Ebiquity (LSE:EBQ) — Investor Presentation

0:01 Good morning, and welcome to the EBQITY PLC Investor Presentation. Simply type in your questions and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company will review all questions submitted today and publish responses where appropriate to do so. Before we begin, I would like to submit the following poll.

0:32 I would now like to hand you over to CEO, Nick Waters. Good morning to you. Good morning, Alex, and thank you, and good morning to everybody who's joining this call. This is the annual results presentation for the year ended December 22 for EBQITY PLC. My name is Nick Waters. I'm joined today by our CFO, Alan Newman. We have approximately forty minutes worth of content, and then we'll obviously be happy to take any questions afterwards. Just to start, you may have seen the announcement that Alan will be retiring at the end of June. So I just wanna put on record my thanks to Alan for everything he has done for the company over the last four years since he joined and and the fantastic contribution he has made and and support to myself and the rest of the wider EBQITY leadership team. So thank you very much, Alan.

1:23 I will start with a quick summary executive summary, which I'm pleased to say, I'm pleased to report we can talk about positive results and positive momentum through the year, you'll have seen we delivered very strong revenue growth of 20%, including 9% organic revenue growth and a significant improvement in the operating margin and total operating profit. We made three acquisitions during the course of '22, one that I would describe as a a relatively small tactical one and two strategic acquisitions. And I'm pleased to be able to tell you that all three of them have been integrated well and contributing well to our results and our business. Also pleasing was a strong geographically distributed performance, all regions growing strongly, all regions performing well.

2:17 We've also, as you know, made quite a concerted effort over the last couple of years to develop our digital media solutions. They continue to deliver high revenue growth and at a high margin. Our largest service line is media performance, and that has been our strongest growing service line. It has been boosted significantly by the acquisitions that were primarily focused in that media performance service line and by our digital media solutions. Our contract compliance service line has had a particularly good year being our fastest growing service

2:49 line organically. Now that is coming off a couple of years where it struggled a little bit. It was the one most badly hit by the COVID pandemic of the nature of the work where the teams actually go and sit in agencies' offices to conduct their audits. And, of course, offices were closed, so 2020 was a very, very difficult year for that particular service line. Started to recover in '21, but it's really found its feet and and gained momentum in '22. As we sit here now, I'm pleased to be able to tell you that I feel the outlook looks encouraging. I will now pass to Alan to go through the numbers, and I'll come back and give you an update on the strategic progress. Graham, thank you, Nick. We'll start with the summary of the income statement.

3:36 I'm gonna just give you the highlights. As Nick mentioned, we had 20% revenue growth, including benefit of the acquisitions in 229% organic growth. So you see that the acquisition contributed 11% in the seven to eight months they were in. If you take the the 9% organic, that in it can also be divided roughly equally between the digital media solutions growth and the rest of the business. And one of the points to make, people have asked us already is quite deliberately, digital media solutions is one of us highest higher margin solutions and serving particular need in in the growth area. And we have, in some cases, really been promoting it. You might say in some ways ahead of our other products. So it is partly it is substituting in some cases.

4:27 On the operating expenses front, the growth there of 17% overall reflects, again, the acquisitions. If we strip those out, the operating expenses grew essentially in in line with inflation, and we had a relatively low organic growth in headcount. The combination of strong revenue growth and lower operating expense growth contributed to almost a doubling of our adjusted operating profit, which is, know, regards a very important achievement in in this year to get back to to 9,000,000 and to be really beginning to exceed now the the performances back in 2019 pre COVID. And as importantly, the operating margin has now, gone into double digits, 12% as we had already achieved at the half year. And, this is really, again, another, hitting a milestone on the journey to being a much more profitable company, which we set out as our medium term goal.

5:22 On the other hand, we have had to cope with higher interest rates. We have net debt, and therefore, our finance costs also went up in the year, a combination by 700,000 to 1,300,000. That's a combination of higher debt to finance the acquisitions and also of mostly higher interest rates that we're having to cope with. And non notwithstanding that, our adjusted profit before tax still went up 95%, and we achieved almost a doubling of our adjusted earnings per share from 2.7 p to 5.4 p. We have in the statutory accounts a number of highlighted items, in particular, the largest of which is a a results from the the way that you have to account for the acquisition of digital decisions as a profit loss charge because the owners had to stay employed all the way through to the end of that period. And that is a nearly £8,000,000 accrual reflecting the success of that company since we bought it. We've also got amortization charges for purchased assets, which we in common of our our role of accounting practice and some one off items such as acquisition costs and also on those leases due to having closed down parts of our office in London and also looking to sublet our office in New York.

6:48 Moving on to the balance sheet. And the broad picture there is growth of the whole balance sheet, thanks to the acquisitions and the equity that we raised to finance them. Within the balance sheet, we've got see, goodwill has increased and also networking capital. That's partly, again, a factor of our of the acquisition themselves, bringing in higher in total, more debtors than than than liabilities, but also a phasing issue as some of those, particularly in America, the companies we acquired have come with quite long payment periods that are imposed on us. So so that has somewhat increased our debt a day numbers from sixty one to sixty seven days, as well as the fact that we're invoicing quite a lot towards the end of the year.

