Digitalbox Regulatory News (DBOX)

26 March 2024

Digitalbox plc

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

Final Audited Results for the year ended 31 December 2023

Digitalbox plc, the mobile-first digital media business, which owns leading websites Entertainment Daily, The Daily Mash, The Poke, The Tab and TV Guide, today publishes its final audited results for the year ended 31 December 2023.

The Company will host a live investor presentation through the Investor Meet Company platform today at 10.00am (further details below).

 Financial Highlights

(1) Adjusted EBITDA is defined as the operating profit after adding back depreciation, amortisation, impairment, share based payments, acquisition costs and direct costs associated with business combinations.

 Operational Highlights

· Expansion of the portfolio from four to five operating brands

· Completed the acquisition of tvguide.co.uk and onboarded to Graphene platform

· Acquired Media Chain assets in August growing the Group's social follower base to over 20m

· G.A.S. (Graphene Ad Stack) now powering Entertainment Daily, The Daily Mash, The Tab, The Poke and TV Guide enabling what the Directors believe could be market-leading monetisation performance

· The Poke successfully repaid 50% of its purchase costs within the period

· The Daily Mash premium ad-free subscription experience continues to grow with an uplift of over 180% taking our current base to over 4,000

· Overall session values grew by 25% on The Tab in a highly challenging ad market, further demonstrating the value of G.A.S.

· The Poke delivered over 300% growth in session values in December 2023 compared to the same month in the previous year

· Significant diversification of audience sourcing model, helping to lessen the impact of algorithmic changes made by the major platforms

Current trading and outlook

· Performance of acquired properties The Daily Mash, The Tab, The Poke and TV Guide has proved the potential of the Digitalbox operating model and its Graphene platform, giving continued confidence in the Group's ability to build a larger portfolio of successful profitable digital brands

· Trading for the current financial year remains in line with expectations with the Company expecting advertising markets to bounce back as we head into 2025

James Carter, CEO, Digitalbox plc, said:  "Digitalbox traded profitably and generated £193k in operating cash in 2023, while experiencing some very challenging market conditions. Despite these conditions, it is a testament to the agility and hard work of our teams that enabled us to further scale the Digitalbox portfolio to five operational brands.

The major platform operators, Alphabet and Meta, created some obstacles that we overcame during the year, and we expect further algorithm changes - most notably from Google in the spring of 2024 - to affect all publishers. However, the knowledge we developed navigating the platforms in 2023 will further equip us for all we expect to face in the current year.

The Company has built a position of significant strength in the entertainment market, now servicing consumers across a broad demographic, from students all the way through to older generations traditionally aligned with linear TV consumption. As we further enhance our offering, we will look to build an expanded level of services to further tap into the evolving on-demand behaviours too.

Having successfully built a larger portfolio from our cash reserves, we continue to remain vigilant for fresh acquisitions that not only suit our model, but also could offer a quick return on our investment (ROI). With a strong track record of achieving a relatively quick ROI, we expect the general market conditions in 2024 to present further opportunities.

Current trading remains in line with market expectations, our expanded portfolio is primed for future growth and we will continue to investigate both bolt-on and organic growth opportunities."

Investor Presentation - Investor Meet Company

Digitalbox will also provide a live investor presentation through the Investor Meet Company platform today at 10.00am. The presentation is open to all existing and potential shareholders. Questions can be submitted at any time during the live presentation. Investors can sign up to Investor Meet Company for free and add to meet Digitalbox plc via

https://www.investormeetcompany.com/digitalbox-plc/register-investor .

Investors who have already registered and added to meet the Company will be automatically invited.

Market abuse regulation

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 (MAR).

Enquiries:

About Digitalbox plc

Based in the UK, Digitalbox is a 'pure-play' digital media business with the aim of profitable publishing at scale on mobile platforms.

Digitalbox operates the following trading brands, "Entertainment Daily", "The Daily Mash", "The Tab", "The Poke" and TV Guide". Entertainment Daily produces and publishes online UK entertainment news covering TV, showbiz and celebrity news. The Daily Mash produces and publishes satirical news content. The Tab is the UK's biggest youth culture site fuelled by students. The Poke expertly curates and editorialises the funniest content from around the web and social media. TV Guide serves as the definitive guide to what is on TV.

Digitalbox primarily generates revenue from the sale of advertising in and around the content it publishes. The Group's optimisation for mobile enables it to achieve revenues per session significantly ahead of market norms for publishers on mobile.

