Results and Strategy
FY18 RESULTS � 2
2018 HIGHLIGHTS Disposal of the Books and Marketing Activation segments for £32m Continuing brands restructured to implement new strategy Organic revenue growth of 11%, pro fi t up 38% Operating pro fi t margin increase from 10% to 12% Net debt halved to £26m £85m new facility in place for next 4 years Pension surplus of £2m 3 Proprietary & Confidential
FINANCIAL SUMMARY 2018 2017 INCOME STATEMENT £M £M Revenue 178.4 162.9 21.2 16.4 Organic revenue Operating profit* growth of 11% 12% 10% offset by currency translation of 2% Profit before tax* 18.5 13.4 Adjusting items (49.6) (32.6) Statutory loss before tax (31.2) (19.2) PBT +38% EPS +39% Earnings per share* 10.10p 7.27p Full year dividend 1.95p 1.95p *Adjusted Results from continuing operations 4 Proprietary & Confidential
ADJUSTING ITEMS £M 49.6 50 KEY: 37.5 32.6 FY18 27.1 25 22.9 FY17 12.1 12.5 9.9 8.7 1.7 0.2 0 -0.4 -12.5 Contingent Impairment of goodwill Amortisation of Other restructuring Total consideration and intangibles acquired intangibles items* * Includes redundancies, restructuring costs, defined benefit pension scheme charges and credits and profit on disposal of properties Figures are for continuing operations 5 Proprietary & Confidential
CASH FLOW Strong underlying free cash fl ow generation £M 40 32.4 32.2 4.6 (6.8) KEY: 30 25.5 (4.0) INFLOW 19.3 (16.5) 20 OUTFLOW TOTAL 10 - (6.6) 4.2 (3.8) 3.2 (10) Adjusted Working Tax and Capex Underlying Deferred Pension Restructuring Disposal of Discontinued Disposal of FCF EBITDA Capital Interest FCF Consideration Payment Costs Properties Operations Subsidiary EBITDA adjusted for non-cash items 6 Proprietary & Confidential
BALANCE SHEET Net debt halved, pension moved into surplus, deferred consideration in its fi nal year 03.08.18 28.07.17 Leverage: 1.1x £M £M Net debt reduced by Fixed Assets 10.8 26.2 50% Goodwill and Intangibles 116.2 151.5 Net Asset Held for Sale 5.3 – Pension surplus of Pension 1.9 (16.0) £1.9m Income Taxes 0.9 (1.3) Working Capital (3.4) 8.2 Deferred Net Debt (26.0) (54.6) consideration: FY19:£19.6m Deferred Consideration (21.2) (15.9) FY20:£2.0m Deferred Tax (3.1) (0.9) Net Assets 81.4 97.2 7 Proprietary & Confidential
GROUP OVERVIEW Kin + Carta has the scale to be a major midsize player in the fast growing digital transformation sector REVENUE £178M REVENUE BY REVENUE BY REVENUE BY CAPABILITY REGION SECTORS OPERATING PROFIT 17% 20% 27% £21M 36% 40% 7% 13% 64% 22% 40% 14% EMPLOYEES 1500+ Americas Financial Services EMEA Retail and Distribution Strategy Industrials and Agriculture Innovation Across eleven offices on four continents Transportation Communication Healthcare Other 8 Proprietary & Confidential
AGENDA FY18 Results Where We Are The Digital Imperative Where We’re Headed Our Work Business Model and Growth Plan 9
WHERE WE ARE 10
STRATEGIC REVIEW FINDINGS Conclusion: fresh brand is well placed to take advantage of a huge market opportunity, but needs a cohesive proposition and a de fi ned growth plan MARKET STRENGTHS OPPORTUNITY + Pure-play, digital specialist + Digital is a critical business issue today + Accelerate organic growth by + Critical mass (c.1,500) and proven record + Market is large and growing leveraging collective capabilities + Complementary set of next generation skills + Clients seek one-stop, deep partnerships + Accelerate inorganic growth by + Great talent, great clients + Existing models are failing clients geographic and skills acquisitions + Ambitious leadership team with a clear focus + Talent prefers working for specialists + Transfer proven UK capabilities to US client base 11 Proprietary & Confidential
OUR BUSINESSES Kin + Carta applies creativity, data and technology to help the world’s largest companies invent, operate and market pro fi table new products and services. STRATEGY INNOVATION COMMUNICATION VENTURES Strategic Consulting Product and Service Communications and Incubated and Insights Development Commerce Ventures 12 12 Proprietary & Confidential
