Ebiquity (LSE:EBQ) — Final Results

0:01 Good morning, and welcome to the EBQITY PLC full year results investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the q and a tab situated in the right hand corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all the questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll.

0:29 I'd now like to hand you 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 EBQITY to the year ended 12/31/2023. 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 positive revenue growth of 7%, strong operating adjusted operating profit increase and the margin increasing 200 basis points two eighty basis points to 15%. We spent a lot of 'twenty three focusing on the transformation, particularly in regard to moving data onto the GMP three sixty five platform and starting to provide our services based on that data management platform.

1:27 We've seen very positive contribution from The United States business good continued growth momentum from our digital media solutions. There were, as we signaled in our interim results presentations, some client budget cuts in the fourth quarter, which softened the back end of the year, and those are most notably in Continental Europe.

1:48 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 GMP three sixty five 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 before I I talk about the income statement, let me just note a couple of items on on the statement itself. Firstly, in 2023, there was a small disposal of a non consult non core consultancy business, Digital Balance Australia.

2:35 The results have been disclosed as discontinued operations and the prior results have been represented accordingly. And then secondly, December 2023 includes twelve months contribution from the acquisitions that we made in April 2022, that was MMI and media path. So group revenue, as Nick has already said, has increased by £5,100,000 or 6.8 percent to £80,200,000 with growth seen across all service lines. Media performance service line contributed £3,300,000 of this increase and resulted from higher revenue in North America, particularly value track and digital media services products of one point nine and one point three million respectively.

3:23 So at £7,800,000, the higher digital media services product is 22% higher than 2022 with where it stood at 6,400,000 and now contributes 10% of the group's revenue. Revenue growth was partially offset by an increase of £2,400,000 in costs, which comprise increasing project related costs and staff cost of 2% each, which added an extra 1,300,000 to the cost base, and adjusted other operating costs increased by £1,100,000 to 12,300,000. This was largely due to a swing in foreign exchange of £1,400,000, which was seen as a charge in 2023 of £05,000,000 but a benefit in 2022 of £800,000 So the results in adjusted operating profit were 12,000,000 an increase of £2,800,000 which is 31% higher than 2022 and a corresponding increase in adjusted operating margin of 2.8 percentage points to 15%.

4:35 Net finance costs increased by £1,000,000 to £2,300,000 driven largely by higher interest rates. There was also increased bank borrowings from May 2023, following the settlement of the £6,400,000 cash element of the Digital Decisions post date remuneration. And tax effective rate is 26.6%, which is 0.8 percentage points higher than the prior year, largely due to the impact of increasing UK Corporation 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 2,600,000 in 2023. So EPS, 5.32, that's an improvement over the prior year of 19.3%.

5:26 So I'm going to talk you now through the regional revenue by segment in 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 £4,100,000 to 16,800,000. Some of this growth came from the full year effect of the MMI acquisition April 2022. However, the remaining growth was largely driven by the media performance service line, which incorporates value track and DMS revenue. UK and Ireland is the largest revenue generating region in 2023.

6:12 Revenue increased by 19% or 4,900,000 to £31,200,000, and revenue growth is driven largely from large global client accounts with multiple service lines, including DMS product, together with one major global agency selection contract. In addition, marketing effectiveness revenue benefited from a three year contract, which was secured in the second quarter of twenty twenty two and delivered from the existing cost base. Continental Europe declined by 11% or GBP 2,800,000 to GBP 23,600,000. 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.

7:04 But despite challenges in some areas, Continental Europe is leading the GMP transition and in particular saw growth in its value track GMP delivered revenue. The margin benefits are shown on the next slide. APAC smallest region. The smallest region is APAC revenue fell by 10% or GBP 1,000,000 in 2023, largely due to the market for local agency selection being lower during the year. There was a bit of foreign exchange in China as well, which impacted the numbers.

7:41 So adjusted operating profit by segment for the group increased to GBP 12,000,000, that's GBP 2,800,000 increase or 31%, and adjusted operating margin is now 15%. So UK and Ireland operating profit grew by £1,100,000, which was driven by the growth in revenue with a consistent margin of 25%. Despite the revenue fall in Continental Europe of £2,900,000, the faster adoption of sales through the GMP platform resulted in an increase in margin by eight percentage points to 32%, and increase in operating profit by £1,200,000. North America scaling benefits there together with increasing volumes of higher margin digital media services revenue led to an increase in operating profit of 1,400,000 to £2,300,000.

