Political uncertainty hits Jaywing

The Sheffield-based firm said trading over the spring was very weak with just a modest improvement over the summer.

The firm said discretionary marketing spend has been running at a level well below that seen in previous years.

Gross profit fell from £15m to £12m in the six months to September 30 and the group made a £1.2m loss after tax.

Martin Boddy, chairman of Jaywing, said: "As we have outlined in previous announcements, trading in the UK in the first quarter of the year was very weak with a modest improvement in the second quarter.

"With the political and economic uncertainty in the period, many clients have been focused on their short term marketing spend and where this spend is discretionary, it has been running at a level well below that seen in previous years."

On a brighter note, the firm said trading in its Australia operation showed profitable growth with earnings rising 40 per cent.

Overall, like-for-like gross profit for the half year fell 20 per cent to £12m, but the impact on EBITDA was mitigated through cost management and efficiencies resulting in a like-for-like EBITDA loss of £551,000.

Despite this, the firm generated a small positive cash flow from operations. Net debt reduced year on year following the sale of HSM Limited in January 2019 and loan repayments.

During September, Jaywing developed a plan to return its UK operations to profitability and cash generation in the short term, which assumed no improvement in trading conditions.

Mr Boddy said: "Taking expert input, we concluded that we needed to take a different approach and the plan sets out how we will reshape and re-engineer the organisation to address the changes that we are seeing in the way clients engage with agencies and the new demands that they are making of them.

"Since September, management has been focused on executing the plan and I am pleased to say that we are making good progress.

"We have improved the management of our working capital, materially realigned our cost base and adopted a new and contemporary agency model that drives revenue and creates efficiencies in delivering even higher quality and effective work for clients. All of this is now being reflected in a stronger financial run rate."

The board is now considering a range of strategic options to return the company to "highly accretive" revenue growth.

Mr Boddy said: "With its performance marketing proposition and pedigree in data science, Jaywing has some highly attractive capabilities that differentiate it from its competition and position it in areas of marketing spend that are set to grow."

In October, the firm announced that entities associated with two of its major shareholders had acquired the company's existing secured loan facility of £5.2m owed to Barclays.

The major shareholders immediately provided the company with additional secured facilities by increasing the Jaywing Facility by £3m to £8m, which enabled the company to repay its outstanding overdraft and provided it with additional working capital.

Mr Boddy said: "By successfully tackling the group's funding challenge, Jaywing is now in a financially stronger position."

The composition of the board has also been reviewed. As a result Adrian Lingard, chief operating officer, is stepping down from the board with immediate effect by mutual agreement.

Mr Boddy said: "On behalf of the board I would like to thank him for his contribution over the past four years."