Preliminary Results for 2018

M&C SAATCHI PLC

NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS

 

1. GENERAL INFORMATION

The Company is a public limited company incorporated and domiciled in the UK. The address of its registered office is 36 Golden Square, London W1F 9EE. The Company is listed on the AIM market of the London Stock Exchange. These 2018 preliminary statements were approved for issue on
26 March 2019. The financial information set out below does not constitute the company's statutory accounts for 2017 or 2018. Statutory accounts for the year ended 31 December 2017 have been reported on by the Independent Auditors. The Independent Auditors' Report on the Annual Report and Financial Statements for 2017 unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006. The audit report for the year ended 31 December 2018 has yet to be signed. Statutory accounts for the year ended 31 December 2017 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 December 2018 will be delivered to the Registrar in due course.

 

Headline results

The Directors believe that the headline results and headline earnings per share provide additional useful information on the underlying performance of the business. The headline result is used for internal performance management, calculating the value of subsidiary convertible shares and minority interest put options. The term headline is not a defined term in IFRS. Note 3 reconciles reported to headline results.

Our segmental reporting (note 4) reflects our headline results in accordance with IFRS 8.

The items that are excluded from headline results are the amortisation or impairment of intangible assets (including goodwill and acquired intangibles, but excluding software) acquired in business combinations, changes to deferred and contingent consideration and other acquisition related charges taken to the income statement; impairment of investment in associates; profit or loss on disposal of associates; revaluation of investments and their related costs; and the income statement impact of put option accounting and share based payment charges. See note 3 for a reconciliation between the Group's statutory results and the headline results.

 

 

M&C SAATCHI PLC

NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

2. ACCOUNTING POLICIES

The unaudited preliminary consolidated financial statements comply with the recognition and measurement criteria of International Financial Reporting Standards (IFRS) as adopted by the European Union and issued by the International Accounting Standards Board (IASB) and with the accounting policies of the Group which were set out in the 2017 Annual Report and Accounts. With the exception of the implementation of IFRS 9: Financial Instruments and IFRS 15: Revenue from Contracts with Customers, which are discussed below, no changes have been made to the Group's accounting policies in the year ended 31 December 2018.

Whilst the financial information included in this preliminary announcement has been computed in accordance with IFRS, this announcement does not itself contain sufficient information to comply with all IFRS disclosure requirements. The Company's 2018 Annual Report and Accounts will be prepared in compliance with IFRS.

 

Impact of adoption of IFRS 9: Financial Instruments

The Group has adopted IFRS 9: Financial Instruments from 1 January 2018. This resulted in certain non-listed equity investments previously held at historic cost being designated as fair value through profit or loss. As at 1 January 2018 the fair value of these instruments was £10.6million with a historic cost of £5.8million. The difference between these two balances of £4.8million has been taken to opening reserves as at 1 January 2018.

The requirement under IFRS 9 to use an expected loss method of impairment of financial assets did not have a material effect on the Group due to the short-term nature of the Group's trade and other receivables.

 

Impact of the Adoption of IFRS 15: Revenue from Contracts with Customers

The Group has adopted IFRS 15: Revenue from Contracts with Customers from 1 January 2018. This resulted in changes in certain aspects of our accounting policies and adjustments to the amounts recognized in the financial statements when compared to if the accounting had been performed under Legacy IFRS. In accordance with the transition provisions of IFRS 15, the Group has adopted the new rules under the modified retrospective method of adoption. Under this method the cumulative effect of initially applying IFRS 15 is recognised at the date of initial application as an adjustment to the opening balance of retained earnings. Therefore, the comparative information has not been restated and continues to be as reported under Legacy IFRS.

M&C SAATCHI PLC

NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

The new standard establishes a five-step model whereby consideration received or expected to be received is recognised as revenue when contractual performance obligations are satisfied by the transfer of control and of the relevant goods or services to the customer. Adopting IFRS 15 has not had a significant impact on the timing of the Group's revenue recognition nor on the Group's equity.

For certain of our contracts however, the adoption of IFRS 15 has resulted in a change in our accounting for certain third-party costs. Third-party costs are included in revenue when the Group acts as principal with respect to the services provided to the client and are excluded when the Group acts as agent. Under IFRS 15, the principal versus agent assessment is based on whether the Group controls the relevant services before they are transferred to the client. As a result of the adoption of IFRS 15, there was an increase in third-party costs included in revenue and costs of sale. This change increased revenue and costs of services by the same amount and therefore had no impact on net revenues or operating profit.

