Ebiquity plc (EBQ) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Ebiquity plc full year results investor presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. And I'd now like to hand you over to Alan Newman, CFO; and Nick Waters, CEO. Good afternoon to you both.

Good afternoon and welcome to our annual results presentation. My name is Nick Waters. Alan's to my side. We'll share the presentation. I will pass to Alan to talk through the numbers in a moment. But first of all, for those of you that are not familiar with us or maybe not so familiar with us, I'll just take a moment to explain who we are and what we do. So we describe ourselves as a world leader in media investment analysis. What does that mean? So advertisers spend very, very large sums of money buying media to communicate their message, and they buy that media through agencies. And they come to us to help them understand whether they're buying that media effectively and efficiently in comparison to other players in the market space. So our role is to help them drive efficiency, effectiveness, eliminate waste and create value from their very large media investments. It's a huge market. Totally, global advertising spend is around about USD 750 billion. But if you look at our primary target customer, which is the world's 100 largest advertisers, they themselves can spend in excess of $100 billion a year. So we have an opportunity to create significant value for them. We offer our services through 5 service lines. You can see on the bottom left corner of the screen there, Media Management, Media Performance, Marketing Effectiveness, Technology Advisory and Contract Compliance. And we are a neutral party which enables us to offer impartial objective advice. And by that, I mean, our own resource of revenue is from the brand owner. We don't take any revenue from any other parts of the media or advertising supply chain. We have over 450 specialists operating from 24 -- 21, sorry, offices around the world. And those obviously cover over 75% of the global advertising market. So we have a very, very comprehensive and independent view of the market. We analyze around about $55 billion of media spend in over 75 markets a year, and we analyze trillions of digital media impressions. The Contract Compliance division, it's called FirmDecisions, and that all is around about $40 billion of contract value annually. And over 70 of the world's top 100 advertisers are client sales. So that's an introduction to who we are. A quick summary of our performance in 2021. It was a strong recovery versus 2020. Clearly, 2020 was a difficult year. Our business was notably impacted by the COVID pandemic. So we're seeing a good recovery from that in '21. Both revenue and profitability were slightly ahead of management's expectations. So good performance that we're satisfied with. That was supported by both healthy new business wins but also good growth, solid growth from existing clients, and we managed our cost base in a prudent manner. Our digital revenue is ahead of plan, and the contribution, the profit contribution that makes is also ahead of plan. So the digital element of the strategy is performing well. And the recovery was very broad-based across the business. All business units in all regions grew in terms of a very good strong recovery everywhere. Asia is specifically the fastest followed by North America. So we ended the year in a very strong financial position. And just yesterday, we announced 2 acquisitions, which will accelerate our growth and the operating efficiencies in the business and our strategic journey. I'll pass to Alan now for the financial overview.

