Results for the year ended 31 December 2018 Creating Advantage
2018 Overview Record revenues and profits Revenue • +14% £225m HPBT £31m +26% Growth in Healthcare Revenue • £152m +27% Profits £35m +36% Return to growth and margin Marketing LFL • H1 H2 FY improvement in Marketing revenue growth -9% +2% -3% Strong financial position Leverage • 1.9x Total dividend increased to 2.3p Dividend • +15% 2 5 March 2019 Results for year ended 31 Dec 2018
Financial highlights 2018 2017 LFL Group Healthcare Revenue (£m) 225.0 197.0 +14% +1% +6% Headline Operating Profit (£m) 33.2 26.4 +26% +12% +13% Margin 14.8% 13.4% Headline Profit Before Tax (£m) 30.9 24.4 +26% +15% Headline Diluted EPS (pence) 7.11 5.75 +24% Net Debt (£m) 77.0 36.3 1.9x pro-forma EBITDA Headline Tax Rate 18% 21% Reduction in US tax rate 3 5 March 2019 Results for year ended 31 Dec 2018
Divisional Summary HEALTHCARE Central costs 1 & Marketing Medical Immersive Comms Total associates Revenue (£m) 82.0 34.2 35.4 73.4 - 225.0 LFL Revenue Growth (%) (3.2)% 12.9% 33.9% (5.1)% - 1.4% Headline Operating Profit (£m) 20.0 9.8 5.1 6.0 (7.7) 33.2 LFL Operating Profit Growth (%) 3.7% 19.2% 62.9% (16.1)% - 12.4% Headline Operating Margin (%) 24.4% 28.6% 14.4% 8.2% - 14.8% 1. Includes £1.4m loss on forward hedging instruments 4 5 March 2019 Results for year ended 31 Dec 2018
Revenue bridge: 2017 to 2018 +1% LFL growth £4.0m £5.0m £3.9m £1.3m £2.3m +34% -3% +13% -5% LFL growth LFL decline LFL growth LFL decline £29.8m £225.0m £3.2m £197.0m 2017 FX Acquisitions Disposals Marketing Medical Immersive Comms 2018 5 5 March 2019 Results for year ended 31 Dec 2018
HPBT bridge: 2017 to 2018 +15% LFL growth £1.4m £1.2m £1.2m £1.6m £0.5m £0.6m Variable rem. £0.5m £30.9m Interest £0.4m Associates £0.1m £5.3m Other £0.4m £2.9m £24.4m 2017 FX Acquisitions Disposals Marketing Medical Immersive Comms Central 2018 6 5 March 2019 Results for year ended 31 Dec 2018
FX impact Hedged position (75% of expected USD profits) Average rates 2019F 2018 2017 Impact of 1c movement £160k USD USD 1.31 1.38 1.24 EUR 1.15 1.14 1.15 £25k EUR -1% Margin impact in 2018 2018 2017 Movement % of revenue Impact on revenue (translational) (3.2) c. 55-60% annualised 50% USD for acquisitions (Losses) / gains on forwards (1.4) 1.1 (2.5) 35% GBP Translational impact (0.4) 7% EUR Impact on profit (1.4) 1.1 (2.9) 7 5 March 2019 Results for year ended 31 Dec 2018
Net debt bridge: Dec-17 to Dec-18 Capex (£2.4m) £15.5m Highlighted items (£1.3m) Cash on derivatives (£0.9m) Share issues re options £0.3m £6.0m £39.0m £36.3m £6.1m £77.0m £47.8m £4.3m 2017 Operating profit Working Interest & tax Dividends Acquisitions Capex & other 2018 & non-cash items capital flows & disposals 8 5 March 2019 Results for year ended 31 Dec 2018
Working Capital £m Conversion Operating profit before highlighted items 33 100% £39m 105% Non-cash items 6 18% Normal Growth (4) (13%) Normal (12)% One-off Changing customer mix Comms (4) (6)% One-off Seasonality Immersive (2) £15.5m (4)% Reversed Performance related 2017 Marketing & (2) in 2019 bonus payments Medical (12)% One-off Acquired working capital Acquisitions (4) 71% Cash from operations 23 9 5 March 2019 Results for year ended 31 Dec 2018
Cash generation • Defensive fundamentals: ➢ Healthcare biased: demand driven by fundamentals of expanding healthcare sector, not consumer led ➢ US biased: limited fallout from Brexit uncertainty • Strong cash generation ➢ 98% 2015-18 average cash conversion • Dividend well covered: 3x • Covenant headroom 1.6x vs 3.0x 2019 consensus leverage covenant limit 10 5 March 2019 Results for year ended 31 Dec 2018
Net debt At 31 December 18 At 28 February 19 Net Debt: Net Debt: £77.0m £81m Facilities: Facilities: £105m + £130m + £10m accordion £50m accordion Leverage: Leverage: 1.9x EBITDA 1 1.9x EBITDA 1 1. Pro-forma for acquisitions, net debt including deferred consideration 11 5 March 2019 Results for year ended 31 Dec 2018
Results for the year ended 31 December 2018 Divisional analysis
