which impact upon IFRS measures, to aid the user
in understanding the activity taking place across the Group's businesses. APMs are used by
the Directors and Management for performance analysis, planning, reporting and incentive purposes.
Where relevant, further information on specific APMs is provided in each section below.
Income Statement measures from continuing operations
Adjusted gross Gross profit Calculated as gross profit before adjusting items.
profit
---------------------
Half year to 30 June Half year Year to 31
to 30 June December
---------------------
2023 2022 2022
GBPm GBPm GBPm
--------------------- --------------------- ------------ ----------------
Gross profit 68.5 95.7 190.7
Adjusting items in cost of sales 0.5 0.1 2.6
-------------------------------------------------------------- --------------------- ------------ ----------------
Adjusted gross profit 69.0 95.8 193.3
-------------------------------------------------------------- --------------------- ------------ ----------------
Adjusted gross None Calculated as adjusted gross profit divided by revenue.
profit margin
--------------------- ----------------------------------------------------------------------------
Adjusted Profit before tax Calculated as profit before tax, before net finance expense, and before
operating profit adjusting items. This
is a key management incentive metric.
Adjusting items include non-cash charges such as amortisation of intangible
assets that are
acquired in a business combination, and effect of fair valuation of
acquired inventory and
property, plant and equipment. Cash charges include items such as
transaction costs, earnout,
retention and deferred payments, and significant costs relating to the
integration of acquired
businesses.
The table below shows a reconciliation:
See note 4 "Adjusting items".
Half year to 30 June Half year Year to 31
to 30 June December
2023 2022 2022
GBPm GBPm GBPm
--------------------- --------------------- ------------ ----------------
Profit before tax 3.1 22.9 40.1
Net finance expense 5.5 3.4 6.8
Adjusting items in operating profit 6.6 5.8 17.3
-------------------------------------------------------------- --------------------- ------------ ----------------
Adjusted operating profit 15.2 32.1 64.2
-------------------------------------------------------------- --------------------- ------------ ----------------
Adjusted None Calculated as adjusted operating profit divided by revenue. Progression in
operating profit adjusted operating
margin margin is an indicator of the Group's operating efficiency.
--------------------- ----------------------------------------------------------------------------
Adjusted Operating Calculated as operating expenses before adjusting items.
operating expenses
expenses
---------------------
The table below shows a reconciliation:
See note 3 "Operating expenses".
Half year to 30 June Half year Year to 31
to 30 June December
2023 2022 2022
GBPm GBPm GBPm
--------------------- --------------------- ------------ ----------------
Operating expenses 59.9 69.4 143.8
Adjusting items in operating expenses (6.1) (5.7) (14.8)
-------------------------------------------------------------- --------------------- ------------ ----------------
Adjusted operating expenses 53.8 63.7 129.0
-------------------------------------------------------------- --------------------- ------------ ----------------
Adjusted net None Calculated as finance expense, less finance income, and less amortisation
finance of loan fees and
income/(expense) loan transaction costs on borrowings for acquisitions and other interest.
The table below shows a reconciliation:
Half year to 30 June Half year Year to 31
2023 to 30 June December
2022 2022
GBPm GBPm GBPm
--------------------- --------------------- ------------ ----------------
Finance expense (8.2) (4.1) (9.8)
Finance income 2.7 0.7 3.0
Adjusting finance expense - amortisation of loan fees and
loan transaction costs on borrowings
for acquisitions and other interest 0.4 0.4 0.8
-------------------------------------------------------------- --------------------- ------------ ----------------
Adjusted net finance expense (5.1) (3.0) (6.0)
-------------------------------------------------------------- --------------------- ------------ ----------------
Adjusted profit Profit before Calculated as profit before tax, before adjusting item. This is a key
before tax tax management incentive
metric.
---------------------
See Condensed Consolidated Income Statement and note 13 "Discontinued operations and non-current
assets classified as held for sale" for a reconciliation.
---------------------------------------------------------------------------------------------------------------------
Adjusted profit Profit after Calculated as profit after tax before adjusting items.
after tax tax
---------------------
See Condensed Consolidated Income Statement and note 13 "Discontinued operations and non-current
assets classified as held for sale" for a reconciliation.
