GlobalData : Interim H1 2019

29 July 2019

GlobalData Plc

Unaudited Interim Report For The Six Months Ended 30 June 2019

"Revenue growth drives further margin improvement"

Financial Highlights

• Enhanced visibility on revenue, improved margin and strong operating cash flow.
• Group revenue increased by 18% to £88.5m (2018: £75.0m).
• Organic revenue growth (1) of 10%.
• Deferred revenue (7) increased by 15% to £77.2m (30 June 2018 restated: £67.2m), which represented 13% organic growth.
• Adjusted EBITDA(2) increased by 53% to £22.3m (2018: £14.6m), with margin of 25.2% (2018:19.4%).
• Adjusted profit before tax(4) increased to £19.4m (2018: £12.6m). Statutory profit before tax of £5.2m (2018: loss £4.2m).
• Cash flow from continuing operations increase of 97% to £34.1m (2018: £17.3m).
• Interim dividend increase 43% to 5.0 pence per ordinary share (2018: 3.5 pence).

Operational Highlights

• Our financial results demonstrate our progress towards becoming a world leading data and analytics business, with a proven business model.
• Continued product investment has focused on an enhanced user interface and integration of additional data sets and tools within our multi-industry platform, to give our clients a richer experience with greater insight.
• Integration of the Research Views businesses has been successful and our shift to a single product platform and centralised operating model is now complete.

Mike Danson, Chief Executive Officer of GlobalData Plc, commented:

"The first half results reflect the product development and integration since the acquisition of Research Views in April 2018. Our vision of creating a differentiated world-class product, that is integral to professionals across the world's largest industries, has been consistent throughout our development.

We look forward to the second half of 2019 in which we expect to further leverage the GlobalData platform, and we do so on the back of some very encouraging metrics in the first six months. Our results demonstrate the focus we have placed on our business model fundamentals and show the Group at an inflection point with further accelerated growth and margin improvement expected across the medium term.

ENQUIRIES
GlobalData Plc	0207 936 6400
Bernard Cragg, Executive Chairman
Mike Danson, Chief Executive
Graham Lilley, Chief Financial Officer
N+1 Singer	0207 496 3000
James White
Mark Taylor
Hudson Sandler	0207 796 4133
Nick Lyon

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Operating Review

	6 months to	6 months to 30	Year to 31
Continuing operations	30 June 2019	June 2018	December 2018
Income statement analysis	£'000	£'000	£'000
Revenue	88,499	74,992	157,553
Statutory profit/ (loss) before tax	5,184	(4,223)	(7,664)
Depreciation	1,924	383	742
Amortisation of software	478	551	1,165
Amortisation of acquired intangible assets	8,202	9,703	20,422
Other income	(629)	-	-
Finance costs	2,330	1,037	2,487
EBITDA3	17,489	7,451	17,152
Restructuring costs	581	1,033	3,661
Adjustment for change in accounting policy8	(1,264)	-	-
Share based payments charge	4,530	2,991	5,679
Revaluation of short and long-term derivatives	(299)	1,066	1,150
Unrealised operating foreign exchange loss	666	(44)	1,407
M&A costs	59	1,672	2,277
Deferred consideration related employee remuneration	518	386	904
Adjusted EBITDA2	22,280	14,555	32,230
Adjusted EBITDA margin2	25.2%	19.4%	20.5%
Cash flow analysis
Cash flow generated from operations	34,141	17,316	25,058
Adjusted operating cash flow 5	35,304	19,374	30,542
Underlying cash flow conversion %5	158%	133%	95%
Adjusted earnings performance
Adjusted EBITDA2	22,280	14,555	32,230
Depreciation	(1,924)	(383)	(742)
Amortisation of software	(478)	(551)	(1,165)
Finance costs	(2,330)	(1,037)	(2,487)
Other income9	629	-	-
Benefit arising on change in Accounting policy8	1,264	-	-
Adjusted Profit Before Tax	19,441	12,584	27,836
Tax (as charged to the Income Statement)	(3,010)	(344)	(3,408)
Adjusted Profit After Tax	16,431	12,240	24,428
Basic Shares	118,303	108,253	113,319
Diluted Shares	127,208	118,869	124,128
Attributable to equity holders:
Basic profit/ (loss) per share (pence)	1.84	(4.25)	(9.87)
Diluted profit/ (loss) per share (pence)	1.71	(4.25)	(9.87)
Adjusted earnings per share (pence)	13.89	11.31	21.56
Adjusted diluted earnings per share (pence)	12.92	10.30	19.68

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The first half results reflect the product development and integration since the acquisition of Research Views, in April 2018. Our vision of creating a differentiated world-class product that is integral to professionals across the world's largest industries, has been consistent throughout our development.