7:37 Digital decisions is now fully so the earn out for digital decisions is now fully provided in the balance sheet. We estimate that will be £15,800,000 that we paid sometime towards the end of May. And as I've said already, we'll Nick will talk further about DigitalCisions and how it's contributed to our business, but it reflects the great success of that business. We also have some deferred consideration now on the balance sheet for MMI, which will be payable in 2025, and we paid a small amount. A final part of the deferred consideration was paid to Canada that we paid in January. Our net debt has, as a result of that, gone up by nearly just over £4,000,000 to 9,100,000.

8:24 That comprises 12,400,000 cash and 21,500,000 bank loan. We have net cash dotted around our business as a company as a company we have operations in many parts of the world, and they each need to keep cash for their operations. And how we get to that cash is that we had a cash inflow from operations, including highlighted items of 3,800,000. So that's after paying out a number of the charges I mentioned earlier as part of the acquisition costs, and that also includes a a net working capital outflow of 6,000,000. And as I mentioned, some of that is phasing issue. Some of that is the nature of the makeup of the assets and liabilities that we acquired from the in the companies we bought.

9:11 And on the so the net cash generation operating expenses is 1,200,000. We had then 17,500,000 invested in the three companies that was funded largely funded by the proceeds of the share issue and a drawdown of bank borrowings of 3,500,000. And that resulted in a net decrease in our net banking cash of 1,300,000. We excuse me. Just clicking on. A key measure for us, though, having looked at cash, including the highest items, is actually to strip those out and to look at our, what we call, adjusted cash generation operations. So that's matching our cash flow against the adjusted operating profit, which is the, in fact, the underlying day to day performance of the business. And that ratio is still healthy at 67%, so we're converting two thirds of our operating profit into cash. It's lower than last year, which is which was abnormal where we've had a very substantial working capital inflow for one off reasons.

10:17 But it's a little below where we'd probably like to target to be 90% most years, but we will expect that to improve next year as we get through some of the working capital reverses.

10:32 And just to give you a background on the net debt situation, we have a facility which we extended or increased and extended to cover the acquisitions last March, which we have available until March 2025, potentially for a further two years. The total facility is £30,000,000. We have drawn down at the year end 21,500,000, leaving undrawn facilities at 8,500,000. And we are applying well within the covenants that have applied since that facility was put in place, which are on interest cover, adjusted leverage, and adjusted for consideration level, and we're we're trading well within those covenants, and we expect to remain so.

11:20 So one of the things that we've done this year differently from previously is to change our segmental analysis really to reflect better reflect the group management structure, and that is to change it from what had previously been service line approach of media and analytics and tech. And we now are showing how our group operates from a geographical perspective. And I think that that really helps us to explain the performance much better as well. So in terms of those geographies, we have UK and Ireland, which includes our international unit specializing in international media and also our marketing effectiveness teams, Continental Europe, North America, and APAC. And in Continental Europe, we now include MMI.

12:05 Sorry. Think about MediaPath, the business that was headquartered in Sweden, and North America includes MMI, the business we bought in America and Canada. Continental Europe sorry, the fastest growing, was gonna say, America more than doubled, including the acquisition, but also had very strong organic growth of 73%, really reflecting the plans we already had in place and those being delivered to improve our our sales in that market. Continental Europe had a respectable organic growth of 6% and or 26% including the EBIQUITY PATH. And The UK, which is our largest remains our largest units, mixed in a sense that domestic business was up 6%, but that was, you know, offset by a reduction in the international project business, which went down by 30%, largely reflecting, as I'll explain further, a drop in media agency selection activity, overall 3% reduction. But it's still you know, we are still very much of the market leader in The UK. So it's it's not the area we expect as much growth from.

13:15 Finally, APAC still relatively small, but doing very well, growing by 18% all organic, and that's particularly in China and Southeast Asia. If we look at our business, and we're going to in segmental analysis now, we're publishing profit by geography. We're also providing a secondary analysis, continuing to explain our services in well, currently, five service lines. Those are the largest of which is media performance. So that's the core business of where we're benchmarking, saving, tracking, explaining to clients how their agency has been performing. And that includes mostly MMI, media parties included in that, and that grew by 33%, including those two, and also includes digital media solutions, which grew by 76%.

14:06 Media management, as I've just mentioned, saw a small reduction in activity mainly because there are fewer agency pitches in the marketplace for us to be advising on in 2022. Contract compliance, as Nick has already mentioned, grew very strongly about 25%. And marketing effectiveness, which is the business that helps me to model, help clients decide how they should allocate their media spend, modeling it against things like their sales potential and delivery. Static, probably because we've deliberately been trying to focus on on on on improving our margins and only really doing work with clients who prepare to pay the kind of, you know, the fees that we believe reflect the value of that activity. Tech advisory is very small and will be folded next year into media management.

