Ebiquity plc (EBQ) Earnings Call Transcript & Summary

Good morning, and welcome to the Ebiquity plc interim 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 review all questions submitted today and will publish responses where appropriate to do so. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Nick Waters, CEO. Good morning.

Good morning, everybody, and thank you very much for joining us for the half year results for Ebiquity plc to the half year ended 30th of June. My name is Nick Waters, and I'm joined by our CFO, Julia Hubbard. I will start with a summary before passing to Julia for some details on the financial performance. I think we can say that despite a somewhat uncertain macro environment, we can be satisfied with our performance during the first half of the year. We've delivered revenue growth of 11%, and operating profit now stands at GBP 6 million with a margin of 14.7%. And you may recall last year, we made a strategic acquisition of a business called MediaPath, which brought with it a data management platform, GMP365. Now we spent a lot of focus in the first half of the year, initiated a big transformation program to place our services on to the GMP365 platform. So that's involving a reorientation of the ways of working, processes and staff responsibilities. And I can report that, that is well underway, and I'll provide a few more details as we go through the presentation. We also made another strategic acquisition last year, a business called Media Management Inc. in the United States. And I'm very pleased to report that, that is delivering very strong momentum for our business in North America, being our fastest-growing region with a revenue growth of 50%. We continue to make progress with a higher-margin Digital Media Solutions that we've been on that path for the last 2.5 years, and that continues to progress well. We are cautious about the macro outlook. We've certainly seen, really since September, a little bit of a change in sentiment in the market in 1 or 2 of our clients with their budgets coming...

Ladies and gentlemen, please bear with me, I believe we just lost the team momentarily. If you just bear with me 1 second, please. [Technical Difficulty]

Okay. So I can say that despite definitely some increasing, what should we say, uncertainty in the macro environment, we think we're well positioned to take advantage of the opportunities ahead of us for both revenue growth and margin enhancement. And I'll pass to Julia now to talk through our financial results.

Thank you, Nick. So I think the first point to note is that 2023 reflects 6 months worth of the results for MMi and MediaPath. We acquired those businesses in April 2022. We have integrated both of those businesses. So we don't have an organic or an inorganic split. That is not possible to pull out. The second point to note is we have disposed of a very small Australian business in April 2023, a business called Digital Balance. We've represented the numbers -- the comparative numbers for '22. So those results for Digital Balance are excluded from the figures. Those were very, very small adjustments. So if you notice that our numbers have changed slightly, that is the reason why. Nick has mentioned revenue up GBP 3.9 million. That's 11% growth to GBP 40.6 million. Within revenue, our Media Performance business is up GBP 2.5 million. That's a 10% increase. And within that line, our Digital Media Solutions numbers have increased to GBP 3.7 million compared to GBP 2.8 million in 2022. That's a 32% growth. Media Management is up GBP 600,000. That's 14% growth, which is acquisition-driven but also local agency selection impact. So what we have seen, the local agency market in 2023 is expected to be 50% down year-on-year. That's really a function of '21 and '22 bouncing back particularly strongly from COVID and really overstating the performance for local agency selection in those 2 years. We therefore have a temporary reduction in '23, and the market anticipates that, that will come back in 2024. Marketing Effectiveness has grown by GBP 900,000, up 25%, which is driven from performance in the U.K. Adjusted profit, GBP 6 million compared to GBP 4.9 million; and operating margin, 14.7% to 13.3% last time. And that delivers an adjusted profit before tax after interest costs, finance costs of GBP 1 million, which compares to GBP 200,000 last year. That number has increased because...

Apologies, ladies and gentlemen, I do believe we've just been disconnected momentarily. [Technical Difficulty]

