Digitalbox Regulatory News (DBOX)

26 September 2023

Digitalbox plc

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

Unaudited interim results for the six months ended 30 June 2023

Digitalbox plc, the mobile-first digital media business, which owns leading websites Entertainment Daily, The Daily Mash, The Tab and The Poke, today publishes its unaudited interim results for six months to 30 June 2023 (the "First Half", the "Period", or "H1 2023").

Financial Highlights

"Adjusted EBITDA" being operating profit/loss before exceptional charges, share based payment charge, amortisation and depreciation

Operational Highlights

· H1 2023 performance ahead of the Board's expectations

· Graphene Ad Stack driving Digitalbox session values ahead of the market

· The Tab session values up 5% year on year

· The Daily Mash Premium content continues to grow direct consumer revenue

· The Poke delivered operating profit during the period, repaying 25% of its acquisition cost

· Traffic sourcing challenges experienced across the market impacted total sessions by 36m

· Entertainment Daily session values returned to year-on-year growth at the end of H1

· Tests of AI assisted content creation for on-platform distribution showed strong potential

· Net cash at 30 June 2023 of £2.3m

Post-period Highlights:

· Daily Mash metered paywall grows subscriber base by 100%

· Acquisition of assets from Social Chain, doubling Digitalbox's social media audience to over 20m

Outlook:

· Global advertising revenues expected to improve as confidence in macro-economic conditions returns towards 2024.

· The Board is confident that despite the headwinds many digital media businesses have faced in the first half of the year, particularly around traffic sourcing, Digitalbox expects to trade positively in the all-important Q4 2023.

· The Company expects to achieve full year 2023 revenue of approximately £2.8m and remain EBITDA (adjusted) positive.

James Carter, CEO, Digitalbox plc, said: "We continue to see gains being delivered by Digitalbox's highly-optimised Graphene Ad Stack. The technology has enabled us to outperform the digital programmatic ad market. Despite the first half seeing an advertising downturn across the UK, our brands delivered session value trends ahead of these conditions. Pleasingly, we have seen The Poke evolve to a position where it is making a strong financial contribution each month. While we have been impacted by a Google algorithm change blocking Entertainment Daily from the Discover feed we have performed increasingly well in our social channels. This powerful engagement is what stimulated the Social Chain transaction which we expect will bring wider distribution benefits to both Entertainment Daily and The Tab as industry-wide traffic sourcing remains a challenge. Looking ahead, while we remain vigilant of the disruptive forces that AI-assisted content might create, we are confident our agile approach positions us well to capitalise on the opportunities it also presents."

Commenting on the Group's performance and prospects for the year, Chairman Marcus Rich said: "It is well known that there are significant audience challenges across the industry with other companies in the sector reporting traffic reductions from Facebook, and Digitalbox has not been immune to this. We envisage that publisher operating models will change significantly as we move to a future where AI technology increasingly impacts the media space. The team have already started harnessing the power of these tools to deliver greater efficiency in production and greater reach through on-platform distribution. Through our existing social follower bases and those made available through other deals like our acquisition of assets from Social Chain, we remain confident we have a route to a significant on-platform existence."

Certain information contained in this announcement would have constituted inside information (as defined by Article 7 of Regulation (EU) No 596/2014) ("MAR") prior to its release as part of this announcement and is disclosed in accordance with the Company's obligations under Article 17 of MAR. The person responsible for arranging for the release of this announcement on behalf of the Company is James Carter, CEO.

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 trading brands of "Entertainment Daily", "The Daily Mash", "The Tab", and "The Poke". 

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.

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

InteriM Statement

Overview

The performance of the Group in the first six months has been marginally ahead of the Board's expectations with revenue of £1.2m which is down 34% on H1 2022. This was largely the result of better than anticipated advertising performance within a tough market.

Importantly, Digitalbox had net cash of £2.3 million at 30 June 2023 which is enabling the business to secure future growth opportunities through deals like that announced in August to acquire the digital assets of 99 Problems, Student Problems and The Life Network Shopping from Media Chain Group Limited.

Operating Review

The delivery of the Group's strategy has progressed well as we continued to be acquisitive and focused on successfully integrating The Poke.

Traffic

The well-documented issues relating to publishers sourcing traffic from the major platforms continued during the period. As global economic pressures impacted the big players - notably Meta and Alphabet - the audience volumes sent to publisher websites have been reduced.

The number of visits to the Group's websites were down year on year, mainly due to having Digitalbox's leading brand's presence blocked by Google's Discover feed. Fortunately, we had identified this issue at the back end of 2022, and were able to adjust our operating model to suit. While we anticipated advertiser demand softening because of the cost-of-living crisis, competition for high-quality mobile inventory in H1 2023 continued to deliver Digitalbox session values across the period that were ahead of the market and a testimony to the power of the Graphene Ad Stack.

