TIDMXLM
RNS Number : 8082G
XLMedia PLC
12 May 2014
For immediate release 12 May 2014
XLMedia PLC
("XLMedia" or the "Group" or the "Company")
Maiden Preliminary Results for the year ended 31 December
2013
XLMedia (AIM: XLM), a leading provider of digital performance
marketing services, is pleased to announce maiden preliminary
results for the year ended 31 December 2013.
Financial Highlights([1]) :
-- Revenue increased 32% to $34.5 million (FY 2012: $26.1 million).
-- Gross profit increased 26% to $20.5 million (FY 2012: $16.3 million).
-- Gross margin decreased 3% to 59% (FY 2012: 62%), reflecting
the launch of new marketing channels in H2 2013 such as display
media buying and social media channels.
-- Operating expenses increased 101% to $8.5 million (FY 2012:
$4.2 million) reflecting all infrastructure put into place during
2013 to prepare the Company for listing and future growth.
-- Adjusted EBITDA([2]) increased 6% to $13.3 million (FY 2012: $12.5 million).
-- Total Equity to total balance sheet ratio 79% (2012: 47%).
-- Dividend declared to Equity holders $5.25 million.
-- Maiden dividend of $0.02768 per share payable on 12 June 2014
to shareholders on the register at 23 May 2014.
Operating Highlights:
-- Successful listing on AIM in March 2014
o Raised approximately $69.5 million (GBP41.8 million gross*)
via a significantly oversubscribed Placing with institutional
investors.
o Proceeds of the placing to fund acquisitions and country
specific joint ventures to accelerate organic growth and expansion
into new territories as well as continued investment in
R&D.
-- Continued strengthening of XLMedia's market position and
geographic reach, with expansion into German and English speaking
markets.
-- Recent entry into the newly opened U.S. market with
agreements in place and dedicated staff to provide traffic to
leading gambling brands.
-- Successful growth of the media channel, expanding into display and social media advertising.
-- Board remains confident of continued growth in 2014 and beyond.
Ory Weihs, Chief Executive Officer of XLMedia, commented:
"We are delighted to announce our first full year results since
listing in London. Our business has shown strong growth throughout
2013 during which time we generated record levels of revenue. The
IPO has provided a positive catalyst for the Group, particularly
strengthening our ability to identify acquisition targets and
negotiate with potential sellers.
"The business remains well placed to build on the growth
experienced during 2013 as we look to continue our growth ambitions
and diversify our geographic spread. We are delighted to be
declaring a dividend in line with our 50% payment target. In view
of our strong start to 2014, the Board remains confident of
delivering further future growth."
For further information, contact:
XLMedia PLC
Ory Weihs Tel: 020 7466 5000 (today)
Tel: 020 8817 5283 thereafter
www.xlmedia.com
Buchanan
Jeremy Garcia / Sophie McNulty/ Clare Akhurst Tel: 020 7466
5000
www.buchanan.uk.com
Cenkos Securities plc
Camilla Hume/ Ivonne Cantu/ Callum Davidson Tel: 020 7397
8900
Operational Review
Introduction
Following its admission to trading on AIM in March 2014, XLMedia
is pleased to report its maiden preliminary results. The Group
delivered a record performance for FY 2013, with Revenue up 32% and
Gross Profit up 26% compared with FY 2012, underpinned by high
levels of organic growth in all segments. Over the course of the
year, the Group has seen momentum build with Q4 representing the
Group's best ever quarter in terms of Revenue and Gross Profit.
This strong trend has continued into the new financial year with
2014 starting positively.
Group adjusted EBITDA grew 6% in 2013, to $13.3 million. The
lesser growth in EBITDA reflects an increase in Operating expenses,
particularly General and administrative expenses, as the Group
prepared for future growth and executing its acquisition
strategy.
The Group's recent admission to trading on AIM not only provided
a strong endorsement for the business from institutional investors
but has also helped to broaden the Group's profile internationally,
will aid in accelerating a number of organic growth opportunities
and will provide further financial support as management evaluates
selective bolt-on acquisitions.
In November 2013, the Group commenced North American activities.
Driving traffic to operators in New Jersey and Nevada was initiated
in January 2014. Whilst our U.S. activities remain very much at an
early stage of development, management remains confident that over
time significant opportunities exist to expand the Group's market
presence in the region.
As articulated at the time of the IPO, acquisitions will form an
important component of the Company's ongoing growth strategy and
the Board continues to evaluate a number of potential acquisition
opportunities ranging in size and complexity. Since admission, the
Company has completed a small bolt-on acquisition of a high
potential domain operating in North America for $300,000 and has
signed a definitive agreement to purchase another high potential
poker website in the US for $130,000. The Board remains confident
that XLMedia continues to be well placed to benefit from the
consolidation opportunities within the online gaming market.
In view of the good start to 2014, the Directors remain
confident of further improvements in performance in the current
financial year and beyond. XLMedia has achieved a consistent track
record of profitable growth and cash generation since its
establishment in 2008 with approximately 70% of its revenues coming
from lifetime revenue share agreements, providing high quality
recurring revenue streams. The business model and growth prospects
support XLMedia's stated intention to return at least 50% of
retained earnings to equity holders as dividends and the Board is
recommending a dividend pay-out of $5.25 million which reflects a
final dividend of $0.02768 per share to shareholders on the
register as at 23 May 2014.
