Interim Results

Ebiquity plc

Interim Results for the six months ended 30 June 2024  

H1 revenue impact but more positive revenue visibility into H2, strategic delivery progressing well

Ebiquity plc ("Ebiquity" or the "Group"), a world leader in media investment analysis, announces interim results for the six months ended 30 June 2024 ("H1 2024").

Note 1: Throughout these interim results, management presents alternative performance measures to explain further the movements in our business. These are not statutory financial measures. Further information can be found in the Alternative Performance Measures section below.

Operational update

Short-term loss of momentum as a result of market headwinds and transformational actions

·    The overall Group result reflects factors which differ region-by-region

·    Significant Regional Variances:

o  North America:   Revenue flat year-on-year with growth targets not met due to client deferrals and some price competition, these headwinds were partially offset by cost management

o  UK & Ireland: Revenue down 7% on prior year due to ongoing budget cuts by clients in Media and client consolidation.  The 2023 level of Agency Selection work did not recur in 2024 as was expected

o  Continental Europe: 14% year-on-year decline in revenue is due to reduced major Agency Selection and Management business in Germany compared with a very strong H1 2023 and some price competition in France.  This was partly offset by strong a performance southern Europe, this performance is expected to continue in H2

·   Transformation: Good progress in transitioning core services to GMP365 and building sales and marketing capabilities. This will remain a continued focus through 2025 with further adoption of technology enabled products and processes following the 2024 completion of internal structural rationalisation

·   Media Performance: A revenue decline of 6% in Ebiquity's largest service line. However, H1 has also seen accelerated migration to the GMP platform in H1 2024, with revenue from GMP-enabled services of £6.2 million in the first half being more than double that of the equivalent period in 2023

·    Media Management: Revenue declined by 27%, impacted most significantly by a reduction in Agency Selection and Management

Current Trading and Outlook

·   The Group suffered a weak H1, which reflected a continuation of poor trading conditions from Q4 2023. In response, management has worked during this period to develop a deep pipeline of revenue opportunities which will be closed and delivered in H2 to make this very much a year of two halves

·   The pressure from macro conditions on clients' businesses continues to create some uncertainty in the advertising market but the Group's service lines offer clients both immediate and longer-term ROI improvements which mitigate these challenges

·    The combination of the Group's new business wins, renewals and upselling opportunities is expected to outweigh continuing market headwinds in H2 leading to a mid-single-digit revenue growth for H2 vs H2 in the prior year.  With one quarter left to go, the Group has secured revenue representing 88.5% of its full year expectations.  The full year on a constant currency basis should see revenue growth.

·   The Group's cost base is largely exacerbating the profit impact of revenue shortfalls. As revenue is expected to increase from early in H2, this operational leverage means that it will convert to profit at higher marginal rates.  H2 Adjusted Operating Profit is expected to reach double-digit growth over H2 2023

·   Net debt as at 30 June 2024 was £15.3 million with cash balances of £6.6 million and undrawn bank facilities of £8 million. The expectation is that net debt, having increased somewhat during the third quarter, will return to around the H1 level by year end.. The Group expects improved cash flow especially in Q4 2024 and Q1 2025 and has sufficient liquidity and headroom against its banking covenants.

Nick Waters, CEO, commented: 

Following a challenging first half of the year, with a fixed cost base compounded by competitive pressure felt in Continental Europe and the UK, we believe we have turned the corner.  A robust marketing and new business programme through Q2 has started to bear fruit with new wins and expanded assignments improving the outlook markedly for H2 where the Company will benefit from operational leverage as it scales up.  Whilst addressing the external difficulties experienced in the first half we have continued to make progress against our broader strategy to increase the use of technology in the delivery of our core services to clients and to bring new products to market. This, combined with a continued commitment to innovation, means the Company is now well set up for success into 2025 and beyond.

Details of presentations

The Company will be hosting a webcast presentation for analysts and institutional investors at 09:30 BST today. If you would like to register, please contact [email protected].

The Company will also be giving a presentation for investors via the Investor Meet Company platform on 2 October 2024 at 13.45 BST. Investors can sign up to Investor Meet Company for free and add to meet Ebiquity plc via: https://www.investormeetcompany.com/ebiquity-plc/register-investor. Investors who already follow Ebiquity plc on the Investor Meet Company platform will automatically be invited. 