8:37 And the adjusted operating margin has moved from 7.2 in 2022 to 13.6% this year. APAC adjusted operating profit fell by 200,000 to £1,600,000.

8:53 Pleasingly, the half one margin for this region, we we saw 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 7,100,000 increased by 500,000 over the prior year, largely 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 £5,000,000 on an annualized basis by the end of twenty twenty five.

9:43 So to date, three of our products have been transitioned to GMP, that's agency selection and value was transitioned. So these products amounts 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 and related expenses and secondly, headcount efficiency savings from the migration to more efficient GMP. By the end of twenty twenty three, savings of around GBP 1,000,000 have been secured largely through data cost savings, but minimal savings were secured from net headcount 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.

10:47 The dual running of new and legacy product will reduce towards the end of twenty twenty four 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 11,200,000 is GBP 2,200,000 lower than the prior year. The major items include amortization and impairment, 6,300,000. Like last year, amortization on purchased intangibles of £3,400,000 relates to the MMI and MediaPath acquisitions. And new this year is an impairment charge of £2,900,000 which largely relates to the write down of goodwill on China.

11:38 Post acquisition accruals, 2,100,000 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 1,800,000 of professional fees and project costs, which largely related to an aborted acquisition. Around GBP 1,000,000 of those fees were settled in January 2024. Transformation costs, 1,300,000 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 1,300,000 in total.

12:33 So onto the balance sheet. Net assets at 12/31/2023 were 41,700,000, an increase of 5,400,000. And this was largely driven from firstly, the settlement of digital decisions post date remuneration, which totaled $616,100,000 in total, but 9,700,000 of that was settled through share issue, and that 9,700,000 adds to the net assets. So that was partially offset by firstly the 2,900,000 goodwill impairment, and secondly, the 1,800,000 MMI deferred consideration. Strong working capital management resulted in working capital decrease of £1,000,000 to £8,400,000, and our lease liability demonstrates our desire to manage continue to manage our property portfolio.

13:27 So reduction in lease liabilities of £1,600,000 to 4,400,000. Our London office lease has recently been renewed from June 2024 at a lower footprint and should lead to annualized savings of around £400,000. So now on to the cash flow. So cash inflow from operations totaled £11,500,000, an increase on the prior year of 7,700,000, and that is largely due to improvements in working capital cash flow. The 2022 debtor collections were impacted by the acquisition and poor collections at that time. As noted previously, the deferred consideration for digital decisions was paid in May 2023.

14:14 Of the total 16,100,000, 6,400,000 was paid in cash and the remainder in equity. CapEx investment in total was £2,000,000 of this 1,600,000 relates to research and development and of that 700,000 relates to accelerating the GMP benchmark product. Lease payments at a similar level of £2,500,000 and the cash balance at the end of the period was 10,000,000, a 2,400,000 reduction from the year end. Point to note, we continue to reflect the Russian cash of £900,000 in 2023 in our cash balance. However, it should be noted that this cash is restricted and may not be usable.

15:02 So adjusted cash flow conversion, 14,700,000 converted being a 122% of the adjusted operating profit and compares to 5,800,000 and sixty 5% in 2022. This is likely to return to a more normalized level of around 80% going forward. And finally, onto 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 three year period from April 2024 and now expires on 04/24/2027. This was extended on more favorable terms and the amended facility is for £30,000,000 with no amortization during the three year period.

15:56 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 on the progress we're making against strategy. So as you all know, we operate in a very large scaled media market, which is dominated now by digital activities.

16:47 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.

17:17 And it is now five companies that dominate the entire digital marketplace. Those five 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 five of those top 10 companies are American and the other five are Chinese. The other really interesting points to note are that Amazon has built itself almost a $60,000,000,000 advertising revenue business. And ByteDance, obviously, the owner of TikTok, is now a $47,000,000,000 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.

18:15 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 the efficiency and the effectiveness of those media investments. It is a market. Approximately $1,000,000,000,000 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 top line of advertisers and they spend about a $100,000,000,000. It's a market of incredible complexity, huge channel proliferation, all sorts of changes in audience targeting and measurement, a proliferation of ad tech and martech suppliers and one that is a market that is plagued by significant transparency issues. At the same time, it's highly dynamic. I referenced the growth of Amazon there being a massive driver of retail media.

