Driving sustainable growth
Results for the year ended 31 December 2017
2017 Overview
6 March 2018 Results for year ended 31 December 2017 2
• Headline profits up over 50%
• Continued strong LFL revenue growth from Healthcare divisions
• Strong cash conversion
• Acquisition of The Creative Engagement
Group
• Final dividend increased by 16% to 1.45p
Reported +52%
LFL +20%
MarketingMedical
+13%+18%
113% of operating profit
Successful integration
Full year +14% to 2.0p
Financial highlights
6 March 2018 Results for year ended 31 December 2017 3
2017 2016
Revenue (£m) 197.0 180.1
Headline Operating Profit (£m) 26.4 18.0
Margin 13% 10%
Headline Profit Before Tax (£m) 24.4 16.0
Headline Diluted EPS (pence) 5.8 4.0
Net Debt (£m) 36.3 31.6
Headline Tax Rate 21% 18%
+9% +4% LFL
+47% +16% LFL
+3 p.p.
+52% +20% LFL
+45%
1.1x pro-rata EBITDA
Increased US taxable profits
Divisional Summary
6 March 2018 Results for year ended 31 December 2017 4
Marketing Medical Immersive Comms
Central
costs* &
associatesTotal
Revenue (£m) 73.6 30.9 14.9 77.6 - 197.0
LFL Revenue Growth (%) 13.2% 17.7% n/a (6.5)% 4.1%
Headline Operating Profit (£m) 15.5 8.3 1.9 7.0 (6.3) 26.4
LFL Operating Profit Growth (%) 16.4 % 34.2% n/a 24.3% n/a 15.6%
Headline Operating Margin (%) 21.1% 26.9% 12.4% 9.0% n/a 13.4%
* Includes £1.1m gain on forward hedging instruments
Revenue bridge: 2016 to 2017
6 March 2018 Results for year ended 31 December 2017 5
£180.1m
2016 FX
£7.1m
£0.5m
£12.2m
£197.0m
£4.6m
Acquisitions
£9.7m
Medical Immersive 2017
£5.2m
£8.4m
CommsMarketingDisposals
+4%LFL growth
+18%LFL growth
-7%LFL decline
+13%LFL growth
HPBT bridge: 2016 to 2017
6 March 2018 Results for year ended 31 December 2017 6
£0.1m
Disposals Marketing
£2.3m
£2.1m
FX
£1.5m
2016
£16.0m
Acquisitions
£3.1m
Immersive
£0.2m
Medical
£1.4m
Comms
£24.4m
Central
£1.9m
2017
+20%LFL growth
£(2.5m)
£0.5m
£0.1m
Central costs
Interest savings
Associate income
FX impact
6 March 2018 Results for year ended 31 December 2017 7
2018F 2017 2016
Average rates
USD 1.40 1.24 1.40
EUR 1.15 1.15 1.33
Impact in 2017
Revenue + £7.1m
Profit + £3.1m
Profit impact of 1c movement +/- in 2017
USD £150k - £175k
EUR £25k
£1.1m
£2.0m
Translational gain
Incremental gains
on forward contracts
2017 impact
c. £3m@ $1.40
2018 impact
Net debt bridge: 2016 to 2017
6 March 2018 Results for year ended 31 December 2017 8
Dividends
£3.3m
Cash from
operations
Tax2016
£20.3m
£1.5m
Interest Acquisitions
& disposals
Highlighted
items
£4.9m
£2.3m
£29.8m
£2.2m
2017Capex & other
£36.3m
£31.6m
113%Cash conversion
£21mFree Cash Flow
Net debt as at 31 December 2017
6 March 2018 Results for year ended 31 December 2017 9
Net Debt:
£36.3m
Leverage(pro-rata for acquisiton):
1.1x EBITDA
Significant headroom vs covenant – 3.0x EBITDA
Facilities:
£75m + £40m accordion
Term:
Sep 2021
Divisional analysis
Results for the year ended 31 December 2017
Re-presenting the Group
6 March 2018 Results for year ended 31 December 2017 11
Reflecting increased Healthcare focus
Revenue split Profit split
37%
16%8%
39%
Marketing
Medical
Immersive
Communications
48%
25%
6%
21% Marketing
Medical
Immersive
Communications
Marketing
Strong revenue and profit growth
• 13.2% like-for-like revenue growth
• 16.4% like-for-like profit growth
• Investment in Fabric, a start up multicultural agency
• Tonic and Nitrogen integrated into Evoke offering – single agency solution
• Acquisition of AboveNationMedia in 2018
6 March 2018 Results for year ended 31 December 2017 12
What we do
• We market pharmaceutical, OTC and wellness brands to consumers and healthcare professionals, 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
2017 2016
Revenue £m 73.6 62.5
LFL growth 13.2% 16.3%
Operating profit £m 15.5 12.3
Margin 21.1% 19.7%
Medical
Strong revenue and profit growth
• 17.7% like-for-like revenue growth
• 34.2% like-for-like profit growth
• Increased focus on consultancy led services
• Record revenue growth and improved operating margins
6 March 2018 Results for year ended 31 December 2017 13
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
2017 2016
Revenue £m 30.9 25.3
LFL growth 17.7% 17.0%
Operating profit £m 8.3 6.0
Margin 26.9% 23.5%
Immersive
Acquisition of TCEG
• Acquisition of TCEG in July 2017, now integrated
• TCEG is performing ahead of expectations and brings new capabilities to the Group
• Strong potential for growth in the US
6 March 2018 Results for year ended 31 December 2017 14
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
2017 2016
Revenue £m 14.9 3.0
LFL growth n/a n/a
Operating profit £m 1.9 -
Margin 12.4% -
Communications
6 March 2018 Results for year ended 31 December 2017 15
Grayling returns to profit
• 24.3% like-for-like profit growth
• Closure of loss-making agencies in Grayling –decline in LFL revenues but a return to profit. Grayling UK returns to growth.