After a challenging year for many media businesses, with audience volatility created by algorithm updates on key platforms and wider economic factors, I am pleased to report that Digitalbox plc ('Digitalbox') successfully delivered a positive Adjusted EBITDA* for 2023. While this represents a reduction on previous years, it marks the fifth consecutive year of profitable trading since being listed in 2019.

The business maintained its strategic focus on delivering a 'mobile first' media operation at scale, using leading technologies to optimise both audience engagement and commercial performance, while integrating bolt-on acquisitions that complement its operating model.

During the year, the management team focused on the delivery of this strategy, and successfully navigated a mix of macro and micro challenges. Specifically, the UK economy was subdued by high interest rates, the cost-of-living crisis and geo-political issues that impacted international markets. These issues had a knock-on effect on the global advertising market. Also, dominant platform owners Alphabet and Meta reported challenges resulting from these conditions. The result was a highly difficult trading environment.

We reported the local headwinds facing the business in the middle of the year as our biggest brand ,Entertainment Daily remained blocked by Google and our second biggest, The Tab, suffered a content strike that reduced the reach on one of its biggest Facebook pages. Despite these headwinds, the team adapted and made headway with dealing with these issues in the latter part of the year. Digitalbox delivered full year revenue of £2.8m (2022: £3.6m) and positive Adjusted EBITDA* which were within market guidance.

Digitalbox ended the year with gross cash of £1.9m, which is £0.9m down on the prior year, and with net cash (gross cash less bank debt) of £1.7m, which is £0.7m less than the prior year. This is chiefly due to the strategic value-enhancing bolt-on opportunities the team completed during the year. In accordance with Digitalbox's stated buy and build strategy, we added 12m followers from the four Media Chain Group pages we acquired, completed the purchase of tvguide.co.uk, while successfully integrating The Poke that we had acquired a few weeks prior to the start of 2023.

With an enlarged brand portfolio comprising Entertainment Daily, The Daily Mash, The Tab, The Poke and tvguide.co.uk and a doubling our social media follower base, the business is well placed to grow into 2024. We can potentially take advantage of further acquisition opportunities that the Directors believe trading conditions will likely bring to the fore.

Marcus Rich

Chairman

25 March 2024

*Adjusted EBITDA is defined as operating profit after adding back depreciation, amortisation, impairment, share based payments, acquisition costs and direct costs associated with business combinations. 

CHIEF EXECUTIVE'S STATEMENT

FINANCIAL HIGHLIGHTS

REVENUE ADJUSTED EBITDA

£2.8m vs £3.6m in 2022 £0.02m vs £1.1m in 2022

ADJUSTED EBITDA MARGIN ADJUSTED EBITDA PER SHARE

0.7% vs 30.2% in 2022 0.02p vs 0.92p in 2022

*Adjusted EBITDA is defined as the operating profit after adding back depreciation, amortisation, impairment, share based payments, acquisition costs and direct costs associated with business combinations.

Chief Executive's Statement

2023 was another important year for Digitalbox, as we expanded the portfolio of trading brands against a backdrop of challenging market conditions. With the first full year of trading of The Poke, which we acquired in December 2022, we can report the brand has already repaid 50% of its acquisition cost and is well positioned to benefit from a recovering advertising market. While tvguide.co.uk took longer than expected to complete, the tech solution we rolled out has seen traffic improve and produce a better-than-expected advertising performance. This performance is a solid foundation for future development.

The year saw economic uncertainty stemming from a mix of post-pandemic structural changes, the war in Ukraine, high interest rates and the UK cost of living crisis which impacted consumer spending. Marketers continue to favour mobile digital media, which presents the most accountable and relevant commercial solution within the marketing mix. However, marketers acted and spent with much greater caution as the cost of living basics like heating and food significantly eroded household incomes.

Against this backdrop we developed our audience positions; the Directors believe the Company is now one of the most significant online publishers in the UK entertainment space and will benefit from the demand for quality mobile advertising inventory at scale.

Our positive year-end position of an expanded, profitable portfolio of trading brands has resulted from our knowledge, focus and agility. These attributes have allowed us to tackle the challenges we faced, while remaining focused on the positive macro trends attached to advertising within the mobile channel which we anticipate will grow ahead of the market.

Financial review

Full year revenue of £2.8m is 22% down on 2022. This headline is masking the volatility within this overall movement due to a challenging macro trading environment. The trading environment saw a 40% growth in the Group's underlying revenues in H1 2022 and a 27% reduction in H2 2022. Although we are disappointed to deliver a reduction in Adjusted EBITDA* compared to 2022, we are pleased to continue the trend of being consistently profitable with Adjusted EBITDA* of £20k, despite the aggressive market conditions.