Okay. So finance cost, GBP 1 million compared to GBP 200,000 last time driven from increased debt together with significant increase in interest rates. That delivers an adjusted profit before tax of GBP 5 million compared to GBP 4.7 million last time. As you will note that there is a highlighted item of GBP 3.6 million in order to get to the statutory operating profit. That highlighted items line includes amortization, which we always pull out, and acquisition and strategic costs or amortization of GBP 1.6 million and acquisitions, strategic and integration costs of GBP 1 million. In addition, we've isolated transformation costs of GBP 700,000. Nick will talk later about the large transformation that we have in place. So we're migrating to the platform that we acquired through MediaPath, the GMP365 platform. That is a very large transformation project, which will be delivered between now and the end of 2025 and is expected to deliver annualized savings of GBP 5 million. In addition, the transformation projects include globalization of resources. So previously, delivery resources have been delivered locally, and we are moving towards a global delivery model. So GBP 700,000, that includes internal salary costs. We have around 9 people who have been predominantly working on those projects and also a lot more people internally, but those 9 people are the core central team. In addition, we have about GBP 200,000 of event costs, bringing people together, retraining them on new ways of working. That compares to a highlighted item of GBP 6 million last time, which was largely driven from amortization and acquisition and strategic costs in that cost. So moving over to regional performance. So we have 2 slides here. This first slide is on revenue. And the regional performance, you can see growth coming from North America. The GBP 2.6 million of the GBP 3.9 million growth, it's North America. That's 50% increase year-on-year to GBP 7.8 million versus GBP 5.2 million last time. That has been driven from Media Performance line, which includes that digital line and really driven as a result of scaling together with higher digital sales. The EU and U.K. have both added revenue of around GBP 1 million in each region, and performance in U.K. is strong, driven from Marketing Effectiveness. In EU, we've had really a bit of mixed performance there. So whilst revenue is up GBP 1 million, we've seen strong performance in France, Spain and the Nordics. And the pressures that Nick has noted is across Italy and Germany, in particular. So whilst we see 3 customers -- specific customers where we're seeing pressure and reduction in revenue year-on-year, we are not seeing widespread pressures across the market as a whole. However, we consider that the EU may continue, in 2024, to be -- to have some challenges. In APAC, you can see that revenue has declined year-on-year, down GBP 500,000. And that is driven from the local agency selection market that I noted previously. Let me turn over to -- the next slide is margins. So we can see that North America margins year-on-year strong growth. You will recall from the growing margin in that region that was loss-making in 2021 moved to a margin of about 7% for the full year '22. That margin growth and enhancement has continued throughout 2023, so 13% delivered at year-end, which compares to 0% in the comparable period in '22. And that really is a result of growth in that marketplace, so scaling together with stronger, higher-margin digital sales. U.K. has added 4% in percentage terms, up 4% to 26%, driven from Marketing Effectiveness. A particular client that we have the full benefit for in 2023, that was delivered in the second quarter in '22. And you'll note the EU margin of 32% remains strong. APAC, just to draw out, really, that's a function of smaller numbers. So APAC is our smallest region. Revenue declined, as I noted, because of agency selection. So temporary decline there for '23. But in addition, we include in our regional performance a division called Contract Compliance, which is branded as FirmDecisions. That business is typically half 2-weighted. So we have profitability in the second half. It was loss-making this year in the first half, and that has depressed the margin in the first half. So taking it down from 17% to 9% this first half. I expect that to return to late teens margin for the full year 2023. So on the next slide, we can see our balance sheet. So net asset growth, GBP 9.2 million. That's largely due to the share issue in partial settlement of Digital Decisions earnout. So that was made in May 2023. And we issued up to GBP 16.1 million earnout, we issued GBP 10 million of shares. Working capital of GBP 8.5 million, which is similar to the December 2022 balance of GBP 8 million. Deferred consideration, GBP 2.4 million this time, that includes the earnout on the MMi acquisition, which is due for payment in 2025. A very large balance in December 2022, the comparative includes the Digital Decisions earnout of GBP 15.8 million in addition to the MMi balance. Noncurrent liabilities, a reduction of GBP 2 million, that's largely driven from regular lease liability payments. And net debt is discussed in a couple of slides. So cash flow. The adjusted inflow from operations totaled GBP 4.7 million. That was a cash conversion of 78%, which was better than 2022. Adding back the cash impact of highlighted items includes the cash element of Digital Decisions, that's GBP 6 million; the cash from discontinued operations of GBP 0.5 million; and the project costs, the highlighted items of about GBP 600,000. Just moving down the cash flow to investing activities. Whilst this looks like a small number, so GBP 0.1 million, it's important to note that we are -- we do continue to invest in R&D, so about GBP 400,000 in the first half and fixed asset additions of GBP 300,000. That's netted with the inflow from sales proceeds of the Australian subsidiary Digital Balance. Financing activities, GBP 2.3 million in total, include the increase in bank borrowings of GBP 3.5 million, which was used partially to satisfy the Digital Decisions earnout cash element, and regular lease payments of GBP 1.3 million offset that balance. So moving forward to the group net debt summary. So net debt in total is GBP 15 million, which compares to GBP 10 million at the end of 2022. The increase...