14:57 Looking at how our profitability changed in the year. As you know, overall, I've just mentioned we doubled our adjusted operating profit and contributions from from a whole world outside of The UK and Ireland. UK and Ireland stay relatively static. Whereas in Europe, again, we saw operating profit up 63% reflecting media part acquisition, but also importantly, the margin going up, affecting the fact that MediaPart is a higher margin business, and also that we had increased profitability in

15:29 a number of European markets reflecting strong sales in those markets, strong revenue growth in those markets. And in particular, France did very well. And that takes a margin in Continental Europe to 30%, which is now the the the highest in the business. In North America, really important this year was a turnaround, which we were planning to achieve in any case organically, but the acquisition airline Canada really boosted that and switches from having been loss making and, historically having had problems in in in North

16:00 America to business which is now profitable and which is well placed with to achieve further scale benefits and further growth in that operating profit margin. APAC continued to be a good performer. Its uptick of 3%, really reflecting revenue growth and and a shift to to really try to drive again towards higher value clients. So I hope that's given a picture of our financial performance. I mean, back to Nick to take you through our strategy and and more details of how we we did in the year.

16:36 Integration progress and contribution of the acquisitions that we made during the course of last year. And as I mentioned, we made two strategic acquisitions. We'll start with the first one, Media Management Inc in The United States Of America. We also made that small tactical acquisition of Ford and Simple in Canada, but we'll focus on on The US one. As Alan mentioned, it's really, really boosted our business there with revenue growth of over a 138%, but also worth noting a strong organic performance from the business. Now bringing MNI into the organization has almost doubled our client roster with now over a 100 clients. That gives us, I would say, great stability, a great platform from which to build our business further.

17:25 Importantly, it it's helped us penetrate some of the largest advertisers more effectively. So we now work with 19 of the top 25 advertisers and have a really good strong roster of those advertisers spending a $100,000,000 or more. We've been able to cross sell successfully. MMI's service offering was highly complementary to EBQITY's.

17:48 They have a a product, a highly automated product through proprietary technology called CircleAudit to service the regional television market, which is is huge, $40,000,000,000, and it's the only product in the market that addresses that. So that's enabled us to cross sell existing EBIQUITY clients into the MMI service offering and and cross sell back the other way. One of the areas we've made success in in cross selling is the digital media solutions with very, very strong revenue growth there. And we're also happy to be able to tell you that we've made good progress capturing the revenue synergies and those which we'd targeted during the course of 2022 have been exceeded. That's been primarily, I would say, driven by eliminating third party data acquisition costs, being able to eliminate one of two contracts and renegotiate.

18:43 We've also eliminated one or two duplicate roles, not not significant number of redundancies, but one or two duplicate roles that aren't needed. And through better resource utilization, have avoided hiring some roles that we might otherwise have had to have done as EBQITY. So good progress there.

19:04 And referring back to the cross selling from clients across our service proposition, We've made very good progress there by with the number of clients buying two or more products up 85% year on year. That broader service offering that I referenced there has enabled us to develop more of a competitive advantage, I would say, really contributing well to new business successes and the expansion of existing client relationships. So we're very happy with the acquisition of MMI and comfortable with the progress that we've made. MediaPath Network, Alan referenced, headquartered out of Sweden, really a globally distributed business that used to compete directly with EBQITY. So the service offering was very, very similar to EBQITY's but delivered in a very different way. It was delivered through the unique technology platform called g m p three six five.

20:02 And that was the strategic rationale for acquiring MediaPath, this high quality, high functional data management platform that will allow us to analyze all these clients' advertising data in a much more automated fashion. So Suzanne Elias, who founded the business and led MediaPath, she's joined our executive leadership team as the chief delivery officer,

20:28 really to drive the change of the delivery of our service onto that technology platform. Now that's a major program that we feel will take three years to roll out. The reason being, GMP three six five has a high level functionality. It takes time for people to be trained on it and to learn it. It also we need to recognize means we'll be, as I said, delivering our services in a different way from that which clients have been used to. So we need to engage with our clients and explain to them the changes that we're making. And, of course, the media agencies are important stakeholder in our business, and we need to engage with them, explain what we're doing, and help them use the platform as well. We have made good progress onboarding major international clients, some of which are listed there, and it's also contributed very significantly to some new business wins.

21:22 Pleasingly, those new business wins are geographically distributed. So a couple of major clients in The United States, Santori in Asia Pacific, and CareCare across 11 markets in Europe, in addition to a range of national advertisers. So I think we're making good progress in transitioning our business to g and p three six five, but it is a long program, which we think will take three years to complete. We are noticing on certain projects significant time savings, which, as I said, was really the rationale for bringing this business in and transferring our business onto g m p three six five. So up to 60% time saving has been identified on some projects.

22:08 To update you on our progress against strategy, just a very quick reminder of what we're in business to do. We help brand owners increase returns from their media investments and so improve business performance. And we have four central strategic objectives to achieve. The first of which is to increase revenue from digital services through the development of productized data solutions. Then we wish to develop high value strategic relationships with more major customers. We're in this fantastic position of having a a wonderful roster of blue chip clients. We talk about working with over 70 of the world's top 100 advertisers, We're currently generating revenue from 75 of those, but there's a lot of growth opportunity with many of them. So we want to strategically develop those.