THE DIGITAL IMPERATIVE � 13
THE PACE OF CHANGE WILL NEVER AGAIN BE AS SLOW AS IT IS TODAY 14
DIGITAL ENGAGEMENT IS INCREASING Digital technologies continue to change the way we work and live ENGAGEMENT SOCIAL PAYMENTS 5.9 $34 3.2 Daily digital $16 Facebook’s annualized screen time (hrs)* Digital vs. Offline 60% revenue per daily user* Payments* 2010 2017 2015 Today NEW CURRENCIES NEW TECHNOLOGIES NEW CHANNELS Crypto- 95% 18% 400% currency trading volume over past year* US largest public technology company Machine learning word accuracy* R&D as a percentage of revenue* *Kleiner Perkins Internet Trends Report 2018 15 Proprietary & Confidential
CHANGE IS IMPERATIVE Companies must re-invent their business models to remain relevant in an increasingly digital world STRATEGY INNOVATION COMMUNICATION TRANSFORMATION Digital is now Product and Marketing to The Amazon Effect a business service models customers is more has reset customer issue are colliding complicated expectations 16 Proprietary & Confidential
DIGITAL TRANSFORMATION IS THE ANSWER TRANSFORMATION = Digital transformation is a rewrite, grounded in STRATEGY new technologies, of a company’s market strategy, offerings and ways of working + INNOVATION + COMMUNICATION SPEED 17
THE MARKET IS HUGE AND GROWING Every company at scale needs help in transforming their organisation to deliver on the promise that digital brings $462Bn 18.5% The global digital $44Bn transformation per year consulting market is SERVICES already $44Bn, $200Bn doubling in size TOTAL Digital transformation expenditures are expected to since 2016 continue to increase at a CAGR of 18.5% through 2024 of F500 CEOs have begun digital CIO and CMO spending on digital transformation 42% transformations, mainly focused on growth services is expected to rise 10% in 2018 and 2019 Sources: Consultancy.UK, IDC, Markets&Markets, Gartner, HarvardBusinessReview, Altimeter, eMarketer, IDC, Statista, Technavio, Business insider, Zinnov Research & Analytics 18 Proprietary & Confidential
OUR COMPETITION As digital transformation budgets increase, it’s unclear which service providers are best equipped to help. BIG CONSULTING AGENCY NETWORKS SPECIALISTS Customer Focused Holistic Offering Talent Attractor Disparate/Legacy Brands Difficult to Navigate Challenged at Scale Technically Challenged Creatively Challenged Strategically Challenged Myopic Vision Breadth without Depth Depth without Breadth 19 Proprietary & Confidential
WHERE WE’RE HEADED 20
THE CONNECTIVE OPERATING MODEL THE CONNECTIVE IS A GLOBAL ECOSYSTEM OF 1,500 TECHNOLOGISTS, STRATEGISTS AND CREATIVES. 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. � 21 Proprietary & Confidential
THE CONNECTIVE OPERATING MODEL THE CONNECTIVE IS A GLOBAL ECOSYSTEM OF 1,500 TECHNOLOGISTS, STRATEGISTS AND CREATIVES. 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. � 22 Proprietary & Confidential
CLIENT FOCUSED, TALENT ATTRACTOR Kin + Carta provides the holistic digital offering clients need with the specialist “vibe” that top talent wants BIG CONSULTING AGENCY NETWORKS SPECIALIST BOUTIQUES Breadth and Depth Holistic Offering Customer Focused Talent Attractor Talent Attractor Difficult to Navigate Disparate/Legacy Brands Highly Scalable Challenged at Scale Breadth without Depth Myopic Vision Client Focused Depth without Breadth Creatively Challenged Technically Challenged Easy to Navigate Strategically Challenged Strategic, Creative and Technical Fragmented 23 Proprietary & Confidential
OUR WORK 24
STRATEGY 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 25 Proprietary & Confidential
INNOVATION 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 � 26 Proprietary & Confidential
COMMUNICATION 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 27 Proprietary & Confidential
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