ZPG Plc 2017 Full Year results 29 November, 2017
FY17 Highlights Alex Chesterman (Founder & CEO) Finance Review Andy Botha (CFO) Business Review Alex Chesterman (Founder & CEO) Summary & Outlook Alex Chesterman (Founder & CEO) Q&A 2
FY17 Financial highlights Revenue ( m) +24% Adjusted EBITDA ( m) +25% (1) 197.7m 244.5m 77.1m 96.4m FY16 FY17 Adjusted basic EPS (p) +20% (2) FY16 FY17 Full Year dividend (p) +10% 12.7p 15.2p 5.2p 5.7p FY16 FY17 FY16 FY17 (1) Adjusted EBITDA is defined as operating profit after adding back depreciation and amortisation, share-based payments and exceptional items (2) Adjusted basic EPS is calculated as profit for the period excluding exceptional items and amortisation of intangible assets arising on acquisitions, adjusted for tax and divided by the weighted average number of shares in issue for the period (3) Full Year dividend includes an interim dividend of 1.9 pence per share and ZPG s proposed final dividend of 3.8 pence per share 3
FY17 Operational highlights 648m+ 56m+ 25k+ 400m+ Visits Leads Partners Savings 4
Continuing to execute on our strategy Launched MovePlanner on Zoopla Expanded uswitch accounts Enhanced partner proposition Executed further M&A and partnerships 5
FY17 Highlights Alex Chesterman (Founder & CEO) Finance Review Andy Botha (CFO) Business Review Alex Chesterman (Founder & CEO) Summary & Outlook Alex Chesterman (Founder & CEO) Q&A 6
Record financial performance, reaching new milestones 244.5m Revenue +24% 96.4m Adjusted EBITDA +25% 37.4m(1) Profit for the year +2% Strong underlying performance & contribution from acquisitions Continued investment in brands, product & team Deal-related costs & share-based payments 88% Cash conversion ratio Highly cash generative (2) 2.0x Leverage ratio Transformative M&A (3) 5.7p Full year dividend Delivering outstanding shareholder returns (1) Profit for the year includes exceptional items and amortisation of intangibles arising on acquisitions (adjusted for tax) of 27.6m during the Period, resulting from acquisitions (2) Cash conversion ratio is calculated as: Net cash flows from operating activities less deal-related transaction costs/ebitda (3) Leverage ratio is calculated as net debt (loans and borrowings less cash and cash equivalents) divided by 12 month rolling proforma Adjusted EBITDA 7
Significant Property revenue growth Property partners (#) +12% Blended ARPP ( ) +5% Property revenue ( m) +41% 22.3k (1) 24.9k 340 358 86.7m 122.3m FY16 FY17 FY16 FY17 FY16 FY17 m FY16 FY17 YoY % Agency 66.5 87.1 31 New Homes 11.7 13.1 12 Other 2 8.5 22.1 160 Property revenue 86.7 122.3 41 (1) The total number of unique Property partners has been restated to exclude 788 legacy software customers of Property Software Group who are not paying for an active support contract and to include Zoopla Advertising and Data partners (2) Other comprises revenue generated from advertising and data (including Hometrack) 8
With solid underlying Partner & ARPP growth Property revenue bridge UK Agency (portal only) 13.0m 9.1m 1.4m 2.5m 122.3m 57.0m 61.8m 96.3m FY16 FY17 m FY16 FY17 YoY % (3) UK Agency partners 13,999 14,775 6 UK Agency ARPP 350 359 3 FY16 Revenue (1) Organic growth Marketing Software Data FY17 Reported Revenue Acquisitions during the year (2) (1) Includes a full twelve months trading from Property Software Group which was acquired during FY16 (2) Acquisitions include contribution from Technicweb, Hometrack and ExpertAgent and Ravensworth during the year (3) The number of UK Agency partners includes hybrid agents calculated on an equivalent branch basis in line with our peers 9
Strong switching levels across Comparison Comparison leads (#) +13% Blended ARPL ( ) (3%) Comparison revenue ( m) +10% 30.2m 34.3m 3.68 3.57 111.0m 122.2m FY16 FY17 FY16 FY17 FY16 FY17 m FY16 FY17 YoY % Energy 52.7 60.1 14 Communications 44.1 44.0 (0) Other 14.2 18.1 27 Comparison revenue 111.0 122.2 10 10
Continued investment in people, product & brands Operating costs +23% Cost mix % 148.1m 11% 14% 120.6m 56% 13.3m 20.5m 51.6m 31% 56% 35% 36.9m 70.4m 76.0m 58% 51% FY16 FY17 FY16 FY17 Marketing Staff Other (1) Other costs represents technology, property and administrative costs 11