Thanks, Nick. So good afternoon, everybody. Our results for the year, which we announced on Wednesday were very similar to the trading update we gave in February. So we're not surprised at that point. Our revenue in 2021 was 13% up on the prior year at GBP 63 million, and that reflected a good business momentum across all our regions. So Continental Europe, Asia Pacific, America and the U.K., with Asia Pacific doing particularly well, growing by 23%, and America doing very well as well. And then quite a strong profit growth in the U.K., which is our largest market, it's more mature, where we've really been addressing the cost base. And all of those factors, particularly the overall revenue driver led us to come back into profit and generate underlying operating profit of GBP 4.7 million, which is a margin of 7.5%. That was better than originally expected this time last year with the initial analyst views. We get [ GBP 3.5 million ] upgraded at half year, and we're pleased to essentially have upgraded again at the final year-end. We are basically a cash-generative business. So it only converts about 100% of our profits into tax -- into cash, sorry, or thereabouts. But this year, we had a particularly strong cash inflow, probably really a phasing of working capital with strong data collections towards the year-end and some of our payables not being recorded in the case of January. That led to our net debt being GBP 4.8 million, which again was better than the analysts expected and significantly better than last year at GBP 3 million improvement, and that then shows the strength, improving strength of our balance sheet. In terms of operational highlights, what drove the revenue growth and profit performance, we had a number of new mandates, some of which have been identified last year when Accenture left the market, and we've won a number of new clients, including Daimler on this list here. And we have existing [ clients ] to view in that and Ferrero gave us more work this year than the previous year. Within that revenue, we also have a significant increase in revenue, about GBP 2.7 million increased to GBP 3.7 million from our Digital Media Solutions. These are the -- a range of solutions, specifically focusing on reporting the performance of -- our advertiser performance in their spend on digital media. And we bought a company called Digital Decisions in 2020, and this has automated service, data monitoring service which we have begun to roll out to a number of our clients with great success. It's also brought with it a number of other solutions which are being rolled out this year and indeed last year as well to provide a range of services targeting -- allowing advertisers to understand their digital media performance. Another highlight was that this year is a year was a number -- a large number of agency selections. After 2020, when some advertisers postponed this, and we managed 6 of the top 10 largest global and multinational selection processes. And that's on the public record. It's identified in trading media, which in itself is helpful to our profile. This is also helpful in securing follow-on work because if we run an agency selection process and help define the agency goals, then we often will have the tracking work performance from that to see whether or not the agency is delivering. Looking into this year, we started well in the first quarter. We're very much in line with our expectations in the first quarter with revenue growth coming through and a healthy pipeline and continue to have momentum looking ahead. We have -- we're also asked a question about the impact of industry economic changes, recession potentially and so inflation. And we're seeing some cost inflation amongst -- in staff while we're maintaining that at the moment. Well, we are managing to get some of our clients to increase their -- increase our prices to them rather to do that. And the more recent development in Ukraine have cast a shadow, shall we say, on our operation in Russia, which in last year accounted GBP 1 million of revenue and GBP 300,000 profit. That's all business done inside Russia for Russian-based clients. But given the development of the Ukraine, we are, as a Board of keeping the operations very much under review into turning its future. But we are positive about the outlook for FY '22 this year. And we do see definitely opportunities for continued growth and margin enhancement and which put us in a good stead for considering the acquisition that we announced this week. Just quickly highlighting a few points on the balance sheet, you'll see that we've highlighted here as a separate item rather strange accounting, which is that we have to treat the deferred consideration on Digital Decisions, which is due next year as a P&L item because it's related to the -- staying in the business of the founder and vendor, chief vendor, and therefore, it's a P&L charge rather than just going to balance sheet. Nonetheless, we've estimated that we expect to pay about GBP 12.5 million in that further consideration next year, and we've accrued GBP 7.9 million of that in the year in 2021. And so I'll also discuss net debt. That comprises gross cash of GBP 13 million and GBP 18 million bank loan as at the end of -- drawn down as at the end of last year. As I mentioned before, we have strong cash flow. Total cash flow from operations was GBP 11.8 million of which GBP 13.2 million is what we call underlying, excludes exceptional items and highest taxes. And we spent little bit of money finishing off the Italy minority buyout, GBP 1.2 million minority buy-out, and we actually see lower internally generated R&D this year, GBP 900,000 compared to GBP 1.1 million. Total added up to GBP 3 million investing activities GBP 3.3 million financing activities, which includes reducing our loan and the IFRS 16 lease liability payments coming down, we spent GBP 2.1 million, and they are coming down as the leases get towards expiring. So the net effect was an increase in banking cash of GBP 2 million, getting us to that GBP 13 million balance at the end of the year. As in preparation for the acquisitions that we announced this week, we have renegotiated and extended and in fact, increased our bank facilities our RCF, which is provided by Barclays and NatWest. We've increased it to GBP 30 million from the GBP 24 million level. It was at before under very similar covenants to those we had before, but with the repayment starting next year, GBP 1.25 million a year of the overall loan facility. So the back to saying, you got to generate cash, we -- they expect us to pay some of it back. And clearly, we then take on the placing results that was announced today -- yesterday, GBP 15 million. That puts our balance sheet into a very, very strong and much stronger position than we had before. In the business, we report media, which is the bulk of our business and analytics and tech. The Media business grew very strongly, particularly supported by the Digital Media Solutions element. As I said, continued just under half of that growth. In terms of profit, the media remains our higher-margin area. It's more mature, and we got the margin back up from 15% last year to 19%, which is -- and we want to see that going further. As important as a turnaround, analytics and tech which had been loss-making last year have come back into profit at 14% margin, which is actually better than we had achieved 2 years ago prior to COVID. And we had a small increase in our central costs, mainly because we're establishing a bonus provision. All of which contributed to the margin I mentioned before, 7.5% from the total profit of GBP 4.7 million.