Business Summary
XLMedia provides marketing services to online gambling
operators. The Group attracts players through online marketing
techniques and subsequently seeks to channel high value "traffic"
(i.e. players) to gambling operators who, in turn, convert such
traffic into paying customers. Online gamblers are attracted by the
Group's publications and advertisements and are then directed, by
the Group, to online gambling operators in return for a share of
the revenue generated by such players, a fee generated per player
acquired, fixed fees or a hybrid of any of these three models.
The three principal revenue generating activities of the Group
are: Content and search, digital media buying and its own affiliate
network.
Content and search; XLMedia earns the majority of its revenue
from the monetisation of traffic generated by its own portfolio of
websites. The Group owns more than 2,000 websites which provide
gambling related content, in 17 languages, to potential players.
These sites' content, written by professional writers, is designed
to attract online gamblers which the Group then directs to gambling
operators. The sites either direct players to a certain operator or
will allow the players to select the operator most relevant to
their requirements.
The Group's strategy is to maintain a high ranking of its sites
on leading search engines by continuously adding content and
features. The Group seeks to optimise the user interface and
experience by utilising sophisticated key word research, on page,
off page and content optimisation techniques. The Group tracks the
flow and quality of traffic to its customers using a number of
in-house platforms to analyse the quality and conversion of traffic
generated by its websites into revenue to achieve an improved
return on investment.
Once a player is directed through a Group website to the site of
an operator, that player is "tagged" in the operator's system as a
player that was generated by the Group. In this division, the
Group's revenues are usually earned once a player generates a win
for a gambling operator. The Group's typical remuneration is based
on a lifetime revenue share model which can see the Group earn
between 30% and 55% of the operator's net winnings related to the
relevant player. In certain circumstances, the Group receives
either a one-off cost per acquisition ("CPA") fee in lieu of a
lifetime revenue share or a fixed periodic fee.
Media Buying; The Group's Media Buying division acquires online
advertising media targeted at potential players with the objective
of directing them to the Group's customers. The Group buys
advertising space on search engines, websites, mobile websites
& applications and social networks and places adverts referring
potential players to the Group's customers' websites or to its own
websites.
The Group has the ability to run a large number of simultaneous
marketing campaigns across different platforms and in different
languages focusing on key word searches and display adverts on
popular websites. The Directors believe that the Group's
established industry relationships, scale and track record help it
to achieve favourable media buying terms when compared to new
entrants in the market.
The Group uses in-house developed platforms and iterative
testing of adverts and placements as well as frequent analysis of
traffic generation to ensure that returns from this division are
maximised. The Group has recently hired a team of experienced
individuals to focus on media buying for display, mobile, in app
advertising and social networks to address the growing opportunity
that the Directors believe exists on these platforms.
Affiliate network; The Group currently manages approximately 300
active affiliates, whose role is to direct potential players to the
Group's customers for which the Group receives revenues. The Group
is then responsible for paying its affiliate partners. The
Directors believe that the Group's affiliate programme is
attractive to existing and potential affiliates as it enables them
to have a single point of contact to direct traffic to, and receive
monies from, rather than engaging in multilateral negotiation,
administration and collection of revenues from the operators.
Having a large affiliate network provides the Group with
additional scale to negotiate with the gambling operators. The
Directors believe that the Group is adept at driving volumes in
this segment and it provides the Group with valuable business flow
and it will help identify potential acquisition targets for the
Group. As the network offers marketing affiliates the ability to
promote many brands, the Group often obtains a large share of
traffic from the total traffic that that individual affiliate
generates.
Growth strategy
Demand for digital marketing within the gambling sector is
accelerating and the online gambling market is estimated to grow at
an average annual growth rate of 9% per annum to 2018. As
regulation of the online gambling market continues to develop,
XLMedia expects this market to continue to grow and sees
significant opportunities to expand its reach into new and existing
territories.
As the EU is currently the largest and most sophisticated area
in the gambling market, and one in which XLMedia already has a
strong market presence, the Group will continue to concentrate on
expanding its existing European footprint, increasing market share
in key territories and increasing content and search activities to
drive customer attraction. The Company's current business model
allows for expansion across Europe without significant capital
expenditure in the near term.
Turning to the U.S. market, although it is currently in its
initial stage, it is expected to generate rapid growth as
regulation returns to a number of key states, which now include
Delaware, Nevada and New Jersey and ongoing discussions pro
regulation are being held in other states. Management has
established a strategic partnership which has already started
generating online traffic. Whilst management believes organic
growth will increase, a number of potential domain acquisition
opportunities that will accelerate both revenue growth as well as
the Group's market position in the U.S. have already been
identified with one high potential domain already bought.
The Group's Content and Search skills set continues to evolve
driven by ongoing investment, mobile marketing, optimisation and
social media activities. This cutting-edge technology allows the
Group to broaden the offering to target other end markets (e.g.
Financial Services, Dating, e-Commerce etc.). Further investment in
this area will enable the Group to maintain its market leading
position.
Update on the USA
The U.S. online gambling market, which was previously the
largest in the world, effectively closed following the enactment of
the Unlawful Internet Gambling Enforcement Act ("UIGEA") in 2006.
