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SYZYGY : 6-Month Report 2024
SYZYGY : 6-Month Report
About this update from Syzygy Ag
Half-Year Report 06 30 2024 Interim Report Content 3 Key financial figures as per 06/30/2024 5 Business development and Group Management Report Financial figures 14 Consolidated balance sheet 15 Consolidated statement of comprehensive income 17 Statement of changes in equity 18 Consolidated statement of cash flows 19 Selected explanatory notes 24 Financial calendar 2024 / contact SYZYGY Performance Hamburg Key financial figures Key financial figures as per 06/30/2024 2024 34,928 2023 35,992 2022 34,369 2021 30,037 2020 26,948 Development of sales (in kEUR) 7 % United Kingdom & US 82 % 11 % Poland Germany Sales by segments 2024 2,837 2023 -1,977 2022 3,104 2021 3,100 2020 1,547 Operating income (in kEUR) 2024 2,525 2023 -2,898 2022 2,461 2021 2,706 2020 1,160 Income before taxes (in kEUR) 2024 0.13 2023 -0.24 2022 0.13 2021 0.15 2020 0.06 Earnings per share undiluted (in EUR) 2024 -312 2023 -921 2022 -643 2021 -394 2020 -387 Financial income (in kEUR) 2024 1,805 2023 -3,200 2022 1,876 2021 2,097 2020 819 Net income (in kEUR) 2024 -249 2023 104 2022 -46 1,417 2021 4,510 2020 Operating cash flow (in kEUR) Key financial figures Despite the subdued economic environment, the SYZYGY GROUP recorded a significant upturn in the new business activities, although the corresponding expenses for new business development had an impact on EBIT. 50.33 % 36.62 % 9.63 % 3.42 % 52 % 48 % 78 % 22 % WPP plc., St. Helier Equity Private investors/others Liabilities Institutional investors Non current assets HANSAINVEST Current assets Shareholder structure Balance sheet structure 36 % Services 19 % Automotive 19 % Consumer goods 15 % Finance/insurances 6 % Telecommunication/IT 5 % Others Sales allocation by vertical markets 2024 116 2023 108 2022 113 2021 110 2020 94 Sales by employee annualised (in kEUR) 33 % 17 % 50 % Top 5 Top 6-10 Others Sales by clients' volume 23 % Technology 17 % Strategy/consulting 16 % Design 16 % Performance marketing 15 % Project management 13 % Administration Employees by function Group Management Report Business development and Group Management Report 1. General The following Group Management Report provides information on the performance of the SYZYGY GROUP (hereinafter referred to as "SYZYGY", the "Group", the "SYZYGY GROUP" or the "Company"). The consolidated financial statements on which the Group management report is based have been prepared in accordance with the International Financial Reporting Standards (IFRS). The financial year corresponds to the calendar year. 2. Quarter In kEUR 2024 2023 Change Sales 17,371 17,244 1% EBIT (before goodwill write-downs) 1,216 515 136% EBIT margin (before goodwill write-downs) 7.0% 3.0% 4 pp EBIT (incl. goodwill write-downs) 1,216 -3,690 n.a. EBIT margin (incl. goodwill write-downs) 7.0% -21.4% 28.4 pp Financial income -144 -253 43% Income of the period (before taxes) 1,072 -3,943 n.a. Net income 768 -3,978 n.a. Earnings per share (in EUR) 0.06 -0.30 n.a. Liquid assets and marketable securities 637 4,623 -86% Operating cash flow -2,550 537 n.a. Employees incl. freelancers 598 671 -11% Freelancer 32 57 -44% January - June 2024 2023 Change 34,928 35,992 -3% 2,837 2,228 27% 8.1% 6.2% 1.9 pp 2,837 -1,977 n.a. 8.1% -5.5% 13.6 pp -312 -921 66% 2,525 -2,898 n.a. 1,805 -3,200 n.a. 0.13 -0.24 n.a. 637 4,623 -86% -249 104 n.a. 598 671 -11% 32 57 -44% 2. Group profile For information on the SYZYGY GROUP's structure, strategy and management, please refer to the explanatory notes in the 2023 group management report (Annual Report 2023, page 56 ff.). The Group consists of Syzygy AG as the holding company and seven subsidiaries: Ars Thanea S.A. diffferent GmbH syzygy Deutschland GmbH SYZYGY Digital Marketing Inc. Syzygy Performance Marketing GmbH SYZYGY UK Ltd. Unique Digital Marketing Ltd. 3. Economic report 3.1. General economic development In the section below, we present additional information and highlight new developments compared with the 2023 management report (Annual Report 2023, page 65 ff.). There are signs of an improvement in the global outlook, even if growth remains low. The effects of the tightening of monetary policy conditions are still being felt, particularly on the property and credit markets. Group Management Report Nevertheless, the global economy is proving to be relatively resilient. Inflation is falling faster than expected and private sector confidence is improving. The imbalances between supply and