Ebiquity plc (EBQ) Earnings Call Transcript & Summary

Good morning, and welcome to the Ebiquity plc Full Year Results Investor Presentation. [Operator Instructions] I'd now like to hand over to Nick Waters, CEO. Good morning to you, sir.

Good morning. Thank you, Alessandro, and good morning to everybody joining this call. My name is Nick Waters. I'm joined by Julia Hubbard for the full year results for Ebiquity to the year ended 31st December 2023. I'll take you through a brief summary of 2023 and looking ahead to '24 before passing to Julia for some more details on the financial results. But as you can see on the left-hand side of the slide there, we have a positive revenue growth of 7%. Strong operating -- adjusted operating profit increase and the margin increasing 200 basis points -- 280 basis points, 15%. We spent a lot of '23 focusing on the transformation, particularly in regard to moving data onto the GMP365 platform and starting to provide our services based on that data management platform. We've seen very positive contribution from the United States business and good continued growth momentum from our digital media solutions whereas we signaled in our interim results presentation some client budget cuts in the fourth quarter, which softened the back end of the year, and those are most notably in Continental Europe. As we started 2024, we can say that trading is in line, as we expected it to be. And the big, big focus for this year will continuing transformational change, moving more client work onto the GMP365 platform, which will deliver us good medium-term and longer-term profitability. I'll pass to Julia now for some details on the financial performance.