It has only recently started to re-open with the U.S. States of
Delaware, Nevada and New Jersey operating a licensing regime with
further U.S. States expected to follow suit. The total US online
gambling market was estimated at $502 million in 2013 and is
expected to reach a total market of $5.3 billion in 2018,
representing average expected growth of 67%([3]) .
The following operational and strategic initiatives continue to
underpin the Group's U.S. growth prospects:
-- Licensing: The Group has already registered with the state
regulator in New Jersey enabling it to contract with operators
targeting players in that U.S. state on a fixed fee basis and is in
the process of applying for a licence which will enable the Group
to operate on a more flexible revenue model based on receiving fees
per player referred and allow for a closer partnership with local
operators.
-- Customers: The Group has signed agreements with 888.com (for
New Jersey), with Borgata Hotel Casino & Spa (for New Jersey)
and with Caesars Interactive Entertainment Inc (for New Jersey and
Nevada) to serve as an online marketing partner for certain of each
entity's respective brands, and is in ongoing discussions with
other licensed gambling operators.
-- Operations: The Group is already in the process of recruiting
staff, and so far has recruited a dedicated US business manager
from one of the leading gambling operators as well as additional 4
dedicated employees. In addition, The Group is developing traffic
channels and expanding its U.S. Client Base and so far has bought
media campaigns in an amount of approximately $400K targeted at the
U.S. market. Since the customers reimburse the Group for most of
the media expenses, these will be recorded net in the financial
statements of the company and will not be reflected in the revenues
or expenses data.
-- Affiliate Network: The Group intends to expand its affiliate
network in the U.S. to capitalise on the early mover advantage that
management believes that the Group has from being one of the first
affiliate marketing companies to commence operations in the U.S.
online gambling sector.
-- Acquisitions: Management continues to identify a number of
potential acquisition opportunities that could accelerate both
revenue growth and the Group's market position in the U.S and is
working on progressing these.
Acquisition strategy
As part of the Group's growth aspirations, an active pipeline of
potential acquisition prospects has been developed. This targeted
list aims to compliment the Group existing European operations in
addition to helping to accelerate the significant opportunity that
exists in the U.S.
Since admission, the Company has completed a small bolt-on
acquisition of a high potential domain operating in the North
American market for $300,000 and has signed a definitive agreement
for the acquisition of an additional US poker website for an amount
of $130,000.
Management believes that consolidation in what is a highly
fragmented market within the gaming arena will help accelerate
innovation, geographic reach and the Group's market position. The
Group's strengthened balance sheet following the successful Placing
and Admission to AIM will allow the Group to accelerate the
conversion of this pipeline. Whilst the Company expects to complete
a number of small bolt on acquisitions, management remains hopeful
of completing one significant transaction during the second half of
this calendar year.
Recruitment
Since the beginning of the current year the Group has
strengthened its team with a number of new hires, mainly in the
Media Buying and Content divisions as well as in the R&D team.
In the Media Buying and Content teams we continue to grow
organically as new media teams deploy additional marketing
campaigns in social and mobile platforms, and content specialists
are recruited to support our growing network of websites in more
languages and markets. In R&D following the IPO we continue to
enhance internal development of our own platforms to allow faster
scaling and better analysis of marketing data in order to improve
optimisation processes. The growth in staff numbers is in line with
current growth projections.
Current Trading & Outlook
XLMedia experienced a strong period of growth in 2013. This
excellent performance further reinforces the business model and
underpins the Board's target through its dividend policy of at
least a 50% pay-out rate.
The current financial year has started well with strong sales
growth in our core European markets, particularly in our strategic
targets, English and German speaking countries. The Group continues
to be encouraged by the development of the U.S. market and believes
the Company is well placed to capitalise on this significant growth
opportunity.
With the progress made in 2013, and in view of the strong start
to 2014, the Board remains confident of delivering continued growth
in 2014.
Financial Review
FY 2013 FY 2012([4]) Change %
Revenues 34,503 26,135 32%
Gross Profit 20,449 16,272 26%
Gross Margin 59% 62%
Operating expenses 8,447 4,203 101%
Operating Profit 12,002 12,069 -1%
Adjusted EBITDA 13,275 12,484 6%
2013 saw a record financial performance for the Group. Content
and Search accounted for 55% of revenues or $18.8 million (2012:
57%), Media Buying for 29% or $10.1 million (2012: 31%) and the
affiliate network for 16% or $5.6 million (2012: 12%). Growth in
the Content and Search segment came from an increase of traffic to
the Group's websites, as well as new websites launched. Growth in
the Media Buying segment came from new media channels such as
display and social media, which did not exist in 2012.
Results per business segment include the following:
Content & Search Media Buying Affiliate Network Total
2013
Revenues 18,840 10,071 5,592 34,503
Segment Profit 14,234 5,583 632 20,449
2012
Revenues 14,922 8,183 3,030 26,135
Segment Profit 10,188 5,607 477 16,272
Revenue growth 26% 23% 85% 32%
Gross profit rose 26% in 2013 to $20.5 million with the
strongest growth coming from the Content and Search segment. Whilst
revenues in the Media Buying segment grew, as expected, Gross
profit remained stable due to lower margins resulting from the
entry into new media channels, such as display media buying and
social media, which are characterized by lower margins compared to
the Pay Per Click search campaigns in previous years.