Thanks, Alan. I will take you through a progress update against the strategy. But to start off with just a quick overview of the market in which we operate, which we believe provides us with strong growth opportunities. And indeed, the global advertising markets are strong at the moment. They rebounded very, very strongly from the COVID pandemic. So we're buoyant through '21, and we see that continuing at the moment into 2022. As you'll be well aware, digital channels dominate. Advertising these days, 64% of all advertisers spend globally will go through digital channels. And the dominant tech platforms will make up approximately 50% of all that spend. There are, however, new channel dynamics, which are increasing in scale and continuing to increase complexity in the advertising market. So last year, we saw a very, very strong growth in the e-retail platforms. And everybody, of course, is very familiar with Amazon. But in the United States, the big retailers like Walmart and Kroger and Home Depot and Instacart have all started selling inventory, medium inventory on their websites now, and that is turning into a multibillion-dollar advertising revenue stream for them. Similarly, advanced TV or connected TV is reaching a critical mass in the U.S. We're all familiar with the subscription-funded streaming services like Netflix and Amazon Prime but there's a range of advertiser-funded advanced TV solutions now in the U.S., and we're starting to see that roll into other markets here. ITV just recently launched ITVX on a similar basis. Approximately 15% of all television spend in the U.S. is now through advanced television. So that is, as I said, increasing complexity in the market, which is supportive for our business. There were considerable inflationary pressures seen in broadcast media towards the end of last year. I think from September onwards, majority of my conversations with clients is about helping them mitigate the television inflation that was coming through. But also, we see a very strong inflation in premium digital inventory. Now that's probably quite a good thing because advertisers now are starting to move away from the long tail of cheap impressions they're buying and focusing their spend with premium publishers, but it is sort of pushing up the cost of advertising. Other major topic that's been in the news -- in all of the news, not just our industry news, is that around data protection and consumer consent. And just recently in the last month or so, both the Belgian and Dutch data protection authorities have ruled that the IAB's transparency and consent framework actually breaches GDPR. And of course, that is the framework through which the European advertising industry, online industry has worked. So that throws a lot of questions about how online advertising is going to work and be targeted in the near future. 2021, there was also a specific feature, if you like, in the industry. That's the amount of media business that was put out to tender by advertisers. They typically -- a typical contract with media agency might last for 3 years and then they put the business up for tender to be competed for. Because of the challenges in 2020, where many, many companies, most companies had higher priorities on their mind, that didn't build the business out to tender. So there was a pent-up demand in '21, which was very supportive for our business last year. So that's the context of the market in which we operate. A recap on the strategy that we set out at the end of 2020 to start executing from the start of 2021. We set out 4 points to the strategy. Firstly, was to increase revenue from new productized digital services or solutions to the digital market that we were developing and aiming to bring to market through 2021. Secondly, to build out higher-value strategic relationships with major customers. Thirdly, to improve the operating efficiency of the business as you saw our presentation, our operating margin is 7.5%. So we plan to push that up into double periods and then into the mid-teens. And then fourthly, just strengthen the business in North America and Asia Pacific. The origins of the business are here in the U.K. So we have a large and mature business, but the business is also maturing in Continental Europe, where our statement is -- has been well understood and well bought for many years. Our segment is less mature in North America and Asia Pacific. And as a consequence, our business is not so scaled in those markets, but we see very good opportunity for growth. So there are the 4 terms of the strategy and I'll walk through how we're doing against each of them. So our digital product solutions are performing ahead of expectation where we can take some satisfaction from this area of business. We brought to market 7 data-led product solution, which will -- which enable us to analyze the digital markets and help our clients recognize where that spend is being inefficient to increase value out of those investments. So revenue growth from those solutions was 260%, albeit off a low base in 2020, which is when we really started to innovate, but delivered GBP 3.7 million, a little over 5% of total group revenues, and at a very healthy margin of 51%. And we see us being able to maintain that margin from these services and probably keep it stabilized at around about 55%. So we'll continue to push aggressively with these productized data-led solutions. Our operational KPIs that we set ourselves for this are ahead of plan. So the tier-end of 2020, we had 10 clients buying these services and operating on our media data platform. At the end of '21, we had 28 clients. We now have over $3 billion of digital media investment analyzed through the platform, up from $0.5 billion a year earlier. And we've now had, almost 650 billion impressions that we are analyzing or have analyzed coming from 87 markets. So we're getting a real great breadth and depth of data, which allows us or enables us to provide more and more valuable advice to our clients. These services are proving very strong compliance. They're able to realize the tangible value from these services very quickly in here. So that is providing us with great case studies that we can go to other clients with and help market these services to them. One of the services we brought to market was one called Responsible Media investment. And we piloted it because we weren't clear what we were going to find and we piloted it with a number of hour higher-value clients in the U.S. and U.K. Essentially, what we do there is we take the data relating to our clients due to media spend and match it with third-party data related to certain behaviors or characteristics of publishers or tech platforms. So we're identifying publishers that perhaps are promoting hate speech or