2017 Interim Results 1 August 2017 - Northcote Internet€¦ · Leverage 2.80x 1.73x 1.45x 23.2...

2017 InterimResults1 August 2017

Introduction

Agenda

1.HighlightsMatthewCrummack

2.FinancialsNickWrighton

3.

4.OutlookMatthewCrummack

Business in focusMatthewCrummack

Highlights

Strong progress in H1 with delivery against our objectives

• Controlled revenue growth

• Improved marketing margin

• Increased adjusted operating profit by over 20%

• Continued to generate strong operational cash flow, reducing leverage

• Completed our first strategic investment

• Declared our first dividend

• Recruited new talent

• Transformed the way we work with a continual change program

• Made good progress on defining our strategy

Continued to save customers time and money

Revenue (£m)

4%

Adj Op Profit (£m)

22%

Adj basic EPS (pence)

14% 0.28x

Leverage

72.8

75.8

H1-16 H1-17

14.4

17.5

H1-16 H1-17

2.8

3.2

H1-16 H1-17

1.73

1.45

FY-16 H1-17

Financial Highlights

Agenda



3.


Business in focusMatthewCrummack

Total revenue (£m)

4%

Insurance revenue (£m)

4%

Strategic initiatives revenue(£m)

15%

LeverageAdjusted operating profit(£m)

22% 0.28x

Adjusted Admin costs (£m)

17%

Marketing margin (%)

5.1%pts

Adjusted basic EPS(pence)

14%

10.7

12.5

H1-16 H1-17

1.73

1.45

FY-16 H1-17

2.8

3.2

H1-16 H1-17

4.3

4.9

H1-16 H1-17

72.875.8

H1-16 H1-17

68.570.9

H1-16 H1-17

14.4

17.5

H1-16 H1-17

34.5%

39.6%

H1-16 H1-17

Strong Financial Performance

Revenue and marketing spend (£m) Marketing margin and contribution (£m)

Revenue growth of 4% compared to H1 2016 despite lower marketing spend

Increase in cost of sales reflects additional spend on on-line pay per click

Distribution cost lower as we did not launch a new

creative in H1

Half-on-half increase in contribution continuing – 20% up on H1 2016

Marketing margin expected to improve in H2 relative

to H1 as we benefit from conversion improvement

54.7 55.259.0

54.159.5 59.4

72.869.3

75.8

14.5 14.8 15.3 11.9 15.1 16.522.1 19.1 24.0

19.4 19.6 23.717.8

20.6 22.8

25.620.9

21.8

H1-13 H2-13 H1-14 H2-14 H1-15 H2-15 H1-16 H2-16 H1-17

Revenue Cost Of Sales Distribution Expenses

20.8 20.8 20.0

24.4 23.8

20.1

25.1

29.3 30.0

38.0% 37.7%

33.9%

45.1%

39.9%

33.8% 34.5%

42.3%39.6%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

H1-13 H2-13 H1-14 H2-14 H1-15 H2-15 H1-16 H2-16 H1-17

Revenue less marketing expense Marketing Margin

Increased revenue from lower marketing spend

Headcount CAPEX (£m)Adjusted admin costs (£m)

168187

197

H1-16 FY-16 H1-17

5.97.8 9.1

4.8

5.9 3.4

H1-16 H2-16 H1-17

Staff Non-Staff

0.9

0.4

0.8

H1-16 H2-16 H1-17

10.7

13.712.5

Modest increase in Headcount reflecting a strengthening and upskilling of the organisation

Increase in Admin costs compared to H1-16 reflects increase in headcount and plc costs

CAPEX remained modest

Business is scaling, with low CAPEX

13.3

12.8

Opening Operational CAPEX Investment Interest ClosingCash1 Cashflow Cash

Demerger(Proforma)

31/12/16 30/06/17

Borrowings £(75.0)m £(73.1)m £(73.2)m

Cash £4.0m £18.4m £23.2m

Net debt £(71.0)m £(54.7)m £(50.0)m

Leverage 2.80x 1.73x 1.45x

23.2(1.0)(0.8) (1.1)

Strong operational cash flow

£1m invested in Mortgage Gym

Cash of £23.2m at end of June

c£16m surplus after allowing for working capital and interim dividend

Leverage of 1.45x – triggers further reduction in margin

2017 H1 Cash flow (£m)

1 adjusted for £5.1m timing difference

Strong cash flow further reducing leverage

1.

1. Operational requirements

2. Repayment of debt – £10m per annum

3. Dividends – target pay out ratio of 20% - 40%

4.

4. Strategic investments

Interim dividend pay out ratio of c20% of PAT1– 0.7pence per share - total cost of £2.9m

Dividend pay-out reflects the potential opportunities for strategic investments in H2-17

Continue to prioritise capital allocation as follows:

Continue to explore both internal and external investment opportunities

Reduction in leverage provides headroom for potentially more material investments

2.

3

4

1 adjusted for the share based payment charge net of tax for the Foundation Awards

Interim dividend, priorities for using cash

Agenda

1.HighlightsMatthew Crummack

2.FinancialsNick Wrighton

3.

4.OutlookMatthew Crummack

Business in focusMatthew Crummack

Business in focus

1.