The following table summarises the impact of adopting IFRS 15 on the Group's consolidated income statement for the year ended 31 December 2018.

 

		Legacy IFRS £000	Additional third party cost £000	Timing adjustments £000	IFRS 15 £000
Billings		607,501	-	(37)	607,464
Revenue		255,410	176,471	(37)	431,844
Cost of sales		-	(176,471)	-	(176,471)
Net revenue		255,410	-	(37)	255,373

 

 

Under certain contractual relationships the Group makes payments to suppliers on behalf of customers prior to billing. Under Legacy IFRS these amounts were recorded as accrued income. As these amounts do not relate to services provided by the Group under IFRS 15 they are recognised separately to trade receivables and contract assets. An amount totaling £5.5m has therefore been recognised as at 31 December 2018 as an 'other receivable' and is included within the consolidated balance sheet position of Trade and other receivables of £149.6m.

 

Other than these reclassifications, the impact of IFRS 15 on the consolidated income statement, consolidated balance sheet, consolidated statement of changes in equity, consolidated cash flow statement and earnings per share was immaterial.

M&C SAATCHI PLC

NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

IFRS 15 - Revenue recognition policy

Billings comprise the gross amounts billed, or billable, to clients in respect of commission based and fee based income together with the total of other fees earned, in addition to those instances where the Group has made payments on behalf of the customer to third parties.

Revenue comprises commission and fees earned and is stated exclusive of VAT and sales taxes.

Performance obligations - At the inception of a new contractual arrangement with a customer the Group identifies the performance obligations inherent in the agreement. Typically the terms of the contracts are such that the services to be rendered are considered to be either integrated (as they all drive the output of the contract as a whole) or to represent a series of services that are substantially the same with the same pattern of transfer to the customer. Accordingly, this amalgam of services is accounted for as a single performance obligation.

Where there are contracts with services capable of being distinct and are distinct within the context of the contract then they are accounted for as separate obligations. In these instances the consideration due to be earned from the contract is allocated to each of the performance obligations in proportion to their stand-alone selling price.

Recognition of revenue - Based on the terms of the contractual arrangements entered into with customers, revenue is typically recognised over time. In the majority of instances this is a result of the assets generated under the terms of a contract having no alternative use to the Group and there being an enforceable right to payment. Exceptions to this are noted below.

Measurement of revenue - Where revenue is recognised over time it is measured based on the proportion of the level of the service performed. Either an output or an input method, depending on the particular arrangement, is used to measure progress for each performance obligation. Where the terms of an agreement are such that the amounts due to be invoiced correspond directly with the value to the customer, then the Group recognises revenue in line with its 'right-to-invoice'. Where this is not the case then an input method based on costs incurred to date is used to measure performance. The primary input of substantially all work performed is represented by labour. As a result of the relationship between labour and cost there is normally a direct correlation between costs incurred and the proportion of the contract performed to date.

Principal vs Agent - When a third-party supplier is involved in fulfilling the terms of a contract then for each performance obligation identified the Group assesses whether they are acting as principal or agent. Where the Group controls the specified services prior to transferring those services to the customer then the Group is acting as principal. The Group considers that control exists where it is primarily responsible for ensuring the service meet the customers' specifications, for integrating products and services into the ultimate deliverable or in cases where it has discretion in establishing pricing.

 

 

 

M&C SAATCHI PLC

NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

When we act as an agent, the revenue recorded is the net amount retained. Costs incurred with external suppliers are excluded from revenue and recorded as other receivables payable by the customer. When the Group acts as principal the revenue recorded is the gross amount billed. When allowable by the terms of the contract out-of-pocket costs such as travel, are also recognised as the gross amount billed with a corresponding amount recorded as an expense.

Treatment of costs - Costs incurred in relation to the fulfilment of a contract are either recognised as an asset or treated as an expense. Costs are capitalised when they relate directly to a contract, are expected to be recovered or enhance resources of the Group, which will be used in satisfying future performance obligations of the contract.

Supplier rebates - The Group receives volume rebates from certain suppliers for transactions entered into on behalf of clients that, based on the terms of the relevant contracts and local law, are either remitted to clients or retained by the Group. If amounts are passed on to clients they are recorded as liabilities until settled or, if retained by the Group, are recorded as revenue when earned.