Thank you, Nick. So behind -- I would like to talk about the income statement, let me just note a couple of items on the statement itself. Firstly, in 2023, there was a small disposal or noncore consultancy business, Digital Balance of Australia. The results have been disclosed as discontinued operations and the prior year results have been represented accordingly. And then secondly, December 2023 includes 12 months contribution from the acquisitions that we made in April 2022, that was MMi and MediaPath. So group revenue, as Nick has already said, has increased by GBP 5.1 million or 6.8% to GBP 80.2 million, with growth seen across all service lines. Media Performance service line contributed GBP 3.3 million of this increase and resulted from higher revenue in North America, particularly ValueTrack and Digital Media Services products of GBP 1.9 million and GBP 1.3 million, respectively. So at GBP 7.8 million, the higher Digital Media Services product is 22% higher than 2022, where it stood at GBP 6.4 million and now contributes 10% of the group's revenue. Revenue growth was partially offset by an increase of GBP 2.4 million in costs, which comprise increasing project-related costs and staff costs of 2% each, which added an extra GBP 1.3 million to the cost base and adjusted other operating costs increased by GBP 1.1 million to GBP 12.3 million. This was largely due to a swing in foreign exchange of GBP 1.4 million, which was seen as a charge in 2023, GBP 0.5 million but a benefit in 2022 of GBP 800,000. So the results in adjusted operating profit were GBP 12 million, an increase of GBP 2.8 million, which is 31% higher than 2022 and a corresponding increase in adjusted operating margin of 2.8 percentage points to 15%. Net finance costs increased by GBP 1 million to GBP 2.3 million, driven largely by higher interest rates. There was also increased bank borrowings from May 2023 following the settlement of the GBP 6.4 million cash element of the Digital Decisions post date remuneration. And tax, tax effective rate is 26.6% which is 0.8 percentage points higher than the prior year, largely due to the impact of increasing U.K. operation tax rates, which increased from 19% to 25% in the period. So that led to a corresponding increase in the tax charge of GBP 600,000, up to GBP 2.6 million in 2023. So EPS, 5.32p. That's an improvement over the prior year of 19.3%. So I'm going to talk you now through the regional revenue by segment in -- across the business before I come back and talk about highlighted items and our transformation progress. So North America delivered the highest regional revenue growth, increasing revenue by 33%, an increase of GBP 4.1 million to GBP 16.8 million. Some of this growth came from the full year effect of the MMi acquisition in April 2022. However, the remaining growth was largely driven by the Media Performance service line, which incorporates ValueTrack and DMS revenue. U.K. and Ireland is the largest revenue-generating region in 2023. Revenue increased by 19% or GBP 4.9 million to GBP 31.2 million. And revenue growth is driven largely from large global client accounts with multiple service lines, including DMS product together with 1 major global agency selection contract. In addition, Marketing Effectiveness revenue benefited from a 3-year contract, which was secured in the second quarter of 2022 and delivered from the existing cost base. Continental Europe declined by 11% or GBP 2.8 million to GBP 23.6 million. We noted this during our interim results presentation in September. Market pressures experienced in some clients in the Italian and German markets resulted in budget cuts and a consequent decline in revenue. But despite challenges in some areas, Continental Europe is leading the GMP transition and, in particular, saw growth in its ValueTrack GMP-delivered revenue. The margin benefits are shown on the next slide. APAC, smallest region -- smallest region is APAC. Revenue fell by 10% or GBP 1 million in 2023, largely due to the market or local agency selection being lower during the year. There was a bit of foreign exchange in China as well, which impacted the numbers. So adjusted operating profit by segment for the group increased to GBP 12 million, that's GBP 2.8 million increase of 31% and adjusted operating margin is now 15%. So U.K. and Ireland operating profit grew by GBP 1.1 million, which was driven by the growth in revenue with a consistent margin of 25%. Despite the revenue fall in Continental Europe of GBP 2.9 million, the faster adoption of sales through the GMP platform resulted in an increase in margin by 8 percentage points to 32%. And increase in operating profit by GBP 1.2 million. North America scaling benefits there, together with increasing volumes of higher-margin Digital Media Services revenue led to an increase in operating profit of GBP 1.4 million to GBP 2.3 million. The adjusted operating margin has moved from 7.2% in 2022 to 13.6% this year. APAC adjusted operating profit fell by GBP 200,000 to GBP 1.6 million. Pleasingly, the half 1 margin for this region, we saw that it was significantly depressed at 9.1% largely due to the back-end weighting of the Contract Compliance business in that region. And pleasingly, the full year margin has normalized at 18.5%. Unallocated costs of GBP 7.1 million increased by GBP 0.5 million over the prior year, largely due to the impact of unallocated foreign exchange. So on to the next slide. So highlighted items and transformation. We acquired MediaPath and MMi in April 2022 and committed to identifying and implementing savings of GBP 5 million on an annualized basis by the end of 2025. So to date, 3 of our products have been transitioned to GMP that's agency selection and ValueTrack during 2023. And towards the end of the year, benchmarking was transitioned. So these products amount to 60% of our group's revenue. The GMP transition rate is a key success metric that we monitor, and this doubled in 2023 to 20% of those products. Transformation costs will come through, firstly, the reduction of project-related costs, principally the data-related expenses; and secondly, head count efficiency savings from the migration to more efficient GMP. By the end of 2023, savings of around GBP 1 million have been secured with largely through data cost savings, but minimal savings were secured from net head count efficiencies as GMP needs to reach critical mass by minimizing the dual running of delivery teams, both legacy and GMP methods before savings can be delivered. The dual running of new and legacy products will reduce towards the end of 2024 and further beyond that period, which will then enable the realization of staff cost transformation savings. So I explained at the interim results presentation that the transformation benefits are delayed by around a year. On highlighted items, the total of GBP 11.2 million is GBP 2.2 million lower than the prior year. The major items include amortization and impairment of GBP 6.3 million. Like last year, amortization of purchased intangibles of GBP 3.4 million relates to the MMi and MediaPath acquisitions. And new this year is an impairment charge of GBP 2.9 million, which largely relates to the write-down of goodwill on China. This acquisition accruals, GBP 2.1 million, relates to the reassessment of deferred consideration on MMi, which was acquired in 2022 and is due for payment in 2025. We've also incurred GBP 1.8 million of professional fees and project costs, which largely related to an awarded acquisition. Around GBP 1 million of those fees were settled in January 2024. Transformation costs, GBP 1.3 million of costs were incurred in transforming and integrating the product portfolio, optimizing the use of newly acquired technologies and moving from a global delivery model to a -- together with transforming finance operations. So that's GBP 1.3 million in total. So on to the balance sheet. Net assets at 31st of December 2023 were GBP 41.7 million, an increase of GBP 5.4 million. And this was largely driven from firstly, the settlement of Digital Decisions post-date remuneration, which totaled GBP 16.1 million in total, but GBP 9.7 million of that was settled through share issue and that GBP 9.7 million adds to the net assets. So that was partially offset by, firstly, the GBP 2.9 million goodwill impairment and secondly, the GBP 1.8 million MMi deferred consideration. Strong working capital management resulted in a working capital decrease of GBP 1 million to GBP 8.4 million. And our lease liability demonstrates our desire to manage -- continue to manage our property portfolio. So a reduction in lease liabilities of GBP 1.6 million to GBP 4.4 million. Our London office lease has recently been renewed from June 2024 at a lower footprint and should lead to annualized savings of around GBP 400,000. So now on to the cash flow. So cash inflow from operations totaled GBP 11.5 million, an increase on the prior year of GBP 7.7 million, and that is largely due to improvements in working capital and cash flow. The 2022 debtor collections were impacted by the acquisition and poorer collections at that time. As noted previously, the deferred consideration for Digital Decisions was paid in May 2023. Of the total GBP 16.1 million, GBP 6.4 million was paid in cash and the remainder in equity. CapEx investment in total was GBP 2 million. Of this, GBP 1.6 million relates to research and development and of that, GBP 700,000 relates to accelerating the GMP benchmark product. Lease payments at a similar level of GBP 2.5 million. And the cash balance at the end of the period was GBP 10 million, a GBP 2.4 million reduction from the year-end. Point to note, we continue to reflect the Russian cash of GBP 900,000 in 2023 in our cash balance. However, it should be noted that this cash is restricted and may not be usable. So adjusted cash flow conversion, GBP 14.7 million converted being 122% of the adjusted operating profit and compares to GBP 5.8 million and 65% in 2022. This is likely to return to a more normalized level of around 80% going forward. And finally, on to the group net debt summary. Bank borrowings are held jointly with Barclays and NatWest. We've recently extended our revolving credit facility, which was due to expire in March 2025. The facility was extended for a further 3-year period from April 2024 and now expires on 24th of April, 2027. This was extended on more favorable terms and the amended facility is for GBP 30 million with no amortization during the 3-year period. Quarterly covenants will be applied from June 2024, and the extended facility bears variable interest at SONIA plus a margin ranging from 2.25% to 2.75%, depending on the group's net debt-to-EBITDA ratio. So the rates are better than the previous facility, which ranged from 2.6% to 3%. And final point to note, we've been in full compliance with our banking covenants throughout the period. I'll now hand over to Nick.

