Creating Advantage Interim Summary: On Track Strong growth from - - PowerPoint PPT Presentation

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Creating Advantage Interim Summary: On Track Strong growth from - - PowerPoint PPT Presentation

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Results for the period ended 30 June 2019 Creating Advantage Interim Summary: On Track Strong growth from Medical and Immersive divisions Medical +9% LFL Immersive +9% LFL Marketing division in line with expectations with strong

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SLIDE 1

Creating Advantage

Results for the period ended 30 June 2019

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SLIDE 2

Interim Summary: On Track

23 July 2019 Results for period ended 30 June 2019

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Medical Immersive +9% LFL +9% LFL Marketing Flat LFL Comms +1% LFL £49m enterprise value acquired Leverage Cash conversion 1.8x 100% Dividend +7%

  • Strong growth from Medical and Immersive divisions
  • Marketing division in line with expectations with strong

second half to come

  • Comms division returns to growth
  • Capabilities enhanced by acquisition of Creativ-

Ceutical and KYNE

  • Investment in capabilities to deliver second half growth
  • Strong progress in reducing net debt
  • Interim dividend increased to 0.75p
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SLIDE 3

Financial highlights

23 July 2019 Results for period ended 30 June 2019

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H119 H118 Revenue (£m) 123.5 102.2 Headline Operating Profit (£m) 14.0 11.8 Margin 11.4% 11.6% Headline Profit Before Tax (£m) 11.4 11.0 Headline Diluted EPS (pence) 2.43 2.60 Net Debt (£m)* 85.8 38.9 Headline Tax Rate 18% 20%

LFL

+21% +3% +19%

  • 17%

+3%

  • 18%
  • 6%

8% increase in weighted shares 1.8x pro-forma EBITDA Reduction in US tax rate

* Excluding IFRS 16 lease liabilities

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SLIDE 4

Divisional Summary

23 July 2019 Results for period ended 30 June 2019

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HEALTHCARE Marketing Medical Immersive Comms Central costs1 & associates Total Revenue (£m) 49.7 18.7 18.8 36.3

  • 123.5

LFL Revenue Growth (%)

  • 9%

9% 1%

  • 3%

Headline Operating Profit (£m) 7.9 3.6 1.9 3.2 (2.6) 14.0 Underlying operating margin(%) 19% 22% 14% 9%

  • 14%
  • 1. Includes £1.2m gain on forward hedging instruments
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SLIDE 5

Revenue bridge: H118 to H119

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Marketing H118 £102.2m Acquisitions

£0.3m £0.6m

Immersive

£0.0m £1.4m £1.6m

£123.5m FX H119 Disposals

£3.1m

Medical Comms

£15.6m

+3%

LFL growth

+9%

LFL growth

+1% Flat +9%

LFL growth

Results for period ended 30 June 2019 23 July 2019

LFL growth

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SLIDE 6

HPBT bridge: H118 to H119

23 July 2019 Results for period ended 30 June 2019

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FX Comms Central

£0.2m

H118

£0.2m

Disposals

£1.8m

Marketing

£0.5m

Medical

£0.5m

Immersive

£0.4m

£11.4m H119

£0.6m

£11.0m

£2.7m

Acquisitions

£2.1m £0.7m £0.7m

Investments

IFRS 16 impact =

£(0.5m)

Operating profit £1.5m Interest £(0.9m)

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SLIDE 7

FX impact

23 July 2019 Results for period ended 30 June 2019

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£175k USD

Average rates H119 H118 H219 H218 USD 1.28 1.38 1.27? 1.38 H119 H118 Movement Impact on revenue (translational) 3.1 Gains / (losses) on H1 forwards 1.0 (0.3) 1.3 Gains / (losses) on H2 forwards 0.2 (0.5) 0.7 Impact from forwards 1.2 (0.8) 2.0 Translational impact 0.7 Impact on profit 2.7

Impact of 1c movement

54% 32% USD

% of revenue

GBP 14% EUR

  • c. 55-60% annualised

for acquisitions

75% hedged for 2019

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SLIDE 8

Net debt bridge: Dec-18 to Jun-19

23 July 2019 Results for period ended 30 June 2019

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Dec-18 Cash from

  • perations

£1.4m £77.0m £12.9m £2.5m

Highlighted items

£3.8m

Interest & tax

£10.4m

Acquisitions & disposals

£3.6m

Capex Other

£85.8m

Jun-19 Minority div. (£0.7m) FX (£0.2m) FV movements (£0.5m)

100%

Cash conversion

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SLIDE 9

Net debt

23 July 2019 Results for period ended 30 June 2019

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At 30 June 2019

Net Debt:

£85.8m

Facilities:

£130m + £50m accordion

Leverage:

1.8x EBITDA1

  • 1. Pro-forma for acquisitions

41%

average H1 cash conversion 2014-18

100%

H1 cash conversion 2019

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SLIDE 10

Divisional analysis

Results for the period ended 30 June 2019

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SLIDE 11

Medical

Strong revenue growth

  • Continued strong performance,

building on client mandates won in late 2018

  • Investments in staff and

property of £0.7m including the launch of Medistrava consulting, which has already won a number of new mandates

  • Significant recent wins and

strong pipeline of new

  • pportunities expected to

support strong H2

23 July 2019 Results for period ended 30 June 2019

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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

H119 H118 Revenue £m 18.7 15.6 LFL growth 9% 16% Operating profit £m 3.6 3.6 Underlying Margin 22% 23%

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SLIDE 12

Marketing

Trading in line with expectations with strong H2 to come

  • LFL revenues flat on H118, as

expected, reflecting client shift in product delivery

  • Focus on integrating Giant and

Navience and investing in staff to enable the expanded Group to benefit from larger scale (£1.1m)

  • Increased number of new

business pitches and client wins support return to growth in H2

  • Acquisition of KYNE has

strengthened our PR offering and provided access to larger, more complex client briefs

23 July 2019 Results for period ended 30 June 2019

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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

H119 H118 Revenue £m 49.7 33.3 LFL growth

  • (9)%

Operating profit £m 7.9 7.4 Margin 19% 22%

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SLIDE 13

Immersive

Excellent H1 but H2 headwinds to come

  • Strong LFL revenue growth
  • f 9.2%
  • Investments in staff and

property of £0.7m

  • Launch of two new

agencies: Axiom Europe to extend our sales training capabilities into Europe, and Forty1 to exploit the increasing need for employee engagement

  • H2 likely to be impacted by

slow-down in spend at larger clients together with drug failures

23 July 2019 Results for period ended 30 June 2019

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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

H119 H118 Revenue £m 18.8 17.0 LFL growth 9% 11% Operating profit £m 1.9 2.3 Margin 14% 14%

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SLIDE 14

Communications

23 July 2019 Results for period ended 30 June 2019

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Return to LFL revenue growth

  • LFL revenue growth of 1%

after several years of decline, reflecting the benefits of our strategy of streamlining and rationalising our operations

  • Continued strong growth in

Grayling UK

  • Good growth in CDR, led by

an excellent performance in Asia

  • Red returned to growth after

client churn in 2017 / 2018

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

H119 H118 Revenue £m 36.3 36.3 LFL growth 1% (5)% Operating profit £m 3.2 2.7 Margin 9% 7%

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SLIDE 15

Strategy

Results for the period ended 30 June 2019

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SLIDE 16

Delivering our strategy

23 July 2019 Results for period ended 30 June 2019

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Our strategy Progress

Increase Healthcare and US presence Expected share of revenues in 2019:

  • Healthcare 72%
  • US 57%

Extend offering by adding key capabilities

  • Acquisition of Creativ Ceutical and KYNE
  • Launch of Medistrava consulting in

Medical

  • Launch of Forty1 employee engagement

brand in Immersive Integrate multiple capabilities for clients Increased level of joint pitches within each of the Healthcare divisions supporting strong H2 growth Maintain balance sheet strength at c. 1.5x EBITDA

  • Significant H1 deleveraging
  • Further progress towards our leverage

target by year end

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SLIDE 17

Growing Healthcare and US focus

23 July 2019 Results for period ended 30 June 2019

17 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 18

Capital Allocation Model with 3 core priorities

23 July 2019 Results for period ended 30 June 2019

18 0.0 21.0 85.0 26.0 2016 2017 2018 2019 1.5x 1.3x 1.9x 1.6x 2016 2017 2018 2019 *

Value accretive acquisitions

£m * Based on analyst consensus

Progressive dividend policy

pence

Conservative balance sheet

Net Debt / EBITDA

1.8 2.0 2.3 2.5 2016 2017 2018 2019 *

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SLIDE 19

H2 Outlook

23 July 2019 Results for period ended 30 June 2019

19

  • Marketing to return to positive LFL growth
  • Medical set for further good organic growth
  • Communications on track to deliver further revenue and

profit improvements

  • Immersive facing headwinds due to slowdown in client

spend

  • Positive contribution from KYNE and CC acquisitions
  • Further deleveraging towards our 1.5x target
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SLIDE 20

Appendices

Results for the period ended 30 June 2019

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SLIDE 21

Like-for-like adjustments

£m Revenue Operating Profit Headline PBT H118 adjustments Reported 102.2 11.8 11.0 Foreign exchange 3.1 1.5 1.5 Disposed operations (1.8) (0.1) (0.1) LFL 103.5 13.2 12.4 H119 adjustments Reported 123.5 14.0 11.4 Foreign exchange

  • (1.2)

(1.2) IFRS 16 impact (0.5) 0.5 Acquisitions (15.6) (1.5) (0.6) Disposed operations (1.2) 0.1 0.1 LFL 106.7 10.9 10.2