demand on the labour markets are decreasing, while unemployment remains at or near record lows. With inflation falling, real incomes are beginning to improve and trade growth is showing positive trends. Developments continue to vary from country to country. Weaker results in many advanced economies, particularly in Europe, contrast with strong growth in the USA and in many emerging markets. Despite tougher financial conditions and other negative factors, such as the Russian war of aggression against Ukraine and the developing conflicts in the Middle East, global gross domestic product (GDP) growth is forecast at 3.1 per cent and 3.2 per cent in 2025, according to the Organisation for Economic Co-operation and Development (OECD). In its Economic Outlook from May 2024, the OECD forecasts inflation of 5 per cent for 2024 and 3.4 per cent for 2025. The OECD's forecasts are largely in line with those of the International Monetary Fund (IMF), which in its World Economic Outlook of April 2024 predicts global economic growth of 3.2 per cent for 2024 and 2025, unchanged from 2023. In the advanced economies, growth will increase slightly from 1.6 per cent (2023) to 1.8 per cent (2025), while it will fall from 4.3 per cent (2023) to 4.2 per cent in the emerging and developing countries. The long-term forecast for global growth is at a historic low of 3.1 per cent. Global inflation will fall from 6.9 per cent (2023) and 5 per cent (2024) to 3.4 per cent (2025). By the end of 2025, inflation in most major economies should return to the central banks' target values. The OECD forecasts gross domestic product (GDP) growth of 0.7 per cent in 2024 and 1.5 per cent in 2025 for the eurozone. The IMF also expects growth to recover to 0.8 per cent in 2024 and 1.5 per cent in 2025. Overall, the forecasts show a slow recovery of the German economy, which is, however, being hampered by ongoing structural challenges and political uncertainties. While inflation is falling significantly and growth is picking up slightly, investor confidence remains subdued due to the uncertainties surrounding the financing of green investments and structural problems. The International Monetary Fund (IMF) and the OECD are forecasting weak growth of just 0.2 per cent for the current year, the weakest among the leading western G7 countries. In January, the expectation was still 0.5 per cent. However, the fund expects the German economy to grow by 1.3 per cent again in 2025 (OECD: 1.1 per cent). The ifo economic forecast for summer 2024 is more optimistic: Germany's price-adjusted gross domestic product (GDP) will increase by 0.4 per cent this year and by 1.5 per cent next year. The inflation rate will fall significantly from 5.9 per cent in 2023 to 2.2 per cent in 2024 and further to 1.7 per cent in 2025. According to the OECD's current forecast, GDP growth in the UK will be 0.4 per cent in 2024 and rise to 1.0 per cent in 2025. During this period, the impact of earlier monetary policy tightening will weaken. Group Management Report Core inflation will be 3.3 per cent in 2024 and 2.5 per cent in 2025. The unemployment rate will rise to 4.7 per cent by 2025 as the labour market cools. However, the actual extent of underutilisation remains uncertain. GDP growth in the US is expected to reach 2.6 per cent in 2024 before slowing to 1.8 per cent in 2025. This is due to the economy's adjustment to high borrowing costs and weakening domestic demand. The Polish economy is slowly recovering. The OECD forecasts that real GDP growth will rise to 2.9 per cent by 2024, supported by real wage increases and fiscal policy measures, despite weaker investment. The reintroduction of VAT on food and higher regulated energy prices will cause overall inflation to rise to 4.8 per cent by the end of 2024, before falling to 3.5 per cent by the end of 2025. GDP growth of 3.4 per cent is forecast for 2025, driven by EU funds and strong foreign direct investment, although consumption growth will be dampened by inflation and the decline in fiscal support. 