Half-year Report

30 November 2020

Dods Group plc

 ("Dods", the "Company" or "the Group")

INTERIM RESULTS TO 30 SEPTEMBER 2020

Dods Group plc (AIM: DODS) announces its unaudited interim results for the half year ended 30 September 2020.

Company Overview

Dods is a leading technology company specialising in business intelligence, media and technology resourcing. With extensive capability in machine learning and AI, we manage and transform large volumes of data and information across multiple industries, for some of the UK's leading business intelligence providers. In the political and regulatory domains, we have built a reputation for high quality, unbiased content across all of our products and services in Westminster, Edinburgh, Paris and Brussels.

Financial Highlights

Continuing operations

1. Adjusted EBITDA is calculated as earnings before interest, tax, depreciation, amortisation of intangible assets, share based payments and non-recurring items.

2. Adjusted EBIT is calculated as operating profit (loss) plus non-recurring costs.

Operational Highlights

· Formation of two new divisions; Dods Technology with Cornelius (Con) Conlon as Managing Director and Dods Intelligence with Munira Ibrahim as Managing Director;

· Covid-19 pandemic accelerated move to a more technology enabled business;

· Successful mobilisation of entire global workforce to remote working; reviewing London office space requirements to reflect the new hybrid working model with a consequential reduction in costs;

· Senior team strengthened across sales, technology, editorial, creative, finance, legal and HR.

Outlook

The results for the period are in line with the Board's expectations.

Despite the continued impact of Covid-19 on revenues, in particular Events and Training, the Group is cash generative, has additional liquidity available and has strengthened and diversified its capabilities and senior management team, particularly through the successful completion of the Merit acquisition in July 2019.

Due to the ongoing uncertainties around the global Covid-19 pandemic, the Board remains cautious about the outlook for the second half of the year but confident in the Company's transformational strategy and the long term outlook for the Group.

Mark Smith, Non- Executive Chairman, commented:

"The Group's results for the first half of FY21 are in line with the Board's expectations; whilst Covid-19 has had a huge impact on parts of our core business our diversified portfolio helped to mitigate the downside. The business adapted quickly to remote working for all employees around the world and continues to operate efficiently under flexible working conditions. We are grateful for the continued support of our customers, suppliers, shareholders, bankers and employees as we continue the modernisation and transformation of Dods.

As announced last week we are delighted to welcome Vijay Vaghela to the Board and Chairmanship of the Audit Committee. I am also pleased to confirm my position as Chairman."

This announcement is released by Dods Group plc and contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 ("MAR"), and is disclosed in accordance with the Group's obligations under Article 17 of MAR.

For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this announcement is being made on behalf of the Group by Simon Bullock, Chief Financial Officer.

For further information, please contact:

Dods Group plc

Mark Smith - Non-Executive Chairman 020 7593 5500

www.dodsgroup.com

Canaccord Genuity Limited (Nomad and Broker)

Bobbie Hilliam 020 7523 8150

Georgina McCooke

BUSINESS AND OPERATIONAL REVIEW

The interim results are in line with expectations and progress continues to be made in transforming Dods from a publishing company to a high-tech business services group as we emerge from the initial impacts of the current global pandemic.

Dods Technology

The business is characterised by strong recurring revenues amongst its clients and this has helped the company to weather a Covid-19 dominated first half. Whilst short term, discretionary and tactical revenue has been indirectly affected by the pandemic (down by over 70%), the recurring revenue base means the business has retained and delivered 95% of the overall revenue earned in the same period last year. During the period the business has:

· Shifted India based workers to a work from home operating model;

· Secured new 'big data' projects in the pharmaceutical and publishing spaces;

· Developed new products and delivered stronger IT support across the group as a whole;

· Undertaken significant cost reduction measures; and

· Grown several key accounts by more than 20%.

