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9
Annual Report and Accounts 2019
D E L I V E R I N G D I G I TA L T R A N S F O R M AT I O N
2019 HIGHLIGHTS
FINANCIAL HIGHLIGHTS
• Like-for-like1 net revenue of £148.0 million3, up 2% compared to
the prior year
• Adjusted profit before tax of £17.6 million3; down 2.5% compared
to the prior year, which includes previously announced £3 million of
growth investments
• Adjusted operating margin 13% of net revenue (2018: 14%)3
• Statutory profit before tax of £1.8 million (2018: loss of £31.2
million)
• Net debt £38.4 million (2018: £26.0 million), representing a net
debt to Adjusted EBITDA ratio of 1.68 times
• Full year dividend maintained at 1.95 pence per share
OPERATIONAL HIGHLIGHTS
• A year of continued transformation and investment to capture
the Digital Transformation (‘DX’) growth opportunity
•
Improved performance in Strategy pillar (16% of net revenue)
• Ongoing double-digit growth in Innovation (56% of net revenue)
• Stabilisation of Communications (28% of net revenue)
• Growth investments gaining traction: 40 Connective deals signed
in the period including new clients Barclays, Blue Cross Blue Shield
and Shell
• Growth investments included geographic expansion, building
central sales, marketing and partnerships functions and
implementing global financial and delivery systems
• Leadership team strengthened by the appointment of new
Chairman with significant DX experience and CFO together with
senior management appointments across the company
Notes
1.
Like-for-like net revenue is defined as the revenue from continuing operations using the
same number of working days when comparing the current period to the prior period.
2. Net revenue is defined as gross revenue excluding all direct costs and third party
3.
expenses passed to clients (pages 36 to 41).
Further details are provided within the Alternative Performance Measure section
(pages 36 to 41).
4. Adjusted results exclude Adjusting Items to enhance understanding of the ongoing
financial performance of the Group. Adjusting Items comprise redundancies
and restructuring costs; gain or loss on disposal of properties; impairment or
amortisation charges related to goodwill, tangible and intangible assets; contingent
consideration required to be treated as remuneration; movements in deferred
consideration; and costs related to the Company’s Defined Benefits Pension
Scheme (note 7).
5. Continuing operations excludes the results of the Books and Marketing
Activation segments disposed of in the prior year (note 8).
Revenue
£172.9m
2019
2018
£172.9m
£178.4m
Adjusted Profit Before Tax4
£17.6m
2019
2018
£17.6m
£18.5m
Statutory Profit/(Loss) Before Tax
£1.8m
£1.8m
2019
2018
£(31.2)m
Full Year Dividend
1.95p
2019
2018
1.95p
1.95p
Net Revenue2, 4
£148.0m
2019
2018
£148.0m
£149.7m
Adjusted Basic Earnings Per Share4
9.22p
2019
2018
9.22p
10.10p
Statutory Basic Earnings/(Loss) Per Share
0.73p
0.73p
2019
2018
(22.09p)
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
01_
02_
03_
OUR
FIGURES
The Digital Imperative
Our Business Model
Our Culture
Chief Executive’s Statement
Our Strategic Priorities
Our Case Studies
Key Performance Indicators
Financial Review
Alternative Performance Measures
Our Positive Impact
Principal Risks and Uncertainties
Corporate Governance Report
Board of Directors
Audit Committee Report
Nomination Committee Report
08
10
12
13
18
20
30
32
36
42
50
58
64
66
70
Letter from Chair of Remuneration Committee
72
Directors’ Remuneration Report
Directors’ Report
Statement of Directors’ Responsibilities
75
95
99
Independent Auditors’ Report to the Members
of Kin and Carta plc
Consolidated Income Statement
Consolidated Statement of
Comprehensive Income
102
112
113
Consolidated Statement of Changes in Equity
114
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
115
116
Notes to the Consolidated Financial Statements 117
Company Balance Sheet
Company Statement of Changes in Equity
163
164
Notes to the Company Financial Statements
165
Shareholder Information
Financial Calendar
173
174
0 1
OVERVIEWKin + Carta Annual Report and Accounts 2019 CHAIRMAN’S STATEMENT
A year into the Group’s transition to
Kin + Carta, the outlook is very positive.
Our financial position is satisfactory and on a solid
footing given our investment in developing the
Connective model. Sales from activities attributable to
the Group-wide Connective were higher than we had
anticipated. We invested more than originally planned
in supporting and developing Connective activity.
That investment in our people and systems is vital.
Our CEO J Schwan’s vision is for the Group to operate
as a Connective that will drive growth. This is enabling
the sharing of knowledge, skills and culture between
Kin + Carta specialisms, and is contributing to a far
more integrated approach to the delivery of services
and sales.
The strategy is clearly beginning to bear fruit. We have
been rated by global research and advisory firm Forrester
as a leading digital experience provider alongside the
major consultancies, which is no mean feat.
In total, the performance of the Group’s three pillars
– strategic consulting, digital innovation and creative
communications – has been impressive. The new
structure is well advanced but there is still more to do
in the coming year before all the pieces of the jigsaw
are in place.
Notable developments have included the launch of
Kin + Carta Advisory, a new strategic front-end to our
proposition. While our intention is to grow organically,
we will actively consider acquisitions that strengthen
the Connective’s breadth of services and territories.
J Schwan has worked tirelessly during his first full year
as CEO, leading the construction of the Connective
that is transforming the way we deliver services for
clients. J’s stated ambition is for Kin + Carta to be
a US$1 billion business by our 2026 financial year.
The Board fully endorses this bold vision.
GOVERNANCE AND
MANAGEMENT
The year has been characterised by the arrival of
several Board members, symbolising renewed energy
and thinking for a new era. John Kerr, former CEO of
Deloitte Consulting and founder of Deloitte Digital,
will become Chairman when I step down following the
Annual General Meeting in December. I would like to
take this opportunity to welcome him and wish him well.
In May, we welcomed vastly experienced executive
Charlie Wrench as Kin + Carta’s first Chief Connective
Officer, with a remit to support J’s mission.
0 2
We also bade goodbye to CFO Brad Gray. Brad was
a dedicated servant of the Company for more than
30 years, helping to steer the organisation through
an intense programme of acquisition and divestment.
We would not be in the healthy position we are today
without his skill and commitment.
In Brad’s place, we welcome new CFO Chris Kutsor,
who joins from Motorola Solutions. Our commitment
to financial expertise is bolstered by the appointment
of Michele Maher as Non-Executive Director and
Chair of the Audit Committee. Michele replaces Mike
Butterworth, who stands down on the date of this
report after a nine-year stint. I welcome Chris and
Michele, and would like to pay tribute to Mike; it has
been a pleasure to work alongside him.
The Board takes its role in corporate governance very
seriously, implementing rigorous and robust systems
to meet the high standards demanded by our investors
and the regulators. We continue to implement changes
in line with the UK Corporate Governance Code 2018,
which applies to the Company from the 2019/20
financial year. These measures include the addition
of employee representation to the portfolio of Non-
Executive Director Nigel Pocklington.
We have also renewed our endeavours to be a
competitive, leading employer within the constraints
of stated best practice.
OVERVIEWKin + Carta Annual Report and Accounts 2019 HEALTH AND SAFETY
AND OPPORTUNITIES
In a business that has transformed from
30 to zero manufacturing sites, and is
now driven by our people rather than
heavy machinery, it would be easy to
see health and safety as less of a priority.
However, we remain committed to
the wellbeing of our employees, and
take concerns like mental health, stress and physical
conditions very seriously. We are working with a new
Health, Safety and Environment Advisor to the Board
to ensure these issues remain at the top of our agenda.
The inception of the Connective is allowing staff to
consider transferring between businesses to new roles,
enabling them to learn and share skills. Motivating the
Kin + Carta workforce and providing a safe, attractive
and fulfilling place to work is crucial to our collective
success.
Many of our employees are actively engaged in
distributing funds made available by the Board to
community projects throughout the UK. This initiative
is part of our mission to get all of our specialisms
certified as B Corporations – businesses that meet the
highest standards of verified social and environmental
performance, public transparency, and legal accountability
to balance profit and purpose – by 2025.
“Investment in our people and systems is vital.
Our CEO J Schwan’s vision is for the Group
to operate as a Connective that will drive
growth.”
OUTLOOK
This is my final Chairman’s Statement. It has been a
privilege to serve on the Board for the past 13 years,
the last seven as Chairman. The Group has undergone
a near-complete transformation in that time. We
have managed to plot a steady course through these
changes to become a vibrant digital business that is
well set for the 21st Century.
Kin + Carta is now on a firm footing with a strong
management team and a shared sense of purpose
among all of our 1,438 employees. I wish everyone
in the business a prosperous future.
Richard Stillwell
C H A I R M A N
1 O C T O B E R 2 0 1 9
0 3
OVERVIEWKin + Carta Annual Report and Accounts 2019 THE CONNECTIVE
W
E
I
V
R
E
V
O
Kin + Carta provides next-generation, digital transformation services that apply technology, data and creativity to
help clients invent, market, and operate new digital products and services. We operate across the UK, Europe, the
US, South America and Asia and fuse three key capabilities – Strategy, Innovation and Communication – under our
organisational model called the ‘Connective’. Each of our specialisms falls under one of these capabilities, which are
the foundation of our business.
STRATEGY
INNOVATION
COMMUNICATION
Our sector-focused management
consultants help our clients better
understand the shifts in their
market and how their products
and services need to evolve.
Our software engineers and
designers utilise emerging
technologies to create new
products and services for our
clients to bring to market.
Our digital marketing experts
help our clients amplify their
digital investments by finding new
audiences and converting them
into lifelong customers.
The Kin + Carta Connective is made up of a number of tribes. Each tribe represents a different specialism that helps
us deliver digital transformation.
0 4
Kin + Carta Annual Report and Accounts 2019
THE CONNECTIVE AT A GLANCE
1,438
EMPLOYEES
11
OFFICES IN FOUR COUNTRIES
NET REVENUE BY
CAPABILITY
16%
28%
56%
Strategy
Innovation
Communication
NET REVENUE BY
REGION
7%
46%
47%
US
UK
Rest of World
NET REVENUE BY
SECTOR
23%
26%
8%
9%
14%
20%
Transportation
Healthcare
Other
Financial
Services
Retail and
Distribution
Industrials and
Agriculture
GEOGRAPHICAL SPREAD
US
408
EMPLOYEES
UK
915
EMPLOYEES
ROW
115
EMPLOYEES
0 5
OVERVIEWKin + Carta Annual Report and Accounts 2019 08
10
12
18
20
32
36
42
50
Chief Executive’s Statement 13
Key Performance Indicators 30
Alternative Performance
Measures
Our Strategic Priorities
Our Culture
Financial Review
Our Case Studies
Our Business Model
T The Digital Imperative
R
O
P
E
R
C
G
E
T
A
R
T
S
Principal Risks and
Uncertainties
Our Positive Impact
I
0 6
Kin + Carta Annual Report and Accounts 2019
Kin + Carta Annual Report and Accounts 2019
0 7
T
R
O
P
E
R
C
I
G
E
T
A
R
T
S
THE DIGITAL IMPERATIVE
REINVENTING THE BUSINESS MODEL
Companies must digitalise and reinvent their business models to remain relevant in an increasingly digital world.
Digital engagement is increasing and digital technologies continue to change the way we work and live.
S T R AT E GY
I N N OVAT I O N
C O M M U N I C AT I O N
T R A N S F O R M AT I O N
Across every
sector, digital
is enabling new
business models
Digital enables
the development
of new products
and services
Digital enables
new channels of
communication
Companies need
help to both think
and work differently
to unlock these
opportunities
Digital transformation is a rewrite, grounded in new technologies, of a company’s market strategy, offerings and
ways of communicating.
DIGITAL TRANSFORMATION | A FAST GROWING MARKET
Every company at scale needs help in transforming their organisation to deliver on the promise that digital brings.
The global digital transformation market is projected to grow at an 18% CAGR from $290 billion in 2018 to
$665 billion in 20231.
US$665bn
18%
per year
US$290bn
2018
e
z
i
S
t
e
k
r
a
M
2023
1.
https://www.prnewswire.com/news-releases/digital-transformation-market-worth-665-0-billion-by-2023--exclusive-report-by-
marketsandmarkets-300829812.html
0 8
Kin + Carta Annual Report and Accounts 2019
==++++
The Continuous Digital Transformation Process
As the pace of technological change continues to increase, businesses are constantly
re-evaluating how to compete and are searching for new opportunities for growth.
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
Changes to
technologies, the
markets that businesses
operate in, and
continued advancement
of digital means that
the business loses its
competitive advantages.
Strategy, products,
services and marketing
needs to be altered in
order for the business
to remain relevant.
Kin + Carta sits in the centre
of this cycle, delivering
ongoing digital transformation
for our clients with our
connected service offering
of Strategy, Innovation and
Communication.
Competitive advantages
are gained from adaptation
to digital trends.
Process of
transformation.
Kin + Carta Annual Report and Accounts 2019
0 9
OUR BUSINESS MODEL
WE DELIVER TRANSFORMATIVE GROWTH FOR THE WORLD’S LEADING
ORGANISATIONS.
Kin + Carta offers its clients three distinct sets of
tightly integrated digital transformation capabilities.
These three capabilities combine to form our
Connective proposition, a holistic combination
offering customers the ability to drive meaningful
change in their business.
Capabilities
N
O P O S I T I O
R
S T R AT E GY
T R A N S F O R M AT I O N
S T R AT E GY
Our sector-focused management
consultants help our clients better
understand the shifts in their
market and how their products
and services need to evolve.
I N N OVAT I O N
Our software engineers and
designers utilise emerging
technologies to create new
products and services for our
clients to bring to the market.
E P
IV
T
C
E
N
N
O
C
E
H
T
T
H
E
C
O
N
N
E
C
T
I
V
E
P
R
O
P
O
S
I
T
I
O
N
I N N OVAT I O N
C O M M U N I C AT I O N
C O M M U N I C AT I O N
Our digital marketing experts
help our clients amplify their
digital investments by finding new
audiences and converting them into
lifelong customers.
THE CONNECT I V E P R O P O S I T I O N
VALUE FOR STAKEHOLDERS
CLIENTS
By combining strategic consulting, next-generation
product development and digital communications,
we help legacy enterprises transform into high growth
digital businesses.
OUR PEOPLE
Our unique organisational structure attracts the best
talent. Our experts are allowed to thrive in their own
‘tribes’, while connected to other specialists through a
thread of culture, values and ways of working.
Read more about our value for stakeholders in Our Positive
Impact report on pages 42 to 49
OUR SHAREHOLDERS
The Connective is an engine for growth in a large and
fast-growing market. Its joined up proposition provides
a platform for expanding into new regions, integrating
new acquisitions quickly and providing an incubation
bed for new ventures. The Connective model allows
us to grow cash flows for accelerated investment and
balance sheet strengthening in the near term, while in
the longer term, providing us with the ability to share
additional returns with our shareholders.
OUR COMMUNITIES
We aim to leverage our unique capabilities to make a
difference in the societies in which we operate.
1 0
Kin + Carta Annual Report and Accounts 2019STRATEGIC REPORT
OUR COMPETITION
The Digital Transformation Marketplace
As digital transformation budgets increase, it’s unclear which service providers are best equipped to help. Each type
of organisation has strengths that allow them to take advantage of the rise in the need for digital transformation
services, but also encounter challenges that hinder their ability to do so.
AGENCY
NETWORKS
S T R E N GT H S
• Customer focused
• Well-known brands
BIG
CONSULTING
S T R E N GT H S
• Holistic offering
• Offer an alternative to the
limited vision of agency
networks
C H A L L E N G E S
• Technically challenged
C H A L L E N G E S
• Difficult to navigate
• Myopic vision – only see
• Creatively challenged
digital transformation as a
marketing issue
• Breadth without depth
• Struggle to retain talent
SPECIALISTS
S T R E N G T H S
• Talent attractor
• Deep knowledge in one
particular area
C H A L L E N G E S
• Challenged at scale – can
only solve one piece of the
puzzle
• Strategically challenged
• Depth without breadth
Kin + Carta combines strengths of all three competitor groups
and is able to avoid the challenges of each of them.
OUR STRENGTHS
Kin + Carta provides the holistic digital offering clients need with the specialist ‘vibe’ that top talent wants, which gives
us a differentiating proposition. Our approach to digital transformation is unique due to the following strengths.
BREADTH AND
DEPTH
TALENT
ATTRACTOR
STRATEGIC, CREATIVE
AND TECHNICAL
We have both a breadth and
depth that is achieved through our
Connective operating model that
integrates our variety of services
from our different capability pillars.
We also have a depth of
experience in our industries
provided by our employees.
Kin + Carta provides an
opportunity to work with others
who appreciate the importance of
digital transformation in the same
way that specialists do, but with
the benefit of scale, breadth and
depth.
Kin + Carta is able to solve
multiple elements of the digital
transformation process due to
our variety of specialists and our
scale.
1 1
1.2.3.Kin + Carta Annual Report and Accounts 2019STRATEGIC REPORT
OUR CULTURE
T
R
O
P
E
R
C
I
G
E
T
A
R
T
S
O U R P U R P O S E
TO INSPIRE GROWTH
THROUGH CONNECTEDNESS
O U R VA L U E S
DEEPLY
CONNECTED
We don’t measure success by
the number of offices we have.
We measure it by how deeply
interconnected we all are.
Because only when our thinking
is truly interconnected can we
pull together for the greater
good: the good of our business,
our clients, and our communities.
ALWAYS
COURAGEOUS
Nothing happens when we sit
still, and the safest choice is often
the riskiest option. That’s why
we question everything. Always
seeking better ways to improve
and grow. Because it’s our job to
plot a new path forward.
INSTINCTIVELY
COMPASSIONATE
We put our egos to one side and
do what’s right, not what’s easy.
We’re empathetic in all we do.
We know when to talk and when
to listen.
Our people are at the centre of delivering
our business model. We strive to create
a culture that they can take pride in and
an environment that continues to provide
opportunities to grow. With the Connective
values at the centre of our culture and how
we engage with our clients, we are able to
create best-in-practice products, platforms
and experiences that have won worldwide
recognition.
O U R AWA R D S
C O R P O R AT E A N D
M A R K E T I N G S T R AT E GY
P R O D U C T A N D S E R V I C E
D E V E L O P M E N T
AC Q U I S I T I O N , C O M M E R C E
A N D R E T E N T I O N
Sunday Times 100
Best Small Companies
2016, 2017, 2018
Global 100 Consultancy
Firm of the Year 2018
PM Society Digital
Awards 2017
Fast Track Tech Track
100, 2015
Crain’s Top 100 Best
Places to Work, 2018
Best Use of Search, UK
Search Awards, 2018
Econsultancy Top 100
Digital Agencies, 2018
1 2
Kin + Carta Annual Report and Accounts 2019
CHIEF EXECUTIVE’S STATEMENT
INTRODUCTION
The pace of change at Kin + Carta has been persistent
and invigorating as we focus our business on its areas
of highest potential. In the past 12 months Kin + Carta
has launched a new brand, refined its business model,
overhauled its proposition, launched new financial
and collaboration systems, appointed new sales and
marketing teams and refreshed its Board and senior
leadership team. We also launched four new offices,
stretching our suite of capabilities into the
US for the first time.
Technology’s impact on our lives and the economy is
accelerating. The global digital transformation (‘DX’)
market is projected to grow at an 18% CAGR from
$290 billion in 2018 to $665 billion in 20231. We
have been relentless in our action this year to create
a platform for long-term value creation in this growing
market. While this has had some impact on our near-
term financial results, we believe we have made the
right moves to support the long-term growth of the
business and build a prosperous future. In parallel,
we have honed our acquisition strategy to expand
our platform into new regions when the right
opportunities present themselves.