Cash generation is a key feature of this business and, despite the challenging trading conditions leading to a year-on-year revenue reduction of £0.8m, the cash generated by operations was £0.2m. The business ended the year with gross cash at the bank of £1.9m, which is £0.9m lower than last year. This is despite having invested £1.0m in intangible assets, via the two acquisition of assets made, and spending £0.1m in loan and lease repayments.

The challenging conditions within capital markets, coupled with the increased base rate, has led the Board to consider the weighted average cost of capital discount rate when considering the carrying value of goodwill and intangible assets in the balance sheet. This, together with a significantly reduced cash generation from Entertainment Daily due to the prevailing economic conditions and the content distribution issues caused by Meta and Google policy and algorithm changes, has led to an impairment charge of £6.4m against the carrying value of goodwill in relation to Entertainment Daily, plus a consequent £5.0m impairment charge on the carrying value of the investments in the Company balance sheet.

Operating review

Digitalbox owns and operates five trading brands - Entertainment Daily, The Daily Mash, The Tab, The Poke and TV Guide. Entertainment Daily produces and publishes online UK entertainment news covering TV, showbusiness, and celebrities. The Tab is the UK's leading student and youth culture site fuelled by a London-based core team and a national network of 30 local university sites. The Daily Mash delivers online satirical news articles in its own distinctive style and The Poke expertly curates the funniest content from around the web and social media. TV Guide delivers the latest information to UK consumers about what to watch and when, ensuring they don't miss out. All five brands generate revenue from advertising in and around the content they publish, and the Daily Mash has also diversified into a paid subscription model.

While 2023 was a year of uncertainty, it demonstrated the effectiveness of the digital advertising medium as its share grew to 67% of global ad spend. Post-pandemic trends continue to evolve and the adoption of ecommerce via the most personal of channels, the mobile device, will continue to drive demand for quality inventory.

With Digitalbox's lean operating model, the Company believes it is well positioned to push forward with our strategy and remain well placed to benefit from for the forecast growth in mobile ad spending over coming years. Above and beyond the macro conditions that impacted most industries in 2023, Digitalbox was impacted by two specific issues aligned to Alphabet (Google) and Meta (Facebook). Google algorithms blocked our biggest brand Entertainment Daily and Facebook - unjustly in our view - sanctioned a key social page for The Tab's coverage of a popular Netflix documentary about the serial killer Jeffrey Dahmer, deeming it as 'promoting a dangerous individual'. Both issues are showing signs of a potential resolution.

Despite the challenges thrown up by the two platforms, our publishing operations for the year saw 239m visits to our websites. As well as successfully integrating The Poke and TV Guide, we established some very strong engagement with the Media Chain Group assets that we acquired and plan to build this further into 2024. Further, there was underlying commercial success as we saw significant year-on-year growth in the Poke and Tab session values over the 12 months and the whole portfolio of trading brands performed ahead of the market.

Compelling content remains at the core of the Digitalbox offering, created by talented teams with an expert understanding of their respective audiences' needs. As part of this being an increasingly important factor in website ranking, we have invested in greater visibility of our teams across expanded author pages on the respective websites. We marry the expertise of these highly valued staff members with our proprietary mobile-first tech stack, Graphene. Named after the incredibly fast, light, super-conductive material, Graphene has been developed to deliver the best user experience through the fastest and lightest page load speeds on mobile.

Alongside this highly optimised, low-friction content delivery, the commercial element of the Graphene suite, the Graphene Ad Stack (GAS) now powers the advertising monetisation of Entertainment Daily, The Daily Mash, The Tab, The Poke and TV Guide. We are seeing significant value creation here on The Poke and TV Guide as improved data from our deployment of GAS has enabled it to significantly grow advertising session values since the early stages of our ownership of both brands. As our portfolio expands, GAS's role in optimising revenue performance across the business and speeding the route to enhanced profitability for acquired properties is key for us.

The Tab has proved to be a great success since its acquisition at the end of 2020 having fully paid back its purchase costs within the first two years. We are tracking to achieve similar results on The Poke and hope to do the same on TV Guide. We continue to evaluate further acquisition opportunities and have seen an increase in opportunities as other publishers with lower margin headroom endured the challenging trading conditions of 2023. We remain ready to move quickly where we can realise the appropriate value.

The Digitalbox team was maintained in scale during a turbulent 2023 to ensure capacity for growth on our existing brands and to ensure any acquisitions can be quickly integrated, whilst operational efficiencies will remain strong.

