HALF YEAR RESULTS 26 WEEKS ENDED 29 JANUARY 2016 Matt Armitage - - PowerPoint PPT Presentation

HALF YEAR RESULTS

26 WEEKS ENDED 29 JANUARY 2016

Matt Armitage Brad Gray CEO CFO

1 2 3 4

Overview

AGENDA

2

2016 Half Year Results Strategy Update Summary & Outlook

OVERVIEW

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Financial ancial Highl ghlights ights

Group reve venue* (£m)

+6%

2015 Group profit fit befo fore re tax* (£m)

+5 +5%

Basic sic earnin rnings s per share re* *

+1% 1%

2016 2015 2016 2015 2016 2015 2016

175.0 185.7 16.1 15.4 9.64p 9.70p 2.25p 2.35p

Another strong financial performance for the half year - underlying profit before tax up 5% to £16.1m on revenue of £185.7m Performance reflects further growth of the Strategic Marketing segment which:

• Contributed 56% of Group underlying operating profit
• Delivered underlying revenue growth of 37%

Good progress in the half year across three growth priorities:

• Further increase in collaboration with over 130 clients using the services of more than
• ne Group business
• Continued international growth – 40% of Strategic Marketing revenue now generated

from international client work

• Two additional Strategic Marketing acquisitions in the half year – FSP and TAB

Marketing Activation and Books segments support Group collaboration and continue to provide profit and cash for further growth Interim dividend increase of 4%

Inte teri rim divid vidend per share re

+4%

* Underlying

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2016 RESULTS

26 WEEKS ENDED 29 JANUARY 2016

Brad Gray CFO

FINANCIAL SUMMARY

5

Incom

• me Statemen

ement

2016 16 £m £m 2015** £m Revenue* 185. 5.7 175.0 Gross Profit* %

60.0 .0 32%

58.0

33%

Operating Profit* %

17.4 .4 9% 9%

16.6

9%

Profit before tax* 16. 6.1 15.4 Non-underlying items (19. 9.0) 0) (13.1) Reported (loss)/profit before tax (2. 2.8) 8) 2.3 Earnings per share* 9.70p 70p 9.64p Interim dividend 2.35p 35p 2.25p

* Underlying ** Restated

 6% increase  5% increase  4% increase  1% increase

14.9 1.7 1.6 0.8 19.0 12.1 (0.4) 0.7 0.7 13.1

• 5.0

0.0 5.0 10.0 15.0 20.0 Acquisition costs Loss/(profit) on disposal of properties Restructuring costs Pension scheme Total HY16 HY15

NON-UNDERLYING ITEMS

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£m

Strat ategic egic Market rketing ing

2016 16 2015** Revenue* £69. 9.4m 4m £50.7m Operating Profit* £9. 9.7m 7m £7.1m Operating Margin* 14% 14% 14%

Mar arketi keting ng Activation vation

2016 16 2015** Revenue* £80. 0.2m 2m £88.1m Operating Profit* £4. 4.0m 0m £5.0m Operating Margin* 5% 5% 6%

Book

• ks

2016 16 2015** Revenue* £36. 6.1m 1m £36.2m Operating Profit* £3. 3.7m 7m £4.5m Operating Margin* 10% 10% 12%

SEGMENTAL SUMMARY

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*Underlying ** Restated

Strategic Marketing represents 56% of the Group’s Operating Profit Margin erosion as customer contracts are renewed – mitigated by restructuring and procurement savings Additional costs being carried in anticipation of the second tranche of the PRH contract

ACQUISITION OF FSP (August 2015)

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ACQUISITION OF TAB (January 2016)

Specialist retail property consultancy Consideration of £2.2m split 70% cash and 30% shares Share element satisfied by an issue from treasury Shares subject to lock-in Mobile focussed app development consultancy Initial consideration of £27.2 million for the year ending 30 April 2015 Further consideration of up to £27.8 million based on incremental profit performance to April 2018 Consideration split 75% cash, 25% St Ives equity Subject to lock-in and claw-back