Thank you, Julia. I'll provide some market context before going into update you on the progress we are making against strategy. So as you all know, we operate in a very large-scaled media market, which is dominated now by digital activities. On the right-hand side of that slide, you'll see that 70% of the digital ad spend -- or the world's advertising spend is now digital and therefore, dominates, on the left-hand side, you'll see that 2024 is I think we can say bouncing back in terms of forecast by eMarketer here and again, driven by quite a strong upswing in digital activity. And it is now 5 companies that dominate the entire digital marketplace. Those 5 companies shown on the right there represent 70% of the world's digital advertising revenue. And if you look on the left-hand side of the slide, it's interesting. There's a couple of points of note there. First of all, that 5 of those top 10 companies are American and the other 5 are Chinese. And the other really interesting points to note are that Amazon has built itself almost a $60 billion advertising revenue business. And ByteDance, obviously, the owner of TikTok is now at $47 billion advertising business. So some very clear dominance and progression in that market. What exactly do we do? Well, we are a data analysis company which provides actionable intelligence and consultancy services for advertisers globally, specifically within the media markets. We do this by analyzing vast amounts of media transaction data, and we help advertisers identify and eliminate wasteful spend and find opportunities to improve both efficiency and the effectiveness of those media investments. It is a [ massive ] ticket, approximately $1 trillion will be an awful lot of that is small to medium-sized enterprises, but we often reference our primary target customer being the world's [ largest ] advertisers, and they spend about $100 billion. It's a market of incredible complexity, huge channel proliferation, all sorts of changes in audience [ theology ] and measurement, a proliferation of tech and non-tech suppliers and one that is a market that is plagued by significant transparency issues. At the same time, it's highly dynamic, I've referenced the growth of Amazon there being a massive driver of retail media. We have advanced television, which in the United States is already a $25 billion advertising market, there's huge sums of money being spent in influencer marketing. So the nature of this market, highly complex, highly dynamic, lacking transparency, very scaled provides opportunity for us to add value to advertisers. We do that through 4 service lines. Media Management, this is where we help advertisers identify the right partners, which is often the right media agencies to work with coming to and tech suppliers and various other venues. Media Performance is the bulk of our business, representing 67% of the revenue last year, and that's where we help advertisers gain greater transparency and governance and the efficiency of their media investments. And it's in that service line that our Digital Media Solutions group. Marketing Effectiveness, a highly skilled group of people providing high-value high-quality product, which identifies exactly the right levers to pull most effectively, as to pull to impact brand and business outcomes. And then finally, Contract Compliance where our teams literally audit whether an agency is adhering to their contraction terms and obligations that they've signed up to with advertisers. And I often get asked about our competitive set because our competitive set does vary a little bit by our service line. Media Management and Media Performance, these are the competitors we come up against mostly. PwC operates its practice out of here in the U.K., but operates a global practice, very high-class, high-quality competitors, as you'd imagine, from the PwC business. And then I would say our next strongest global competitor, also located here in the U.K. but providing services to multinational clients is MediaSense, a private equity-owned business. Then we have Cortex, which is an Americas specialist. It's headquartered in North America, actually in Miami because it is a South American specialist. So United States and South America. ID Comms is U.K. partnership, private partnership business, which has presence in America as well. MediaLink is a highly scaled, strong competitor in media [Audio Gap] in performance work, but it is a very strong player in [ America ]. And there's R3, which is an Asia-focused specialist business founded in Singapore more than 20 years ago, operating in China for 20-odd years and has expanded its operations into the United States in the last 5-plus years. And ECI and Europe MediaLab are our Europe specialist-focused businesses. And then Deloitte has entered our niche, our segment with strategic intent in the Asia Pacific region, but we haven't seen that anywhere else in the world. So that's the competitive set for Media Management and Media Performance. I often get asked what is the total addressable market. That's slightly difficult to be accurate because there is no published data, but we can make educated informed estimates of this. We look at the Media Management sector and data from 2023 produced by Convergence, an independent company that monitors and manages or measures, these kind of things and $35 billion worth of media spend was reviewed last year, of which 55% was national, 45% multi-market. 30% was total volumes in the United States and 79% in the multi-market volume was managed by a consultant, that equates to USD 12 billion. I'm pleased to say that we have the #1 market share of that multi-market work, managing 33% of the total volume we can see there, the market share our competitors have. Based on our fee income and the realistic amount of business to be served by consultants, we see an addressable market of in the region of GBP 30 million to GBP 40 million a year. We look at Media Performance, I come back to the point about the world's top 100 advertisers being our primary target, customer spending $100 billion. Now every advertiser in that segment has different requirements, different countries. They want the service in different depth of service, different number of brands and categories, different levels of media spend, different media mix. So it's extremely difficult to be precise in what the addressable market is, so you can see we've got a pretty wide-spread there. But I think between GBP 100 million and GBP 200 million is a realistic number. We look at Marketing Effectiveness. That is a very different set of competitors. Nielsen, Analytic Partners, Kantar are very, very big players. Gain Theory, a high-quality WPP-owned operation, Ekimetrics, a private business coming out of France are very credible and high-quality players to compete with. We estimate the U.K. market to be about GBP 75 million of the income opportunity. The United States market, we estimate to be at 5x that size. Both Continental Europe and Asia Pacific, this segment is much less developed. It is also worth noting that a lot of the very large advertisers have their own in-house marketing effectiveness teams. It's also worth noting that most of the large media agencies have this capability as