FINANCIAL PERFORMANCE
2019 reflects mixed financial results. We invested for
growth and are pleased to see early signs of success
with significant new client wins across our key sectors
such as Barclays, Blue Cross Blue Shield and Shell. We
also drove structural changes in our Communication
and Strategy pillars to refocus on more strategic DX
opportunities. Our Strategy pillar is already seeing an
improved year ahead and our Communications pillar
is stabilising. We are now much better positioned
heading into FY20.
Other positive developments during the year include
improved geographic diversification and higher
growth in DX-focused business, which both help
provide a more solid and sustainable foundation for
future growth. These changes continue to be driven
by a focus on areas of greatest opportunity such as
Innovation and the higher growth market in the US.
Our Innovation pillar now accounts for 56% of the
Group’s net revenue compared to 48% a year ago, and
our US business is now 46% of net revenue, compared
to 40% in the prior year. Our new global sales and
marketing function signed over 40 Connective deals,
holding our target of a healthy 50% gross margin, and
our pipeline and backlog has improved.
1.
https://www.prnewswire.com/news-releases/digital-
transformation-market-worth-665-0-billion-by-2023-
-exclusive-report-by-marketsandmarkets-300829812.html
As explained in the pre-close Trading Update, these
results include £3 million of investment in launching
our new strategy which was second half weighted.
We continue to invest at a similar level in 2020. This
investment encompasses an ongoing realignment
of our operations, our sales and marketing function,
geographic expansion and launching new capabilities
to the market.
OPERATIONAL UPDATE
Kin + Carta offers our clients three distinct sets of
tightly integrated digital transformation capabilities:
• STRATEGY – Our sector-focused management
consultants help our clients better understand the
shifts in their market and how their products and
services need to evolve.
•
INNOVATION – Our 700+ software engineers and
designers utilise emerging technologies to create
new products and services for our clients to bring
to market.
• COMMUNICATIONS – Our digital marketing
experts help our clients amplify their digital
investments by finding new audiences and
converting them into lifelong customers.
These three capabilities combine to form our
Connective proposition, a holistic combination offering
customers the ability to drive meaningful change in
their business. We have made significant progress over
the past year evolving the Company around this core
proposition.
1 3
Kin + Carta Annual Report and Accounts 2019STRATEGIC REPORT CHIEF EXECUTIVE’S STATEMENT
CONTINUED
Strategy
We started the year with a set of disparate businesses
in our Strategy pillar, operating somewhat independently
from the rest of the Group. After a significant amount
of restructuring we now have a powerful go-to-
market brand and a clear strategic front-end to
our DX proposition.
The newly formed Kin + Carta Advisory (‘KCA’) is
a management consultancy focused on helping
our clients navigate the sometimes overwhelming
digital opportunity, while enabling a clear bridge
to implementation through our Innovation and
Communication capabilities. KCA consultants are
focused on our key sectors, are located in offices in both
London and New York and are already delivering projects
leading to meaningful implementation programmes for
our Innovation and Communication pillars.
KCA is supported by Kin + Carta Incite, our next-
generation market research consultancy that provides
strategic insights to KCA as well as our other pillars.
In addition to our enterprise customers, we are also
engaged by some of the largest technology companies
in the world, including Amazon, Facebook, Apple and
Google. The ability for Kin + Carta consultants to serve
both the disruptors and the disrupted provides them
with a unique perspective in the market.
We are optimistic around the moves we have made
in our Strategy pillar and look forward to unlocking
further growth opportunities in the year ahead.
Innovation
Our digital Innovation pillar, comprising Kin + Carta
Solstice and Kin + Carta TAB, is delivering double-
digit revenue growth in both the US and the UK. We
continue to build meaningful products and platforms
for some of the world’s largest companies in the most
exciting areas of emerging technology such as Cloud,
Machine Visioning, Artificial Intelligence, Natural
Language Interfaces, Blockchain and Mobile.
Our fastest growth area is in Cloud Transformation.
This involves helping our clients re-engineer legacy
software systems to run on top of our partners’
(Google, Microsoft, Amazon, Pivotal) cloud platforms.
These transformation projects allow us to form deep,
long-term relationships with our customers while
providing them the agility of a digitally native company.
We are growing existing relationships and winning new
exciting Fortune 1000 clients in our strategic sectors.
Our UK team leveraged the Connective’s financial
services sector expertise to win three of the largest
banks in Europe as new customers. Our US team
leveraged the healthcare strength in our UK Strategy
pillar to win several significant multi-year projects with
healthcare insurers.
Our 700+ strong global engineering team is
collaborating across regions more closely than ever,
developing new tools and skills and accelerating their
distribution across our global client base. The future
for our Innovation pillar is truly exciting.
1 4
Kin + Carta Annual Report and Accounts 2019STRATEGIC REPORT Communications
Our Communications pillar, comprising
Kin + Carta AmazeRealise and Kin +
Carta Edit, had a challenging year as it
shifted its focus away from low value
projects to higher value DX work and
larger projects. This involved focusing
on clients who are looking to implement
new marketing technology (‘MarTech’)
platforms as opposed to focusing on
clients commissioning one-off campaign
work. Where we define and implement a MarTech
platform in addition to the content that goes on the
platform, the relationship with the client becomes
deeper, the tenure longer and our ability to impact
change more meaningful.
Changes we have implemented in this pillar include
some significant new hires and appointments, including
a new Managing Director, a new Chief Growth Officer,
a new Director of Employee Experience, and a new
Financial Director. We also appointed our Chief
Connective Officer, Charlie Wrench, as the interim
Head of Communications as we work further through
its evolution.
Historically, our digital marketing capabilities were
solely focused in the UK which experienced delays
to some client investment decisions due to Brexit
uncertainty. Our focus this year was to diversify our
geographic presence and bring our capabilities to the
US market. We opened our first office in Chicago and
began offering our communications service offerings
into our existing innovation-focused Fortune 1000
client base. This involved making more strategic hires,
as well as laying the groundwork for a joint business
development effort between our Innovation and
Communications sales teams which is building a base
for growth in FY20.
We have also won some significant new clients in the
UK within the pillar, while also winning 11 different
marketing technology-related awards during the year.
Our Communication pillar also referred over £5 million
in revenue around the Group, a sign of the Connective
strategy beginning to pay dividends.
While we still have more work to do to shape our
Communications pillar for our DX-focused future,
we are optimistic that the moves we have made will
set us up for long-term success starting in the second
half FY20.
“We invested for growth and are pleased to
see early signs of success with significant
new client wins across our key sectors.”
STRATEGIC PRIORITIES
At the time that we unveiled our new transformation
strategy and identity, we pinpointed six strategic
priorities. A year into this journey, we have made
significant progress against all of these, which we
outline below. We have also simplified this list into the
following five ongoing priorities, which we believe will
underpin the next stage of our growth.
1. GROWTH – We will accelerate organic growth through
the continuous optimisation of a highly measurable,
integrated and scalable demand generation machine:
In FY19 we built new central sales, marketing,
partnerships and lead generation teams and signed
over 40 cross-specialisms deals valued at over £11
million in new net revenue through these channels.
Our goal in the next financial year is to optimise
these teams around our key sectors and scale our
new partnership function in the US and the UK.
2. PROPOSITION – We will build a market-defining set of
sector-focused technology-led business transformation
offerings: In FY19 we hired our first Chief Connective
Officer, Charlie Wrench, launched our new brand,
defined our first go-to-market DX proposition
and created Kin + Carta Advisory as the strategic
‘front-end’ to our DX proposition. We evolved
our capabilities in Cloud Modernisation, Artificial
Intelligence, MarTech Modernisation and in Digital
Advisory. Our sector-focused approach allowed
for our Innovation pillar to meaningfully break into
the Healthcare sector for the first time with two
seven-figure multi-year wins while also expanding
our Financial Services expertise in the UK, winning
three of Europe’s largest banks as new clients. In the
next financial year we will continue to invest in the
evolution of our Connective proposition and begin a
process of further rationalising our brands to make it
easier for our clients to engage multiple parts of our
proposition.
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Kin + Carta Annual Report and Accounts 2019STRATEGIC REPORT CHIEF EXECUTIVE’S STATEMENT
CONTINUED
5. EXPANSION – We will execute a purposeful and
intelligent geographic expansion into new regions
domestically and internationally: In FY19 we
launched a new Innovation office in Edinburgh,
a new Communications office in Chicago and
new Kin + Carta Advisory offices in New York
and London. We now have all three of our core
capabilities in the US. In the next financial year we
will turn our attention to acquisition opportunities,
with a focus on unlocking growth in the western
and southern regions of the US.
By continuing to focus on these five key areas we
believe we will be poised to accelerate growth within
the exciting DX market.
3. PEOPLE – We will create an industry-leading
employee experience with a focus on the growth
potential of our talent and a shared commitment to a
triple bottom-line (profits, people and planet): In FY19,
through a number of new employee experience
initiatives we won seven Best Place to Work awards
and raised our global employee NPS (‘eNPS’) score
by more than 50%. We also launched our first
coordinated Corporate Social Responsibility (‘CSR’)
plan, which pledges to certify all of our specialisms
as B Corporations (www.bcorporation.net) by 2022,
with a plan to certify our first four specialisms in
the next financial year.
4. PLATFORM – We will build an operational platform
made up of best-in-class operational systems and
seamless shared services: In FY19 we rolled out new
collaboration, financial and project delivery systems.
In the next financial year we will roll out standard
CRM and HR systems and begin expanding our
shared services platform. This will ensure we are
taking advantage of operational gearing as we scale,
while allowing for our specialisms to focus on what
makes them unique.
1 6
Kin + Carta Annual Report and Accounts 2019STRATEGIC REPORT The realignment of our operations combined with
ongoing investment in them positions us at the heart
of the DX market opportunity. Core to our growth is
our Connective collaborative model, harnessing the
best combination of our skills for each of our clients.
The power of the Connective is gaining traction
evidenced by significant referrals and revenue growth
across the business. I am excited about the potential
for Kin + Carta as our growth accelerates into 2020
and beyond.
J Schwan
C H I E F E X E C U T I V E O F F I C E R
1 O C T O B E R 2 0 1 9
OUTLOOK
Trading at the start of the new financial year has been
in line with expectations. Our Strategy pillar is seeing
improved performance, our Innovation pillar continues
to power ahead and our Communications pillar is
stabilising.
For FY20 we expect double-digit net revenue growth
of 10–12%, accelerating primarily in the second half,
with double-digit Adjusted operating margins of
12–13% for the year. While investment will have some
impact on H1 2020 profitability, it will deliver higher
growth and improved profitability in H2 2020. The
investments we are making in realigning our business
and the functions and systems that power its growth
have positioned us well for the long term.
Over the medium term we expect both net revenue
growth and operating margins to improve into the
low teens, while we manage operating margin to
fund continuing investment in the growth of the
business. We will look to manage Adjusted net debt
to EBITDA between one and two times depending
on the opportunities available to us.
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Kin + Carta Annual Report and Accounts 2019STRATEGIC REPORT OUR STRATEGIC PRIORITIES
STRATEGIC PRIORITIES
2018/2019 PROGRESS
ORGANIC GROWTH
We will accelerate growth through
the continuous optimisation of a
highly measurable, integrated and
scalable demand generation machine.
We built new central sales, marketing, partnerships and lead
generation teams and signed over 40 cross-specialism deals
valued at over £11 million in new net revenue through these
channels.
PROPOSITION
We will build a market-defining
set of sector-focused technology-led
business transformation offerings.
PEOPLE
We will create an industry-leading
employee experience with a focus
on the growth potential of our talent
and a shared commitment to a triple
bottom line (people, profit and planet).
PLATFORM
We will continue to build an operational
platform made up of best-in-class
operational systems and seamless
shared services.
We hired our first Chief Connective Officer, Charlie Wrench, launched
our new brand, defined our first go-to-market DX proposition and
created Kin + Carta Advisory as the strategic ‘front-end’ to our DX
proposition. We evolved our capabilities in Cloud Modernisation,
Artificial Intelligence, MarTech Modernisation and in Digital Advisory.
Our sector-focused approach allowed for our Innovation pillar to
meaningfully break into the Healthcare sector for the first time with two
seven-figure multi-year wins while also expanding our Financial Services
expertise in the UK, winning three of Europe’s largest banks as new
clients.
Through a number of new employee experience initiatives, we
won seven Best Place to Work awards and raised our global
employee NPS (‘eNPS’) score by more than 50%. We also
launched our first coordinated Corporate Social Responsibility
(‘CSR’) plan.
We rolled out new collaboration, financial and project
delivery systems.
EXPANSION
We will execute a purposeful and
intelligent geographic expansion
into new regions domestically and
internationally.
We launched a new Innovation office in Edinburgh, a new
Communications office in Chicago and new Kin + Carta Advisory
offices in New York and London. We now have all three of our
core capabilities in the UK and US.
KPIs
1.
4.
Cross-Specialism
Deals
Net Revenue Growth
at Constant Currency
2.
5.
Net Revenue by
Sector
Employee Net Promoter
Score (‘eNPS’)
3.
6.
Adjusted Operating
Profit Margin
Geographic
Expansion
Read more about our KPIs on pages 30 and 31
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Kin + Carta Annual Report and Accounts 2019STRATEGIC REPORT FUTURE FOCUS
LINKS TO KPIs
LINKS TO RISKS
In the next financial year, our goal is to optimise the central sales,
marketing, partnerships and lead generation teams around our
key sectors and scale our new partnership function
in the US and the UK.
In the next financial year, we will continue to invest in the
evolution of our Connective proposition and begin a process
of further rationalising our brands to make it easier for our
clients to engage multiple parts of our proposition.
In the next financial year, our CSR plan is to certify four specialisms
as B Corporations (‘B Corp’). The CSR plan pledges to certify all of
our specialisms as B Corporation by 2022.
To learn more about Our Positive Impact plans, refer to pages
42 to 49.
In the next financial year, we will roll out standard CRM and HR
systems and begin expanding our shared services platform. This
will ensure we are taking advantage of operational gearing as we
scale, while allowing our specialisms to focus on what makes
them unique.
In the next financial year, we will turn our attention to acquisition
opportunities, with a focus on unlocking growth in western and
southern regions of the US.
1.
2.
3.
4.
1.
3.
1.
5.
3.
4.
2.
4.
6.
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5
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Risks
1 Growth
2 Scalability
3 Assimilation
4 Economy and
Volatility
5 Clients
6 Our People
9 Pension Scheme
7 Brand and Culture
8 Finance
10
Data Security and
GDPR
Read more about our Principal Risks and Uncertainties
on pages 50 to 55
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In today’s enterprise environment,
every business leader is in search of
modernising their legacy tech stack
to deliver better software. From the
top down, businesses are demanding
processes to deliver better code as fast
as possible while also delivering high-
quality features based on predictable
timelines. It’s the natural tension between
process and people; the highest possible
standards for delivery and the world-class
talent necessary to make it a reality.
To address this issue, Kin + Carta has
developed a proprietary methodology
we call FleXP: a balanced and blended
approach for helping companies rewrite
mission-critical software, migrate legacy
systems to the cloud and develop new
greenfield applications using modern
software engineering principles. Through
FleXP, our development teams are able
to maintain the adaptability and speed of
Extreme Programming (‘XP’) along with
the predictability of Scrum to provide
our clients with a more flexible outcome
and people-focused approach to critical
modernisation.
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Kin + Carta Annual Report and Accounts 2019
DISCOVER FINANCIAL SERVICES
Our multi-year partnership with Discover is a powerful
example of foundational enterprise change being driven by
a team-first approach. As Discover looked to develop new
dynamic customer acquisition features, speed to market
was contingent on how efficiently they could migrate
legacy backend technology to a cloud-native platform.
While our development strategy focused on cloud-
enabling their legacy systems, the key to creating lasting
change lay in setting the standard for building high-
performance, return on investment focused delivery
teams within the Discover organisation through our
FleXP approach.
Discover got to market faster, brought new customers
into the business, increased revenue and developed new
opportunities for cross-selling. By balancing process
and people, together, we were able to maintain their
existing systems, keep them pointing at the most critical
strategic priorities, all the while building the type of
results-driven team necessary to scale for the future and
transform their enterprise.
The Discover Kin + Carta relationship is stronger than
ever with work continuing through FY20.
GORDON FOOD SERVICE AND
GOOGLE
As North America’s largest privately-held food distributor,
Gordon Food Service (‘GFS’) knew that differentiating its
brand from existing competitors and new entrants meant
serving their customers like never before. For years, GFS
had maintained separate ordering systems for Canadian
and US customers, averaging a 10-week cycle for system
enhancements. The company seized the opportunity to
deliver a single platform across North America that felt
like more of a B2C experience, providing customer value
in new ways.
Through a partnership between Kin + Carta and
Google, our team not only redefined GFS customers’
ordering experience but engaged a long-running FleXP
programme team in our Buenos Aires delivery centre
that migrated their legacy systems to the Google
Cloud Platform and transformed how they bring new
customer experiences to market.
Through this modern software engineering approach, we
successfully removed obstacles that previously impeded
innovation, and their in-house technical teams have been
transformed into cloud-based Continuous Integration
and Delivery operations. Customers benefit hugely,
with customer experience (‘CX’) improvements and new
features delivered in real-time which previously would
have taken months to implement.
As their market continues to change and customer
expectations evolve, GFS is now equipped with the
strategy, technology and talent to continue setting the
pace of its industry. According to Tom Pearce, IT Manager,
E-Commerce at GFS: “Kin + Carta brought a customer-
driven development methodology that helped us build
what our customers actually want, instead of what we
thought they wanted. They had a proven process for
that approach, along with experience working on Google
Cloud Platform. It’s been tremendously successful.”
The GFS Kin + Carta programme continues to move
from strength to strength in FY20 and beyond.
MODERNISATION FOR MAJOR
HEALTH INSURER
One of the US’s leading health insurance providers
understood that in order to digitally enable their
internal customers with top tier speed, reliability
and performance they required a top-to-bottom
modernisation of their business.
Looking for a strategic partner with the right balance of
adaptability, talent, scale and a people-driven culture, our
client’s leadership turned to Kin + Carta. Together, we
helped them in three key areas of their business: rewriting
their claim processing system; building a consolidated
and consistent API-driven real-time view of their data;
and delivering a digital strategy to better engage with key
external partners along their user journeys.
Our team leveraged the combination of cloud-native
engineering with Pivotal Cloud Foundry and product
leadership to provide modern, highly capable operating
model their business depended on. As a result, employee
satisfaction rose, financial accuracy improved and a
much more flexible system now allows their internal
teams to keep technical debt to a minimum.
Together, our team continues to rack up successes with
a roadmap leading well into FY20.
OUR TECHNOLOGY PARTNERS
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Seamless digital experiences have
become the driving force that brings
brands closer to their consumers.
However, when it comes to developing
a deep understanding of consumers,
identifying areas of need and building
solutions to meet those needs, the
underlying challenges aren’t just
business challenges. Consumer
expectations – for speed, consistency
and ingenuity – have never been higher.
As these consumer demands increase,
businesses are investing more in
artificial intelligence (‘AI’) to enhance
productivity, enable faster and more
efficient decision-making and uncover
insights hidden deep within reservoirs
of business data.
We’re helping our clients implement and
optimise AI in ways that will increase
revenue and motivate customer loyalty,
and we’ve advanced our capabilities
across three key AI areas: Machine
Visioning, Natural Language Processing
(‘NLP’) and Decision Intelligence.
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Kin + Carta Annual Report and Accounts 2019
MACHINE VISIONING
AT CORTEVA
Corteva, a global agriscience leader, has partnered with
Kin + Carta to deliver digital products to employees
and growers since 2016. Yield estimation is a critical
measurement for multiple personas in Corteva’s
ecosystem. Internally, Corteva leaders need to know
exactly how much seed their supply chain is producing
to ensure they’ll meet demand for next year. Externally,
Corteva’s customers want an accurate yield forecast to
ensure they make the best decisions for their operation.
