Hibu Group Investor Presentation 15 May 2019
Disclaimer This presentation is for information purposes only and does not constitute a prospectus or any offer to sell or the solicitation of an offer to buy any security in the United States of America, the United Kingdom or in any other jurisdiction. Securities may not be offered, sold or transferred within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act of 1933, as amended. The information contained in this presentation does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2018 have been filed with the Registrar of Companies. The auditor has reported on those accounts and its report was unqualified and did not contain a statement under Section 498(2) or 498(3) of the Companies Act 2006. Statutory accounts for the year ended 31 March 2019 will be filed with the Registrar of Companies. The auditor has not yet reported on those accounts but is expected to do so prior to filing. This presentation may include forward-looking statements within the meaning of the securities laws of certain applicable jurisdictions. These forward-looking statements include, but are not limited to, all statements other than statements of historical facts, including, without limitation, those regarding our intentions, beliefs or current expectations concerning, among other things, our future financial conditions and performance, results of operations and liquidity, our strategy, plans, objectives, prospects, growth, goals and targets, future developments in the markets in which we participate or are seeking to participate, and anticipated regulatory changes in the industry in which we operate. These forward-looking statements can be identified by the use of forward-looking terminology, including, but not limited to, terms such as “aim”, “anticipate”, “assume”, “believe”, “continue”, “could”, “estimate”, “expect”, “forecast”, “guidance”, “intend”, “may”, “outlook”, “plan”, “predict”, “project”, “should”, “will” or “would” or, in each case, their negative, or other variations or comparable terminology. By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and are based on numerous assumptions. Our actual financial condition, results of operations and cash flows, and the development of the industry in which we operate, may differ materially from (and be more negative than) those made in, or suggested by, the forward-looking statements contained in this presentation. In addition, even if our financial condition, results of operations and cash flows, and the development of the industry in which we operate, are consistent with the forward-looking statements contained in this presentation, those results or developments may not be indicative of results or developments in subsequent periods. We undertake no obligation publicly to update or revise any forward-looking statements, except as may be required by law. 2
Agenda • Hibu US • Yell UK • Group Financials • Strategic Outlook 3
Hibu US
US FY19 Business commentary • Continuing transition to a digital business, including P2D program and digital operating model • Digital marketing services now 60% of revenues • Modest digital revenue growth, although below budget • Continuing shift to higher value customers taking multiple products • Digital retention remains challenging • US separate from UK and Group Financial commentary • Digital marketing revenue in Q4 was $2.0m higher than the previous quarter benefiting from an increase in search and display revenue. The full year finished $2.0m ahead of previous forecast, up 0.7% on the prior year. • Print and digital directories revenues were flat versus Q3, and the full year finished $0.8m ahead of previous forecast. • EBITDA in Q4 was $7.7m up on Q3 and the full year finished $8.1m ahead of previous forecast driven by $2.8m higher revenue and an additional $3.1m of indirect cost savings. • Operating cash flow in Q4 was, as anticipated, $23.2m lower than Q3, due to the timing of annual payments, a number of which fall in Q4, and a strong collections performance in Q3. The full year finished $3.5m ahead previous forecast. 5
US Market Overview SMB DIFM Digital Marketing Services ($ Billions) • $30bn ‘Do It For Me’ market growing at c. 7% • Hibu is one of the largest $39 service providers with 1% share • Highly competitive and $30 fragmented market dominated by small service providers 2019E 2023E Includes online advertising, display, search, social, video and email, website design services, reputation management services and listings management services. Source: Thrive Analytics SMB surveys; Hibu estimates 6
Digital Marketing Made Easy • 85% of SMBs prefer working with one marketing provider* • Most businesses lack the time, knowledge and expertise needed to manage their digital marketing • Hibu offers the ‘one stop shop’ to be successful at digital marketing *Thrive Analytics Local Pulse Report, January 2017 7
Technology and Data Evolution From To Efficient AI assisted Manual error prone and Processes automated processes inefficient processes Cyber Proactive approach with Reactive approach with Security advanced tooling limited capability Legacy data warehouses, Modern Data Lake and Data and MI fragmented data Power BI tools High cost in-house Efficient, modern and Hosting hosting leading cloud services Customer Email only – dashboard Email, text & comprehensive Reporting siloed by product dashboard, Mobile app development Internally developed with Integrated CPQ Platform, New sales Tools limited flexibility commissions & reporting platform 8
US FY20 Priorities Priorities • Optimize account management and service/fulfillment responsibilities as sales becomes predominately digital supporting stronger retention & increase (R&I) • Drive customer acquisition to targeted segments generating higher AOV and lower churn • Implement new sales tools and tech to further improve sales productivity • Consolidate customer support roles and further automate customer onboarding and service functions for improved customer experience and back office efficiency • Add adjacent products/services supporting existing product retention, higher margins & differentiation 9
Yell UK
UK FY19 Business commentary • Transition to fully digital business now complete; last print book delivered January • Revenue challenges, especially in Q3 and Q4; operational actions already underway to address this • Yell.com strengthened: underlying traffic stabilised at around 10 million monthly visits; partners adding additional c. 25m 1 monthly usage; strong growth in reviews; messaging capability being rolled out • Pension deficit at April 2018 covered by subsequent contributions, no further regular contributions required before the next valuation expected in 2021 • Operations and capital structure separate from US and Group • Raised £225 million bond May 2018 Financial commentary • Digital revenue in Q4 was £3m lower than Q3 for a variety of reasons largely relating to the final transition from print to digital. These include the roll-off of some Yell.com spend from customers transitioned a year earlier from print to digital; the loss of certain national digital customers with the end of print; the loss of some high revenue (but low margin) search campaigns; the short term impact of sales force reorganisation; and headcount being below target • Digital EBITDA margins held up well at 34% with lower costs offsetting the revenue decline • Trading operating cash flow in Q4 was £4m lower than Q3 due to the timing of payments 1. Searches for businesses via Yell’s content syndication partners, where Yell data was used in the search results provided. Source: Syndicated partner stats, January to March 2019. 11
UK Market Overview SME DIFM Digital Marketing Services (£ Billions) • £2.6bn market growing at c. 8% (although management view is £3.7 this may be softening) • Yell is number one provider of £2.6 managed digital marketing services with c. 7% share • Fragmented market dominated by small service providers 2018E 2022E Source: ONS, PwC E&M outlook, PwC merchant survey, Management Information, PwC Analysis 12
Digital Marketing Made Easy • Businesses lack the time, knowledge and resources to Meas asur urement nt Prese sence ce manage their digital marketing Tracking, Measuring & Strong & Synchronized adapting via Y4B App • Yell offers the ‘one stop shop’ to be successful at digital marketing • Compelling market proposition – broad range, Perform ormance ce Conne nnect local service and leading Drive qualified traffic & Maintain & Update your re-marketing to existing technology customers business info • Partnering with the leading providers in the industry Reput utat ation Manage reviews and distribute dynamic relevant content 13
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