well. So it's a reasonably congested market, competitive market. We have a good reputation in it and a good market share and a good market position and most certainly, good growth opportunity there. Contract Compliance is less crowded space. And you can see the brands on the bottom there, the media -- sorry, the consultants that operate in this space. Again, coming back to that potential target, world's top 100 advertisers. Extrapolating across our fees against that client base and the realistic opportunity to convert, we see probably about GBP 30 million fee income opportunity, but there is also the opportunity to expand into other marketing disciplines like create production and direct marketing and elements like that. So we think that's a market with plenty of growth potential and opportunity. So what's our competitive advantage in this market? I think, firstly, the scale of our data pools. We now have 2 highly developed data management platforms, the GMP365 platform and the Media Data Vault combined contained $32 billion worth of media transaction data, including 3.1 trillion impressions of digital media. And that's by far and away, the largest data lake and independent player in the market. We have extraordinary global reach. We're now providing analysis for multinational clients from 122 countries and we have experts in-market representing 80% of global ad spend, i.e., people who understand the national marketplace in the world's largest advertising markets, which none of our competitors have that capability. We've got a fantastic client roster, around about 75 of the world's largest advertisers. I think it's at 76 at the moment. We've been bringing really interesting innovations to market as well and our whole service offering is underpinned by high-quality technology. So that's the context in which we operate in and our competitive advantage. So how are we doing against our strategy? A reminder of the 4 elements of the strategy: geography to accelerate growth in North America and Asia Pacific; product, continued momentum with our product clients' digital services and innovate for new channels; to develop higher-value relationships with more strategic clients; and to improve operating efficiency through increased usable automation and a change of our operating model. And that's the transformation program that I will talk to you now. And the purpose of the transformation program is really to improve the operating efficiency of the business. We're doing that by seeking to change the business from a people-intensive one, a high level of human intervention and collection and analysis of data by our teams in market around the world and transition that to increased use of technology supported by globally mutualized delivery teams increasingly located in lower cost centers. We also think this move enhances the client experience and indeed, our product. We provide clients with much more timely reporting. Reducing human intervention reduces the opportunity for inaccuracy to greater accuracy and go overly consistent methodology and always-on visibility for the client regarding the data. So we've made progress through 2023. A lot of hard work has gone into this. And I'm satisfied with the progress that we made last year. We focused mostly last year on transitioning Agency Selection management and ValueTrack onto the platform. I'm pleased to say that during the course of the year, we managed 49 center Agency Selection processes from 35 clients managed on a GMP365 platform. We also now are servicing 59 clients buying our ValueTrack product using the GMP365 platform. So I would say that's really, really good progress. At the same time, we had to train our staff, and we've had to reorganize the staff from providing end-to-end delivery to clients to this new process globally mutualized delivery teams. We've got a very deep data lake in the platform now. I referenced $32 billion in our combined platforms on the previous slide, $15 billion that is in the GMP platform. We spent a lot of time during '23 calibrating a globally consistent Benchmarking product, which we tested for the first time in Q4 with 2 large international clients we're now in progress, being measured wider rollout through '24, and that's a program that will roll through '24 and '25. It's not been without its challenges. I just list the major ones here. I think it's important to note that there are some important stakeholders, external stakeholders in our business. Whilst the clients own the data, various the media agencies that are required to provide us with the data, and they've built their processes to provide us the data in our old math. And now we're obviously asking them to change that. Our clients have been used to buying very highly customized services in-market. We obviously to get the maximum benefits of efficiencies through use of technology and there will be a degree of reduced customization there because we have to explain what we're doing and why we're doing it to them, to the clients. There is more local nuance required to service national advertisers than perhaps we had anticipated in terms of software development. We don't see that as a major obstacle, but there's a little bit more software than we had anticipated there. Changing our teams from managing end-to-end processes to a very different processes has required a complete reorganization of reporting lines and [ jumbled scripts ] and roles and responsibilities. So a lot of internal work has gone into that. And a lot of work gone into recalibrating the product to create a globally consistent methodology. And as I said before, that certainly require a lot of internal training of clients and client and agency management. As a consequence, we are slower making full conversion to GMP365 than envisioned, and I would estimate we're probably a year behind where we hope to be or thought we would be. At the same time all that work has been going on, we have, I would say, streamlined our product portfolio within the Media Performance service sector. We're now able to depict it like this into 3 categories, our Digital Media Solutions, you can see our products there in the green box being streamlined into that category, that universe of products. And those are the products served and the data is housed in the Media Data box. Our Pool Benchmarking is, as we've said, increasingly being transitioned onto GMP365 platform and ValueTrack is served on the platform, increasing as well. Turning then to the Digital Media Solutions. Again, we're very satisfied with the progress here. We passed an interesting milestone during the course of last year, which since we developed -- first developed these solutions, we have now identified more than $1 billion worth of value for clients through their digital media activity. So I think that's a real tangible number and strong value proposition that we're bringing to market there. As a consequence, we now have 84 clients buying from that portfolio of solutions, which we put in market in late 2020. So really good progress there. Revenue grew 22%. It's now representing 10% of total group revenue. We're building that deep data late there in the Media Data Vault as well. From these new Digital Media Solutions, we have $14 billion