3.2. Advertising market performance The following comments on the forecast development of advertising expenditure are subject to the same reservations as those already discussed in section 4.4 of the Management Report 2023 (Annual Report 2023, page 66 ff.). They provide an indication of general trends and shifts in media budgets, but are only suitable as a yardstick for assessing the expected development of the SYZYGY GROUP to a very limited extent. Despite the current global geopolitical tensions and economic challenges, the biannual forecasts from media companies such as Dentsu and GroupM paint a more optimistic picture for the global advertising industry in 2024 compared to the end of 2023, driven by digital growth, the recovery of key markets such as China and the accelerated use of retail media, CTV advertising and artificial intelligence. According to the new Dentsu Global Ad Spend Report, global advertising investments are expected to increase by around 5.0 per cent to a net USD 754.4 billion by 2024. This indicates a continuation of the growth trend. A more detailed analysis shows that the improved investment prospects are particularly evident in the UK, Germany, the USA, Japan and France. Furthermore, an additional boost is expected from the US presidential election, which is likely to account for around a third of the additional advertising expenditure in 2024 (approx. USD 11 billion). In contrast, GroupM's Global Midyear Forecast predicts that global advertising revenue will increase by 7.8 per cent to USD 989.8 billion in 2024, with a further increase of 6.8 per cent expected for 2025. Artificial intelligence (AI) is playing an increasingly important role in this. By 2029, AI could account for 94.1 per cent of advertising revenue, three years earlier than previously forecast. Machine- generated content in advertising will also become increasingly important. According to Dentsu, global spending on digital advertising has exceeded previous growth expectations. It is expected to rise to 59.6 per cent by 2024. Double-digit growth is expected for retail media and paid social. Search will remain an important spending driver. Dentsu's Ad Spend Report shows that the German advertising market is recovering. While advertising spend in Germany still recorded slight growth of 0.6 per cent in 2023, a clearly positive trend is expected for the current year. The analysts have revised their forecast for 2024 upwards: instead of 1.8 per cent growth, they now expect 3.4 per cent. Group Management Report A positive trend can also be seen in the following two years, when net advertising investment will initially According to the Dentsu Ad Spend Forecast, the Polish advertising market will grow by 7.3 per cent to USD 2.8 The following table shows the distribution of permanent employees by geography: increase by 3.3 per cent (2025) and 3.2 per cent (2026). This puts Germany in fourth place in a Western European comparison. The media company GroupM expects growth of 4.1 per cent. Dentsu analysts forecast year-on-year growth of 6.0 per cent for the UK (GroupM: 4.9 per cent), mainly due to a sharp increase in digital advertising investment, which accounts for more than three quarters of spending. Growth billion by 2024, with spending on digital advertising increasing by 10 per cent. Despite the positive forecasts, advertisers remain cautious and the market recovery will not be felt immediately. Unpredictable economic and political events could slow down growth. The market is being driven by increased investment in innovation, digital development and major sporting events. Overall, there is more optimism than in the previous year and Poland is on the verge of economic stabilisation. Employees 06/30/2024 Germany 458 Poland 75 United Kingdom 29 United States 4 Total 566 06/30/2023 476 76 58 4 614 of 4.5 per cent is forecast for 2025, with the UK advertising market expected to reach USD 50.1 billion. The UK Digital Ad Spending 2024 report shows that digital advertising accounts for 82.6 per cent of total media spend in the UK. Within digital advertising, retail media is the most important growth driver. According to Dentsu, the US advertising market will develop more dynamically and record the strongest growth at 5.9 per cent (GroupM: 5.8 per cent), compared to 2.2 per cent in 2023. The presidential election in November is expected to generate an additional USD 11 billion in advertising expenditure across various channels. 3.3. Employees The SYZYGY GROUP's headcount decreased during the reporting period: As at 30 June 2024 the SYZYGY GROUP had 566 permanent employees. This is a decrease of 23 employees compared to the reporting date of December 31, 2023 and a decrease of 48 employees compared to the same quarter of the previous year. This is a decrease of 18 employees in the German companies compared to the same quarter of the previous year, while the international companies recorded an overall decrease of 30 employees. Germany 81 % Poland 13 % United Kingdom 5 % United States 1 % Employees by region Group Management Report The employees by function or area of work shows a significant increase in employees in technology function, while all other areas are slightly declining: On average, 570 employees and around 37 freelancers worked for the SYZYGY GROUP during the period. This results in annualised sales per employee of EUR 116,000 (previous year: EUR 108,000, with an average of 618 36 % Services 19 % Automotive 19 % Consumer goods Employees 06/30/2024 Technology 130 Strategy/consulting 96 Design 91 Performance marketing 91 Project management 86 Administration 72 Total 566 06/30/2023 117 109 98 111 96 83 614 employees and 46 freelancers). 