During 2013 operating expenses increased significantly, relating
to the recruitment of finance and marketing teams, research and
development, IT systems and to prepare for the IPO. Going forward
as a public company, whilst we will maintain tight control of
expenses, we expect these to grow further as we expand and execute
our acquisition strategy, but revenues and Gross profit will rise
accordingly.
Cash flow from operating activities remain strong at $11.9
million (2012: $12.9 million). As revenues grew trade receivables
grew as well, which brought the operating cash flow slightly down.
The Company usually collects revenues within 30 to 60 days. The
Board expects cash flow to remain strong going forward.
Cash flow from investing activities amounted to $1.5 million,
which was used mainly for investing in business information systems
and software, as well as additional websites mainly for the
Scandinavian markets.
Cash flow from financing activities was $2.5 million, which
included a net $14.3 million investment in the Company by a U.S.
fund offset by dividends and other payments to shareholders in the
amount of $9.1 million, payments to minority holders of $2.1
million and pre-paid expenses in connection with the Company's IPO
in the amount of $0.7 million.
XLMedia's balance sheet remained strong in 2013. As at 31
December 2013, the Company had cash and cash equivalents of $15.5
million (2012: $2.6 million). Total working capital([5]) was $15.8
million (2012: $3.5 million) and total assets were $33.4 million
(2012: $17.3 million), with shareholders' equity of $26.5 million
(2012: $8.1 million). The material increase in equity was from net
income of $11.1 million and the issuance of shares to the U.S.
investor totaling $14.3 million offset by dividends to shareholders
of $5.2 million and dividend payments to minority holders in the
Group of $2.3 million. Following the IPO and the strengthening of
the balance sheet, the Group is well positioned to execute the
Company's strategy of growth by acquisitions as well as organic
growth.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the period
from 22 April
Year ended (Inception)
31 December to 31 December
------------
Year ended
31 December
2013 2012 2012*
------------ ------------- ------------
USD in thousands (except per
share data)
--------------------------------------------- ------
Revenues 34,503 17,732 26,135
Cost of revenues 14,054 6,471 9,863
------------
Gross profit 20,449 11,261 16,272
Research and development
expenses 907 428 581
Selling and marketing expenses 1,785 656 1,002
General and administrative
expenses 5,755 2,031 2,620
------------
8,447 3,115 4,203
------------
Operating income 12,002 8,146 12,069
Finance expenses 496 143 78
Finance income 123 161 105
------------
Income before other income
(expenses) 11,629 8,128 12,096
Other income (expenses),
net 32 (190) 1,378
------------
13,474
Profit before taxes 11,661 7,938
Taxes 552 82 159
------------
Net income and other comprehensive
income 11,109 7,856 13,315
============ ============= ============
Attributable to:
Equity holders of the Company 8,838 6,856 12,237
Non-controlling interests 2,271 1,000 1,078
------------ ------------- ------------
11,109 7,856 13,315
============ ============= ============
Net earnings per share attributable
to equity holders of the
Company:
Basic and diluted net earnings
per share (in USD) 0.087 0.069 0.12
============ ============= ============
Weighted average number of
shares used in computing
basic earnings per share
(in thousands) 101,436 100,000 100,000
============ ============= ============
Weighted average number of
shares used in computing
diluted earnings per share
(in thousands) 101,820 100,000 100,000
============ ============= ============
* Combined financial information of the group . For further
details on the combined financial information please refer to the
Group's admission document, part 4 - Financial information, Note
2
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As of 31 December
2013 2012
--------- ---------
USD in thousands
-------------------------
Assets
Current assets:
Cash and cash equivalents 15,455 2,562
Short term investments 428 130
Trade receivables 4,498 2,952
Related parties 147 692
Other accounts receivable 1,974 856
--------- ---------
22,502 7,192
--------- ---------
Non-current assets:
Property, plant and equipment 738 454
Intangible assets 6,853 7,285
Goodwill 2,416 2,416
Long term investments 340 -
Other account receivable 552 -
10,899 10,155
--------- ---------
33,401 17,347
========= =========
Liabilities and equity
Current liabilities:
Trade payables 1,536 854
Related parties 605 -
Business combination consideration
payable 2,867 2,000
Other liabilities and accounts
payable 1,646 891
6,654 3,745
--------- ---------
Non-current liabilities:
Liabilities to Related Parties - 2,499
Business combination consideration
payable - 2,690
Other account payable 227 341
227 5,530
--------- ---------
Equity attributable to equity
holders of the Company:
Share capital - -
Share premium 14,311 -
Capital reserve from transaction
with non-controlling interests 106 106
Capital reserve from share-based
transactions 479 -
Retained earnings 10,494 6,856
25,390 6,962
--------- ---------
Non-controlling interests 1,130 1,110
--------- ---------
Total equity 26,520 8,072
--------- ---------
33,401 17,347
========= =========
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the period
from 22 April
(Inception)
to 31 December
2012
Year ended Year ended*
31-Dec 31-Dec
2013 2012
USD in thousands
Cash flows from operating activities:
Net income and comprehensive
income 11,109 7,856 13,315
Adjustments to reconcile net
income to net cash provided
by operating activities:
Adjustments to the profit or
loss items:
Depreciation and amortisation 794 386 415
Finance expense (income), net 255 (152) (145)
Gain from sale of assets (32) - -
Cost of share-based payment 479 - -
Taxes on income 552 82 159
Gain on bargain purchase - - (179)
Gain from remeasurement of investment
in initially consolidated subsidiary - - (1,389)
2,048 316 (1,139)
Changes in asset and liability
items:
Increase in trade receivables (1,546) (875) (765)
