In Interim Results to 30 Ju June 2018 Alan Rommel - Chief Executive Officer Roger Antony - Group Finance Director September 2018 DRIVING CHANGE PEOPLE LED TECHNOLOGY ENABLED
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Highlights Encouraging Growth in Higher Margin Consultancy Services • PCS revenue up 31%, now 35% of Group contribution • Profit before tax up 25% to £0.85m Financial • Increased operating margin to 2.4% with investment Align, Grow and Invest • Demonstrable synergies with increase in intra- company revenues (£3.5m vs £1.7m H1 2017) Operational • Major frameworks secured • Exit from final legacy non-core business, Inition Refresh the Consultancy proposition • Appointment of Data Consultancy MD and marketing Strategic expertise • Client centric proposition combining analytics expertise with ability to scale consultancy at pace DRIVING CHANGE PEOPLE LED TECHNOLOGY ENABLED 3
Fi Financial Review DRIVING CHANGE PEOPLE LED TECHNOLOGY ENABLED 4
Key Financial Highlights H1 2018 Consultancy Services’ growth drives Group PBT improvement Operating Profit Profit before tax Consultancy (from Continuing (from Continuing revenues Operations) Operations) up 31% up 12% up 25% £0.85m £5.1m £1.0m (H1 17: £0.68m) (H1 17: £3.9m) (H1 17: £0.9m) DRIVING CHANGE PEOPLE LED TECHNOLOGY ENABLED 5
Divisional Results Further progress in rebalancing the Group Parity Consultancy Services (“PCS”) Consultancy Services H1 18 H1 17 • £000 £000 Revenue up 31% - growth from “Outcome Managed Service” contracts Revenues 5,142 3,927 • Investment and use of contractors Divisional Contribution 618 546 provide opportunity to increase the margin Divisional Contribution Margin 12.0% 13.9% Parity Professionals Professionals H1 18 H1 17 • Average contractors: 953 (H1 17: 962) £000 £000 recovered from IR35 impact in 2017 Revenues 41,573 40,713 • Permanent fees up 16%: £366k (H1 17: £315k) Divisional Contribution 1,136 1,132 • Divisional Contribution Margin 2.7% 2.8% Measured investment in sales headcount Divisional Contribution Mix Group • Growth in Consultancy Services further enhances divisional contribution mix DRIVING CHANGE PEOPLE LED TECHNOLOGY ENABLED 6
Continuing Group Income Statement Focussed strategy increasing Group profitability H1 H1 18 18 H1 H1 17 17 % £000 £000 £000 £000 Revenue * 43,220 42,915 +1% • Central costs – reduced despite Divisional contribution 1,754 1,678 additional compliance fees, with strong cost controls maintained Central Costs & depreciation (728) (759) Operating Profit 1,026 919 +12% Finance costs net of income • Finance costs – reduction due to (179) (235) improvement in net debt H1 18 on Profit before tax 847 684 +25% H1 17 Tax charge (88) (56) Profit from continuing 759 628 +21% operations • Tax charge – effective tax rate 10% (H1 17: 8%) * excludes inter-segment revenues £3.5m (H1 17: £1.7m) DRIVING CHANGE PEOPLE LED TECHNOLOGY ENABLED 7
Summarised Balance Sheet Improved financial position Significant movements: Jun Jun 18 18 Dec c 17 17 £000 £000 £000 £000 • Working capital – increase predominately Intangible assets 4,733 4,821 due to increase in contractor volumes Tangible assets 61 78 during H1. • Debtors days - remain at an excellent Deferred tax 810 919 level at 30 June: 20 (31.12.17: 18 days, Working capital 4,936 3,666 excl. Inition). • Pension deficit – increase in discount rate DB pension liability (902) (1,059) reduces IAS 19 deficit to below £1m. Net debt (1,905) (1,632) • Net debt – 0.8 x annualised EBITDA Assets held for sale - 396 • Assets held for sale – Inition - final legacy of previous strategy – disposal in April 18. Net assets 7,733 7,189 DRIVING CHANGE PEOPLE LED TECHNOLOGY ENABLED 8
Cash Flow Bridge Small increase in net debt due to working capital movement DRIVING CHANGE PEOPLE LED TECHNOLOGY ENABLED 9
Revenues and Frameworks • High level of repeat business • 38 new clients across the business, 23 in the Private Sector DRIVING CHANGE PEOPLE LED TECHNOLOGY ENABLED 10
Operating Review DRIVING CHANGE PEOPLE LED TECHNOLOGY ENABLED
Parity Consultancy Services (“PCS”) Helping clients to make the best use of information to drive advantage • Deliver data analysis to achieve business goals • Guide the development of data strategy, and optimise systems architecture • Deliver data applications for clients to access data using our internal capability and the best available talent in the market Improves Revenues Engagement Group Up margins 31% Trust DRIVING CHANGE PEOPLE LED TECHNOLOGY ENABLED 12
Parity Professionals (“PP”) Helping clients recruit professionals to support IT and business change programmes • Deep knowledge of skill verticals • Detailed understanding of industry sectors • Passion and commitment through unrivalled relationships and exceptional service Contract Market Perm Placements Intelligence Fees up up 9.5% 16% Scale DRIVING CHANGE PEOPLE LED TECHNOLOGY ENABLED 13
Our Observations LARGE SYSTEMS SLOW TO CHANGE USE OF AI DATA ATTRACTING INSIGHTS DATA PRIVACY AN GROWING LIMITED BY STORAGE ENDURING INTEREST USER COSTS CONCERN “WAIT & EDUCATION CONTINUE SEE” TO FALL DATA APPROACH INTEGRITY A TO CONTINUING REAL ISSUE NETWORK BLOCKCHAIN IT SKILLS CAPACITY A SHORTAGES CONSTRAINT INCREASING ON DATA STRUGGLE MANAGEMENT FOR SINGLE ‘TRUTH’ DRIVING CHANGE PEOPLE LED TECHNOLOGY ENABLED 14
Strategic Focus • Blending the understanding of analytics and technology with Service • Ability to deploy people with best skills available • People led, free from lock-in to exclusive technologies • Strong focus on relationships, building higher margins Focus and repeat revenues • Focused on profitable growth in every part of the business • Controlled central costs Management • Creating an operation that is responsive to the evolving data market and the need for flexible talent DRIVING CHANGE PEOPLE LED TECHNOLOGY ENABLED 15
Outlook and Summary • Strengthened data expertise and marketing capability Structure • Strong and stable platform for growth with flexible access to world-class skills • Invest to move up the value chain with consultancy supporting group margin improvement Strategy • Increase penetration and brand awareness in niche recruitment markets DRIVING CHANGE PEOPLE LED TECHNOLOGY ENABLED 16
Outlook and Summary • Short-term client-side delay on one large contract but rest of the Group performing in line with expectations Current Trading • Expect a stronger second half, in line with traditional seasonality and expectations for the year as a whole • Growth in both businesses, targeting PCS growth to 50% of group contribution over time to improve Confidence group profitability, leveraging additional revenues and ensuring scalability for consistent growth DRIVING CHANGE PEOPLE LED TECHNOLOGY ENABLED 17
Appendix DRIVING CHANGE PEOPLE LED TECHNOLOGY ENABLED 18
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