Leading as a mobile-first business

Our strategy to create a mobile-first business has helped position us as a leader in the market for both audience engagement and monetisation. Push media skills remain critical, and our brands engage consumers at scale through this channel with 91% of our audience across the portfolio visiting on mobile devices. With an average of 20m monthly user visits to our sites, we present truly significant user scale to the market especially when combined with our capacity to engage.

Mobile advertising spend was growing well ahead of the economic issues that emerged in H2 2022 and we anticipate its acceleration as we emerge from this challenging period in 2024. As part of our Graphene technology suite that supports our mobile-first strategy, we are building a single site template for all our brands which enables optimisations to be rapidly applied across the portfolio. As previously reported, our GAS set up on The Poke quickly drove it to profitability and we are seeing similar results on TV Guide. This will give Digitalbox a distinct advantage as we look to further optimise our existing portfolio, complete more acquisitions, build new sites and benefit from the forecast growth in the digital ad market.

PROJECTED GLOBAL DIGITAL / MOBILE AD SPEND

*Source: eMarketer, March 2023 https://www.insiderintelligence.com/content/digital-ad-spend-worldwide-pass-600-billion-this-year

Portfolio growth

Television listings site TV Guide is the most recent addition to the Digitalbox portfolio, with its acquisition completing in October 2023. We feel the site is an excellent stablemate for Entertainment Daily with a distinct proposition and relationship with Entertainment Daily's regular editorial output. It brings over 1m monthly users.

The Poke, as detailed previously acquired at the end of 2022, had a strong first year of full trading with a focus on unlocking the brand's commercial potential, with like-for-like revenues growing by over 80%.

Entertainment Daily saw an overall reduction in sessions (visits) of 27% year-on-year largely as result of Google algorithms drastically reducing its appearance in their search and Discover feeds. Google accounted for 25m sessions in 2022 so it is good to be making headway towards a resolution in 2024. Facebook performed comparatively well across the year given the reported challenges faced by other publishers. The editorial team continued to hit all the TV and showbiz stories as the news broke, maximising traffic and social engagement around moments that caught the nation's imagination. This year also saw the second annual Entertainment Daily Awards, along with expanded social amplification through the new Soap Daily page and the acquired Media Chain Group pages.

The Tab continues to make a consistent positive contribution and is growing its advertising session values significantly ahead of the market. There was strong growth of 25% year-on-year. Editorial campaigning for key issues connecting with the student demographic continued to produce national media pick-ups, alongside its established output of entertainment and culture coverage. While the site had to ride out the challenge of the Facebook strike, this has been resolved for 2024. We continue to leverage the existing Tab portfolio of Facebook pages, the newly acquired Media Chain Group pages and are growing our TikTok and Instagram followers.

The Daily Mash had a year of transition as we progressed our consumer-revenues strategy, informed by the brand's loyal audience and genuinely unique content. Subscription sign-ups grew by over 180% across the year. Although the TV show was not continued by UK TV due to challenges faced by its Dave channel, we managed to create some significant engagement testing short form video content across multiple social channels including Tik Tok and Facebook and this informs how we move forwards.

Culture and people

We remain focused on creating a culture that enables talented people to do their best work. Even before the pandemic that meant being flexible and agile rather than harbouring traditional views of office culture or adopting a one-size-fits-all approach. We continue to mix office-based roles and remote working arrangements, full-time and part-time positions, staff and freelance contributor agreements to marry the needs of the business with those of our people. A hybrid scenario of both home and office working is what we have found most successful.

Good communication and a sense of inclusion are important to us, so we continue to publish monthly all-staff updates on progress and stage weekly leadership sessions alongside daily team meetings. Alongside this, we hold two annual all-staff gatherings, with this year's summer event a murder mystery themed conference at Oakley Hall in Hampshire and literary themed event in London's Bloomsbury for Christmas.

Recruiting and retaining great people is crucial to our growth. Our success hiring younger talent on Entertainment Daily through its apprentice programme has continued along with training and development for more senior staff. The Daily Mash and the Poke brought on new contributors and The Tab continues to offer free and highly relevant training initiatives for its network of student journalists.

Everyone at Digitalbox benefits from the company's life assurance and pension schemes and we aim to ensure our staff are rewarded fairly and have opportunities to progress within the business. All team members and their dependents have access to our free wellbeing and support programme including personalised healthy eating and exercise plans, mental health support, legal and medical advice and ways to prevent burnout. A share options scheme also exists for senior staff.