disinformation like antivax content and material like that, all those that are known to rip off intellectual property and those that perhaps we consider consent control. So we match the data sets and identify where our clients' investments or advertising spend are going to support bad actors in the supply chain. And on the basis of the findings of those pilots, we are rolling that out further this year as some of our clients have been quite large to see where the investments are going. Several more products under development in the second half -- to be released in the second half of this year. Turning to the second part of the strategic clients. We have made strong progress in developing high value. strategic clients. We define the universe of 21 high-value strategic clients that wanted to build more relationships, even build greater commercial relationships with and the revenue growth from that universe was very strong, considerably ahead of total revenue growth for the group. That's enabled us to invest in more, what we call global client partners. They're the people that have the experience and the knowledge, the seniority in the gravitas to build these relationships with very large multinational advertiser so investing into that capability and broadening the geographic reach when big advertisers are headquartered in Amsterdam, Paris, in Germany, in the United States. We also set ourselves operational KPIs in terms of how many clients are buying to service lines. And we performed very well in that at the end of 2020, we had 58 clients buying to more service lines. And during the course of the 12 months, the end of '21, we moved that up to 76. Alan referenced the fact that we performed very well in gaining major mandates or agency selection mandates from major international advertisers. In fact, we've had 6 of the top 10 largest global multinational agency processing, including 3 of the top 5. So we're highly competitive in that segment. We're highly recognized as very professional in doing a great job there. And we've been very effective at cross-selling into the new digital product solutions. The third element of strategy is improving our operational efficiency, and we can see progress there. And we continue improvement. The media operation center, which is effectively a scaled delivery center. We operate in Madrid. It's a nearshore center. That's where with 15% more projects in the prior year. So we're moving work into the scale center, really at the pace that we want to. There is now a - [ I got another ] extension to the media operations center, which enables us to better service work from the U.S. time zone. We have improved our process automation in 2 parts of the business. First of all, the immediate performance part in the U.S.; and secondly, piloting RPA solutions in FirmDecisions. also to support FirmDecisions, our Contract Compliance division. We are developing a shared service center in India, which will further enable us to improve cost efficiencies. And we continue to evaluate how we streamline our operating model and how we can develop harmonized standardized ways of working to enable further automation. And this is really where one of the acquisitions we announced yesterday comes in, primary strategic rationale for acquiring the media part business, which is high-quality technology platform, which will enable us to service our clients more efficiently. And finally, the 4 elements of the strategy, strengthening North America and Asia Pacific. Again, very good progress here and very pleased to report strong progress. We recruited new managing directors at the start of the year into both the U.S. and the China business. And that's led to very good new business performance in both of them. I'm not able to name the wins in the U.S. The clients concerned for them to have their names advertised, but a very major packaged goods brand company is now -- which was secured in 2021 is now the largest 3 largest clients, a very significant well-known West Coast global technology leader and is buying on digital product solutions office and a leading global [ hub ] core brands also awarded us their business in the U.S. In China, the client community is less shy, should we say, about how I must use their names in this presentation. Huawei, you're all very familiar with has had to retreat from Western markets, really owing to geopolitical situations, but it's a huge advertiser in its domestic market. So they're rewarding us their business in China is a very, very strong endorsement. And that lets us pick up on the new state-owned dairy company and Kang Shi Fu, which is a massive noodle business across the whole China. There's also just Chinese domestic businesses, LVMH. And of course, China is a huge market for also actually good brands. LVMH is big client in China. And while we -- most of them are sports [ apparels ] brands globally is also [ owners ] of our business there. And we organically launched into the Indian market with Ebiquity this year. The FirmDecisions business has been present in India for 3 years, but we evaluated the opportunity to bring Ebiquity to market there. And I'm pleased to report a very good successful start to operations there. We already now count 5 biggest top 10 largest advertisers as our customers in the market. We expected our geographic reach with a small acquisition in Canada Forde & Semple was a business that we had used as sample when our clients required services in the Canadian market. So that business is now rebranded as a Ebiquity Canada and enables us to serve those clients directly and capture the revenue directly rather than outsourcing. As Alan mentioned, we do have a small subsidiary in Russia and clearly, given the terrible situation in Ukraine. We keep that -- the ongoing operations of that business under review. To supplement or really to accelerate the strategic execution of strengthening North America, we acquired and announced this yesterday the acquisition of Media Management Inc., which significantly scales our business in the vital U.S. market. So reporting against our operational metrics. You can see the baseline there at 31st of December 2020 and the progress we've made against that value into the 2021. So just some of these figures, I'll repeat number of clients buying 2 service lines has moved from 58 to 76, and the number of clients buying 1 or more products on the new digital solutions portfolio has gone from 10 to 28, and the volume of digital advertising analyzed on the platform nearly 650 billion impressions up from just around 100 billion and the value moving from GBP 0.5 billion to GBP 3 billion. So we're getting a real breadth and depth of data on the platform now. And we are able to analyze data on the platform from 87 markets up from 