Increase in other accounts receivable (183) (129) (148)
Decrease in related parties 93 (577) (53)
Increase in trade payable 682 854 865
Increase in other accounts payable 594 623 1,068
(360) (104) 967
Cash paid and received during
the year for:
Interest received (paid), Net (123) 15 15
Taxes paid (547) (155) (212)
(670) (140) (197)
Net cash from operating activities 12,127 7,928 12,946
* Combined financial information of the group . For further
details on the combined financial information please refer to the
Group's admission document, part 4 - Financial information, Note
2
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended For the period from 22 April (Inception) to Year ended *
31-Dec 31 December 31-Dec
2013 2012 2012
USD in thousands
Cash flows from investing activities:
Purchase of property, plant and equipment (482) (180) (241)
Acquisition of initially consolidated
subsidiary - - (1,469)
Decrease in other financial assets, net
acquired in business combination 457 3,383 -
Purchase of intangible assets (936) (702) (732)
Proceeds from sale of assets 50 - -
Short term and long term investments (607) (124) (156)
Net cash from investing activities (1,518) 2,377 (2,598)
Cash flows from financing activities:
Prepaid expenses for share capital issuance (707) - -
Sale of shares to non-controlling interests 31 393 393
Financing by non-controlling interests 10 75 75
Dividend paid to equity holders (1,800) - -
Dividend to equity holders as result of the (2,888) - -
Subsidiary acquisition
Dividend paid to non-controlling interests (2,292) (1,011) (1,089)
Issue of share capital (net of issue 14,311 - -
expenses)
Adjustment of equity arising from business
combination - - (7,848)
Repayment of liabilities to Related Parties (4,381) (7,200) (7,200)
Net cash from financing activities 2,284 (7,743) (15,669)
Increase in cash and cash equivalents 12,893 2,562 (5,321)
Cash and cash equivalents at the beginning
of the period 2,562 - 7,883
Cash and cash equivalents at the end of the
year 15,455 2,562 2,562
Significant non-cash transactions:
Adjustment of equity arising from business
combination - - 10,797
Loans from related party - 5,388 5,388
Liabilities to Related Parties incurred in
business combination - 9,125 9,125
Purchase of intangible assets - 341 341
Dividend payable to equity holders as result
of the Subsidiary acquisition 512 - -
Dividend payable to non-controlling
interests 237 - -
* Combined financial information of the group . For further
details on the combined financial information please refer to the
Group's admission document, part 4 - Financial information, Note
2
Notes to the financial statements
NOTE 1: GENERAL
General description of the Group and its operations:
The Group is a global digital publisher and marketing company
which attracts paying users from different online channels and
directs them to online gambling operators.
The Group operates as a marketing affiliate to multiple gambling
operators. The Group attracts players through online marketing
techniques and subsequently seeks to channel high value "traffic"
(i.e. players) to gambling operators who, in turn, convert such
traffic into paying customers. Online gamblers are attracted by the
Group's publications and advertisements and are then directed, by
the Group, to online gambling operators in return for a share of
the revenue generated by such players, a fee generated per player
acquired, fixed fees or a hybrid of any of these three models.
The Company commenced its operations on 22 April 2012 and
purchased business activity and assets.
The Company's registered office is in Jersey.
In November 2013 the Company signed an agreement to acquire the
Subsidiary from the Parent Company for a consideration of USD 3.4
million.
In December 2013 the Company has entered into a Share Purchase
Agreement with a new investor for consideration for USD 15
million.
On 21 March 2014 the Company completed an Initial Public
Offering ("IPO") on London Stock Exchange's Alternative Investment
Market (AIM). The total gross funds raised in the IPO were GBP 32.8
million (equal to USD 54.2 million).
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies have been applied consistently
in the financial statements for all periods presented, unless
otherwise stated.
(a) Basis of presentation of the financial statements:
These financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS").
The financial statements have been prepared on a cost basis.
The Company has elected to present profit or loss items using
the function of expense method.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)
(b) Consolidated financial statements:
The consolidated financial statements comprise the financial
statements of companies that are controlled by the Company
(subsidiaries). Control is achieved when the Company is exposed, or
has rights, to variable returns from its involvement with the
investee and has the ability to affect those returns through its
power over the investee. Potential voting rights are considered
when assessing whether an entity has control. The consolidation of
the financial statements commences on the date on which control is
obtained and ends when such control ceases.
The financial statements of the Company and of the subsidiaries
are prepared as of the same dates and periods. The consolidated
financial statements are prepared using uniform accounting policies
by all companies in the Group. Significant intragroup balances and
transactions and gains or losses resulting from intragroup
transactions are eliminated in full in the consolidated financial
statements.
Non-controlling interests in subsidiaries represent the equity
in subsidiaries not attributable, directly or indirectly, to a
parent. Non-controlling interests are presented in equity
separately from the equity attributable to the equity holders of
the Company. Profit or loss and components of other comprehensive
income are attributed to the Company and to non-controlling
interests. Losses are attributed to non-controlling interests even
if they result in a negative balance of non-controlling interests
in the consolidated statement of financial position.
