Chief Executive's Statement

Overview

I am delighted to announce that for the 6 months to 31 October 2011 we have experienced a performance that on all key metrics either meets or betters management's expectations for the period.

At £24.02m, total revenue grew by 17% compared to the same period last year (£20.51m) with total underlying operating profit up by 75% to £2.51m (£1.44m).

Underlying operating profit derived from existing continuing businesses grew by 44% to £2.42m, reflecting additional cost synergies delivered as a result of the continuing positive impact of the acquisition of Xtreme Information, which we completed in April 2010, as well as strong organic revenue growth of 6%.

Gross margin for the period increased from 54% to 56% and underlying operating margin was up from 7.0% to 10.5%.

Underlying diluted EPS was up 1.01p to 2.35p for the period, an increase of 75%.

As in previous years, our revenue, profits and margins are weighted towards the second half of the year.

These are robust results and reflect our continued focus on delivering both top line growth accompanied by increasing margins and a strong earnings performance.

Growth Strategy

The success of our growth strategy of "adding value to data" is clearly reflected in these results, which show that our Analytics division has enjoyed organic growth of 16% compared to the same period last year and over 51% growth overall. This is an outstanding performance, which has been generated by the growing demand, particularly from global advertisers, for help in navigating through an increasingly complex media market.

To further strengthen our ability to support this demand we continue to take steps to extend our geographic footprint, with the addition of offices in both Russia and Australia.

Our Russian acquisition of The Joined Up Media Company (JUMC) was completed in May 2011, and is led by Vladimir Rass, the former President of MindShare in Russia. As a result, we now have an exceptionally strong presence in Moscow with a team which is widelyrecognisedas bringing a level of expertise to the market that was formerly absent. 

In October 2011 we announced the acquisition of Faulkner Media Management - the leading media benchmarking consultancy in Australia. The company employs 25 people based in offices in Sydney and serves over sixty clients in Australia, New Zealand and across South East Asia. Eric Faulkner and his team have built a market-leading business and we are delighted that they will continue to lead the business as they engage with Ebiquity clients across the region.

We continue to look for further opportunities to improve our client offering or to improve our geographical footprint.

Keeping pace with the changing market

The rapidly growing influence of social media is changing the way that our clients think about the overall media landscape, both paid (advertising) and non-paid (social, blogs, editorial) media. Our clients understand that the two do not work in isolation from each other and that the influence of one can either undermine or support the impact of the other. Only by evaluating the combination of the two will it be possible to determine the value and performance of total brand communication.

This was the rationale behind the acquisition of Echo, which was completed in May 2011, but it also speaks more broadly to our overall growth strategy of increasing our abilities and skills to enable us to provide our clients with actionable insights that will improve their business performance.

Outlook

As companies seek greater value for their media and marketing investment, they increasingly look to Ebiquity to help improve their business performance by bringing clarity and understanding to an increasingly challenging and complex environment.

Our evaluation and performance measurement tools, combined with our clear insights derived from data analysis, enables them to take better-informed decisions.

Whilst we cannot be entirely immune from the economic uncertainties that lie ahead, we believe that our clear-sighted strategy will insulate us from the worst of the storm and are confident that our growth strategy will continue to deliver in 2012 and beyond.

Michael Greenlees

Chief Executive Officer

24 January 2012

Financial Review

Introduction

Ebiquity plc is publishing its interim results for the 6 months to 31 October 2011.  All results are stated before taking into account highlighted items unless otherwise stated.  These include share option costs, amortisation of purchased intangible assets, acquisition costs, and restructuring and other non-recurring items.

Segmental reporting presentation

Our two segments are "Analytics" and "Platform".  The Analytics division consists of our Media Consulting, Effectiveness and Reputation Management practices and our Platform division consists of our Advertising Intelligence and Media Technology practices.

Acquisitions and disposals in the six months to 31 October 2011

On 20 May 2011, we purchased 100% of TCRG Holdings Limited (the holding company of the Echo Group, "Echo") for total expected consideration of £4.60m consisting of upfront consideration of £3.50m, deferred consideration of £0.30m and estimated earn out payments of £0.80m. Total consideration is capped at £10.00m. Echo operates from offices in Surrey, New York and Singapore and employs approximately 45 people.

On 28 May 2011, the Group acquired 50.1% of the Joined Up Media Company Limited ("JUMC") for total expected consideration of £0.45m consisting of an initial cash payment of £0.30m, deferred consideration of £0.06m and estimated earn out payments of £0.09m. Total consideration is capped at £1.20m. JUMC operate from offices in London and Moscow and employs approximately 10 people.

On 14 October 2011, the Group acquired 100% of Faulkner Media Management Pty Limited ("FMM", an Australian company) for total expected consideration of AUD $5.90m (approximately £3.74m) consisting of an initial cash payment of AUD $4.00m (approximately £2.54m) and estimated earn out payments of AUD $1.90m (approximately £1.20m). AUD $5.90m also represents the total maximum consideration payable. FMM operates from offices in Sydney and employs approximately 25 people.

The results of the above acquisitions are all consolidated into our Analytics division from their respective dates of acquisition.

On 1 July 2011, the Group disposed of its editorial monitoring business, Newslive, for cash consideration of £0.17m which resulted in a small profit on disposal.  Newslive was part of the Platform division and employed approximately 35 people.