50. We are tasking ourselves to drive more of the revenue or our media revenue from digital services. As at end of December 2020, 25% of our revenue came from digital services. That has moved up -- ticked up to 29%. So as the whole business grew by 13%, so clearly, revenue from digital services grew faster. but obviously, we want to get that, that figure up further than the 30% mark and gradually moving up towards representing half of our business. Just quickly, I look at the acquisitions. The first one here is MediaPath. It's referenced as a Swedish-based multinational media consultancy. We said it's Swedish-based simply because of the founder Susanne Elias is Swedish and lives in Stockholm, but the business was designed to service international clients right from the start. It specializes in 3 of our specialist areas, agency selection processes, performance measurement and media benchmarking. And it delivers those services through a proprietary technology platform called GMP365 by moving our business over time on that platform, we believe it will significantly improved the efficiencies by which we operate. There's a 45 team member business, geographically distributed across 12 countries, both in markets where they can serve large multinational advertisers and also in lower-cost markets when the analysis can be done in markets like Bulgaria, Indonesia and India. Susanne will drive our leadership team and have a responsibility alongside staff with integrating the business. She has a very, very nice roster of blue-chip clients, including some of the brand names you can see there, there's a huge advertiser McDonald's obviously very well known. Disney in the United States and Heineken is a [indiscernible]. So the primary strategic rationale for acquiring MediaPath is the technology enablement that it brings to GMP365. On a stand-alone basis, you can see it's a nice healthy business, GBP 6.3 million of revenue at an operating margin 29%. And that margin has been stable for the last 5 years between 27% and 32%. The deal is a GBP 15.5 million consideration payable on completion, with 75% of the consideration paid in cash and 25% in Ebiquity shares. And those share is subject to 24-month lock-in period and a further 12-month orderly market agreement. So it very much aligns the interest of MediaPath shareholders, of which Susanne was the largest and some of our other key executives are. She very much aligns them with our interests in ensuring the success of the deal. And turning briefly to Media Management, Inc, MMi. It is a U.S.-focused media audit specialist. In fact, a U.S. dedicated one. It doesn't service clients outside the United States. And it has a different approach to media audit from ourselves and also to proprietary technology. So audit which ingests vast amounts of data directly from the media buying management platforms, platforms like [ Medioration ] Hudson Index and Strata and enables it to forensically analyze the media buys on a stock-by-stock, dollar-by-dollar basis under our clients through that unique visibility and ensure the campaigns delivered with accuracy. And where they're not delivered in accuracy and whether there is financial discrepancy, clearly, that gets higher relative value return back to clients. Thomas Bridge is the founder and sole shareholder of that business and the company has 40-person team centered in [indiscernible] it was originated in St. Louis, Missouri. There's about 20 people there and the other 20 people are distributed across the U.S. Like Susanne, Thomas is the owner of business and he joined the North American management team. And again, business has a fantastic high-quality client roster, including major American corporates like AT&T, GEICO and General Motors. So the strategic rationale, the primary strategic rationale for acquiring MMi is the scaling of our business in the United States. In fact, it doubles our business in the United States. So we'll have more than GBP 10 million in revenue next year. The initial consideration is GBP 6.1 million for this, and that it was essentially an 80-20 cash-share split, go tweak for our tax optimization purposes for the principal to be 84-16 and that share is subject to an 18-month lock-in period again with a further 12-month orderly market agreement. There is this deal the second tranche as a further consideration, which will be payable in 2025 based 1x 2024 reported operating profit the combined Ebiquity U.S. MMi North American businesses, which we expect to be at least GBP 3 million. Both Thomas and our North American management team view it will be in excess of that, but we feel targeting a minimum of GBP 3 million is sensible. And that second tranche will also be payable of 80% in cash 20% in Ebiquity shares and subject to the same lock-in period. So again, deal structure designed very much to align the interest of the principal with our interests and may bring both businesses, MediaPath part and MMi together smoothly integrate the businesses early to realize synergies early and to align the interest of Thomas and Susanne with those on ourselves to make these deals a success and drive our share price high. So if we look ahead. The outlook is good. Trading at start of the year in line with the Board's expectations. We have good forward visibility. Still, also in line with Board's expectations. Clearly, There is a caveat to that, which is a caveat that I would think most businesses have is that the geopolitical environment could destabilize things, but it has, at this moment, not yet impacted our client's activity and/or indeed their relationships with us. So yes, there's a caveat there that is not to materialize at this stage. The 2 acquisitions that we've talked through will accelerate the company's progress in executing our strategy by increasing our scale in the U.S. and facilitating our ability to improve the operating efficiency in the business, and we're getting this access to both world's largest advertisers, which are our primary target customer, and the visibility for the full year is currently in line with our expectations. So to summarize, a good recovery in 2021, and that recovery is broad-based across all regions and business units. And with the revenue and profit contribution from our new portfolio of Digital Media Solutions performing ahead of plan as well as the development of our high-value, strategic client relationships. the acquisitions, we've talked through, will accelerate our transformation strategy, and we believe that continued and increasing complexity in the media markets, which ensure brand advertisers require help navigating them. We feel like it has supported to Ebiquity's purpose and our ongoing business. So thank you very much for listening. At this point, I'll pass back to Alexandre.