Julia, so we just lost you momentarily. [Technical Difficulty]

Thank you. So net bank debt, GBP 15 million, compares to a position at the end of '22 of GBP 9 million. The increase is driven from the Digital Decisions cash earnout. We are fully compliant with covenants throughout period, and we have sufficient headroom, GBP 5 million remaining. Also important to note that included in our net debt is an amount of cash relating to our Russian subsidiary. Whilst it was -- the performance from the Russian subsidiary is very small, we have around GBP 900,000 of ring-fence cash still sitting in Russia, which, I think, it is unrealistic that we will be able to repatriate those funds. So just moving on, I'll pass back to Nick, who can talk through the market.

Great. Thank you very much for that, Julia. I'll just start with a bit of a recap really of the market context within which we operate. It's an extremely scaled, very complex and highly dynamic market. We reference our primary target customers, the world's top 100 advertisers, plus large domestic advertisers. Between them, they spend approximately USD 100 billion a year on media investments. So that's a very large sum of money that we believe we have the opportunity to positively impact. And we feel marketers have a real need for our services because they operate in such a complicated environment. They're finding extremely difficult to navigate, and they need external advisers. Of course, they have plenty of other parties in the marketing ecosystem advising them, but we are the only independent adviser. We're not selling anything other than our analysis, our ability to analyze the market and give advice on how to create efficiencies and effectiveness and to eliminate waste from those very large sum of their spending. And this is just a snapshot of the headlines taken from the first 6 months, and actually, if you look closely, quite a few of them as recently as the month of June. And this just shows the dynamism of the market, whether it be the chaos over at Twitter, Meta's launch of Threads as a competitor; whether it be the rapid emergence of a hugely scaled media channel in retail media, which will forecast -- is forecast to surpass television investment in the next few years; and most recently, there's a question mark over transparency over at Google; and even more recently, allegations of misselling of advertising of YouTube. So a huge amount of complexity constantly in a state of flux that marketers find extremely difficult to navigate. And we feel that's a good opportunity for Ebiquity. So what do we actually do? Well, we help brand owners increase the returns from these very large media investments and to improve their business performance. And we do that by analyzing very, very large quantities of data relating to billions of U.S. dollars worth and trillions of digital media impressions from across the market. And through our analysis, we find areas where the advertisers have inadvertently wasted their investment. We find opportunities for them to create efficiencies in their investment and further effectiveness. And just as a reminder, we're not an agency business. We often get sort of bucketed with the agency businesses because we don't have a list of peers doing exactly what we do, but we're not an agency business. We don't create any advertising. We don't plan or buy any media. We are effectively a data analysis company, which provides actionable intelligence and consultancy services for this extremely scaled, complex and dynamic global media and marketing industry. And we provide our services through 4 service lines. We did have a fifth one, tech advisory. It's a very small service line. But as Julia referenced, we disposed of the noncore -- small noncore asset in Australia, a company called Digital Balance. And we folded the remainders of our tech advisory capability within the Media Management service line, and that now represents approximately 13% of our revenue. Media Performance is the bulk of our revenue, approximately 70%, and that includes the higher-margin, faster-growing Digital Media Solutions as well as the majority of revenue from the MMi and MediaPath acquisitions. The Marketing Effectiveness service line represents about 11% of our total revenues. It's been growing very strongly at 25% year-on-year. And our smallest service line is Contract Compliance, which, at the half year bulk, is flat, largely to do with the back-weighted nature of it and particularly...

