Results for the year ended 31 December Creating Advantage

Transcription

1 Results for the year ended 31 December 2018 Creating Advantage

2 2018 Overview Record revenues and profits Revenue 225m +14% HPBT 31m +26% Growth in Healthcare Revenue 152m +27% Profits 35m +36% Return to growth and margin improvement in Marketing Marketing LFL revenue growth H1-9% H2 +2% FY -3% Strong financial position Leverage 1.9x Total dividend increased to 2.3p Dividend +15% 5 March 2019 Results for year ended 31 Dec

3 Financial highlights Revenue ( m) LFL Group Healthcare +14% +1% +6% Headline Operating Profit ( m) Margin 14.8% 13.4% +26% +12% +13% Headline Profit Before Tax ( m) % +15% Headline Diluted EPS (pence) % Net Debt ( m) x pro-forma EBITDA Headline Tax Rate 18% 21% Reduction in US tax rate 5 March 2019 Results for year ended 31 Dec

4 Divisional Summary HEALTHCARE Marketing Medical Immersive Comms Central costs 1 & associates Total Revenue ( m) LFL Revenue Growth (%) (3.2)% 12.9% 33.9% (5.1)% - 1.4% Headline Operating Profit ( m) (7.7) 33.2 LFL Operating Profit Growth (%) 3.7% 19.2% 62.9% (16.1)% % Headline Operating Margin (%) 24.4% 28.6% 14.4% 8.2% % 1. Includes 1.4m loss on forward hedging instruments 5 March 2019 Results for year ended 31 Dec

5 Revenue bridge: 2017 to m 4.0m +1% LFL growth 1.3m 2.3m 3.9m -3% +13% +34% -5% LFL decline LFL growth LFL growth LFL decline 29.8m 225.0m 197.0m 3.2m 2017 FX Acquisitions Disposals Marketing Medical Immersive Comms March 2019 Results for year ended 31 Dec

6 HPBT bridge: 2017 to % LFL growth 1.2m 1.2m 1.4m 1.6m 0.5m 0.6m Variable rem. Interest 0.5m 0.4m 30.9m 5.3m Associates Other 0.1m 0.4m 24.4m 2.9m 2017 FX Acquisitions Disposals Marketing Medical Immersive Comms Central March 2019 Results for year ended 31 Dec

7 FX impact Hedged position (75% of expected USD profits) Average rates 2019F Impact of 1c movement USD EUR k 25k USD EUR Movement -1% Margin impact in 2018 Impact on revenue (translational) (3.2) (Losses) / gains on forwards (1.4) 1.1 (2.5) Translational impact (0.4) Impact on profit (1.4) 1.1 (2.9) % of revenue 50% USD 35% GBP 7% EUR c % annualised for acquisitions 5 March 2019 Results for year ended 31 Dec

8 Net debt bridge: Dec-17 to Dec m Capex Highlighted items ( 2.4m) ( 1.3m) Cash on derivatives ( 0.9m) 36.3m 39.0m 6.0m Share issues re options 0.3m 6.1m 77.0m 47.8m 4.3m 2017 Operating profit & non-cash items Working capital flows Interest & tax Dividends Acquisitions & disposals Capex & other March 2019 Results for year ended 31 Dec

9 Working Capital m Conversion Operating profit before highlighted items % 39m Non-cash items 6 105% 18% Normal Growth (4) (13%) Normal Changing customer mix Comms (4) (12)% One-off Seasonality Immersive (2) 15.5m (6)% One-off Performance related 2017 bonus payments Marketing & Medical (2) (4)% Reversed in 2019 Acquired working capital Acquisitions (4) (12)% One-off Cash from operations 23 71% 5 March 2019 Results for year ended 31 Dec

10 Cash generation Defensive fundamentals: Healthcare biased: demand driven by fundamentals of expanding healthcare sector, not consumer led US biased: limited fallout from Brexit uncertainty Strong cash generation 98% average cash conversion Dividend well covered: 3x Covenant headroom 1.6x vs 3.0x 2019 consensus leverage covenant limit 5 March 2019 Results for year ended 31 Dec

11 Net debt At 31 December 18 Net Debt: 77.0m Facilities: 105m + 10m accordion Leverage: 1.9x EBITDA 1 At 28 February 19 Net Debt: 81m Facilities: 130m + 50m accordion Leverage: 1.9x EBITDA 1 1. Pro-forma for acquisitions, net debt including deferred consideration 5 March 2019 Results for year ended 31 Dec

12 Results for the year ended 31 December 2018 Divisional analysis

13 Marketing Lower L4L revenues but margin improvements Revenues impacted by the loss of certain drug mandates due to normal course regulatory approval process As a result, H1 saw a decline in revenues, but H2 saw a return to growth Margin improvement despite lower like-for-like revenues Acquisition of Giant, Navience and AboveNation have added key capabilities and provided access to larger, more complex client briefs Revenue m LFL growth (3.2)% 13.2% Operating profit m Margin 24.4% 21.1% What we do We market pharmaceutical, OTC and wellness brands to consumers, healthcare professionals and the payer community, by: - Educating, building awareness, and driving retention for brands among patients and healthcare professionals - Providing a digital-centric service, mirroring consumer and professional behaviour - Creating more valuable and productive long-term relationships between our clients and their customers 5 March 2019 Results for year ended 31 Dec