[Operator Instructions] But just while the company takes a few moments to review those questions submitted today, I'd like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, can be accessed via your investor dashboard. Nick, Alan, as you can see, we have received a number of questions throughout today's presentation, and thank you to all the investors for submitting those. Could I just ask you to read out the questions and give responses where it's appropriate to do so, and then I'll pick up from you at the end.

Certainly. The first question is from[ Neil B. ]. Do you see any opportunities to provide data analytics for the programmatic trading tech platforms such as Trade Desk -- sorry, the question just moved down on the screen. The answer to that, [ Neil ], is no. Our only source of revenue is from the brand owners, and it's very important we keep it that way because one of our largest or strongest selling points and assets is our independence. So everybody is trying to sell brand over something. Their tech solution is better than another. And we were able to provide that independent advices for which tech solution is better than another. So the answer to that is no. [ Dion ] asks, [ was ] Ebiquity's operating margin in the same areas that media network has one of 29.1%? Well, I'm actually going to pass to Alan for that in case I...

Well, as I explained in the segmental analysis, broadly speaking, our media business, which includes the 2 main services that lead in part offers, which are cost guarantee tracking and HD selection. Our overall margin there is 19% compared to the 29%. How you can sort of cut and dice that, clearly, our overall group margin is 7% on a half [indiscernible]. It's fair to say we're at least 10 points lower margin in the equivalent business than they are as a whole.

[ Neil B. ] asks what quantum of cost savings you've targeted following the acquisitions? And what operating profit margin are you targeting for '22? Could you achieve 10%? The second question, could we achieve 10%? Yes, we believe so. On a pro forma basis, the business would be at 9.7% margin. So we get in...

In '21.

In '21, that was on a pro forma basis. So yes, we definitely believe we can achieve 10% in '22. What quantum of cost savings are we targeting? So by '25, we believe we'll achieve GBP 5 million of annualized recurring cost savings from the combined acquisition. Right. I think we've answered that one. So [ Neil B. ] again, what is the pro forma net debt position following the acquisition's inflection?

As a slightly want to tell actually because we only start replacing information this week, but basically, we should actually be a net debt position, which is actually similar to where we ended up on minus GBP 5 million. So paying out 23 -- sorry, will be that decision slightly worse, bigger than before. We're paying out GBP 23 million. We're raising GBP 15 million by where we're using some of our resources. So that the net movement will be roughly GBP 8 million. to the sort of worse than we were. So the net debt to be roughly GBP 12 million immediately after the acquisition. But clearly, we're going to generate cash through the year while our profits coming in from the new businesses. So we said that by the end of the year, we expect to be back into a net debt of around 1x EBITDA which will be a lot -- which is a consistent appetite with where we are now. So 1x operating profit being fine, which is where we ended up the year last year.

There's a question there about Capital Markets Day from [ Dion ]. As we've been promised since over 4 years ago, Capital Markets Day, one was scheduled in 2019 and then canceled. I asked because the company has changed a lot. Typically to understand from the outside. If we did actually hold a Capital Markets Day shortly after I joined the business, I joined in July 2020, and we held one, I think, it was in September, October 2020.

We did.

So I think it's fair to say we could do another one soon. We don't have a date scheduled for one, but it's not something we will look at doing because as you said, we have changed quite a lot even since September or October '20. [ Mark H. ] asks, the RNS mentioned potential synergies of GBP 5 million from the Swedish acquisition. Well, it was actually from the 2 acquisitions combined. Can you provide more color on the nature of the synergies [indiscernible] revenue exception?

Now the synergy target we set of GBP 5 million is all cost synergies and it's sort of 3 areas. One is within America, there are some unique pretty immediate surges on sort of external cost data, for example, contracts we have for people like Nielsen, where we expect to say by simply only having 1 contract to 2. And then secondly, there are savings from the bringing together again in America of our 2 businesses where we have some duplication of roles and people in roles. So over time, we'll be able to eliminate some of the duplication and therefore, probably means reducing the combined head count a little bit and/or avoiding having to recruit people for it to support growth, which is a position we were going to be in this year in America before the acquisition. The other -- and larger proportion of the GBP 5 million which will occur over time is then bringing us on to the adopting of the MediaPath platform and doing synergies whereby recently we will be reducing. The delivery cost therefore the labor time, particularly, that it takes to carry out our work. That's the system that MediaPath brings is more, will provide great efficiency for us. So it's, again, going to be ultimately head count reduction in the current Ebiquity group, not so much in the MediaPath site.