worth of digital media transaction data and 2.7 trillion impressions providing, again, a really, really deep and rich data lake. We've also ingested data from the historical Ebiquity activities to further enrich that, so it now stands at $17 billion worth and 3.1 trillion impressions, which really is very much the deepest pool that any independent player has out there. We started to develop use cases for AI and large language learning models. This is primarily internally focused at the moment. It will take us a little bit longer before we have the bandwidth to develop external-facing products. We've added CO2 measurement as a module within our digital governance program. We brought an innovative product to market for the advanced television segment focused on the United States, which has demonstrated a clear value proposition to the clients that we have piloted in with and we're now in the process of scaling that up still primarily focused on the United States where the bulk of the -- bulk of the spend is, but it will be applicable to other markets globally. We've also improved the automation of our paid search product. That's a massive vertical as you will be aware, and the ambition there is to increase scalability and capacity of that product. We've been working on a retail media product, to come back to that point that Amazon is now $58 billion advertising business. So we see strong opportunity there. We've been working on that and I'm pleased to say we now have a product in live pilot phase. That's still quite early days. We don't have the results from that yet, but I'm pleased that we now have something that we are testing in market. We see further product development opportunities for influencer marketing, and we're looking at attention metrics as well. So plenty of activity for new opportunities and innovation. If I turn to our geographic performance now, it really was North America that was the standout performer with revenue growth of 32%, actually I think it was 33%. Adjusted operating profit margin has improved to the mid-teens as well, and it was only 2 years ago, we were in a negative position there and then moved to a single-digit margin business in 2022. So getting to mid-teens is good, and there's plenty of upside potential there as well. That progress has been driven primarily by increased sales in Digital Media Solutions, but we've also expanded relations with existing clients and 1 new business. Now what we've seen in the first quarter of 2024 is a sharp reaction from competition, which I assume is in response to our success last year. So we are moving the business onto a war footing to make sure we maintain momentum and fend off the competition. We're doing a lot of increased outbound prospecting and extensive roadshows, including a divide and conquer strategy, splitting teams up and sending across cities in Continental U.S.A., so we'll get back on the front foot there to keep momentum going. Europe was a mixed performance. The U.K. domestic business was resilient in difficult conditions. The global clients managed out of the U.K. performed very strongly. We had a mixed performance in Continental Europe, France and Spain did well. Those softness in Germany and Italy. The first quarter of the year in business has come back quite well, particularly the Italian business, which has really bounced back nicely. The German business will take a little bit longer to come back. Again, a bit of a mixed bag in the Asia Pacific region. I think we can split that into Asia and Australia. We had steady progress in China, India and Southeast Asia, but the Australian business was weak and our Contract Compliance work was subdued. There was also, as Julia mentioned, less Media Management activity across Asia than is typical. That wasn't company-specific to us, that was across the market. In 2024, we are expecting, we're seeing Contract Compliance return to growth, and we do expect Media Management to have a better year in '24. China, again, South East Asia, India all started the year well, and I'm confident in the progress of the business in Asia. Australia remains difficult, and it is taking us longer term business around than we had wanted. We look at the development of our high-value strategic client opportunities. I'm really pleased with the growth here. That universe has stood at a 15.5% revenue growth. We now have 101 clients buying 2 or more service lines and that's almost doubled over the last few years from when we set off on the strategy to cross-sell more services to more clients. Expanded relationships across the service lines, Media Management, significant Media Management work for some major brands there and global Media Performance work, and to name important multimarket Media Management assignments for Beiersdorf and BMW in the course of 2023. We also secured new business from major brands in the United States, which contributed to the growth there and expansion of services to General Motors. We've expanded important relationships into new geographies. Disney, they're moving into Europe for Media Performance work and converted major domestic national advertising in China, which I think is pretty good and important there, brand called Kang Shi Fu, or Master Kong is a huge noodles business in China. So that, I think, demonstrates we are getting our value proposition understood by big domestic advertisers in that market. We've expanded relationships with important strategic global clients into Southeast Asia. So in summary, this is the table of operating metrics that we've been tracking and publishing over the recent years. The left-hand side, you can see the baseline as it were of our 2020 actual numbers, and you can see how it had progressed to the end of 2023. So there's obviously 101 clients now buying 2 or more service lines in the business, 84 clients buy from our portfolio of Digital Media Solutions. Now here's the volume and the value data from Digital Media Solutions to new products rather than including the data that we've ingested. Subsequently, you can see the very significant progression there. We're now servicing 83 clients in the GMP365 platform and have moved our revenue from Digital Services up steadily 36% and there's plenty more headroom opportunity there. So to summarize, '23, continued growth and margin improvement driven considerably but the United States, by Digital Media Solutions and cross-selling and up-selling across our client portfolio. Very pleased that we brought new innovations to market that keeps our products and services current and keep us relevant in the market. We've also made significant progress transitioning our business onto the platform, the GMP365 platform. As we look to 2024, our major, major focus is the transition of our Benchmarking product onto the platform. We have started the year as we would have expected and we'll continue to focus on the transformation work, both internally and externally. We are committed to delivering not just enhanced client service but greater efficiency and increased medium and long-term profitability. And so that concludes the presentation. Thank you very much for your time and attention. And I think, Alessandro, I'm correct in saying we hand over to you for some questions.

