Creating Advantage 2018 Overview Record revenues and profits - - PowerPoint PPT Presentation

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Creating Advantage 2018 Overview Record revenues and profits - - PowerPoint PPT Presentation

Jan 19, 2023 318 likes •736 views

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

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SLIDE 1

Creating Advantage

Results for the year ended 31 December 2018

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SLIDE 2

2018 Overview

5 March 2019 Results for year ended 31 Dec 2018

2

Revenue

£225m +14%

HPBT

£31m +26%

Revenue

£152m +27%

Profits

£35m +36%

Marketing LFL revenue growth

H1

  • 9%

H2 +2% FY

  • 3%

Leverage

1.9x

Dividend

+15%

  • Record revenues and profits
  • Growth in Healthcare
  • Return to growth and margin

improvement in Marketing

  • Strong financial position
  • Total dividend increased to 2.3p
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SLIDE 3

Financial highlights

5 March 2019 Results for year ended 31 Dec 2018

3

2018 2017 Revenue (£m) 225.0 197.0 Headline Operating Profit (£m) 33.2 26.4 Margin 14.8% 13.4% Headline Profit Before Tax (£m) 30.9 24.4 Headline Diluted EPS (pence) 7.11 5.75 Net Debt (£m) 77.0 36.3 Headline Tax Rate 18% 21%

LFL Group Healthcare

+14% +1% +6% +26% +12% +13% +26% +15% +24% 1.9x pro-forma EBITDA Reduction in US tax rate

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SLIDE 4

Divisional Summary

5 March 2019 Results for year ended 31 Dec 2018

4

HEALTHCARE Marketing Medical Immersive Comms Central costs1 & associates Total 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

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SLIDE 5

Revenue bridge: 2017 to 2018

5

£225.0m Immersive Marketing

£1.3m

£197.0m 2017

£3.9m £2.3m £4.0m

Disposals Acquisitions

£29.8m £5.0m

FX Comms 2018

£3.2m

Medical

+1%

LFL growth

+13%

LFL growth

  • 5%

LFL decline

  • 3%

LFL decline

+34%

LFL growth

Results for year ended 31 Dec 2018 5 March 2019

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SLIDE 6

HPBT bridge: 2017 to 2018

5 March 2019 Results for year ended 31 Dec 2018

6 £0.5m

Medical Marketing 2017 £24.4m

£1.6m

Comms

£1.4m

Central £30.9m

£0.6m

2018 Disposals Acquisitions FX

£2.9m

Immersive

£1.2m £5.3m £1.2m

+15%

LFL growth

Variable rem. £0.5m Interest £0.4m Associates £0.1m Other £0.4m

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SLIDE 7

FX impact

5 March 2019 Results for year ended 31 Dec 2018

7

£160k £25k USD

Average rates 2019F 2018 2017 USD 1.31 1.38 1.24 EUR 1.15 1.14 1.15 2018 2017 Movement Impact on revenue (translational) (3.2) (Losses) / gains on forwards (1.4) 1.1 (2.5) Translational impact (0.4) Impact on profit (1.4) 1.1 (2.9)

Impact of 1c movement

EUR 50% 35% USD

% of revenue

GBP 7% EUR

  • c. 55-60% annualised

for acquisitions

Hedged position (75% of expected USD profits)

  • 1%

Margin impact in 2018

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SLIDE 8

Net debt bridge: Dec-17 to Dec-18

5 March 2019 Results for year ended 31 Dec 2018

8

2017

£36.3m £39.0m

Operating profit & non-cash items Capex & other Acquisitions & disposals

£15.5m £77.0m

Working capital flows

£6.0m

Interest & tax

£6.1m

Dividends

£47.8m £4.3m

2018

Capex (£2.4m) Highlighted items (£1.3m) Cash on derivatives (£0.9m) Share issues re options £0.3m

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SLIDE 9

Working Capital

5 March 2019 Results for year ended 31 Dec 2018

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£m Conversion

Operating profit before highlighted items 33 100% Non-cash items 6 18% Normal Growth (4) (13%) Normal Changing customer mix Comms (4) (12)% One-off Seasonality Immersive (2) (6)% One-off Performance related 2017 bonus payments Marketing & Medical (2) (4)% Reversed in 2019 Acquired working capital Acquisitions (4) (12)% One-off Cash from operations 23 71% 105% £39m £15.5m

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SLIDE 10

Cash generation

5 March 2019 Results for year ended 31 Dec 2018

10

  • 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

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SLIDE 11

Net debt

5 March 2019 Results for year ended 31 Dec 2018

11

At 31 December 18

Net Debt:

£77.0m

Facilities:

£105m + £10m accordion

Leverage:

1.9x EBITDA1

At 28 February 19

Net Debt:

£81m

Facilities:

£130m + £50m accordion

Leverage:

1.9x EBITDA1

  • 1. Pro-forma for acquisitions, net debt including deferred consideration
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SLIDE 12

Divisional analysis

Results for the year ended 31 December 2018

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SLIDE 13

Marketing

Lower L4L revenues but margin improvements

  • Revenues impacted by the loss of

certain drug mandates due to normal course regulatory approval process

  • As a result, H1 saw a decline in

revenues, but H2 saw a return to growth

  • Margin improvement despite

lower like-for-like revenues

  • Acquisition of Giant, Navience

and AboveNation have added key capabilities and provided access to larger, more complex client briefs

5 March 2019 Results for year ended 31 Dec 2018

13

What we do

  • We market pharmaceutical, OTC and

wellness brands to consumers, healthcare professionals and the payer community, by:

  • Educating, building awareness, and driving

retention for brands among patients and healthcare professionals

  • Providing a digital-centric service, mirroring

consumer and professional behaviour

  • Creating more valuable and productive

long-term relationships between our clients and their customers

2018 2017 Revenue £m 82.0 73.5 LFL growth (3.2)% 13.2% Operating profit £m 20.0 15.5 Margin 24.4% 21.1%

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SLIDE 14

Marketing

5 March 2019 Results for year ended 31 Dec 2018

14

  • Continued

sequential growth: 1% in H118 2% in H218

  • H218 2% up on H217

10 20 30 40 50 60 70 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 2014 2015 2016 2017 2018 $m Marketing revenue - half yearly Core Acquisition

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SLIDE 15

Medical

Strong revenue and profit growth

  • 12.9% like-for-like revenue

growth in 2018 represents the third successive year of double digit revenue growth

  • Margin improvement despite

continued investment in staff and new services – driven by an increase in strategic consultancy engagements

  • Strong pipeline and recent new

wins gives confidence for 2019

5 March 2019 Results for year ended 31 Dec 2018

15

What we do

  • We support the planning, generation

and communication of evidence across medical affairs and health economics

  • We provide publication, medical

education and market access services for pharmaceutical and biotech clients

  • We focus on insight-driven strategy

underpinned by data, analytics and stakeholder engagement powered by creative and digital experiences

2018 2017 Revenue £m 34.2 30.9 LFL growth 12.9% 17.7% Operating profit £m 9.8 8.3 Margin 28.6% 26.9%

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SLIDE 16

Immersive

Very strong revenue growth & margin improvement

  • The Creative Engagement

Group acquired on 1 July 2017

  • LFL revenues (H2 vs H2) for

the division up 34%; 26% on a full year basis

  • Margin improvement from

12.4% to 14.4% as a result of focus on higher quality work

  • Investment in US and internal

communications capabilities

  • ROIC (2018 profits over cash

consideration) = 20.5%

5 March 2019 Results for year ended 31 Dec 2018

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What we do

  • We engage audiences through

the creation and delivery of live experiences, film, immersive, interactive, training and scientific content

  • We work with an international

blue-chip client base across a range of sectors, with a particular strength in healthcare

2018 2017 1 Revenue £m 35.4 14.9 LFL growth 33.9% n/a Operating profit £m 5.1 1.9 Margin 14.4% 12.4%

  • 1. H2 only
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SLIDE 17

Communications

5 March 2019 Results for year ended 31 Dec 2018

17

Continued focus on right- sizing operations

  • 5.1% fall in LFL revenues as

planned

  • Profits down £1.0m but

include restructuring costs in Grayling of c. £1m to support improved profitability in 2019 and beyond

  • Red impacted by 2017 client

churn, but recent wins

  • Good performance from

CDR

What we do

  • Grayling is a global integrated

communications network, covering public relations and public affairs

  • Citigate Dewe Rogerson is an

international financial and corporate public relations consultancy

  • Red is a strategic communications

consultancy offering PR, digital and content expertise

2018 2017 Revenue £m 73.4 77.6 LFL growth (5.1)% (6.5)% Operating profit £m 6.0 7.0 Margin 8.2% 9.0%

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SLIDE 18

Strategy

Results for the year ended 31 December 2018

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SLIDE 19

Delivering our strategy

5 March 2019 Results for year ended 31 Dec 2018

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Our strategy Progress

Increase Healthcare and US presence Expected share of revenues in 20191:

  • 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 to EBITDA

  • Operating well within facility & covenant

limits

  • Leverage 1.9x at 31 December 2018

1. Based on consensus

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SLIDE 20

Growing Healthcare and US focus

5 March 2019 Results for year ended 31 Dec 2018

20 2019 based on analyst estimates 67% 72% 33% 28% 0% 20% 40% 60% 80% 100% 2018 2019 Healthcare % of revenues Healthcare Non-healthcare 50% 57% 50% 43% 0% 20% 40% 60% 80% 100% 2018 2019 US % of revenues US Non-US