 

Further details on revenue recognition in terms of the nature of contractual arrangements are as follows:

 

 

§ Commission based income in relation to media spend - The Group arranges for a third party to provide the related goods and services in the capacity of an agent. Revenue is recognised in relation to the amount of commission the Group is entitled to. Often additional integrated services are provided at the same time with regards to the development and deployment of an overarching media strategy, due to the integrated nature of the services provided under the terms of the contract this is recognised as a single performance obligation. Where there is variability in the overall level of media spend then the Group estimates the variable consideration to which they will be entitled at inception of the contract. This estimate is revised at the earlier of either the completion of the contract or the end of the financial reporting period. The Group considers the commission earned to be reflective of the value to the customer and measures revenue to be recognised as the amount to which they have the 'right-to-invoice'. Although there may be a blend of services, some of which are akin to the Group acting as principal, as there is one performance obligation and as the main feature of the arrangements are the Group acting as an agent, all such revenue is recognised net in line with the Group acting as an agent.M&C SAATCHI PLC

NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

§ Commission based income in relation to talent performance - The Group arranges, in the capacity of an agent, for talent, or other third parties, to provide their time in return for a booking fee. Accordingly this booking fee is recognised as the amount of commission to which the Group is entitled. The revenue is typically recognised as the booking or obligation is performed. Where contracts do not have an enforceable right to payment, as editorial oversight for the performance of the talent is held by the customer, revenue continues to be recognised over time.

In those instances where performance obligations are recognised at a point in time then the Group adopts a milestone approach and recognises revenue at the point in time at which a performance obligation is fully satisfied.

§ Retainer fees - Retainer fees relate to arrangements whereby the nature of the Group's contractual promise is to agree to 'stand-ready' to deliver services to the customer for a period of time rather than to deliver the good or services underlying that promise. Retainer fees are recognised over the period of the relevant assignments or arrangements, typically in line with 'stand-ready' incurred costs. The primary input of all work performed under these arrangements is labour. As a result of the direct relationship between labour and cost there is normally a direct correlation between costs incurred and the proportion of the contract performed to date.

§ Project fees and production income - Project fees typically relate to assignments under which a bespoke customer asset is created which has no alternative use to the Group. Where such assignments are carried out under contractual terms which entitle the Group to payment for its performance to date in the event of contract termination, then fees are recognised over the period of the relevant assignments. Revenue is typically recognised in line with the value delivered to the customer which is the amount to which the Group has the 'right-to-invoice'. In instances where amounts eligible for invoice do not correspond directly with the value to the customer then an input method based on costs incurred is used. The primary input of all work performed under these arrangements is labour. As a result of the direct relationship between labour and cost there is normally a direct correlation between costs incurred and the proportion of the contract performed to date.

Where projects are carried out under contracts the terms of which entitle the Group to payment for its performance only when control passes at a delivery date or a milestone then fees are recognised at the time that payment entitlement occurs.

 

 

M&C SAATCHI PLC

NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

IFRS 15 - Trade receivables and work in progress policy

Trade receivables are stated net of provisions for bad and doubtful debts. Work in progress includes outlays incurred on behalf of clients, including production costs, and other third-party costs that have not yet been billed and are considered receivables under IFRS 15.

 

IFRS 15 - Accrued and deferred income policy

Accrued income is a contract asset and is recognized when a performance obligation has been satisfied but not yet been billed. Contract assets are transferred to receivables when the right to consideration is unconditional and billed per the terms of the contractual agreement.

In certain cases, payments are received from customers prior to satisfaction of performance obligations andrecognised as deferred income on the Group's balance sheet. These balances are considered contract liabilities and are typically related to prepayments for third party expenses that are incurred shortly after billing.

 

 

 

 

M&C SAATCHI PLC

NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

3. Headline results and earnings per share

The analysis below provides a reconciliation between the Group's statutory results and the headline results.