• Good performance from Red
• Mixed performance in CDR: strong in the Netherlands, weaker in the UK
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
2017 2016
Revenue £m 77.6 89.3
LFL growth (6.5)% (9.3)%
Operating profit £m 7.0 5.5
Margin 9.0% 6.2%
Strategy
Results for the year ended 31 December 2017
Strategy
6 March 2018 Results for year ended 31 December 2017 17
Enhance Healthcare offering through:
• Leveraging Huntsworth Health for integrated
clients
• Extension of offering into under served areas
through:
• Organic launches
• Selective M&A in the core business
• Maintain balance sheet strength
2018 Outlook
6 March 2018 Results for year ended 31 December 2017 18
• Health set for further good organic growth
• Strong balance sheet allows bolt on acquisitions
• Continued profit improvement in Communications division
• Negative impact from FX c. £3m (@ $1.40)
• Further dividend progression
Appendices
Results for the year ended 31 December 2017
Highlighted items
£m 2017 2016
Acquisition related 0.4 (0.7)
Disposal related (0.3) (0.4)
Amortisation of acquired intangible assets 1.4 0.9
Impairment of goodwill - 30.5
Impairment of software development costs - 0.2
Restructuring costs - 2.0
TOTAL 1.5 32.5
6 March 2018 Results for year ended 31 December 2017 20
Restructuring
complete
No
impairment
Like-for-like adjustments
£m RevenueOperating
ProfitHeadline
PBT
TCEG acquisition (12.2) (2.0) (1.5)
2017 disposed operations 0.3 (0.3) (0.3)
2016 disposed operations 9.4 0.2 0.2
TOTAL (2.5) (2.1) (1.6)
6 March 2018 Results for year ended 31 December 2017 21
Figures represent the year on year movement on acquisitions and disposals
Free Cash Flow
£m
Cash from headline operations 29.8
Highlighted items (2.3)
Interest (1.5)
Tax (3.3)
Capex (2.0)
TOTAL 20.7
6 March 2018 Results for year ended 31 December 2017 22
2017 divisional revenue by geography
6 March 2018 Results for year ended 31 December 2017 23
31%
9%
29%
73%
45%
50% 91%
71%
27%
9%
13%
33%
4%
8%
2% 5%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Group Marketing Medical Immersive Communications
UK US Europe Asia MEA
2017 divisional profit by geography
6 March 2018 Results for year ended 31 December 2017 24
26%
8%
26%
96%
44%
61% 92%
74%
4%
-11%
10%
49%
3%
18%
-20%
0%
20%
40%
60%
80%
100%
Group Marketing Medical Immersive Communications
UK US Europe Asia MEA
Central costs analysis
6 March 2018 Results for year ended 31 December 2017 25
54%
4%
20%
7%
4%
11%Exec
Board
Support staff
Property
Travel
Other
£7.6m2017 central costs,
ex. FX gain of £1.1m
2016
£5.0m
£7.6m
2017
£0.1m
OtherShare based
payments
£1.5m
Exec bonus
£0.9m
2.5%Fixed central costs as
% of revenue
Consolidated balance sheet£m 2017 2016
Non-current assets
Goodwill & Intangibles 181.2 159.8
Other non - current assets 12.8 13.1
194.0 172.9
Current Assets
Trade debtors and other receivables 66.4 56.1
Other current assets 9.9 10.2
Cash and short-term deposits 10.1 15.0
86.4 81.3
Current Liabilities
Trade and other payables (67.6) (47.9)
Other current liabilities (2.0) (1.9)
Provisions (0.6) (2.0)
(70.2) (51.8)
Non-current Liabilities
Bank loans and overdrafts (45.7) (45.4)
Other non current liabilities (2.8) (0.2)
Provisions (1.3) (1.6)
Trade and other payables (3.0) (2.9)
(52.8) (50.1)
NET ASSETS 157.4 152.3
6 March 2018 Results for year ended 31 December 2017 26
Deferred consideration
6 March 2018 Results for year ended 31 December 2017 27
Above Nation:
£1.1m
£1.4m
2019
2021
Shareholding at 13 February 2018
% share capitalNo. voting
shares
Aberforth Partners 22.8
Fidelity International 10.1
Hargreave Hale Investment Managers 10.1
JO Hambro Capital Management 7.8
Kabouter Management 5.4
Michinoko 5.0
Miton Asset Management 5.0
T Rowe Price Global Investments 4.0
Lazard Asset Management 3.6
JP Morgan Asset Management 1.9
Other 24.3
TOTAL 100.0 331,858,168
6 March 2018 Results for year ended 31 December 2017 28
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