Enquiries:

Ebiquity                                                                                                                               Via Camarco

Nick Waters, CEO                                                                                                                            

Camarco

Ben Woodford                                                                                                                  +44 (0)7990 653 341

Geoffrey Pelham-Lane                                                                                                    +44 (0)7733 124 226

Panmure Liberum (Financial Adviser, NOMAD & Broker)                            

Edward Mansfield / Dougie McLeod (Corporate Advisory)                                      +44 (0)20 7886 2500

Mark Murphy / Sam Elder (Corporate Broking)

Chief Executive's Review

Continued progress

Despite a disappointing H1, Ebiquity has continued to make good strategic progress during this period, preparing for improved delivery against our objectives and strengthening financial performance during the remainder of the year.

Following completion of the integration of Media Management Inc ("MMi") in the US, we look forward to revenue growth accelerating again in North America as the recent client prospecting drive is converted to new business.  We are also pleased to see an increased contribution from our portfolio of technology enabled solutions providing strong revenue growth in H1 and a steadily increasing share of our overall revenue across all regions.

In what have been particularly challenging market conditions since late 2023, our performance during H1 has not met our original expectations, but we have used the period to lay the foundations for growth, having expanded relationships with clients, progressed our business transformation programme, and continued to build scale in the US, the world's largest advertising market.

Delivering the operating metrics

We continue to make progress against our operating metrics.  The number of clients buying Digital Media Solutions is up over 20% vs prior year, and the number of clients buying two or more Service Lines is on track to match or exceed 2023.

As we onboard clients the data lakes in our closed environments have expanded significantly.  We now have over US$50bn worth of media investment data from 114 countries within GMP365.  The Media Data Vault now houses transaction data from over US$22bn of media investment, representing more than 3.5 trillion impressions. 

These data lakes provide us with the deepest and widest insight into media markets globally in our sector and act as a strong moat against competition seeking to offer directly comparable services.  They also offer the opportunity to train large language models on empirical data in a closed environment from which to develop new valuable services for clients.

A highly dynamic market

The threat of inflation and high interest rates appears less acute than a year ago, however the increased pressure on consumers, brand owners and marketing budgets, which they heralded, remains.

Although Ebiquity cannot claim immunity from the pressure on marketing budgets, such a volatile environment presents opportunities for us to help brand owners navigate this uncertainty and ensure they are maximising returns from their media investments.

Our role as a business intelligence partner for the global advertising industry means that we are well placed to exploit changing industry dynamics on behalf of clients. This includes transformative developments such as the shift from linear free-to-air broadcasting to advertising funded video on demand; and the implications of advertising delivered through Connected TV.  Retail Media has emerged quickly as a medium attracting very significant advertising investment with brand owners re-allocating budgets from other channels. 

Developments such as these, and the continuous change in consumer usage of social media and search platforms creates a difficult landscape for advertisers to maintain and improve the efficiency and effectiveness of their media investments - Enabling them to do so is Ebiquity's core expertise.

Driving Efficiency and Effectiveness

Against this background, our business transformation programme is progressing, with a considerable focus on increasing the use of automation to create a more efficient, scalable service and compelling experience for our clients. Following the 2022 acquisition of MediaPath, we employ GMP365, a high-quality data management platform licensed to us on terms which give effective exclusivity in our industry, providing us with a base from which to drive greater efficiency in the delivery of our services Group-wide.

The strategic intention is to transition the delivery of three core services on to the GMP365 platform.  We have also undertaken a fundamental change in our operating model, from end-to-end work managed by in-market teams developing and delivering customised products, to globally mutualised delivery and data-management teams supporting in-market client facing teams with globally consistent products.  This has concentrated the focus of local teams on winning business.

To effect these changes has required a re-design of the workflow processes for each service, and changes to the roles, responsibilities and reporting lines of approximately 60% of the Group's employees.  It has also required extensive training on use of the platform for a large portion of the workforce, and considerable stakeholder management with agencies and clients.  Additionally the Group has been running dual processes to ensure ongoing client service during the transition.

The planning and execution of this significant transformation over the last 12 months has drawn management time and attention to internal matters and a reduced focus on client-facing and growth activities.  We are now substantially through that process and expect to have fully completed all changes to the operating model by the end of the year.  We believe this will provide the strong foundations from which the Group can re-assert its externally focused and client-oriented proposition, together with a scalable operating model to drive profitable growth.