Dods Intelligence

The national UK lockdown on March 23rd and subsequent social distancing requirements have significantly impacted revenues for Dods Events (down 95%, but with improved margins) and Dods Training (down 51%), resulting in a rapid and accelerating switch from physical to virtual events and training sessions and also moving more of our media and publications from print to digital, driving higher margins. Through the period, the team have:

· Pivoted the delivery of events and training courses to virtual - with 220 training courses and 50 events delivered. This shift to virtual has resulted in higher margins due to lower delivery costs;

· Transitioned the majority of the publications to digital only during lockdown which resulted in further cost savings and are reviewing the print frequency on an ongoing basis;

· Partnered with EY on delivering Civil Service Learning contracts in addition to continuing a similar partnership with KPMG;

· Expanded the client base and now working directly with brands including Oracle, SAP, Salesforce and Dell Boomi to provide access to our niche and highly influential political audience;

· Launched partnership with Politix to on-sell our unique UK and EU monitoring product to German and Austrian clients;

· Launched a new marketing franchise called Dods Insights that brings together our editorial expertise and access across a variety of topical news stories; and

· Enacted a reduction in headcount in the events team by 30% with smaller reductions across sales and delivery teams.

The team successfully implemented the above whilst in lockdown and with staff levels reduced by 40% due to the Company benefitting from the Government furlough scheme.

Covid-19 Update

The Group continues to address the challenges of Covid-19 which is having an adverse impact on both revenues and profits particularly in our events and training businesses; which will, in part, be mitigated by strong recurring revenues within business intelligence and resilience within Dods Technology (Merit).

The majority of employees are working from home with minimal disruption to the business and this trend is expected to continue into 2021.

Going Concern

The directors have considered the implications for Going Concern and remain satisfied with the Company's funding and liquidity position. See further comments under Statement of Financial Position.

Outlook

The new team is continuing to innovate, build recurring revenues, drive margin improvements and reduce costs to support the Group's activities. Whilst it is impossible to predict the extent of the continued global uncertainty around the pandemic, the Board remains confident in the medium to long-term prospects of the Group.

Con Conlon Munira Ibrahim

Managing Director Managing Director

Dods Technology Dods Intelligence

FINANCIAL REVIEW

Income statement

The Group's revenue from continuing operations decreased by 18% to £10.2 million (H1 2020: £12.5 million) despite the benefit of a full six month trading period from the Merit acquisition (H1 2020: 2.5 months).

Across Dods Intelligence, revenues from Events declined 95% (from £4.6m to £0.2m) compared with the prior period and Training revenues declined by 51% to £0.4m over the same period as a direct consequence of the Covid-19 pandemic and Government requirements on social distancing. Monitoring and Media revenues were down 5% and 11% respectively. On a like-for-like basis revenues from Dods Technology (Merit) were up £0.1m (2%).

During the period gross profit decreased by 24% to £3.2 million (H1 2020: £4.2 million) as a result of the revenue shortfalls in Events and Training. Gross margin decreased from 34% to 31% in the period, again driven by Events and Training. Excluding these two businesses, overall margins were up 1.5%, reflecting the migration from print to digital across all media offerings.

Adjusted EBITDA decreased by £1.5 million to a loss of £0.2 million (H1 2020: £1.4 million profit). Operating loss was £2.3 million (H1 2020: £0.1 million loss), after a right-of-use assets charge of £0.7 million (H1 2020: £0.5 million), an amortisation charge of £0.4 million (H1 2020: £0.3 million) for business combinations a charge of £0.2 million (H1 2020: £0.1 million), for intangible assets depreciation charge of £0.3 million (H1 2020: £0.2 million) and non-recurring costs of £0.5 million (H1 2020: £0.3 million).

Net finance costs have increased for the period to £0.3 million (H1 2020: £0.2 million) reflecting borrowing costs associated with the £3.0 million term loan from Barclays Bank procured for the acquisition of Merit.

The taxation credit for the period was £3k (H1 2020: charge £37k).The tax charge is based on the use of accumulated tax losses.

Adjusted earnings per share, basic and diluted, from continuing operations in the period were a loss of 0.31 pence and 0.30 pence respectively (H1 2020: 0.04 pence profit) and were based on the adjusted loss for the period of £1.7 million (H1 2020: £0.2 million profit) with a weighted average number of shares in issue during the period of 564,786,453.

Earnings per share, both basic and diluted, from continuing operations in the period were a loss of 0.46 pence (H1 2020: loss of 0.08 pence) and were based on the loss after tax for the period of £2.6 million (H1 2020: loss of £0.3 million).

The Board is not proposing a dividend (H1 2020: £nil).

Statement of Financial Position

Assets

Other non-current assets consisted of goodwill of £28.8 million (FY 2020: £28.9 million), intangible assets of £11.0 million (FY 2020: £11.2 million) and tangible fixed assets of £1.9 million (FY 2020: £2.1 million).