First, data scientists built a machine visioning model
to predict yield by taking photos of ears of corn.
Kin + Carta then productionised the model,
transforming yield estimation and creating
operational efficiencies.
Because of the broad need for yield estimation, our team
built a reusable library for delivery of two applications
with the same functionality: ‘Blueprint’ for employees
and ‘Pioneer Seeds’ for growers. The team leveraged
machine learning at the edge using Apple’s CoreML and
Google’s TensorFlow Lite to ensure yield estimation
produces immediate results offline in rural locations.
This initiative has revolutionised the agriculture
industry. Yield estimations once took multiple hours
per field by trained agronomists using varying methods.
Now with Blueprint, we’ve introduced a consistent
method that enables low-skill workers to take the same
estimates in minutes. The product has created buzz
and elevated Corteva as a leader in digital innovation.
The Pioneer Seeds app recently debuted at the Farm
Progress Show in Decatur, IL to much fanfare, and the
app has seen over 100,000 yield estimates taken in its
first two weeks of release.
DECISION INTELLIGENCE
FOR A MAJOR EQUIPMENT
MANUFACTURER
By harnessing AI, we’re also able to help our clients bring
new bold technologies to life like never before. At a
major equipment manufacturer, an internal team of data
scientists had developed a confidential machine vision
model that classifies images based on various traits.
The system was intended to help operators identify
opportunities to optimise their labour in the future. The
model had only existed in the lab before we developed
an AI-driven mobile application to make it a reality.
When mounted to the machine, the app takes images
in rapid succession, classifies them in real-time using a
machine vision model and Apple’s CoreML and creates
a map that visualises the results.
Access to data has allowed internal teams to test and
refine the machine vision model and also allows users to
gain real-time feedback that helps them develop long-
term plans. To make it more robust in terms of business
value, the application was designed to be compatible
with other image classification models, allowing its use
across different industries to scale value and return on
investment beyond any single-use case.
NATURAL LANGUAGE
PROCESSING FOR A GLOBAL
FOOD AND BEVERAGE COMPANY
Voice-activated communication is one of the most
immediate illustrations of the way AI creates seamless
customer experiences. To facilitate transformation of
quick-service ordering, we’re working with a major
global food and beverage company to explore how
AI-powered voice ordering could help set them apart
in the marketplace.
To gain a deeper understanding of customer
expectations around voice-based ordering, our team
developed a proof of concept using Google’s Natural
Language Processing (‘NLP’) platform called Dialogflow.
Because the application allows existing mobile users
to test real-world ordering scenarios, the captured
learnings from this initiative have already created fresh
perspectives on user-experience mapping and service
integration as well as a broader vision for improving
ordering operations on a global scale.
OUR TECHNOLOGY PARTNERS
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Private equity firms often find
themselves caught between an
ambitious vision of the future and the
ability to predict how to get there.
These firms have a vested interest in
growing their portfolio companies and
increasing their valuation multiples.
Often this can be done by adapting a
portfolio company with a successful
traditional model to a digital model. It
can also be accomplished by creating
a new digital model to compete in
a sector where existing players are
struggling with digital transformation.
In order to see the return on their digital
investment quickly, private equity
firms rely on agile digital specialists
rather than expensive and slow-moving
consultants. With a flexible and scalable
combination of speciality skills and
services, Kin + Carta are uniquely
positioned to help these firms put data
and digital experiences at the heart of
their valuation process.
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JLA
JLA is an asset leasing business providing catering,
laundry, heating and fire safety equipment to over
25,000 businesses. Serving a wide variety of industries
including care homes, hospitality, healthcare and
facilities management, JLA leadership turned to
Kin + Carta to support them in their transition to
become a digital and data-led business focusing on
making existing processes more efficient, customer-
driven and driving long-term retention.
Our goal at project launch was to help JLA imagine its
future digital self. Rather than identifying opportunities
through broad strategic frameworks and theoretical
models, we helped JLA’s board to visualise their digital
twin. The exercise demonstrated how to improve the
use of their existing data (which connects 70,000+
assets) and identify clearly articulated changes to the
organisational design to become a digital enterprise.
With a clear vision of what was possible, we began
working on the future target operating model design,
developing the data vision and producing proof of
concepts for digital products. This also included a
working Internet of Things (‘IoT’) proof of concept to
display live compliance and operational data through
a cloud-based engine.
Whether it’s identifying innovation opportunities,
internal process improvements, or their customers’
experience as a whole, JLA is now prepared to more
quickly deliver its future digital self. Kin + Carta and
JLA continue to partner on bringing to life a technology
and data-enabled business that delights its customers.
ALLICA BANK
Allica was created to fill a market gap in commercial
banking to better serve small-to-medium businesses.
With a brief for simplicity, speed and responsiveness,
we partnered with Allica to build a more nimble and
SME-focused digital bank from the ground up.
In addition to a need for more seamless solutions for
working capital, cash management and loan services,
Allica leadership also knew that delivering a level of
service and personalisation was paramount to the
company’s success.
Kin + Carta worked in close collaboration with the
client to develop the Allica web platform and consumer
mobile experience through an agile, user-value
prioritised approach. Facing a range of challenges
that included optimisation for different distribution
channels, disruptive product features, and product
coverage, our teams provided leadership that Allica
depended on. According to Allica CIO Simon Batemen,
the quality of the final experiences are “mind-blowing”.
Allica was formally granted a banking licence in
September this year, and will be delivering commercial
loans before the end of the year, with online banking
and saving applications to follow next year. All of this
work is backed by a comprehensive digital strategy
supported by Kin + Carta. Kin + Carta and Allica
continue to partner to deliver on the future of SME
banking.
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Business today is driven by insights
gained from data, and products set up
to drive behavioural change. Companies
often need help understanding the
patterns and characteristics hidden in
their data, and how that information can
inform future products and services.
With over 20 years of marketing
communications and product
development experience, we build both
robust marketing automation platforms
and innovative digital products for our
customers. Our advanced solutions
serve the full customer journey
from acquisition to advocacy. With
data-led optimisation programmes,
we design and engineer automated
digital experience platforms that help
increase revenue and reduce ongoing
costs. To this end, we’re working with
our strategic client Shell on both their
marketing automation and product
development fronts.
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SHELL B2B
Originally engaged to support the Company’s
international B2B fuel card through a customer
relationship management (‘CRM’) platform, Kin + Carta
have become a strategic advisory partner around both
communications planning and marketing technology.
We work in partnership with Shell’s central marketing
team to deliver customer communications to 28
markets around the globe.
Expanding from our initial remit, we began working
with Shell to redesign their marketing technology
platforms and data strategy. Our work demonstrated
immediate return on investment (‘ROI’) and provided
a solution that will continue to support their evolving
marketing strategy for years to come. Our engagement
has led to significantly streamlined marketing
workflows, developments in data compliance and
demonstrable ROI. Our work is now expanding into
search engine marketing to support their Make the
Future initiative. Our work on standardising their data
and CRM principles are being rolled out to markets
across the globe.
SHELL ENERGY
In response to public and governmental concerns about
climate change and the reality of dwindling natural
oil and gas reserves, Shell launched its New Energies
business unit focused on the eventual replacement of
carbon energy sources with cleaner, greener, renewable
energy. As part of this strategy, in 2018 Shell acquired
First Utility, the largest of the challengers to the ‘big
6’ electricity and gas suppliers in the United Kingdom.
Rebranded Shell Energy Retail, today it is the seventh
largest utility provider in the UK, serving 850,000
customers.
Shell Energy engaged Kin + Carta to rethink the future
of utilities through the delivery of a bold new mobile
resource for their customers. The upcoming launch
of the Shell Energy brand created significant pressure
to ensure the Shell Energy app was ready in time as it
would be the main point of contact for many of their
customers. The new app was delivered in just a quarter
of the time it took to build the existing app. Our lean
development methodologies, outcome-led approach
and focus on user value were critical in successfully
hitting the brand launch deadline.
A key objective in our development was to ensure
satisfaction with existing users as well as providing
a scalable platform to support innovation and future
growth. Applying our proven methodology and armed
with existing data as well as robust user research, we
focused primarily on value to users rather than building
features for features’ sake. This meant we were able
to initially deliver the highest value features that really
mattered to Shell customers, within the five-month
timeframe to brand launch.
An ongoing and lasting business benefit in this
engagement has resulted from our ability to embed a
culture of continuous improvement and collaboration
with Shell Energy. This culture enables ideas to be
evaluated and tested, and features built, integrated,
and deployed in short release cycles.
Moving on from the successful brand launch, Shell
Energy and Kin + Carta continue to collaborate
closely and work as a team, evaluating and prioritising
additional features and improvements to the app,
staying true to outcome-driven innovation and putting
the customer at the core of everything we do.
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2 8
Kin + Carta Annual Report and Accounts 2019
Across industries, enterprises in today’s business
landscape generally fall into one of two camps. There
are disruptors – digital natives who rewrite the rules of
business in their category – and the disrupted – legacy
organisations who often aspire to achieve the reach,
growth and technological proficiency of the disruptive
powers that threaten them.
It’s not about early adopters or fast followers. We
help our clients capture the largest piece of the
market-share pie by relentlessly matching and often
surpassing the experiences of digital-first competitors
for everyday consumers, as we’ve done for SilverRail
as they look to maximise their share of rail customers
in the UK and US.
Kin + Carta has served both groups and in doing so, is
uniquely placed to deliver value through understanding
the unique strengths and challenges of each.
The disruptors are renowned for understanding their
customers and exploiting their data to deliver against
individual functional and emotional needs. But they
still need objective insights to get under the skin of
the humans they seek to serve and particularly to
understand their non-customers in an all-consuming
drive for penetration. Consumer segmentation,
customer journey mapping, positioning and message
optimisation are all areas where we help these clients,
to inform and support strategic planning processes.
In turn, that work with household brands like Facebook,
Amazon, Apple and Google gives us a fascinating
perspective on what it takes to disrupt, to be digital-
first and to mobilise an agile business at scale. And
these insights inform the ways we challenge and
support the legacy businesses as they seek to survive
and flourish in a future that is very unlike their past.
We use this knowledge to reset paradigms and
overcome myths that can stand in the way of legacy
businesses’ transformation while working with our
clients to understand and deliver against these critical
elements:
New ways of working fuel success. We help our clients
place as much attention on their internal cultures and
processes as on their consumer. We help implement
new ways of working that can energise the whole
organisation. We’ve challenged ourselves to deliver
a radical new agile insights approach which has
transformed the way we work for Kraft Heinz allowing
us to deliver value at speed.
Seamlessness and immediacy are key. We know you
need a holistic approach to building entire customer
journeys that make engaging with them easy and
applicable to their customers’ daily activities. These
insights have helped us support a major UK bank
optimise the apps they’ve built to help customers
consolidate debt and manage money more effectively.
Quality of service can make or break the customer
experience. We place an emphasis on the quality and
extent of the service our clients offer their customers
to increase engagement and loyalty with their markets.
To this end, we’ve helped the Virgin Group define
and deliver consistent service delivery across all their
brands through both online and offline channels.
Working closely with the world’s leading digital
disruptors has challenged us to find new and distinctive
ways to support many other clients across sectors. It’s
one step in an exciting journey to continue delivering
new and better services to both.
Capabilities
S T R AT E GY
I N N OVAT I O N
C O M M U N I C AT I O N
2 9
Kin + Carta Annual Report and Accounts 2019STRATEGIC REPORT KEY PERFORMANCE
INDICATORS
1.
Cross-Specialism
Deals
2.
Net Revenue
by Sector
Definition:
Number of cross-specialism deals across the
Connective.
Performance:
We have scaled our central sales, marketing,
partnership and lead generation teams in order to
achieve organic growth.
40 cross-specialism deals valued at over £11 million
in new net revenue were signed in the period.
Link to Strategic Priorities:
Definition:
Net revenue which focuses on five key sectors:
• Healthcare
• Financial services
• Transportation
Industrial and agriculture
•
• Retail and distribution
Performance:
Our Innovation pillar meaningfully
broke into the Healthcare sector for
the first time with two seven-figure
multi-year wins. We also expanded
our Financial Services expertise in
the UK, winning three of Europe’s
largest banks as new clients.
Link to Strategic Priorities:
23%
26%
8%
9%
14%
20%
Transportation
Healthcare
Other
Financial
Services
Retail and
Distribution
Industrials and
Agriculture
3.
Adjusted Operating
Profit Margin
4.
Net Revenue Growth at
Constant Currency
Definition:
This is defined as a percentage of Adjusted operating
profit over net revenue.
Performance:
The Adjusted operating profit margin was 13% while
we continue to fund investment to drive growth in the
Connective (2018: 14%). Over the medium term, we
expect operating profit margin growth to improve into
low teens.
Definition:
Net revenue growth from continuing operations is
measured using the same number of working days
when comparing the current period to prior period on
a constant currency basis.
Performance:
Net revenue growth on a like-for-like basis of billing
days at constant currency was nil. There was a
favourable currency impact of 2%.
Link to Strategic Priorities:
Link to Strategic Priorities:
3 0
Kin + Carta Annual Report and Accounts 2019STRATEGIC REPORT 5.
Employee Net Promoter
Score (‘eNPS’)
6.
Geographic
Expansion
Definition:
eNPS based on employees’ likelihood to recommend
Kin + Carta as an employer.
Definition:
Strategic expansion into new regions domestically and
internationally.
Performance:
Through a number of new employee experience
initiatives, we have won seven Best Place to Work
awards globally and raised the score of our Global
eNPS by 50%.
We continue to focus on the growth potential of our
talent and our shared commitment to a triple bottom
line (people, profits and planet).
Performance:
In the period, we launched a new Innovation office in
Edinburgh, a new Communications office in Chicago
and new Kin + Carta Advisory offices in New York and
London. We now have all three of our core capabilities
in the UK and US.
Link to Strategic Priorities:
2019: 27
2018: 14
Link to Strategic Priorities:
Strategic Priorities
Organic Growth
Proposition
People
Platform
Expansion
Read more about Our Strategic Priorities
on pages 18 and 19
3 1
Kin + Carta Annual Report and Accounts 2019STRATEGIC REPORT FINANCIAL REVIEW
OVERVIEW
I am pleased to serve as the new Kin + Carta CFO
and excited about the opportunity in front of us. We
have the people, the client base and the appropriate
strategy to capture significantly more growth from
the DX market in the near term and coming years.
We continue to make the necessary changes to
position the Company for more reliable, and profitable
future growth.
The results that follow are discussed in terms of
continuing operations. The results are for 362 days
compared to the prior period of 371 days.
The Group’s statutory results for continuing operations
are set out in the table below:
Revenue
Net revenue
Statutory profit/(loss)
before interest and tax
Statutory profit/(loss)
before tax
Basic profit/(loss) per
share
362 days to
31 July
2019
£172.9m
£148.3m
371 days to
3 August
2018
£178.4m
£149.7m
£4.3m
£(28.2)m
£1.8m
£(31.2)m
0.73p
(22.09)p
The Group’s statutory profit before tax of £1.8 million
(2018: loss of £31.2 million) includes Adjusting
Items of £15.8 million (2018: £49.6 million), of
which £13.2 million relates to non-cash items in
the current period. Adjusting non-cash items include
past service costs of £4.1 million related to the St Ives
Defined Benefits Scheme (the ‘Scheme’), contingent
consideration treated as remuneration of £2.4 million,
and the amortisation of acquired intangibles of
£6.7 million.
The Group prepares Adjusted results which, in
management’s view, reflect how the business is
managed and show the performance in a manner
consistent with the previous year. Adjusted results
exclude items such as costs related to restructuring
activities, acquisitions made in current and prior
periods, disposal of sites, impairment charges and the
Scheme charges. Further details are provided in the
Alternative Performance Measures section on pages
36 to 41.
3 2
NET REVENUE AND ADJUSTED
OPERATING PROFIT
Net revenue growth on a like-for-like basis of working
days was 2% (£2.7 million), including a favourable
currency impact of approximately 2%. Net revenue
from clients outside of the UK increased from
£72.6 million to £78.5 million, and now represents
54% of Group net revenues compared to 48% in the
prior year.
Adjusted operating profit was £19.9 million, or 13%
of net revenue compared to £21.2 million and 14% in
the prior year, reflecting higher investments in growth,
restructuring in the Communication and Strategy
businesses, as well as macroeconomic weakness in
the UK market.
Central costs were £5.8 million (2018: £5.3 million).
The Group has separately identified these central costs
that cannot be directly attributed to the individual
trading entities of the Group. Central administration
costs represent 3.9% of Group net revenue, and
comprise the costs of running a plc and certain
functions retained in the centre.
Kin + Carta Annual Report and Accounts 2019STRATEGIC REPORT
ACQUISITIONS
No acquisitions were made in the current
period. However, the total current year
cash outflow for businesses acquired
in prior periods was £19.9 million. This
includes a final payment of £3.4 million
related to Solstice, and £16.5 million to
settle the third deferred consideration
payment for the TAB business. There
remains at 31 July 2019 a liability of
£2.0 million in relation to the final
tranche of TAB’s deferred consideration. Subsequent
to the period end in August 2019, the Group settled
the remaining liability of £1.2 million in cash and issued
a loan note for £0.8 million.
BALANCE SHEET
The net assets of the Group have increased from
£81.4 million to £88.0 million primarily due to net
profit after tax of £1.1 million and a net actuarial gain
of £5.2 million related to the Scheme. Total assets
have increased from £191.7 million to £194.5 million
and total liabilities have decreased from £110.3 million
to £106.9 million. Non-current assets consist largely
of goodwill and intangible assets of £111.2 million
(2018: £116.2 million).
TAX
The total tax charge for continuing operations was
£0.7 million (2018: £1.2 million). A number of Adjusting
Items are not deductible for taxation purposes. Further
details are provided in the Alternative Performance
Measures section on pages 36 to 41.
“We continue to make the necessary changes
to position the Company for more reliable,
and profitable future growth.”
The Group’s effective tax rate on the Adjusted profit
before tax was 19.5% (2018: 19.8%) compared to the
standard rate of corporation tax of 19% (2018: 19%)
and federal US tax of 21% (2018: 21%) for the Group.
The Adjusted tax charge was £3.4 million (2018:
£3.7 million). The Group’s effective tax rate on
Adjusted profit is lower than the prior period due
to a decrease in UK and US statutory corporate
income tax rates.
Net income tax of £0.3 million (2018: £5.4 million)
was paid in the period.
DIVIDEND
The Board is recommending a final dividend of
1.30 pence per ordinary share (2018: 1.30 pence)
giving a total dividend of 1.95 pence (2018:
1.95 pence) in respect of the 2019 financial period.
The dividend is covered 4.7 times by 2019 Adjusted
earnings. Subject to shareholder approval at the Annual
General Meeting, the final dividend will be
paid on 17 December 2019 to shareholders on the
register at 22 November 2019, with an ex-dividend
date of 21 November 2019.
3 3
Kin + Carta Annual Report and Accounts 2019STRATEGIC REPORT FINANCIAL REVIEW
CONTINUED
PENSIONS
The Group closed the Scheme to new members in
2002 and ceased future accruals within the Scheme in
2008. The Group accounts for post-retirement benefits
in accordance with IAS 19 Employee Benefits. The
Consolidated Balance Sheet reflects the net surplus on
the Scheme at 31 July 2019 based on the market value
of the assets at that date and the valuation of liabilities
using a discount rate based on AA non-gilt bond yields.