22:55 Big focus on improving operational efficiency. As Alan talked to us through the numbers, we've almost doubled the doubled the margin. So we're making progress there, but there's there's more that we can do, and we're heavily focused on that. And then we are, as you've seen, our revenue is skewed geographically to The UK, Ireland and Continental Europe. So we have quite a focus on strengthening our business and growing our business in North America and Asia Pacific. The context of the market we operate in is is highly dynamic and increases in complexity. Think that's good that's market. That's And probably from about the half year mark onwards.

23:47 But the the global advertising market in totality held up well, albeit some pockets of it were very, very significantly challenged.

23:56 Geographically, the most challenging market was China, and that was really down to the zero COVID policy, which you'll be aware, stayed in place for much longer, which definitely dampened down economic activity and frankly made it much harder for our people to run the business and and and generate business whilst they were effectively trapped in their apartments for long periods of time. We also saw a reduced amount of activity in agency selection work, which Alan referenced explaining the media management service line performance. If we think back chronologically, that segment was hit most hard or very heavily, I should say, during 2020 in the COVID years. Our advertisers had other things to worry about than putting their business up a pitch. That then released pent up demand in '21, so I would say that was a surge year and '22 probably returned to much more normalized levels of activity.

24:50 We have seen, I think, the most significant shifts in the digital market for for quite some time with alphabet and meta coming under pressure for the first time that I can recall. Twitter, obviously, the upheaval there resulted in a lot of self inflicted wounds, but we've seen significant gains from TikTok, Amazon building a $10,000,000,000 plus advertising business, Apple on the route to building a $10,000,000,000 plus advertising business as well. So very, very significant changes in the digital market. Now two really interesting trends that wouldn't say they've come out of nowhere, but they really exploded in 2022 was the boom in commerce media. Retailers have looked to Amazon and understood the value to their businesses by monetizing their digital real estate and the audiences that come on to their website. So there's a very concerted effort to develop advertising businesses in the in the retail media space.

25:41 There's quite a lot of commentary around it suggesting this is the third wave of digital advertising. It has the potential to be the biggest of them all. We're seeing open web programmatic budgets flow into retail into retail media, and we're seeing search budgets flow into that and trade budgets that historically been going to buy shelf space. So very exciting space there. The most the the quickest growing segment, those advanced television, albeit smaller, commerce media is around about $45,000,000,000 market in The US now. Advanced television, about $25,000,000,000, but it's growing the quickest. I think there are challenges there for advertising. Audience for advertisers rather. Audience measurement is poor and campaign controls are weak. So all of this creates a lot of complexity for advertisers therefore demand for EBQTY services that we are able to help advertisers navigate these challenges.

26:36 At the end of two thousand twenty, or rather at our our 2020 results in March, we presented a set of operating metrics with the baseline as of the end of two thousand twenty. And I'm pleased to to show you that we're making very good progress against each of these operating metrics. So in our our bid to cross sell more services and develop higher strategic relationships with clients, we are now selling two or more service lines to 97 clients since the end of two thousand twenty two. The development of the digital media solutions is progressing well with a number of clients buying those almost doubled year on year to 55 now. Now we talk here about the volume of digital advertising and the value of digital advertising analyzed within our media data vault. Now I've got 1,400,000,000,000 impressions and over $6.56600000000 dollars of advertising in the media data vault, which we have analyzed.

27:31 Now that provides us with an incredibly rich and deep dataset from which we are able to provide an incredibly robust analysis, the most robust analysis of any any independent player of digital marketing activities. And I also feel feel this represents quite an increasingly deep moat now. If another player wanted to take the same approach, they've got a long way to catch up. It would be difficult for them to compete head on credibly against us when we've got this particular depth of data in this specific area, I think. Now the number of countries served with digital solutions or the new portfolio, This was important as the premise was that we would be able to service clients or analyze clients' data wherever they operated in the world. So if we look at those top 100 advertisers, of which we're now serving 75, they advertise in a huge number of markets.

28:32 And whilst 80% of their spend may go in the major economies and the major advertising markets, 20% of their spend in a long tail of market still represents a large amount of money. So we're demonstrating our ability to service the world's largest advertisers wherever they may operate, now analyzing data for them in 91 countries around the world. Now that's probably reaching a saturation point, and there may not be much great benefit in tracking this metric going forward. So that might be a metric that we retire. I don't think there's a great difference between servicing clients in 91 markets versus a 105, for example. The final metric we look at there is the percentage of revenue we derive from digital services, which has now moved up to to 32% off a base of 25% when we started reporting these metrics.

29:20 Now it might seem that moving up three percentage points year on year to 32% isn't particularly dramatic, but the context to that is that the two major acquisitions we brought in of MMI and MediaPath, their business models are quite heavily skewed towards the broadcast market as well. The fact that we're continuing to progress the the ratio of revenue delivered from digital services in the context of those two acquisitions, I think, is a positive, and we can be satisfied with that. Turning to those digital media solutions now then. It it is fair to say that has transformed our digital capabilities. I think a couple of years ago, we we didn't have a confident digital product in market, but you can see the rate of growth that this is this is moving out and being taken up by clients. So has delivered 76% organic growth, and we continue to run that with a very strong profit margin at somewhat over 50%.