19:07 We have advanced television, which in The United States is already a $25,000,000,000 advertising market. There's huge sums of money spent in influencer marketing. So the nature of this market, highly complex, highly dynamic, lacking transparency and very scaled, provides opportunity for us to add value to advertisers. We do that through four service lines. Media management is where we help advertisers identify the right partners, which is often the right media agencies to work with, but can include tech suppliers and various other vendors. 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 efficiency of their media investments.

19:55 And it's in that service line that our digital media solutions include. Marketing effectiveness, highly skilled group of people providing high value, high quality product, which identifies exactly the right levers to pull most effectively to pull to impact brand and business outcomes. And then finally, contract compliance where our teams literally audit whether agencies adhering to their contractual terms and obligations that they've signed up to with advertisers. And I often get asked about our competitive set. The 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. PLC operates its practice out of here in The UK, but operates a global practice, very high class, high quality competitors, as you'd imagine, from the PLC business. And then I would say our next strongest global competitor, also located here in The UK, but providing service to multinational clients, is MediaSense, private equity owned business. Then we have Cortex, which is an America's specialist. It's headquartered in North America, actually in Miami, because it is a South America specialist. So United States and South America.

21:15 IDComms is a UK partnership, private partnership business, which has presence in America as well. MediaLink is a highly scaled, strong competitor in media

21:29 performance work that is a very strong player in media management. Then there's R3, which is an Asia focused specialist business founded in Singapore more than twenty years ago, operating in China for twenty odd years and has expanded its operations into The United States in the last five plus years. Then ECI and Europe Media Lab, 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 Media Performance. I often get asked what is the total addressable market. That that's slightly difficult to be accurate on because there is no published data, but we can make educated, informed estimates of this. We look at the media management center data from 2023 produced by Convergence, an independent company that monitors and manages or measures these kind of things, and $35,000,000,000 worth of media spend was reviewed last year, of which 55% was national, percent 45% multimarket.

22:44 30% was out of the total volumes in The United States, and 79% of the multimarket volume was managed by consultant that equates to USD 12,000,000,000. I'm pleased to say that we have the number one market share of that multi market work managing 33% of the total volume. You 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 30,000,000 to £40,000,000 a year. We look at media performance. I come back to the point about the world's top 100 advertisers being our primary target, customers spending $100,000,000,000 Now every advertiser in that segment has different requirements, different different countries they want this service in, different depth of service, different number of brands and categories, different level 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 widespread there. But I think between GBP 100,000,000 and GBP 200,000,000 is a realistic number. If you look at marketing effectiveness, that is a very different set of competitors.

24:00 Nielsen Analytics Partners, Kantar, very, very big players. Game Theory, a high quality WPP owned operation, Ecometrix, say, and private business coming out of France, all very credible and high quality players to compete with. We estimate The UK market to be about 75,000,000 of fee income opportunity. The United States market, we estimate to be 5x that size. Both Continental Europe and Asia Pacific, this segment is much less developed. But 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, a good market share and a good market position, and there's certainly good growth opportunity there. Contract compliance is a U. S.

24:57 Crowded space. You can see the brands on the bottom there, the media sorry, the consultants that operate in this space.

25:08 Again, coming back to that potential target of the world's top 100 advertisers and extrapolating across our feeds against that client base and the realistic opportunity to convert, we see probably about £30,000,000 fee income opportunity, but there is also the opportunity to expand into other marketing disciplines like creative production and direct marketing

25:33 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 two highly developed data management platforms, the GMP three sixty five platform and the media data pool combined contain $32,000,000,000 worth of media transaction data, including 3,100,000,000,000 impressions of digital media. And that's by far and away the largest data lake for any independent player in the market. We have extraordinary global reach. We now provide the analysis for multinational clients from 122 countries, and we have experts in market representing 80 of global ad spend, I. E,

26:22 people who understand the national marketplace in the world's largest advertising markets, which none of our competitors have that capability. We've got this fantastic client roster, around about 75 of the world's largest advertisers. I think it's 76 at the moment. We've been bringing really interesting innovations to market as well. And now 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 four elements of the strategy: geography to accelerate growth in North America and Asia Pacific product continued momentum with our productized digital services and innovate for new channels develop high value relationships with more strategic clients and to improve operating efficiency through increased use of automation and a change of our operating model. And that's the transformation program that I will talk to you now.