---------------------------------------------------------------------------------------------------------------------
Adjusted basic Basic earnings per Calculated as adjusted profit after tax divided by the weighted average
earnings per share number of ordinary
share shares outstanding during the period. This is a key management incentive
metric.
---------------------
See note 7 "Earnings per share" for a reconciliation.
---------------------------------------------------------------------------------------------------------------------
Cash Flow measures from continuing operations
Free cash flow Net cash from Net cash from operating activities after proceeds from the sale of
operating activities property, plant and equipment
and software, purchase of property, plant and equipment, and capitalisation
of software and
development costs. This measure reflects the cash generated in the period
that is available
to invest in accordance with the Group's capital allocation policy.
See "adjusted operating cash flow" below for a reconciliation.
--------------------- ----------------------------------------------------------------------------
Adjusted Net cash from Free cash flow before payment of interest, tax, restructuring and
operating cash operating activities integration costs, and transaction
flow costs relating to the acquisition of businesses. This is a measure of the
cash generation
and working capital efficiency of the Group's operations. Adjusted
operating cash flow as
a percentage of adjusted operating profit is a key management incentive
metric.
Half year to 30 June Half year Year to 31
to 30 June December
2023 2022 2022
GBPm GBPm GBPm
Profit for the period from continuing operations 2.4 18.3 45.4
Add back:
Taxation and net finance expense 6.2 8.0 1.5
Adjusting items 6.6 5.8 17.3
-------------------------------------------------------------- --------------------- ------------ ----------------
Adjusted operating profit 15.2 32.1 64.2
-------------------------------------------------------------- --------------------- ------------ ----------------
Depreciation excluding effect of fair valuation of property,
plant and equipment 7.2 7.1 14.6
Amortisation of capitalised software and development costs 3.3 2.8 5.9
Adjusted working capital movement (1) (4.4) (8.7) (18.8)
Adjusted provision movement (1) (0.1) (0.4) (0.8)
Other:
- Net loss on 0.2 - -
disposal of
property, plant and
equipment and
software
- Fair value (gains)/losses on derivative financial
instruments (0.3) 0.2 (0.1)
- Foreign exchange losses - 0.3 0.6
- Share-based payment charges 0.8 3.6 6.9
- Proceeds from sale 0.1 - -
of property, plant
and equipment and
software
- Purchase of property, plant and equipment (1.9) (3.2) (7.0)
- Capitalisation of software and development costs (5.9) (3.5) (8.3)
-------------------------------------------------------------- --------------------- ------------ ----------------
Adjusted operating cash flow 14.2 30.3 57.2
Interest paid (6.2) (4.3) (9.3)
Tax paid (4.8) (1.0) (7.2)
Payments relating
to:
Restructuring and integration costs (3.3) (0.5) (2.0)
Earnout and retention bonuses (3.7) (0.3) (0.3)
Transaction costs (0.6) (0.8) (1.4)
-------------------------------------------------------------- --------------------- ------------ ----------------
Free cash flow (4.4) 23.4 37.0
Proceeds from sale (0.1) - -
of property, plant
and equipment and
software
Purchase of property, plant and equipment 1.9 3.2 7.0
Capitalisation of software and development costs 5.9 3.5 8.3
-------------------------------------------------------------- --------------------- ------------ ----------------
Net cash from operating activities 3.3 30.1 52.3
-------------------------------------------------------------- --------------------- ------------ ----------------
(1) See "adjusted working capital movement" and "adjusted provision
movement" below for a
reconciliation.
--------------------- ----------------------------------------------------------------------------
Adjusted working None The adjusted working capital movement excludes movements in provisions, and
capital movement movements relating
to adjusting items.
