FULL YEAR RESULTS ENDING 28 JULY 2017 Matt Armitage Brad Gray CEO CFO
AGENDA 1 2 3 4 Overview 2017 Full Year Results Strategy Update Summary & Outlook New photo to be supplied by CKD 2
OVERVIEW Challenging year, reflected in our financial performance Encouraging underlying progress within our core Strategic Marketing segment - which remains at the centre of our long term growth strategy 393.2 7.80 Strategic Marketing now represents 75% of adjusted operating profit 367.5 Good progress on key strategic priorities: • 1.5 Enhanced collaboration with 209 clients using the services of more than one Group business (up from 150 in 2016) • Continued international growth – nine Strategic Marketing businesses serving clients internationally, representing 39% of Strategic Marketing revenues (up from 37% in 2016) Net Debt: improved by 32% at £54.6m (2016: £80.8m) 30.4 17.61 13.39 3
2017 RESULTS FOR FULL YEAR ENDING 28 JULY 2017 Brad Gray CFO 4
FINANCIAL SUMMARY 2017 17 2016** Incom ome Statemen ement £m £m £m Total revenue Revenue 393. 3.2 367.5 growth of 7% Gross profit 108. 8.8 105.1 27. 7.1 33.3 Operating profit* 7% 7% 9% Profit before tax* 24. 4.1 30.4 Adjusting items (68. 8.2) 2) (36.1) Non-cash Adjusting Statutory loss before tax (44. 4.1) 1) (5.7) items £66.1m 13. 3.39p 39p 17.61p Earnings per share* Full year dividend 1.95p 95p 7.80p * Adjusted Results 5 ** Restated
ADJUSTING ITEMS £m 80 Key: 68.2 70 2017 60 2016 50 40 36.1 33.1 33.0 30 17.4 20 12.7 10 3.0 2.6 1.7 1.9 1.7 (2.8) 0 Acquisition costs* Impairment Restructuring items (Gain)/loss on disposal of St Ives Defined Benefits Total -10 properties Pension Scheme costs 6 * Includes amortisation of acquired intangibles and contingent deferred consideration
SEGMENTAL SUMMARY Strat ategic egic Market rketing ing 2017 17 2016 Revenue £163 63.0m £144.1m Revenue growth of 13%, organic Operating profit* £20. 0.2m 2m £19.4m 5%, acquisitive growth and Operating margin* 12% 12% 13% currency translation 8% Mar arketi keting ng Activation vation 2017 17 2016 Revenue £153 53.7m £154.8m Revenue broadly in line Operating profit* £4. 4.3m 3m £8.1m with prior year; margin eroded Operating margin* 3% 3% 5% due to pricing pressures Book oks 2017 17 2016 Revenue £76. 6.5m 5m £68.6m Revenue Operating profit* £2. 2.6m 6m £5.8m growth of 12% margin decline Operating margin* 3% 3% 9% to 3% 7 *Adjusted Results
GROWTH ANALYSIS - STRATEGIC MARKETING 2017 2016 VAR VAR H2 H2 £m £m £m £m £m £m Revenu enue 87.2 74.7 +12.4 • H1 2016 – Prior year momentum maintained Opera erating ing Prof ofit it 14.0 9.7 +4.3 • H2 2016 – Q4 sees a number of project cancellations Margin rgin 16% 16% 13% 13% • H1 2017 – Significant impact on revenue & margin from project cancellations 2017 2016 VAR VAR H1 H1 £m £m £m £m £m £m Revenu enue 75.8 69.4 +6.4 • H2 2017 – New clients replace cancelled projects. Strong revenue growth and recovery in margin Opera erating ing Profit ofit 6.2 9.7 -3.5 Margin rgin 8% 8% 14% 14% 8
2018 REVENUE PIPELINE - STRATEGIC MARKETING 3% Key: 14% 31% Unidentified 62% Identified 30% Confirmed 83% 23% 39% 15% Q1 Q2 H2 • Improved visibility in Q1 & Q2 • Efforts concentrated on latter part Q2 & H2 9
CASH FLOW £m Key: 40 2.9 Inflow 8.7 34.7 33.6 3.6 30 Outflow 3.5 29.4 0.7 2.8 Total 20 10 - Adjusted EBITDA Working Tax & interest Net Capex Underlying Acquisitions Pension Adjusting items FCF capital FCF payment & disposal of properties • Much improved underlying FCF generation • FCF supplemented by property disposal 10
LIQUIDITY 28. 8.07. 07.17 29.07.16 £m £m £m Net debt 54. 4.6 80.8 EBITDA* 33. 3.9 41.3 Net debt/EBITDA* 1.6x 6x 2.0x Pensio nsion Assets 354. 4.5 344.1 Liabilities (370 70.5) (370.5) Deficit 16. 6.0 26.4 Interest cover* 9.0x 0x 11.5x Financial gearing 52. 2.3% 3% 60.4% *Adjusted Results 11
DEFERRED CONSIDERATION – ESTIMATED* FY18 18 FY19 19 Total £m £m £m £m £m £m £m Solstice 16.4 3.5 19. 9.9 30 TAB 7.3 5.0 12. 2.3 25 8.5 20 FY18 18 FY19 19 Total £m £m £m £m £m £m 15 £25.2m Cash 16.7 8.5 25.2 10 16.7 Shares 7.0 – 7.0 5 Total 23. 3.7 8.5 32. 2.2 0 FY18 FY19 • Best estimate of deferred consideration Impact on debt • Solstice at maximum TAB – 2 nd deferred consideration of £3.8m agreed, paid and excluded from above • 12 * Based on budgets and latest forecast