Nick, sorry, we just lost you momentarily there, please. [Technical Difficulty]

Thank you. So I'll quickly recap on progress against strategy, and I'll recap -- I'll update you on the progress against strategy. Just as a reminder, we have 4 central elements to the strategy, the first being to accelerate growth in North America and Asia Pacific, where we have historically been underweight and we still see strong opportunities for growth. Secondly, we have spent the last few years concentrating quite heavily on putting productized digital services into market and, more recently, innovating for newly critical channels and diversifying our service offering as a result. Our third strategic pillar is to develop higher-value relationships with more of our major blue-chip clients. And then the fourth one is to improve operational efficiency -- operating efficiency through increased use of automation and the transformation of our operating model that we've referenced earlier. So very pleased to say, as we've spoken about earlier, the acceleration of our growth in North America, now representing our fastest-growing region with 50% revenue growth. And we have successfully integrated, first of all, the strategic acquisition last year, Media Management Inc. in the United States and a smaller, more tactical acquisition in Canada of Forde and Semple. The team has been quite focused on cross-selling across our expanded client base, particularly the Digital Media Solutions. We felt we were underweight in the United States. And if you're an underweight business there, it's a little bit difficult to get taken seriously, difficult to have credibility. But we now work with 19 of the 25 largest advertisers in the U.S. So we feel we do have a critical mass, we've got visibility, and we've got credibility. And I think that puts us in a good position to realize future growth opportunities, of which we see a lot. There are more than 200 advertisers that spend over $100 million annually, and we feel we have the opportunity to bring our products and services to bear to help them improve returns on that investment. We've expanded client relationships. As we say, our objective is to develop high-value strategic relationships with more major clients in more territories. So I'm very pleased to report we've enhanced or increased our scope with General Motors in the United States and with Danone and Ferrero globally. We've extended our geographic relationships with Johnson & Johnson and Disney into Europe, with one brand new logos in Amgen in the United States and Lenovo in China. I'm pleased that we've brought Mercedes-Benz back. That was a client we had previously lost. We brought that back in China. So our global client revenue growth has been good in the first half of the year, but we have noted as Julia referenced, some pressure from selected clients in the start of the second half or really in September time when 1 or 2 clients in Continental Europe definitely come back to revise, review the scope of work and look at our fees. When it comes to products for the last few years, our priority has been to address the digital market, and this chart, which fairly self explanatory, is why we want to do that. More than 2/3 of the world's advertising budget are now through digital channels, and that's forecast to continue growing to a little bit almost 3/4 of all advertising budgets by the year 2027. And this is an area of -- the digital marketplace is an area of very high wastage and real complexity in the market. So it's an area where we can bring our value proposition to bear in a very meaningful way. So the Digital Decisions acquisition was the engine for development of Digital Media Solutions and became the Digital Innovation Centre. And it's been an extremely successful acquisition for us. The final payment of the deferred consideration was made in May. I'm very pleased say that the 3 founders remain in the business, and all 3 of them have taken up senior roles within the wider group. We have deliberately focused on making these productized solutions so that they are higher-margin, now account for 9% of group revenue at a higher margin. And it's demonstrating to be highly repeatable. It is delivering extremely good value for customers, and we've now passed the $1 billion mark in value opportunity identified for clients since the inception. We continue to look at opportunities for new product innovation and, most recently, have brought a product for the connected television market into the United States, which the CTV market in the United States is forecast to be worth approximately $25 billion, and there seems to be very little oversight or governance for that or of that market. So we felt there was an opportunity for us to bring in clarity and guidance for our clients. And we brought a pilot product to market earlier in the year. I'm very pleased to say that it has delivered quite strong findings and seems to demonstrate a very clear value proposition, which has encouraged some of those pioneering clients or pilot clients to repeat purchase and increase the number of brands that they are asking us to analyze. And the next phase of development there is to make sure we have a fully scalable product primarily for the United States, but -- that we can bring to other markets as well. That's not been the only innovation. We partnered with a company called Scope3. Now Scope3 measures the CO2 or CO2-equivalent emissions from each impression through the digital supply chain, and we now match or have the ability to match all the data, all the impressions from our clients, digital advertising to those CO2 emissions and quantify the carbon footprint of their digital advertising activity. Now we feel there should be a good market for this particular product. All major corporates are required to publish their carbon footprint and their path to net zero. So we would hope that this product has a good uptake. But what we have noticed is that whilst the marketing teams are very interested, responsibility for reducing the carbon footprint tends to lie with another team in these big corporations, the sustainability teams. So we have to bridge that gap between the marketing and the sustainability teams and bring this to the attention of those involved. We continue to look at opportunities for new product development and looking at the retail media market, absolutely massive market in the United States, increasingly growing in other markets. So we're seeing -- assessing if we can bring or develop a value proposition for that market. And the next one we're looking at is the influencer marketing arena, which, again, I think has very little governance. Large sums of money are going into that from advertisers, and there appears to be very little governance there. We don't have a large R&D team. So we tend to take a view on these things in sequential format rather than running in parallel. We are in the early stage of thinking when it comes to the application of generative AI. We naturally are looking at internal ways in which AI can be applied to improve the efficiencies, whether it's through development of our Digital Media Solutions and data processing and analysis, various elements of workflow management. But we're also looking at through the lens of how we can influence or develop our products and services using generative AI. One of the challenges that open-source, large language learning modules have is the data on which they're trained or the information on which they're trained. Open-source information carries a lot of misinformation and flaws. As we all know, the Internet is full of misinformation. The way we're looking at this is we have highly trusted data. All the data we have relates to actual bulk media activity. So we know there's no misinformation there due to actual, real trusted data. And it's also contained in a closed environment. So it's protected. No open-source AI application can access our information. So we're able to turn -- this is the way we're looking at it. We're able to train generative AI on our own proprietary trusted and secure curriculum of data, and we see...

