Results for the period ended 30 June 2019 Creating Advantage
Interim Summary: On Track Strong growth from Medical and Immersive divisions Medical +9% LFL • Immersive +9% LFL Marketing division in line with expectations with strong Marketing Flat LFL • second half to come Comms division returns to growth Comms +1% LFL • Capabilities enhanced by acquisition of Creativ- £49m enterprise value acquired • Ceutical and KYNE Investment in capabilities to deliver second half growth • Strong progress in reducing net debt Leverage 1.8x • Cash conversion 100% Interim dividend increased to 0.75p Dividend +7% • 2 23 July 2019 Results for period ended 30 June 2019
Financial highlights H119 H118 LFL Revenue (£m) 123.5 102.2 +21% +3% Headline Operating Profit (£m) 14.0 11.8 +19% -17% Margin 11.4% 11.6% Headline Profit Before Tax (£m) 11.4 11.0 +3% -18% Headline Diluted EPS (pence) 2.43 2.60 -6% 8% increase in weighted shares Net Debt (£m)* 85.8 38.9 1.8x pro-forma EBITDA Headline Tax Rate 18% 20% Reduction in US tax rate * Excluding IFRS 16 lease liabilities 3 23 July 2019 Results for period ended 30 June 2019
Divisional Summary HEALTHCARE Central costs 1 & Marketing Medical Immersive Comms Total associates Revenue (£m) 49.7 18.7 18.8 36.3 - 123.5 LFL Revenue Growth (%) - 9% 9% 1% - 3% Headline Operating Profit (£m) 7.9 3.6 1.9 3.2 (2.6) 14.0 Underlying operating margin(%) 19% 22% 14% 9% - 14% 1. Includes £1.2m gain on forward hedging instruments 4 23 July 2019 Results for period ended 30 June 2019
Revenue bridge: H118 to H119 LFL growth +3% £0.3m £1.6m £1.4m £0.6m £0.0m Flat +9% +9% +1% LFL growth LFL growth LFL growth £15.6m £123.5m £3.1m £102.2m H118 FX Acquisitions Disposals Marketing Medical Immersive Comms H119 5 23 July 2019 Results for period ended 30 June 2019
HPBT bridge: H118 to H119 Investments £2.1m £0.7m £0.7m Operating profit £1.5m Interest £(0.9m) £0.2m £0.6m £1.8m IFRS 16 impact = £2.7m £(0.5m) £0.5m £0.2m £0.5m £0.4m £11.4m £11.0m H118 FX Acquisitions Disposals Marketing Medical Immersive Comms Central H119 6 23 July 2019 Results for period ended 30 June 2019
FX impact Average rates H119 H118 H219 H218 Impact of 1c movement £175k USD USD 1.28 1.38 1.27? 1.38 75% hedged for 2019 H119 H118 Movement Impact on revenue (translational) 3.1 % of revenue Gains / (losses) on H1 forwards 1.0 (0.3) 1.3 c. 55-60% annualised 54% USD Gains / (losses) on H2 forwards 0.2 (0.5) 0.7 for acquisitions Impact from forwards 1.2 (0.8) 2.0 32% GBP 14% EUR Translational impact 0.7 Impact on profit 2.7 7 23 July 2019 Results for period ended 30 June 2019
Net debt bridge: Dec-18 to Jun-19 £2.5m £3.8m £77.0m £12.9m Minority div. (£0.7m) FX (£0.2m) £85.8m FV movements (£0.5m) £10.4m 100% Cash £3.6m conversion £1.4m Dec-18 Cash from Highlighted items Interest & tax Acquisitions Capex Other Jun-19 operations & disposals 8 23 July 2019 Results for period ended 30 June 2019
Net debt 100% At 30 June 2019 H1 cash conversion 2019 Net Debt: £85.8m Facilities: 41% £130m + £50m accordion average H1 cash conversion 2014-18 Leverage: 1.8x EBITDA 1 1. Pro-forma for acquisitions 9 23 July 2019 Results for period ended 30 June 2019
Results for the period ended 30 June 2019 Divisional analysis
Medical Strong revenue growth H119 H118 • Continued strong performance, building on client mandates Revenue £m 18.7 15.6 won in late 2018 • Investments in staff and What we do property of £0.7m including the LFL growth 9% 16% • We support the planning, generation launch of Medistrava and communication of evidence consulting, which has already across medical affairs and health economics Operating profit won a number of new 3.6 3.6 £m mandates • We provide publication, medical education and market access services for pharmaceutical and • Significant recent wins and biotech clients Underlying strong pipeline of new 22% 23% Margin • We focus on insight-driven strategy opportunities expected to underpinned by data, analytics and support strong H2 stakeholder engagement powered by creative and digital experiences 11 23 July 2019 Results for period ended 30 June 2019