27:24 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 peak intensive one, a high level of human intervention in collection analysis of data by 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 inaccuracies, greater accuracy, a globally consistent methodology, and always on visibility for the client regarding their data.

28:18 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 value track onto the platform. And I'm pleased to say that during the course of the year, we managed 49 separate agency selection processes from 35 clients managed on the GMP three sixty five platform. We also now are servicing 59 clients buying our ValueTrack product using the GMP three sixty five platform. So I would say that's really, really good progress. At the same time, we've had to train a lot of staff, and we've had to reorganize the staff from providing end to end delivery to clients to this new process of jointly mutualized delivery teams.

29:13 We've got very deep data lake in the platform now. I referenced $32,000,000,000 in our combined platforms on the previous slide, 15,000,000,000 of that is in the GNP platform. We spent a lot of time during 2023 calibrating a globally consistent benchmarking product, which we tested for the first time in Q4 with two large international clients. We're now in progress. They measured wider rollout through '24, and that's a program that will roll through 2425. It's not been without its challenges, and I just list the major ones here.

29:52 I think it's important to note that there are some important stakeholders, external stakeholders in our business whilst the clients own the data. It is the media agencies that are required to provide us with the data. And they've built their processes to provide us with the data in our old old manner. And now we're obviously asking them to change that.

30:13 Our clients have been used to buying very highly customized services in market, obviously, to get the maximum benefits or efficiencies through use of technology, and there will be a degree of reduced customization there. So 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. I 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 very different processes has required a complete reorganization of reporting lines and job descriptions and roles and responsibilities. So a lot of internal work has gone into that.

31:09 Lot of work gone into recalibrating the product to create a globally consistent methodology. And as I said before, that's gonna require a lot of internal training and clients and client and agency management. And as a consequence, we are slower making full conversion to GMP three sixty five and envision that I would estimate we're probably a year behind where we hoped to be or thought we would be. At the same time, all that work has been going on. We have,

31:38 I would say, streamlined our product portfolio within the media performance service sector. We're now able to depict it like this in three categories. Our digital media solutions, you can see the 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 vault. Our full base benchmarking is, as we've said, increasingly being transitioned onto the G and P three sixty five platform and value track we served on the platform increasingly as well. Turning then to the Digital Media Solutions. Again, we're very satisfied with the progress here.

32:23 We passed an interesting milestone during the course of last year, which since we developed first developed these solutions, we've now identified more than $1,000,000,000 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 twenty twenty. So really good progress there. Revenue grew 22%. It's now representing 10% of total group revenue. We're building that deep data lake there in the Media Data Vault as well. From these new digital media solutions, we have $14,000,000,000 worth of digital media transaction data and 2,700,000,000,000 impressions providing, again, a really, really deep and rich data lake. We've also ingested data from historical EBQTAY activities to further enrich that. So it now stands at $17,000,000,000 worth of 3,100,000,000,000 impressions, which really is very much the deepest pool that any independent player has out there.

33:32 We started to develop use cases for for AI and large language learning models. This is primarily internally focused at the moment. It'll 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 it 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.

34:20 We've also improved the automation of our paid search product.

34:23 That's a massive vertical as you'll 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 $58,000,000,000 advertising business. So we see strong opportunity there. We've been working on that. 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%.

35:14 Actually, think it was 33%. Adjusted operating profit margin has improved to the mid teens as well. And it was only two 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 of digital media solutions, but we've also expanded relations to existing clients and won new business. Now what we've seen in the first quarter of twenty twenty four is a sharp reaction from competition, which I assume is in response to our success last year. So we are moving business onto a war footing to make sure we maintain momentum and fend off competition. We're doing a lot of increased outbound prospecting and extensive roadshows, including design and conquer strategy, splitting teams up and sending them across cities in Continental U. A. So we get back on the front foot there to keep momentum going.

36:14 Europe was a mixed performance. The UK domestic business was resilient in difficult conditions. The global clients managed out of The UK performed very strongly. We had a mixed performance in Continental Europe. France and Spain did well, but there was 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.

37:05 There was also, as Juliet 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 are seeing Contract Compliance return to growth, and we do expect media management to have a better year in 'twenty four. China, again, Southeast Asia and Europe all started the year well, and I'm confident in the progress in the business in Asia and Australia remains difficult, and it is taking us longer to turn the business around than we had wanted. We look at the development of our high value strategic client opportunities. Really pleased with the growth here. That universe is still at 15.5% revenue growth. We now have 101 clients buying two 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.