Nick, sorry, we just lost you momentary then. [Technical Difficulty]

Great. Thank you. So yes, we see a potential for all productized first-line client management, self-serve applications, new interface -- client interface opportunities. We believe the opportunities for generative AI are greater for our business than the threat. So that's an area we are looking at. Julia referenced earlier a major transformation program. It's a 3-year transformation program that we have initiated. This is in relation to our strategic objective of improving the efficiency of our core business through increased use or improved use of automation, and the aim is to transition, step by step, the processing of our core services on to GMP365 data management platform. It is a very significant piece of work that has been going on during the first half of the year as we -- to make use of the data management platform or optimize the use of it. We are changing our workflow processes. We're developing different specialisms for members of the staff and job specifications that comes with that reporting lines. We are increasingly neutralizing globalized resources, and all this requires training of our staff and, indeed, recalibration of our core products as well as time working with the clients and agencies in relationship management capacity. But I'm pleased to report progress in transitioning our work on to the platform. So we always said the first step we take would be to manage our agency selection processes. Those mandates on the platform and at the half year mark, we've managed 78 of those processes out of approximately 200. So I'd say that represents quite good progress. We then said we would transition on ValueTrack product onto the platform, and at the half year mark, we've transitioned approximately 50% of the work we do there. We won't get to 100% because there are some of our major customers that have highly customized approach to ValueTrack that won't necessarily fit directly onto the platform, but we see plenty of opportunities to further migrate more clients there. The third cab off the rank is always going to be our core Media Performance benchmarking business. That's yet to start transitioning. We have spent the year-to-date calibrating the product for global adoption using the data management platform, and the intention is to start with a controlled and measured rollout of that in early 2024. And Julia referenced the transformation costs that will be taken primarily in '23 and into the first half of '24, but we'll realize the benefits through our annualized savings by the end of 2025. So we publish, every 6 months, progress against a set of operating metrics that measure our progress against the strategic goals. We publish the actual numbers at the end of -- the year-end results, and the half year mark, we describe where we are in terms of being on target or ahead of target or behind. When it comes to the number of clients buying 2 or more service lines and this point about developing high-value strategic relationships, we had 97 at the end of 2022. At the half year mark, we're marginally ahead of where we were at the half year mark last year. So I'd say we're on target for that. And in Q4 -- it's Q3, Q4, the outtake of decisions clients taking on those -- for that particular service will now determine where we land at the year-end. For the end of '22, we had 55 clients buying from our Digital Media Solutions portfolio. At the midyear mark, that number is now over 70. We have over 1.8 trillion impressions on the Media Data Vault now. So we're continuing to build a rich or large data lake there. And the value of digital advertising is around the $8 billion mark. So the more data we have, the more value, the more impressions we have, the deeper, the richer the analysis and the value we can bring. And as I said, that brings a deeper moat. A new metric that we haven't previously published before is the number of clients activated on the platform. At the time of purchasing, acquiring MediaPath, they brought with them 55 clients on the platform at the end of last year. We've moved that up to 74. That progress continues, and we now have more than 100 clients activated on the platform. Revenue from -- derived from Digital Media Services continues to grow. Now that is different from the revenue growth of our Digital Media Solutions because in our multi-market benchmarking, there is digital work included and, indeed, included on the GMP365 platform. The point of this metric was to demonstrate that historically, Ebiquity was...