Marketing Lower L4L revenues but margin 2018 2017 improvements • Revenues impacted by the loss of Revenue £m 82.0 73.5 certain drug mandates due to normal course regulatory approval process What we do LFL growth (3.2)% 13.2% • As a result, H1 saw a decline in • We market pharmaceutical, OTC and revenues, but H2 saw a return to wellness brands to consumers, growth healthcare professionals and the payer Operating profit community, by: 20.0 15.5 • Margin improvement despite £m - Educating, building awareness, and driving lower like-for-like revenues retention for brands among patients and healthcare professionals • Acquisition of Giant, Navience Margin 24.4% 21.1% - Providing a digital-centric service, mirroring and AboveNation have added consumer and professional behaviour key capabilities and provided - Creating more valuable and productive access to larger, more complex long-term relationships between our clients client briefs and their customers 13 5 March 2019 Results for year ended 31 Dec 2018
Marketing Continued • Marketing revenue - half yearly sequential growth: 70 1% in H118 60 2% in H218 50 H218 2% up on H217 • 40 $m 30 20 10 0 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 2014 2015 2016 2017 2018 Core Acquisition 14 5 March 2019 Results for year ended 31 Dec 2018
Medical Strong revenue and profit growth 2018 2017 • 12.9% like-for-like revenue growth in 2018 represents the Revenue £m 34.2 30.9 third successive year of double digit revenue growth What we do • Margin improvement despite LFL growth 12.9% 17.7% • We support the planning, generation continued investment in staff and communication of evidence and new services – driven by an across medical affairs and health economics Operating profit increase in strategic 9.8 8.3 £m consultancy engagements • We provide publication, medical education and market access services for pharmaceutical and • Strong pipeline and recent new biotech clients wins gives confidence for 2019 Margin 28.6% 26.9% • We focus on insight-driven strategy underpinned by data, analytics and stakeholder engagement powered by creative and digital experiences 15 5 March 2019 Results for year ended 31 Dec 2018
Immersive Very strong revenue growth & 2018 2017 1 margin improvement • The Creative Engagement Group acquired on 1 July Revenue £m 35.4 14.9 2017 • LFL revenues (H2 vs H2) for What we do LFL growth 33.9% n/a the division up 34%; 26% on a full year basis • We engage audiences through the creation and delivery of live • Margin improvement from Operating profit experiences, film, immersive, 5.1 1.9 12.4% to 14.4% as a result of £m interactive, training and scientific focus on higher quality work content • Investment in US and internal • We work with an international Margin 14.4% 12.4% communications blue-chip client base across a capabilities range of sectors, with a particular • ROIC (2018 profits over cash strength in healthcare consideration) = 20.5% 1. H2 only 16 5 March 2019 Results for year ended 31 Dec 2018
Communications Continued focus on right- 2018 2017 sizing operations • 5.1% fall in LFL revenues as Revenue £m 73.4 77.6 planned • Profits down £1.0m but What we do include restructuring costs in LFL growth (5.1)% (6.5)% Grayling of c. £1m to • Grayling is a global integrated support improved communications network, covering Operating profit public relations and public affairs profitability in 2019 and 6.0 7.0 £m beyond • Citigate Dewe Rogerson is an international financial and corporate • Red impacted by 2017 client public relations consultancy churn, but recent wins Margin 8.2% 9.0% • Red is a strategic communications • Good performance from consultancy offering PR, digital and content expertise CDR 17 5 March 2019 Results for year ended 31 Dec 2018
Results for the year ended 31 December 2018 Strategy
Delivering our strategy Our strategy Progress Increase Healthcare and US presence Expected share of revenues in 2019 1 : Healthcare 72% • US 57% • Extend offering by adding key capabilities Acquisition of Giant, Navience and • AboveNation Potential for further small-scale M&A • Integrate multiple capabilities for clients Increased level of joint pitches within each of the Healthcare divisions Maintain balance sheet strength at 1.5x to 2.0x net debt Operating well within facility & covenant • to EBITDA limits Leverage 1.9x at 31 December 2018 • 1. Based on consensus 19 5 March 2019 Results for year ended 31 Dec 2018
Growing Healthcare and US focus Healthcare % of revenues US % of revenues 100% 100% 28% 33% 80% 80% 43% 50% 60% 60% 40% 40% 72% 67% 57% 50% 20% 20% 0% 0% 2018 2019 2018 2019 Healthcare Non-healthcare US Non-US 2019 based on analyst estimates 20 5 March 2019 Results for year ended 31 Dec 2018
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