30:18 We have seven of these productized digital solutions in market. Increasingly, when it we're we're centering them on what we call the digital governance program and selling the other solutions more on a modular basis. So rather than selling on a stand alone basis, they're increasingly sold as add ons, if you like, to the digital governance program. One of these new solutions we call responsible media investment, there's a a a enormous focus as as you're all aware on big corporates and their social responsibility and their ESG strategies. We're now able to advise these big advertisers where their media dollars are going in terms of whether they are inadvertently funding bad actors such as websites that promote hate speech or disinformation, conspiracy theories, anti vax theories, and various other dynamics like that. We've now expanded that to 13 markets. It is different in each market because the context of each market is slightly different, but the principle remains the same. We help advertisers identify if they are inadvertently funding bad actors.

31:28 A new element to that is Scope three data. We have partnered with an organization called Scope three, which launched, I believe, was in January 2022. They are the the measurement provider for the carbon carbon footprint or carbon emissions of every aspect of the digital supply chain. So they have a a c o two equivalent emissions data point for every impression in the advertising digital advertising supply chain. And we match our clients' digital activity to scope three's data to quantify the carbon carbon c o two emissions equivalent for our advertisers' digital supply chain. I think that's hopefully going to be seen as a valuable service for big corporates as they are increasingly required to report their scope three emissions.

32:24 I referenced earlier the growth, the speed of growth in the advanced television market in The United States. We have a pilot product in in market there, and we'll be able to look at our first analysis of that in April of this year. So it'd be interesting to see how that goes. In terms of new product development, we are focused on getting a a retail media solution in market to capture that particularly large segment. We're seeking to evolve our paid search product through enhanced automation, and we're looking at influencer marketing. Our our national teams in China and Singapore and Italy have developed their own approach to influencer marketing. So we're having a look at that and seeing the the relevance, if you like, of the validity of rolling that out on a wider geographic basis. So plenty of activity of new product development.

33:14 If we look to the second element of the strategy, developing high value strategic clients, I've referenced already that we work seventy seventy five of the world's top 100 advertisers. We also mustn't forget, we have an extremely strong breadth of national advertisers working with around about a total of 600 clients around the world. 97 of our total clients are buying two or more service lines, which is progress up 28% year on year. We remain very competitive with the world's largest brand owners winning important global agency selection mandates. Now this is important not just for the work that that provides, but for the downstream work that follows in terms of performance tracking, performance benchmarking, marketing effectiveness opportunities, and contract compliance opportunities.

34:08 And although we work with such a a high number of the world's leading advertisers, we're still able to penetrate new logos, new advertisers with some promising new business wins. So believe we are competitive in the market. And the third focus is of the strategy is creating a more efficient business. Margin has proved improved significantly, And that's been delivered by a contribution of factors, one of which is reduction of production costs. I referenced the elimination of third party data contracts that's contributed to that as has starting to do a little bit more work on the g m p three six five platform and reduce outsourcing in markets where we don't have our own on the ground expertise. So that's been very helpful.

34:58 The digital media solutions, which is growing strongly, operate at a very high margin, so we have an improving revenue mix there as well. You saw from Alan's geographic segmentation analysis that historically, we were losing money in The United States. So the acquisition of MMI has enabled us to scale the business and gain economies of scale, turning us to profit. We are capturing these cost synergies. That's in on track. We have operated for a number of years now a media operation center primarily located in Madrid, but now developing in Guatemala to better service The United States time zone with some resources in India and Indonesia and through the acquisition of MediaPath, a center in Sofia, Bulgaria as well. So we're able to transfer more repetitive work from the higher cost centers into the media operations center.

35:53 We're taking that concept and utilizing the GMP three six five platform as our service delivery model to effectively globalize the nature of the media operations center. So a focus on utilizing technology to improve efficiencies. The fourth element of the strategic focus is geography. We've referenced the growth in North America. That acquisition of MMI has not only increased penetration of large US corporates, but it's improved our visibility within the market as well. Asia Pacific is our fastest growing region organically, up 18%. And despite the challenges of the zero COVID policy in China, that's a that's a good performance of 11% organic growth.

36:41 I'll reference extremely strong performance in Southeast Asia. Now our Singapore business unit revenue is up 80%. That is being driven by a combination of things. Regional new business wins headquartered out of Singapore, a lot of Asia Pacific regional clients are headquartered in Singapore. So winning those mandates has boosted the Singapore margin or Singapore revenue, I should say. But also, we're starting now to gain a few more clients from some of the larger growth markets in Southeast Asia such as Indonesia, The Philippines, and Vietnam. Continental European growth has been boosted by MediaPath, but there is also very strong organic growth in a number of our markets with a particular standout performance from France with revenue up 46%, but it's is also worth referencing good performances in Spain and Italy.

37:33 Media performance is our largest service line and contributed very strong revenue growth, largely reflecting the acquisitions and the fast growing digital services. I've referenced already the contract compliance service line being our largest or fastest organic line. And Alan mentioned tech advisory services being folded into media management. You'd have seen on the segmentation analysis that tech advisory is a a small a small portion of our revenue, and I don't feel it really makes sense to have that as a stand alone service line. We will continue to offer those services, and it's important for us to have that capability. Clients do look for us to provide that. But we'll follow that intermediate management, and I think that'll give us a little bit more of a streamlined approach.