Marketing Trading in line with H119 H118 expectations with strong H2 to come Revenue £m 49.7 33.3 • LFL revenues flat on H118, as expected, reflecting client shift in product delivery What we do LFL growth - (9)% • Focus on integrating Giant and • We market pharmaceutical, OTC and Navience and investing in staff to wellness brands to consumers, enable the expanded Group to healthcare professionals and the payer Operating profit community, by: benefit from larger scale (£1.1m) 7.9 7.4 £m - Educating, building awareness, and driving • Increased number of new retention for brands among patients and business pitches and client wins healthcare professionals support return to growth in H2 Margin 19% 22% - Providing a digital-centric service, mirroring consumer and professional behaviour • Acquisition of KYNE has - Creating more valuable and productive strengthened our PR offering and long-term relationships between our clients provided access to larger, more and their customers complex client briefs 12 23 July 2019 Results for period ended 30 June 2019
Immersive Excellent H1 but H2 H119 H118 headwinds to come • Strong LFL revenue growth of 9.2% Revenue £m 18.8 17.0 • Investments in staff and property of £0.7m What we do LFL growth 9% 11% • Launch of two new • We engage audiences through agencies: Axiom Europe to the creation and delivery of live extend our sales training Operating profit experiences, film, immersive, 1.9 2.3 capabilities into Europe, and £m interactive, training and scientific Forty1 to exploit the content increasing need for employee engagement • We work with an international Margin 14% 14% blue-chip client base across a • H2 likely to be impacted by range of sectors, with a particular slow-down in spend at larger strength in healthcare clients together with drug failures 13 23 July 2019 Results for period ended 30 June 2019
Communications Return to LFL revenue growth H119 H118 • LFL revenue growth of 1% after several years of Revenue £m 36.3 36.3 decline, reflecting the benefits of our strategy of streamlining and What we do LFL growth 1% (5)% rationalising our operations • Grayling is a global integrated • Continued strong growth in communications network, covering Operating profit public relations and public affairs Grayling UK 3.2 2.7 £m • Citigate Dewe Rogerson is an • Good growth in CDR, led by international financial and corporate an excellent performance in public relations consultancy Asia Margin 9% 7% • Red is a strategic communications • Red returned to growth after consultancy offering PR, digital and content expertise client churn in 2017 / 2018 14 23 July 2019 Results for period ended 30 June 2019
Results for the period ended 30 June 2019 Strategy
Delivering our strategy Our strategy Progress Increase Healthcare and US presence Expected share of revenues in 2019: Healthcare 72% • US 57% • Extend offering by adding key capabilities Acquisition of Creativ Ceutical and KYNE • Launch of Medistrava consulting in • Medical Launch of Forty1 employee engagement • brand in Immersive Integrate multiple capabilities for clients Increased level of joint pitches within each of the Healthcare divisions supporting strong H2 growth Maintain balance sheet strength at c. 1.5x EBITDA Significant H1 deleveraging • Further progress towards our leverage • target by year end 16 23 July 2019 Results for period ended 30 June 2019
Growing Healthcare and US focus Healthcare % of revenues US % of revenues 100% 100% 28% 33% 80% 80% 43% 50% 60% 60% 40% 40% 72% 67% 57% 50% 20% 20% 0% 0% 2018 2019 2018 2019 Healthcare Non-healthcare US Non-US 2019 based on analyst estimates 17 23 July 2019 Results for period ended 30 June 2019
Capital Allocation Model with 3 core priorities 85.0 1.9x 2.5 1.6x 2.3 1.5x 2.0 1.3x 1.8 26.0 21.0 0.0 2016 2017 2018 2019 2016 2017 2018 2019 * 2016 2017 2018 2019 * Value accretive acquisitions Progressive dividend policy Conservative balance sheet £m pence Net Debt / EBITDA * Based on analyst consensus 18 23 July 2019 Results for period ended 30 June 2019
H2 Outlook • Marketing to return to positive LFL growth • Medical set for further good organic growth • Communications on track to deliver further revenue and profit improvements • Immersive facing headwinds due to slowdown in client spend • Positive contribution from KYNE and CC acquisitions • Further deleveraging towards our 1.5x target 19 23 July 2019 Results for period ended 30 June 2019
Results for the period ended 30 June 2019 Appendices
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