(c) Business combinations and goodwill:
Business combinations are accounted for by applying the
acquisition method. The cost of the acquisition is measured at the
fair value of the consideration transferred on the date of
acquisition with the addition of non-controlling interests in the
acquiree. In each business combination, the Company chooses whether
to measure the non-controlling interests in the acquiree based on
their fair value on the date of acquisition or at their
proportionate share in the fair value of the acquiree's net
identifiable assets.
Direct acquisition costs are expensed as incurred.
Contingent consideration is recognised at fair value on the
acquisition date and classified as a financial asset or liability
in accordance with IAS 39. Subsequent changes in the fair value of
the contingent consideration are recognised in the statement of
income or in the statement of comprehensive income. If the
contingent consideration is classified as an equity instrument, it
is measured at fair value on the acquisition date without
subsequent remeasurement.
Goodwill is initially measured at cost which represents the
excess of the acquisition consideration and the amount of
non-controlling interests over the net identifiable assets acquired
and liabilities assumed. If the resulting amount is negative, the
acquirer recognises the resulting gain on the acquisition date.
After initial recognition, goodwill is measured at cost less any
accumulated impairment losses. For purposes of evaluation of
impairment of goodwill, goodwill purchased in a business
combination is evaluated and attributed to the cash-generating
units to which it had been allocated.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES(Cont.)
Non-controlling interests of an entity represent the
non-controlling shareholders' share of the net income and
comprehensive income of the entity and their share of the net
assets at fair value upon the acquisition of the entity. The
non-controlling interests are presented in equity separately from
the equity attributable to the equity holders of the Company.
Business combinations in which the Company acquires an entity
that is under the common control of the Parent Company is accounted
for in a manner similar to a pooling of interests. The effect of
this accounting is to reflect the financial position, results of
operations and cash flows of the acquiree as if it had been a
subsidiary of the Company for the entire period in which the
acquiree had been under the control of the Parent Company.
Accordingly, the assets acquired and liabilities assumed are
recorded based on their carrying amounts as reflected in the
financial statements of the acquiree prior to the business
combination. The excess of the consideration paid by the Company
over the carrying amount of the net assets acquired is recorded as
a reduction of equity in the statement of equity.
(d) Functional currency, presentation currency and foreign currency:
1. Functional currency and presentation currency:
The functional and presentation currency of the Company is the
U.S. dollar ("Dollar" or "USD").
2. Transactions, assets and liabilities in foreign currency:
Transactions denominated in foreign currency are recorded upon
initial recognition at the exchange rate at the date of the
transaction. After initial recognition, monetary assets and
liabilities denominated in foreign currency are translated at the
end of each reporting period into the functional currency at the
exchange rate at that date. Exchange rate differences, other than
those capitalised to qualifying assets or recorded in equity in
hedges, are recognised in profit or loss. Non-monetary assets and
liabilities measured at cost in foreign currency are translated at
the exchange rate at the date of the transaction. Non-monetary
assets and liabilities denominated in foreign currency and measured
at fair value are translated into the functional currency using the
exchange rate prevailing at the date when the fair value was
determined.
(e) Cash equivalents:
Cash equivalents are considered as highly liquid investments,
including unrestricted short-term bank deposits with an original
maturity of three months or less from the date of acquisition or
with a maturity of more than three months, but which are redeemable
on demand without penalty and which form part of the Group's cash
management.
(f) Short-term deposits:
Short-term bank deposits are deposits with an original maturity
of more than three months from the date of acquisition. The
deposits are presented according to their terms of deposit.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES(Cont.)
(g) Allowance for doubtful accounts:
The allowance for doubtful accounts is determined in respect of
specific debts whose collection, in the opinion of the Company's
management, is doubtful. Impaired debts are derecognised when they
are assessed as uncollectible.
(h) Revenue recognition:
Revenues are recognised in profit or loss when the services are
provided, the revenues can be measured reliably, it is probable
that the economic benefits associated with the transaction will
flow to the Company and the costs incurred or to be incurred in
respect of the transaction can be measured reliably. Revenues are
measured at the fair value of the consideration received.
The Company usually works with its customers on performance
basis, and recognises revenues according to revenue share model or
one-time payment per user acquisition.
(i) Taxes on income:
Taxes on income in profit or loss comprise current and deferred
taxes. Current or deferred taxes are recognised in profit or loss,
except to the extent that the tax arises from items which are
recognised directly in other comprehensive income or in equity. In
such cases, the tax effect is also recognised in the relevant
item.
1. Current taxes:
The current tax liability is measured using the tax rates and
tax laws that have been enacted or substantively enacted by the end
of reporting period as well as adjustments required in connection
with the tax liability in respect of previous years.
2. Deferred taxes:
Deferred taxes are computed in respect of temporary differences
between the carrying amounts in the financial statements and the
amounts attributed for tax purposes.
Deferred taxes are measured at the tax rates that are expected
to apply when the asset is realised or the liability is settled,
based on tax laws that have been enacted or substantively enacted
by the end of the reporting period. Deferred taxes in profit or
loss represent the changes in the carrying amount of deferred tax
balances during the reporting period, excluding changes
attributable to items recognised in other comprehensive income or
in equity.