3.4. Net assets, financial position and results of operations of the SYZYGY GROUP 3.4.1. Results of operations The SYZYGY GROUP's sales are calculated by reducing the billings by media costs incurred by the performance marketing companies as transitory items on the income and expenditure side. 15 % Finance/insurances 6 % Telecommunication/IT 5 % Others Sales allocation by vertical markets Compared to the previous year, the following changes occurred due to shifts in sales: Sales with customers in the service sector increased by 5 percentage points, with companies in the consumer goods sector by 23 % Technology 17 % Strategy/consulting 16 % Design 16 % Performance marketing 15 % Project management 13 % Administration Employees by function The SYZYGY GROUP's sales decreased in the reporting period 2024 by -3 per cent to EUR 34.9 million. The share of sales generated in Germany amounts to 82 per cent. The Poland segment contributed 11 per cent of the sales generated. The UK & US segment contributed 7 per cent of the SYZYGY GROUP's total sales. 4 percentage points and in the telecommunications sector by 1 percentage point. SYZYGY Frankfurt Group Management Report Turnover with customers from the automotive sector fell by 2 percentage points and from the finance and insurance sectors by 6 percentage points. Companies that cannot be allocated to any of these five core sectors also fell by 2 percentage points to 5 per cent. SYZYGY generated 50 per cent of total sales with its ten largest customers. This is 2 percentage points above the previous year's level. 3.4.2. Operating expenses and depreciation and amortisation The cost of services rendered fell disproportionately to sales by -5 per cent to EUR 26.7 million (previous year: EUR 28.0 million.). The gross margin rose accordingly by 2 percentage points to 24 per cent due to the slightly disproportionate fall in acquisition costs. General administration costs and sales and marketing costs both fell slightly below the previous year's level. 3.4.3. Operating income and EBIT margin The operating profit before goodwill impairment rose compared to the same period of the previous year to a positive figure of EUR 2.8 million (previous year: EUR 2.2 million), with the EBIT margin rising accordingly to 8.1 per cent (previous year: 6.2 per cent). In the same period of the previous year, impairment losses on goodwill totalling EUR 4.2 million were recognised, resulting in a negative outcome of EUR 4.2 million. 3.4.4. Financial income After six months, the SYZYGY GROUP reported a negative financial result of EUR -0.3 million (previous year: EUR -0.9 million), which resulted from financing costs and pro rata interest expenses for long-term contracts in accordance with IFRS 16 (primarily rental agreements). 3.4.5. Income taxes, net income, earnings per share The SYZYGY GROUP's business performance is reflected in pre-tax earnings of EUR 2.5 million. In the same period of the previous year, the pre-tax result was EUR -2.9 million negative - primarily due to impairment losses on goodwill. This corresponds to an increase in earnings before taxes of EUR 4.8 million. 0.7 million. This results in a consolidated profit of EUR 1.8 million (previous year: EUR -3.2 million). On the basis of the average of 13,500,026 shares entitled to dividends and after deduction of minority interests in the amount of kEUR 106 basic earnings per share totalled EUR 0.13 (previous year: EUR -0.24); this is EUR 0.37 higher than in the same period of the previous year. At EUR 2.2 million, depreciation and amortisation was lower than in the previous year (EUR 2.6 million). Furthermore, no impairment losses were recognised on goodwill (previous year: EUR 4.2 million). 2024 2,837 2024 -312 2024 1,805 2023 -1,977 2023 -921 2023 -3,200 2022 3,104 2022 -643 2022 1,876 2021 3,100 2021 -394 2021 2,097 2020 1,547 2020 -387 2020 819 Operating income (in kEUR) Financial income (in kEUR) Net income (in kEUR)