The GlobalData platform has had significant investment over the past four years, which we accelerated in the past 18 months in advance of a re-launch of our Intelligence Centre products earlier in 2019. Our single, integrated platform, now spans over 15 of the world's largest industries, with each industry product built upon a core layer of high value, and proprietary, "Gold Standard" data and insights. The scale of our platform gives us the operational leverage and product development firepower to invest in a significant amount of additional content that is applicable across all of our industries, as well as advanced software solutions, tools and functionality which enhances the client experience.

Our platform-based business model allows us to innovate and enhance our product on a continual basis whilst maintaining a relatively fixed cost base in absolute terms. We have demonstrated our ability to achieve this with Adjusted EBITDA margin of 25% in the first half (19% in H1 2018). Whilst our second half costs are typically higher, which may limit further margin expansion in the second half, we are confident that the Group has reached an inflection point whereby revenue growth generates a significant incremental margin and as a result have expectations of expanding our margin to 30% in the medium term.

The GlobalData approach is based around experienced, motivated management and our four strategic priorities. Alongside our product enhancements, our continued focus on sales excellence, training and a targeted pipeline has driven our like for like organic revenue growth by 10%. Moreover, we enter the second half of the year with deferred revenues having grown organically by 13%, reflecting consistent renewal rates and good rates of new business (derived by increasing our return from existing clients and new client wins).

We look forward to the second half of 2019 in which we expect to further leverage the GlobalData platform; and we do so on the back of some very encouraging metrics in the first six months. Our results demonstrate the focus we have placed on our business model fundamentals and show the Group at an inflection point with further accelerated growth and margin improvement expected across the medium term.

Key Achievements

• Revenue of £88.5 million: Group revenue has grown by 18% including the benefit from our acquisitions. Organic revenue growth was 10%.
• Deferred revenue of £77.2m: Deferred revenue has grown by 15%, organically by 13%.
• Adjusted EBITDA Margin: Achieved our margin target of 25% and whilst our costs are typically higher in the second half of the year, we look forward to further margin expansion across the medium term.
• Re-launchof Intelligence Centre Product: The Group re-launched its enhanced Intelligence Centre product across all of our industries in April this year.

Mission

Through our data and analytics we help our clients to decode the future, to be more successful and innovative. Our services provide our clients with innovative solutions to complex issues delivered via a single integrated online platform. Clients leverage our Gold Standard data and expert analysis across multiple markets and geographies, which is key to their strategic planning, competitive intelligence and new product development, as well as identifying new sector trends, marketing opportunities and new sales channel prospects. At a time of increased uncertainty and ever-constant change we aim to provide our clients with a realisable competitive advantage.

Our Strategic Priorities

Our principal goal is to become a world leading data and analytics business operating across multiple industries and geographies. Fundamental to the GlobalData Approach are our four core strategic priorities as we look to execute our plans and achieve our goal:

• World Class Products
• Sales Excellence
• Operational Agility
• Client Centric

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World Class Products

The core of our products is our high value proprietary Gold Standard data, which industry leaders and professionals rely upon in their daily activities. As well as our unwavering focus on maintaining the high standards we set ourselves on data quality and reliability, we have invested significantly in software, platform functionalities and alternative content sets which accompany and complement our core data and are becoming ever more important in our offering.

The GlobalData Approach is one of continual improvement and enhancements and our operating structure and business model will allow us to explore other innovations to our products, which will drive further value for our clients.

Sales Excellence

We have a global sales team operating in key geographies around the world and our priority continues to be to ensure that all of our global salesforce understand their markets and the value proposition of our product and to help them find the right opportunity at the right time.

Once again, our revenues have grown across all of our regions reflecting our approach, however we recognise that managing a global sales force is challenging and we continue to work hard on all of the these key aspects.

Operational Agility

Our business model is a relatively simple one: create the content once and leverage sales from that content across multiple formats (subscriptions, reports, research engagements and events) and geographies. Indeed, controlling costs and seeking constant operational improvements gives us the capacity to redirect some of our cost base to targeted innovation and product development investments as well as progressing our margin.

In the first half, we achieved our stated medium term target of 25% Adjusted EBITDA margin. We believe that our revenue growth will continue to increase our margin to 30% in the medium term.

Client Centric

Outstanding client service is a key element of our performance. Our aim is to deliver best in class client service at every point of interaction with our clients.

Our approach to client service aligns account managers, analysts and client service partners across all time-zones in which we operate. As we continue to embed client centricity throughout the organisation, we will use technology and tools to continually enhance the overall client experience.

Looking forward we will continue to focus on our strategic priorities, which will drive revenue and earnings growth and ultimately maximise shareholder value.

Our Employees

A key part of the GlobalData Approach is the experienced management team and talented employees, who continually drive the business forward. I would like to thank all our global colleagues for their hard work and dedication through the course of the first half and look forward to sharing continued success in the second half of 2019 and beyond.