On an IAS 19 basis, the net surplus on the Scheme was
£6.7 million (2018: surplus of £1.9 million) before the
related deferred tax liability. The value of the plan assets
increased to £385.9 million (2018: £353.5 million) due
to the strength of investment returns. Approximately
65% of the plan assets are invested in return-seeking
assets providing a higher level of return over the longer
period. Plan liabilities increased to £379.2 million
(2018: £351.6 million) due primarily to the decrease in
the discount rate used, partially offset by the impact of
a reduction in assumed rates of future improvement in
life expectancy. The increase in the accounting surplus
is primarily attributable to the reduction in the assumed
rate of future improvement in life expectancy of Scheme
members.
The Scheme’s actuarial valuations determine the
cash deficit recovery payments by the Group and
the Scheme’s triennial valuation as of April 2019 is
currently in progress. The Group currently makes deficit
funding contributions of £2.6 million per annum and
a contribution of £0.4 million per annum towards the
costs of administration of the Scheme. On the disposal
of the Books segment in April 2018, the Group made an
additional contribution of £2.5 million to the Scheme.
The charge for the Group’s defined contribution
schemes was £2.3 million (2018: £2.1 million) in
the period.
CASH FLOW
Cash generated from operations was £9.0 million
(2018: £25.8 million). The decline was due to the
disposal of the Books and Marketing Activation
segments in the prior period and an increase in
working capital investment in the current period. Total
dividends paid were £3.0 million (2018: £2.8 million).
This consisted of a final dividend for the 2018 financial
period of 1.30 pence per share and an interim dividend
of 0.65 pence per share.
The capital expenditure incurred within the continuing
business primarily related to the fit-out of new office
space and the refurbishment of offices.
During the period, the Group sold a property in
Redditch for a consideration of £7.2 million. This
property was previously occupied by SP Group Limited,
which was disposed of in the prior period.
3 4
Kin + Carta Annual Report and Accounts 2019STRATEGIC REPORT NET DEBT
During the period, the Group successfully negotiated
a new revolving credit facility of £85.0 million, expiring
on 30 November 2022, on terms broadly in line with
the previous agreement. The banking group consists of
HSBC UK plc, Bank of Ireland and Fifth Third Bank.
Net debt increased during the year from £26.0 million
to £38.4 million primarily due to payments of earnout-
related consideration of £19.9 million for the Solstice
and TAB acquisitions, partially offset by the sale
proceeds from the Redditch property. At 31 July 2019,
Kin + Carta had drawn £60.4 million on its revolving
credit facility, leaving an unutilised commitment of
£24.6 million. The Group had cash and cash equivalents
of £22.0 million.
At 31 July 2019, the ratio of net debt to EBITDA
before Adjusting Items was 1.7 times (2018: 1.1 times)
as shown in the Alternative Performance Measures
section on pages 36 to 41.
Chris Kutsor
C H I E F F I N A N C I A L O F F I C E R
1 O C T O B E R 2 0 1 9
3 5
Kin + Carta Annual Report and Accounts 2019STRATEGIC REPORT ALTERNATIVE PERFORMANCE
MEASURES
The Annual Report includes both statutory and Adjusted results. In the management’s view, the Adjusted results
reflect the ongoing performance of the business, how the business is managed on a day-to-day basis and allows for
a consistent and meaningful comparison.
The alternative performance measures (“APMs”) and key performance indicators (“KPIs”) are aligned to our strategy
and are used to measure the performance of our business and are the basis for remuneration.
The Adjusted results exclude the items listed below as their inclusion could distort the understanding of the
performance for the year and the comparison with prior years.
KEY ADJUSTMENTS FOR ADJUSTED OPERATING PROFIT, PROFIT
BEFORE TAX AND EPS
Adjusted operating profit is calculated by adding back costs relating to restructuring activities, acquisitions made in
prior periods, the disposal of surplus property, impairment charges, movements in deferred consideration and the
St Ives Defined Benefits Pension Scheme. The tax effects of these adjustments are reflected in the Adjusted tax
charge. The adjustments are detailed below:
1. Profit on the disposal of property, plant and equipment and restructuring costs – these items are excluded
in order to reflect the performance of the business in a consistent manner and how the performance of the
business is managed on a day-to-day basis. They are not considered to be part of the core activities of the
business.
They have arisen as a result of initiatives to reduce the cost base and improve the efficiency and collaboration
across the Group. The initiatives reflect a significant change in the organisational structure of a business area and
are assessed on an individual basis and excluded from the Adjusted results.
2. Amortisation of acquired intangibles and impairments – the amortisation and impairments of assets acquired
through business combinations are excluded from Adjusted results. These costs are acquisition-related and are
not part of the ongoing trading performance of the business. The amortisation of computer software is included
within the Adjusted results as it is part of the ongoing trading performance.
3. Contingent consideration required to be treated as remuneration, and increase in deferred consideration – our
acquisitions, where deferred consideration arises, are structured such that the consideration is contingent on
continued employment within the Group. Under IFRS 3 this is treated as an expense and therefore part of the
statutory result. Where the purchase price has been determined and there is a subsequent increase or decrease
arising from the payment of deferred consideration under IFRS 3 this is required to be expensed. We do not
consider this to be part of the underlying trading performance.
4. Administrative expenses related to the St Ives Defined Benefits Pension Scheme – the Scheme was closed to
new members in 2002 and ceased future accrual in 2008. There are now less than five employees who are
members of the Scheme and still employed by the Group. On the disposal of the Books segment Kin and Carta
plc is the last remaining employer. The costs of the Scheme including administration costs, past service costs
related to the Guaranteed Minimum Pension (‘GMP’) and pension finance charge/(credit) are not considered to
be part of the ongoing performance of the Group and they are excluded from the performance measures. As such
they are treated as Adjusting Items. The analysis of Adjusting Items from continuing operations is set out below:
3 6
Kin + Carta Annual Report and Accounts 2019STRATEGIC REPORT
Adjusting Items description
Profit on disposal of property, plant and equipment
Amortisation of acquired intangibles
Expenses related to restructuring items
Impairment of goodwill and other assets
Contingent consideration required to be treated as remuneration
Increase in deferred consideration
Administrative expenses/(income) related to the St Ives Defined Benefits Pension Scheme
Total Adjusting Items added back to the statutory operating profit
Bank amortisation fees
Pension finance charge
Total Adjusting Items added back to the statutory profit before tax
Tax related to Adjusting Items
Total Adjusting Items added back to the statutory profit after tax
The key APMs frequently used by the Group for continuing operations are:
362 days to
31 July
2019
£’000
371 days to
3 August
2018
£’000
(1,771)
6,674
2,635
–
2,375
–
5,707
15,620
189
(30)
15,779
(2,772)
13,007
(1,542)
8,659
3,062
12,082
23,994
3,094
(31)
49,318
–
324
49,642
(2,436)
47,206
Like-for-like revenue: The measure is defined as the revenue from continuing operations using the same number
of working days when comparing the current period to the prior period. The Company moved to calendar billable
month reporting from August 2018; the previous reporting cycle comprised of 52/53-week years. The number of
working days in the current period was 258 against a comparator of 265 days. The comparator revenue has been
adjusted to reflect an equal number of working days.
Statutory revenue
Number of working days in the period
Number of working days in the current period
Like-for-like revenue
Like-for-like revenue %
Statutory revenue
Less Adjusting revenue
Adjusted revenue
362 days to
31 July
2019
£’000
172,874
258
258
172,874
(0.4)%
362 days to
31 July
2019
£’000
172,874
(763)
172,111
371 days to
3 August
2018
£’000
178,355
265
258
173,643
371 days to
3 August
2018
£’000
178,355
(63)
178,292
Adjusting revenue includes revenue recorded after the decision to cease the operations of a subsidiary.
3 7
Kin + Carta Annual Report and Accounts 2019STRATEGIC REPORT
ALTERNATIVE PERFORMANCE
MEASURES CONTINUED
Adjusted net revenue: The measure is defined as revenue less project-related costs as shown on the consolidated
income statement. Project-related costs comprise primarily of third party pass-through expenses and direct costs
attributable to a project.
Adjusted revenue
Project-related costs
Adjusted net revenue
362 days to
31 July
2019
£’000
172,111
(24,090)
148,021
371 days to
3 August
2018
£’000
178,355
(28,614)
149,678
Like-for-like Adjusted net revenue: The measure is defined as the Adjusted net revenue from continuing operations
using the same number of working days when comparing the current period to the prior period. The Company
moved to calendar month reporting from August 2018; the previous reporting cycle comprised of 52/53-week
years. The number of working days in the current period was 258 against a comparator of 265 days. The comparator
revenue has been adjusted to reflect an equal number of working days.
Adjusted net revenue
Number of working days in the period
Number of working days in the current period
Like-for-like working days Adjusted net revenue
Like-for-like working days Adjusted net revenue growth %
362 days to
31 July
2019
£’000
148,021
258
258
148,021
1.6%
371 days to
3 August
2018
£’000
149,678
265
258
145,724
Like-for-like Adjusted net revenue at constant currency: The measure is defined as the Adjusted net revenue from
continuing operations using the same number of working days when comparing the current period to the prior
period at constant currency. The Company moved to calendar month reporting from August 2018; the previous
reporting cycle comprised of 52/53-week years. The number of working days in the current period was 258 against a
comparator of 265 days. The comparator revenue has been adjusted to reflect an equal number of working days.
Like-for-like working days Adjusted net revenue
Effect of constant currency
Like-for-like working days Adjusted net revenue at constant currency
Like-for-like working days Adjusted net revenue decline % at constant currency
362 days to
31 July
2019
£’000
148,021
–
148,021
(0.3)%
371 days to
3 August
2018
£’000
145,724
2,711
148,435
Adjusted operating profit: This measure is defined as the operating profit or loss less Adjusting Items.
Statutory operating profit/(loss)
Add back total Adjusting Items excluding pension finance charge and tax
Adjusted operating profit
362 days to
31 July
2019
£’000
4,265
15,620
19,885
371 days to
3 August
2018
£’000
(28,153)
49,318
21,165
3 8
Kin + Carta Annual Report and Accounts 2019STRATEGIC REPORT
Adjusted profit before tax: This measure is defined as the Group net profit or loss before tax less Adjusting Items.
Statutory profit/(loss) before tax
Add back total Adjusting Items excluding tax
Adjusted profit before tax
362 days to
31 July
2019
£’000
1,777
15,779
17,556
371 days to
3 August
2018
£’000
(31,171)
49,642
18,471
Like-for-like Adjusted profit before tax: The measure is defined as the Adjusted profit before tax from continuing
operations using the same number of working days when comparing the current period to the prior period. The
Company moved to calendar month reporting from August 2018; the previous reporting cycle comprised of 52/53-
week years. The number of working days in the current period was 258 against a comparator of 265 days. The
comparator revenue has been adjusted to reflect an equal number of working days.
Adjusted profit before tax
Number of working days in the period
Number of working days in the current period
Like-for-like Adjusted profit before tax
Like-for-like Adjusted profit before tax %
362 days to
31 July
2019
£’000
17,556
258
258
17,556
(2.4)%
371 days to
3 August
2018
£’000
18,471
265
258
17,983
Adjusted profit after tax: This measure is defined as the Group profit or loss after tax before Adjusting Items:
Statutory profit/(loss) after tax
Add back total Adjusting Items
Adjusted profit after tax
362 days to
31 July
2019
£’000
1,121
13,007
14,128
371 days to
3 August
2018
£’000
(32,394)
47,206
14,812
Adjusted basic earnings per share: This measure is defined as basic earnings per share after Adjusting Items.
Adjusted profit after tax
Weighted number of shares (‘000)
Adjusted basic earnings per share (pence)
362 days to
31 July
2019
£’000
14,128
153,307
9.22
371 days to
3 August
2018
£’000
14,812
146,654
10.10
3 9
Kin + Carta Annual Report and Accounts 2019STRATEGIC REPORT
ALTERNATIVE PERFORMANCE
MEASURES CONTINUED
Adjusted operating margin: This measure is defined as the percentage of Adjusted operating profit over net revenue.
Adjusted net revenue
Adjusted operating profit
Adjusted operating margin
362 days to
31 July
2019
£’000
148,021
19,885
13.4%
371 days to
3 August
2018
£’000
149,678
21,165
14.1%
Adjusted EBITDA: This measure is defined as the Adjusted operating profit or loss before depreciation, amortisation,
finance expense and taxation. The amortisation charge is adjusted to remove the effect of the amortisation of
acquired intangibles, which is included as an Adjusting Item.
The Adjusted EBITDA for 2018 has been determined on the basis of the continuing operations only for the purpose
of calculating the ratio of net: EBITDA.
Adjusted operating profit
Add back depreciation and amortisation – continuing operations for the current year
Less amortisation of intangibles classified as Adjusting Items
Adjusted EBITDA
362 days to
31 July
2019
£’000
19,885
9,471
(6,674)
22,682
371 days to
3 August
2018
£’000
21,165
11,025
(8,659)
23,531
Net debt: This measure is calculated as the total of loans and other borrowings (both current and non-current), less
cash and cash equivalents.
Loans – current liabilities
Loans – non-current liabilities
Cash and cash equivalents
Net debt
2019
£’000
–
60,416
(22,017)
38,399
2018
£’000
40,363
–
(14,398)
25,965
For the measurement of the bank covenants, cash and cash equivalents denominated in currencies other than GBP
Sterling are translated at an average rate rather than at the period end spot rate used in the Consolidated Balance
Sheet. The reconciliation is as follows:
Net debt
Foreign exchange difference between spot rate and average rate
Net debt for covenant purposes
2019
£’000
38,399
(272)
38,127
2018
£’000
25,965
–
25,965
4 0
Kin + Carta Annual Report and Accounts 2019STRATEGIC REPORT
Net debt to Adjusted EBITDA: This measure is calculated by dividing net debt by Adjusted EBITDA. The Adjusted
EBITDA for the prior year is based on continuing and discontinued operations.
Adjusted EBITDA
Net debt for covenant purposes
Net debt to Adjusted EBITDA
362 days to
31 July
2019
£’000
22,682
38,127
1.68
371 days to
3 August
2018
£’000
23,531
25,965
1.10
4 1
Kin + Carta Annual Report and Accounts 2019STRATEGIC REPORT
OUR POSITIVE IMPACT
BRINGING OUR PURPOSE TO LIFE
Our purpose is to inspire growth through
connectedness. We have set out below the steps
we are taking to make that real for our clients, our
communities, our people, our shareholders and our
suppliers.
The Board continues its commitment to working in
a socially responsible way. It is driven to ensure that
corporate social responsibility (‘CSR’) is reflected in our
business practices and that we have a positive impact
on the environment in which we live and work, and on
each of the Connective’s stakeholders.
In this report, we outline how we have continued the
good practices that are embedded in our culture and
ways of working, how there has been additional focus on
this area over the past 12 months, and how we measure
our impact and performance across non-financial key
performance indicators, now and in the future.
OUR TRIPLE BOTTOM LINE INITIATIVE
To provide structure, focus, and external validation
for our efforts to become a triple bottom line
business, the Connective is utilising the B Corp
assessment and certification framework as a
tool. This is a recognised, relevant and robust
framework, suitable for the size and sectors of
our specialisms, that allows us to measure current
performance against stringent criteria in the key
areas of governance, people, community, the
environment, and the positive impact (or otherwise)
of our work with clients. It also provides guidance
for improvement initiatives in the areas where we
may not currently achieve best practice, and allows
us to plan a suitable, tailored route both to B Corp
certification for each of our specialisms and beyond
as we continue our journey to becoming a true triple
bottom line business.
During the period, we reviewed current activities,
identifying areas for improvement and agreeing
action plans for each specialism to improve across
a number of relevant areas. We have also noted
areas of strength in each business, and we will be
using these learnings to roll out consistent policies
and behaviours across the Connective. Our Positive
Impact report summarises our current practices and
performance in each of the key areas where we can
enhance our positive impact, together with plans for
the future.
B Corporation (‘B Corp’): A globally recognised
assessment framework to assist companies to
become more responsible by considering the impact
of their decisions on their clients, community,
people, suppliers, and the environment.
Triple Bottom Line: giving consideration to people,
profit and planet.
During the period, the Board agreed that a greater
emphasis on social responsibility and the positive
impact of the Connective was a core strategic area
that would enhance the Connective’s effectiveness
and deserved additional focus and resource. A
Head of Responsible Business was appointed to
the Connective’s CSR function, reporting to the
Chief Connective Officer, with responsibility for
the assessment and improvement of our impact on
all of our stakeholders and the environment. As a
result of the initial assessment, the long-term goal
was set to achieve B Corp certification for each of
our specialisms, with a view to each business having
a greater triple bottom line focus, and striving to
use our business as a force for good for all of our
stakeholders.
We strongly believe that becoming a triple bottom
line business will have numerous benefits across the
organisation as well as in society, and will ultimately
be an important factor in driving:
• Engagement among our teams, across the
Connective, and with our clients.
• Growth opportunities for our people as well
as our service lines.
•
Increasing success and the future
competitiveness of the Connective.
4 2
Kin + Carta Annual Report and Accounts 2019
STRATEGIC REPORT OUR PRACTICES AND PERFORMANCE
OUR CLIENTS
Across the Connective, we undertake a wide range
of services for our clients, who are located around
the world and in various sectors. In each case, we
endeavour to provide the highest level of advice and
support to optimise opportunities and solve problems
for each of our customers. In addition, we strive to
identify further areas where we may be able to assist.
In the future, we plan to take our services further,
with tailored recommendations for each of our clients
in every project about how they might increase their
positive impact on society or on the environment with
their own products. We will also record the proportion
of our own work which can be classified as positive
impact, so we can consider if and how we can improve
in this area in future years.
We have well-established practices to promote
responsible business with our clients. The CEO of
each of our specialisms has signed up to the
Connective’s Anti-Corruption and Bribery Policy, which
sets out best practice in areas such as the prohibition
of facilitation payments and political donations.
OUR PEOPLE
Kin + Carta provides expert advice as well as innovative
technological and communications solutions to our
clients, in each case originally developed by our people.
We recognise that our success depends on their quality.
As a result, we undertake to and generally succeed in
recruiting, retaining, and progressing the best people
across all our specialisms. We make a significant
investment in creating an inclusive, progressive and
engaging environment in each of our offices, and look
to live our shared values across all our specialisms and
geographies. Being connected, compassionate and
courageous together allows us to enjoy our work, our
community, and our client relationships.
As part of the B Corp assessment process, we undertook
a detailed review during the year of all relevant aspects
of each specialism’s relationship with its employees,
including: compensation and financial security, benefits,
diversity and inclusion, training and career development,
health and wellness, safety, communication, working
flexibility, satisfaction and engagement, and culture.
As a result, we are developing plans for each specialism,
and for the Connective as a whole, to improve aspects
in each of these areas where necessary or desired, with
a view to achieving industry-leading status.
Employee Experience and
Engagement
The Connective promotes positive employee experience
across learning and development, feedback and appraisals,
health and wellbeing, social occasions, flexible working
arrangements, and the office environment, in addition to
competitive remuneration packages and incentives.
Our investment in our people is in line with our long-term
goal to become an internationally recognised best place
to work. Understanding the views of our employees
and maintaining a regular and open dialogue is central
to achieving this goal. We undertake six-monthly
engagement surveys to understand employee perceptions
of the business. The findings are subsequently reported
to the Board and key initiatives are agreed for progress.
We have also continued to develop the channels through
which employees can learn more about our business and
performance and provide opportunities to ask questions.
4 3
Kin + Carta Annual Report and Accounts 2019STRATEGIC REPORT OUR POSITIVE IMPACT
CONTINUED
We have launched ‘All Kin’ employee town halls in
addition to issuing regular internal announcements,
videos and podcasts that deliver short, sharp summaries
of news across the Connective.