[Operator Instructions] But just while the company take a few moments to review those questions that have been submitted today, I'd like to remind you that recording of this presentation along with a copy of the slides and the published Q&A can be accessed via your Investor dashboard. As you can see, we have received a number of questions, both pre-submitted and throughout today's live presentation. Nick, if I could maybe hand back to you just to read out those questions and give a response to it where it is appropriate to do so. I'll pick up after you at the end.

Yes. Thank you very much, Alessandro. I think the first question might not actually be aimed at this particular company presentation because it says, can you provide visibility on earnings growth, et cetera? But then it says congratulations on the last year and the integration of [ Untied Knots. Untied Knots ] is not an acquisition we made. So I suspect that question has been submitted into the wrong company presentation. So we'll move on to the next one. With regard to the significant investment during '23, was it all expensed or some of it capitalized? Julia?

So I presume that this question is based on the transformation investment that we've made. So the transformation costs of GBP 1.3 million, we cluster as highlighted items. And in terms of investment in all of the work that we've been doing, we have capitalized research and development of GBP 2 million in the year and GBP 700,000 of that related to the GMP365 platform.

So the next question, is the cash inflow in the second half of the full year and improving adjusted operating margins expected to continue at a similar level in '24? And if so, might it lead to a resumption of dividend payments?

So in terms of cash flow payments, cash flow, that conversion, hopefully, that was explained in the presentation. And so we are at 122%. Does that all come in the second half? I think at the first half, we were around 78%. So we did see that improvement from 2022, but there was further improvement in the second half. On a normalized basis, I think I stated this, I think on a normalized basis, we didn't expect that to be around the 80% mark. In terms of dividend payments, I'm not sure we've made dividend payments, certainly not within my time. Nick, have we made dividend payments?

Not in recent history, no.

I think it's something obviously that the Board would consider every year. So it is reviewed. However, having said that, and we do have debt at the moment. So I think we'd need to balance that with any dividend policy.