Another question from [ Mark H. ]. Do you now have a business structure in place to achieve our near-term objectives, or will further high-level hires be necessary? Essentially, we've got it in place, I think, and there are no plans to make any further high-level hires. 2 acquisitions actually bring some good senior bench strength with them. So there's no plan to add more expense at highest to the business. [ Dion ] asks will you be providing a pro forma starting stake in January '21 that includes the recent acquisitions? If so, when? Why not in 2021 RNS?

I think if you read the circular, you'll see we have provided exactly that as a pro forma statement of what our revenue and profits would have been in January '21 if you add all the acquisitions together. And that would tell you that we had -- the combined entity would have had GBP 75 million, GBP 74.8 million revenue and GBP 10.7 million profit. So we have provided that pro forma. And I think certainly in the circular this was just published at, you'll be seeing. I think it's actually online now and which -- and the RNS, I think, it also included that number.

Sorry, the questions are jumping around a bit. Let me...

Lots of questions. Last dividend.

Last dividend in 2018, Edison suggested in February '22, there could be a dividend of 0.5p for '21 and then 1.3p this year. Why no dividend mentioned? What is the dividend policy? [indiscernible]

I don't recall. If they did something at '22, then I missed it because we suspended the dividend in 2020 when the COVID crisis hit to preserve cash, and we were definitely not alone in so doing. Many, many companies did that. Our sense was then -- we were going though a period we had a loss. We also wanted to make sure we had to preserve cash, and then we also wanted to make sure we were investing our cash in the business and taking soundings amongst a lot of our -- you tend obviously to water our institutional shareholders. The general view was there wasn't a strong view that we should be paying a dividend, but it was more a sense that as a growth company, we should be investing in keeping the cash in the business. And that doesn’t apply to everyone, but some people felt that. So that's -- our current view is we don't have a plan to restore, reset dividend at the moment.

Some questions from [ Neil B. ]. Where else are you looking to make fill-in acquisitions? At the moment, geographically, I don't think there are any priorities. You could argue that we don't have businesses that we own in Japan, Korea and Brazil. All of which are very large advertising markets. But they all have their own challenges for business like ourselves entering. So I think we would have to enter carefully, and at the moment, they're not on the priority list. Another one from [ Neil ]. What were the dampening factors on the slower growth in U.K.? And are there any signs of improvement in spend in travel, tourism and autos? Well, here in the U.K. and Ireland, we have a very mature business. We have a large market share. It's impossible to tell exactly what market share is because there's no published figures, but we have a very large client base. So it is difficult to win new clients. And therefore, to grow the business, we have to bring more solutions to them, more products and more services. And it was really only during the course of '21 that we were bringing the new digital product solutions to market, and we deliberately targeted the first range of solutions at international clients to give visibility to people with regional or global job descriptions for the first time across a multi-market basis. It's only really in the back half, maybe in Q4 that we started bringing to market national solutions which then enable countries like our U.K. business to sell new services into the client. So that explains sort of growth. However, we did reorganize the business, and we wouldn't call restructuring because that was overstated, but we do reorganize the business to significantly enhance the profit contribution coming from the U.K.

I should also clarify that when we took -- when I talked about the U.K., we're talking about services delivered to U.K. clients covering the U.K. media. We have a roster of large clients such as Jaguar Land Rover, which is a U.K.-based business from actually there, we do a lot. And I was excluding the British-based clients for whom the outbound, the international [indiscernible] we're doing has grown, but I was making the point about the U.K. domestic market, as Nick has explained, that it has particular factors.

[ Mark H. ] asks, how long have you been courting these acquisitions and what brought them to head single-tenant? Can you talk to the process who runs the acquisition program? Well, both of these acquisitions came out of really speculative, shall we say, contacts from myself. In the summer of last year, the Northern Hemisphere summer of last year I felt we were 6 months plus into executing the exit strategy we had laid out, I felt we were making progress against that and now is the time to look at inorganic activity. And so I just simply did an outreach to independent business owners operating our sector. And we have developed a good dialogue with both Thomas and Susanne. It became clear that we had common values that as we discussed the industry and the business -- so we could really share a vision of what our combined business could look like. There was no -- we didn't set out to bring 2 acquisitions to fruition at the same time simply the conversations progress at about the same pace in a similarly positive manner. And so that was it. Neither of these companies, I think it's worth saying we're in that process. Neither Susanne nor Thomas had brought their business to market. So there was no option process. And they've both been approached in the past by private equity firms and other trade partners that not progress those discussions. It was really primarily about cultural alignment. They felt that they themselves have very strong cultural alignment to our leadership here and that we share on the vision of what we could do together. So it was a very constructive process. You ask who runs the acquisition program here? Well, it's myself and Alan really. We do have a senior leadership team or an executive leadership team all of whom are tasked with identifying potential acquisition targets and bring them to my attention and Alan's attention, and then we take it from there.

