Jaywing plc (LON:JWNG) today announced its interim results for the six months ended 30 September 2017 (“H1”).
Financial highlights from continuing operations
|
Period to 30 September 2017 £’000 |
Period to 30 September 2016 £’000 |
|
|
Gross profit* |
17,835 |
17,114 |
|
Adjusted EBITDA** |
1,454 |
2,132 |
|
Adjusted EBITDA margin*** |
8.2% |
12.5% |
|
Loss after tax |
(376) |
(384) |
|
Reported EPS |
(0.44)p |
(0.45)p |
|
Net debt |
8,083 |
3,398 |
* Revenue less direct costs of sale
** Before amortisation, share based charges, exceptional items and acquisition related costs
*** As a percentage of gross profit
Commenting on the results, Martin Boddy, Chairman of Jaywing plc, said: “Since the election was called in the Spring we have seen consumer-led businesses in the UK grapple with difficult trading conditions. In common with previous periods where there has been a squeeze on consumer spending and more general economic uncertainty, their first action has been to cut costs, including marketing costs. Over the past months, we have experienced the impact of these market pressures in particular parts of our business, alongside every other agency.
If things continue to follow the same cycle, then we can expect the remaining marketing spend to move towards the most accountable and cost effective digital marketing channels and then expect to see spend start to recover on the back of improved marketing performance. Indeed, digital marketing spend is still forecast to increase in the latest e-Marketer report. So as a specialist in data science led digital marketing, we can expect Jaywing to benefit from this in the medium term.
As a result of these market conditions, we saw a number of existing clients either delay or reduce their spend on marketing contracts. With limited exposure to growth in overseas markets to offset this, our UK H1 financial performance has been adversely impacted and we expect profits to be substantially below market expectations for the full financial year. We have continued to carefully monitor costs and have implemented mitigating actions in response.
Despite these factors, we are encouraged with the strong performance of our Media and Analysis segment during H1 due to the demand for our data science consultancy services. We have experienced strong growth in our Australian operation and have secured some excellent new business wins across the UK business, including a rapidly growing company in the UK financial services sector.
Furthermore, our industry profile continues to grow with Epiphany being named Search Agency of the Year at the UK Agency Awards in September. Jaywing was named Prolific North’s Large Integrated Agency of the Year and also won Silver at the industry’s most prestigious Cannes Corporate Awards in September.
Looking ahead to H2 we are optimistic that performance will improve, particularly in Q4 as this has historically been the period when we typically generate around a third of our profits for the entire year.”
CHIEF EXECUTIVE COMMENTARY
“Overall Gross Profit increased by 4% from the same period last year as a result of the acquisitions of Digital Massive and Bloom.
In the Media & Analysis segment, our data science consultancy has had a strong H1 largely as a result of demand for its risk proposition. However, within our performance marketing division, as a result of the adverse market conditions described above, we saw some clients reduce their monthly spend at renewal or in the case of five clients, cease trading. This impacted H1 performance despite strong Q1 sales. Our Australian operation is performing well. Looking ahead to H2, the reduction in client spend appears to be stabilising, whilst potential new clients remain cautious.
In May we launched Jaywing Intelligence and have since built a pipeline of sales opportunities. At the end of August we acquired a small social content agency and expect to see this contribute to a better H2.
In our Agency segment, we saw some excellent new business wins in brand led marketing. However, these have been somewhat overshadowed by the spend from one of our larger FMCG clients stalling since the election was called. We are now seeing spend from this client slowly recover as well as revenues flow from recent wins.
Our contact centre division also sits within the Agency segment. With a major client taking their contact centre function in house plus cost increases in relation to living wage, apprenticeship levy and rent following a rent review, its H1 performance was adversely impacted. Despite this, we are pleased to report that we have already replaced the client lost with another of similar significance to Jaywing and expect to benefit from this win in Q4.
In terms of cash, net debt has increased by £4.6m from the previous year end to £8.1m at 30 September 2017. £2.7m of this relates to planned earn-out payments with the rest due to capex on the new Sheffield office building and a negative movement in working capital from the strong debtors position at the previous year end. We expect net debt to reduce by this year end.
We continue to actively pursue our strategy to scale the business by looking at complementary acquisitions in other territories and the UK. Adding new capabilities to our successful Australian business is a priority as is adding new services to our online media and data science offerings”.
Rob Shaw
Jaywing PLC – Chief Executive Officer
20th November 2017