I would like to take the opportunity to thank all Digitalbox staff for their incredible hard work and enthusiasm during a challenging last year and their valuable contribution to enable us to position the building blocks for future growth. As the company continues to expand its portfolio it's a pleasure to be working with such a talented and committed team.

Business outlook

Since listing on the AIM market of the London Stock Exchange in 2019, Digitalbox has continued to develop as a profitable UK digital media business positioned squarely in the mobile space.

Despite the highly challenging macroeconomic environment of 2023, global digital advertising spend is forecast to grow by more than 40% in the next four years. The consumer and market reaction to both economic and health-related turbulence of the last few years has accelerated the trends which benefit Digitalbox, pushing the business to the forefront as mobile devices' share is forecast to shift from 67% of all digital ad spend in 2023 to 73% in 2027 and our content and tech teams continue to strengthen delivery through this channel.

Beyond the advertising market, TV continues to be highly competitive with the battle for share pushing all participants towards higher quality content. The streamers' optimum operating models have yet to settle and the terrestrial channels face the pressure of this changing landscape, yet the quality of the output continues to grow to benefit our audiences and fuel the information they crave from publishers like Digitalbox. This increasingly competitive market stimulates our various audiences leading to big shows like I'm a Celebrity Get Me Out Of Here and Love Island showing strong engagement across our properties in 2023.

The four acquisitions completed since being listed on AIM - The Daily Mash, The Tab, The Poke and TV Guide - have all proved the potential of our model, giving us confidence we can continue to create growth within the portfolio and make further acquisitions when the fit is right.

While H1 2022 saw a strong recovery from the pandemic, the markets adjusted to work with the new realities of the economic landscape in mid-year and continued throughout 2023. The trend towards a more cautious approach to marketing spend was stimulated by the previously mentioned macro international uncertainty driven by war and spiralling interest rates alongside the UK's cost of living crisis. As consumer spending power recovers in line with declining interest rates and greater political certainty is installed, we expect the advertising market will bounce back.

Our view is that Digitalbox's position in the open advertising market is a good place to be as it can adapt in real time, with high-quality inventory always in demand. Global commentary points towards a measured market recovery in 2024 with a full return forecast for 2025. We have no reason to doubt these predicted improving conditions and are confident the business is very well placed to benefit from the returning market.

Our audience sourcing is now more diverse and balanced than at any time in the Company's history, which offers greater stability. We enter 2024 with an expanded trading brand portfolio primed for future growth, alongside a returning economy and a confident digital advertising sector expected to significantly increase its share of global ad spend over coming years.

James Carter

Chief Executive

25 March 2024

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2023

1Adjusted EBITDA is defined as the operating profit after adding back depreciation, amortisation, impairment, share based payments, acquisition costs and direct costs associated with business combinations

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2023

 CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 AS AT 31 DECEMBER 2023

The financial statements were approved by the Board and authorised for issue on 25 March 2024.

James Carter David Joseph

CEO CFO

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2023

NOTES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

1. GENERAL INFORMATION

Digitalbox Plc is a public limited company incorporated and domiciled in the United Kingdom. The address of the registered office is Jubilee House, 92 Lincoln Road, Peterborough, England, PE1 2SN. The Company is listed on AIM of the London Stock Exchange.

The principal activity of the Group and of the Company are disclosed in the Directors' Report.

These financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the Group operates.

2. STANDARDS, AMENDMENTS AND INTERPRETATIONS ADOPTED IN THE CURRENT FINANCIAL YEAR ENDED 31 DECEMBER 2023

The following IFRS standards, amendments or interpretations became effective during the year ended 31 December 2023 but have not had a material effect on this Consolidated Financial Information:

Standard

Amendments to IAS 1 (Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements): Disclosure of Accounting Policies.

Amendments to IAS 8 (Accounting Policies, Changes in Accounting Estimates and Errors): Definition of Accounting Estimates

Amendments to IAS 12 (Income taxes): Deferred Tax related to Assets and Liabilities arising from a Single Transaction

Amendments to IAS 12 (Income taxes): International Tax Reform - Pillar Two Model Rules

All new standards and amendments to standards and interpretations effective for annual periods beginning on or after 1 January 2023 that are applicable to the Group have been applied in preparing these Consolidated Financial Statements.

3. NEW AND REVISED IFRS STANDARDS IN ISSUE BUT NOT YET EFFECTIVE

The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Consolidated Financial Statements are disclosed below. The Group intends to adopt these standards, if applicable, when they become effective.