Despite the complexity of "lifting and shifting" a substantial element of the workforce, with the consequent internal disruption and distractions this brings, we have made good progress transitioning the delivery of two core services on to the platform.  Our initial priorities have been Agency Selection processes (Media Management) and ValueTrack (Media Performance).  We conducted 35 Agency Selection processes on the platform in H1 this year versus 31 last year, and this number continues to rise in H2.  These processes have however been somewhat smaller in scope than last year with an aggregate of 130 client/country processes managed against 183 in the same period of 2023. 

We have made further progress with the ValueTrack product.  50 clients have been activated in H1 across countries which equate, in aggregate, to 473 national implementations.  This compares to 30 clients and 307 implementations for the same period last year.  As we transition more clients, and they become familiar with the output, we will start to reduce the dual running of old and new processes paving the way for the cost reductions which will secure the financial return on this investment. 

The roll out of the third service, our new Benchmarking product, has commenced but is progressing more slowly than anticipated.  We are now working with 10 clients across 25 markets.  Some platform modifications are required to meet client needs in national markets before onboarding.  These are underway with first releases in September.  The plan had been to complete the transition of Benchmarking by the end of 2025.  This is now likely to be extended by 12 months, with the full transformation plan now expected to take four years rather than the initial three.

Building client partnership and coverage

With an extensive portfolio of large blue-chip clients our strategy is to cross-sell and up-sell more products and services in more geographies.  The soft Q4 of last year continued into Q1 requiring a robust marketing and new business drive against existing and prospective clients through Q2.  These efforts have started to bear fruit with increased scopes of work from major clients and new logos added.

A leading global entertainment business extended our relationship from Europe into their home US market for the first time in a winner-takes-all competitive tender.  Our US business has also increased assignments with a global spirits brand and national insurance company, as well as adding a renowned new economy brand as a new logo globally.  We are encouraged that we have re-gained competitiveness in the world's largest advertising market.

We have also started to see an improvement in Europe, winning a global remit for a large European consumer products company.  At the end of 2023 we had particularly suffered from client budget cuts and reductions in scopes of work in Italy, Germany and France.  We are pleased with the strong recovery in Italy which has successfully returned to growth.  Our Germany business has also stabilised and replaced revenue lost last year.  Our French business has found recovery more challenging, but difficulties in Media Management and Media Performance has been counter-balanced by strong growth in the Marketing Effectiveness unit.

International new business has gathered momentum in recent weeks with new wins from global alcoholic beverages, confectionery, pharmaceutical, entertainment and financial services clients that are all new to Ebiquity.

Further opportunities exist as we are currently engaged in 11 live multinational RFPs.  These include five major Middle Eastern brands as we start to gain traction in that region.  Our Asia Pacific management is reporting "unprecedented" demand.  These international new business opportunities are supplemented with a range of national activity.

Product Innovation underpinned by unrivalled market intelligence

We have continued to progress product improvements and innovations.

The evolution of Digital Media Solutions into a Digital Governance service has been well received in the marketplace with 20 additional clients on-boarded in H1.

We have also redefined our Connected TV product into a Streaming TV product which is delivering excellent value for the first wave of clients in the US and has now been introduced in the UK.  A new Retail Media product is now live with its first clients.

A unique selling point of Ebiquity is the depth and scale of our pools of media data.  We have continued to build these data lakes with over US$ 20bn of digital media transaction data in the Media Data Vault, and over US$ 50bn of multi-media transaction data in GMP365.  This provides the best independent view of the media markets anywhere in the world.  No competitor is able to understand the market price dynamics of media across thousands of channels and multiple audiences in over 100 markets worldwide.  For international and major national advertisers around the world Ebiquity is the only Company that can help improve the efficiency of media investments using such strong empirical evidence. 

Artificial Intelligence

AI offers significant opportunities for Ebiquity to enhance operational efficiency and to provide richer insights to our clients.

