Annual Report and Accounts and Notice of AGM

RNS Number : 9228F

Kin and Carta PLC

31 October 2018

 

31 October 2018

Kin and Carta plc

('Kin + Carta', the 'Group' or the 'Company')

2018 Annual Report and Accounts and Notice of AGM

Further to the Company's announcement of its annual results on 9 October 2018, copies of the Annual Report and Accounts 2018 for the fifty three weeks ended 3 August 2018 ('the Annual Report 2018'), the Notice of Annual General Meeting of the Company and the Form of Proxy in relation to the Annual General Meeting ('the Shareholder Documents') have today been submitted to the National Storage Mechanism and will shortly be available for inspection at: www.morningstar.co.uk/uk/nsm

The Shareholder Documents will shortly be available to download from the Company's investor website at https://investors.kinandcarta.com/ under Financial Reports and Company Circulars, respectively, in the Shareholder Information section of the investor website.

Copies of the above Shareholder Documents have today been posted or made available to shareholders.

The Company's Annual General Meeting will be held at 11.00 a.m. on Thursday, 29 November 2018 at One Tudor Street, London EC4Y 0AH.

Additional Information

The following information is extracted from the Annual Report 2018 (page references are to pages in the Annual Report 2018) and should be read in conjunction with the Company's announcement of its annual results issued on 9 October 2018.  Both documents can be found at https://investors.kinandcarta.com/ and together, constitute the material required by DTR 6.3.5 to be communicated to the media in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the Annual Report 2018 in full.