Revenue

Total Group revenue increased by 17% to £24.02m (2010: £20.51m).

Revenue from continuing operations has increased by 19% from £20.10m to £23.90m.  On an organic basis, continuing revenue has increased by 6%.

All of the acquisitions in the current year have been in the Analytics division, which has helped Analytics revenue increase by 51% to £11.38m.  On an organic basis, Analytics revenue has grown by 16%, with particularly strong growth in international revenues (defined as non-UK sourced revenue, or UK sourced revenue where marketing activity is analysed in more than one country), which grew by 34% to £5.56m.

Platform revenue remained stable in the year.  The renewal rate for advertising monitoring has remained consistent at 91% in the six months to 31 October 2011 (2010: 91%).

All of the acquisitions in the period have added to our international presence. 75% of total group revenue (£18.01m) now comes from international sources, up from 71% for the same period last year (£14.66m). 

Gross profit  

Gross profit for the period was up 21% to £13.40m (2010: £11.04m), yielding an improved gross margin of 56% (2010: 54%). 

On a continuing organic basis, gross profit has increased by 10% to £12.12m, with a 2% improvement in gross margin to 57% (2010: 55%).

Analytics gross profit has increased from £3.69m to £5.66m, with gross margin increasing to 50% (2010: 49%).  On an organic basis, Analytics gross profit has increased by £0.68m to £4.37m.

On a continuing basis, Platform gross profit has increased from £7.36m to £7.75m, with margins increasing from 59% to 62%, largely as a result of the recognition of cost synergies released as part of the Xtreme integration process. 

Operating profit

Operating profit before highlighted items is termed "underlying operating profit".  Certain items have been highlighted because separate disclosure is considered relevant in understanding the underlying performance of the business. 

Underlying operating profit was £2.51m (2010: £1.44m), representing a 75% increase over the prior year.  On a continuing organic basis the increase is 44%.

The Analytics division has increased operating profit by £0.43m (a 17% increase), and on an organic basis the increase is £0.24m (10% increase).

On a continuing basis, the Platform division has seen an increase in operating profit of £0.19m (a 5% increase).

Central costs predominantly represent central salaries (Board, Finance, IT and HR), certain UK property costs, and central legal and advisory costs.  Central costs have fallen due to the full period impact of cost savings being generated from the integration of Xtreme.

Highlighted items

Highlighted items comprise significant non-cash charges and non-recurring items which are highlighted in the income statement because separate disclosure is considered relevant in understanding the underlying performance of the business.

In the current period, the non-recurring items relate almost exclusively to the associated costs of the acquisitions made in the period.

Amortisation of purchased intangibles relates to acquisitions made in the current financial year of £0.14m and to acquisitions made in prior periods of £0.72m.

Integration costs relate to certain one-off costs incurred whilst integrating the acquisitions made in the current and prior financial years in to the Group's existing operations.

Severance costs relate to de-duplication of senior management and support functions following the acquisitions made in the year.

Under IFRS, professional fees and expenses in relation to acquisitions can not be capitalised.  Acquisition costs therefore relate largely to professional fees associated with the acquisitions of Echo, JUMC and FMM. A profit of £0.05m arising on the disposal of Newslive has been netted off against acquisition costs.

As at 31 October 2011, £0.46m of the £0.69m cash highlighted items had been settled.

Result before tax and EPS

Net finance costs were £0.30m (2010: £0.28m) which reflects the higher level of debt following the acquisitions made in the current period.

Underlying profit before tax was up 92% to £2.21m (2010: £1.15m).  Reported profit before tax is £0.20m (2010: £2.27m loss). 

The tax for the period is a charge of £0.31m, representing a current tax charge of £0.45m offset by a deferred tax credit of £0.15m. 

Underlying diluted earnings per share was up 75% to 2.35p (2010: 1.34p).  The Group reports a basic loss per share of 0.16p (2010: loss of 2.78p). 

Financial Position and Cash flow

Net assets have increased by £2.69m from April 2011 mainly as a result of a placing of 2.85m shares in May 2011, the proceeds of which were used to partly fund the Echo acquisition.  The most notable movements on the balance sheet are due to the acquisitions in the period, with goodwill and intangible assets increasing by a combined total of £7.74m and provisions increasing by £2.07m mainly due to the recognition of deferred contingent consideration provisions.

A cash and net debt analysis is provided as follows.

¹ Debt on the Balance Sheet at 31 October 2011 is shown net of £0.42m (2010: £0.36m) of loan arrangement fees that have been paid which are amortised over the life of the facility. The debt stated above excludes these costs.

Underlying net cash inflow from operating activities in the period was £0.95m (2010: outflow of £0.30m).  This improvement of £1.25m is largely due to the increase in underlying operating profit.  After highlighted items are considered, net cash outflow from operations for the period was £0.51m (2010: £2.78m), reflecting the cash impact of the highlighted items in the period.

Total additional borrowings in the period were £5.48m, largely used to fund the acquisitions in the period.  This movement is offset by loan repayments in the period of £1.17m and foreign exchange movements of £0.05m.

Due to the seasonality of our cash flows, net debt is historically higher at our half year relative to the full year.

During the period, the Group continued to trade within all of its banking facilities and covenants. 

Andrew Beach

Chief Financial Officer

24 January 2012