PRELIMINARY RESULTS – 31 DECEMBER 2013 29 April 2014 0

Preliminary Results – December 2013

Highlights 2013 results in line with consensus

Investment programme producing revenue growth in three key strategic areas and extended into 2014

Lord Myners to become Chairman following the 2014 AGM

Announcing next step in our alliance with BlueFocus, signing a framework joint venture agreement 1

Preliminary Results – December 2013

Board changes  Lord Myners to take over as Chairman following the 2014 AGM -

Previously Chairman of several leading international and FTSE100 companies including Marks & Spencer and Guardian Media Group

-

City Minister in the last Labour Government

-

Joins the board with immediate effect

-

Appointment process led by non-executive committee and external search consultants

 Richard Sharp and Joe MacHale to step down from the board at 2014 AGM

2

Preliminary Results – December 2013

2013 Results - In line with consensus £’m

2013

2012

Growth

Profit before tax (pre-investments)

24.5

22.5

8.9%

Revenue

171.7

173.0

(0.8)%

Operating profit pre-central costs

30.9

33.6

18.0%

19.4%

Central costs

(7.3)

(7.0)

Operating profit post-central costs

23.6

26.6

13.7%

15.3%

Net finance costs

(3.5)

(4.1)

Profit before tax

20.1

22.5

Tax and tax rate (24%, 23%)

(4.9)

(5.2)

Attributable profits

15.2

17.3

Diluted EPS (pence)

5.6

6.9

Margin

Margin

3

Preliminary Results – December 2013

(11.1)%

(10.7)%

(18.6)%

2013 by division £’m Total operations

Revenue

L4L Revenue Growth %

Operating Profit

Operating Margin

*Grayling margin pre-investment 18.2% 4

Preliminary Results – December 2013

78.4

57.1

23.3

12.9

171.7

(6.4)%

7.1%

1.1%

(7.2)%

(1.3)%

11.2

11.9

4.7

3.1

30.9

14.3%*

20.8%

20.3%

24.2%

18.0%

Cash flow £’m

5

2013

2012

Cash generated from operations

23.3

26.9

Conversion

99%

101%

Exceptional cash flow

(4.7)

(3.7)

Interest

(3.0)

(3.8)

Tax

(2.4)

(2.2)

Capex

(2.9)

(1.9)

Free cash flow

10.3

15.3

Acquisitions & deferred consideration

(3.3)

(2.6)

Dividends

(7.9)

(8.0)

BF proceeds & Other (including FX)

35.8

(0.5)

Net movement in debt

34.9

4.2

Closing net debt

32.0

66.9

Preliminary Results – December 2013



£1.8m future deferred consideration liabilities

Strategic investment priorities

Digital 26% of revenues 10% growth

Multioffice 50% of revenues 4% growth in average fee

Growth Markets 44% of revenues 4% growth

Investment in talent

6

Preliminary Results – December 2013

Digital

Senior global digital hires

47% Digital Revenue 2007-13 CAGR 81%

digital revenue growth in 2013

Total Group Digital revenue 2007 - 2013

30% 20% 10%

1%

1%

2%

4%

23% 26%

10%

2007 2008 2009 2010 2011 2012 2013 7

Preliminary Results – December 2013

39 Market assignment competitively re-pitched for Grayling Grayling won a retained engagement for PayPal in Europe and the Middle East

Asia Pacific – new regional mgt team in 2014

Middle East & Africa New healthcare social marketing agency

Multi-office

Close alliance with

10

Digital revenues of

10%

Growth markets

34% organic growth with multi-million dollar 2014 pipeline 2014 USA merger of Grayling, Dutko Grayling and Atomic into a single brand

6

Senior Hires in Growth Markets

10

Grayling offices in the USA

50% 4% of Group revenues

6

growth in average fee per client

Senior Hires

Grayling providing international strategic communications and tournament promotional support

2013 & 2014 investment in talent INVESTMENT PROGRAMME • 2013 clearly producing revenue growth in three key strategic areas – 22 senior hires

USA

30 Snr hires

UK

EUROPE

11

2

Snr hires

Snr hires META

4 Snr hires

8

Preliminary Results – December 2013

• Investments primarily in Grayling and Huntsworth Health – together 79% of Group Revenues

• Extending into 2014 - further 30 senior hires planned

ASIA PACIFIC

5 Snr hires

Grayling Update April 2014

9

Preliminary Results – December 2013

We aren’t the same Grayling you remember Patchwork of Acquisitions

London Headquartered

Global Centres of Excellence

Digitally Siloed

Digitally Embedded

Top 20 Hopeful

Top 10 Contender

Industry Follower

10

United Brand

Preliminary Results – December 2013

One to Watch

THIS IS

World-renowned clients Data-driven insights Breakthrough creative Global execution