Principal Risks and Uncertainties

Risk	Description	Change in 2018	Mitigating activities
GROWTH Growth initiatives may be under invested or not pursued in the right sectors or territories and may therefore fail to deliver growth.	Whilst our digital transformation businesses have strong client servicing organisations, some have under invested in new business and partnership channels, compromising potential growth rates.	Increased. Achieving growth remains a key strategic objective for the Group. The Board considers that the risk rating has increased compared to the prior year due to the increased focus and smaller size of the Group following the disposal of the legacy print businesses. As such it is the impact rather than the likelihood that has resulted in the increase.	Further investment in new business functions. Developing the Group's proposition (The Connective) to encourage collaborative behaviour and growth opportunities. Detailed budgets and three-year plans submitted to the Board for review. Stringent selection criteria followed for pursuing acquisitions that fit within the Group's strategy and culture.
SCALABILITY Digital Transformation businesses may not have sufficient scale within their sectors to secure substantial customer contracts.	Achieving scalability is important within our Digital Transformation businesses in order to pursue a high growth strategy. Whilst included as a risk, achieving greater scalability is also an opportunity for the Group.	Unchanged. The inherent risk rating remains the same; however, the Board considers the residual risk rating to be lower than the prior year due to the encouraging signs within The Connective, greater collaboration and the merging of businesses (see Assimilation risk below).	Collaboration by businesses such as working on joint pitches. Organic growth of businesses through recruitment drives and opening of new offices. Bringing businesses closer together under a single senior management team (such as in Data) to achieve a greater combined scalable offering. Investment in high growth digital transformation businesses and greater focus on securing longer-term contracts.
ASSIMILATION The Group has merged six of its businesses into two digital platforms - AmazeRealise and Edit. Whilst this is the right move in order to create a solid platform for growth, there is a risk of short-term impacts as the businesses assimilate.	Short-term impact from merging businesses could manifest in the form of temporary challenges as cultures are merged and logistic considerations are managed.	New risk. This risk has been added as a key risk this year following the recent merging of businesses. It is considered to be a short-term risk during the integration phase and will continue to be monitored by the Board.	New office moves to house new businesses in the same location and to create a more positive working environment. People focused initiatives and bonding to encourage a uniform culture. Developing processes and procedures to increase efficiency.
ECONOMY AND VOLATILITY Challenging economic conditions may inhibit growth and create uncertainty. This could lead to volatility in earnings given the smaller size of the Group following the disposal of the legacy print businesses.	Uncertainty in the economy, largely associated with Brexit, could result in marketing campaigns or projects being cancelled or deferred at short notice. Whilst the Group does have long-term contracts with clients, the level of spend is predominantly at the client's discretion rather than being derived from guaranteed sales volumes.	Unchanged. This risk rating remains high. Whilst selling the print legacy businesses has in part de-risked exposure to markets that have been noticeably impacted by economic developments (e.g. the grocery sector), an economic downturn could still have a very significant impact on the Group's activities.	Diversification into markets that are capable of delivering profit growth with an increasing range of our businesses. Diversification through growth in the US and opportunities pursued to open overseas offices, where client demand warrants it. Investment in a wider range of services offered to clients. A continual review of the Group's cost base. Secure more long-term client relationships and contracts. Seek to increase market share by investing in sophisticated and targeted sales lead generation. A regular review of performance of all businesses against their budgets, monthly forecasting and implementing remedial action, where needed.
CLIENTS Competitive pressure that may result in the loss of a key client.	The Group has a variety of key clients. Long-term relationships have been fostered with many of these clients over a number of years.	Decreased. Following the disposal of the legacy print businesses this risk, whilst significant, has been revised as a lower risk compared to the prior year. The print segments had experienced over capacity with price pressure largely prevalent. No single client makes up more than 5% of the Group's revenue.	Encourage collaborative behaviour across the Group's businesses and create a commitment to cross-selling that will distinguish the Group's digital transformation offering from its competitors'. Achieve or exceed service level agreements with clients. Broaden our capabilities, providing marketing solutions in support of our clients' marketing strategies. Avoid over reliance on any single client. Implement bespoke propositions for securing the renewal of key client contracts, providing Group support where appropriate Conduct client satisfaction surveys.
OUR PEOPLE A failure to attract, develop and retain employees with the necessary talent for our businesses.	Retaining and recruiting staff is a key priority for the Group as it continues to invest in new and existing service orientated businesses. Following the disposal of the legacy print businesses, the Group is now entirely a people focused business.	Unchanged. This risk rating is consistent with the prior year and reflects how central and key our people are to everything the Group is striving to achieve.	Implement appraisals and fulfil training needs where identified. Develop a collaborative culture across the Group's businesses. Operate discretionary share-based incentive schemes, and other benefits. Pay part of consideration in shares to vendor directors of acquired businesses, with 'lock-in' obligations. Ability of people to second or transfer to different parts of the Group which is enabled by the make-up of The Connective.
BRAND AND CULTURE The Group has undergone a rebranding and whilst considerable thought has gone into this, there is a risk that it might not resonate with the Group's stakeholders and not facilitate the culture being promoted.	It is vital that the Brand architecture is cohesive and easily understood by customers and top talent globally.	New Risk. This is a new risk following the launch of the new brand, Kin + Carta.	Involving the operating businesses with the rebranding and its launch through undertaking a thorough consultation process. Strong leadership alignment at the top of the organisation to demonstrate that the Group's purpose is to serve its employees and not the other way around.
FINANCE The Group's ability to trade may be compromised by a lack of cash funds.	Being able to finance working capital and carry out operations is fundamental to the Group.	Unchanged. The risk rating is consistent with the prior year. The bank facility was renewed on 3 September 2018 and runs up to 30 November 2022 with an option to extend for a further year; further details are provided on page 135.	Conduct 'going concern' reviews and longer-term viability assessments twice yearly. Continually monitor the Group's performance against its banking covenants. Undertake monthly reviews of working capital, cash forecasts and headroom on banking covenants. Periodically review the Group's financial KPIs with its bankers.
PENSION SCHEME The volatility of the St Ives Defined Benefits Pension Scheme deficit ('the Scheme').	The volatility of the Scheme's deficit is impacted by the inflation rate, changes in the discount rate derived from gilt yields and changes in actuarial assumptions, such as mortality.	Decreased. This risk rating associated with the Scheme has reduced from the prior year as the accounting deficit has been eliminated in the current year. As at 3 August 2018, the Scheme has a surplus of £1.9 million compared to a deficit of £16.0 million in the prior year.	Agree deficit recovery plan with the Pension Scheme Trustee. Regularly engage the Trustee directors in discussions on the Group's performance. Manage possible Section 75 debts arising from business disposals and closures. Contribute to discussions on the Scheme's investment strategy. Proactively seek to limit the growth in the pension liability.
DATA SECURITY AND GDPR Exposure to reputational or financial damage due to corruption or theft of company owned or client owned data or data breaches arising or non-compliance with the General Data Protection Regulation ('GDPR').	This includes the risk of loss of data, sabotage or disruption to the business, fraud, reputation damage, and possible fines.	Unchanged. This risk rating is considered to be consistent with the prior year following a comprehensive exercise to assess data security risks and the requirements to comply with GDPR.	IT functions in place around the Group with responsibility to protect data (e.g. encryption, firewalls, restricted access). Periodic reviews by Internal Audit, utilising in-house IT as well as specialist external consultants. Cyber security and IT questionnaires completed periodically by subsidiaries to highlight areas of potential risk, together with any mitigating actions performed in order to address this risk. The appointment of a Data Protection Officer for the Group to assist with the Group's GDPR compliance and to provide a report to the Board prior to each Board meeting. GDPR audits and the rolling out of new policies, processes and procedures.

Related Party Transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this [Annual Report 2018] note. No material related party transactions have been entered into during the current period, which might reasonably affect the decisions made by the users of these financial statements.

No other executive officers of the Company or their associates had material transactions with the Group during the period.

The Group earned revenue of £0.2 million (2017 - £0.8 million) from Loop Integration LLC and the Group incurred £19,000 charges (2017 - £Nil) for services received. The Group also received a dividend of £0.4 million (2017 - £nil). At the reporting date, Loop

Integration LLC owed the Group £8,000 (2017 - £27,000) for services rendered.

The Group considers the Directors of Kin and Carta plc to be the key management personnel. The total amounts for Directors' remuneration were as follows:

	2018 £'000	2017 £'000
Short-term employee benefits	1,564	962
Post-employment benefits	95	95
	1,659	1,057

Statement of Directors' Responsibilities

The following statement which was prepared for the purposes of the Annual Report 2018 is repeated here for the purposes of complying with DTR 6.3.5. It relates to and is extracted from the Annual Report 2018 and is not connected to the extracted and summarised information presented in this announcement.

The Director's confirm to the best of their knowledge:

·     the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

·     the Strategic Report includes a fair review of the development, position and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

Signed in accordance with a resolution of the Board of Directors on 8 October 2018 on its behalf by J Schwan, Chief Executive Officer and Brad Gray, Chief Financial Officer.

Enquiries:

Daniel Fattal                020 7928 8844

Company Secretary

Kin and Carta plc

 

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