2. Why solving botheration is such a big deal….

3. How we are investing in solving for botheration

4. How creative marketing can help change behaviour4.

5.

Solving botheration is critical to our mission of helping people everywhere to save time & money

1 in 5 have never switched car, home insurance, energy

It’s toocomplicated

HASSLE

I can’tbe bothered

APATHY

Investment in internalinnovation

Investment in externalinnovation

Marketingscience driving

botheration

We help people everywhere save time and money

Contents£56m

Contents & Buildings£535m

Buildings£7m

Car£527m

Energy£932m

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£2bn alone could be saved in the UK for the ‘never switched’

£2,056,871,00


Total annual cost of botheration*

20.1 million car insurance policies

3,658,000 have never switched car insurance

Difference in spend

£526,781,000Annual cost of botheration*

26.3 million households

8,469,000 have never switched home energy supply

Difference in spend


3.6 million policies for home contents insurance

998,000 have never switched home contents insurance

Difference in spend


16.9 million policies for combined home insurance

4,735,000 have never switched combined home insurance

Difference in spend


450,000 policies forhome building insurance

126,000 have never switched home building insurance

Difference in spend


These consumers can save real money on core household bills


£144Per annum

£110Per annum

£56.50Per annum

£113Per annum

£56.50Per annum

* Populus research 5,000 switchers vs non-switchers May 2017’* Component figures rounded to nearest £1k and may not sum exactly

Internal investment driving botheration through innovationContinuing to reconfigure for agility

• People: Completed major transformation on team and individual working and accountabilities

• Process: Continuous improvement in software engineering and Product are driving higher quality and higher output: better communication and test-fail strategies are reducing re-work

• Improving automated release capabilities to deliver value faster through DevOPs

• Software architecture improvements, including a shift to micro-services, are managed symbiotically through shorter software release cycles

Site releases per month0

5

10

15

20

25

Jan

15

Feb

15

Mar

15

Ap

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5M

ay 1

5Ju

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5Ju

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Dec

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Jan

16

Feb

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Mar

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Ap

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6M

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Dec

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Jan

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Feb

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Mar

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Dec

17


Shifting from software development hygiene to innovation

With basic journey development allowing for continual improvement, we are shifting to innovative product development, reimagining the customer experience.

• The completion of our new Van journey is a great example: completed quickly by a small squad, enabling a framework for independent release of all product journeys

• Post H1 changes, we are kicking off several innovation development streams, focused on fundamental change to our customer experience, reducing hassle further, and driving higher repeat rates


0%

10%

20%

30%

40%

Jan 2017 Feb 2017 Mar 2017 Apr 2017 May 2017 Jun 2017

% Desktop customers rating core journeys easy or very easy

0%

10%

20%

30%

40%

Apr 2017 May 2017 Jun 2017

Onsite feedback survey


% Mobile core journeys rating very difficult

“Quick and easy to access and change information”18/06/17 11:34

It’s early days, but we do see positive consumer reaction

“A friend told me that this company are reliable and quick”23/06/17 21:07

“The programme is set up from previous year and is just a matter of checking the details and progressing for a new quote. Easy!”29/06/17 15:18

“I always use Gocompare for simple, straightforward information and instructions. For a computer-illiterate person, it was stress free and very helpful” 29/06/17 13:51

Investing in fintech innovation at the core of botheration

Strategic partnership with MortgageGym in the PCW space launching in September 2017

Innovative end-to-end hybrid online mortgage advice

The 2014 Mortgage Market Review translated into more friction for customers in their mortgage application process. MortgageGym solves this uniquely by focusing on the customer experience through a hybrid broker network

Key factsFREE consumer service

REVENUE from brokers year 1 onwards

46%of internet searches are mortgages across all financial service products

LIVEintegration into most of the UK’s largest mortgage lenders for eligibility and affordability decisions

2.55m consumers – UK target market

MATERIAL secondary revenue stream from SaaS & data value

FIRST online robo-advice mortgage broker

GLOBAL potentially scalable internationally


Source: Mortgage Gym Limited

‘Onwards & Upwards’ 60’ TVC

Launch date – 23rd July

New Advertising campaign starts with a 60 sec TVC that sees our iconic Brand asset Gio Compariobringing to life our Mission to save people time and money everywhere and delivering our Brand promise to create a Fairer World for All

‘Proudly Independent, Free and Fair’

‘Unbiased information’

‘Find your perfect deal from many….or they don’t make a single penny’

£2bn cost of Botheration supported by PopulusResearch

Addressing botheration via marketing science


Agenda



3.


Businessin focusMatthewCrummack

Outlook

Revenue growth in H2 to be stronger than in H1, with full year revenue growth of high single-digits

A further improvement in marketing margin in H2 compared to H1

Adminexpenses to increase at a slower pace than revenue for the full year

Further strategic investments in H2

2017 Interim Results 1 August 2017 - Northcote Internet€¦ · Leverage 2.80x 1.73x 1.45x 23.2...

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Transcript of 2017 Interim Results 1 August 2017 - Northcote Internet€¦ · Leverage 2.80x 1.73x 1.45x 23.2...