Next question says, what exactly is involved in our training AI on proprietary and secure curriculum? And what evidence is there as to how the results of our work with generative AI lead to a competitive advantage and enhancing our ability to service client needs better than others? So I think it's important to say the work we have been doing to date is quite internally focused on improving or speeding, increasing the rate at which we process a lot of the data. That's where our focus has been to date. We do have this concept of aiming, if you like, or training large language learning modules at the data that is housed within our secure environment. We have not yet started working on actually doing that. We've got a bit of things to be going on with at the moment. And the thesis is that we will be able to offer clients the opportunity to ask whatever questions they might want to the data and ask that directly to the data without having to go through us. And the thesis that have a valuable and quick and easy-to-use service, but I don't think any of our competitors could replicate. But that is very much conceptual and not in practice in reality at the moment. We claim that market effectiveness involves attributing forecasting, optimizing investments to increase business outcomes and ROI. How is that effectiveness quantitatively measured? It is primarily quantitatively measured through 2 main areas: one being brand metrics, whether it be awareness consideration, purchase intent, a particular attitude towards brands or indeed all the way through to sales and more importantly, profitable sales. So the more data that we have, the more accurate and more verifiable, if you like, that, that can be made, but it's a high-quality service offering that adds a lot of value to clients and is very well regarded and respected. At the time of the full year '23 interim results, you made reference -- sorry, fiscal year '23 interim results, I think, you made reference to new product development for retail media and influencers [indiscernible] on progress. What products have we developed, if any, of that particular application in assisting conveyors of influence marketing and for application in which countries? Yes, we have a somewhat sequential approach to new product development. We're a relatively small company. We don't have a large number of people working on new product development. So we take it reasonably sequentially. We were focused on getting an advanced television product into market, which we have now done. We then focus, not totally sequentially. There was some in parallel on the retail media market. And as I said earlier, we are now in pilot phase of that. The next one that we are looking at and frankly, when it comes to a global basis, seeking out a global opportunity, we're still in discovery phase for influencer marketing. But we're not starting from ground zero. We have local innovation, which is working successfully in China, in Southeast Asia and in Italy, and that's forming a basis from which we are seeking -- seeing if we can create a globally scalable product with a clear value proposition there. So I've got quite a good degree of confidence that we'll come up with something, though, because it is providing value for advertisers, for customers in those 3 markets that I noted. Any more questions, Alessandro? Do I need to scroll down?

Yes, if you scroll down, there should be some more.

What have been the difficulties in the migration to GMP365? Is this due to interoperability issues or software bugs? No, not software bugs at all. I'm very pleased to say it was a well-established platform had been in development for 10 years servicing clients. It is primarily around where Ebiquity is coming from and where we want to go to. So we are coming from a position where the company was built through acquiring small national units who all have their own way of providing these services. So there was no consistency globally. Everything was developed locally. It was handcrafted locally. It was highly customized and people were doing end-to-end services. So our global clients are saying, can you be more consistent about how you deliver these services around the world, and we felt we were quite inefficient in the way we were doing this. So to transition onto a data management platform or a globally distributed data management platform requires change to our product from highly customized local products to a more consistent global product, which in itself requires training of our people. It requires a lot of engagement with agencies to explain to them the change in the way their performance will be measured. And it requires a lot of engagement with clients to explain to them what the changes to the product are and what it means for them and why it's beneficial. We also have to change our working -- our workflows and processes. So if we move from everything being done in-market, end-to-end in-market, we're now saying actually, there's a more efficient way of servicing this right on the data management platform using what I call globally mutualized delivery teams, i.e., teams no longer focused on just servicing a national business that's servicing multinational clients across the globe and moving those roles from higher cost locations like London and Paris and New York, for example, to our lower cost locations like [indiscernible] and Bulgaria and Guatemala. And there's an awful lot of internal plumbing to change as well as a lot of external stakeholder engagement. So that's -- that hopefully provides the context for that. But the software works absolutely fine, there's no problem there. I believe there are GBP 4 million of estimated deferred acquisition payments. Is that right? What is the phasing over the next 2 years? And how much is likely to be fulfilled in new shares? Yes, that figure is approximately right. We have deferred consideration, one last segment of deferred consideration payable, which is for the MMi acquisition in the United States. And the sum to be paid, there is 1x operating profit, 2024 operating profit of the combined business. That will be paid in April, May '25, and the split between cash and shares is, off the top of my head I remember, I think it was 80% cash, 20% shares?

I think that's right, yes.

This one is definitely for you, Julia. Acquisition of intangibles was high in '23 at GBP 1.6 million. What did this represent? And what are your expectations for '24?

Okay. So CapEx was GBP 2 million for this year, GBP 1.6 million R&D. About GBP 700,000 of that was for GMP, really getting -- accelerating that spend on Benchmarking product. In terms of 2024, I think around the GBP 2 million is about right. It really will then give us some flexibility if we need to accelerate any development on -- again, on the GMP product to make that -- to accelerate the uptake quicker.

What has been your pitch success record against competitors in the last year? And that's a very good question. And we are only now, I think, getting more disciplined and better at tracking it. And that's partly because a lot of our contracts are on renewal basis. And sometimes a competitor is introduced and sometimes they aren't. So I don't think we historically have been as disciplined as we could be about tracking success versus competitors. Where we do have good accurate data, and I'll say we will roll that out globally now to make sure we have a good accurate data, it's about a 50% success rate. Is there any major project work? Let me see. I have to scroll back up. Is there any major project work -- based work that will be coming to an end of '24? Yes, we always have in any given year, some substantial projects that won't repeat. Obviously, the ambition is to win new projects to replace them, but there are a couple of, I would say, 3 large global Agency Selection mandates that we ran in '23, which will not repeat in '24. So we have to go out and hunt and find more to replace that. And that's definitely going to be difficult to replace all of that segment in '24, not just dependent on our ability to win the mandate, but it's dependent on large clients putting the business up to pitch. So there will be a couple of projects that we won't be -- that won't be repeated in '24. What first half, second half revenue split should we expect in '24?

