Results and Strategy FY18 RESULTS 2 2018 HIGHLIGHTS Disposal of - - PowerPoint PPT Presentation

Results and Strategy

FY18 RESULTS

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2018 HIGHLIGHTS

Disposal of the Books and Marketing Activation segments for £32m Continuing brands restructured to implement new strategy Organic revenue growth of 11%, profit up 38% Operating profit margin increase from 10% to 12% Net debt halved to £26m £85m new facility in place for next 4 years Pension surplus of £2m

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FINANCIAL SUMMARY

INCOME STATEMENT 2018 £M 2017 £M

Revenue 178.4 162.9 Operating profit* 21.2 12% 16.4 10% Profit before tax* 18.5 13.4 Adjusting items (49.6) (32.6) Statutory loss before tax (31.2) (19.2) Earnings per share* 10.10p 7.27p Full year dividend 1.95p 1.95p

Organic revenue growth of 11%

• ffset by currency

translation of 2%

PBT +38% EPS +39%

*Adjusted Results from continuing operations

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ADJUSTING ITEMS

£M

• 12.5

12.5 25 37.5 50 Contingent consideration Impairment of goodwill and intangibles Amortisation of acquired intangibles Other restructuring items* Total

32.6

• 0.4

9.9 0.2 22.9 49.6 1.7 8.7 12.1 27.1

* Includes redundancies, restructuring costs, defined benefit pension scheme charges and credits and profit on disposal of properties Figures are for continuing operations Proprietary & Confidential

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KEY:

FY18 FY17

(10)

• 10

20 30 40

Adjusted EBITDA Working Capital Tax and Interest Capex Underlying FCF Deferred Consideration Pension Payment Restructuring Costs Disposal of Properties Discontinued Operations Disposal of Subsidiary FCF

CASH FLOW

Strong underlying free cash flow generation

KEY:

INFLOW OUTFLOW TOTAL

£M

EBITDA adjusted for non-cash items Proprietary & Confidential

25.5 4.6 (6.8) (4.0) 19.3 (16.5) (6.6) (3.8) 3.2 4.2 32.4 32.2

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Leverage: 1.1x Net debt reduced by 50%

BALANCE SHEET

Net debt halved, pension moved into surplus, deferred consideration in its final year

03.08.18 £M 28.07.17 £M

Fixed Assets 10.8 26.2 Goodwill and Intangibles 116.2 151.5 Net Asset Held for Sale 5.3 – Pension 1.9 (16.0) Income Taxes 0.9 (1.3) Working Capital (3.4) 8.2 Net Debt (26.0) (54.6) Deferred Consideration (21.2) (15.9) Deferred Tax (3.1) (0.9) Net Assets 81.4 97.2

Proprietary & Confidential

Pension surplus of £1.9m Deferred consideration: FY19:£19.6m FY20:£2.0m 7

GROUP OVERVIEW

Kin + Carta has the scale to be a major midsize player in the fast growing digital transformation sector

EMPLOYEES REVENUE OPERATING PROFIT REVENUE BY CAPABILITY REVENUE BY REGION REVENUE BY SECTORS

Across eleven offices on four continents

1500+ £178M £21M

40% 40% 20%

Strategy Innovation Communication

64% 36%

Americas EMEA

17% 7% 13% 14% 22% 27%

Financial Services Retail and Distribution Industrials and Agriculture Transportation Healthcare Other Proprietary & Confidential

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AGENDA FY18 Results Where We Are The Digital Imperative Where We’re Headed Our Work Business Model and Growth Plan

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WHERE WE ARE

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+ Pure-play, digital specialist + Critical mass (c.1,500) and proven record + Complementary set of next generation skills + Great talent, great clients + Ambitious leadership team with a clear focus

STRATEGIC REVIEW FINDINGS

Conclusion: fresh brand is well placed to take advantage of a huge market opportunity, but needs a cohesive proposition and a defined growth plan

MARKET OPPORTUNITY STRENGTHS

+ Accelerate organic growth by leveraging collective capabilities + Accelerate inorganic growth by geographic and skills acquisitions + Transfer proven UK capabilities to US client base + Digital is a critical business issue today + Market is large and growing + Clients seek one-stop, deep partnerships + Existing models are failing clients + Talent prefers working for specialists

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OUR BUSINESSES

Kin + Carta applies creativity, data and technology to help the world’s largest companies invent, operate and market profitable new products and services.