I think there's a question that seems to have disappeared about pro forma segmental analysis. Someone asked, I think, that whether or not the -- the short answer to which is all of the revenue and the profit of MediaPath and MMi would fall under media in our segmental analysis. So I think we'd add it will go in there. I think I misspoke earlier when I said the pro forma revenue of the combined business in 2020 is almost GBP 74.8 million. The pro operating profit actually would have been GBP 7 million, so by 3 weeks would have given us the margin of 9.7% [indiscernible] mix the margin and the figure out just to be clear. But that will be in the circular information. Shall I pick up the preemption one as well? [indiscernible]

Yes.

This question, are there going to be 120 million shares post pacing acquisitions and what is happening [indiscernible] wise. Right it's roughly, there's GBP 23 million, I think, is the number of shares being placed. I think slightly under 120 million, I think went up 113 million, if my math is correct, 118 million. And well, I think I might say one should be asking our brokers this question, the advice we have on the funding. As you know, one can have a full rights issue to allow you to exercise all the [indiscernible] at a full rights issue and of those from our brokers and looking at our share [indiscernible], we has a preponderance of very, already have a preponderance of very, very strong institutions, the news taking that is best interest really in the company in the process and the shareholders to undertake what's it's called [indiscernible] to get to consult and have a placing that did not go out to all our shareholders. And that's mainly because actually a very high portion of our shareholders are institutional and therefore, could be approached through an institutional placing. And that's what the GM will approve.

[indiscernible], yes, you'll follow up to the Capital Markets Day. It was a virtual one in December 2020. It must have been around about.

I think it's November actually, but anyway.

Would be good to have a real one soon. Yes. Noted. I think probably we should be considering that. It's not on the agenda right now, but it's definitely something for us to consider. [ Neil B. ] asks about geographic regions to expand in. At the moment, as I mentioned before, not at this stage any further geographies to expand in. And Nick then also ask what is the pipeline of new products look like? So we, as I said, we brought 7 to market last June. I think we need a busy time to bend them in both in terms of getting our people up to speed with them familiar and comfortable with them and selling them in at a staged rate to the clients. We don't have a suddenly here a whole range of products and services and confuse them. So we're just taking a little bit of a pause on that. We are working on, I think, there's another 4 solutions that we're working on. And I think we will bring them to market or at least 2, bring at least 2 of them to market in the second half of this year. [ Dion ] asks why on what appears to be a strong rising recovery from 2020 was revenue in the second half of '21 less than in the first half? It wasn't less. It was sort of rate of growth.

Yes, correct. The revenue in the second half was higher than the first. It's just really that the first half of 2020 was particularly low level. And therefore, we had all these. If you remember, we had 2020 second half, grew, I think, remember about 9% compared to 2020 first half, and therefore, it was already a higher base as we came to '21. So it's a function of really the comparator. But the second half of '20 being stronger, and therefore, second half '21 grew, but not by as much as we've grown over the first half, if that makes sense. I think there's another question. Given the cash generative nature of the business also recognize a period to have good organic investment opportunities, what is the management actually did? And I think I've already covered that, but I'll repeat that we don't have, we obviously keep under review every -- as we should. As a Board, our dividend policy, having stock and diversity is go -- We don't have any immediate plans to restore it, but we will keep under view. Obviously made the point that whilst we have our cash generative. We have been quite significant net debt, so our dividend payment capacity is something that limited by that and also[ frankly ] by an accounting issue, making sure switching reserves. But we keep under review is all I can really say.

That's the last question. I'll pass back to you on Alexandre.

Nick, thank you very much for being so generous to your time. I think you actually managed to address every question from the investors. And of course, the company will review all questions submitted today and will publish those responses on the investment company platform. But just before redirecting investors to provide you with their feedback, which I know is particularly important to the company, Nick, I was just wondering if I could ask you for a few closing comments.

Thanks, Alexandre. I mean, first of all, thank you very much for your time and for listening. And I think I just want to leave you with a view that management, myself and Alan feel we've got the business into a good place now, very stable fitting, stable foundations, where we have very clear and focused strategy. We're executing on that. We feel very, very pleased with the acquisitions that we've made, which will really accelerate our strategy to transform the business. And we will, first of all, make sure these businesses are integrated successfully, and then we will keep reviewing opportunities to further inorganic growth. So thank you very much for listening. We think we're in a very good place to move forward.

Thank you.

Nick, Alan, thank you for updating investors today. Could I please ask investors not to close the session as you now be automatically redirected to provide your feedback in order to the management team can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of Ebiquity plc, we'd like to thank you for attending today's presentation. That concludes today's session and good afternoon to you all.

Good afternoon. Bye.