So that's not a number that we have published and have released to the market. However, if you look at our half 1 to half 2 split historically, it's 49%, 51%; 51%, 49%. So it's around -- it's around that figure. I wouldn't expect to see a significant weighting in either half.

Why did the acquisition [ abort ] and what geographic and functional areas are you looking at for new acquisitions? I don't want to go into too much detail as to why the acquisition [ abort ]. But essentially, the process ran for a long time and gradually became more complicated for a variety of reasons. And it became -- it started to look increasingly difficult to execute successfully and the risk profile seemed to be elevating. So I think we took the sensible decision not to go. There's all those frustrating things where you've gone a long way and you'd like to just finish and get it done. But I actually think, with all the facts we knew by the time we had bought it, if we had gone ahead, we would be sitting on a lot of complexity and a lot of risks. I think it was better to back off. Geographic and functional areas. Well, the geographic lenses we look at is back to the -- one of the elements of the strategy, accelerating growth in North America and scaling in Asia Pacific. Challenge with Asia Pacific is there's very limited opportunity to acquire. So I think we're probably going to have to do the hard way, organically. There are acquisition opportunities in the United States, and that will be very attractive if we can get one for a sensible price, I think it's worth saying. Right now, our focus is on the transformation project, rather than any large strategic acquisitions we might do if opportunity arise, 1 or 2 small-scale tactical ones like we did in Canada at the start of '22. But we won't pursue -- actively pursue a large strategic acquisition. If one is brought to us, we'll have to consider it carefully. Functional areas, that's a good question. I think any businesses that are future-focused and starting to answer -- are answering the challenges that clients have in the new media markets, whether it be advanced television, retail media, influencer marketing, where, remind me, I think ways to accelerate our capability and growth in these new areas where a large amount of client's money is spent with very poor or little governance. You talked about a step-up in competition and talked about a war footing. Does this imply we might see some margin pressure? Does is reflect subscale competitors desperate for volume? Could competitors perish in this environment? All very good questions, which have now disappeared off my screen. I'll have to come back to them. We see -- where might we see some margin pressure. Very good question. I hope not. At the moment, we don't think so. We need to carefully calibrate how we respond to this. If we have competitors that are systematically underbidding us, undercutting us, then we need to see how we respond to that. So I think that's a question still to be answered. Does this reflect subscale competitors desperate for volume? I think there's an element of that, yes. We are bigger than our competitors. They don't want us to see -- they don't want to see us gobble up all the market share. So I think there is a degree of that, yes. Could competitors perish in this environment? It's possible, but I think they will probably still find enough business to survive. We don't often see competitors in our niche going out of business. They usually find a way to survive with 1 or 2 important clients. What areas would you consider making acquisitions? Will this be more accretive with the GMP platform? How would you pay for this? Your share rating is very low. Quite correct. Again, I come back to the point about looking at acquisitions through the lenses of our strategic focus areas. Geography and the preference would be further scaling in the United States, product. Are there acquisitions that can bring us new innovation and future-facing product developments. Will it be more accretive for the GMP platform? I think the GMP platform is primarily there to service our large-scale, historical revenue from our classic Agency Selection, ValueTrack and Media Benchmarking work rather than the new innovations, which we've been building out of the Media Data Vault. How would you pay for this? Your share rating is very low. I know. It is very annoying and very frustrating. So there's no quick answer to that, and that is why I think, probably our focus now is internally focused on the transformation, paying down debt, as Julia said, just doing the best we can to build the business and encourage people to invest and get that share rating up. That's the last question I have here.

Perfect. Nick, Julia, thank you very much for answering those questions from investors. And of course, the company can review all the questions submitted today, and we'll publish those responses on the Investor Meet Company platform. But just before redirecting investors to provide you with their feedback, which I'm sure is particularly important to you both. Nick, could I just ask you for a few closing comments?

Yes, indeed. Thank you, Alessandro, and thank you very much for your time and attention this morning. Just to close, I think we can be satisfied with the performance in '23. I think the direction of travel is clear, and hopefully, you were able to get a good understanding of our progress against our main strategic objectives and where we are focusing our time and energy, and we remain very much committed to long-term growth and profitable growth over the medium and long term. So thanks very much for listening.

Nick, Julia, thank you once again for updating us today. Can we please ask investors not to close the session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, potentially will be greatly valued by the company. In behalf of the management of Ebiquity plc, we'd like to thank you for attending today's presentation, and good morning to you all.