The Directors are continuing to assess the potential impact that the adoption of the standards listed above will have on the Consolidated Financial Statements for the year ended 31 December 2024.

4. ACCOUNTING POLICIES

Principal accounting policies

The Group is a public Group incorporated and domiciled in the United Kingdom. The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

4. ACCOUNTING POLICIES (continued)

Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRS) issued by the International Accounting Standards Board (IASB) as adopted by the United Kingdom ("adopted IFRSs") and those parts of the Companies Act 2006 which apply to companies preparing their financial statements under IFRSs. The financial statements are presented to the nearest round thousand (£'000) except where otherwise indicated.

The Group comprises the parent company and its subsidiaries, as detailed in note III to the company financial statements. All of these have been included in the consolidated financial statements in accordance with the principles of acquisition accounting as laid out by IFRS 3 Business Combinations.

Going concern

The Group generated a loss during the year of £6,677k (2022: profit of £804k), the Group had closing net assets of £7,394k (2022: £13,975k), net current assets of £2,301k (2022: £3,318k) and cash at bank and in hand of £1,913k (2022: £2,827k).

The Group generated net cash from operating activities of £180k during the year (2022: £1,183k). The Group has remained cash generative during a difficult economic period which saw the impact of the war in Ukraine inflating global food and energy prices which, in turn, has driven consumer spending power down driving a consequent downturn in global advertising spend. This, together with the adverse changes in the distribution models of the global tech platforms led to a challenging year for media businesses worldwide.

In considering going concern, the Directors consider the current financial position and performance of the business, as well as reviewing financial information for a period of at least 12 months from the date of approval of the financial statements. Given the strong and liquid balance sheet position, the ability of the Group to generate operating cash in a challenging market, the full year effect of the successful acquisition of The Poke and the completion of the acquisition of tvguide.co.uk, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The going concern basis of accounting has therefore been adopted in preparing the financial statements.

Business combinations and goodwill

Acquisitions of subsidiaries and business are accounted for using the acquisition method. On acquisition of a subsidiary, the Directors determine whether substantially all of the fair value is concentrated into a single asset or group of assets. When applicable, the Directors elect to apply the optional concentration test and recognise the acquisition as an asset acquisition, rather than a business combination. The assets and liabilities and contingent liabilities of the subsidiaries are measured at their fair value at the date of acquisition. Any excess of acquisition over fair values of the identifiable net assets acquired is recognised as goodwill. Goodwill arising on consolidation is recognised as an asset and reviewed for impairment at least annually. Any impairment is recognised immediately in profit or loss accounts and is not subsequently reversed. Acquisition related costs are recognised in the income statement as incurred.

Transactions between wholly owned group members involving the hive-up or hive-across of trade and / or assets and liabilities are outside the scope of IFRS 3 on the grounds that they represent common control business combinations. The group has elected to apply IFRS 3 in accounting for all such transactions, which involves a full fair value exercise at the date of the transaction. This accounting policy has been consistently applied to all such transactions, and has been chosen on the grounds that the nature of these transactions is

 4. ACCOUNTING POLICIES (continued)

the amalgamation of acquired businesses into the existing trading business, which generally takes place shortly after the original acquisition.

Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group. and the revenue can be reliably measured. Revenue is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes. 

The Group does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment exceeds one year. As a consequence, the Company does not adjust any of the transaction prices for the time value of money.

The Group monitors the performance obligations in accordance with IFRS 15 considering that the performance obligations are met upon the Group delivering the advertisement to the customer.

A receivable is recognised when the services are delivered at this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.

Rendering of services

Revenue from providing services is recognised in the accounting period in which the services are rendered.

Revenue from the sale of advertising space is recognised upon the advertisement being generated and the Group delivering the advertisement to the customer. The Group recognises revenue when the amount of revenue can be reliably measured, it is probable future economic benefits will flow to the entity and the Group has satisfied the performance obligations. Revenue is not received in advance and therefore the Group does not account for contract liabilities.

Foreign currency

The individual financial statements of each group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each group company are expressed in pound sterling, which is the functional currency of the Group, and the presentational currency for the consolidated financial statements.

In preparing the financial statements of the individual companies, transactions in currencies other than the individual company's functional currency (foreign currencies) are recorded at rates of exchange prevailing on the dates of the transactions. At the reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in foreign currency are not retranslated. Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary items, any exchange component of the gain or loss is also recognised directly in equity.

