Post on 13-Jul-2020
Positioned to capture the DX opportunity
Half Year Results 2020
PROPRIETARY AND CONFIDENTIAL
Agenda
2
Highlights
New Positioning
Financial Results
Operational Update
Progress on Strategic Priorities
Questions
Half year highlights
• Net revenue +3% including c. £2m of Spire
Digital
• Innovation on track
• Strategy restructuring showing improved
results
• Communications, whilst profitable, taking
longer to turnaround. Further restructuring and
strategic review underway
• Continued positive revenue shift into
Innovation, US and Strategic sectors
• Operating profit of £5.4m includes investments
setting foundation for growth ramping in H2
3PROPRIETARY AND CONFIDENTIAL
• Launched new global go-to-market brands
Advise, Create and Connect in another
significant step towards our Connective
integrated consultancy model
• Spire Digital acquisition trading and integrating
well, validating acquisition model. Further
Innovation acquisitions targeted
• Strategic review underway of
underperforming and non-strategic areas of
the business
• On track for FY expectations; No impact from
COVID-19 to date, but continuing to assess
risks
Embedding of growth investments
PROPRIETARY AND CONFIDENTIAL
new positioning
4
Proprietary and Confidential
PurposeAt Kin+Carta, we’re not here to talk about changing the world. We’re here to make it work better.
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Proprietary and Confidential
Structured to attract the best digital talent in the world.
Kin+Carta is uniquely designed to address today’s challenges.
Digitally-native management Consultancy.
Modern software engineering and emerging technology Studio.
Data-driven Digital marketing Agency.
Strategic Brands Venture BrandsPillar
Strategy
Innovation
Communications
6
Proprietary and Confidential
Transformation takes a village. We call ours The Connective.
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PROPRIETARY AND CONFIDENTIAL
financial results
8
PROPRIETARY AND CONFIDENTIAL
Financial highlights
9
Net revenue of £76.0m; up 3%
including c.£2m of Spire, with attractive shift into strategic areas:
• Innovation grew double-digits, now
comprising 60% of total net revenue
• US 51% driven by Innovation growth
• Strategic sector concentration higher
at 83% compared to 77%
• Client longevity 80% of clients have 3
years or more tenure
Acquired Spire Digital via equity
placing of 15.3m shares
Employees Across 11 Offices on 4 Continents
NET REVENUE BY CAPABILITY NET REVENUE BY REGION *
NET REVENUE BY SECTOR
1600
24%
60%
16%
StrategyInnovationCommunication
7%
42% 51%
USUKRest of World
17%
15%
10%15%
13%
29%
Financial ServicesRetail and DistributionIndustrials and AgricultureTransportationHealthcareNon Strategic
(30%)
(54%)
(16%)
(44%)(48%)
(8%)
*PY net revenue is pro-rated from gross revenue
PROPRIETARY AND CONFIDENTIAL
Financial highlights
10
Net revenue of £76.0m; up 3%
including c.£2m of Spire, with attractive shift into strategic areas:
• Innovation grew double-digits, now
comprising 60% of total net revenue
• US 51% driven by Innovation growth
• Strategic sector concentration higher
at 83% compared to 77%
• Client longevity 80% of clients have 3
years or more tenure
Acquired Spire Digital via equity
placing of 15.3m shares
*PY net revenue is pro-rated from gross revenue
Valu
e A
xis
0%
15%
30%
45%
60%
Innovation % of Net revenue US % of Net revenue
51%60%
46%56%
40%48%
27%38%
FY17 FY18 FY19 H120
PROPRIETARY AND CONFIDENTIAL
Longevity, stability and predictability Our offerings and client base drive repeat business that underpins our long term growth
11
Client spend (%)
2018
2019
2020
0% 23% 45% 68% 90%
Top30 Top100
Client Longevity
less than 2 years
2 years or more
4 years or more
6 years or more
Top 100 Clients
38
23
18
21
Revenue predictability (%)
£'m
0.0
15.0
30.0
45.0
60.0
12710
60
Total Revenue £’m
Annual Clients 3+ Years
Annual Clients 2+ Years
Potential Annual/ Repeats
Project
67%
11%8%
14%
(% of total revenue base)
PROPRIETARY AND CONFIDENTIAL
Financial summary
PBT of £5.4m includes • c.£2m of the previously
announced £3m growth investments - no change to £3m total for FY
• Lower Communications earnings
Adjusting items up primarily due to the Spire acquisition, partially offset by a decrease in DB pension scheme cost
Net revenue continued to shift to Innovation and the US
Spire c. £2m in net revenue
INCOME STATEMENT £M HY 2020 HY 2019%
CHANGE
Revenue 89.6 87.2 3%
Net revenue* 76.0 73.6 3%
Operating profit* 7.2 9.2 (22)%
Profit before tax* 5.4 8.0 (33)%
Adjusting items (11.3) (9.6) -
Statutory loss before tax (5.9) (1.6) -
Earnings per share* 2.75p 4.21p (35)%
Interim year dividend 0.65p 0.65p -
*Adjusted Results, including IFRS16 effects: c.£0.5m favorable OP c.£0.6m unfavorable interest expense to PBT
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PROPRIETARY AND CONFIDENTIAL 13
*EBITDA adjusted for non-cash items