38:19 That will be coupled, if you like, with the disposal of a small business unit in Australia, Digital Balance, which the the service that offer offers is really to help advertisers optimize the customer journey on their website. So it doesn't really fit in with the rest of the EBQITY business. So this is a little bit of tidying up of our service proposition, and that disposal will be announced shortly or the completion of that. As we sit here now at the start of April, I think we can be comfortable that 2023 has started on track. We're we're satisfied where we are in terms of the first quarter. And as we look forward, the pipeline visibility is good. Our strategy is on plan, and we continue to progress.

39:08 We are delivering the synergy benefits to our three year targets. We do need to be cognizant of inflationary pressures in the macro environment. In October of last year, we made one off cost of living relief payments to a range of our lower paid members of staff. There is upward pressure on salaries, and we will see how that progresses through the year, but we do remain confident in delivering our medium term margin growth. We also feel that the complexity and dynamism of the global media market continues to offer EBQITY up continues to offer opportunities for EBQITY. So we feel we are well placed to meet advertiser needs.

39:54 Now that concludes the presentation. That's the slide slides that we have. So we'll take any questions now. And, Alex, perhaps you would take the slide deck down from Steve. Great. That's great, Nick. Alan, thank you very much indeed for your presentation this morning. And if I may, I will now bring your cameras back up. Nick, did you want me to take down the slides? Yes. I think so. I think we should do that, and we'll we'll turn to questions. But I can see. Some are some are posted already. So I'll I'll read out and moderate the questions. I'll take some myself, and I'll ask Alan to take some as well. So the first one, given more than a 1,400,000,000,000 digital media impressions available, does EBQITY offer or envisage offering any AI enhanced services to the customer base to enhance margin and differentiate the offering still further? Is this possible? That's a very, very good question. It is something we have been considering for a little while now, the application of either AI or machine learning or indeed both.

41:06 I would say we're still at the very early stages of figuring that out. But, yes, that is very much our view that we would like to find ways of harnessing AI and or machine learning to, as you say, enhance the service offering and improve our our our business. So that's something that's very early stage, though, and I couldn't commit to when we might be able to bring something to market in that respect. EBQITY claim, we are world leader in media investment analysis amongst our 500 media specialists. How many chartered financial analysts do we employ? I'm gonna have to pass that question to Alan. I think that question or the answer is none, but I think that question is probably a slight misunderstanding of what we mean by investment analysis. We are not investment analysts in the sense of, you know, a financial house would be or would need to have CFAs. We our our specialists our specialists in media investment analysis, I. Then how to analyze and understand what is actually happening in terms of purchasing of media.

42:10 So so we don't we wouldn't need to have any. Thanks, Alan. Historically, EBQITY has purchased companies and made deferred payments to sellers remaining with business. Our record, particularly in The USA, has been bad with some sellers walking away when the payments have been paid and the business profitability is plunging. What are we doing to prevent this happening again? That's a very good question. I can't reference historical acquisitions. I I joined the company two and a half years ago, so I'm not familiar with the details of those. But, clearly, I can talk to the steps we've taken with the acquisitions we have made in the last couple of years. Let's start with digital decisions where the deferred consideration will be paid out during the course of the next few months.

42:56 I think the first point to note there is a considerable portion of the deferred consideration is paid in EBQITY shares. So it remains in the interests of the partners of that business to ensure the ongoing strength of the organization. But I'd also point to the fact that for three partners, the largest of which was Ruben Shroyers, he's the chief product officer of our organization and part of the EBIQUITY leadership team. He has a central role in the company, and I think he recognizes the value that he brings to the organization and that we regard him. One of the other partners, Lars has taken on a newly created role as of the start of this year. He becomes our chief data and technology officer, and he joins the leadership team as well. And the third partner, chap called p Hanford, has taken another senior and central role in the group as our group director for growth and revenue. So I think those guys are in a reasonably good place. They're they're motivated, they're happy, and they know they've got central part in the company. If we look to The US, the acquisition of MMI, those businesses or or EBQITY and MMI have been well integrated. We now have merged the management teams operating under one structure.

44:13 The the the principal of that business, Thomas Bridge, his deferred consideration is for one times the combined operating profit of the group in 2024. So he'll be with us or he he he has interest in the business through to the end of 2024. But as I said, we've now merged and integrated the management teams there, so I feel confident we have stability with that business. Looking at media path, Suzanne, as I referenced earlier earlier, the principal and and large shareholder in that business has joined the leadership team as well. She doesn't have any deferred consideration. She re all her consideration upfront, but a significant proportion of that from memory, 2020%.

45:02 20%. 25% of her consideration is in EBIQUITY stock locked in through to the end of two thousand twenty four and then with orderly market requirements placed on her after that. But Suzanne has joined the executive leadership team. She has a newly created post chief delivery officer. And I've gotta say she couldn't be working any harder and more enthusiastically to make that a success. She's really, really committed to the joint vision that we shared through that particular acquisition. So, clearly, you can never guarantee what's gonna happen, but I think we're in a good place with all of those. And, certainly, we feel we have the ability to manage any situation with these regards. Next question. Might have skimmed up a little bit too high. Should I deal with this one?