Deferred tax assets and deferred tax liabilities are presented
in the statement of financial position as non-current assets or
non-current liabilities, respectively. Deferred taxes are offset in
the statement of financial position if there is a legally
enforceable right to offset a current tax asset against a current
tax liability and the deferred taxes relate to the same taxpayer
and the same taxation authority.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)
(j) Property, plant and equipment:
Property, plant and equipment are measured at cost, including
directly attributable costs, less accumulated depreciation. Cost
includes spare parts and auxiliary equipment that are used in
connection with plant and equipment.
Depreciation is calculated on a straight-line basis over the
useful life of the assets at annual rates as follows:
mainly %
--------
Motor vehicles 15%
Office furniture and equipment 10%
Computers and peripheral equipment 33%
Leasehold improvements are depreciated on a straight-line basis
over the shorter of the lease term (including any extension option
held by the Group and intended to be exercised) and the expected
life of the improvement.
The useful life, depreciation method and residual value of an
asset are reviewed at least each year-end and any changes are
accounted for prospectively as a change in accounting estimate.
Depreciation of an asset ceases at the earlier of the date that
the asset is classified as held for sale and the date that the
asset is derecognised. An asset is derecognised on disposal or when
no further economic benefits are expected from its use.
(k) Intangible assets:
Separately acquired intangible assets are measured on initial
recognition at cost including directly attributable costs.
Intangible assets acquired in a business combination are measured
at fair value at the acquisition date. After initial recognition,
intangible assets are carried at their cost less any accumulated
amortisation and any accumulated impairment losses.
Intangible assets with a finite useful life are amortised over
their useful life and reviewed for impairment whenever there is an
indication that the asset may be impaired. The amortisation period
and the amortisation method for an intangible asset are reviewed at
least at each financial year end. Changes in the expected useful
life or the expected pattern of consumption of future economic
benefits embodied in the asset are accounted for prospectively as
changes in accounting estimates. The amortisation of intangible
assets with finite useful lives is recognised in profit or
loss.
Intangible assets with indefinite useful lives are not
systematically amortised and are tested for impairment annually or
whenever there is an indication that the intangible asset may be
impaired. The useful life of these assets is reviewed annually to
determine whether their indefinite life assessment continues to be
supportable. If the events and circumstances do not continue to
support the assessment, the change in the useful life assessment
from indefinite to finite is accounted for prospectively as a
change in accounting estimate and on that date the asset is tested
for impairment. Commencing from that date, the asset is amortised
systematically over its useful life.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES(Cont.)
Gains or losses arising from the derecognition of an intangible
asset are determined as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognised in
profit or loss.
Software:
The Group's assets include computer systems comprising hardware
and software. Software forming an integral part of the hardware to
the extent that the hardware cannot function without the programs
installed on it is classified as property, plant and equipment. In
contrast, software that adds functionality to the hardware is
classified as an intangible asset.
Intangible assets with a finite life are amortised on a
straight-line basis over the useful life as follows:
mainly %
Non-competition 33%
Software (purchased) 33%
Non-competition is amortised over the non-competition agreement
term.
(l) Impairment of non-financial assets:
The Company evaluates the need to record an impairment of the
carrying amount of non-financial assets whenever events or changes
in circumstances indicate that the carrying amount is not
recoverable. If the carrying amount of non-financial assets exceeds
their recoverable amount, the assets are reduced to their
recoverable amount. The recoverable amount is the higher of fair
value less costs of sale and value in use. In measuring value in
use, the expected future cash flows are discounted using a pre-tax
discount rate that reflects the risks specific to the asset. The
recoverable amount of an asset that does not generate independent
cash flows is determined for the cash-generating unit to which the
asset belongs. Impairment losses are recognised in profit or
loss.
An impairment loss of an asset, other than goodwill, is reversed
only if there have been changes in the estimates used to determine
the asset's recoverable amount since the last impairment loss was
recognised. Reversal of an impairment loss, as above, shall not be
increased above the lower of the carrying amount that would have
been determined (net of depreciation or amortisation) had no
impairment loss been recognised for the asset in prior years, and
its recoverable amount. The reversal of impairment loss of an asset
presented at cost is recognised in profit or loss. The following
criteria are applied in assessing impairment of these specific
assets:
1. Goodwill in respect of subsidiaries:
The Company reviews goodwill for impairment once a year as of 31
December or more frequently if events or changes in circumstances
indicate that there is an impairment.
Goodwill is tested for impairment by assessing the recoverable
amount of the cash-generating unit (or group of cash-generating
units) to which the goodwill has been allocated. An impairment loss
is recognised if the recoverable amount of the cash-generating unit
(or group of cash-generating units) to which goodwill has been
allocated is less than the carrying amount of the cash-generating
unit (or group of
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES(Cont.)
cash-generating units). Any impairment loss is allocated first
to goodwill. Impairment losses recognised for goodwill cannot be
reversed in subsequent periods.
2. Intangible assets with an indefinite useful life that have not yet been systematically
amortised:
The impairment test is performed annually, on 31 December, or
more frequently if events or changes in circumstances indicate that
there is an impairment.
(m) Financial instruments:
1. Financial assets:
The financial assets of the Group include cash and cash
equivalents, short term investments, trade and other receivables.
The financial assets are initially recognised at fair value plus
directly attributable transaction costs and subsequently measured
based on its terms at amortised cost, using the effective interest
method. The amortisation of the effective interest is recognised in
profit or loss in as finance expenses or income.