Cash flow
PROPRIETARY AND CONFIDENTIAL
Balance sheet
Pension surplus
Leverage ratio (pre-IFRS basis)
1.80
fy20fy21
£M HY 2020 FY 2019
Fixed Assets * 28.1 10.5
Goodwill and Intangibles 121.5 111.2
Working Capital 7.6 3.1
Pension 5.2 6.7
Lease liabilities * (23.2) -
Income Taxes (1.4) (2.0)
Net Debt (39.5) (38.4)
Deferred Tax (1.6) (1.3)
Deferred Consideration (8.8) (2.0)
Net Assets 87.9 88.0
fy22
* IFRS16 includes: £18.5m of fixed assets (£23.2m) Finance lease payable
Net debt£39.5m (FY19 £38.4m)
£6.3m£3.2m£5.9m
Deferred consideration (Spire)
£5.2m
Loan Facility / Covenant£85m / 2.75x
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PROPRIETARY AND CONFIDENTIAL
operational updates
15
Strategy
• Net revenue up 1% despite the anticipated disruption caused by the restructuring necessary to create Kin + Carta Advise
• Advise and Incite positive trends Q2 over Q1 in both the UK and the US; pipelines on track to deliver 2H growth
• Advise continuing to unlock sizeable Create and Connect implementation programs
16PROPRIETARY AND CONFIDENTIAL
Our new strategic brand, Kin + Carta Advise, is a digitally-native management consultancy. This offering targets our clients’ CEO buyers.
Our sector-focused, management consultants help our clients better understand the shifts in their market and how their products and services need to evolve.
Innovation
• Net revenue up 14%, including c. £2m of Spire Digital
• H1 organic growth hampered by several large UK projects delayed into H2 due to Brexit (subsequently started post election)
• US grew double digits
• Improved pipeline compared to a year ago
• Existing Solstice and TAB Innovation businesses combined to form Kin + Carta Create. Spire joining at end of calendar year
• Spire performing and integrating well
• Over £5m in new pipeline created through partnership and existing US sales channels
• Utilising K+C Argentina delivery center for client work; utilising Connective legal and finance services
• Global engineering team swelled to over 800, unlocking new opportunities in AI and Cloud for some of the largest companies
17PROPRIETARY AND CONFIDENTIAL
Our new strategic brand, Kin + Carta Create, is a next-generation modern software engineering studio. This offering targets our clients’ CIO buyers.
Our 800+ software engineers and designers utilise emerging technologies to create new products and services for our clients to bring to market.
Communications
• Net revenue down 15%; further restructuring and strategic review underway
• Continue to move focus away from low value projects to higher value MarTech platform work
• Kin + Carta Connect created through restructure of AmazeRealise
• Restructure includes new Managing Director, rebuilding sales function, lowering cost base, moving targeted capabilities to Argentina, adding flexible workforce
• Newly created Connect US business growing
• Ventures business Edit executing similar aggressive restructuring plan
• Restructuring and improved backlog and go get position expected to provide stabilisation in H2
18PROPRIETARY AND CONFIDENTIAL
Our new strategic brand, Kin + Carta Connect, is a data-driven marketing technology agency. This offering targets our clients’ CMO buyers.
Our digital marketing experts help our clients amplify their digital investments by finding new audiences and converting them into lifelong customers.
PROPRIETARY AND CONFIDENTIAL
our clients
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Proprietary and Confidential
FINANCIAL SERVICES
RETAIL AND DISTRIBUTION
TRANSPORTATION HEALTHCARE INDUSTRIALS AND AGRICULTURE
New
DX
RE
MIT
S
Our expanding Blue Chip client base
20
+Sixth year of working with Ford's high profile Smart Mobility team
+Recently began a multi-year program to build the all new Fleet Commercial Services driver app
+The app utilises telemetry data from the vehicles to improve the experience for drivers and fleet managers
+This seven figure Create UK product development project has led to a Create US modernisation opportunity, based out of Detroit
21PROPRIETARY AND CONFIDENTIAL
Telematics and machine learning optimize fleet management for Ford
Key Partners:
+Global quick serve restaurant’s existing digital ordering channels (kiosk, mobile) take more effort than traditional alternatives
+Project involves automating the drive-thru experience using AI
+Partnering with Google leveraging their DialogFlow natural language platform (Google Assistant’s backbone)
+Currently going to market with Google on other voice enabled use cases
22PROPRIETARY AND CONFIDENTIAL
Using AI to voice enable the quick serve drive-thru experience
Key Partners:
PROPRIETARY AND CONFIDENTIAL
progress against
strategic priorities
23
PROPRIETARY AND CONFIDENTIAL
Growth
24
We will accelerate growth through
the continuous optimisation of a
highly measurable, integrated and
scalable demand generation machine.