45:54 Yes, please. I mean, I'm sure the answer is, Edison made a mistake last year and published something which it slipped out. It shouldn't have been there saying there was gonna be a dividend. So, yeah, it's a it's a comment that they shouldn't have been said. Going to the principle of dividends, I mean, clearly, we've been through a period of rebuilding the business in 2020 or in twenty nineteen, twenty, and we have also undertaken a number of recent acquisitions. So our current view is it would not be in the business of shareholders to be paying cash out as dividends. We are investing that money that we're generating in the business, and we think that is what's generating good returns or better returns for our shareholders. But we review and keep it, you know, every year, look at whether or not we should reinstate dividends, but there isn't a current plan at this moment.

46:47 So, Alan, I think the next one's probably for you as well. Yeah. Worth just saying that the the guys on the call, the investors on the call can't see these questions, so you might need to just read them out. Oh, I beg your pardon. Sorry. I my so the sorry. In which case, they are the question before was the question about why Edison had said there was gonna be a dividend payment 2022, and, evidently, there wasn't. That that was a mistake on their part or joint mistake. And the question is also about dividend policy, which I've answered. This question someone's asked whether they've worked backwards to work out what the contribution of Digital Decisions was to our business in terms of profit in '22 in '21 and what was it in '22. So the £6,650,000 of revenue, which we've declared for so that it's not actually directly digital decisions for the digital media solutions business within the group.

47:40 And we were asked what was the profit on that, and that was in '22, it was £3,600,000. And you can work that out backwards by knowing that the 15.8 is basically six times the average profit for the two years less what we paid originally for the business. So, hopefully, that's that answer that question. The other question was, would all these contributions be under media services? Not actually media services. It's under media performance, which, as I mentioned earlier, is the largest component and is the the core cause of our work, but it's the part of the business that services which track, if not, the performance of agencies. There was then a question about why did the printed text, the management presentation, not appear on our website.

48:28 Well, it just didn't. It should have been up. I think it it appeared on our website momentarily after the presentation analyst. You know, that was the process point. So I'm I'm not quite sure what the point was at some. We're not under an obligation to put it on at the same time. Nick, your next question, I'll say. How well have your media path and MMI acquisitions performed? Have they exceeded your expectations? Well, hopefully, the presentation has given you a reasonably good flavor of how they've performed. We're very happy with the way they've performed. They've certainly performed to expectations. I didn't particularly have in mind a view as to whether they would exceed expectations. I think they're they're spot on with where we wanted them to be and and where we expected them to be. Can you expand on your responsible media solution and the opportunity for the company?

49:22 Yes. So the responsible media solution takes third party data. I reference one, scope three data, but we take data from the global disinformation index. Here in The UK, we take data from the city of London police, which publishes a list of websites guilty of intellectual property theft. In The UK and The US, we take data from a database reflecting minority owned media. That's been a big thing, particularly in The US where minority owners of media, should we say African Americans or Hispanic media owners have felt they're not taking a fair share of advertisers' budgets. Advertisers aren't funding them in the same way as they are other media repos.

50:10 So we've been able to match those third party data sources to our clients' digital advertising spend and and match impressions to those third party data sources and identify. If they do have any problems in this area, I think just a couple of things worth referencing. We we identified that one of our global pharmaceutical companies was inadvertently funding an anti vaxx website. And we also identified for for some of our customers this this concern that they might not be satisfactorily supporting minority owned media owners in in The United States could well have been borne out. We are quantifying very interestingly the carbon footprint or carbon equivalent, c o two equivalent footprint of our advertisers, our clients' digital advertising.

50:57 We now are able to create and we have created a what you could call a c o two PM. We are we are calling it that actually on the sample we found. So we're able to advise clients where their worst impressions sorry, where their worst c o two emissions are and help advise them how to cut that. One of the factors we found, and I think everybody has understood for quite some time that our websites out there that are built purely to attract advertising builders, they have very limited consumer interest and perhaps what we might call clickbait or some you know, look at what what these 10 celebrities look like now kind of thing, where those pages get loaded with an awful lot of ads. Now we say they have very limited consumer value.

51:43 We've also identified the fact that they are the worst offenders for burning carbon because they load up so many ads. We have identified that around about 15% of our clients' advertising spend goes to these made for advertising websites. So if we can help them eliminate that 15% of spend, which we would deem as wasted, completely wasted, not only can we help them redirect that back to media, which they can get a better return on their investment, but it also can help them fund quality journalism. And, of course, quality journalism, as we know, has suffered from, you know, limitations, should we say, on funding. Better journalism attracts more audiences in, which is better for advertisers. But, also, there's a further benefit. And as these are the worst, these major advertising websites are the worst carbon emitting offenders, we can help our clients do a lot of positive things.