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Product and Service Development Strategic Consulting 
 and Insights Communications and Commerce Incubated 
 Ventures

STRATEGY INNOVATION COMMUNICATION VENTURES

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THE DIGITAL IMPERATIVE

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THE PACE OF CHANGE WILL NEVER AGAIN BE AS SLOW AS IT IS TODAY

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DIGITAL ENGAGEMENT IS INCREASING

Digital technologies continue to change the way we work and live

*Kleiner Perkins Internet Trends Report 2018

ENGAGEMENT

Daily digital screen time (hrs)*

PAYMENTS

Digital vs. Offline Payments*

SOCIAL

Facebook’s annualized revenue per daily user*

NEW CURRENCIES

Crypto- currency trading volume over past year*

NEW CHANNELS

Machine learning word accuracy*

NEW TECHNOLOGIES

US largest public technology company R&D as a percentage of revenue*

95%

3.2 5.9

2017 2010

60%

$16 $34

Today 2015

18%

400%

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The Amazon Effect has reset customer expectations

TRANSFORMATION

Marketing to customers is more complicated

COMMUNICATION

Product and service models are colliding

INNOVATION

Digital is now a business issue

STRATEGY

CHANGE IS IMPERATIVE

Companies must re-invent their business models to remain relevant in an increasingly digital world

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DIGITAL TRANSFORMATION IS THE ANSWER

Digital transformation is a rewrite, grounded in new technologies, of a company’s market strategy, offerings and ways of working

STRATEGY + INNOVATION + COMMUNICATION SPEED TRANSFORMATION =

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THE MARKET IS HUGE AND GROWING

Every company at scale needs help in transforming their organisation to deliver on the promise that digital brings

Sources: Consultancy.UK, IDC, Markets&Markets, Gartner, HarvardBusinessReview, Altimeter, eMarketer, IDC, Statista, Technavio, Business insider, Zinnov Research & Analytics

18.5%

per year

Digital transformation expenditures are expected to continue to increase at a CAGR of 18.5% through 2024

$44Bn

SERVICES

The global digital transformation consulting market is already $44Bn, doubling in size since 2016

$200Bn TOTAL

• f F500 CEOs have begun digital

transformations, mainly focused on growth

$462Bn

CIO and CMO spending on digital transformation services is expected to rise 10% in 2018 and 2019

42%

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OUR COMPETITION

As digital transformation budgets increase, it’s unclear which service providers are best equipped to help.

Holistic Offering Difficult to Navigate Creatively Challenged Breadth without Depth Talent Attractor Challenged at Scale Strategically Challenged Depth without Breadth Customer Focused Disparate/Legacy Brands Technically Challenged Myopic Vision BIG CONSULTING AGENCY NETWORKS SPECIALISTS

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WHERE WE’RE HEADED

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THE CONNECTIVE OPERATING MODEL

The Connective attracts top talent by allowing them to work in specialist boutiques. . . while connecting them to cross-sell and deliver the transformation clients want. THE CONNECTIVE IS A GLOBAL ECOSYSTEM OF 1,500 TECHNOLOGISTS, STRATEGISTS AND CREATIVES.

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THE CONNECTIVE OPERATING MODEL

Proprietary & Confidential

The Connective attracts top talent by allowing them to work in specialist boutiques. . . while connecting them to cross-sell and deliver the transformation clients want. THE CONNECTIVE IS A GLOBAL ECOSYSTEM OF 1,500 TECHNOLOGISTS, STRATEGISTS AND CREATIVES.

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Fragmented

Holistic Offering Difficult to Navigate Breadth without Depth Creatively Challenged Talent Attractor Challenged at Scale Depth without Breadth Strategically Challenged Customer Focused Disparate/Legacy Brands Myopic Vision Technically Challenged BIG CONSULTING AGENCY NETWORKS SPECIALIST BOUTIQUES

CLIENT FOCUSED, TALENT ATTRACTOR

Kin + Carta provides the holistic digital offering clients need with the specialist “vibe” that top talent wants

Breadth and Depth Talent Attractor Highly Scalable Client Focused Easy to Navigate Strategic, Creative and Technical

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OUR WORK

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WHERE TO PLAY, HOW TO WIN

Our strategists help our clients better understand the shifts in their market whilst recognising the potential digital brings.