During the period, we have run numerous initiatives
to enhance employee experience. A key focus of the
Connective’s Employee Experience Leads has been
providing support to, and driving awareness initiatives
on the resources available to, employees within the
Connective on wellbeing or mental health matters.
Senior management and Employee Experience Leads
also attended mental health first aid training. This
programme will continue to run and be strengthened.
In addition, our Global Citizenship programme has laid
the legal and operational foundations to enable the
movement of our employees across the Connective.
This, coupled with our increasingly collaborative
approach across the specialisms and peer learning
drives, will, we believe, increase the knowledge and
skills levels, and job satisfaction, among our teams.
Diversity and Inclusion
As at 31 July 2019, we employed 1,438 people
including 1,356 full-time and 82 part-time employees.
The Connective is committed to promoting equality
of opportunity for all employees and job applicants,
supported by its Equal Opportunities Policy. The
objective of the policy is to ensure no job applicant
or employee receives less favourable treatment on
the grounds of age, disability, sex, sexual orientation,
marital or civil partner status, race, colour, nationality,
religion or belief. Employees who become disabled
during their working life will remain in employment
wherever possible, and will be assisted with occupational
rehabilitation and retraining. Wherever practicable,
the Connective will modify procedures or equipment
to maximise an individual’s full capabilities.
Connective Employees
Senior Management
Board Composition
0.1%
39.6%
31.3%
22.2%
60.3%
68.7%
77.8%
Males
Females
Non-binary
867
569
2
4 4
Males
Females
33
15
Males
Females
7
2
Kin + Carta Annual Report and Accounts 2019STRATEGIC REPORT Integrity and Human Rights
We continue to formally protect the interests of our
employees through our Dignity at Work Policy, which
ensures the Connective provides a working environment
free from harassment and bullying as well as a clear
procedure to tackle such behaviour. Our Speak Up Policy
is readily available to all employees to ensure they can
confidentially raise any concerns about the business.
OUR COMMUNITY
The Connective has various initiatives to support
charities, including: setting and then donating an
annual budget to charities serving communities in
which the Connective operates or to which employees
or clients have a particular affinity; matching the total
contribution made by the Chairman from forgoing
a proportion of his fees; and supporting fundraising
events for charities nominated by employees.
In recent years, each of our specialisms have engaged
with charitable projects in their local communities,
and those further afield in some instances, through
individual fundraising, volunteering or company
donations. These contributions have covered a broad
range of deserving causes, and the provision of time has
ranged from practical volunteering activities to strategic
advice for charities.
During the year, the Connective made donations of
varying sums to a spectrum of charities including
Cancer Research UK, Crisis, Ronald McDonald House
and Save the Children.
In the future, the Connective also plans to record the
amount of time donated to charities, such that we can
better identify our impact to optimise the results for
those causes we support.
OUR SUPPLIERS
The Connective is committed to building strong
working relationships with its suppliers, ensuring that
we are aligned on quality, delivery, innovation, risk and
compliance. Our principal suppliers complete
a questionnaire covering financials, conflicts of interest,
and other relevant information. They are also required
to adhere to our Anti-Corruption and Bribery Policy,
as mentioned above, and our Ethical Trading Policy.
The Ethical Trading Policy sets out our ethical and
compliance values, such as promoting trade and use
of goods which are produced and marketed under
conditions that are socially, environmentally and
financially responsible; and considering the social and
economic wellbeing of current and future generations
through our business practices.
We are committed to ensuring that there is no slavery
or human trafficking within our supply chains and we
expect our suppliers to adhere to the Modern Slavery
Act 2015 (‘MSA’). We have undertaken steps, as far as is
reasonable and practicable, to ensure the requirements
of the MSA are implemented within
our supply chain.
The Company Secretary maintains a Bribery Risk
Register, which is refreshed annually and reviewed by
the Board together with a report from the Head of
Internal Audit on how the Connective’s Anti-Corruption
and Bribery Policy has been applied during the year. The
Internal Audit function follows up any high-risk areas
identified from this exercise.
Payment terms granted to suppliers are negotiated
according to the amount at risk and the financial
strength of the supplier concerned, which will be
adhered to, provided that they perform in accordance
with the agreed terms. The average creditor days
outstanding at 31 July 2019 for the Group was 59 days
(2018: 71 days).
OUR SHAREHOLDERS
The Board believes in maintaining good relationships
with its shareholders. Effective two-way communication
with institutional shareholders and analysts takes
place through regular presentations involving the
Chief Executive Officer and the Chief Financial Officer.
The Board receives an investor relations report at each
of its regular meetings. The Chief Executive Officer and
the Chief Financial Officer conduct biannual analysts’
briefings and, where appropriate, meet the Company’s
major shareholders to further explain the Connective’s
investment proposition. A number of major shareholders
have accepted the opportunity to meet Non-Executive
Directors including the Chairman.
The Annual General Meeting is regarded as an
opportunity to communicate directly with shareholders
and the chairs of the Audit, Nomination and
Remuneration Committees are available at each meeting
to answer shareholders’ questions.
Those shareholders that have an obligation to notify the
Company of their voting interests are shown on page 97.
4 5
Kin + Carta Annual Report and Accounts 2019STRATEGIC REPORT OUR POSITIVE IMPACT
CONTINUED
Health and Safety Management
Targets have been set for the Accident Incident Rate
(‘AIR’)1 and the Accident Severity Rate (‘ASR’)2 for the
Connective. To assist in reducing workplace accidents,
each office completes formal monthly workplace
inspections and risk reduction advice is provided by
the Connective’s HS+E Advisor.
To reflect our commitment to employee wellbeing, since
January 2019 we have included any absences due to
work-related stress in quarterly HS+E reports to the
Board. The Connective has invested in training Mental
Health First Aiders within each of its offices to improve
resilience and help our people recognise and respond
effectively to mental health matters.
Accident Incident Rate:
2018/19: 1.94
Target Rate: less than 3
Accident Severity Rate:
2018/19: 110
Target Rate: less than 500
1. Accident Incident Rate (‘AIR’) – All classes of work-related injury
accident, including agency workers but excluding contractors
and other third parties. Headcount includes agency workers but
excludes contractors and other third parties. AIR is calculated as
total accidents 5 100,000/total worked hours.
2. Accident Severity Rate (‘ASR’) – Total lost hours due to any work-
related injury accident counted from the next scheduled shift or
working day. Hours are as recorded using a standard working day.
Total worked hours includes hours worked by agency workers but
excludes contractors and other third parties. ASR is calculated as
total lost hours 5 100,000/total worked hours.
HUMAN RIGHTS
Ethical values and integrity are central to our businesses
both in the UK and abroad. As a socially responsible
business, we recognise that we must operate legally,
ethically and to approved policies at all times in order
to deliver our customers the best service, consistent
quality and confidence that the people who make and
sell our products are not being exploited or exposed.
Our Ethical Trading Policy establishes the principles
that we expect our employees, contractors, agents,
suppliers, consultants and other connected third parties
to comply with (see page 45). To protect the rights of our
employees, we have an Equal Opportunities Policy (see
page 44).
The Company’s Modern Slavery Act Policy Statement
is published on its website at www.kinandcarta.com in
accordance with section 54 of the Modern Slavery Act
2015 (‘MSA’). The Company is completely opposed to
any form of slavery and human trafficking and the Group
will not knowingly do business with any organisation or
body involved in slavery and human trafficking.
The Connective had no human rights issues during
the period.
HEALTH, SAFETY AND
ENVIRONMENTAL (‘HS+E’)
MANAGEMENT
The Connective is committed to avoiding harm to
people and reducing the impact of its operations on the
environment. HS+E management has equal importance
with the commercial, operational and financial aspects of
our activities.
Our transformation to an exclusively digital business has
reduced our risk profile following the disposal of the print
operations during the prior year. This transformation
was addressed in our reviewed HS+E Policy Statement
in August 2019 and a supporting HS+E Framework
Policy document, which stipulates the organisation
and arrangements for managing the health, safety and
environmental risks of the Connective.
HS+E performance is reviewed on a quarterly basis by
the Board. This performance review includes: accident/
incident rates, legal compliance, corrective action taken
or required, and policy development.
4 6
Kin + Carta Annual Report and Accounts 2019STRATEGIC REPORT Intensity Ratio 2018/19 compared to 2017/18
5.00
4.50
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
g
u
A
t
p
e
S
t
c
O
v
o
N
c
e
D
n
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J
b
e
F
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2018–19
2017–18
The Connective will continue to explore practical
and cost effective ways to reduce carbon emissions
resulting from its operations.
Water consumption will no longer be included in
the Annual Report with the organisation no longer
operating industrial processes.
Environmental Management
An environmental aspect and impact assessment was
developed for the Connective to assist in the setting of
environmental objectives and targets. Significantly, and
as referenced on page 42, the Connective has targeted
achievement of B Corp certification to demonstrate
its commitment to a high standard of environmental
performance.
Carbon Reporting
This is the first year of reporting under the UK
Government’s Streamlined Energy and Carbon
Reporting (‘SECR’) policy under the Companies
(Directors’ Report) and Limited Liability Partnerships
(Energy and Carbon Report) Regulations 2018. The
Connective’s footprint is calculated in accordance
with the Greenhouse Gas (‘GHG’) Protocol and
Environmental Reporting Guidelines, including
streamlined energy and carbon reporting guidance.
Activity data has been converted into carbon emissions
using factors that enable the calculation of the tonnes
of carbon dioxide equivalent (‘tCO2e’) produced.
Calculating the tCO2e allows the different greenhouse
gases to be compared on a like-for-like basis relative
to one unit of CO2.
Breakdown of Emissions by Scope (tCO2e)
Of the 536 tCO2e emitted during the period, 88% was
through electric consumption (scope 2 emissions),
11% was from the combustion of natural gas (scope 1
emissions), and 1% was from travel in employee-owned
vehicles (scope 3 emissions).
1%
11%
88%
Scope 1
Scope 2
Scope 3
tCO2e 58
tCO2e 471
tCO2e 7
Intensity Ratio
The intensity ratio (all emissions divided by turnover) of
the transformed business is significantly lower than the
previous operation.
In comparison to the prior period, carbon emissions
for the period ended 31 July 2019 were 18% lower
and gave an intensity ratio 3.1. To enable an accurate
comparison of the Connective’s carbon emissions for
the reporting period versus the prior period, emissions
produced from the print operations were removed from
2017/18 source data.
4 7
Kin + Carta Annual Report and Accounts 2019STRATEGIC REPORT T
R
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Y
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The Kenyan part of the
Impact Programme at
Kin + Carta Solstice
provides employees with
an opportunity each year to
deliver on inspiring projects
outside our usual client work.
Each year, Kin + Carta Solstice
selects two to three Nairobi-
based companies that:
a) believe digital is imperative
to their business
outcomes; and
b) are making a positive social
impact in their community.
4 8
Kin + Carta Annual Report and Accounts 2019
S
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For each of these Kenyan companies, we discuss and
identify with them a digital problem that we can help
them to solve. We then form agile teams and commit
to remote, pro-bono work with the companies, so we
can work together to achieve the best solutions. The
programme closes with two weeks on the ground in
Kenya with our partner companies – which is often a
chaotic but enjoyable blend of teaching, discovering
and building.
Kin + Carta team: an interdisciplinary mix of 11
Kin + Carta Solstice employees (including strategists,
developers, researchers and consultants).
Our 2019 local company partners:
• Twiga: One of Nairobi’s fastest tech startups, Twiga
is successfully bridging the gap between farmers
and vendors, minimising food waste and offering
above market price for producers at a competitive
rate for consumers. Twiga stands as a catalyst for
change within the retail and agtech sectors by
connecting farmers with vendors through emerging
technology.
•
Internet of Elephants (‘IOE’): While conservation
efforts receive more funding and are top of mind
in major cities like Nairobi, IOE is reaching other
locations typically unconnected with conservation.
Augmented reality and data visualisation products
are used to create an engaging new way for the
public to connect with wildlife.
• GrowthAfrica: A long-term partner of the
programme, GrowthAfrica is Nairobi’s leading
accelerator focused on growing successful
enterprises, innovations and entrepreneurs across
Africa. Through business acceleration, strategic
advice and access to investments, they have been
a consistent partner in introducing Kin + Carta
Solstice to new businesses with digital challenges
and future opportunities for the programme.
This has been one of our highest impact programmes
to date. Internally, we have measured success against
marketing reach, recruiting value and employee
retention. Externally, we measure the programme
improvement against how we qualify partners,
alignment on the problem to solve and real business
outcomes. We’re happy to announce the Chief
Technology Officer of Twiga, Caine Wanjau, will
be involved as a speaker at our upcoming annual
conference, FWD.
Kin + Carta Annual Report and Accounts 2019
4 9
PRINCIPAL RISKS AND
UNCERTAINTIES
APPROACH TO RISK MANAGEMENT
Kin + Carta has policies and procedures in place to ensure that risks are properly identified, evaluated and managed
at the appropriate level within the business. Our risk management framework, which is reviewed by the Audit
Committee, is described on pages 62 and 63. Formal half-yearly reviews and discussions on risks and challenges
facing the Connective are undertaken by the Board in addition to considering specific risk matters at each Board
meeting. The risk register includes risks that are specific to the holding company, such as corporate financing,
in addition to risks escalated from the specialisms which could have a material effect on the Connective. Risks
pertinent to the specialisms are further considered by the Executive Directors during quarterly presentations by
each operating business. The presentations include an update on the forecast, current market conditions, strategic
direction and an annual SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis.
The longer term viability of the Company has been assessed by the Board over a three-year period during the year.
Details of this review are on page 96.
RISK
OVERSIGHT
RISK
ASSURANCE
RISK OWNERSHIP
AND CONTROL
EXECUTIVE
DIRECTORS AND
SPECIALISM
MANAGERS
Our Executive Directors and
specialism managers identify
risks and are responsible
for day-to-day operational
supervision, which includes the
identification, mitigation and
management of risk.
BOARD
INTERNAL
AUDIT
Our Internal Audit function
gives assurance over our risk
management, control and
governance processes and
systems.
The Board has overall
responsibility for risk
management. It is responsible
for carrying out a robust
assessment of the principal
risks facing the Connective,
including those threatening our
ability to achieve our business
model, strategic objectives,
solvency and liquidity. The
Board sets and monitors the
risk appetite.
AUDIT
COMMITTEE
On behalf of the Board, the
Audit Committee reviews
the effectiveness of the
Connective’s internal control
and risk management systems.
5 0
Kin + Carta Annual Report and Accounts 2019STRATEGIC REPORT HEAT MAP
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1
6
8
3
5
7
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10
9
Impact
RISK
1 Growth
2 Scalability
3 Assimilation
4 Economy and Volatility
5 Clients
6 Our People
7 Brand and Culture
8 Finance
9 Pension Scheme
10 Data Security and GDPR
RISK APPETITE
Risk appetite is the degree of risk we consider appropriate and acceptable to achieve our strategic objectives. As
part of its annual risk assessment, the Board has considered and reviewed the nature and extent of its risk appetite.
The outcome of this exercise informs decision-making across the Connective, providing direction and boundaries
that help to set the level of mitigation needed. The Connective’s risk appetite across the principal risks was not
altered materially during the period following consideration by the Board. Risk appetite is subject to ongoing
review by the Board, which takes into account changes to the economic environment, strategic progress and the
performance of the specialisms.
The Board seeks to minimise liquidity risks and risks associated with the welfare of our people; it consequently has
a particularly low risk appetite in these areas. For liquidity risk, we have detailed procedures for monitoring
headroom in the bank facility and the associated leverage and interest cover covenants. The Connective model
facilitates the opportunity for our people to work in different areas within the organisation and to gain from wider
experiences. In other aspects, such as growth initiatives, the Board has a greater risk appetite and sets the level
of mitigation accordingly. Mitigation of risks associated with growth initiatives has included strengthening the
Board and senior management, with several significant appointments having been made during the period. These
appointments are described in more detail on pages 70 and 71. Thus, the Board accepts a managed risk profile, while
attempting to mitigate risks effectively, as we seek to deliver our strategic goals.
5 1
Kin + Carta Annual Report and Accounts 2019STRATEGIC REPORT PRINCIPAL RISKS AND
UNCERTAINTIES CONTINUED
The table below details the Connective’s principal risks and the key mitigating activities in place to address them. The
changes in the risk ratings from the Board’s assessment in the prior period have been highlighted.
No new key risks have been added to the register during the period. However, the Board is mindful of the potential
impact of the pace of change as the business transforms and has considered this in its review of the principal risks.
Risk
Description
Mitigating activities
1 GROWTH
↔
2 SCALABILITY
↔
The business continues to undertake
a number of initiatives to support its
strategy and growth model. It is important
that our specialisms continue to identify
new business opportunities and partnership
channels to maximise potential growth.
Growth initiatives may be underinvested
or not pursued in the right sectors or
territories and may therefore fail to
deliver growth.
Achieving scalability within our specialisms
is important in order to pursue a high
growth strategy. While included as a risk,
achieving greater scalability is also an
opportunity for the Connective.
Digital Transformation businesses may not
have sufficient scale within their sectors
to secure substantial customer contracts.
3 ASSIMILATION
↔
During the prior period, six businesses were
successfully merged into two specialisms,
AmazeRealise and Edit. The Connective
continues to identify areas for assimilation
and integration to create a solid platform
for growth.
Short-term impacts from integrating
businesses and functions could manifest
in the form of temporary challenges
as cultures are merged and logistical
considerations are managed.
• Further investment in new business
functions.
• Embedding the Connective proposition
to encourage collaborative behaviour
and growth opportunities, supported by
the appointment of Charlie Wrench, our
first Chief Connective Officer.
• Detailed budgets and three-year plans
submitted to the Board for review.
• Stringent selection criteria followed for
pursuing acquisitions that fit within the
Connective’s strategy and culture.
• Collaboration between specialisms
such as working on joint pitches.
• Organic growth of businesses through
recruitment drives and opening of new
offices.
• Bringing businesses and functions
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
with a greater emphasis on recurring
revenue.
• Office moves to accommodate new
specialisms in the same location while
enhancing the working environment.
• People-focused initiatives and bonding
to encourage a uniform culture with
shared values across the Connective.
• Developing processes and procedures
to increase efficiency.
•
Identifying and facilitating resource
requirements to manage the changes
being implemented.
5 2
Kin + Carta Annual Report and Accounts 2019STRATEGIC REPORT Risk
Description
4 ECONOMY
AND
VOLATILITY
Challenging economic conditions may
inhibit growth and create uncertainty. This
could lead to volatility in earnings.
↑
Uncertainty in the economy, largely
associated with Brexit, could result in
marketing campaigns or projects being
cancelled or deferred at short notice.
While the Connective 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.
5 CLIENTS
↔
The Connective has a number of key clients
in each of its specialisms. Competitive
pressure may result in the loss of a key
client.
Should the Connective lose a number of its
key customers or key suppliers, this could
have a material impact on its finances.
However, for the period ended 31 July
2019, no single customer accounted for
more than 6% of revenue.
Mitigating activities
• Diversification into markets that are
capable of delivering profit growth
with an increasing range of marketing
companies.
• Diversification through growth in the
US and other overseas locations, where
client demand warrants it.
•
Investment in a wider range of services
offered to clients.
• A continual review of the Connective’s
cost base.
• Secure more long-term client
relationships and contracts with a
greater emphasis on recurring revenue.
• 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.
• Encourage collaborative behaviour
across the Connective’s specialisms
to strengthen our ability to anticipate
our clients’ needs and offer them tailored
solutions to distinguish the Connective’s
marketing 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 Connective support
where appropriate.
• Conduct client satisfaction surveys.
5 3
Kin + Carta Annual Report and Accounts 2019STRATEGIC REPORT PRINCIPAL RISKS AND
UNCERTAINTIES CONTINUED
Risk
Description
6 OUR PEOPLE
↔
Retaining and recruiting staff is a key
priority for the Connective as it continues
to invest in new and existing service
orientated businesses. Following the
disposal of the legacy print businesses
in the prior year, the Connective is now
entirely a people-focused business.