23 July 2019 Results for period ended 30 June 2019

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SLIDE 22

Highlighted items

£m H119 H118 Revaluation of deferred consideration and put options 0.7

  • Acquisition costs

(1.0) (0.1) Disposal related * (3.4) 0.6 Amortisation of acquired intangible assets (3.2) (1.1) Property consolidation (5.2)

  • Imputed interest on deferred consideration and put options

(0.3)

  • TOTAL

(12.4) (0.6)

23 July 2019 Results for period ended 30 June 2019

22 * Relates to Grayling MEA held for sale. Prior year relates to gain on contingent consideration receivable in respect

  • f the disposal of Whiteboard Advisors in H118
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SLIDE 23

Cashflow detail

£m KYNE (13.4) CC (17.1) Equity raise 15.9 Cash acquired 9.8 Cash held for sale (0.2) Deferred consideration (paid) / received (5.4) Cash outflow from acquisitions / disposals (10.4)

23 July 2019 Results for period ended 30 June 2019

23 £m Cash from operations before highlighted items 17.2 Repayment of finance lease liabilities (4.3) Operating cashflow 12.9 Operating profit before highlighted items 14.0 Finance lease interest (1.1) Operating profit include property charges 12.9 Cash conversion 100%

Operating cash conversion Cash from acquisitions / disposals

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SLIDE 24

Pro-forma EBITDA

£m Operating profit before highlighted items 35.4 Share options 1.4 Depreciation & amortisation 3.8 Non controlling interest (0.8) Pro-forma effect of acquisitions Navience 1.6 KYNE 1.7 Creativ Ceutical 3.3 Pro-forma EBITDA 46.4 Statutory Net debt 131.8 Exclude IFRS 16 lease liabilities (46.0) Adjusted Net Debt 85.8

23 July 2019 Results for period ended 30 June 2019

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1.8x leverage

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SLIDE 25

Growing Healthcare and US focus

23 July 2019 Results for period ended 30 June 2019

25 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 26

HY19 divisional revenue by geography

23 July 2019 Results for period ended 30 June 2019

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13% 5% 50% 33%

Communications

66% 28% 5%

Medical

37% 63%

Immersive

92% 8%

Marketing

4% 54% 32% 10%

Group

Rest of the World USA United Kingdom Europe

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SLIDE 27

23 July 2019 Results for period ended 30 June 2019

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HY19 divisional headline operating profit by geography

86% 15%

Marketing

47% 45% 8%

Medical

89% 11%

Immersive

16% 50% 34%

Communications

2% 62% 28% 8%

Group

Rest of the World USA United Kingdom Europe

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SLIDE 28

Deferred consideration and put/call liabilities

23 July 2019 Results for period ended 30 June 2019

28 £’m 2019 2020 2021 2022 2023 Above Nation Put option 2.9 Navience Deferred consideration 10.2 Put option 8.3 Giant Put option 4.9 KYNE Working capital acquisition 3.0 Deferred consideration 6.1 Put option 4.3 Creativ Ceutical Deferred consideration 7.6 2.0 Put option 13.3 3.0 17.8 13.0 8.3 20.5

* Huntsworth has the option to equity settle all deferred consideration and put/call liabilities

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SLIDE 29

Consolidated balance sheet

£m Jun-19 Jun-18 Dec-18

Non-current assets Goodwill & Intangibles 344.9 185.4 287.3 Other non - current assets 55.9 12.6 13.0 400.8 198.0 300.3 Current Assets Trade debtors and other receivables 94.1 81.8 82.0 Other current assets 11.2 13.1 9.5 Cash and short-term deposits 18.6 11.6 22.8 123.9 106.5 114.3 Current Liabilities Trade and other payables (86.8) (78.0) (69.4) Other current liabilities (15.2) (2.0) (2.7) Provisions (1.9) (1.1) (6.4) (104.0) (81.1) (78.5) Non-current Liabilities Bank loans and overdrafts (96.8) (49.2) (99.2) Other non current liabilities (52.4) (3.3) (8.8) Provisions (68.0) (4.6) (28.0) Trade and other payables

  • (3.7)

(4.1) (217.2) (60.8) (140.1) NET ASSETS 203.5 162.6 196.0

23 July 2019 Results for period ended 30 June 2019

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SLIDE 30

Shareholding at 8 July 2019

% share capital

  • No. voting

shares Aberforth Partners 12.1 Canaccord Genuity Wealth Management 9.0 Merian Global Investors 8.7 Fidelity International 8.7 Aviva Investors 8.3 Kames Capital 5.9 Kabouter Management 5.0 Michinoko 4.8 Miton Asset Management 3.6 BlackRock 3.4 Other 30.5 TOTAL 100.0 368,870,178

23 July 2019 Results for period ended 30 June 2019

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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