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SLIDE 21

3 year progress

5 March 2019 Results for year ended 31 Dec 2018

21 1.5x 1.1x 1.9x 1.6x 4.0 5.8 7.1 8.2 16.0 24.4 30.9 36.9

5 10 15 20 25 30 35 40

1 2 3 4 5 6 7 8 9 2016 2017 2018 2019 Leverage EPS HPBT

Consensus CAGR in HPBT

32% 27% CAGR in EPS

Leverage broadly unchanged

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SLIDE 22

Marketing

5 March 2019 Results for year ended 31 Dec 2018

22

  • Better Together

➢ By leveraging our digital, creative and analytics strength in all our marketing and communications business, we are building an industry leading capability that can work together for clients.

  • Adding Value to Existing Clients

➢ By leveraging our advanced media capability and our multicultural expertise we were awarded a new remit as multicultural media AOR for one of the largest pharma marketers.

  • Globalising Client Remits

➢ By leveraging our multidisciplinary expertise and geographic reach we help clients across more markets.

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SLIDE 23

Medical

5 March 2019 Results for year ended 31 Dec 2018

23

  • Expand consultancy offering
  • Expand data and analytics offering
  • Add new capabilities in market access and health economics
  • Expand into new territories
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SLIDE 24

Immersive

5 March 2019 Results for year ended 31 Dec 2018

24

  • Broaden base of Healthcare clients
  • Expand Internal Communications offering
  • Develop further Industrial Learning
  • New verticals
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SLIDE 25

Communications

5 March 2019 Results for year ended 31 Dec 2018

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  • Improve margins
  • Grayling:

➢ Build on UK growth ➢ Multi-country clients

  • CDR:

➢ Develop life sciences capability ➢ Expand Asia footprint

  • Red:

➢ Expand into financial services

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SLIDE 26

2019 Outlook

5 March 2019 Results for year ended 31 Dec 2018

26

  • Marketing to return to positive LFL growth (H2 weighted)
  • Medical & Immersive set for further good organic growth
  • Profit improvement in Communications division
  • Potential for further small-scale M&A
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SLIDE 27

Appendices

Results for the year ended 31 December 2018

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SLIDE 28

Like-for-like adjustments

£m Revenue Operating Profit Headline PBT 2017 adjustments Reported 197.0 26.4 24.4 Foreign exchange (3.2) (1.5) (1.5) Disposed operations (1.3) 0.3 0.3 LFL 192.5 25.2 23.2 2018 adjustments Reported 225.0 33.2 30.9 Foreign exchange

  • 1.4

1.4 Acquisitions (29.8) (6.2) (5.4) Disposed operations

  • (0.1)

(0.1) LFL 195.2 28.3 26.8

5 March 2019 Results for year ended 31 Dec 2018

28

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SLIDE 29

Highlighted items

£m 2018 2017 Revaluation of deferred consideration and put options (1.8)

  • Acquisition costs

1.0 0.4 Disposal related * (0.9) (0.3) Amortisation of acquired intangible assets 3.5 1.4 Imputed interest on deferred consideration and put options 0.4

  • TOTAL

2.2 1.5

5 March 2019 Results for year ended 31 Dec 2018

29 * Relates to gain on contingent consideration receivable in respect of the disposal of Whiteboard Advisors in 2017

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SLIDE 30

Pro-forma EBITDA

£m Operating profit before highlighted items and associate profit 32.9 Share options 1.4 Depreciation & amortisation 3.6 Non controlling interest (0.4) Pro-forma effect of acquisitions AboveNation 0.3 Giant 2.1 Navience 4.5 Pro-forma EBITDA 44.4 Statutory Net debt 77.0 Guarantees 2.0 Cash-settled deferred consideration 5.3 Bank Net Debt 84.3

5 March 2019 Results for year ended 31 Dec 2018

30

1.7x leverage 1.9x leverage

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SLIDE 31

H1 / H2 working capital analysis

5 March 2019 Results for year ended 31 Dec 2018

31

H1 sees weaker cash conversion due to:

  • Billing milestones weighted to H2
  • Bonus payments

41% H1 136% H2

(10) (8) (6) (4) (2)

  • 2

4 H1 H2

Average H1/H2 working capital flows 2014-18 Average H1/H2 cash conversion 2014-18