Dividend

The Group's policy is to pay a dividend that reflects the growth and cash generation of the business. The Board is pleased to announce an interim dividend of 5.0 pence per share (2018: 3.5 pence). The interim dividend will be paid on 3 October 2019 to shareholders on the register at the close of business on 30 August 2019.

Current Trading and Outlook

There continues to be significant uncertainty following the UK's vote to leave the European Union, however as a Board we do not believe our impact assessment has changed on the matter since our statement in the 2018 Annual Report. We continue to monitor the key aspects applicable to us.

We have started the year well and having regard for our deferred revenues we are confident that we will make further progress for the year as a whole.

Mike Danson

Chief Executive Officer

26 July 2019

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Notes to the Operating review

• Revenue
  Revenues increased by 18% to £88.5m (2018: £75.0m), which reflects the benefit of our acquisitions and like for like underlying organic growth of 7% and a further benefit from currency fluctuations (particularly driven by USD) of 3% (total organic growth 10%). The organic revenue growth was driven by increased sales of our subscription products across all regions, which showed organic growth of 13% (10% excluding currency benefit). Recurring revenue now accounts for 76% of Group revenues (2018: 71%)
• Adjusted EBITDA
  Adjusted EBITDA increased by 53% to £22.3m (2018: £14.6m), which reflects revenue growth inclusive of acquisitions, as well maintaining a stable cost base. The result of which has seen an expansion of margin to 25% compared with 19%.
• Profit Before Tax
  Adjusted EBITDA has increased to £22.3m (2018: £14.6m) and Adjusted Profit Before Tax has increased from £12.6m to £19.4m. The Group incurred non-cash charges relating to amortisation of acquired intangibles of £8.2m (2018: £9.7m) reflecting our M&A activity over recent years, £4.5m of share based payments charge (2018: £3.0m) reflecting the accounting charge for our long term incentive plan and revaluation gain on derivatives (currency forward contracts) of £0.3m (2018: loss of £1.1m). Together with items relating to restructuring and acquisition fees of £0.7m and increased finance costs, statutory profit before tax was £5.2m (2018: £4.2m loss).
• Deferred revenue
  Deferred revenue increased by 15% to £77.2m at 30 June 2019 (30 June 2018 restated: £67.2m), with underlying organic growth at 11% year on year, with 2% currency benefit (total organic growth 13%). See note 1 for details of 2018 restatement.
  The majority of the Group's revenues are derived from annualised subscription contracts and deferred revenue is a key performance indicator for the Group. Growth in deferred revenue is monitored to assess current trading, client sentiment and visibility on future revenues.
• Cash Generation
  Cash generated from continuing operations increased to £34.1m (2018: £17.3m). Excluding cash costs associated with the acquisitions, underlying cash from operations represented 158% of Adjusted EBITDA representing the significant proportion of annual contracts that are invoiced in December each year, with the subsequent settlement from our clients being received in the first quarter of the year. Cash receipts reduce in the second half of the year.
• Net Debt
  Net Debt reduced by £6.8m to £57.3m (31 December 2018: £64.1m) principally due to the strong operational cash flows in the first half of the year, offset slightly by £8.2m spent on M&A activity.
• Impact of Currency
  We are a global business and as a result we incur revenue and costs in currencies other than our reporting currency of Sterling. Circa 65% of our revenues are in currencies other than Sterling, whereas only 40% of costs are non- Sterling. Therefore, whilst there is some natural hedge, the impact of currency movements does affect the Group's earnings. Generally a strong US Dollar in comparison to Sterling will benefit our revenues but has an adverse effect on costs and conversely, a weak US Dollar will have the opposite effect.
  During the first half, the average US Dollar to Sterling conversion rate was 1.29 compared with 1.38 in 2018, therefore the weaker Sterling in 2019 has benefitted the Group's EBITDA by £0.3m in the first six months.
• IFRS 16: Leases
  IFRS 16: Leases came into effect on 1 January 2019, this is the first set of accounts which incorporates the adoption of the new standard.
  The main impact of the standard is to capitalise the Group's rental leases as "right-of-use assets" within Property, Plant and Equipment on the Statement of Financial Position with corresponding liabilities representing the commitment to fulfil those lease obligations. The assets are then depreciated over the life of the lease and a notional interest charge is made against the liability.
  The standard allows for different transition options and the Group has adopted the Modified Retrospective: Asset equals liability approach, resulting in the Group adopting the standard from 1 January 2019 with no adjustment to reserves or comparative numbers. On adoption, the Group's assets increased by £36.1m with liabilities increasing by the same value.
  For the six months to 30 June 2019 reported EBITDA has increased by £1.3m as a result of rental costs no longer being charged to Administrative expenses. Additional depreciation and interest costs of £1.5m and £0.7m

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