Nick, sorry, we've just momentarily lost you again. [Technical Difficulty]

The last metric there is the percentage of revenue derived from digital services is different from our revenue in Digital Media Solutions because the revenue -- that final metric there includes work we do in digital cost benchmarking from historical products and services. And the reason we track this metric is to move ourselves from an overweight broadcast to a more balanced business. And if we look at our primary target customer, who was top 100 advertisers, they typically spend about 50% of their budget on digital activities or digital media. So we should be moving that number up towards the 50%. So to summarize, it has been a more difficult market in the first half of the year, but we've continued to grow the business. We have initiated this very significant internal transformation program, which will realize efficiencies as we move forward. We've continued to sell our productized digital media services and innovate for newly critical channels and the opportunities we see in the market. Very encouraging momentum in the United States, and we see the opportunity to continue that in the foreseeable future. Some clients have reduced their budgets, and their businesses are certainly under pressure, which makes us feel the outlook is less buoyant in the near term, but we do and feel confident that we have opportunities for continued revenue growth and margin enhancement. We are indeed building a world leader in business intelligence and consulting services for this highly complex scale and dynamic global media and marketing industry. And that concludes the presentation. So we'll be very happy to take any questions now.

[Operator Instructions] Just while the team take a few moments to review those questions submitted today, I'd like to remind you the recording of the presentation, along with a copy of the slides and the published Q&A, can be accessed via your investor dashboard. I think, Julia, we did receive several presubmitted questions. Perhaps we could start off the Q&A session with those. The first one reads as follows -- and I think you have actually covered this off in the presentation, but just in case there's anything further to add. What are the interesting results demonstrated by the U.S. initial pioneers program addressing the connected TV market as alluded to in the results? And as said, I think you have covered that off, just if there's anything further to add.

Yes. There's been a few areas and essentially around tax, if you like, that the advertisers are simply unaware of. We'll be familiar that in the programmatic digital market, there are ad serving fees while the same exists in the connected television market, and there is a real lack of transparency on those ad serving fees. So one customer was really alarmed to learn that 8% of their total budget was going around ad serving fees, and that clearly wasn't spending that would reach consumers. Then there is the amount of inventory that is being served to smaller devices. And what we see -- we know we've got a lot of empirical evidence, but when impressions are served to large, full-screen televisions, they are much more effective at communicating messages than on smaller screens like laptops or tablets and, even worse, on mobile phones. So there's a lack of control about where those impressions are delivered, and clients were not aware...

Nick, sorry, I just lost you there momentarily. [Technical Difficulty]

The other area that's problematic with impression distribution on smaller devices is the amount of fraud. So we saw mobile -- distribution of impressions on mobile to be particularly susceptible to fraud and on midsized screen, tablets and laptops, to be fairly susceptible to fraud that there was a pretty clean environment on the full-screen television. So quite a few interesting findings there that advertisers simply were not aware or had no visibility over prior to this.

And the next presubmitted question we've got here, what are the major hurdles for any further near-term acquisitions?

Well, I think if we look at the market outlook, which I think most people are more cautious about, we just need to be cognizant of that. We need to be cognizant of the cost of debt. Our debt ratio is very comfortable at the moment, but we need to think about how much we'd be comfortable increasing that given the cost of debt. And if we needed to raise equity, we need to be cognizant of the fact that the share price is relatively depressed and undervalued at the moment. So I think it's that area of market outlook, cost of debt and cost of equity effectively that we need to be mindful for. It might be that if the market does deteriorate, then the assets might become lower-priced anyway.