KEY KPI:
HY Net revenue of
£76m
STRATEGIC PRIORITY 01
Optimize central demand
around our key sectors
Scale partnership function
in both the US and the UK
Increase central demand
net revenue contribution
by > 50%.
HY20 PROGRESSFY20 GOALS
Scaling of partnership function delivering
£3.25Mn in wins and £11Mn in pipeline
across the US and UK
Google partnership progressing well across
AI, Search and Cloud service lines
Consolidated marketing muscle of Solstice,
TAB and AmazeRealise behind Kin + Carta
core brand
New central sales function delivering over
£5m in backlog, £23m in pipeline, 400 leads
in first half. (+3%)
PROPRIETARY AND CONFIDENTIAL
Proposition
25
We will create and evolve a market
defining set of sector-focused,
technology-led business
transformation offerings.
KEY KPI:
Gross Margin
48.5%
STRATEGIC PRIORITY 02
Continue to invest in the
evolution of our holistic DX
proposition
Further simplify our brands to
make it easier for clients to
engage
HY20 PROGRESSFY20 GOALS
Launched the new www.kinandcarta.com
repositioning firm around a more fluid,
end to end, software engineering centric
proposition
This has led to more cross-sell wins
including a seven figure K+C Connect US
eCommerce win for an existing strategic
K+C Create US agriculture client
Sector focus has continued to gain
traction, particularly with Healthcare, a
sector just beginning it’s DX journey,
growing from 8% to 15% of net revenue. (49.0%)
PROPRIETARY AND CONFIDENTIAL
People
26
We will create an industry leading
employee experience with a focus on the
growth potential of our talent and a
shared commitment to a triple bottom-
line (profits, people and planet).
KEY KPI: Employee Net Promoter Score
(updated at year end)
STRATEGIC PRIORITY 03
Certify first four specialisms as
B Corps
Rollout central HR system
across the Connective
Demonstrate continued
meaningful increase in eNPS
through coordinated employee
experience initiatives
FY20 GOALS HY20 PROGRESS
B Corp Certification of K+C
Advise, Create and Incite on
track for this fiscal year
Early returns being realized
through upticks in employee
engagement and positive
qualitative feedback on talent
attraction wins
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PROPRIETARY AND CONFIDENTIAL
People
27
We will create an industry leading
employee experience with a focus on the
growth potential of our talent and a
shared commitment to a triple bottom-
line (profits, people and planet).
KEY KPI: Employee Net Promoter Score
(updated at year end) 27
STRATEGIC PRIORITY 03
PROPRIETARY AND CONFIDENTIAL
Platform
We will build an operational platform
made up of best-in-class operational
systems and seamless shared
services.
KEY KPI: Operating Margin on Net Revenue
9%
STRATEGIC PRIORITY 04
c.£2m of the £3m growth investments
On track to complete the roll out of
our PSA (professional service
automation) and CRM systems by
the end of the calendar year
New HRIS system nearing the final
stages of evaluation
Spire to be fully integrated onto this
Connective operating platform in
FY21
Increased leverage of K+C
operations in Argentina with Create
UK, Connect UK and the Central
Office.
HY20 PROGRESSFY20 GOALS
Complete roll out FinancialForce
and SalesForce CRM
Rollout central HRIS system
Expand our shared services
platform across finance, HR, IT
and legal, to ensure we are taking
advantage of operational gearing
as we scale, while allowing our
specialisms to focus on what
makes them distinctly unique
A common platform and lower cost operating center will ensure we are taking advantage of operational gearing as we scale.
(12%)
28
PROPRIETARY AND CONFIDENTIAL
Expansion
We will execute a purposeful and
intelligent expansion into new
regions domestically and
internationally.
KEY KPI:
US & Rest of World
60%
STRATEGIC PRIORITY 05
Increased attention on
acquisition opportunities for
DX services firms in the US and
Europe, with a near term focus
on unlocking growth in the
western and southern regions
of the United States.
FY20 GOALS HY20 PROGRESS
Successfully completed the
acquisition of Spire Digital,
leading our expansion into the
western United States
Seeing growth in our Connect
US and Create Edinburgh
investments
New potential acquisitions in
new regions of the US and
Europe targeted(54%)
29
Summary Shape of revenue changing in line with strategic intent (US,
Innovation, key sectors)
Launch of Advise, Create and Connect aligning go to market
muscle behind one powerful brand
Strategy and Innovation on track with further restructuring in
Communications driving stabilisation in H2
Spire Digital acquisition proving out regional expansion
strategy
Strategic priorities on track with DX market continuing to gain
steam
30PROPRIETARY AND CONFIDENTIAL
Outlook
Restructuring, improved positioning, growth investments and a stronger pipeline give the Board confidence in an improved second half
Trading at the start of the second half is in line with expectations, with optimism tempered by uncertainties caused by the effects of COVID-19
Currently expect to meet expectations for the year, as we have seen no impact from COVID-19 to date, but are maintaining a careful watch on external risks that could cause deterioration in our markets