---------------------
Half year to 30 June Half year Year to 31
to 30 June December
---------------------
2023 2022 2022
GBPm GBPm GBPm
--------------------- --------------------- ------------ ----------------
Increase in inventories (1.0) (12.2) (7.4)
Decrease/(increase) in receivables 12.2 (1.6) (4.9)
(Decrease)/increase in payables (19.3) 4.8 (4.8)
-------------------------------------------------------------- --------------------- ------------ ----------------
Increase in working capital, excluding provisions (8.1) (9.0) (17.1)
Deduct inflows from
adjusting charges:
Effect of fair valuation of acquired inventory (0.1) (0.1) (0.5)
Add back following
outflows:
Adjustments for integration and restructuring costs,
transaction costs relating to acquisition
of businesses, and earnout and retention bonuses 3.8 0.4 (1.2)
-------------------------------------------------------------- --------------------- ------------ ----------------
Adjusted working capital movement (4.4) (8.7) (18.8)
-------------------------------------------------------------- --------------------- ------------ ----------------
Adjusted Increase/(decrease) The adjusted provisions movement excludes movements relating to adjusting
provisions in provisions items.
movement
---------------------
Half year to 30 June Half year Year to 31
to 30 June December
---------------------
2023 2022 2022
GBPm GBPm GBPm
--------------------- --------------------- ------------ ----------------
(Decrease)/increase in provisions (1.5) (0.1) 1.0
Adjustments for integration and restructuring costs 1.4 (0.3) (1.8)
-------------------------------------------------------------- --------------------- ------------ ----------------
Adjusted provision movement (0.1) (0.4) (0.8)
-------------------------------------------------------------- --------------------- ------------ ----------------
Other measures from continuing operations
Return on capital None ROCE is calculated as annual adjusted operating profit for the last 12
employed (ROCE) months divided by the
average total assets (excluding defined benefit pension asset and deferred
tax assets)), current
liabilities (excluding current interest-bearing loans and borrowings), and
non-current lease
liabilities.
The average is based on the opening and closing position of the 12 month
applicable period.
---------------------
12 months ended 12 months 12 months ended
30 June ended 31 December
30 June
---------------------
2023 2022 2022
GBPm GBPm GBPm
--------------------- --------------------- ------------ ----------------
Adjusted operating profit for the last 12 months 47.3 58.2 64.2
Opening capital employed 302.9 155.9 181.5
Total assets 458.4 483.0 479.7
Current liabilities (115.2) (143.6) (140.3)
-------------------------------------------------------------- --------------------- ------------ ----------------
Total assets less current liabilities 343.2 339.4 339.4
Less defined benefit asset (4.7) (2.6) (3.9)
Less deferred tax assets (43.7) (31.5) (43.5)
Add the current portion of interest-bearing liabilities 30.7 28.6 36.0
Less non-current lease liabilities (30.5) (31.0) (28.5)
-------------------------------------------------------------- --------------------- ------------ ----------------
Closing capital employed 295.0 302.9 299.5
Average capital employed 299.0 229.4 240.5
-------------------------------------------------------------- --------------------- ------------ ----------------
ROCE % 15.8% 25.4% 26.7%
-------------------------------------------------------------- --------------------- ------------ ----------------
Constant currency None Constant currency variances are derived by calculating the current year
amounts at the applicable
prior year foreign currency exchange rates, excluding the effects of
hedging in both years.
Revenue growth is presented on a constant currency basis as this best
represents the impact
of volume and pricing on revenue growth.
--------------------- ----------------------------------------------------------------------------
Organic growth None Organic growth is the growth achieved year-on-year from existing business,
and not from new
mergers and acquisitions.
--------------------- ----------------------------------------------------------------------------
Cash conversion None Calculated as adjusted operating cash flow divided by adjusted operating
profit. This is a
key management incentive metric and is a measure used within the Group's
incentive plans.
--------------------- ----------------------------------------------------------------------------
Adjusted EBITDA None Calculated as adjusted operating profit for the last 12 months before
depreciation of tangible
fixed assets and amortisation of intangibles (other than those already
excluded from adjusted
operating profit).