High levels of cash generation & conversion 74.3m 164.3m 88% 117.5m Cash conversion ratio (1) 81.0m 7.1m 23.6m 5.8m 75.4m 3.4m 30-Sep-16 1-Oct-16 Cash flows from Debt raised (net operating of repayments) activities Issue of share capital Acquisitions and investments Capex Dividends Interest paid & others 30-Sep-17 m FY16 FY17 Total loans and borrowings 149.7 266.9 Cash and cash equivalents (3.4) (75.4) Net debt 146.3 191.5 (1) Cash conversion ratio is calculated as: Net cash flows from operating activities less deal-related transaction costs/ebitda 12
Delivering outstanding shareholder returns +24% +25% 40% 2.0x Revenue growth Adj. EBITDA growth Dividend payout Leverage ratio (1) Leverage ratio is calculated as net debt (loans and borrowings less cash and cash equivalents) divided by 12 month rolling proforma Adjusted EBITDA 13
Increased revenue diversity & enhanced offering Energy 22% Marketing 32% Comms 16% 14% 8% 8% Software Finance Data Source: FY17 Pro forma revenue (unaudited). The figures include a full twelve month s trading from TechnicWeb, Hometrack, ExpertAgent, Ravensworth and Money in order to give a more meaningful comparative 14
With updated divisional KPIs Company KPIs REVENUE STAFF COSTS MARKETING COSTS OTHER COSTS ADJUSTED EBITDA VISITS & FTEs Divisional KPIs MARKETING PROPERTY REVENUE SOFTWARE DATA ADJUSTED EBITDA PARTNERS ARPP ENERGY COMPARISON REVENUE COMMS FINANCE ADJUSTED EBITDA LEADS ARPL 15
Showing strong underlying growth Company KPIs ( m) FY16 FY17 YoY % REVENUE 259.8 282.5 9 ADJUSTED EBITDA 99.0 109.2 10 Margin 38% 39% VISITS (MILLION) 630 676 7 FTES 937 942 1 PROPERTY ( m) FY16 FY17 YoY% MARKETING 85.6 91.6 7 SOFTWARE 20.8 23.2 12 DATA 17.9 21.0 17 REVENUE 124.3 135.8 9 ADJUSTED EBITDA 52.5 60.9 16 Margin 42% 45% COMPARISON ( m) FY16 FY17 YoY% ENERGY 54.9 62.6 14 COMMUNICATIONS 44.1 44.0 0 FINANCE 36.5 40.1 10 REVENUE 135.5 146.7 8 ADJUSTED EBITDA 46.5 48.3 4 Margin 34% 33% KPIS FY16 FY17 YoY% PROPERTY PARTNERS (#) 24,920 25,465 2 ARPP ( ) 432 454 5 KPIS FY16 FY17 YoY% LEADS (# MILLION) 45.3 50.9 12 ARPL ( ) 2.99 2.88 (4) Source: FY16 and FY17 Pro forma financials (unaudited). Each period includes a full twelve month s trading from Property Software Group, TechnicWeb, Hometrack, ExpertAgent, Ravensworth and Money in order to give a more meaningful comparative 16
Finance summary Strong financial performance across the business Cross-sell strategy to both consumers & partners is working Highly cash generative with strong deleveraging profile Integration of acquisitions including Money going well 17
FY17 Highlights Alex Chesterman (Founder & CEO) Finance Review Andy Botha (CFO) Business Review Alex Chesterman (Founder & CEO) Summary & Outlook Alex Chesterman (Founder & CEO) Q&A 18
Transparency & efficiency drive us TRANSPARENCY EFFICIENCY Find Empowering smarter property Market Move and household Manage decisions SOFTWARE SOFTWARE Manage Consumers DATA DATA Maximise Partners 19
With a portfolio of leading brands and products PROPERTY COMPARISON MARKETING SOFTWARE DATA ENERGY COMMS FINANCE (1) (1) Acquisition expected to complete on 1 December 2017 20
We re stronger and more diversified than ever More consumer traffic than ever before with more services to engage with More partners than ever before with more products to offer them More partners than ever before with more products to offer them More consumer traffic than ever before with more services to engage with 21
And we re continuing to innovate and differentiate Launched Zoopla MovePlanner Enhanced uswitch accounts 22
With our cross-sell strategy clearly working 25% of mortgage visits to uswitch from Zoopla 10,000+ new Comparison partner leads pm Products per Property partner up by 27% to 1.4 1m+ of referral fees generated via MoveIT 23
We ve made some more exciting strategic investments 24
And our latest acquisition is a perfect fit 1 2 3 4 5 Strategic fit Market leading Growth opportunity Value add Strong ROI 25