4. ACCOUNTING POLICIES (continued)

Intangible assets

Intangible assets include goodwill arising on the acquisition of subsidiaries and represents the difference between the fair value of the consideration payable and the fair value of the net assets that have been acquired. The residual element of goodwill is not being amortised but is subject to an annual impairment review.

Also included within intangible assets are various assets separately identified in business combinations (such as brand value) to which the Directors have ascribed a fair value and a useful economic life. The ascribed value of these intangible assets is being amortised on a straight-line basis over their estimated useful economic life, which is considered to be 7 years.

Other intangible assets purchased by the Group are initially recognised at cost. After recognition, under the cost model, intangible assets are measured at cost less any accumulated amortisation and any accumulated impairment losses.

Amortisation is recognised so as to write off the cost less their residual values over their useful lives, which is considered to be 3 years straight line for development costs and between 3-7 years straight line for other intangible assets.

Financial instruments

The Group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument.

Contract liabilities

Contract liabilities comprise payments in advance of revenue recognition and revenue deferred due to contract performance obligation not being completed. They are classified as current liabilities if the contract performance obligations payments are due to be completed within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Contract liabilities are recognised initially at fair value and subsequently at amortised cost.

Trade and other receivables

Trade and other receivables are measured at initial recognition at fair value, and subsequently measured at amortised cost using the effective interest method. A provision is established when there is objective evidence that the Group will not be able to collect all amounts due. The amount of any provision is recognised in profit or loss.

The Group always recognises lifetime expected credit losses (ECL) for trade receivables and amounts due on contracts with customers. The expected credit losses on these financial assets are estimated based on the Group's historical credit loss experience, adjusted for facts that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast director of conditions at the reporting date, including time value of money where appropriate. Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument.

Cash and cash equivalents are recognised as financial assets. They comprise cash held by the Group and short-term bank deposits with an original maturity date of three months or less.

4. ACCOUNTING POLICIES (continued)

Trade payables are initially recognised as financial liabilities measured at fair value, and subsequent to initial recognition measured at amortised cost.

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deduction of all its liabilities. Equity instruments issued by the Group are recorded at the proceeds received net of direct issue costs.

Share based payments

Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the statement of comprehensive income on a straight-line basis over the vesting period.

Non-market vesting conditions are taken into account by adjusting the number of options expected to vest at each statement of financial position date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. The cumulative expense is not adjusted for failure to achieve a market vesting condition.

Fair value is calculated using the Black-Scholes model, details of which are given in note 22.

Pensions

The pension schemes operated by the Group are defined contribution schemes. The pension cost charge represents the contributions payable by the Group.

Property, plant and equipment

Property, plant and equipment are stated at cost net of accumulated depreciation and provision for impairment. Depreciation is provided on all property plant and equipment, at rates calculated to write off the cost less estimated residual value, of each asset on a straight-line basis over its expected useful life. The residual value is the estimated amount that would currently be obtained from disposal of the asset if the asset were already of the age and in the condition expected at the end of its useful economic life.

The method of depreciation for each class of depreciable asset is:

Office equipment - 25% reducing balance

Impairment of Assets

Impairment tests on goodwill are undertaken annually at the balance sheet date. The recoverable value of goodwill is estimated on the basis of value in use, defined as the present value of the cash generating units with which the goodwill is associated. This is computed by applying an appropriate discount rate to the estimated value of future cash flows. When value in use is less than the book value, an impairment is recorded and is irreversible.

Impairment of Assets (continued)

Other non-financial assets are subject to impairment tests whenever circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its estimated recoverable value (i.e. the higher of value in use and fair value less costs to sell), the asset is written down accordingly. Where it is not possible to estimate the recoverable value of an individual asset, the impairment test is carried out on the asset's cash-generating unit. The carrying value of property, plant and equipment is assessed in order to determine if there is an indication of impairment. Any impairment is charged to the statement of comprehensive income. Impairment charges are included under administrative expenses within the consolidated statement of comprehensive income. 

Taxation and deferred taxation

Corporation tax payable is provided on taxable profits at prevailing rates.

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the balance sheet differs from its tax base, except for differences arising on:

· the initial recognition of goodwill; and

· the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting nor taxable profit.

Recognition of deferred tax assets is restricted to those instances where it is probable that future taxable profit will be available against which the asset can be utilised. The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered).

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:

· the same taxable Group company; or

· different Group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.