The Group holds a 40% stake in the issued share capital of Sans Frontières Associates (SFA) and has loaned SFA £0.6 million (FY 2020: £0.6 million) at the period end. The loan is unsecured and carries no interest charge. Additionally, the Group holds a 30% stake in Social 360 at a cost of £0.5 million (FY 2020: £0.5 million).

The Group had a cash balance of £4.1 million (FY 2020: £4.4 million) and gross borrowings of £3.0 million at the period end (FY 2020: £3.0 million).

The Group has a term loan of £3.0 million (FY 2020: £3.0 million) over a 5-year period at an rate of 3.25% over LIBOR. The current amount due is £0.9 million (FY 2020: £3.0 million) and non-current is £2.1 million (FY 2020: £nil).

Current liabilities fell by £1.7 million to £16.3 million (FY 2020: £18.0 million). Excluding the term loan, the current liabilities increased primarily as a result of VAT and PAYE deferrals available as part of the UK Government's support for businesses impacted by Covid-19. £0.9m of VAT has been deferred and will be paid between April 2021 and March 2022. The Group has entered into a Time To Pay agreement with HMRC with respect to £1.3 million of PAYE that will be fully settled by March 2021.

Deferred tax liability was £0.9 million (FY 2020: £0.9 million).

Total assets of the Group were £61.1 million (FY 2020: £63.9 million) with the main movements being a reduction in debtors of £1.7 million and fall in fixed assets from amortisation and depreciation charges.

Total equity reduced by £1.5 million to £34.3 million (FY 2020: £35.8 million), reflecting the loss for the period partially offset by the issue of shares relating to deferred consideration for the acquisition of Merit.

Liquidity and capital resources

The Group has generated cash from operations of £1.6 million (H1 2020: £0.2 million) during the period primarily driven by strong debtor collections and the deferral of VAT and PAYE.

The cash position at the period end was £4.1 million (2020: £4.4 million). As at 30 September 2020 the Group had a net cash position of £1.1 million (2020: £1.4 million).

The Group continues to benefit from an excellent relationship with Barclays Bank plc; as previously reported capital payments on the £3.0 million term loan have been deferred from April to December 2020; all covenants have been waived through to January 2021 and the revolving credit facility of £2 million remains available for draw-down. The Board is confident the business has sufficient liquidity to meet its obligations, although this is an area of continued focus due to the uncertainty arising from the Covid-19 pandemic.

Simon Bullock

Chief Financial Officer

Condensed consolidated income statement

For the half year ended 30 September 2020

Loss per share (pence)

The notes on pages 11 to 16 form part of these unaudited interim results.

Condensed consolidated statement of comprehensive income

For the half year ended 30 September 2020

The notes on pages 11 to 16 form part of these unaudited interim results.

Condensed consolidated statement of financial position

As at 30 September 2020

The notes on pages 11 to 16 form part of these unaudited interim results.

Condensed consolidated statement of changes in equity

For the half year ended 30 September 2020

1 The share premium reserve represents the amount paid to the Company by shareholders above the nominal value of shares issued.

2 The merger reserve represents accounting treatment in relation to historical business combinations.

3 The translation reserve comprises foreign currency translation differences arising from the translation of financial statements of the Group's foreign entities into sterling.

4 The share option reserve represents the cumulative expense recognised in relation to equity-settled share-based payments.

The notes on pages 11 to 16 form part of these unaudited interim results.

Condensed consolidated statement of cash flows

The notes on pages 11 to 16 form part of these unaudited interim results.

1. Basis of preparation 

Dods Group plc is a Company incorporated in England and Wales. 

This condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU. The annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU. As required by AIM Rules, the condensed set of financial statements has been prepared, and applying accounting policies and presentation that were applied in the preparation of the Group's published consolidated financial statements for the year ended 31 March 2020.

The comparative figures for the year ended 31 March 2020 have been extracted from the Group's statutory accounts for that financial period. Those accounts have been reported on by the company's auditor and delivered to the registrar of companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

The taxation charge for the six months ended 30 September 2020 is based on the utilisation of accumulated tax losses.