MAXIMUM DEFERRED CONSIDERATION – INCREMENTAL Consid sidera ratio tion Consid sidera ratio tion EBIT ITDA DA £m £m £m £m £m £m Remainin ing Estim imate ted Incre crementa tal Cash sh Shares res Incre crementa tal maxim ximum TAB 24.0 12.3 11.7 8.8 2.9 1.6 Solstice 19.9 19.9 – – – – Total 43. 3.9 32. 2.2 11. 1.7 8.8 2.9 1.6 13
BALANCE SHEET 28. 8.07. 07.17 29.07.16 £m £m £m 69. 9.0 96.3 Fixed assets 108. 8.7 135.8 Goodwill Net debt reduced by 32% at £54.6m 8.2 12.5 Working capital (1. 1.3) 3) 1.3 Income taxes (54. 4.6) 6) (80.8) Net debt (15. 5.9) 9) (1.8) Deferred consideration Disposal of (0. 0.9) 9) (3.3) Deferred tax selected non- core properties (16. 6.0) 0) (26.4) Pension Net Asset ets 97.2 7.2 133.6 14
STRATEGY UPDATE Matt Armitage CEO 15
REPORTING SEGMENTS BOOKS STRATEGIC MARKETING MARKETING ACTIVATION 10% 75% 15% % share of Group Adjusted operating profit 16
MARKETING ACTIVATION • Challenging conditions due to on-going pressures within the UK grocery retail sector £153.7m (1)% decline • Continued diversification of the client base to reduce exposure • New wins and project extensions including Royal Mail, Innocent, Superdry, AkzoNobel, ESPA and OfficeTeam BOOKS • Revenue growth versus the previous year £76.5m 12% growth • Focus on extending supply chain solutions to reduce overall costs • Significant restructuring costs as a result of the loss of the HarperCollins contract 17
STRATEGIC MARKETING DIGITAL DATA INSIGHT £93.0m .0m | | 31%* £32.3m .3m | | ( (11)%* £37.7m .7m | | 3 3%* • • • Closer alignment of Digital marketing Data businesses aligned single Significant number of new client wins businesses in response to client management team demand • • Change in client work mix – margins • Significant number of new client wins Further expansion of international footprint and contract renewals expected to improve particularly within the US • • • Synergies between Solstice and TAB Further collaboration between Data and Growing collaboration between Pragma continue to deliver positive results Digital businesses moving forward and FSP 18 *Revenue growth
CURRENT FOCUS FOR GROWTH INTERNATIONALISATION COLLABORATION ACQUISITION 19
STRATEGY IN ACTION COLLABORATION INTERNATIONALISATION Over 200 clients currently working 39% of our Strategic Marketing revenue now with more than one Group business comes from clients based outside the UK Increased demand for integrated International offices in Singapore, Shanghai, solutions New York, Chicago, Buenos Aires and San Francisco supporting projects across the world Operating model continues to evolve Number of new global client wins and project to help drive growth and margin deliveries including DuPont and Bosch improvement 20
COLLABORATION RESOURCE SHARING TAB has created co-sourced teams with Solstice, Amaze, Incite and Realise for three major international businesses Realise UX experts are with Solstice working on a leading US industrial company Amaze are working with Realise to support a leading sports company CROSS SELLING Realise have introduced Branded3 to many clients including leading insurance, travel and betting companies plus Amaze to one of the world’s largest producers of medicines Response One have introduced Branded3 to two significant businesses TAB has been introduced to two of the largest companies in the world by Realise and Amaze 21
COLLABORATION DEMAND GENERATION TAB and Incite jointly developed a white paper which has resulted in major client wins for TAB with three major international financial businesses Joint lead generation conferences and technology partner events KNOWLEDGE TRANSFER TAB and Solstice technology horizon and R&D planning shared Multiple specialist training sessions: SEO; data intelligence; market trends; technology developments 22
SUMMARY & OUTLOOK • Significantly improved performance with Strategic Marketing in the second half • Collaboration now having a tangible impact on performance • Debt levels reduced • Positive outlook and improved visibility into new financial year 23
THANK YOU matt.armitage@st-ives.co.uk brad.gray@st-ives.co.uk Website: st-ives.co.uk Twitter: @StIvesGroup 24
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