The media ecosystem is characterized by a plethora of naming conventions across systems. In programmatic media, for example, there can be hundreds of different names for the same Exchange. To generate the most accurate and relevant insights for our clients, this type of data must be categorized and harmonized - a complex and time-consuming task. To address this, we are building AI applications that help categorize and harmonize data more rapidly and at scale, allowing our consultants to focus on providing the best insights and deliverables for our clients in a shorter timeframe

We are also exploring the use of AI-generated narratives to enrich reports and accelerate the delivery of insights to our clients. Across all our AI initiatives, we prioritize data security, such as ensuring no data retention on external systems.

Outlook

Following a challenging first half of the year we believe we have turned the corner.  The effort put into a re-vitalised new business and marketing drive is bearing fruit.  A large number of new assignments has been won in Q2 leading to improving revenue in H2, with further new business opportunities pending.  The challenge has shifted from winning the business to delivering secured revenue and converting live opportunities.  There is a risk that some of this new revenue will slip from 2024 into Q1 2025.  The radical change to the operating model has now been implemented and the turbulence created is largely behind us.  The re-designed organisation, with technology roll out well advanced, and a commitment to innovation means the Company is now well set for scalable growth into 2025 and beyond.

Finance review

The comparatives below show the organic performance of the Group.  In April 2023, the Group disposed of Digital Balance Australia Pty Limited, a very small, non-core Australian consultancy business.  The results of this business have been disclosed as Discontinued Operations in 2023.

Revenue for the six months ended 30 June 2024 of £37.9 million was £2.8 million or 7% lower than the comparable period in 2023, with flat year-on-year revenue in North America and a 7% decline in UK & Ireland and 14% decline in Continental Europe as discussed above.

Revenue from Media Performance services declined by £1.6 million or 6%. This is 60% of the overall year-on-year revenue shortfall for the Group. Within this however, the period saw a more than doubling of revenue from GMP365 enabled services and continued growth in Digital Media Solutions as more clients have migrated to these technology- enabled products. This progress is expected to continue in H2.  One unintended consequence of the slower migration to these new services in UK and North America has been some dual running of costs (supporting both the legacy and the new models) during 2024 to date.

Media Management services revenue declined by £1.4 million or 27% in H1 2024 owing to lighter activity market-wide and large processes managed by Ebiquity last year not repeating.

Revenue from Marketing Effectiveness grew by £0.3 million (6%).

Adjusted operating profit (statutory operating profit excluding highlighted items) from continuing operations decreased by £3.6m to £2.3 million (2023: £6.0 million).  The adjusted operating profit margin decreased to 6.2% compared to 14.7% in the prior year.  £2.8m of this shortfall was the impact of lower revenues.  H1 costs were also slightly higher than in H1 2023 due to the dual running of both the legacy and the technology enabled delivery models.  Despite a reduction in highlighted items from £3.6m to £2.5m, there was a resulting statutory operating loss of £0.1m, compared to a statutory operating profit in the prior year of £2.4m.

Segmental Review of Performance

Revenue by geographical segment

This revenue segmentation will be the one used by the Group from 2024 onwards.  It captures the region in which the work was sold.  2023 regional revenue recognition was based on where the work was performed.  It is not practically possible to proforma adjust 2023 comparatives onto the new basis.  During this transition, a like-for-like comparison based on External revenue (invoiced/accrued by the region) is shown below:

External Revenue by geographical segment

Adjusted Operating Profit by geographical segment

The Group implemented a transformation program in UK&I and Continental Europe in May 2023 and rolled this out to the whole Group in July 2023.  The transformation impacted the internal recharging within the Group - the result being we do not have like-for-like reporting by region; only at Group level.  Pre-transformation, staff costs for delivery on projects by teams in other markets were booked as intercompany partner costs at an agreed fee between the markets.  Post-transformation, staff costs for delivery teams are all transferred to the centre then invoiced out of the centre at a mark-up to markets based on time sheet recording and they are classified within staff costs.

Highlighted items

Highlighted items comprise charges and credits which are highlighted in the income statement, where separate disclosure is considered appropriate in understanding the underlying performance of the business. These are used for the calculation of certain Alternative Performance Measures.

Amortisation and Impairment:

·    Amortisation of purchased intangibles decreased slightly in the period to £1.6m (2023 £1.7m) as a result of the China customer relationship becoming fully written down in January 2024. Purchased intangible assets include customer relationships of acquired entities, owned software, and MediaPath's GMP Licence asset.