We are well positioned to complete more cash acquisitions that can help de-risk the business. For example, to reduce reliance on the Google Discover feed, the acquisition of the digital assets of 99 Problems, 90's Life and The Life Network Shopping provides Digitalbox with the opportunity to extend its audience reach. 99 Problems has 10m Facebook followers and 1.4m Instagram followers, 90's Life has 200k Facebook followers and The Life Shopping Network has 1m Facebook followers. The combined follower bases will more than double the number currently owned by Digitalbox at approximately 8m Facebook followers.

Furthermore, the economic conditions have pushed potential acquisition targets into the zone of being considered 'distressed', creating more opportunities. The Digitalbox executive team has remained considered in their approach to M&A. Acquisitions will only be done if there is plausible turnaround opportunity to put an asset on the path to profitability. This remains a key acquisition criterion.

With the challenge of publishers, like Digitalbox, sourcing traffic from the major platforms to become long-term, we are looking to a future where our brands will increasingly exist within the platform walled gardens alongside our websites. We have begun planning for this pivot with the assistance of AI tools to help generate content.

Entertainment Daily

Entertainment Daily - which is focused on TV and showbiz news - had a challenging six months as Google blocked its presence within their Discover feed cutting around 28m sessions from the same period in 2022, however, it showed resilience through its social media engagement. We have invested considerable resources following Google's guidelines and ensuring our Core Web Vitals performance across the portfolio is as strong as it can be to increase the prospects of being featured within their results.

The Daily Mash

The Daily Mash strengthened its content offering through the 'Mash Premium' channel. It has diversified its revenue composition with a new metered paywall that has doubled its subscriber base year-on-year. As the platforms have tightened up on the amount of traffic they are prepared to send to satire sites like The Daily Mash, the site has been trialling a pivot to an on-platform existence through an AI-generated video article format that is now delivering over 20k 1-minute video views per day that we believe will provide a platform for further video content expansion.

The Tab

The Tab has contributed a profit every month since it was acquired in October 2020 and is beginning to see its session values mature. The site benefited from the fact it has a strong youth following in the US where advertising markets have been much more buoyant than the UK, resulting in year-on-year growth of 5%. In addition, The Tab strengthened its position within Google's Discover feed as it grew to 5m sessions for the period while Facebook assigned a red flag to its Holy Church of Netflix page. This flag was imposed for reporting on Netflix's Jeffrey Dahmer series and resulted in page reach being reduced by 95% with the same knock-on effect on traffic being generated from this source. This flag was raised in September 2022 and is expected to be removed after 12 months. The Tab has continued to benefit from the Graphene Ad Stack boosting monetisation and has provided a strong model for the Company's approach to acquisition identification and integration. This approach as was deployed on The Poke.

The Poke

The Poke.co.uk was acquired out of cash in December 2022. The site has established itself as a strong companion to The Daily Mash in the humour space and repaid 25% of its acquisition costs in H1. Digitalbox acquired the dotcom domain on acquisition and has now switched it to this domain. This helps provide a clearer opportunity to explore expansion into territories beyond the UK.

TV Guide.co.uk

Completing the acquisition of the web and mobile platform assets of TVGuide.co.uk remains a desired objective with the tech re-platforming having taken longer than anticipated. To ensure the site's stability and performance, Digitalbox assumed responsibility to rebuild the site that is currently live and in the final testing phase.

Social Chain

In August, the Company completed the acquisition of three of Social Chain AG assets, 99Problems, 90's Life and The Life Network Shopping on better terms than originally announced. Digitalbox's management is convinced that having a greater audience scale opportunity to operate within the walled gardens of the major platforms will bring future dividends. These assets provide access to an additional 12 million followers on social media, which more than doubles Digitalbox's follower base.

The future

Digitalbox has historically pursued a strategy of maximising profitability by driving audiences off the major platforms to its websites. As the platforms adjust their approach, Digitalbox will invest in a pivot to a much greater presence through video within the walled gardens that are offering preferential treatment to this type of content. As with The Daily Mash, assisted by AI tools we expect to make this transition in our business over the next six to twelve months.

Financial review

The Directors are pleased to report revenues ahead of the Board's expectations for the period of £1.2m in H1. The team had a clear understanding of the pressures that the tough economic conditions would place on the platforms - most notably Google and Meta - and budgeted accordingly whilst they explore a pivot to a greater on platform presence fuelled by AI.

The anticipated period on period significant traffic reduction impacted on the gross profit %, taking it from 87% last year to 77% this year. Whilst this gross profit % is still exceptionally high, this presents as a significant reduction leading to a gross profit of £1.0m in H1 2023, down from £1.6m in H1 2022.

Despite these challenges, cash performance has been solid with net cash (gross cash at the bank less government back loans) being £2.3m at 30 June 2023, down from £2.5m as at 31 December 2022, after corporation tax payments of £96k and loan repayments of £60k in H1.

The business continues to be highly liquid with total net current assets of £3.1m at 30 June 2023 (£3.4m at 30 June 2022) driven by gross cash of £2.6m at the bank.