A failure to attract, develop and retain
employees with the necessary talent
would impact the ability of the specialisms,
and Connective as a whole, to deliver the
services sought by our clients and support
the growth of the business.
7 BRAND AND
CULTURE
In October 2018, the Company launched a
rebrand. It is vital that the brand architecture
is cohesive and easily understood by
customers and top talent globally.
If the brand and culture do not resonate
with the Connective’s stakeholders,
business opportunities may be missed
to competition.
The Company’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
Connective.
The Company has a Defined Benefits
Pension Scheme (the ‘Scheme’), which is
currently in a funding deficit. 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.
An increase in the deficit could lead to
higher contributions being made by the
Company.
↔
8 FINANCE
↔
9 PENSION
SCHEME
↔
5 4
Mitigating activities
•
Implement appraisals and fulfil training
needs where identified.
• Develop a collaborative culture across
the Connective’s specialisms.
• Emphasis on becoming a triple bottom
line business and enhancing employee
experience.
• 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 for people to second or transfer
to different specialisms which is enabled
by the makeup of the Connective.
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 Connective’s purpose is to serve
its employees and not the other way
around.
• Conduct half-yearly ‘going concern’
reviews and longer-term viability
assessments.
• Continually monitor Kin + Carta’s
performance against its banking
covenants.
• Undertake monthly reviews of working
capital, cash forecasts and headroom
on banking covenants.
• Periodically review the Connective’s
financial KPIs with its bankers.
• Agree deficit recovery plan with the
Pension Scheme Trustee.
• Regularly engage the Trustee directors
in discussions on the Connective’s
performance.
• Contribute to discussions on the
Scheme’s investment strategy.
• Proactively seek to limit the growth
in the pension liability.
Kin + Carta Annual Report and Accounts 2019STRATEGIC REPORT Risk
Description
10 DATA
SECURITY
AND GDPR
↑
Failure to adequately protect, prevent
or respond to a data breach or cyber
attack would expose the Connective to
non-compliance with the General Data
Protection Regulation (‘GDPR’), reputational
damage, fines, disruption to the business
and/or the loss of information for our
clients, employees or business.
It is vital that we continue to educate
our people, maintain vigilance across the
Connective and scrutinise our existing
capabilities to reduce the likelihood
of attack or breach in a fast-changing
environment with regularly evolving
external threats.
Mitigating activities
•
IT functions in place around the Connective
with responsibility to protect data (e.g.
encryption, firewalls, restricted access).
• Employee awareness drives and training
regarding data protection and education
on external threats.
• Periodic reviews by Internal Audit,
utilising in-house IT as well as specialist
external consultants. Cyber security and
IT questionnaire completed periodically
by subsidiaries to highlight areas
of potential risk, together with any
mitigating actions performed in order
to address this risk.
• A Data Protection Officer in place for
the Connective to assist with its 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.
Key to change in risk level:
↑
Higher
↔
No Change
↓
Lower
NON-FINANCIAL INFORMATION REGULATION
Under sections 414CA and 414CB of the Companies Act 2006, as amended by The Companies, Partnerships and
Groups (Accounts and Non-Financial Reporting) Regulations 2016, we must include in our Strategic Report certain
non-financial information. Information required by these Regulations is included in Our Business Model (pages 10
and 11), Our Positive Impact (pages 42 to 49) and our Principal Risks and Uncertainties reports (pages 50 to 55).
This Strategic Report on pages 8 to 55 was approved by the Board of Directors and signed on its behalf by
J Schwan
C H I E F E X E C U T I V E O F F I C E R
1 O C T O B E R 2 0 1 9
5 5
Kin + Carta Annual Report and Accounts 2019STRATEGIC REPORT 58
64
66
70
72
75
95
99
Letter from Chair of
Remuneration Committee
Audit Committee Report
Directors’ Remuneration
Report
Report
Nomination Committee
Report
Directors’ Report
Board of Directors
Statement of Directors’
Responsibilities
E Corporate Governance
C
N
A
N
R
E
V
O
G
E
T
A
R
O
P
R
O
C
5 6
Kin + Carta Annual Report and Accounts 2019
Kin + Carta Annual Report and Accounts 2019
5 7
CORPORATE GOVERNANCE REPORT
DEAR SHAREHOLDER
The Board invests a significant amount of time
maintaining high standards of governance, in
recognition of the value that it can add to the success
and sustainability of performance as well as the
reputation of the Group’s business. I am pleased,
therefore, to introduce our Corporate Governance
Report for the period ended 31 July 2019 (‘the period’),
which includes individual reports from the Chair of
each of the Audit Committee, Nomination Committee
and Remuneration Committee on pages 66 to 94.
BOARD OF DIRECTORS AND
ITS MEMBERSHIP
The Board meets at regular intervals and is responsible
for overall Group strategy, acquisitions and divestments,
major capital projects, risk and financial matters. Senior
executives within the Group make regular presentations
to the Board to apprise the Directors on their markets
and how they serve them, growth opportunities and
future challenges and how they propose to address
them. All Directors receive agendas and papers in
advance of each meeting. Following the meeting,
detailed minutes are recorded and actions followed up.
The Board is satisfied that it has an effective and
appropriate balance of skills and experience and that,
throughout the period, each of the Company’s Non-
Executive Directors was independent in character and
free from any business or other relationship which
could materially interfere with the exercise of his or
her judgement. In reaching this opinion, the Board
considered the nature of the Non-Executive Directors’
other appointments, any potential conflicts of interest
they have identified and their length of service.
Their individual circumstances were also assessed
against the independence criteria set out in the UK
Corporate Governance Code 2016 (the ‘Code’). The
Non-Executive Directors have a clear understanding of
their roles and responsibilities, which are appropriately
documented. The Non-Executive Directors met during
the period, without any Group executive being present.
During the period, Mike Butterworth fulfilled the role
of Senior Independent Director to 31 December 2018.
He was succeeded by Helen Stevenson who became
Senior Independent Director on 1 January 2019.
5 8
The roles of Chairman and Chief Executive Officer are
separate and distinct, and an appropriate division of
responsibilities between the two has been set out in
writing and approved by the Board. The Chairman has
responsibility for the management of the Board and
related matters while the Chief Executive Officer has
responsibility for executive leadership of the Group,
and for strategy implementation and performance.
The Company’s articles of association set out detailed
provisions for the appointment, reappointment and
retirement of Directors. All of the continuing Directors
will retire at the 2019 Annual General Meeting (the
‘AGM’) and seek re-election, except for John Kerr, Chris
Kutsor and Michele Maher who were appointed as
Non-Executive Chairman Designate, Chief Financial
Officer and Non-Executive Director respectively during
the period and will therefore seek election at the AGM.
As part of a planned succession process and in line with
the new provisions of the UK Corporate Governance
Code 2018, I will retire as Chairman and member of
the Board at the AGM and Mike Butterworth resigns
as Independent Non-Executive Director on the date of
this report.
The Board’s membership throughout the period and
the Directors’ attendance at scheduled meetings of
the Board is set out in the table on page 61.
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE BOARD INDUCTIONS
On appointment, each Director receives an induction
tailored to their skill set, previous experience and
knowledge of the markets in which the Connective
operates. The induction is designed to broaden
the Directors’ understanding of the Connective, its
specialisms’ operations, strategic priorities, people
and culture.
Chris Kutsor joined the Board as Chief Financial Officer
on 17 June 2019. Through his induction, he met with
the Board of Directors and the Finance Directors
of each of the specialisms and received appropriate
induction materials and briefing sessions, including
training around the responsibilities and obligations of
being a director of a listed company.
Michele Maher joined the Board as an Independent
Non-Executive Director on 15 May 2019 and John Kerr
joined the Board as Non-Executive Chairman designate
on 22 July 2019. As part of their inductions, John and
Michele met with the Board of Directors and received
materials such as Company policies and information
related to the Company’s Directors’ and Officers’
liability insurance.
BOARD ACTIVITY
During the period, the Board carried out a review
of matters reserved to it for decision. The Executive
Directors meet regularly with the Chief Executive
Officers and Managing Directors of the Connective’s
specialisms to discuss strategy alignment, knowledge
sharing, performance, major customers, sales growth
(including cross-selling and collaboration opportunities),
risks and people matters.
All Directors have full and timely access to the relevant
information needed to enable them to properly
discharge their responsibilities and have unrestricted
access to other executives within the business to
discuss any matter of concern. Where appropriate,
the Directors may obtain independent professional
advice in respect of their duties to the Board and
its committees at the Company’s expense. Each
Director also has access to the advice and services
of the Company Secretary who advises the Board on
corporate governance matters and has responsibility
for ensuring that board procedures are observed.
The areas of focus for the Board during the period
were: the Connective’s strategy and rebranding; trading
performance; corporate governance, including Board
composition and the implications of the UK Corporate
Governance Code 2018 and the actions necessary to
implement the new provisions for the financial year
ending in 2020; reviewing key risks and how they are
being managed; the Connective’s triple bottom line
initiatives; and health and safety performance. The
Board also held an annual strategic review away-day
in the Chicago offices of Kin + Carta Solstice at which,
inter alia, presentations were received from the senior
executives of five of the Connective’s digital and data
specialisms.
5 9
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE CORPORATE GOVERNANCE REPORT
CONTINUED
BOARD COMMITTEES
The Board is supported by Audit, Nomination and Remuneration Committees. The table on page 61 sets out the
Directors who served on each of the Committees and their meeting attendance during the period. The Company
Secretary acts as Secretary to all the Committees and each Committee has written terms of reference, which are
available on our website (www.kinandcarta.com).
A
Audit
Committee
THE
BOARD
R
Remuneration
Committee
N
Nomination
Committee
A
Audit Committee. The Audit Committee is
responsible for monitoring and reviewing
the integrity of the financial reporting
process, including: the appropriateness of
any judgements and estimates taken in preparing the
financial statements; the internal and external audit
functions; the effectiveness of the risk management
systems and monitoring of internal controls. The Audit
Committee Report on pages 66 to 69 discusses the
principal activities of the Committee during the period,
the significant matters which were considered and how
the Committee addressed them.
N
Nomination Committee. The Nomination
Committee is responsible for reviewing
the size, structure and composition of the
Board, including the consideration of skills,
knowledge and experience of the Board members. It
oversees succession planning, is responsible for the
identification and nomination of candidates to fill
Board positions and recommending the re-election of
Directors. A report on the activities of the Nomination
Committee and its membership throughout the period
is set out on pages 70 and 71.
R
Remuneration Committee. The Remuneration
Committee is responsible for determining
the remuneration policy and its application
in relation to the Executive Directors’
remuneration, while supporting shareholder value and
the delivery of the Connective’s strategic priorities. A
letter from the Chair of the Remuneration Committee
and the Directors’ Remuneration Report can be found
on pages 72 to 94.
6 0
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE BOARD AND COMMITTEE ATTENDANCE
In the opinion of the Board, the Board and its Committees each met sufficiently frequently to properly discharge the
responsibilities set out in their respective terms of reference.
Directors’ attendance at Board and Committee meetings during the period was as follows:
David Bell
Mike Butterworth
Brad Gray*
John Kerr**
Chris Kutsor*
Michele Maher***
Nigel Pocklington
J Schwan
Helen Stevenson
Richard Stillwell
Board
Audit
Committee
Nomination
Committee
Remuneration
Committee
9/9
9/9
7/7
1/1
2/2
3/3
9/9
9/9
9/9
9/9
–
3/3
–
–
–
1/1
3/3
–
3/3
–
–
2/2
1/1
–
1/1
1/1
2/2
2/2
2/2
2/2
–
4/4
–
–
–
2/2
4/4
–
4/4
–
This table only details attendance at meetings in the scheduled annual meeting calendar; other ad-hoc meetings were held during the period.
This table is based on each Director’s maximum possible attendance at these meetings. On 4 August 2018, Matt Armitage resigned from the Board
and its Committees. Accordingly, Matt was not eligible to attend any of the Board meetings during the period.
* Brad Gray stepped down from and Chris Kutsor was appointed to the Board on 17 June 2019.
** John Kerr was appointed to the Board on 22 July 2019.
***Michele Maher was appointed to the Board on 15 May 2019.
Throughout the period at least three Independent Non-Executive Directors served on each of the Audit, Nomination
and Remuneration Committees.
BOARD AND COMMITTEE
PERFORMANCE EVALUATIONS
During the period, internally facilitated evaluations of
the effectiveness of the Board were undertaken. The
evaluations took the form of one-to-one interviews
between the Chairman and each Director, with the
exception of John Kerr, Chris Kutsor and Michele
Maher who each underwent a formal selection process
that evaluated the skills and experience that they could
bring to the Board. An evaluation of the Chairman
was carried out by the Non-Executive Directors,
led by the Senior Independent Director at the time,
Mike Butterworth. Following the evaluations, the
Board was satisfied that it is operating effectively.
Recommendations following the evaluation of the
effectiveness of the Board were implemented. These
included:
• greater consistency in the format and presentation
of reports to the Board to aid understanding and
comparison; and
• developing new KPIs for inclusion in the Board
papers in line with the transformation of the
business.
Following its performance review, the Board confirms
that all Directors standing for re-election continue to
perform effectively and demonstrate commitment to
their roles.
Internal questionnaires were sent to the Committees’
members to assess the effectiveness of the Committees
following the period. The outcome in each case was
that they continued to operate effectively and were
well chaired.
In 2017, an independent evaluation of the Board and
its Committees was externally facilitated by The People
Stuff, a third party consultancy. The Board and its
Committees typically undertake externally facilitated
performance evaluations every two years. In view of
the changes to the composition of the Board during
the period, the Board determined it would be beneficial
to undertake externally facilitated evaluations of its
effectiveness during the financial year ending in 2020.
This is in accordance with the Code’s best practice
provisions on the frequency of externally facilitated
evaluations.
6 1
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE CORPORATE GOVERNANCE REPORT
CONTINUED
INTERNAL CONTROL AND
RISK MANAGEMENT
In compliance with the Code, and having due regard
to the Financial Reporting Council’s Guidance on Risk
Management, Internal Control and Related Financial
and Business Reporting, the Group has in place a
corporate reporting and risk management framework.
The Board is responsible for the Group’s system of
internal control, including financial, operational and
compliance controls and risk management, and for
reviewing the effectiveness of those controls. The
system of internal control is designed to manage and
mitigate, rather than eliminate, the risk of failure to
achieve business objectives, and can only provide
reasonable, but not absolute, assurance against
material misstatement or loss, fraud or breaches of
laws and regulations.
As part of the annual budget process, each specialism
is required to submit an analysis of strengths,
weaknesses, opportunities and threats to the Board.
Once consolidated by the Group’s finance function,
the Board’s Executive Directors review this detail with
senior managers of the specialisms, and if necessary,
findings from this analysis will be elevated to Board
level discussion for further consideration. The Company
puts in place a series of forecasting mechanisms in
order to receive information from the specialisms
across the Connective and to forecast as efficiently
and effectively as possible.
Risks within the business relating to strategic, market,
operational, financial, legislative, regulatory, contractual
and reputational matters are referred to the Board
as necessary and the Directors consider themselves
collectively responsible for ensuring that these risks
are suitably managed.
The Group recognises that taking and managing
risks is inherent in any business and in delivering its
strategy. On pages 50 to 55 we set out the principal
risks and uncertainties that have been identified from
the reporting and risk management framework, their
possible impact on the business, and the mitigating
actions approved by the Board.
The Board carries out half-yearly reviews and considers
the impact that these principal risks and challenges
might have on the business and on the Group’s ability
to meet its strategic objectives.
The process by which the Board exercises control is
by holding nine scheduled Board meetings per annum,
an annual Board strategy away day, regular meetings
of senior management within each specialism which
are chaired by an Executive Director, and regular
management meetings of each operation within
the specialisms. Risk is reported on and monitored
between the senior management teams of each
business and the Executive Directors, and any new
areas of significant risk to the businesses are then
raised at the next Board meeting as appropriate.
6 2
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE The Connective’s Internal Audit function consists of
a qualified accountant who, as necessary, draws on
additional resource from professional services firms.
The Internal Audit work plan is linked closely to the
risk management framework, with the plan designed
to give assurance around key risk areas. Subsequent
to the period end, the Audit Committee undertook an
evaluation of the effectiveness of the Internal Audit
function. The conclusions and actions arising from the
evaluation are to be described in the report for the
financial year ending in 2020.
The Internal Audit function independently reviews
the risk identification procedures implemented by
management. Internal Audit reviews risk registers of
the specialisms and ensures they are updated by the
Finance Directors of each specialism. Verification of
mitigating actions takes place on a cyclical basis as part
of the annual audit cycle.
During the period, the Internal Audit function performed
work on the Group’s internal controls; reviewing
the control environment and conducting testing of
key controls. Control testing of accounts receivable,
accounts payable, payroll and credit control cycles took
place at selected sites, according to the cyclical audit
cycle. High-risk issues identified within audit reports,
together with corrective actions, were considered in
detail at the meetings of the Audit Committee.
Annual internal control questionnaires, supplemented
by a half-year questionnaire, are completed by all the
Group’s specialisms, reviewed by the Head of Internal
Audit and supplied to the external auditors. Any
inconsistencies identified with the Group’s established
corporate governance frameworks are disclosed to the
Audit Committee.
COMPLIANCE STATEMENT
For the period ended 31 July 2019, the UK Corporate
Governance Code issued by the Financial Reporting
Council in April 2016 (the ‘Code’) is the corporate
governance standard applying to Kin and Carta plc as
a FTSE SmallCap company with a Premium listing on
the Main Market of the London Stock Exchange. The
Code requires us to describe in our Annual Report
our application generally of the Code’s principles and
explain any non-compliance with the Code’s provisions.
The Code can be found on the Financial Reporting
Council’s website (www.frc.org.uk).
In the opinion of the Board, the Company has been
in compliance with the Code’s provisions throughout
the period.
This Corporate Governance Report, together with the
reports on pages 66 to 94, describes how the Board
has applied the Code’s principles and where it has
adopted additional elements of corporate governance
good practice.
In July 2018, the FRC published a revised Corporate
Governance Code which applies to accounting periods
beginning on or after 1 January 2019. During the
period, the Board considered the implications of the
UK Corporate Governance Code 2018 and the actions
necessary to implement the new provisions for the
financial year ending in 2020. The Board looks forward
to reporting on how it has applied the UK Corporate
Governance Code 2018 in its next annual report.
This Corporate Governance Report was approved by
the Board of Directors and signed on its behalf by
Richard Stillwell
C H A I R M A N
1 O C T O B E R 2 0 1 9
6 3
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE BOARD OF DIRECTORS
RICHARD STILLWELL | CHAIRMAN
APPOINTED: 26 April 2011
N
CAREER: Richard joined the Board on 1 September 2006 and was appointed Chairman of the Company on
26 April 2011. He was Executive Vice President of ICI plc, where he had held various posts for 26 years until
2000, before changing career and qualifying as a barrister. More recently Richard has held Non-Executive
Directorships at Penna Consulting plc, Scott Bader Ltd, where he was Chairman, TBI Ltd and Fibreweb plc,
as well as Albertis Motorways UK Ltd and Albertis Overseas (UK) Ltd.
Richard will retire as Chairman and member of the Board and its committees at the conclusion of the
Company’s 2019 AGM.
RELEVANT SKILLS AND EXPERIENCE: Richard has considerable experience of serving on boards and
committees and overseeing the transformation of businesses. He brings calm and intentional leadership
to the Board.
OTHER ROLES: Richard is currently a Non-Executive Director of Curo Group (Albion) Ltd, a not-for-profit
company involved in the provision of housing and community services.