 

Year ended 31 December 2018	2018 £000	Amortisation of acquired intangibles £000	Impairment of acquired intangibles £000	Impairment of associates	FVTPL investments under IFRS 9 £000	Revaluation of contingent consideration £000	Capital gains tax on issue of put options £000	Acquisition related remuneration * £000	Put option accounting ** £000	Headline results
Billings	607,464	-	-	-	-	-	-	-	-	607,464
Revenue	431,844	-	-	-	-	-	-	-	-	431,844
Net revenue	255,373	-	-	-	-	-	-	-	-	255,373
Operating profit	16,768	4,427	2,195	674	(1,177)	37	-	1,299	6,104	30,327
Share of results of associates and JV	2,825	-	-	-	-	-	-	-	-	2,825
Finance income	273	-	-	-	-	-	-	-	-	273
Finance cost	(2,268)	-	-	-	229	-	-	-	911	(1,128)
Profit before taxation	17,598	4,427	2,195	674	(948)	37	-	1,299	7,015	32,297
Taxation	(6,635)	(1,021)	-	-	179	-	517	-	(342)	(7,302)
Profit for the year	10,963	3,406	2,195	674	(769)	37	517	1,299	6,673	24,995
Non-controlling interests	(2,708)	(937)	-	-	-	-	149	(403)	-	(3,899)
Profit attributable to equity holders of the Group***	8,255	2,469	2,195	674	(769)	37	666	896	6,673	21,096

 

 

*   The non-controlling interest charge is moved to operating profit due to underlying equity being defined as a conditional share award.

** These values represent put options accounted for as conditional share awards (£13,501k) and fair value adjustments to minority put option liabilities (£3,037k).

*** Headline earnings are profit attributable to equity holders of the Group after adding back the adjustments noted above. The increase is calculated as the difference between 2017 and 2018 measures. Headline operating margin is calculated as: Headline operating profit divided by net revenue. Headline operating margin excluding new businesses is calculated as: Headline operating profit after adding back the cost of businesses started divided by net revenue. 

 

M&C SAATCHI PLC

NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

3. Headline results and earnings per share continued

 

Year ended 31 December 2017	2017 £000	Amortisation of acquired intangibles £000	Impairment of acquired intangibles £000	Deferred tax on acquired intangible US tax rate change £000	Deferred tax on put options US tax rate change £000	Revaluation of contingent consideration £000	Acquisition related Remuneration £000	Put option Accounting £000	Headline results £000
Billings	535,964	-	-	-	-	-	-	-	535,964
Revenue	251,481	-	-	-	-	-	-	-	251,481
Operating profit	5,335	2,021	5,214	-	-	40	614	13,501	26,725
Share of results of associates and JV	1,987	-	-	-	-	-	-	-	1,987
Finance income	3,326	-	-	-	-	-	-	(3,037)	289
Finance cost	(1,346)	-	-	-	-	-	-	-	(1,346)
Profit before taxation	9,302	2,021	5,214	-	-	40	614	10,464	27,655
Taxation	(4,736)	(671)	(1,804)	981	392	-	-	(996)	(6,834)
Profit for the year	4,566	1,350	3,410	981	392	40	614	9,468	20,821
Non-controlling interests	(1,894)	(365)	-	-	-	-	(591)	-	(2,850)
Profit attributable to equity holders of the Group***	2,672	985	3,410	981	392	40	23	9,468	17,971

 

 

 

 

 

 

M&C SAATCHI PLC

NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

3. Headline results and earnings per share continued

Basic and diluted earnings per share are calculated by dividing profit attributable to equity holders of the Group by the weighted average number of shares in issue during the year.

 

Year ended 31 December 2018					2018 £000	Headline 2018 £000
Profit attributable to equity shareholders of the Group					8,255	21,096
Basic earnings per share
Weighted average number of shares (thousands)					84,360	84,360
Basic EPS					9.79p	25.01p
Diluted earnings per share*
Weighted average number of shares (thousands) as above					84,360	84,360
Add
- Conditional shares without dividend rights					4,039	4,039
- Conditional shares with dividend rights**					1,500	1,500
- Contingent consideration					350	350
Total					90,249	90,249
Diluted earnings per share					9.15p	23.38p

 

* All the minority interest put options are non-dilutive as the exercise price approximates fair value of the underlying non-controlling interest.

** Conditional share with dividend rights are excluded from any calculation of conditional share awards that uses diluted EPS growth as a measure.

 

 

 

Year ended 31 December 2017	2017 £000	Headline 2017 £000
Profit attributable to equity shareholders of the Group	2,672	17,971
Basic earnings per share
Weighted average number of shares (thousands)	77,999	77,999
Basic EPS	3.43p	23.04p
Diluted earnings per share*
Weighted average number of shares (thousands) as above	77,999	77,999
Add
- Conditional shares without dividend rights	2,763	2,763
- Conditional shares with dividend rights**	3,829	3,829
- Contingent consideration	108	108
Total	84,699	84,699
Diluted earnings per share	3.16p	21.22p

 

* All the minority interest put options are non-dilutive as the exercise price approximates fair value of the underlying non-controlling interest.