37:59 We expanded relationships across the service lines, media management, significant media management work for some major brands there and global media performance work for the name. Important multi market media management assignments for Eisenhower 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 then moving into Europe for media performance work and converted major domestic national advertising in China, which I think is critically important there. A brand called Kung Shi Fu or Mastercom 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.

39:01 So in summary, this is the table of operating metrics that we've been tracking and publishing over recent years. The left hand side, you can see the baseline as it were of our 2020 actual numbers, and you can see how they progress to the end of 2023. So as I said, 101 clients now buying two or more service lines in the business, 84 clients buying from our portfolio of Digital Media Solutions. And I've used the volume and the value data from digital media solutions, the new products rather than including the data that we've ingested subsequently. You can see the a very significant progression there. We're now servicing 83 clients in the GMP three sixty five platform and have moved our revenue from digital services up steadily to 36%, and there's plenty more headroom opportunity there.

39:54 So to summarize, 'twenty three, continued growth and margin improvement driven considerably by 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 keeps us relevant in the market. We've also made significant progress transitioning our business onto the platform, the GP three sixty five platform. As we look to 2024, a 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.

40:40 We are committed to delivering not just enhanced client service, but greater efficiency and increased medium and long term profitability. So that concludes the presentation. Thank you very much for your time and attention. And I think, Alessandra, I'm correct in saying we hand over to you for some questions. Perfect. Yeah, Nick, Julia, thanks very much for your presentation. Ladies and gentlemen, please do continue to submit your questions just by using the Q and A tab, which is situated on the top right hand corner of your screen. 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 and a can be accessed via your investor dashboard. As you can see, we have received a number of questions both presubmitted 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 think the first question might not actually be aimed at this particular company presentation because it says, can you provide visibility on earnings growth, etcetera?

41:44 But then it says, congratulations on the last year and the integration of Untie Knots. Untie 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? Yeah. So I presume that this question is based on the transformation investment that we've made. So the transformation cost of £1,300,000, we classed as highlighted items. And in terms of investment and all of the work that we've been doing, we have capitalized research and development of £2,000,000 in the year and 700 of thousand of that related to the GMP three six five platform.

42:36 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 'twenty four? And if so, might it lead to a resumption of dividend payments? So in terms of cash flow payments cash flow conversion, hopefully, that was explained in the presentation. So we are at 122%. Did that all come in the second half? I think in the first half, we were around 78%. So we did see that improvement from 2022. But there was there was further improvement in the second half. On a normalized basis, I think I stated this, you know, I think on a normalized good And that's And And then history, no. I think it's something, obviously, that the Board would consider every year. So it is reviewed. However, having said that, we do have debt at the moment.

43:47 So I think we'd need to balance that with any dividend policy. Next question is 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 in 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.

44:40 We have not yet started working on actually doing that, but plenty of things to be going on with at the moment. And the the thesis is that we will be able to offer clients the opportunity to ask whatever questions they might want of the data and ask that they directly to the data without having to go through through us and the thesis is that that will provide a valuable and quick and easy to use service that I don't think any of our competitors could replicate. But that is very much conceptual rather than practicing in reality at the moment. You claim that marketing effectiveness involves introducing, forecasting, optimizing investment to increase business outcomes and ROI.

45:29 How is that effectiveness quantitatively measured? It is primarily quantitatively measured through two main areas. One being brand metrics, whether it be, awareness, consideration, purchase intent, particular attitudes 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 twenty three interim results, I think. You made reference to new product development for retail media and influence and marketing progress.

46:25 What products have we developed, if any, that particular application in assisting players of influence marketing and for application in which countries? Yeah. We have a a somewhat sequential approach to new product development. We're a relatively small company. We don't have a large number of people working in 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 focused not totally sequentially. There was some in parallel on the retail media market. And as I said earlier, we are now in pilot phase for 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.

47:14 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 there because it is providing value for for advertisers, for customers in those three markets that I I noted. Any more questions, Alessandro? Do I need to scroll down? Yes. If you scroll down, there should be some more. Okay.

47:59 What have been the difficulties in migration to g m p three six five? 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. It'd been in development for for ten years servicing clients. It is primarily around where EBQITY 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 had 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.

48:48 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 on to a data management platform, a globally distributed data management platform requires change to our our 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 in 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.