Going concern

The Directors have considered the financial projections of the Group, including cash flow forecasts and the availability of committed bank facilities for the coming 12 months. They are satisfied that the Group has adequate resources for the foreseeable future and that it is appropriate to continue to adopt the going concern basis in preparing these interim financial statements.

Accounting estimates and judgements

The Group makes estimates and judgements concerning the future and the resulting estimates may, by definition, vary from the actual results. The Directors considered the critical accounting estimates and judgements used in the interim financial statements and concluded that the main areas of judgement are:

· Potential impairment of goodwill and other assets as a result of the impact of COVID-19; and

· Contingent deferred payments in respect of acquisitions.

The condensed set of interim financial statements have been prepared on a going concern basis and were approved by the Board on 29 November 2020. 

2. Segmental information 

Business segments

The Group now considers that it has two operating business segments, Dods Intelligence and Dods Technology.

Dods Intelligences' business segment concentrates on the provision of key information and insights into the political and public policy environments around the UK and the European Union.

The Dods Technology segment has extensive capability in machine learning and AI and manages the transformation of large volumes of data and information across multiple industries for some of the UK's leading business intelligence providers.

The following table provides an analysis of the Group's segment revenue by business segment.

No client accounted for more than 10 percent of total revenue.

Asset segment information has not been disclosed because this information is not reviewed by the senior management team for the purpose of allocating resources.

Note the prior year comparison for Dods Technology reflects only the post-acquisition period of 2.5 months.

3. Non-recurring items

4. Earnings per share

5. Goodwill

6. Intangible assets

7. Property, plant and equipment

8. Interest-bearing loans and borrowings

During the period, the Group maintained a term loan of £3 million (H1 2020: £3 million), over a 5-year period carrying a rate of 3.25% over LIBOR, with the first repayment of £0.2 million due on 31st December 2020.

In addition, it has access to a revolving credit facility (RCF) of £2 million carrying a rate of 3.5% over LIBOR.

9. Share Capital

Holders of deferred shares do not have the right to receive notice of any general meeting of the Company or any right to attend, speak or vote at such meeting. The deferred shareholders are not entitled to receive any dividend or distribution and shall on a return of assets in a winding up of the Company entitle the holders only to the repayment of 1 penny in aggregate. The deferred shares are also incapable of transfer and no share certificates will be issued.

During the period the Company issued 26,141,667 ordinary shares related to the acquisition of Merit.

During the period the Group issued nil (2020: nil) ordinary shares on the exercise of employee share options for cash consideration of nil (2020: nil) of which £nil (2020: nil) was credited to share capital and £nil (2020: nil) to share premium.

10. Related party transactions

During the period, Artefact Partners LLP provided strategic consultancy services to Dods Group plc to the value of £nil (H1 2020: £20,000). Current non-executive director Richard Boon is an LLP designated member of Artefact Partners LLP.

During the period, the Group received a repayment of £nil (H1 2020: £70,000) on its interest free loan to its associate Sans Frontieres Associates (SFA). At 30 September 2020 the balance of this loan was £560,000 (H1 2020: £630,000).

During the period, an amount of £29,753 (H1 2020: £24,650) was payable to an associate, Social 360 Limited, in relation to profit-share for monitoring services provided. At 30 September 2020, £nil (H1 2020: £24,650) was outstanding.

On acquisition of Merit, an arm's length non-repairing 7-year lease was entered into between a Merit subsidiary (Letrim Intelligence Services Private Limited) and Merit Software Services Private Limited. Cornelius Conlon, a director of the Group, is the beneficial owner of Merit Software Services Private Limited. The lease relates to the Chennai office of Merit. During the period, payments of £339,000 (H1 2020: £158,000) were made to Merit Software Systems Private Limited in relation to the lease.

During the period the Company issued 13,333,819 ordinary shares in connection with the deferred consideration payable as part of the acquisition of Meritgroup Limited, to Con Conlon, Managing Director of the Dods Technology division.

In addition, Con Conlon was paid £220,000 due to his continued employment, post-acquisition (see note 11).

11. Contingent Liabilities

Upon the acquisition of Meritgroup Limited ("Merit") the Company became obligated, under certain conditions, to make payments to two employees of Merit. In the period £272K was paid and was reported as a non-recurring charge.

Further payments of £272K per annum could become due in July 2021 and July 2022 contingent upon their continued employment.