52:38 What is the timing of the £15,800,000 Right. To digital screens, and how much do you expect to be fulfilled in shares? I think there's several actual financial questions here. That's it. So I'll take it for you. I think, actually, was the interest rate on our debt, was it floating, was the question. Yes. It is floating. Our our debt is based on what is now called Sonya, the success of the LIBOR plus the margin. The margin itself varies slightly depending on where we are against the covenants. At the moment, they we're roughly 3% above Sonya, which is rough in total is around 7%. And, obviously, if Sonia goes down, which people think might happen later this year, then then our interest rates would go down.

53:25 The timing of the payment decisions. The obligation is to pay within or to agree formally the amount and and to pay within a certain period after our AGM. Some is in our control. That, therefore, will be sometime in May subject to the vendor's right to challenge any numbers. And the percentage that the vendor has the right to ask us to pay up to a certain amount. I think it's actually €5,000,000 in cash, and we can determine the balance. So we will determine that balance in due course once we having regard to our debt capacity and also having regard to the price of shares to whether or not it's, you know, the extended dilution that that would be impart by by using more shares. So I don't really I can't really give a specific number at this point. I think having said that, I think the the analysts will be giving an estimate when they publish their papers this week.

54:27 Improvement working cap the question is, would there be some improvement in working capital expected in '23 sort of reduction in debt of days? Short answer is yes, although not as I was alluding to earlier. One of the challenges we have is the businesses we've bought, which have both MediaPath and MI, do a lot of work for very large American companies. And I don't actually have a problem naming them. People like Procter and Gamble are saying that they expect us to operate a hundred and twenty day terms. And some of other American companies and other clients is asking us to be a hundred and fifty days. So these big American groups, and it's particularly Americans, do try and impose very, frankly, onerous, in my view, credit terms on us. We try our best to say no to try and get them to reduce them, but we have inherited quite a lot of that. So it's gonna be quite hard to have a big shift. Although I do expect, you know, we obviously will continue to keep collecting and working hard to collect. So I'd expect some small improvements in working capital. And, clearly, once you establish even if you've got long credit terms that you are effectively obliged to accept from your customers, once you're on a year on year basis of the of the same credit terms, if you like, from year to year, then clearly, working capital doesn't there won't be an outflow.

55:45 What happened last year was we were acquiring this business with long credit terms, and that hit us a bit. So I expect it to the short answer is yes. I do expect it to get a bit better in the next year. And then exceptional costs. The question was, are we expecting any further exceptional costs in 2023? And by their nature, exceptional costs are not things you should plan for, but clearly, we do certain things we regard as being appropriate to treat as exceptional, highlighted, which I mentioned earlier that the amortization of purchased intangibles will continue to go through as a highlighted item. And the other thing we Treaty has highlighted is our share based payments, which can fluctuate. We're not expecting really well, there may be some restructuring costs this year as a result of our pushing hard to integrate the businesses, move you know, automate, but we're not expecting margin as things stand right now on that.

56:44 Could you talk about the retail media product introduction? Well, I can't tell you very much at the moment because it's still very much in the new product development phase. We have an idea. We're working that up. That's not yet in beta testing, so it's quite early days yet. In an ideal world, we would seek to bring that bring that to market probably sometime in the summer. But it is our focus. That's our our priority in our NPD at the moment, but there there's not much more I can update you on on that. Oops. As the company grows in scale, would it make sense to split the roles of CFO and COO upon Alan's retirement? Yes. That's absolutely what we are doing. We're at the very advanced stage of recruiting a CFO replacement to Alan. We'll hope to be able to announce that imminently, and that individual will just take on the CFO role.

57:36 The COO responsibilities for Alan will be allocated to other members of the management group As we move more of our business onto the g and p three six five technology platform, the nature of our operations will change a little bit, and there'll be different members of the management team responsible for that. So that will indeed happen. It sounds like you might be looking at further acquisitions in The US and Asia Pacific. What might we expect in the coming year? That's a good question. And we do look at m and a opportunities through the lens of those four central elements of the strategy, one of which is identified is accelerating growth in US and Asia Pacific.

58:22 So if we find appropriate opportunities to seek to acquire, I think we're at we are minded to try and bring in the right relevant strategic opportunities, and and I would like to identify elements that can strengthen our business further in The US and Asia. That's that's very, very true. That's great. Thank you for that, Nick and Alan. And I think you have addressed all the questions from investors today. And of course, the company will review all questions submitted today, and we will publish those responses on the Investor Meet company platform. But perhaps before redirecting investors to provide you with their feedback, which I know is particularly important to you and the company, Nick, could I please ask for a few closing comments? Thank you. Sure. Thank you, Alex, and thank you all of you for for watching today.

59:09 Thank you very much for your questions. I hope that's been illuminating and has given you as much information as you would like at this time and a good good background, good update on on the company and the progress we're making against our our strategy. So thank you very much for listening, and thank you for your support. Nick and Alan, thank you once again for updating investors today. Could I please ask investors not to close this session as you will 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, and I'm sure will be greatly valued by the company. On behalf of the management team of EBIQUITY PLC, we would like to thank you for attending today's presentation. That concludes today's meeting. Good morning to you all.

59:55 Thank you.