49:33 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 on the data management platform using globe what I call globally mutualized delivery teams, I. Teams no longer focused on just servicing a national business, but 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 Sofia and Bulgaria and Guatemala. And there's there's an awful lot of internal plumbing to to change as well as a lot of external stakeholder engagement.

50:20 So that's that hopefully provides the context for that. But the software works absolutely fine. There's no there's no problem there. I believe there are £4,000,000 estimated deferred acquisition payments. Is that right? What is the phasing over the next two years? And how much is likely to be full 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 the sum to be paid, there is one times operating profit, 2,024 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 memory, I think it's 80% cash, 20% shares. I think that's right. Yes. Yeah.

51:12 Scroll down. This one's definitely for you, Julia. Acquisition of intangibles was high in '23 at £1,600,000. Yeah. What did this represent, and what are your expectations for '24? Okay. So CapEx was £2,000,000 for this year, 1.6 r and d, about 700,000 of that was for GMP, really getting accelerating that spend on benchmarking product. In terms of 2024, I think around the 2,000,000 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.

52:03 K. Scrolling down. What has been your pitch success record against competitors in the last year? And that's a that's a very good question. 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 we will roll that out globally now to make sure we get good accurate data. It's about a 50% success rate.

52:49 Is there any major project work? Oh, that one's gone. That's good. Yeah. Let me see. I've gotta scroll back up. Alessandra, you're a bit quick on the button there. Is there any major project work base based work that will be coming to an end in '24? Yes. We always have, on any given year, some substantial projects that won't repeat. Obviously, the ambition is to win new projects to replace them. But there were a couple of, I would say, three 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.

53:35 And, you know, that that's definitely going to be difficult to replace all of that segment in '24, not just dependent on our ability to win the mandates, but it's dependent on large clients putting the business up for pitch. So there will be a couple of projects that we won't be competing in '24. What first half, second half revenue split should we expect in '24? I'll pass that to you, June. Thank you. So that's not a number that we have 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.

54:27 Why did the acquisition evolve? 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 evolved. 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 a sensible decision not to go ahead. It's one of those frustrating things where you've gone a long way in and you'd like to just finish it and get it done. But I actually think with all the facts we knew by the time we aborted, if we had gone ahead, we would be sitting on a lot of complexity and a lot of risks. So I think it was better to back off.

55:23 Geographic functional areas. Well, the geographic lenses we 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 gonna have to do that the hard way organically. There are acquisitions opportunities in The United States, and that would 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, one or two small scale tactical ones like we did in Canada at start of twenty two, but we won't pursue actively pursue a large strategic acquisition.

56:11 If one is brought to us, we'll have to consider carefully. Functional areas. That's a good question. I think any businesses that are future focused and starting to answer or answering the challenges that clients have in the new media markets, whether it be advanced television, retail media, influencer marketing, whatever it might be, I think, ways to accelerate our capability and growth in these new areas where large amounts of client 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 this reflect subscale competitors desperate for volume? Could competitors perish in this environment? All very good questions, which have now disappeared off my screen.

57:04 So I'm just going to come back to them. Will we see or 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 where 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 I think there's an element of that. Yeah. We are bigger than our competitors. They don't want us to see they want don't want to see us gobble up all the market share. So I think there is a degree of that. Yeah. Could competitors perish in this environment?

57:59 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 one or two 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 quite correct. Again, I'll come back to that point about looking at acquisitions through the lenses of our strategic focus areas, geography, and the and the preference would be further scaling The United States product. Are there acquisitions that can bring us new innovation, future facing product developments?

58:50 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, you know, from our classic agency selection, value track, immediate benchmarking work rather than the new innovations which we've been building out of the media data for. 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.

59:38 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 is particularly important to you both, Nick, could I just ask you for a few closing comments? Yes. Indeed. Thank you, Alessandra, and thank you very much for your time and attention this morning. Just to close, I think we can be satisfied with the performance of '23. I think the direction of travel is clear, and hopefully, you are 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 medium and long term. So thank you very much for listening. Perfect.

1:00:35 Nick, Julia, thank you once again for updating investors today. Can I please ask investors not to close this session as you now be automatically redirected to provide your feedback in order the management team can better understand your views and expectations? This will only take a few moments to complete, but some should be greatly valued by the company. On behalf of management team of EBQITY PLC, we'd like to thank you for attending today's presentation, and good morning to you all.