DIGITALBOX PLC 

INTERIM CONSOLIDATED INCOME STATEMENT

for the six months ended 30 June 2023

DIGITALBOX PLCINTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITYfor the six months ended 30 June 2023

DIGITALBOX PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 30 June 2023

DIGITALBOX PLC

CONSOLIDATED CASH FLOW STATEMENT

for the six months ended 30 June 2023

DIGITALBOX PLC

NOTES TO THE INTERIM REPORT

for the six months ended 30 June 2023

1. Corporate information

The interim consolidated financial statements of the group for the period ended 30 June 2023 were authorised for issue in accordance with a resolution of the directors on 25 September 2023. Digitalbox plc ("the company") is a Public Limited Company listed on AIM, incorporated in England and Wales. The interim consolidated financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006.

2. Statement of Accounting policies

2.1 Basis of Preparation

The entities consolidated in the half year financial statements of the company for the six months to 30 June 2023 comprise the company and its subsidiaries (together referred to as "the group").

The interim consolidated financial statements do not include all the information and disclosures required in the annual financial statements.

The directors are satisfied that, at the time of approving the consolidated interim financial statements, it is appropriate to adopt a going concern basis of accounting and in accordance with the recognition and measurement principles of International Financial Reporting Standards adopted for use in the United Kingdom ("IFRS"). In reaching this conclusion the directors have considered the financial position of the Group, its cash, liquidity position and borrowing facilities together with its forecasts and projections for a period in excess of 12 months from the date of approval. At the reporting date the Group had £2,579k of cash at bank and in hand providing a strong position to support the continued and future success of the Group.

2.2 Accounting Policies

The principal accounting policies adopted in the preparation of the financial statements are set out in the consolidated financial statements of the Group for the year ended 31 December 2022. The policies have been consistently applied to all the years presented, unless otherwise stated. The Group's accounting policies have been consistently applied in accordance with IFRS continued into the six months ended 30 June 2023.

This Interim Statement is prepared in accordance with IAS 34 "Interim Financial Reporting". Accordingly, whilst

the Interim Statement has been prepared in accordance with IFRS, and the primary statements follow the format of the annual financial statements, only selected notes are included - those that provide an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the last annual reporting date. IAS 34 states a presumption that anyone who reads the Group's Interim Statement will also have access to its most recent annual report. Accordingly, annual disclosures are not repeated in this Interim Statement.

The preparation of these consolidated half year financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates in preparing these consolidated half year financial statements.

3. Segment Information

The Group's primary reporting format for segment information is business segments which reflect the management reporting structure in the Group and of its four media assets.

Unaudited six months to 30 June 2023

Unaudited six months to 30 June 2022

3. Segment Information (continued)

12 months to 31 December 2022

* Admin expenses exclude share based payment charges, amortisation, depreciation, impairment charges and acquisition and listing costs.

External revenue by location of customer

4. Earnings per share

The calculation of the group basic and diluted loss per ordinary share is based on the following data:

Earnings per ordinary share has been calculated using the weighted average number of shares in issue during the relevant financial periods. IAS 33 requires presentation of diluted EPS when a company could be called upon to issue shares that would decrease earnings per share or increase the loss per share.

5. Tangible Assets

6. Intangible Assets

The other intangible assets are being amortised over a period of 7 years and development costs are being amortised over 3 years on completion of the project.

Amortisation is charged to administrative costs in the Statement of Comprehensive Income.

7. Share capital

There were no shares issued in the 6 months to 30 June 2023 (6 months to 30 June 2022: 1,590,936).

8. Related party transactions

During the period, Integral 2 Limited charged £36k (6 months to 30 June 2022: £37k, 12 months to 31 December 2022: £65k) to the Group, a company related by virtue of David Joseph, a member of key management personnel, having control over the entity. As at 30 June 2023, £6k (30 June 2022: £5k, 31 December 2022: £6k) was owed to Integral 2 Limited. On 13 January 2023 David Joseph acquired 550,000 shares in Digitalbox plc at 8 pence per share through Integral 2 Limited taking his total holding to 1,150,000 shares.

During the period, M Capital Investment Partners (Holdings) Limited billed £6k (6 months to 30 June 2022: £12.5k, 12 months to 31 December 2022: £25k) to the Group, a company related by virtue of Martin Higginson, a member of key management personnel during the period, and having control over the entity. As at 30 June 2023, £nil (30 June 2022: £nil, 31 December 2022: £2.5k) was owed to M Capital Investment Partners (Holdings) Limited. Martin Higginson resigned as a director of Digitalbox plc on 30 April 2023.

The key management personnel are considered to be the Board of Directors. Key management were remunerated £211k in the six months to 30 June 2023 (6 months to 30 June 2022: £192k, 12 months to 31 December 2022: £406k).

The key management personnel have been provided with a total of 3,008,882 effective share options resulting in a charge of £14k in the period (6 months to June 2022: £17k, 12 months to 31 December 2022: £17k).

9. Events after the interim period

On 31 August 2023, Digitalbox plc acquired the digital assets of 99 Problems, Student Problems and The Life Network Shopping from Media Chain Group Limited (part of "Social Chain AG") for a total cash consideration of $600,000.