BALANCE SHEET

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29. 9.01. 01.16 £m £m 31.07.15 £m Fixed assets 87. 7.8 94.3 Goodwill 156. 6.2 137.5 Working capital 9.4 2.8 Income taxes (0. 0.9) 9) (0.3) Net debt (82. 2.1) 1) (62.8) Deferred consideration (13. 3.1) 1) (8.3) Deferred tax (3. 3.3) 3) (2.7) Pension (21. 1.1) 1) (27.6) Net Asset ets 132. 2.9 132.9

LIQUIDITY

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29. 9.01. 01.16 £m £m 31.07.15 £m Net debt 82. 2.1 62.8 EBITDA* (rolling 12 months) 44. 4.1 43.4 Net debt / EBITDA* 1.9x 9x 1.4x Pens nsio ion Assets Liabilities 303. 3.3 (324 24.4) 311.0 (338.6) Deficit 21. 1.1 27.6 Interest cover* 13. 3.3x 3x 14.8x Financial gearing 61. 1.8% 8% 47.3%

* Underlying

DEFERRED CONSIDERATION

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Cash £m £m Share ares £m £m Total £m £m FY16 Second Half 6.6 1.6 8.2 FY17 12.7 3.2 15.9 FY18 3.7 1.9 5.6 FY19 2.0

• 2.0

Total 25. 5.0 6.7 31. 1.7

Includes Realise, Solstice & TAB

22.1 7.4 (9.9) 1.4 4.3 4.1 4.9 18.2 0.9

(20) (10)

• 10

20 30

• Cont. EBITDA

after non cash items Pension Wkg capital Tax & interest Net Capex Underlying FCF Acquisitions Exceptional items & disposal of empty properties FCF

£m

CASH FLOW

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Key: Inflow Outflow Total

EBITDA* after non cash items Capex

* Underlying

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STRATEGY UPDATE

Matt Armitage CEO

REPORTING SEGMENTS

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BOOKS 22% STRATEGIC MARKETING 56% MARKETING ACTIVATION 23%

Data

Data & CRM solutions Direct response & data marketing

11%* %* £19. 9.9m 9m rev even enue ue

Digital

Digital marketing & commerce Digital marketing Search & digital marketing Mobile & app development consultancy (US) Mobile & app development consultancy (UK)

17%* %* £32. 2.2m 2m rev even enue ue

Insight

Consumer insight & market research Retail & consumer markets consultancy Retail & property consultancy Healthcare strategic consultancy & communications

9%* £17. 7.3m 3m rev even enue ue

Total

37% 37%* £69. 9.4m 4m reven evenue ue 37% % grow rowth

STRATEGIC MARKETING

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* % of total Group underlying revenue

STRATEGIC MARKETING

Data – Occam & Respon

ponse e One

• Strong growth in half year
• Investment in Amaze One, My Bench and Accelero
• Enhanced analytics and digital offering

Digital tal – Amaz

aze, e, Realis lise, e, Brande anded3 d3, Sols lstic ice and nd TAB

• Robust organic growth due to continued expenditure in digital and technology
• Solstice and TAB further broaden our digital and mobile capabilities – over 800 digital practitioners globally
• Significant number of international client wins in the half year – Emirates, Travelex, HP

Insight ight – Inc

ncit ite, Pragm agma, Hive and d FSP

• Growth driven by international expansion – further offices opened in New York (Hive) and San Francisco (Incite)
• All businesses delivering an increasing number of international projects for high profile clients
• Pragma and FSP working closely to provide a broader range of strategic services and have already worked on a

number of projects together

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20% % grow rowth 78% % grow rowth 7% grow

• wth

• Revenues in line with the prior period
• Penguin Random House contract now generating additional

volumes, although impacting margins

• New 3 year agreements with Oneworld Publications,

Cambridge University Press and Oxford University Press

Exhibitions and events

43%* £80.2m .2m revenue nue (9%) decline ne

Point of sale & retail communications Print management & outsourcing Field marketing services

MARKETING ACTIVATION

• Challenging conditions due to on-going pressures within the

UK grocery retail sector

• Continuing to diversify the client portfolio to reduce exposure
• Many clients now using multiple services across our Marketing