2. Financial liabilities:
The financial liabilities of the Group include trade and other
accounts payables, liabilities to related parties and business
combination consideration payable. The financial liabilities are
initially recognised at fair value less directly attributable
transaction costs and subsequently measured based on their terms at
amortised costs, using the effective interest method. The
amortisation of the effective interest is recognised in profit or
loss as finance expenses or income.
3. Offsetting financial instruments:
Financial assets and financial liabilities are offset and the
net amount is presented in the statement of financial position if
there is a legally enforceable right to set off the recognised
amounts and there is an intention either to settle on a net basis
or to realise the asset and settle the liability
simultaneously.
4. Derecognition of financial instruments:
a) Financial assets:
A financial asset is derecognised when the contractual rights to
the cash flows from the financial asset expire.
b) Financial liabilities:
A financial liability is derecognised when it is extinguished,
that is when the obligation is discharged or cancelled or expires.
A financial liability is extinguished when the debtor (the Group)
discharges the liability by paying in cash, other financial assets,
goods or services; or is legally released from the liability.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES(Cont.)
(n) Provisions:
A provision in accordance with IAS 37 is recognised when the
Group has a present obligation (legal or constructive) as a result
of a past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the
obligation. When the Group expects part or all of the expense to be
reimbursed, for example under an insurance contract, the
reimbursement is recognised as a separate asset but only when the
reimbursement is virtually certain. The expense is recognised in
the income statement net of the reimbursed amount.
(o) Employee benefit liabilities:
The Group has several employee benefit plans:
1. Short-term employee benefits:
Short-term employee benefits include salaries, paid annual
leave, paid sick leave, recreation and social security
contributions and are recognised as expenses as the services are
rendered. A liability in respect of a cash bonus or a
profit-sharing plan is recognised when the Group has a legal or
constructive obligation to make such payment as a result of past
service rendered by an employee and a reliable estimate of the
amount can be made.
2. Post-employment benefits:
The plans are financed by contributions to insurance companies
and classified as defined contribution plans.
The Subsidiary has defined contribution plans pursuant to
Section 14 to the Severance Pay Law under which the Subsidiary pays
fixed contributions and will have no legal or constructive
obligation to pay further contributions if the fund does not hold
sufficient amounts to pay all employee benefits relating to
employee service in the current and prior periods. Contributions to
the defined contribution plan in respect of severance or retirement
pay are recognised as an expense when contributed concurrently with
performance of the employee's services.
(p) Share-based payment transactions:
The Company's employees and officers are entitled to
remuneration in the form of equity-settled share-based payment
transactions.
Equity-settled transactions:
The cost of equity-settled transactions with employees and
officers is measured at the fair value of the equity instruments
granted at grant date. The fair value is determined using an
acceptable option pricing model.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES(Cont.)
The cost of equity-settled transactions is recognised in profit
or loss together with a corresponding increase in equity during the
period which the performance is to be satisfied ending on the date
on which the relevant employees or officers become entitled to the
award ("the vesting period"). The cumulative expense recognised for
equity-settled transactions at the end of each reporting period
until the vesting date reflects the extent to which the vesting
period has expired and the Group's best estimate of the number of
equity instruments that will ultimately vest.
(q) Earnings per share:
Earnings per share are calculated by dividing the net income
attributable to equity holders of the Company by the number of
Ordinary Shares outstanding during the period. The Company's share
of earnings of investees is included based on the earnings per
share of the investees multiplied by the number of shares held by
the Company. If the number of Ordinary Shares outstanding increases
as a result of a capitalisation, bonus issue, or share split, the
calculation of earnings per share for all periods presented are
adjusted retrospectively.
Potential Ordinary shares are included in the computation of
diluted earnings per share when their conversion decreases earnings
per share from continuing operations. Potential Ordinary shares
that are converted during the period are included in diluted
earnings per share only until the conversion date and from that
date in basic earnings per share.
(r) Research and development:
Research and development costs are charged to profit and loss as
incurred as development costs did not meet the criteria for
recognition as an intangible asset.
* Gross before expenses, which included GBP 32.6 raised for new
shares ([1]) The Company was incorporated on 22 April 2012, and
purchased the current business which was originally established in
2008, therefore the financial statements include 2012 for nine
months only. However, in its admission document to AIM published in
March 2014 XLMedia included combined financial information of the
Group for the full year ended 31 December 2012. Therefore, all
references in the financial highlights refer to comparing full year
2013 to full year 2012. For further details on the combined
financial information please refer to the Group's admission
document, part 4 - Financial information, Note 2. ([2]) Earnings
before interest, taxes, depreciation and amortisation and adjusted
to exclude share based payments.
([3]) Source: H2GC United States data, May 2014 ([4]) The Company was incorporated on 22 April 2012, and purchased the current business which was originally established in 2008, therefore the financial statements include 2012 for nine months only. However, in its admission document to AIM published in March 2014 XLMedia included combined financial information of the Group for the full year ended 31 December 2012. Therefore, all references in the financial highlights refer to comparing full year 2013 to full year 2012. For further details on the combined financial information please refer to the Group's admission document, part 4 - Financial information, Note 2.
([5]) Current assets less current liabilities
This information is provided by RNS
The company news service from the London Stock Exchange
END
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