·    In H1 June 2023 there was a credit of £0.1m for the movement in impairment of assets in Russia. 

Post-acquisition accruals and charges:

·    There were no such post-acquisition accruals and charges in H1 2024. The £0.3m charge in the prior period was the final element of the contingent consideration relating to the 2020 acquisition of Digital Decisions B.V., which was settled in May 2023.

Professional charges including acquisitions and aborted acquisitions:

·    The Company refinanced the loan facility in April 2024, incurring costs of £0.2m. Of this amount, £0.1m was a non-cash item being the write-off of the previous facility arrangement fee.

·    Acquisition related costs total £0.5m and relate to legal and professional fees for an aborted transaction. No further costs are expected to be incurred for this project.

·    A £0.6m credit has been recognised upon the re-assessment of the MMi earnout accrual. 

Reorganisation:

·    Costs of £0.7m were incurred as part of the ongoing process to transform and integrate the product portfolio, optimise the use of newly acquired technologies, move from a regional to a global delivery model together with transforming the finance operations.

·    Upon renewal the London office downsized to one floor. As part of this renewal the newly agreed settlement amount for dilapidations became less than the initial provision. This resulted in a credit of £0.1m being recognised for the excess provision.

Finance costs                  

Net finance costs decreased slightly from £1.0 million at 30 June 2023 to £0.8 million at 30 June 2024. This was predominantly driven by foreign exchange movements.

Taxation

The projected adjusted effective tax rate for the 2024 full year is 24.9%, which is lower than the 2023 full year adjusted effective tax rate of 26.6%, this reduction is due to the difference in the projection of where the profits are expected to be realised, which attract different tax rates around the world.   The projected highlighted effective tax rate for the 2024 full year of 5.4% is a reduction on the 2023 full year rate of 7.2%, this is due to the proportionally additional disallowable expenses in the current year.

Earnings per share

Adjusted basic earnings per share decreased from 2.94p at 30 June 2023 to 0.84p as at 30 June 2024. Additionally, adjusted diluted earnings per share decreased from 2.86p in the prior period to 0.81p. There was a statutory loss per share of 0.86p (2023: profit per share of 0.44p). Diluted earnings per share also decreased to a loss of 0.86p (2023: profit per share of 0.43p).

Dividend

No dividend has been declared for the six months ended 30 June 2024 (2023: £nil).

Statement of financial position and net assets

¹Net working capital comprises trade and other receivables, lease receivables, trade and other payables, accruals, provisions and contract liabilities (less the Digital Decisions post-date remuneration) and current tax assets and liabilities.

Net assets

Net assets at 30 June 2024 were £40.0 million, a decrease of £1.7 million from 31 December 2023. The key driver for this is the increase in net bank debt, which increased to £15.4 million. Loan borrowings remained the same as at 31 December 2023, however, the cash balance decreased by £3.5 million. This was a consequence of large one-off payments in highlighted items and increased contractor costs.

Working capital

Working capital increased to £10.7 million, up from £8.4 million at 31 December 2023. The decrease in net trade debtors was somewhat offset by the increase in accrued income. Accrued income is typically higher at interim reporting compared to year-end, as the structure of client contracts can result in billing upon project completion, which is often towards Q3 and Q4 for some clients. Debtor days has increased slightly from 69 days at 31 December 2023, to 72 days at 30 June 2024. Debtor days can fluctuate year-on-year depending on the billing profile of customers, with some European customers having extended credit terms.

Adjusted cash conversion

Adjusted cash from operations represents the cash flows from operations excluding the impact of highlighted items and discontinued businesses. The adjusted net cash inflow from operations in the 6-month period was £2.6m (2023: £4.7m), which represents a cash conversion ratio of 111% of adjusted operating profit.

Equity

During the six months to 30 June 2024, the number of ordinary shares in issue increased by 0.1 million to 140.5 million (2023: 140.4 million). The issuance of ordinary shares related solely to the exercise of employee share options.

Net debt and banking facilities

¹ Includes restricted cash of £0.9 million held in Ebiquity Russia (2023: £0.9m).

Bank borrowings are held jointly with Barclays and NatWest. On 25 April 2024, the revolving credit facility ('RCF') was extended for a further three-year period to 24 April 2027, on more favourable terms. The amended facility is for £30.0m, with no amortisation of the facility during the three-year period.