J SCHWAN | CHIEF EXECUTIVE OFFICER
APPOINTED: 4 August 2018
N
CAREER: J is the Founder and former CEO of Solstice, a digital innovation firm. He grew Solstice to 400
employees at a 25% CAGR without any external investment until its sale to the Company in 2015. Solstice
continued to scale at the same growth rate under J’s leadership for the following three years. During his tenure,
Solstice was also continually recognised as a Best Place to Work by Forbes and Fortune. In August 2018, J became
the CEO of the Company and has led its transition into a global leader in digital transformation services.
J has been inducted into the Chicago Entrepreneurship Hall of Fame, is an EY Entrepreneur of the Year
finalist, was awarded the University of Illinois College of Engineering Young Alumnus of the Year award
and is a recipient of Tech Week 100.
He received his Bachelors in Materials Science Engineering from the University of Illinois at Urbana
Champaign and began his career at Accenture.
RELEVANT SKILLS AND EXPERIENCE: J has been at the forefront of digital transformation throughout
his career and has a proven track record of delivering high levels of growth. His deep understanding of the
digital transformation sector and substantial entrepreneurial expertise are assets to the Board.
OTHER ROLES: J serves on the Foundation Board of Lurie Children’s Hospital.
CHRIS KUTSOR | CHIEF FINANCIAL OFFICER
APPOINTED: 17 June 2019
N
CAREER: Chris has led finance organisations spanning billion-dollar operations, venture capital investing
and strategic sales functions. He most recently served as the Investor Relations Officer of a global Fortune
500 technology firm. Chris holds an MBA in Strategy and Finance from The University of Chicago Booth
School of Business.
RELEVANT SKILLS AND EXPERIENCE: Chris is a seasoned executive with proven financial leadership
in the technology sector. He brings to the Board broad financial expertise and a strong history of
managing effective relationships with the institutional investor community and media.
OTHER ROLES: Chris serves as a board director to First Light USA, LLC, a privately held technology
development company.
COMMITTEE MEMBERSHIP
BOARD STRUCTURE
AS AT 31 JULY 2019
Chair of the Committee
Member of the
Audit Committee
Member of the Nomination
Committee
6
Member of the Remuneration
Committee
A
N
R
1
2
Chairman
Executive
Non-Executive
6 4
OTHER DIRECTORS WHO
SERVED DURING THE PERIOD
Matt Armitage, Chief Executive
Officer, stepped down from the
Board on 4 August 2018.
Brad Gray, Chief Financial Officer,
stepped down from the Board on
17 June 2019.
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE DAVID BELL
INDEPENDENT NON-EXECUTIVE DIRECTOR
MIKE BUTTERWORTH
INDEPENDENT NON-EXECUTIVE DIRECTOR
A N R
JOHN KERR
NON-EXECUTIVE CHAIRMAN DESIGNATE
N
APPOINTED: 4 August 2018
APPOINTED: 1 August 2010
APPOINTED: 22 July 2019
CAREER: David served as CEO of two of the
world’s largest advertising marketing services
companies, NYSE-listed True North and Interpublic
Group. He was also CEO of Bozell Worldwide,
which he helped grow to a top-ten global agency.
From 2006 to 2009, David was a senior advisor to
Google and has held a similar position with AOL/
Oath since 2009. David was elected by his peers
into the Advertising Hall of Fame in the USA in
2007 and in 2013, the Hall of Fame established the
David Bell Award which is given to one inductee
who has best demonstrated this level of service.
David was an independent director at Time Inc.
between 2014 and 2018 and has previously served
on numerous other US listed company boards,
as well as many growth stage companies in the
marketing and media technology sectors.
RELEVANT SKILLS AND EXPERIENCE: David’s
extensive experience in digital media is an asset to
the Board, contributing to the development and
implementation of its digital transformation growth
strategy. He also has deep knowledge of the US
market which is a key geography for the business.
OTHER ROLES: David is currently an
independent director of Creative Realities Inc.
CAREER: Mike is a Chartered Accountant and
served for eight years as Group Finance Director
of Cookson Group plc, a FTSE250 company,
until December 2012 when Cookson de-merged.
Previously, Mike was Group Finance Director of
Incepta Group plc for five years, an international
marketing and communications group, prior to
which he spent five years as Group Financial
Controller at BBA Group plc, the international
aviation and materials technology group.
Having served nine years on the Board as a Non-
Executive Director, Mike will stand down from the
Board and its committees on 1 October 2019.
RELEVANT SKILLS AND EXPERIENCE:
Mike contributes recent and relevant financial
experience having worked in various finance
roles in a wide range of industries. He has
considerable experience of serving on the boards
of listed companies in both executive and non-
executive capacities.
OTHER ROLES: Mike is Non-Executive Director
and Chair of the Audit Committee of Stock
Spirits Group plc.
CAREER: John previously acted as Chief Executive
of Deloitte Consulting, leading the creation of
Deloitte Digital, the first dedicated digital consulting
business. He grew the business organically and
by strategic acquisition. John holds a BA from the
University of Strathclyde and is a member of the
Institute of Chartered Accountants of Scotland.
John will become Chairman at the conclusion of
the 2019 AGM, succeeding Richard Stillwell, who
will step down as part of a planned succession
process outlined in November 2018.
RELEVANT SKILLS AND EXPERIENCE: John
brings to the Board strong leadership skills and
considerable senior board level expertise. He
has extensive experience in helping businesses
develop their digital capabilities and advising
global businesses on how best to position
themselves for growth. This enables John to
contribute wide-ranging global, strategic and
advisory knowledge and insight to the Board.
OTHER ROLES: John is Chairman of LC Financial
Holdings Limited and is a Non-Executive Adviser to
Travers Smith LLP. He also serves as a Trustee of Plan
International UK.
MICHELE MAHER
INDEPENDENT NON-EXECUTIVE DIRECTOR
A N R
NIGEL POCKLINGTON
INDEPENDENT NON-EXECUTIVE DIRECTOR
A
RN
HELEN STEVENSON
SENIOR INDEPENDENT DIRECTOR
A N R
APPOINTED: 15 May 2019
APPOINTED: 1 June 2016
APPOINTED: 1 May 2012
CAREER: Michele most recently served as Chief
Financial Officer of Hogg Robinson Group plc. She
trained with KPMG and held various positions at
technology solutions company, Dell. Michele is a
Fellow of the Institute of Chartered Accountants
and holds an Executive MBA from Cranfield.
Michele will chair the Audit Committee with
effect from 2 October 2019 when she will replace
Mike Butterworth who will stand down from the
Board and its committees on 1 October 2019.
RELEVANT SKILLS AND EXPERIENCE:
Michele is a chartered accountant and provides
the Board and the Audit Committee with
relevant financial expertise, gained through
an established career in senior finance and
management roles across a range of business
sectors. This comprehensive experience makes
her ideally suited to chair the Audit Committee
and to act as its financial expert.
OTHER ROLES: Michele has no other
appointments to disclose.
CAREER: Nigel is currently Chief Commercial
Officer of Moneysupermarket Group plc. Prior
to this, he held a variety of senior roles within
Expedia Inc., including President of eBookers
and Chief Marketing Officer of Hotels.com. He
spent a decade of his early career at Pearson plc,
including a period leading the digital operations
of the Financial Times.
RELEVANT SKILLS AND EXPERIENCE: Nigel
has strong, relevant and current commercial
experience at a senior management level in a variety
of global digital businesses, ranging from global
e-commerce to financial technology. He currently
serves as Chair of the Remuneration Committee.
Nigel’s experience gained from his membership of
that committee for over two years prior to being its
Chair, combined with his understanding of employee
and investor viewpoints, make him well suited to
chairing the Remuneration Committee.
OTHER ROLES: Nigel is Chief Commercial
Officer of Moneysupermarket Group plc.
CAREER: Helen served as Chief Marketing
Officer UK at Yell Group plc from 2006 to 2012
and, prior to this, served as Lloyds TSB Group
Marketing Director. Helen started her career with
Mars Inc where she spent 19 years, culminating in
her role as European Marketing Director, leading
category strategy development across Europe.
RELEVANT SKILLS AND EXPERIENCE: Having
served on the Board as a Non-Executive Director
for seven years, Helen has developed strong
knowledge and understanding of the Company
and its governance. She has considerable
marketing and digital experience and has held
numerous board positions in various sectors,
enabling her to contribute a unique perspective
on matters. This varied experience makes her
well-suited to the role of Senior Independent
Director, a position she took on in January 2019.
OTHER ROLES: Helen currently holds
Non-Executive Directorships with the Skipton
Building Society and Reach plc. She also serves
on Henley Business School’s Strategy Board and
is a Governor of Wellington College.
6 5
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE AUDIT COMMITTEE REPORT
The Audit Committee’s key role is to
monitor the integrity of financial reporting
and gain assurance around the processes
that support it, including internal control,
risk management and legal and regulatory
compliance.
DEAR SHAREHOLDER
On behalf of the Audit Committee, I am pleased to
present its report for the period ended 31 July 2019.
The Committee carries out the functions required by
DTR 7.1.3R of the UKLA Disclosure and Transparency
Rules. The principal responsibilities of the Committee
are set out in the Committee’s terms of reference,
which are available from the Group’s website
(www.kinandcarta.com).
CURRENT MEMBERSHIP
I chaired the Committee up to the date of this report,
1 October 2019, bringing recent and relevant financial
experience, having served as Chief Financial Officer of a
FTSE 250 company for eight years until December 2012.
I am standing down from the Board and its Committees
with effect from the date of this report, having served
nine years as a Non-Executive Director. With effect
from 2 October 2019, Michele Maher will chair the
Committee; Helen Stevenson and Nigel Pocklington
will continue to serve as members. Michele has recent
and relevant financial expertise, having been Chief
Financial Officer of Hogg Robinson Group plc until
its sale in 2018, and is a Fellow of the Institute of
Chartered Accountants. The Board is satisfied that all
members bring extensive expertise to the Committee.
All members of the Committee are Non-Executive
Directors and the Audit Committee, as a whole,
has competence relevant to the sector in which the
Company operates.
In addition to the Committee members, the Chairman,
the Executive Directors of the Board, the Head of
Internal Audit and the external audit partner are invited
to attend each meeting. The Committee members do,
however, meet separately at least twice a year with the
external auditors and the Head of Internal Audit and I
have been in frequent contact with both the external
audit partner and the Head of Internal Audit.
6 6
KEY ACTIVITIES
The Committee held three scheduled meetings in the
period at which it:
• agreed an internal audit plan with the Group’s Head
of Internal Audit;
• considered reports from the Head of Internal Audit;
• monitored the quality of work performed by the
Internal Audit function;
• considered the appropriateness of the Group’s
risk management process, including the results of
an internal controls questionnaire, completed by
management within the Group’s operating sites;
• considered the external auditor’s reports to the
Committee, their fees and their independence,
including an assessment of the appropriateness
to conduct any non-audit work;
•
recommended to the Board the appointment of
PricewaterhouseCoopers LLP (‘PwC’) as external
auditor;
• ensured the integrity of the financial reporting
process was upheld;
•
reviewed the Group’s trading updates and Half Year
Report prior to release;
• considered significant accounting and reporting
issues pertinent to the preparation of the Half Year
Report and the Annual Report and Accounts;
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE • analysed the effectiveness of the external audit by
reviewing replies to questionnaires completed by
management and Audit Committee members;
• considered the requirements under IFRS 8
Segmental Reporting standard and concluded that
the presentation of a single operating segment with
corporate costs classified separately is in line with
the Connective operating model;
• agreed a process for the review of the Committee’s
effectiveness;
•
received the Group’s updated bribery risk register and
considered the effectiveness of recommendations by
Internal Audit;
• approved the Group’s Speak Up policy which covers
whistleblowing arrangements;
• assisted the Board with the review of the
Company’s Business Risk Register;
• considered an assessment of the Group’s longer-
term viability; and
•
received a report setting out the Going Concern
review undertaken by management.
The Committee was satisfied with the effectiveness
of the internal controls within the Group during
the period.
ANNUAL REPORT AND
ACCOUNTS 2019
The Committee undertook a review and assessment of
the Annual Report and Accounts for the period ended
31 July 2019 (the ‘Annual Report’) in order to determine
whether, in its opinion, the Annual Report for the period,
taken as a whole is fair, balanced and understandable
and provides shareholders with the information they
need to assess the Group’s position, performance,
business model and strategy. To provide additional
support to the Board in making this assessment,
the Committee considered and discussed a detailed
review and verification process of the Annual Report
undertaken by management and provided assurance
to the Board that this process was both followed and
effective. In this respect, the Committee:
•
•
received reports on the requirements of Provision
C.1.1. of the Code, which were updated as an
ongoing part of the year end process;
reviewed a full draft of the Annual Report, using an
evaluation tool to help judge what constitutes ‘fair’,
‘balanced’ and ‘understandable’; how performance is
reported; the explanation of the business model; and
the articulation of the Group’s strategy and whether
the Annual Report, in the opinion of the Committee,
complies with Provision C.1.1. of the Code; and
•
reviewed the outcomes of reviews performed by
the external auditor.
6 7
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE AUDIT COMMITTEE REPORT
CONTINUED
SIGNIFICANT FINANCIAL MATTERS
The Committee has assessed whether suitable accounting policies have been adopted and whether management has
made appropriate estimates and judgements in respect of significant financial matters. The Committee considered
accounting papers which provided details on the main financial reporting judgements and classifications, which
were addressed as follows:
Significant matters considered
How the Committee addressed these issues
The assessment of the carrying value
of goodwill (£85.7 million) and intangible
assets (£25.6 million)
The classification of Adjusting Items
(£15.8 million before tax)
The valuation of the St Ives Defined
Benefits Pension Scheme (£6.7 million
surplus)
The Committee received reports in relation to the assessment of the
carrying value of the goodwill for each cash generating unit (‘CGU’).
The Committee considered key judgements including the discount rate,
terminal growth rates and the future cash flow forecast of each CGU to
which goodwill and investments are allocated, based upon the projected
forecasts approved by the Board. The conclusion of the review and the
key assumptions are disclosed in the notes to the consolidated financial
statements.
The Committee considered reports on the carrying value of acquired
intangible assets where there were indicators of impairment such as loss
of clients, maintenance of proprietary techniques and trademarks. The
Committee also reviewed disclosures where a reasonably possible change
indicated a material impairment.
The Committee was satisfied with the assumptions applied to support
the carrying value of goodwill of £85.7 million and intangible assets of
£25.6 million.
The Board uses Adjusted results as the measure of the ongoing financial
performance of the Group’s businesses and excludes such items that
are considered to distort the comparison of the trading performance
of the Group and across its businesses. The Audit Committee assessed
the classification of these Adjusting Items according to their nature and
value, in line with ESMA and the FRC Guidance (‘APMs’). The Committee
reviewed reports outlining the accounting policy on the classification of
Adjusting Items and satisfied itself with the treatment applied.
The accounting policy on Adjusting Items can be found in note 2 to the
consolidated financial statements and in the Alternative Performance
Measures section on pages 36 to 41.
The valuation of the St Ives Defined Benefits Pension Scheme (the
‘Scheme’) is judgemental mainly due to underlying assumptions used
to determine the Scheme’s liability. This includes assumptions such as
the discount rate, inflation and life expectancy of the Scheme members
at the balance sheet date. The Committee reviewed reports from
management outlining the assumptions used, and agreed with those
assumptions as outlined in note 28. The assumptions presented to the
Audit Committee by management are underpinned by actuarial advice.
The Audit Committee considered the suitability of the actuary.
6 8
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE GOING CONCERN
The Committee received a report setting out the Going
Concern review undertaken by management that forms
the basis of the Board’s going concern conclusion on
pages 95 and 96.
e. The Chief Financial Officer is to consult with the
Chairman of the Audit Committee in advance of any
non-audit work in excess of £25,000 per project
that the external auditor may be invited to perform
for the Group, so that an agreed view might be
taken on whether to put the project out to tender.
The Committee has satisfied itself that this policy
has been appropriately applied. Following PwC’s
appointment, the non-audit fees for the period were
£45,000 as disclosed in note 5 to the consolidated
financial statements.
The Committee also considered the robustness of
PwC’s safeguards and procedures to counter threats or
perceived threats to their objectivity, the application
of their independence policies and their adherence
to the Ethical Standard published by the FRC. In all
these respects the Committee was satisfied with
PwC’s objectivity and independence. The Committee
is satisfied that there are no relationships between
the Company and PwC, its employees or its affiliates
that may reasonably be thought to impair the auditor’s
objectivity and independence. The Committee met with
PwC without any Executive Director or management
present to ensure that no restrictions are placed on the
scope of their audit and to offer the external auditor
opportunities to discuss any items the auditor may not
wish to raise with the executives being present.
The Committee is satisfied with the independence,
performance and effectiveness of the external auditor
and has recommended to the Board that a resolution
be proposed at the AGM that PwC be reappointed
as auditor of the Company to hold office until the
conclusion of the 2020 Annual General Meeting.
Mike Butterworth
C H A I R O F A U D I T C O M M I T T E E
1 O C T O B E R 2 0 1 9
VIABILITY
An overview of the viability assessment process was
provided to, and reviewed by, the Audit Committee.
The viability assessment was then provided to the
Board to assist in its evaluation of the Company’s
longer-term viability in order to make the statement
found on page 96.
EXTERNAL AUDITOR
As previously reported, following a competitive tender
process, PwC were appointed at the 2018 AGM
replacing Deloitte LLP as the Company’s external
auditor. The external auditor’s appointment is reviewed
regularly and, in accordance with the Financial
Reporting Council’s (‘FRC’) Ethical Standard, the Lead
Audit Partner will be rotated at least once every five
years. The Company has no current retendering plans
but is mindful of the best practice provisions of the
Statutory Audit Services Order.
Following the conclusion of the first year of PwC’s
audit involvement, the Committee proposes to
undertake an assessment of the effectiveness of the
external audit process during the year, the outcome
of which will be disclosed in the annual report for the
financial year ending in 2020.
The Committee’s policy on the engagement of the
external auditor for non-audit services, which reflects
the EU rules, is as follows:
a. Certain types of engagement shall not be
undertaken by the external auditor, including
services related to the internal audit function
and tax.
b. Relevant ethical guidance shall be taken into
account regarding any proposal to request the
Group’s external auditor to perform non-audit
services.
c. Cumulative non-audit fees from 2019/20 onwards
are capped at 70% of the average of the audit
fees for the Group for the preceding three-year
period. PwC were first appointed as auditor for
the 2018/19 financial year, therefore this cap
is applicable from the 2020/21 financial year
onwards.
d. Subject to (e) below, the Board shall appoint
whoever, in its opinion, will provide the most cost
effective and timely service for undertaking a
particular project.
6 9
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE NOMINATION COMMITTEE REPORT
The Nomination Committee’s key role is to
lead the process for Board appointments
and make recommendations to the Board.
DEAR SHAREHOLDER
On behalf of the Nomination Committee, I am pleased
to present its report for the period ended 31 July 2019.
The principal role of the Committee is to consider
and recommend to the Board candidates who are
appropriate for Executive or Non-Executive Director
roles in order to maintain an appropriate balance
of skills, experience, independence and knowledge
represented on the Board and ensure that the Board
is appropriately refreshed.
CURRENT MEMBERSHIP
The Committee comprises Mike Butterworth (to the
date of this report), John Kerr, Chris Kutsor, Michele
Maher, Nigel Pocklington, J Schwan, Helen Stevenson
and myself as Chair. It is important to our Board that
the selection process is appropriate to the particular
circumstances and that any decision made to nominate
a new member of the Board is collective.