Final presubmitted question we have here is, when our content approaches 0 cost due to generative AI, someone will make money offering AI-driven quality assurance and compliance services to ensure alignment with brand values, regulatory standards and copyright. Is this something Ebiquity would look towards offering as a service?

Well, in truth, that is not something we have considered. We are still at the early stage of thinking about generative AI. And our thinking to date has been driven really by how we view our...

Nick, sorry, we just lost you. [Technical Difficulty]

So we haven't particularly thought of it in terms of the content. But that's an interesting thought and one that we should certainly consider.

Nick, that concludes the presubmitted questions. [Operator Instructions] I'll pass on to Julia for appropriate -- that would be great. And I'll pick up from you at the end.

Thank you. If I can take the next one, [ Roger ], whose question is, I note that you're trading broadly in line with our expectations. I've not been able to find out what market expectations are. Can you tell us please your understanding of market expectations? [ Roger ], if I can point you to [ house ] broker, which is Panmure Gordon, they've issued a note on Friday. And also, Shore Capital are following us as well. So they should -- you should be able to get notes from them. In terms of -- when those statements were written...

Julia, sorry, I think we just momentarily lost you again there. [Technical Difficulty]

Yes. So Panmure Gordon's note in terms of expectations, we're sitting at GBP 85 million and GBP 12.7 million when we wrote the interest statement on Friday. We noted that there were pressures on specific customers. So I think they've subsequently brought their top line down, but that GBP 12.7 million operating profit will be there or thereabouts. And the next point again from [ Roger ] that -- the question is that said, I also note the increase in your drawings of the RCF and the amount of headroom in the context of increased expenditure and transformation. What effect is the reduced headroom under the RCF having on the way you run your business, especially in light of the market uncertainties you described? [Audio Gap] But I don't [indiscernible] we've got insufficient headroom and just not impacting the way we run the business at all. Our cash broadly turns into -- sorry, our profit broadly turns into cash flow ratio of 78%. For a growing business, I think that's probably around the right mark. So not concerned about the headroom. And clearly, we have been through an audit review. And we, as a Board, have confirmed our working capital and our going concern basis of preparation of accounts. Should I take [ Neil B.'s ] question? So [ Neil ], next question. Do you have a rough idea of H1 organic growth in the business, excluding acquisitions? We run the business in the most efficient manner, and that means that we've integrated those acquisitions into the business as a whole. There were some synergies that we took out back in 2022 with the MMi acquisition in particular. But unfortunately, because we have integrated those businesses, it's very difficult to pinpoint any organic-inorganic growth split. What I would say is that clearly, the 50% growth that we've seen in the U.S. has been driven through the benefit of the acquisition, the benefits of scale and the benefits of increased sales of the digital products that we have at a higher margin. Yes. [ John W. ], thank you for your question. Transformation projects are all part of normal business, not in any way exceptional and should not be adjusted out, is the question. Yes. Again, this is something we had very long and in-depth discussions with the auditors. Whilst the cost highlighted are not one-off in nature, the significance of the work streams are. These are very, very major transformation. It's a 3-year program. We have people that are dedicated to delivering the work streams under the transformation program. So we have really talked about them, so it's possible to add the numbers back. And should you choose to wish to, I think there's sufficient disclosure. But given the size under the significance of the work streams to understand what is going on in the business, I've separately identified those costs. Net debt at the end of 2024. If I could just refer you to the analyst forecasts, I think probably that's the best explanation on that one. Likewise, [ John W. ], on net debt, if I can just refer you to the analyst notes. Further expectations on transformation costs. Yes, in terms of what I'm anticipating, the transformation costs themselves, I would expect to be running at a similar level to the second half of 2023, slightly reduced to the 2024. But I think realistically, we've got major projects, evaluation of one of our major -- sorry, delivery of our major product, which is a benchmarking product, which we plan to move on to GMP365. That work will continue throughout 2024. So the costs will continue throughout that period, albeit at a slightly lower levelized effect.