11

Preliminary Results – December 2013

1/ 3

AT A GLANCE

138

of the world’s biggest companies

54 offices

5 core values of our business is multi-market

PASSION

2/ 3 Cutting edge proprietary tools

15

REGIONAL HUBS

50+

ACTION

26

ESTABLISHED over

30 years ago

Data Driven Measurements

affiliates

Preliminary Results – December 2013

INNOVATION

countries

time zones

12

CONNECTION

ALWAYS-ON RESEARCH

6

Highly rated by clients

INSIGHT

of our staff are bilingual

1,000 consultants

Embedded DIGITAL expertise

43 languages

Key Appointments Driving Transformation

Peter Harris CEO, USA

Pete Pedersen Global CEO

Perry Tell Head of Digital, North America

13

Julio Romo Head of Digital, META

Preliminary Results – December 2013

Jan Simunek CEO, CEE, CIS & Russia

Chris Lee Head of Digital Knowledge

Loretta Ahmed CEO, Middle East, Turkey & Africa

Sarah Scholefield Global Engagement Leader

Alison Schwartz Managing Director, San Francisco

Our wins and client brands keep getting bigger. We’ve signed Unisys and Concur in the past month and significantly grown PayPal, Hilton, The European Tour and British Airways in the past year.

14

Preliminary Results – December 2013

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Huntsworth Health Update

April 2014

15

Preliminary Results – December 2013

Building health and science brand value Through extraordinary storytelling, compelling content and immersive experiences that establish a strong affinity between your customers and your brand

16

Preliminary Results – December 2013

creating compelling brand experiences through

STRATEGY

17

Preliminary Results – December 2013

CREATIVITY

TECHNOLOGY

We have a vast opportunity to foster success together, through the creation of truly human brands 18

Preliminary Results – December 2013

18

Proprietary iPad Platforms

19

Preliminary Results – December 2013

20

Preliminary Results – December 2013

BlueFocus alliance  In 2013 we announced an unprecedented strategic alliance between leading Eastern and Western public relations consultancies to help global companies communicate around the world  In October 2013 BlueFocus invested £36.5m via new shares, representing a stake of 19.6% at 58p per share  At the same time, Oscar Zhao, BlueFocus CEO, joined the board

21

Preliminary Results – December 2013

BlueFocus at a glance BlueFocus Communication Group “BFCG” - At a glance BlueFocus has expanded from public relations into a range of marketing services, including media buying and digital, to become the leading marketing services group in China Overview • • •

•

•

BFCG was founded in August 1996 by Oscar Zhao, Zhiping Xu, Tie Wu, Taoran Sun and Lianghua Chen BFCG is the #1 Chinese PR and communication firm Sectors of expertise: IT (historical expertise), telecommunications, finance, healthcare, fast moving consumer goods, consumer durables (cars, household appliances), government and NGOs Listed on the Shenzhen Stock Exchange on February 2010 and became the first listed PR company in China. Since the IPO, BlueFocus has increased its revenue eightfold and has become the biggest PR firm in Asia Headquartered in Beijing, BlueFocus operates three branches in Shanghai, Guangzhou and Hong Kong, as well as 23 regional offices in Mainland China / More than 2,800 employees

•

•

BFCG’s strategy for future growth relies on creativity and technology. BlueFocus is committed to greater digitalization and globalization over the next 10 years In terms of geographic growth, BlueFocus will emphasize expansion in Europe and North America

Areas of focus

Sales evolution

898

38

56

2009

2010

143

Mobile internet

670 252

420

2012

2013

2014E

Note: 2014E to 2016E figures are broker estimates and do not reflect management’s business plan

22

Video streaming

Preliminary Results – December 2013

2015E

•

BlueFocus’ ambition is to grow to 10x its current size in the next 10 years

•

Currently 50% of its revenues come from digital

•

2022 objectives:

1,039

EURm

2011

E-commerce

2,500

CAGR 2012-2022B +26%

CAGR 2009-2012 +88%

Big data

2016E

//

2022B 2023B Source: BlueFocus



Generating 1/3 of revenues from overseas operations



Generating 2/3 of revenues from digital

BlueFocus divisions BlueFocus Communication Group “BFCG” - Divisions

•

Media relations

•

Crisis management

•

Investor relations

•

Corporate image management

•

Event management

23

Preliminary Results – December 2013

Communicatio n Services 55%

Communication Services 55%

•

Digital advertising

•

Media

•

Media buying

•

Brand management

•

Business analytics

•

E-commerce

2013 SALES BREAKDOWN

Public communications

SERVICES

•

KEY CLIENTS

PR strategy consulting 2013 SALES BREAKDOWN

•

KEY CLIENTS

SERVICES

AGENCIES

Advertising

AGENCIES

Communication services

Advertising 45%

Developing the strategic alliance 

24

Building business through Huntsworth “China Go Global”



Development units set up in London and Beijing



Supporting business co-operation between China and Europe



Three year assignment with UK Trade & Investment to develop these initiatives



Continued investment in start-ups and talent to raise Group presence, particularly in Beijing and Shanghai