Research and Insights, Product and Marketing Strategy, Data Intelligence, Cognitive Decisioning & Reasoning

STRATEGY

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INNOVATION

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DEVELOP NEW OFFERINGS

We utilize emerging technologies and modern ways of working to create new digital products and services that reimagine the way our clients do business.

Mobile Product Development, Web App Development, Smart TV Development, VR/MR Development, IoT and Connected Product Development, Natural Language Experiences, R&D-as-a-Service

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GROW WITH IMPACT

We combine human creativity and machine intelligence to find new digital audiences and turn them into life-long advocates.

Paid Media, Social Media Strategy, Search Engine Marketing, PR, Web Design and Build, Multi-Channel Commerce, CRM

COMMUNICATION

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REMODEL THE WAY YOU WORK

By integrating new digital platforms and teaching the latest ways of working, we turn digital initiatives into balanced, integrated programs of organisational change.

Commerce and Content Platform Integrations, Cloud Native Platform Integrations, Digital Organisational Design, Agile/XP Transformations, Digital Governance and Operations

TRANSFORMATION

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BUSINESS MODEL AND GROWTH PLAN

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BUSINESS MODEL

Top line CAGR in line with double digit market expansion for digital transformation services Double digit operating profit margins, allowing for significant medium term investments in top line growth Cash Flow used for balance sheet strengthening, facilitating growth investments and additional shareholder returns

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Growth investments focused on opening new regions, expanding digital capabilities and developing new partnerships

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NEAR TERM FINANCIAL TARGETS

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FY19 Additional £2M investment in year one Mid-single digit revenue growth Operating margin >10% FY20 Double digit revenue growth Operating margin >12% BALANCE SHEET Managing Net Debt To EBITDA < 1X from the end of FY20 onwards

The financial targets set out above have been provided for guidance only and neither represent an expectation nor forecast of the future financial outturn of the Group

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OUR GROWTH CATALYSTS

Geographic Expansion Deepen Sector Focus Scale our Sales Function New Capabilities and Ventures

LEVERAGE THE ASSETS WE HAVE EXPAND OUR CAPABILITIES AND REACH

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(INVESTMENT £2M)

All investments should pay back in 12-18 months time

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SCALING OUR SALES FUNCTION

SALES AND MARKETING

Central Team and Cross Selling

PARTNERSHIPS

Partner Co-Marketing and Co-Selling

INDUSTRY RANKINGS

Primary Placement in Reports

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DEEPEN SECTOR FOCUS

We will focus on these key areas of strength and expand the Connective capabilities into them. In future years, we may expand this focus. STRATEGY INNOVATION COMMUNICATION

Financial Services Retail and Distribution Industrials and Agriculture Transportation Healthcare = existing strength = growth opportunities

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NEAR TERM GEOGRAPHIC EXPANSION

STRATEGY COMMUNICATION INNOVATION TRANSFORMATION STRATEGY INNOVATION

GROWTH OPPORTUNITIES EXISTING CAPABILITIES

COMMUNICATION INNOVATION STRATEGY COMMUNICATION INNOVATION TRANSFORMATION

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STRATEGY

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IMPLEMENTATION

Target size of £50M+ with accretive EBITDA valuations Targets that can accelerate growth through cross-sell

ON ACQUISITIONS

Blend of cash and equity, managing to leverage targets Retain key operating management Fully integrate into Connective pillar (Strategy, Innovation, Communication)

STRATEGY CHARACTERISTIC

Larger regional acquisitions, leading with Innovation Smaller, “tuck-in” acquisitions to support identified growth

• bjectives

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Revenue ($000s)

$500 $1,000 2019 2025

• rganic

acquisitions

2025 BHAG

Our internal Big Hairy Audacious Goal is to become a $1Bn revenue business by 2025.

To achieve our BHAG, we’ll need to grow at a 25% CAGR through a combination of organic and acquisitive growth

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The financial targets set out above have been provided for guidance only and neither represent an expectation nor forecast of the future financial outturn of the Group

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THE PACE OF CHANGE WILL NEVER AGAIN BE AS SLOW AS IT IS TODAY

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KIN + CARTA Critical mass in a large and rapidly growing market A new company with the strategy, innovation and communication capabilities to compete with the biggest players Big enough to matter with the agility to create a differentiating proposition A highly driven and energised leadership team A scalable business model with clearly defined opportunities for growth

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THANK YOU

j.schwan@kinandcarta.com brad.gray@kinandcarta.com www.kinandcarta.com