** Conditional share with dividend rights are excluded from any calculation of conditional share awards that uses diluted EPS growth as a measure.

 

 

 

 

M&C SAATCHI PLC

NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

4. Segmental information

 

					UK	Europe	Middle East and Africa	Asia and Australia	Americas	Total
Year ended 31 December 2018					£000	£000	£000	£000	£000	£000
Billings					211,523	60,190	38,876	170,460	126,415	607,464
Revenue					180,187	60,190	30,099	98,057	63,311	431,844
Net revenue					95,826	34,165	15,790	65,378	44,214	255,373
Operating profit excluding Group costs					17,408	5,497	1,167	6,409	5,957	36,438
Group costs					(5,618)	(71)	-	(333)	(89)	(6,111)
Operating profit					11,790	5,426	1,167	6,076	5,868	30,327
Share of results of associates and JV					2,354	(13)	-	433	51	2,825
Financial income and cost					(486)	(31)	83	90	(511)	(855)
Profit before taxation					13,658	5,382	1,250	6,599	5,408	32,297
Taxation					(2,107)	(1,879)	(260)	(1,909)	(1,147)	(7,302)
Profit for the year					11,551	3,503	990	4,690	4,261	24,995
Non-controlling interests					(1,331)	(452)	(389)	(1,189)	(538)	(3,899)
Profit attributable to equity shareholders of the Group					10,220	3,051	601	3,501	3,723	21,096
Headline basic EPS										25.01p
Non-cash costs included in headline operating profit:
Depreciation					(1,686)	(314)	(318)	(770)	(470)	(3,558)
Amortisation of software					(154)	(20)	(21)	(99)	-	(294)
Office locations					London	Paris Milan Berlin Madrid Geneva Stockholm Moscow Istanbul	Johannesburg  Cape Town  Abu Dhabi  Dubai  Beirut  Tel Aviv	Sydney  Melbourne  New Delhi Bangalore Islamabad  Hong Kong  Shanghai  Tokyo Kuala Lumpur   Bangkok  Singapore Jakarta	New York  Chicago  Los Angeles San Francisco Mexico City São Paulo

 

 

Segmental results are reconciled to the income statement in note 3. Our segmental and headline results are one and the same. The above segments reflect the fact that our business is run on an operating unit basis. In accordance with IFRS 8 paragraph 12, we have aggregated our operating units into regional segments.

 

 

M&C SAATCHI PLC

NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

4. Segmental information continued

 

Segmental and headline income statement 2017

 

Year ended 31 December 2017	UK £000	Europe £000	Middle East and Africa £000	Asia and Australia £000	Americas £000	Total £000
Billings	169,299	59,037	27,207	132,007	148,414	535,964
Revenue	94,013	33,492	14,650	64,703	44,623	251,481
Operating profit excluding Group costs	15,149	5,187	1,568	7,733	3,385	33,022
Group costs	(5,821)	(71)	-	(339)	(66)	(6,297)
Operating profit	9,328	5,116	1,568	7,394	3,319	26,725
Share of results of associates and JV	1,633	3	-	351	-	1,987
Financial income and cost	(437)	(69)	11	48	(610)	(1,057)
Profit before taxation	10,524	5,050	1,579	7,793	2,709	27,655
Taxation	(1,478)	(1,604)	(421)	(2,110)	(1,221)	(6,834)
Profit for the year	9,046	3,446	1,158	5,683	1,488	20,821
Non-controlling interests	(813)	(721)	(534)	(1,189)	407	(2,850)
Profit attributable to equity shareholders of the Group	8,233	2,725	624	4,494	1,895	17,971
Headline basic EPS						23.04p
Non-cash costs included in headline operating profit:
Depreciation	1,386	357	371	576	389	3,079
Amortisation of software	70	37	11	93	-	211
Office locations	London	Paris Milan Berlin Madrid Geneva Stockholm Moscow Istanbul	Johannesburg Cape Town Abu Dhabi Dubai Beirut Tel Aviv	Sydney Melbourne New Delhi Bangalore Islamabad Hong Kong Shanghai Tokyo Kuala Lumpur Bangkok Singapore	New York Chicago Los Angeles San Francisco Mexico City São Paulo

 

 

 

 

 

M&C SAATCHI PLC

NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

4. Segmental information continued

 

Segmental income statement translated at 2017 exchange rates

It is normal practice in our industry to provide constant currency results.