Exchange of people, training and client development to drive digital change



New framework joint venture agreement signed

Preliminary Results – December 2013

Joint Venture 

Joint Venture to expand the Huntsworth/BlueFocus network, particularly in the Asia-Pacific region 

Huntsworth will hold 51% majority stake and will manage and consolidate any acquisitions



BlueFocus to obtain Chinese regulatory approvals following which a circular will be sent to Huntsworth shareholders for approval



Huntsworth and BlueFocus investment limited to £50m each over the first three years



Any Huntsworth capital required to fund JV acquisitions will need prior Huntsworth Board approval

Note: Chinese regulatory approvals expected in Autumn 2014 25

Preliminary Results – December 2013

Outlook The BlueFocus strategic alliance, and reduced earn-outs, enable investment ahead of the expected recovery in PR revenues and breaks our dependence on the European economies

Group revenues declined by 2.5% Q1 2014. 2013 and 2014 investment programme to provide best possible basis for future organic growth

Investment programme will continue to dilute margins in 2014. Real benefits of these investments and the strategic alliance with BF to be seen from 2015 onwards Note: PR revenue recovery typically lags advertising recovery by 6-12 months 26

Preliminary Results – December 2013

APPENDICES 27

Preliminary Results – December 2013

Highlighted items £’m

2013

2012

(1.6)

(3.9)

Acquisition and transaction related credit

2.2

1.3

1

Litigation credit/(costs)

0.6

(0.2)

2

Restructuring costs

(3.7)

(0.8)

3

Start-up net operating result

(0.5)

-

4

Total highlighted items

(3.0)

(3.6)

Amortisation of intangibles

Note

1 Adjustments to earn-out liabilities, and transaction related costs 2 The litigation credit represents an agreed final settlement, net of costs incurred, from a former employee in regard to disputes concerning certain restrictive covenants of their employment agreement 3 People, property and rebranding costs 4 Represents the net operating result of organically started businesses – Gross revenue of £0.7m

28

Preliminary Results – December 2013

Geographical revenue change 178.0 0.2 177.0 1.2

£’m

176.0

1.9

1.2

175.0 174.0

1.6

2.9

173.0

172.0 171.0

0.7 173.0 171.7

170.0 169.0

FY '12 Revenue

29

FX Impact

Preliminary Results – December 2013

USA

Middle East

Asia

UK

Europe

Other

FY '13 Revenue

Operating profit change 

£4.4m investment plan in 2013 29.0

16.3% Margin

28.0 27.0

15.4% Margin

0.3

26.0 £’m

1.1 4.4

25.0 24.0

23.0

13.7% Margin

28.0 26.6

22.0

23.6

21.0 20.0 FY ‘12

30

Preliminary Results – December 2013

FX Impact

Operating Performance

OP Before Investments

Investments

FY ‘13

Quarterly revenue growth

Q1

Q2

Q3

Q4

H1

H2

FY

Grayling

46%

(7.7)%

(6.6)%

(5.4)%

(5.9)%

(7.2)%

(5.7)%

(6.4)%

Huntsworth Health

33%

11.8%

7.6%

3.3%

5.6%

9.7%

4.5%

7.1%

Citigate

14%

(4.3)%

5.3%

7.7%

(3.6)%

0.4%

1.8%

1.1%

Red

7%

0.0%

0.0%

(3.9)%

(24.1)%

0.0%

(14.3)%

(7.2)%

100%

(0.9)%

(0.1)%

(0.8)%

(3.5)%

(0.5)%

(2.2)%

(1.3)%

Total operations

31

2013 L4L revenue growth

Share of Group revenue

Preliminary Results – December 2013

Balance sheet

32

£’m

2013

2012

Intangible assets

293.0

293.6

Other non-current assets

5.5

5.7

Current assets – excluding cash

50.5

47.3

Other liabilities

(51.8)

(51.0)

Deferred consideration

(1.8)

(10.1)

Provisions

(1.5)

(2.0)

Net deferred tax

(4.3)

(2.4)

Net debt

(32.0)

(66.9)

Total net assets

257.6

214.2

Gearing

11.1%

23.8%

Preliminary Results – December 2013

Taxation  Income statement

- Underlying tax - Tax expense of £4.8m / Effective tax rate of 24.0% -

Highlighted tax - Tax credit of £1.1m

-

Total tax - Net tax expense of £3.7m

 Cash tax -

Net corporation tax paid £2.4m

- Difference in net tax paid of £2.4m vs. total tax expense of £3.7m is predominantly explained by non-cash items e.g. deferred tax

33

Preliminary Results – December 2013

Deferred consideration timing 

£1.8m future deferred consideration liabilities: - 2014 - £0.6m cash - 2015 - £0.6m cash - 2016 - £0.6m cash or shares (at Huntsworth discretion)

34

Preliminary Results – December 2013

5 Year financial history Revenue - £’m

PBT before investments - £’m

180

30

175

25

170 20 165

15 160 10 155 5

150

145

0 2009

35

2010

2011

Preliminary Results – December 2013

2012

2013

2009

2010

2011

2012

2013