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SLIDE 32

Growing Healthcare and US focus

5 March 2019 Results for year ended 31 Dec 2018

32 2019 based on analyst estimates 85% 85% 15% 15% 0% 20% 40% 60% 80% 100% 2018 2019 Healthcare % of profits Healthcare Non-healthcare 64% 71% 36% 29% 0% 20% 40% 60% 80% 100% 2018 2019 US % of profits US Non-US

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SLIDE 33

US healthcare expenditure

5 March 2019 Results for year ended 31 Dec 2018

33 Source: HCTadvisor 10% 33% 3% 4% 5% 20% 25% Relative contribution to US health expenditure, 2018 Prescription drugs Hospitals Home Health Dental Nursing care Physicians & clinics Other health

68%

Projected growth in prescription drugs, 2018-26

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SLIDE 34

FY18 divisional revenue by geography

5 March 2019 Results for year ended 31 Dec 2018

34

14% 6% 48% 32%

Communications

71% 29%

Medical

26% 74%

Immersive

90% 10%

Marketing

5% 50% 35% 10%

Group

Rest of the World USA United Kingdom Europe

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SLIDE 35

5 March 2019 Results for year ended 31 Dec 2018

35

FY18 divisional headline operating profit by geography

88% 12%

Marketing

74% 26%

Medical

34% 66%

Immersive

14%

  • 9%

57% 38%

Communications

2% 64% 28% 6%

Group

Rest of the World USA United Kingdom Europe

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SLIDE 36

Deferred consideration and put/call liabilities

5 March 2019 Results for year ended 31 Dec 2018

36 £’m 2019 2020 2021 2022 2023 Above Nation Deferred consideration 5.3 Put option 0.8 * Navience Deferred consideration 11.8 * Put option 9.9 * Giant Put option 5.7 * 5.3 11.8 5.7 9.9 0.8

* Option to equity settle

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SLIDE 37

Basic and diluted shares

5 March 2019 Results for year ended 31 Dec 2018

37 million 2018 2019 2020 2021 Issued share capital (ex-shares in EBT) Opening 328.0 349.0 350.1 351.2 Options exercised 3.3

  • Scrip dividend

1.1 1.1 1.1 1.1 Share issues 16.6

  • Closing

349.0 350.1 351.2 352.3 Weighting on options exercised (2.2)

  • Weighting on scrip dividend

(0.6) (0.6) (0.6) (0.6) Weighting on share issues (12.5)

  • Weighted average shares - basic

333.7 349.5 350.6 351.7 Dilutive impact of options 12.2 12.3 13.9 15.5 Potentially dilutive impact of deferred consideration 4.1 11.8 11.8 11.8 Weighted average shares – diluted 350.0 373.6 376.3 379.0

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SLIDE 38

IFRS 16 impact

38

2019 Budget Presentation

2019 2020 2021 2022 2023 2024 2025 Charge £m Current IFRS 16

Estimated P&L impact in 2019

  • c. £0.8m

£7.7m

Rental expense

£6.8m + £1.7m

Dep’n Interest

+ £7.7m

  • c. 2.4x

Estimated statutory leverage under IFRS 16 EBITDA Net debt

+ £42m

Bank / covenant leverage unaffected

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SLIDE 39

Consolidated balance sheet

£m Dec-18 Dec-17

Non-current assets Goodwill & Intangibles 287.3 181.2 Other non - current assets 13.0 12.8 300.3 194.0 Current Assets Trade debtors and other receivables 82.0 62.5 Other current assets 9.5 9.3 Cash and short-term deposits 22.8 10.1 114.3 81.9 Current Liabilities Trade and other payables (69.4) (67.6) Other current liabilities (2.7) (2.0) Provisions (6.4) (0.6) (78.5) (70.2) Non-current Liabilities Bank loans and overdrafts (99.2) (45.7) Other non current liabilities (8.8) (2.8) Provisions (28.0) (1.3) Trade and other payables (4.1) (3.0) (140.1) (52.8) NET ASSETS 196.0 157.4

5 March 2019 Results for year ended 31 Dec 2018

39

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SLIDE 40

Shareholding at 11 February 2019

% share capital

  • No. voting

shares Aberforth Partners 12.3 Canaccord Genuity Wealth Management 9.2 Aviva Investors 8.9 Merian Global Investors 8.6 Kames Capital 6.3 Kabouter Management 6.0 Fidelity International 5.3 Michinoko 5.0 BlackRock 4.1 Miton Asset Management 3.6 Other 30.7 TOTAL 100.0 349,557,070

5 March 2019 Results for year ended 31 Dec 2018

40

The shareholding figures and percentages in the table above include shares where the holder manages those shares on behalf of a third party (i.e. managed holdings) as well as shares beneficially owned indirectly or directly by the holder

117k

Median daily volume in H218