[ Roger S. ] asked, how easy is it for you to hire the people you need given the specialist industry knowledge you require? The talent pool that we fish in is pretty broad because anybody that works from a media agency has the right knowledge and background. Similarly, people who work for -- whether it be the big tech platform, selling advertising or broadcasters, et cetera. So there's a lot of people work in the media space. I think it's fair to say in recent years, we've...

Nick -- ladies and gentlemen, sorry for that. [Technical Difficulty]

Yes, we found -- in recent years, we found out that Meta and, to a lesser degree, Amazon, very acquisitive when it comes to hiring people, but you will be familiar with the fact that they've been through a number of quite swingeing cuts and redundancy programs. So there is a bit less competition for hiring at the moment. So I would say if we need people, we can find them. I don't find it that challenging. [ Roger ], the transition program initiative must require a good deal of time-consuming and delicate management of humans. Who is leading on this? However necessary, in the long term, it must be a drag to winning and servicing business in the here and now. You're right. It does require a good deal of delicate management of humans. Who is leading on this? Well, it's really the whole executive leadership team. I am clearly the project sponsor. We've hired one external consultant who specializes in this, who is proving very valuable. We have, as Julia indicated, redirected the entire time of 2 people for project management purposes and a large percentage of time of other people when it comes to particularly around the recalibration of product and workflows and processes. So there is a team on it -- a senior leadership team on it, of which I'm the product -- project sponsor. Is it a drag to winning and servicing businesses in the here and now? Well, I think it's certainly fair to say it's increased workload for some people. I think we could be satisfied with our new business wins when it comes to, let's say, North America or global clients, expanding relationships and parts of Continental Europe. So it certainly increases the workload for some people. But I think we've done okay so far in managing that. This one might be for you, Julia. You said Ebiquity is trading broadly in line with market expectations for '23. What are the market expectations for revenues and adjusted profits for the year?

So again, if I can just point you to the broker notes, I do have the most recent one that the Panmure Gordon issued. 2023, I mentioned that their note prior to Friday was revenue of GBP 85 million. Given that we have softness on the top line, they've brought that number down to GBP 82 million, which, I think, is reasonable. Their EBIT number was GBP 12.7 million, and they're still holding broadly there or thereabouts. So I think they're now in a GBP 12.5 million.

Next question from [ Neil B ]. Are there any management positions that need filling? Now the short answer there is no. We did historically have a CFO double-hatting with the COO's responsibilities now. So we've been going through the transformation program. We've allocated a number of those tasks out into specific areas of the business. But that's something we'll keep under review. But at the moment, no, the answer is no. Is your U.S. growth mainly achieved through the MMi acquisition?

[ John ], just to reiterate, we don't have that organic-inorganic split simply because we've integrated the businesses. We have the -- we had, of course, the acquisitions integrated from April 2022. So there will be an element of growth from acquisitions. But having said that, we've found that the U.S. was -- given the scale of [ us ] adding the acquisitions, was growing inorganically and organically last year, I mean, 2022. Coupled with that, they have definitely benefited from the Digital Decisions -- sorry, the Digital Media Solutions growth. So that's been an area of growth for them.

Yes, success in cross-selling anything.

Yes.

Nick, Julia, you've covered on every question that we've had through. And of course, any further questions that do come through, the team will have the ability to review those. Nick, perhaps before redirecting investors to provide you their feedback, which I know is particularly important to you and the team, if I could just ask you for a few closing comments, please.

Yes. Well, in summary, a satisfactory first half of the year. Lots of progress against each of our strategic goals, positive progress. Definitely some change in sentiment in the macro outlook as we have conversations with our clients. I think to date, any client activity on rescoping projects or fees has been isolated to a few specific clients. We haven't seen it more widespread, and we haven't even seen it on a sort of sectoral basis yet. So whilst there is caution out there, and we must be cautious or mindful about the outlook, we're still progressing and trending in a good way.

That's fantastic. Nick, Julia, thank you indeed for updating investors, and we do apologize for several disruptions we had through the meeting. Could I please ask investors not to close the session? You'll be automatically redirected to provide your feedback in order the team can better understand your views and expectations. This will only take a few moments to complete, and that's greatly valued by the team. On behalf of the management team of Ebiquity plc, we'd like to thank you for attending today's presentation, and good afternoon to you.