The table below shows a reconciliation:
----------------------------------------------------------------------------
12 months ended 12 months 12 months ended
30 June ended 31 December
30 June
2023 2022 2022
GBPm GBPm GBPm
--------------------- --------------------- ------------ ----------------
Adjusted operating profit for the last 12 months 47.3 58.2 64.2
Add back depreciation excluding effect of fair valuation of
property, plant and equipment 14.7 13.8 14.6
Add back amortisation of intangible assets 11.6 9.3 11.9
Less amortisation of acquired intangible assets (5.2) (4.3) (6.0)
-------------------------------------------------------------- --------------------- ------------ ----------------
Adjusted EBITDA 68.4 77.0 84.7
-------------------------------------------------------------- --------------------- ------------ ----------------
Covenant EBITDA None Calculated as adjusted EBITDA for the last 12 months before share based
payment charge, and
after interest income/(expense) unrelated to gross borrowings
The table below shows a reconciliation:
12 months ended
30 June
2023
GBPm
--------------------- --------------------- ------------ ----------------
Adjusted EBITDA for the last 12 months 68.4
Add back share based payment charge 4.1
Add interest income unrelated to gross borrowings 2.1
-------------------------------------------------------------- --------------------- ------------ ----------------
Covenant EBITDA 74.6
-------------------------------------------------------------- --------------------- ------------ ----------------
(1) See "Interest income/(expense) unrelated to gross borrowings" below for
a reconciliation.
--------------------- ----------------------------------------------------------------------------
Covenant EBITA None Calculated as Covenant EBITDA for the last 12 months less depreciation of
tangible fixed assets
and amortisation of intangibles (other than those already excluded from
adjusted operating
profit).
The table below shows a reconciliation:
----------------------------------------------------------------------------
12 months ended
30 June
2023
GBPm
--------------------- --------------------- ------------ ----------------
Covenant EBITDA for the last 12 months 74.6
Less depreciation excluding effect of fair valuation of
property, plant and equipment (14.7)
-------------------------------------------------------------- --------------------- ------------ ----------------
Covenant EBITA 59.9
-------------------------------------------------------------- --------------------- ------------ ----------------
Interest None This is interest income/(expense) on net defined benefit pension scheme,
income/(expense) currency translation
unrelated to gains/(losses), other interest income/(expense), and amortisation of loan
gross borrowings fees on borrowings
excluding those on borrowings for acquisitions.
12 months ended
30 June
2023
GBPm
Interest income on net defined benefit pension scheme 0.1
Net currency translation gains 2.4
Other interest income 0.1
Amortisation of loan fees and loan transaction costs on
borrowings (1.2)
Less amortisation of loan fees and loan transaction costs on
borrowings for acquisitions 0.7
-------------------------------------------------------------- --------------------- ------------ ----------------
Interest income unrelated to gross borrowings 2.1
-------------------------------------------------------------- --------------------- ------------ ----------------
Covenant net None Calculated as adjusted net finance income/(expense)(1) for the last 12
interest months less interest
income/(expense) unrelated to gross borrowings (1)
12 months ended
30 June
2023
GBPm
Adjusted net finance expense for the last 12 months (8.1)
Less interest income unrelated to gross borrowings (2.1)
-------------------------------------------------------------- --------------------- ------------ ----------------
Covenant net interest (10.2)
-------------------------------------------------------------- --------------------- ------------ ----------------
(1) See "Adjusted net finance income/(expense)" and "Interest
income/(expense) unrelated
to gross borrowings" above for a reconciliation.
--------------------- ----------------------------------------------------------------------------
Net debt None See note 9 "Net debt" for an explanation of the balances included in net
debt, along with
a breakdown of the amounts.
--------------------- ----------------------------------------------------------------------------
Covenant net debt None Calculated as Net debt before unamortised loan fees on borrowings, and
before lease liabilities
from discontinued operations.
Half year
to 30 June
2023
GBPm
Net debt 216.1
Add back unamortised loan fees and loan transaction costs on
borrowings 1.1
Add back lease liabilities from discontinued operations 0.5
----------------------------------------------------------------------- ------------ ------------ ----------------
Covenant net debt 217.7
----------------------------------------------------------------------- ------------ ------------ ----------------
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END
IR DZGZLGKNGFZZ
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