14 $m Marketing Marketing revenue - half yearly Continued sequential growth: 1% in H118 2% in H218 H218 2% up on H217 0 H1 H2 H1 H2 H1 H2 H1 H2 H1 H Core Acquisition 5 March 2019 Results for year ended 31 Dec

15 Medical Strong revenue and profit growth 12.9% like-for-like revenue growth in 2018 represents the third successive year of double digit revenue growth Margin improvement despite continued investment in staff and new services driven by an increase in strategic consultancy engagements Strong pipeline and recent new wins gives confidence for Revenue m LFL growth 12.9% 17.7% Operating profit m Margin 28.6% 26.9% What we do We support the planning, generation and communication of evidence across medical affairs and health economics We provide publication, medical education and market access services for pharmaceutical and biotech clients We focus on insight-driven strategy underpinned by data, analytics and stakeholder engagement powered by creative and digital experiences 5 March 2019 Results for year ended 31 Dec

16 Immersive Very strong revenue growth & margin improvement The Creative Engagement Group acquired on 1 July 2017 LFL revenues (H2 vs H2) for the division up 34%; 26% on a full year basis Margin improvement from 12.4% to 14.4% as a result of focus on higher quality work Investment in US and internal communications capabilities ROIC (2018 profits over cash consideration) = 20.5% Revenue m LFL growth 33.9% n/a Operating profit m Margin 14.4% 12.4% 1. H2 only What we do We engage audiences through the creation and delivery of live experiences, film, immersive, interactive, training and scientific content We work with an international blue-chip client base across a range of sectors, with a particular strength in healthcare 5 March 2019 Results for year ended 31 Dec

17 Communications Continued focus on rightsizing operations 5.1% fall in LFL revenues as planned Profits down 1.0m but include restructuring costs in Grayling of c. 1m to support improved profitability in 2019 and beyond Red impacted by 2017 client churn, but recent wins Good performance from CDR Revenue m LFL growth (5.1)% (6.5)% Operating profit m Margin 8.2% 9.0% What we do Grayling is a global integrated communications network, covering public relations and public affairs Citigate Dewe Rogerson is an international financial and corporate public relations consultancy Red is a strategic communications consultancy offering PR, digital and content expertise 5 March 2019 Results for year ended 31 Dec

18 Results for the year ended 31 December 2018 Strategy

19 Delivering our strategy Our strategy Progress Increase Healthcare and US presence Expected share of revenues in : Healthcare 72% US 57% Extend offering by adding key capabilities Acquisition of Giant, Navience and AboveNation Potential for further small-scale M&A Integrate multiple capabilities for clients Maintain balance sheet strength at 1.5x to 2.0x net debt to EBITDA Increased level of joint pitches within each of the Healthcare divisions Operating well within facility & covenant limits Leverage 1.9x at 31 December Based on consensus 5 March 2019 Results for year ended 31 Dec

20 Growing Healthcare and US focus 100% Healthcare % of revenues 100% US % of revenues 80% 33% 28% 80% 50% 43% 60% 60% 40% 20% 67% 72% 40% 20% 50% 57% 0% % Healthcare Non-healthcare US Non-US 2019 based on analyst estimates 5 March 2019 Results for year ended 31 Dec

21 3 year progress Consensus % CAGR in HPBT 27% CAGR in EPS Leverage broadly unchanged x 1.1x 1.9x 1.6x Leverage EPS HPBT March 2019 Results for year ended 31 Dec

22 Marketing Better Together By leveraging our digital, creative and analytics strength in all our marketing and communications business, we are building an industry leading capability that can work together for clients. Adding Value to Existing Clients By leveraging our advanced media capability and our multicultural expertise we were awarded a new remit as multicultural media AOR for one of the largest pharma marketers. Globalising Client Remits By leveraging our multidisciplinary expertise and geographic reach we help clients across more markets. 5 March 2019 Results for year ended 31 Dec

23 Medical Expand consultancy offering Expand data and analytics offering Add new capabilities in market access and health economics Expand into new territories 5 March 2019 Results for year ended 31 Dec

24 Immersive Broaden base of Healthcare clients Expand Internal Communications offering Develop further Industrial Learning New verticals 5 March 2019 Results for year ended 31 Dec

25 Communications Improve margins Grayling: Build on UK growth Multi-country clients CDR: Develop life sciences capability Expand Asia footprint Red: Expand into financial services 5 March 2019 Results for year ended 31 Dec

26 2019 Outlook Marketing to return to positive LFL growth (H2 weighted) Medical & Immersive set for further good organic growth Profit improvement in Communications division Potential for further small-scale M&A 5 March 2019 Results for year ended 31 Dec