 

Had our 2018 results been translated at 2017 exchange rates then our constant currency results would have been:

		UK	Europe	Middle East and Africa	Asia and Australia	Americas	Total
Year ended 31 December 2018		£000	£000	£000	£000	£000	£000
Billings		211,523	59,898	40,058	178,282	130,728	620,489
Revenue		180,187	59,898	31,016	102,677	65,762	439,540
Net revenue		95,826	34,055	16,273	68,534	46,046	260,734
Operating profit excluding Group costs		17,408	5,433	1,203	6,620	6,060	36,724
Group costs		(5,688)	(70)	-	(351)	(89)	(6,198)
Operating profit		11,720	5,363	1,203	6,269	5,971	30,526
Share of results of associates and JV		2,354	(18)	-	438	53	2,827
Financial income and cost		(487)	(31)	86	90	(530)	(872)
Profit before taxation		13,587	5,314	1,289	6,797	5,494	32,481
Taxation		(2,093)	(1,862)	(267)	(1,981)	(1,169)	(7,372)
Profit for the year		11,494	3,452	1,022	4,816	4,325	25,109
Increase/(decrease) in 2018 results caused by translation differences		57	51	(32)	(126)	(64)	(114)

 

 

The key currencies that affect us and the average exchange rates used were:

	2018	2017
US dollar	1.3359	1.2884
Malaysian ringgit	5.3840	5.5370
Australian dollar	1.7860	1.6808
South African rand	17.6326	17.1503
Brazilian real	4.8669	4.1129
Euro	1.1305	1.1417

 

 

M&C SAATCHI PLC

NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

 

5. Net finance income / (costs)

 

Year ended 31 December			2018 £000	2017 £000
Bank interest receivable			272	200
Other interest receivable			1	89
Fair value adjustment to minority shareholder put option liabilities			-	3,037
Financial income			273	3,326
Bank interest payable			(1,175)	(1,344)
Other interest payable			(182)	(2)
Fair value adjustment to minority shareholder put option liabilities			(911)	-
Financial expense			(2,268)	(1,346)
Net finance (costs) / income			(1,995)	1,980

 

 

6. Taxation

					2018	2017
Year ended 31 December					£000	£000
Taxation in the year
- UK					2,140	1,689
- Overseas					6,478	5,286
Withholding taxes payable					-	21
Utilisation of previously unrecognised tax losses*					(25)	(817)
Adjustment for under / (over) provision in prior periods*					(482)	625
Total					8,111	6,804
Deferred taxation
Origination and reversal of temporary differences					(1,476)	(3,612)
Recognition of previously unrecognised tax losses**					-	(121)
Effect of changes in tax rates					-	1,665
Total					(1,476)	(2,068)
Total taxation					6,635	4,736

 

* In 2017 this mostly this relates to our US offices.

** Recognised to reflect the probable future corporation tax that we can reclaim.

 

 

M&C SAATCHI PLC

NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

7. Dividends

 

Year ended 31 December			2018 £000	2017 £000
2017 final dividend paid 7.40p on 6 July 2018 (2016: 6.44p)			6,261	5,032
2018 interim dividend paid 2.45p on 9 November 2018 (2017: 2.13p)			2,117	1,716
			8,378	6,748

 

The 2018 proposed final dividend of 8.51p, totalling £7,566,099. The final dividend will be paid, subject to shareholder approval at the 5 June 2019 AGM, on 5 July 2019 to shareholders on the register at 6 June 2019.

 

The dividends relate to the profit of the following years:

 

Year ended 31 December			2018	2017
			£000	£000
Interim dividend paid 2.13p on 9 November 2018 (2017: 2.13p)			2,117	1,716
Final dividend payable 8.51p on 5 July 2019 (2017: 7.40p)			7,566	6,361
			9,683	8,077
Headline dividend cover			2.2	2.3

 

 

Headline dividend cover is calculated by taking headline profit after tax attributable to equity shareholders and dividing it by the total dividends that relate to that year's profits. The Group seeks to maintain a long-term headline dividend cover of between 2 and 3. Retained profits are used to reinvest in the long term growth of the Group through funding working capital and Investing activities; and to repaying bank debt.