Quarterly covenants are applied, being interest cover >3.0x; adjusted leverage <2.5x; and adjusted deferred consideration leverage <3.5x.   The Group does not expect to have any compliance issues based on current projections.

The facility bears variable interest at the Barclays Bank SONIA rate plus margin, ranging from 2.25% to 2.75%. The margin rate depends on the Group's net debt to EBITDA ratio.

Net Debt increased from £12.0m at 31 December 2023 to £15.3m at 30 June 2024.  This was the result of lower revenues as noted above but also some one-time cash outflows during the period.  These included professional fees, reorganisation costs (as shown in Highlighted Items above) and property costs as the Group rationalised its London office space.  Cash flow naturally improves in Q4 and Q1 as seasonal revenues are collected.  Based on current projections, no liquidity issues are anticipated.

Alternative Performance Measures

In these results we refer to 'adjusted' and 'reported' results, as well as other non-GAAP alternative performance measures.

Further details of highlighted items are set out within the financial statements and the notes to the financial statements.

In the reporting of financial information, the Directors have adopted various alternative performance measures ('APMs'). The Group includes these non-GAAP measures as they consider them to be both useful and necessary to the readers of the financial statements to help understand the performance of the Group. The Group's measures may not be calculated in the same way as similarly titled measures reported by other companies and therefore should be considered in addition to IFRS measures. The APMs are consistent with how business performance is measured internally by the Group.

Alternative Performance Measures used by the Group are detailed in the table below:

A1: Reconciliation of net revenue

A2: Reconciliation of adjusted operating profit

A3: Reconciliation of operating profit margin

A4: Reconciliation of adjusted profit before taxation and adjusted profit after taxation

A5: Reconciliation of net debt

A6: Reconciliation of adjusted cashflow from operations

Interim Consolidated Income Statement

for the six months ended 30 June 2024

Interim Consolidated Statement of Financial Position

as at 30 June 2024                                                                   

Interim Consolidated Statement of Changes in Equity

for the six months ended 30 June 2024

Interim Consolidated Cash Flow Statement

for the six months ended 30 June 2024

Notes to the interim financial statements for the six months ended 30 June 2024

1.  Accounting Policies

Basis of preparation

The condensed consolidated interim financial statements for the six months ended 30 June 2024 have been prepared in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting'. These interim financial statements should be read in conjunction with the Group's Annual Report and Accounts for the year ended 31 December 2023, which have been prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 ('IFRS') and the applicable legal requirements of the Companies Act 2006.

The condensed consolidated interim financial statements have been prepared on a going concern basis. Whilst the Group has incurred a statutory loss for the 6 months to 30 June 2024, the Group continued to have sufficient headroom on all its covenants and projects that this will continue for the foreseeable future.  The Group meets its day-to-day working capital requirements through its cash reserves and borrowings, described in notes 8 and 10. As at 30 June 2024, the Group had cash balances of £6,565,000, (including restricted cash of £941,000) and undrawn bank facilities available of £8,000,000.

In assessing the going concern status of the Group and Company, the Directors have considered the Group's forecasts and projections, taking account of reasonably possible changes in trading performance and the Group's cash flows, liquidity, and bank facilities. The Directors have prepared a model to forecast covenant compliance and liquidity to 31 December 2025 that includes a base case and scenarios to form a severe but plausible downside case.

The base case assumes growth in revenue and EBITDA based on the Group's reforecast for the year ended 31 December 2024 and management projections for the year ended 31 December 2025.  The severe but plausible case assumes a downside adjustment to revenue of 10% throughout the period with only a 2% reduction in operating costs. Under this scenario, management is satisfied of covenant compliance throughout the going concern period.

The Directors consider that the Group and Company will have sufficient liquidity within existing bank facilities, to meet its obligations during the next 12 months and hence consider it appropriate to prepare the condensed consolidated interim financial statements on a going concern basis.

Following the Russian invasion of Ukraine, the Group has been reviewing the future of its subsidiary in Russia (Ebiquity Russia OOO) and has been in negotiations with a view to divesting its 75.01% shareholding in it.  In view of the uncertainty regarding this operation, an impairment provision was made in the previous year-end against the value of its assets in the Group balance sheet.  Its cash balances are also deemed to be restricted cash and totalled £0.9m at the end of the period. Details are provided in notes 3 and 8.