Calcasa highlights 1 Market-leading Calcasa is a leading provider of residential property market analysis in the Netherlands Deeply integrated and long-term relationships (10yr+) with many of the top lenders Analysed by the ECB, Dutch Central Bank and all the major ratings agencies Strategic-fit Combination creates the largest residential property valuation database in Europe Builds on Hometrack s leading position in UK & Australia as an international data platform Further enhancing ZPG s data expertise, product capabilities and partner relationships Value-add Subscription model with strong record of sustained revenue growth & profitability Significant structural growth and opportunities to drive incremental ZPG revenues Expected to be earnings & margin enhancing on an adjusted basis in the first full year 26
FY17 Highlights Alex Chesterman (Founder & CEO) Finance Review Andy Botha (CFO) Business Review Alex Chesterman (Founder & CEO) Summary & Outlook Alex Chesterman (Founder & CEO) Q&A 27
FY17 Summary & Outlook Record revenue & Adjusted EBITDA performance Strong consumer engagement & partner growth Good start to first half across both divisions Comfortable with current market expectations for FY18 1 (1) As at 28 November 2017 Company collated consensus figures for FY18 Revenue and EBITDA were 302m and 118m, respectively. These figures include only those analysts who have published updated figures since 7 September 2017, the date of our last market update. 28
FY17 Highlights Alex Chesterman (Founder & CEO) Finance Review Andy Botha (CFO) Business Review Alex Chesterman (Founder & CEO) Summary & Outlook Alex Chesterman (Founder & CEO) Q&A 29
Appendix 26 30
Summary Income statement REPORTED SUMMARY INCOME STATEMENT M FY16 FY17 YOY % REVENUE 197.7 244.5 24 OPERATING COSTS (120.6) (148.1) 23 ADJUSTED EBITDA 77.1 96.4 25 SHARE-BASED PAYMENTS (4.8) (7.6) 58 DEPRECIATION (1.7) (1.2) (29) AMORTISATION OF OTHER INTANGIBLES (2.0) (2.6) 30 AMORTISATION OF INTANGIBLE ASSETS ARISING ON ACQUISITIONS (7.5) (14.6) 95 EXCEPTIONAL ITEMS (11.4) (16.7) 46 OPERATING PROFIT 49.7 53.7 8 NET FINANCE COSTS (3.5) (5.6) 60 PROFIT BEFORE TAX 46.2 48.1 4 INCOME TAX EXPENSE (9.5) (10.7) 13 PROFIT FOR THE YEAR 36.7 37.4 2 (1) ADJUSTED PROFIT FOR THE YEAR 52.4 65.0 24 (2) ADJUSTED BASIC EPS (PENCE PER SHARE) 12.7 15.2 20 (1) Adjusted profit for the year is calculated as profit for the year after adding back exceptional items and amortisation of intangible assets arising from acquisitions adjusted for tax (2) Adjusted basic EPS is Adjusted profit for the year divided by the weighted average number of shares in issue for the period 31
ZPG KPIs The figures below include a full twelve month s trading from Property Software Group, TechnicWeb, Hometrack and ExpertAgent, Ravensworth and Money to give a more meaningful comparator. Company KPIs ( m) FY16 FY17 YoY % REVENUE 259.8 282.5 9 STAFF COSTS (52.7) (59.6) 13 MARKETING COSTS (83.7) (87.2) 4 OTHER COSTS (24.4) (26.5) 8 TOTAL COSTS (160.8) (173.3) 8 ADJUSTED EBITDA 99.0 109.2 10 Margin 38% 39% KPIS FY16 FY17 YoY % VISITS (MILLION) 630 676 7 FTES 937 942 1 Source: FY16 and FY17 Pro forma financials (unaudited). Each period includes a full twelve month s trading from Property Software Group, TechnicWeb, Hometrack, ExpertAgent, Ravensworth and Money in order to give a more meaningful comparative 32
Updated divisional KPIs disclosure PROPERTY ( m) FY16 FY17 YoY% MARKETING 1 85.6 91.5 7 SOFTWARE 2 20.8 23.2 12 DATA 3 17.9 21.0 17 REVENUE 124.3 135.7 9 ADJUSTED EBITDA 52.5 60.9 16 Margin 42% 45% KPIS PROPERTY PARTNERS (#) 4 24,920 25,465 2 ARPP ( ) 5 432 454 5 COMPARISON ( m) FY16 FY17 YoY% ENERGY 6 54.9 62.6 14 COMMUNICATIONS 7 44.1 44.0 0 FINANCE 8 36.5 40.1 10 REVENUE 135.5 146.7 8 ADJUSTED EBITDA 46.5 48.3 4 Margin 34% 33% KPIS LEADS (# million) 9 45.3 50.9 12 ARPL ( ) 10 2.99 2.88 (4) 1. Marketing represents revenue generated from the provision of marketing services including portal, websites and print revenues 2. Software represents revenue generated from the provision of software services 3. Data represents revenue generated from the provision of data services 4. Total unique number of Property partners is defined as the total number of unique businesses paying for ZPG Property