Activation businesses

• Focus on protecting margins through efficiencies and cost

reductions and differentiating our offering through targeted investment in new service lines

Book production services

20%* £36.1m .1m revenue nue in in line e with PY

BOOKS

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* % of total Group underlying revenue

BUSINESS MODEL

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St Ives offers autonomy to its Group businesses and supports collaboration between them to accelerate growth

INTERNATIONAL MARKETING SERVICES GROUP MADE UP OF DYNAMIC MARKET LEADING BUSINESSES St Ives: Provides investment to accelerate growth Supports and facilitates collaboration Offers autonomy Group Businesses: Operate as individual brands Offer complementary services Share common attributes – culture, ambition, specialism

SHARED ATTRIBUTES

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SPECIALISM CULTURE AMBITION

STRATEGY FOR GROWTH

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Our strategy for growth is centred around three key priorities

INTERNATIONALISATION COLLABORATION ACQUISITION

STRATEGY IN ACTION - INTERNATIONALISATION

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Expanding international reach and headcount in line with client demand Over 40% of Strategic Marketing revenue now comes from international client work (30% in 2015) Eight Strategic Marketing businesses now service clients on an international basis Offices opened in San Francisco and Dubai, in addition to existing offices in New York, Chicago, Singapore and Shanghai

40%

NEW CLIENT WIN: EMIRATES – GLOBAL DIGITAL PARTNER

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Amaze has been appointed by Emirates, as its global digital partner to assist in fulfilling its ambitions in the digital domain.

Amaze’s initial engagement was to work with Emirates Airline and sister company dnata to deliver enterprise architecture consultancy and implementation services across its web platform.

The objective is to continue to enhance the

• rganisation’s ability to deliver customer service

excellence across its digital platforms, as part of its broader omni-channel strategy.

The partnership marks the first of its scale for Amaze in the Middle East.

STRATEGY IN ACTION - COLLABORATION

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Over 130 clients currently working with more than one Group business

ACQUISITION CRITERIA

We have a strict set of criteria to ensure successful transactions

COMMON ATTRIBUTES COMPLEMENTARY BUSINESSES STRUCTURE: CASH/EQUITY SCALE AND CREDIBILITY FIREPOWER: £125M REVOLVING CREDIT FACILITY STRICT FINANCIAL CRITERIA

FOLLOWING ACQUISITION WE HAVE A PROVEN AND WELL PRACTISED INTEGRATION MODEL

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STRATEGY IN ACTION - ACQUISITION

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The App Business (TAB)

• Mobile focussed app development consultancy
• Supports the continued re-positioning of the Group via the growth of our Strategic Marketing segment
• Coupled with Solstice, creates a leading, global native mobile consultancy
• Complementary digital and technology offering to our existing UK digital businesses
• Brings product development and engineering skills to work alongside existing communications expertise
• Extends our blue chip client base and provides significant collaboration opportunities
• Expected to be earnings enhancing in the current Financial Year

CASE STUDY: MET OFFICE – WEATHER CLOUD

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The Met Office - the UK's national weather service - appointed The App Business to overhaul their existing mobile offering with a brand new product, built from the ground up and ready for an initial release in just 14 weeks. Underpinning the app is a Cloud-based middleware fully engineered by The App Business. This smart software layer provides a purpose-built platform that lays the foundation for the future of the Met Office's services,

• ptimising complex weather and scientific data for mobile

at scale - across both iOS and Android. This enables the Met Office to provide services wherever the public need them - to smartphones today, and into cars, homes and wearables tomorrow.

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SUMMARY & OUTLOOK

Matt Armitage CEO

SUMMARY OF HIGHLIGHTS

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• Another strong set of results, reflecting significant progress in our Strategic Marketing segment
• Collaboration across the Group continues to gain traction
• Further scope to expand our Strategic Marketing activities organically and through acquisition
• Continued investment in our growing international operations and client offerings
• Marketing Activation and Books remain profitable and cash generative despite challenging conditions
• Group well positioned to make further strategic and financial progress

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THANK YOU

marketing@st-ives.co.uk Website: st-ives.co.uk Twitter: @StIvesGroup