27 Results for the year ended 31 December 2018 Appendices

28 Like-for-like adjustments m Revenue Operating Profit Headline PBT 2017 adjustments Reported Foreign exchange (3.2) (1.5) (1.5) Disposed operations (1.3) LFL adjustments Reported Foreign exchange Acquisitions (29.8) (6.2) (5.4) Disposed operations - (0.1) (0.1) LFL March 2019 Results for year ended 31 Dec

29 Highlighted items m Revaluation of deferred consideration and put options (1.8) - Acquisition costs Disposal related * (0.9) (0.3) Amortisation of acquired intangible assets Imputed interest on deferred consideration and put options TOTAL * Relates to gain on contingent consideration receivable in respect of the disposal of Whiteboard Advisors in March 2019 Results for year ended 31 Dec

30 Pro-forma EBITDA m Operating profit before highlighted items and associate profit 32.9 Share options 1.4 Depreciation & amortisation 3.6 Non controlling interest (0.4) Pro-forma effect of acquisitions AboveNation 0.3 Giant 2.1 Navience 4.5 Pro-forma EBITDA 44.4 Statutory Net debt 77.0 Guarantees 2.0 Cash-settled deferred consideration 5.3 Bank Net Debt x leverage 1.9x leverage 5 March 2019 Results for year ended 31 Dec

31 H1 / H2 working capital analysis H1 sees weaker cash conversion due to: Billing milestones weighted to H2 Bonus payments Average H1/H2 working capital flows Average H1/H2 cash conversion (2) H1 H2 41% 136% (4) (6) H1 H2 (8) (10) 5 March 2019 Results for year ended 31 Dec

32 Growing Healthcare and US focus Healthcare % of profits US % of profits 100% 80% 15% 15% 100% 80% 36% 29% 60% 60% 40% 20% 85% 85% 40% 20% 64% 71% 0% % Healthcare Non-healthcare US Non-US 2019 based on analyst estimates 5 March 2019 Results for year ended 31 Dec

33 US healthcare expenditure Relative contribution to US health expenditure, % 25% Prescription drugs Hospitals Home Health Dental 33% Nursing care Physicians & clinics 20% Other health 68% Projected growth in prescription drugs, % 4% 3% Source: HCTadvisor 5 March 2019 Results for year ended 31 Dec

34 FY18 divisional revenue by geography Marketing Medical 10% 29% Group 10% 5% 90% Immersive 71% Communications 35% 50% Rest of the World USA United Kingdom Europe 14% 26% 32% 6% 74% 48% 5 March 2019 Results for year ended 31 Dec

35 FY18 divisional headline operating profit by geography Marketing Medical 12% 26% Group 2% 6% 88% 74% 28% Rest of the World USA Immersive Communications 64% United Kingdom Europe 14% 34% 38% -9% 66% 57% 5 March 2019 Results for year ended 31 Dec

36 Deferred consideration and put/call liabilities m Above Nation Deferred consideration 5.3 Put option 0.8 * Navience Deferred consideration 11.8 * Put option 9.9 * Giant Put option 5.7 * * Option to equity settle 5 March 2019 Results for year ended 31 Dec

37 Basic and diluted shares million Issued share capital (ex-shares in EBT) Opening Options exercised Scrip dividend Share issues Closing Weighting on options exercised (2.2) Weighting on scrip dividend (0.6) (0.6) (0.6) (0.6) Weighting on share issues (12.5) Weighted average shares - basic Dilutive impact of options Potentially dilutive impact of deferred consideration Weighted average shares diluted March 2019 Results for year ended 31 Dec

38 Charge m IFRS 16 impact c. 0.8m Estimated P&L impact in m Rental expense 6.8m + 1.7m Dep n Interest Current IFRS 16 c. 2.4x Estimated statutory leverage under IFRS 16 EBITDA + 7.7m Net debt + 42m Bank / covenant leverage unaffected 2019 Budget Presentation 38

39 Consolidated balance sheet m Dec-18 Dec-17 Non-current assets Goodwill & Intangibles Other non - current assets Current Assets Trade debtors and other receivables Other current assets Cash and short-term deposits Current Liabilities Trade and other payables (69.4) (67.6) Other current liabilities (2.7) (2.0) Provisions (6.4) (0.6) Non-current Liabilities (78.5) (70.2) Bank loans and overdrafts (99.2) (45.7) Other non current liabilities (8.8) (2.8) Provisions (28.0) (1.3) Trade and other payables (4.1) (3.0) NET ASSETS (140.1) (52.8) March 2019 Results for year ended 31 Dec

40 Shareholding at 11 February 2019 % share capital Aberforth Partners 12.3 Canaccord Genuity Wealth Management 9.2 Aviva Investors 8.9 Merian Global Investors 8.6 Kames Capital 6.3 Kabouter Management 6.0 Fidelity International 5.3 Michinoko 5.0 BlackRock 4.1 Miton Asset Management 3.6 Other 30.7 No. voting shares TOTAL ,557, k Median daily volume in H218 The shareholding figures and percentages in the table above include shares where the holder manages those shares on behalf of a third party (i.e. managed holdings) as well as shares beneficially owned indirectly or directly by the holder 5 March 2019 Results for year ended 31 Dec