services during the period (subscription or transactional) 5. ARPP (average revenue per partner) is defined as total Property revenue generated divided by the total number of Property partners during the month, measured as a monthly average over the period 6. Energy represents revenue generated from energy switching services, business energy and boiler cover 7. Communications represent revenue generated from mobile, broadband, pay TV and home phone switching services 8. Finance represents revenue generated from financial product switching services 9. A Comparison lead is measured at the point when a consumer shows intent to switch via an application form hosted on the Company's website, clicks through to a specific offer or at the point in time when the customer leaves the Company's website having clicked through to a third-party website 10. ARPL (average revenue per lead) is defined as total Comparison revenue divided by the total number of Comparison leads during the period Source: FY16 and FY17 Pro forma financials (unaudited). Each period includes a full twelve month s trading from Property Software Group, TechnicWeb, Hometrack, ExpertAgent, Ravensworth and Money in order to give a more meaningful comparative 33
Accounting notes (before Calcasa) Guidance for below EBITDA line items FY18 FY19 FY20 SHARE-BASED PAYMENTS 8m to 9m p.a UNDERLYING D&A 5m to 6m p.a NET FINANCE COSTS 8m to 9m 7 to 8m 7 to 8m Guidance for deal-related items which are excluded from adjusted basic EPS (1) FY18 FY19 FY20 AMORTISATION OF ACQUIRED INTANGIBLE ASSETS c. 27m c. 27m c. 27m (1) EXCEPTIONAL ITEMS c. 9m c. 2m c. 1m (1) Exceptional items include deferred and contingent consideration payable to Management shareholders continuing in employment, acquisition related performance bonuses and transaction costs 34
Calcasatransaction summary Consideration Initial consideration of 30.0m ( 26.5 million 1 ) on completion on a cash-free, debt-free basis Performance-based earn-out of up to 50.0 million ( 44.2 million 1 ) over the next 3 years Total consideration represents a maximum multiple of 10x FY17-FY20 Net Profit for Calcasa Financing Transaction to be funded through cash and extension of existing credit facilities Planned opening net debt ratio of c.2.9x the enlarged Company s EBITDA Strong deleveraging profile based on Company s cash generation Impact Completion of the acquisition is expected to take place on 1 December 2017 Company to maintain current dividend policy of 35%-45% payout ratio Transaction costs of c. 0.3m in FY18 and acquired amortisation charge of c. 2.5m p.a (1) Exchange rate of GBP/EUR = 1.13 35
Disclaimer This document contains forward-looking statements. These forward-looking statements include all matters that are not historical facts. Statements containing the words believe, expect, intend, may, estimate or, in each case, their negative and words of similar meaning are forward-looking. By their nature, forward-looking statements involve risks and uncertainties because they relate to events that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that the Company s actual financial condition, results of operations and cash flows, and the development of the industry in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this document. In addition, even if the Company s financial condition, results of operations and cash flows, and the development of the industry in which we operate are consistent with the forward-looking statements in this document, those results or developments may not be indicative of results or developments in subsequent periods. Important facts that could cause the Company s actual results of operations, financial condition or cash flows, or the development of the industry in which we operate, to differ from current expectations include those principal risks and uncertainties disclosed below. As a consequence, the Company s future financial condition, results of operations and cash flows, as well as the development of the industry in which we operate, may differ from those expressed in any forward-looking statements made by us or on the Company s behalf. 36