LSAI.L Regulatory News (LSAI)

Location Sciences Group PLC("Location Sciences" or the "Company")

Trading Update 

Location Sciences (AIM: LSAI), the leading location data verification company, provides the following trading update for the six months to 30 June 2020 ("H1 2020" or the "period").

Trading Performance

Unaudited revenues (including X-Mode securitisation) for the six months ended 30 June 2020 are expected to be approximately £0.65 million, an increase of approximately 43% on the corresponding period last year (H1 2019: £454,872) with core revenues (excluding X-Mode securitisation) of approximately £0.46 million, which is slightly ahead of H1 2019 despite the impact of COVID-19.

To mitigate the impact of COVID-19, the Company's directors implemented a cost reduction programme and are pleased to report this has seen cash administrative expenses being reduced to approximately £0.95 million for the period (H1 2019: £1.11 million), a reduction of 15%. This in turn has led to an improved adjusted cash EBITDA loss of approximately £0.68 million in the period, a decrease of approximately 17% compared to 2019 (H1 2019: EBITDA loss £0.82 million).

Cash Resources

In March 2020, the Company raised approximately £0.975 million (before expenses) through an equity placing comprising the issue and allotment of 111,430,000 new ordinary shares and an additional approximately £0.07 million was raised through the issue and allotment of 74,057,996 new ordinary shares pursuant to the issue of warrants.

The combination of the £1.05 million of capital raised together with the cost control measures implemented resulted in the Company having cash reserves of approximately £1.7 million at 30 June 2020 (31 December 2019: £1.3 million), which the directors believe will be sufficient for the Company's requirements until Q2 2021.

Impact of COVID-19

Verify revenues were adversely impacted by significantly reduced advertising spend in Q2 2020. In particular, it has been a challenging time for location-based advertising within sectors that rely on people's movement, such as retail and QSR. As these sectors come back to life, the Board expects a focus on local advertising which should be a positive driver for the Company's media verification revenues in H2 2020 and especially in Q4 when the Board expects the majority of the Company's Verify revenues to be secured. However, overall, the Board believes that advertising spend will be lower in 2020 compared to 2019.

The Company has worked hard to replace these revenues, investing significant time and energy into enlarging its data insights customer base, including making its location data available to UK Government departments and pitching for global data projects linked to the COVID-19 data analysis. Although no major contract wins have been secured to date, the Company is still exploring several open opportunities and will provide updates in due course.

The cash impact of the lower Verify revenues was mitigated quickly through making operational overhead cutbacks, which included reducing the Board's and senior management's remuneration.

Verify Progress

As announced in its COVID-19 update on 23 March 2020, the Company launched an updated version of its Verify Proximity platform at the end of April 2020. This will give its customers a clearer picture of how to obtain better value from their location spend and how to drive better performance. This will be needed in the months ahead, as companies look for a competitive edge.

In addition, Location Sciences launched its Verify Audience product in the US. Verify Audience allows brands, agencies and suppliers to check the validity of location based derived audience segments, a review of historical movements in contrast to proximity which validates the real time locations as digital advertising campaigns are delivered. To date eight paid for tests have been undertaken with the initial feedback from agencies and suppliers being very encouraging and the Company expects to be able to announce further news in the coming months.

X-Mode Partnership

The Company's partnership with X-Mode is progressing well and has allowed it to expand its insights customer base and, in particular, pitch for insight deals outside the UK as well as upsell insights to its Verify customers. This gives the Company a greater market opportunity going forward.

As a consequence of its partnership with X-Mode and specifically the initial transfer of some its data contracts, the Company has been required to recognise an additional approximately £0.2 million of income in H1 2020, representing the securitisation of these contracts over the period from 1 January 2020 to 31 December 2021.

iOS 14 - Changing the Location Landscape

The upcoming changes caused by iOS 14, Apple's latest iOS update due in September 2020, will see users being given the choice of sharing their IDFA (the unique identifier for advertisers) as well as an approximate location as an alternative to their precise location. This new operating system update will add greater consumer choice and transparency features that will have a significant impact on location advertisers - particularly when it comes to behavioural audiences and precise location targeting at scale.

The Board expects that these changes will be welcomed by consumers which will, as a result, increase the volume of location data being shared - albeit the increase in volume is likely to be driven with the sharing of approximate location (rather than not sharing at all).

Mark Slade, the Company's Chief Executive. commented on the impact of iOS 14 in a recent blog, which can be found via this link

https://www.locationsciences.ai/blog/ios-14-and-its-impact-on-the-location-based-advertising-market/

Mark Slade, Chief Executive Officer of Location Sciences, commented: "While the first half of 2020 was not what anyone had been expecting or indeed hoping for, there are some positive macro trends emerging in our industry. Only last month, Group M (the world's largest advertising agency) told its customers that location verification is critical to brand safety, a milestone which has been a long time coming and something we celebrated internally.

In the second half of 2020, we expect advertising revenues to return, albeit perhaps not to 2019 levels, however, with a renewed focus on local marketing, something which Location Sciences is ideally positioned to benefit from. I am confident we will emerge from this global crisis as a stronger company and better able to deliver shareholder value."

A further update on trading and prospects will be provided at the time of the release of the Company's unaudited interim results due to be released in mid-September 2020.

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About Location Sciences Group PLC:

Location Sciences is the pre-eminent global location verification provider to the $160 billion digital advertising industry. Working in partnership with brands, media agencies and suppliers to reduce ad-wastage and improve the effectiveness of location-based advertising campaigns. 

The digital advertising market-place remains unregulated and un-monitored, with an estimated $19 billion wasted on ad-fraud in 2018. Location Sciences has developed Verify, the world's first independent location verification product. Utilising sophisticated machine learning and pattern recognition technologies, Verify detects location ad-fraud and shines a light on location data inaccuracy with the aim of bringing back integrity, transparency and trust to the market place.