There were unused tax losses at 31 December 2023 amounting to £3,610k. In the majority, these were restricted for use for 5 years from the date of acquisition of Tab Media Limited against future taxable profits arising from the trade formerly carried on in Tab Media Limited and now carried on in Digitalbox Publishing Limited. A deferred tax asset was recognised in relation to these losses for the first time in 2022, as the losses were considered to be highly likely to be recoverable against future profits. It is still the view that these losses will be highly likely to be recoverable against future profits.

Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the Executive Directors, who are responsible for allocating resources and assessing performance of the operating segments.

A business segment is a group of assets and operations, engaged in providing products or services that are subject to risks and returns that are different from those of other operating segments.

Segmental reporting (continued)

A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic environments. The Executive Directors assess the performance of the operating segments based on the measures of revenue, profit before taxation and profit after taxation. Central overheads are not allocated to business segments.

5. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

In the application of the Group's accounting policies, which are described in note 4, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on experience and other factors considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The following are the critical judgements and estimations that the Directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the financial statements.

Impairment of goodwill and other intangible assets

Impairment of the valuation of the goodwill relating to the acquisition of subsidiaries is considered annually for indicators of impairment to ensure that the asset is not overstated within the financial statements. The annual impairment assessment in respect of goodwill requires estimates of the value in use (or fair value less costs to sell) of subsidiaries to which goodwill has been allocated.

This requires the Directors to estimate the future cash flows and an appropriate discount factor, in order that the net present value of those cash flows can be determined. Discounted cash flow forecasts are stress tested under a range of scenarios. The headroom was deemed insufficient and therefore an impairment has been recognised against goodwill and intangible assets relating to Entertainment Daily in the year of £6,384k (2022: nil).

Critical accounting estimates

Amortisation of intangible assets

The periods of amortisation adopted to write down capitalised intangible assets requires estimates to be made in respect of the useful lives of the intangible assets, to determine an appropriate amortisation rate. Development costs (domain names and website costs) are being amortised on a straight-line basis over the period during which the economic benefits are expected to be received, which has been estimated at 3 years. Intangible assets recognised in relation to the brand names are being amortised straight-line over 7 years.

Share based payment expense

Non-market performance and service conditions are included in the assumptions about the number of options that are expected to vest. At the end of each reporting period the Group revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of

5. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)

the revision to the original estimates, if any, in the consolidated statement of comprehensive income, with a corresponding adjustment to equity.

This requires an estimate as to how many options will meet the future vesting criteria as well as the judgements required in estimating the fair value of the options at the date of grant for equity-settled options.

Provision for bad and doubtful debts

The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables. To measure expected credit losses on a collective basis, trade receivables are grouped based on similar ageing. The expected loss rates are based on the Group's historical credit losses experience over the twelve month period prior to the period end. Forward looking issues have been considered, including in relation to the ongoing impact of the hostile global trading conditions driven by the impact of the war in Europe. This has had an immaterial effect on the expected credit loss rate.

6. SEGMENTAL INFORMATION

A segmental analysis of revenue and expenditure is as follows:

6. SEGMENTAL INFORMATION (continued)

*Adjusted EBITDA is defined as the operating profit after adding back depreciation, amortisation, impairment, share based payments, acquisition costs and direct costs associated with business combinations.

The segmental analysis above reflects the parameters applied by the Board when considering the Group's monthly management accounts.

Directors' Detailed Emoluments

Details of individual Directors' emoluments for the year are as follows:

All pension contributions represent payments into defined contribution schemes.

The Executive Directors have service contracts with the Company which are terminable by the Company or relevant director after a fixed term of 12 months followed by 6 months' notice.

The Directors' interests in the issued ordinary share capital of the Company was as follows:

*David Joseph acquired shares through Integral 2 Limited, a company controlled by him.

There is a share-based payment charge attributable to options held by the directors during the year amounting to £46k (2022: £17k). The options held in the prior year lapsed on 28 February 2022. New options were issued in the year that lapse on 5 April 2026.

Effective options in Digitalbox plc exist due to two directors having warrants in its subsidiary company, Digital Publishing (Holdings) Limited, which, when exercised, are satisfied by issuing shares in Digitalbox plc.

These are set out in the table below,

The warrants had vested prior to admission onto AIM on 28 February 2019 and carry an effective exercise price of 2.28 pence per share issued in Digitalbox plc.

A full breakdown of options in issue are shown at page 24. Further information on share options is included in note 22.

The market price of the shares at 31 December 2023 was 3.35p with a quoted range from throughout 2023 of 3.35p to 8.75p. The options vest based on performance criteria detailed in note 22.

The tax assessed for the year differs from the standard rate of corporation tax in the UK applied to profit/(loss) before tax.