In the reporting of financial information, the Directors have adopted various alternative performance measures ('APMs'). The Group includes these non-GAAP measures as they consider them to be both useful and necessary to the readers of the financial statements to help understand the performance of the Group. The Group's measures may not be calculated in the same way as similarly titled measures reported by other companies and therefore should be considered in addition to IFRS measures. The APMs are consistent with how business performance is measured internally by the Group. Details of the APMs and their calculations are set in the relevant section above.

2.  Segmental reporting

In accordance with IFRS 8, the Executive Directors have identified the operating segments based on the reports they review as the chief operating decision-maker ('CODM') to make strategic decisions, assess performance and allocate resources. The definition of these segments is the regional operations.

Certain operating segments have been aggregated to form four reportable segments: UK & Ireland ("UK&I"), Continental Europe, North America and Asia Pacific ("APAC").

The Group's chief operating decision‑makers assess the performance of the operating segments based on revenue and adjusted operating profit. This measurement basis excludes the effects of non‑recurring expenditure from the operating segments such as restructuring costs and acquisition related costs. The measure also excludes the effects of recurring expenditure recorded to highlighted items such as equity‑settled share‑based payments, purchased intangible amortisation and transformation related costs. Interest income and expenditure are not allocated to segments, as this type of activity is driven by the central treasury function, which manages the cash position of the Group.

The segment information provided to the Executive Directors for the reportable segments for the period ended 30 June 2024 are as follows:

Revenue

Note that the below table shows served revenue for both periods.  Served revenue comprises external revenue of each segment plus intercompany revenue less intercompany partner costs.

This revenue segmentation will be the one used by the Group from 2024 onwards.  It captures the region in which the work was sold.  2023 regional revenue recognition was based on where the work was performed.  It is not practically possible to proforma adjust 2023 comparatives onto the new basis.  During this transition, a like-for-like comparison based on External revenue (invoiced/accrued by the region) is shown below:

External Revenue by geographical segment

Adjusted operating Profit and Operating Margin

The Group implemented a transformation program in UK&I and CE Europe in May 2023 and rolled this out to the whole Group in July 2023.  The transformation impacted the internal recharging within the Group - the result being we do not have like-for-like reporting by region; only at Group level.  Pre-transformation, staff costs for delivery on projects by teams in other markets were booked as intercompany partner costs at an agreed fee between the markets.  Post-transformation, staff costs for delivery teams are all transferred to the centre then invoiced out of the centre at a mark-up to markets based on time sheet recording and they are classified within staff costs.

A reconciliation of segment adjusted operating profit to total (loss)/profit before tax is provided below:                                                                                                                                                              

¹ Note that the staff costs line of this reconciliation has been broken out into two lines this year with the comparative re-presented accordingly.  This indicates that the year-on-year movement is derived from the delivery staff costs which arise from the transformation recharges in place.

² The local regions recharge relevant costs to the centre where a calculation is performed, and then the regions are now being charged back a marked up amount which gives rise to a profit in the centre.  This eliminates at Group level.

3.   Highlighted items

Highlighted items comprise charges and credits which are highlighted in the income statement because separate disclosure is considered relevant in understanding the underlying performance of the business.  These are used for the calculation of certain Alternative Performance Measures.  For further information and reconciliations please see the Alternative Performance Measures section above.  Cash items are defined as items for which a cash transaction has occurred in the period.  All other items are defined as non cash.

¹ Note that in the prior year interim statement there was one line for acquisition, integration and strategic costs which totalled £623,000.  This year, this line has been broken out into two lines; revaluation of earn out accruals and acquisition related costs, with the comparative re-presented accordingly. 

The share option charge reflects the expense for the period arising from the cost of share options granted at fair value, recognised over the vesting period. For the period ended 30 June 2024, a charge of £182,000 (30 June 2023: £307,000) was recorded. 

The amortisation charge for purchased intangible assets decreased slightly in the period to £1,603,000 (30 June 2023: £1,701,000) due to certain intangible assets becoming fully amortised in January 2024. These assets include customer relationships of acquired entities, owned software (MMi's Circle Audit system) and MediaPath's GMP licence asset.