THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
For immediate release
1 April 2020
Kin and Carta plc
Kin and Carta plc ('Kin + Carta') today updates the market on the impact of COVID-19 on its business and the steps it is taking to mitigate the risks it presents.
Following the announcement on 11 March 2020 of Kin + Carta's half year results for the period from 1 August 2019 to 31 January 2020, we have been closely monitoring the risk of COVID-19 on our operations. The virus has impacted markets around the world, creating unexpected discontinuity and uncertainty for all businesses. This has led a few of our clients to scale back or suspend some projects, alongside a partial slow down in our pipeline conversion. 78% of our revenue is from multi-year client engagements and as such we are seeing many large digital transformation programmes continue as planned. Until the scale and duration of disruption is more clear, we will not be providing further guidance.
Supporting our clients remains our priority and as such we have taken measures to allow us to continue serving them during this challenging time. The nature of our work in digital transformation is core to our clients' businesses, and they have welcomed our support and our ability to deliver projects remotely. With our clients now largely functioning online, the digital interface between the client and their customer has never been more important.
We have also taken steps to protect and support our staff during this difficult time in order to preserve the capabilities required to allow us to take advantage of the upturn in the market once the crisis abates. Given the nature of our business, remote working was already a widespread practice amongst our staff and this ability to serve our clients and operate the business has allowed us to continue to deliver client projects. In all of our offices we have reduced physical staff attendance to a minimum and we are now working remotely across the globe.
Given the current uncertainties caused by COVID-19, the Board considers that conserving cash and maintaining maximum financial flexibility is in the long term best interests of the business and all its stakeholders. We are implementing a number of actions to achieve this. We have initiated a cost reduction programme across the business which includes a number of targeted redundancies and furloughs, as well as voluntary pay reductions for executives and staff. Should the risks impact our business further, we have additional cost reduction measures at our disposal.
Accordingly, the Board has taken the decision to withdraw its recommendation to pay the previously proposed interim dividend of 0.65 pence per share, which would have been payable on 7 May 2020. The Board recognises the importance of dividends to our shareholders and will consider the timing and the quantum of dividends when greater clarity around the business has returned.
We are in the process of agreeing the triennial valuation as of 30 April 2019 with the Trustees of the legacy St Ives defined benefit pension scheme. The recovery plan currently includes approximately £3 million of cash deficit repair contributions per annum. In light of the impact of COVID-19 and as part of the triennial process, the level of contributions is a matter of discussion with the Trustees. In addition, the asset investment strategy of the scheme is designed to provide protection in a downturn in asset markets: the asset portfolio continues to have instruments that hedge 90% of the impact of variations in interest rates and inflation rates and makes use of derivative overlays that protect against significant falls in equity markets.
We have updated our fiscal stress tests across the business, modelling various levels of revenue decline, reduced cash flows and the related mitigating steps available to reduce our cost base and conserve cash. We do not currently anticipate liquidity constraints, but anticipate a potential technical breach of our current net debt to EBITDA covenant for a period of time given the current circumstances. Following ongoing dialogue with our banks, they are supportive of our business and the measures we are implementing.
We are continuing to monitor external risks and our internal stress models carefully.
Whilst we are reassured by the longevity and depth of our client relationships and our clients' continuing need for digital transformation services, further highlighted by the COVID-19 crisis, the current situation causes us to be cautious about the near-term prospects. We continue to take prudent steps to reduce costs, conserve cash, and protect our staff while ensuring we continue to support our clients and protect our core capabilities. We expect to be well positioned when the business climate recovers.
Kin + Carta
J Schwan CEO
Chris Kutsor CFO
+44 (0) 207 928 8844
Elly Williamson / Jessica Hodgson
+44 (0)20 3328 8386
Numis Securities Limited
Nick Westlake / Matt Lewis
+44 (0)207 260 1345
This announcement contains inside information and is issued on behalf of Kin + Carta by Daniel Fattal, Company Secretary.
Cautionary statement regarding forward-looking statements
This Announcement may contain 'forward-looking statements' with respect to certain of Kin + Carta's plans and its current goals and expectations relating to its future financial condition, performance, strategic initiatives, objectives and results. Forward-looking statements sometimes use words such as 'aim', 'anticipate', 'target', 'expect', 'estimate', 'intend', 'plan', 'goal', 'believe', 'seek', 'may', 'could', 'outlook' or other words of similar meaning. By their nature, all forward-looking statements involve risk and uncertainty because they are based on numerous assumptions regarding Kin + Carta's present and future business strategies, relate to future events and depend on circumstances which are or may be beyond the control of Kin + Carta which could cause actual results or trends to differ materially from those made in or suggested by the forward-looking statements in this Announcement, including, but not limited to, domestic and global economic business conditions; market-related risks such as fluctuations in interest rates; the policies and actions of governmental and regulatory authorities; the effect of competition, inflation and deflation; the effect of legislative, fiscal, tax and regulatory developments in the jurisdictions in which Kin + Carta and their respective affiliates operate; the effect of volatility in the equity, capital and credit markets on profitability and ability to access capital and credit; a decline in credit ratings of Kin + Carta; the effect of operational and integration risks; an unexpected decline in sales for Kin + Carta; inability to realise anticipated synergies; any limitations of internal financial reporting controls; and the loss of key personnel. Any forward-looking statements made in this Announcement by or on behalf of Kin + Carta speak only as of the date they are made. Save as required by the Market Abuse Regulation, the Disclosure Guidance and Transparency Rules, the Listing Rules or by law, Kin + Carta undertakes no obligation to update these forward-looking statements and will not publicly release any revisions it may make to these forward-looking statements that may occur due to any change in its expectations or to reflect events or circumstances after the date of this Announcement.