KEY ACTIVITIES
Board changes
During the period the Committee considered the
composition of the Board generally and Board level
succession planning. The Committee’s succession
planning was in respect of the roles of Chairman, Senior
Independent Director, Chair of the Audit Committee,
Chair of the Remuneration Committee and Chief Financial
Officer. External search agencies Russell Reynolds and
Sam Allen Associates were engaged to support the
recruitment process for the positions of Chairman, Chair
of the Audit Committee and Chief Financial Officer. The
Company has no other connections with Russell Reynolds
or Sam Allen Associates.
In November 2018, I announced my intention to resign
as Chairman of the Company at the conclusion of the
2019 AGM, having been Chairman since 2011 and a
Non-Executive Director since 2006. Russell Reynolds
were engaged to identify prospective successors.
A rigorous search was undertaken and, following a
series of interviews, the Committee, led by the Senior
Independent Director, Helen Stevenson, recommended
to the Board the appointment of John Kerr as Non-
Executive Chairman Designate. John joined the Board
as Non-Executive Chairman Designate on 22 July 2019
and will assume the role of Chairman at the conclusion
of the Company’s 2019 AGM. He brings strong
leadership skills and extensive experience in helping
businesses develop their digital capabilities, having
previously acted as CEO of Deloitte Consulting and
leading the creation of Deloitte Digital globally.
7 0
The Committee planned for the succession of Mike
Butterworth who resigns from the Board on the date of
this report, having served as a Non-Executive Director
and Chair of the Audit Committee for nine years and
Senior Independent Director to 31 December 2018.
On 1 January 2019, Helen Stevenson, having served
as Non-Executive Director for seven years, succeeded
Mike Butterworth as Senior Independent Director.
On the same date, she stepped down as Chair of the
Remuneration Committee, a role that was assumed by
Nigel Pocklington who served on that committee for
over two years prior to his appointment as Chair. Sam
Allen Associates were engaged to identify candidates
for the Chair of the Audit Committee position. Following
a rigorous search, the Committee recommended the
appointment of Michele Maher, recognising the value
her extensive financial expertise, most recently as Chief
Financial Officer of Hogg Robinson Group plc, alongside
experience at the technology solutions company, Dell,
would bring to the Board. Michele has served as a Non-
Executive Director since 15 May 2019 and will chair the
Audit Committee from 2 October 2019.
Brad Gray resigned from the Board as Chief Financial
Officer on 17 June 2019. Sam Allen Associates were
engaged to identify prospective candidates for the Chief
Financial Officer position. After a series of interviews
and meetings, the Committee identified Chris Kutsor
as the appropriate candidate for the role. Chris brings
to the Board experience as Finance Director of various
businesses within Motorola Solutions, a global Fortune
500 technology solutions company. He was most recently
the Investor Relations Officer for Motorola Solutions.
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE The Committee discharged its other principal duties
during the period by:
• ensuring that an appropriate review of Board,
Committee and Director effectiveness was
undertaken;
• considering whether the Non-Executive Directors
were sufficiently independent for corporate
governance purposes; and
• approving the division of responsibilities between
the Chairman and the Chief Executive Officer.
Richard Stillwell
C H A I R O F T H E N O M I N AT I O N C O M M I T T E E
1 O C T O B E R 2 0 1 9
Following recommendations from the Committee,
during the period, the Board unanimously approved
the appointments of John Kerr, Chris Kutsor and
Michele Maher.
Any appointment to the Board involves a thorough
process where talent is assessed and benchmarked
against the expectations of the role and as part of this
process, all members of the Committee have a one-to-
one meeting with any potential candidate.
Diversity
The Board supports the increasing focus on the
composition of boards and the emphasis on diversity.
It agrees that diversity within the boardroom and
within the specialisms is important to the success of
the Connective, improving adaptability, agility and
supporting long-term growth and sustainability. The
Board and the Committee are pleased that the Board’s
gender diversity increased during the period with the
appointment of Michele Maher, taking the number of
female Board directors to two (2017/18: one).
The Committee oversees the assessment of the
effectiveness of the Board, considering the Board’s
optimal composition and leading the diversity agenda.
Following recommendations from the Committee,
the Board adopted a Diversity Policy in September
2019, which is available to view on our website
www.kinandcarta.com. The Board Diversity Policy
recognises that diversity of the Board’s gender,
ethnicity and other underrepresented groups can have
a positive impact on the quality of decision-making.
It sets several measurable objectives, including to
increase female representation on the Board to 33%
by 2022 and increase the representation on the Board
of people from ethnic minorities to a minimum of one
director by 2024. All Board appointments are made on
merit and against objective criteria, in the context of
the skills, experience, independence and knowledge
which the Board as a whole requires to be effective.
Our disclosure on diversity across the Connective can
be found on page 44 within the Strategic Report.
7 1
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE LETTER FROM CHAIR OF THE
REMUNERATION COMMITTEE
I am pleased to present our Directors’
Remuneration Report for the period ended
31 July 2019.
AT A GLANCE:
Summary for Executive Directors
Performance and remuneration for 2018/19
• 2018/19 annual bonus pay-out of 25%
of maximum
• 2016 LTIP award vesting 0%
Implementation for 2019/20
• No salary increases
• Bonus of up to 100% salary, based 75% on
Adjusted PBT and 25% on strategic/personal
objectives
• LTIP vesting 50% on Relative TSR, 25% on
growth in Adjusted revenue and 25% on
growth in Adjusted PBT
• LTIP grants at 100% of salary for the CEO and
200% of salary for the recently recruited CFO
reflecting part of his buyout arrangements
• LTIP vesting underpinned by Committee
discretion
• LTIP holding period of two years post vesting
The Remuneration Committee’s
key role is to set the broad policy
for remunerating the Executive
Directors and recommend a
remuneration policy which
supports the creation of value for
shareholders and the delivery of
the Group’s strategic priorities.
The Committee is mindful of the
intense scrutiny around executive
remuneration and seeks to adopt
best practice where appropriate
taking into account its position
in the SmallCap sector.
7 2
DEAR SHAREHOLDER
On behalf of the Remuneration Committee (the
‘Committee’), I am pleased to present the Directors’
Remuneration Report for the period ended 31 July
2019 covering the remuneration of Executive and
Non-Executive Directors. This was my first year leading
the Committee, succeeding Helen Stevenson in January
2019, and I would like to take this opportunity to thank
Helen for her strong leadership of the Committee over
the last five years.
This report is split into three parts: this Annual
Statement, a Policy Report and an Annual Report
on Remuneration. The Committee considers that
the policy approved by shareholders at the 2017
AGM remains fit for purpose and accordingly is not
proposing any changes this year. This report contains
an abbreviated Policy Report to give context to
decisions taken by the Committee during the year, with
the full Policy Report, as approved by shareholders,
available in our Annual Report and Accounts 2017
on the Company’s website. As required by legislation,
we will be submitting this year’s Annual Report on
Remuneration to an advisory vote at the 2019 AGM.
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE BOARD CHANGES
As announced last year, J Schwan took over the role
of Chief Executive Officer from Matt Armitage with
effect from 4 August 2018 and served in this role for
the full financial period.
We announced on 10 May 2019 that Brad Gray, would
be stepping down from his role as Chief Financial
Officer and member of the Board with effect from
17 June 2019, continuing in full time employment with
the Group to facilitate an orderly handover until the
end of the financial period. Details of the remuneration
arrangements relating to Brad’s departure from the
Group are included on page 90.
Brad was succeeded as Chief Financial Officer on
17 June 2019 by Chris Kutsor, an experienced
external hire serving most recently as the Investor
Relations Officer for Motorola Solutions. Details of
Chris’ remuneration arrangements on appointment
are detailed on page 89 ; however in summary he
was appointed on a base salary of US$325,000, a
pension contribution in line with the majority of Group
employees of 5% of salary, and he will be eligible to
participate in the Group’s annual bonus and LTIP from
2019/20 onwards on broadly the same basis as his
predecessor. As part of his recruitment, the Committee
took into account the need to compensate Chris for
incentives forfeited by leaving his previous employer
and agreed a balanced buyout package in accordance
with the Remuneration Policy, details of which are
included on page 89.
This year we were also pleased to welcome three new
Non-Executive Directors to the Kin + Carta Board:
David Bell (with effect from 4 August 2018); Michele
Maher (with effect from 15 May 2019); and John Kerr
(as Non-Executive Chairman Designate, with effect
from 22 July 2019). Fees paid to David, Michele and
John are in line with the fees paid to the other Non-
Executive Directors, as disclosed on page 84.
PERFORMANCE AND REWARD
FOR 2018/19
Significant progress has been made during the year
in launching the Connective proposition to clients
which is central to the Group’s overall strategy. We
see exciting opportunities for the year ahead with the
Group well positioned in its transformation journey.
Targets for Executive Directors’ 2018/19 bonuses were
based 75% on Adjusted PBT (measured before strategic
investments) and 25% on strategic/personal objectives.
Although Adjusted PBT of £19.6 million (before
strategic objectives of £2 million, as approved by the
Committee) supported a payout of 31% of salary, the
Committee and the Executive Directors agreed that
no payout for the PBT element of the 2018/19 bonus
would be made in light of the Group’s overall financial
performance. The strategic and personal objectives
were achieved in full and are disclosed on page 85.
Therefore, in total a bonus award of 25% of annual
salary will be paid. A summary of actual performance
against the targets is included on page 85.
The Annual Report on Remuneration also gives
details of LTIP awards granted in November 2016.
These awards originally included an element based
on the proportion of operating profit from Strategic
Marketing, however as a result of the disposals of the
Marketing Activation and Books segments in 2017/18,
the Committee considered that this was no longer
a relevant measure of performance (as it would be
100% by default) and resolved instead to increase
the weighting on the relative TSR (from 50% to 75%).
In terms of performance, the Company’s 2018/19
Adjusted basic EPS performance, weighted 25%, did
not meet the relevant targets and this element of
the award will therefore lapse. On relative TSR the
Company’s performance was below the median for its
comparator group and therefore the award will lapse in
full. Further details are provided on page 86.
IMPLEMENTATION OF
REMUNERATION POLICY
FOR 2019/20
As detailed above, Chris Kutsor was appointed as
Chief Financial Officer and he receives an annual
salary of US$325,000 in line with his predecessor at
the relevant exchange rate. In respect of the Chief
Executive Officer, the Committee determined that
the salary of J Schwan would remain at £400,000
per annum.
The annual bonus will operate on a similar basis as in
2018/2019. Maximum bonus opportunities remain
at 100% of salary, with any amount earned over 50%
of salary continuing to be deferred in shares for two
years and subject to malus provisions. Reflecting the
impact of share issuances to fund acquisition-related
payments, 75% of the bonus will continue to be based
on Adjusted PBT, with the remaining 25% based on
the achievement of key strategic/personal objectives.
The Committee reiterates its intention that the use
of Adjusted PBT is a temporary change reflecting the
current stage in the Company’s transition to a digital
transformation business and that we expect to revert
to EPS over the longer term.
7 3
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE LETTER FROM CHAIR OF THE
REMUNERATION COMMITTEE CONTINUED
LTIP grant sizes will be 100% of salary in respect of
the Chief Executive Officer and 200% of salary in
respect of the Chief Financial Officer, reflecting part
of his buyout arrangements. Vesting will be subject
to stretching targets, underpinned by Committee
discretion. The Committee has reviewed the
performance measures and weightings applying to
this year’s awards to ensure they remain aligned with
Group strategy and is proposing a number of changes
as follows:
•
•
the elements based on Adjusted Revenue and
growth in Adjusted PBT will each be upweighted
from 15% to 25% of the total award to reinforce
the Group’s profitable growth strategy; and
to accommodate these increases, the weighting on
TSR will be reduced from 70% to 50% of the total
award. Reflecting feedback from shareholders and
market practice, we will also revert to measuring
TSR on a relative basis against the constituents of
the FTSE AllShare Index.
As before, LTIP awards are subject to a two-year
holding period after vesting.
These proposals are consistent with the Remuneration
Policy approved by shareholders at the 2017 AGM. Further
details of the implementation of our Remuneration Policy
for 2019/20 are provided on pages 91 and 92.
LOOKING AHEAD
2018 saw the publication of additional remuneration
reporting regulations, as well as a revised UK Corporate
Governance Code. Although Kin + Carta’s compliance
with these new requirements is not strictly required until
next year, we have adopted some of the requirements
early. In particular, shareholders will note that we have
reduced pension contributions for new Executive
Director hires (including Chris Kutsor) to be in line
with the rate offered to the majority of employees. We
are not yet in a position to disclose a ratio of CEO-to-
employee pay, although the Committee fully supports
this initiative and is working to ensure that we have
meaningful disclosure next year and beyond.
The 2020 AGM will mark the third anniversary of the
current Remuneration Policy. Accordingly, the Committee
will be undertaking a review of the current Policy
during the 2019/20 financial year to ensure it remains
appropriate and continues to support Kin + Carta’s
strategic focus. As part of this process, the Remuneration
Committee welcomes feedback from our shareholders
and will be initiating a consultation programme later in
the year.
On behalf of the Committee, I hope that we can count
on your continued support at this year’s AGM.
Nigel Pocklington
C H A I R O F T H E R E M U N E R AT I O N
C O M M I T T E E
1 O C T O B E R 2 0 1 9
74
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE DIRECTORS’ REMUNERATION REPORT
This Directors’ Remuneration Report has been prepared in accordance with The Large and Medium-sized Companies
and Groups (Accounts and Reports) (Amendment) Regulations 2013. The Report is also in accordance with the
requirements of the Listing Rules and the relevant recommendations contained within the Code relating to
Directors’ remuneration and takes into account the views of our major shareholders. The legislation requires the
auditor to report to the Company’s members on certain disclosures contained in this report and to state whether in
their opinion that part of the report has been properly prepared in accordance with the Companies Act 2006. The
sections, between pages 75 and 94, which are subject to audit, have been highlighted.
POLICY REPORT
Summary of Directors’ Remuneration Policy
Kin + Carta’s remuneration policy was approved by shareholders at the AGM on 30 November 2017, and took effect
from that date. We publish below an abbreviated version of the policy, updated as necessary, to give context to
decisions taken by the Committee during the year. The full policy report, as approved by shareholders, can be found
in the Annual Report and Accounts 2017 available on the Company’s website.
Basic salary
Purpose and link to strategy
To provide competitive fixed remuneration that will
attract and retain key employees of a high calibre and
which reflects their experience and position in the
Company.
Operation
Normally reviewed annually with increases effective
from 1 August. Salaries are paid monthly.
In setting salaries, the Committee takes into account
the following:
• capability of the individual;
• any changes in responsibility;
•
increases awarded across the workforce;
• external economic factors such as inflation; and
• benchmarking for similar roles in comparable
organisations.
Maximum potential value
Executive Directors’ salaries effective 1 August 2019
are as follows:
• Chief Executive Officer, J Schwan: £400,000 p.a.;
and
• Chief Financial Officer, Chris Kutsor: US$325,000 p.a.
No monetary maximum has been set, although
increases are generally in line with the range (in
percentage of salary terms) awarded across the Group.
In accordance with normal practice at all levels in
all parts of the Group, increases above this level (in
percentage of salary terms) may be made in certain
circumstances such as where there is a change in
responsibility or a significant increase in the scale of
the role or size and complexity of the Group.
Performance metrics
Not applicable.
7 5
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE DIRECTORS’ REMUNERATION REPORT
CONTINUED
Benefits
Purpose and link to strategy
To provide market competitive, yet cost-effective,
benefits to attract and retain high-calibre executives.
Operation
Benefits generally include provision of a car, or cash in
lieu of car and fuel allowance, and private medical and
life assurance cover.
The Committee may introduce other ancillary benefits
which are on similar terms to those offered to the
wider workforce or required in order to remain market
competitive.
Overseas recruitment or an international assignment
may require the benefits package to be more tailored
and may include, for example, relocation costs, tax
equalisation arrangements, etc., as necessary.
Pension
Purpose and link to strategy
To provide market competitive, yet cost-effective
benefits.
Operation
Only basic salary is pensionable.
Maximum potential value
The maximum annual car and fuel allowance is
£15,520.
The maximum overall cost of total benefit provision
(including but not limited to annual car and fuel
allowance) may vary each year subject to changes in
the Company’s insurance premiums or changes to the
terms of the benefits provided.
The values for the year under review, expressed as a cost
to the Company of providing the benefits, are described
in the Directors’ single figure table on page 84.
Performance metrics
Not applicable.
Maximum potential value
Up to 15% of salary*.
A Company contribution to a defined contribution
pension scheme, a personal pension or provision of
a cash payment in lieu of a pension contribution (or
combination of such) may be provided at the discretion
of the Committee.
Performance metrics
Not applicable.
* As noted in the Letter from the Chair of the Remuneration Committee, the Remuneration Policy will be reviewed in 2019/20; the policy on
pensions will be considered as part of this process. New Executive Directors will receive a pension contribution in line with the rate offered to the
majority of employees (currently 5% of salary).
76
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE Annual bonus
Purpose and link to strategy
Incentivises achievement of annual objectives which
support the short-term performance goals of the
Company.
Operation
At the start of each year the Committee determines the
choice of annual bonus measures and targets to ensure
they reflect the KPIs of the business at that time.
Payments under the annual bonus plan are subject to:
• compulsory payment of any bonus earned over 50%
of salary (on an after tax basis) in the Company’s
shares under the Company Deferred Bonus Shares
(“DBS”) arrangement which are subject to a holding
period of two years; and
•
the element of the annual bonus paid in shares
is subject to malus provisions in the event of a
material misstatement of the Company’s financial
position.
Deferred shares will generally be forfeited if a Director
leaves the Group (unless in certain good leaver
situations or if the Committee determines otherwise).
Dividends and/or dividend equivalents are payable
on the deferred bonus shares during the two-year
holding period.
Maximum potential value
100% of basic salary.
Performance metrics
Performance is measured over one financial year.
Bonus awards are subject to achievement against a
sliding scale of challenging financial targets and may
also be subject to challenging strategic/personal
objectives.
The majority of any bonus will be earned for achieving
challenging financial targets aligned with the Company’s
key performance indicators (e.g. Adjusted PBT or EPS). A
minority may be subject to achieving pre-set strategic/
personal objectives which reflect the key priorities of the
role at the time.
Bonuses become payable once a threshold level of
performance is achieved against the target(s) which
triggers a bonus payment of up to 25% of salary,
rising to 100% of salary for meeting (or exceeding)
the maximum target(s) set. Measurement of financial
metrics is made on the basis of audited figures. Where
strategic/personal targets are set it may not always be
practicable to set these using a sliding scale.
Page 91 of the Annual Report on Remuneration
provides details of the performance measures and
weightings to apply for the year ending 31 July 2020.
7 7
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE DIRECTORS’ REMUNERATION REPORT
CONTINUED
Long-Term Incentives
Purpose and link to strategy
Incentivises executives to achieve superior financial
growth and returns to shareholders over the longer term.
Provides alignment with shareholders through awards
of shares.
Promotes retention of key individuals.
Operation
The Long-Term Incentive Plan (“LTIP”) was approved
by shareholders in 2010.
Awards can be in the form of an option, a conditional
award or a forfeitable award.
Eligibility to receive awards is at the discretion of the
Committee each year.
An LTIP award may be made shortly after an
appointment (subject to the Company not being in a
prohibited period) subject to the permitted maximum.
Awards are normally made on an annual basis and
vest three years from grant subject to continued
employment and the satisfaction of challenging three-
year performance targets.
A two-year holding period following LTIP vesting
applies to grants to Executive Directors from 2017/18
onwards. In total, this results in a five-year combined
vesting and holding period.
The Committee reviews the quantum of awards
annually and monitors the continuing suitability of the
performance measures.
Participants benefit from the value of dividends paid
over the vesting period to the extent that awards
vest. This benefit is delivered in the form of cash or
additional shares at the time that awards are exercised.
All awards granted after November 2013 are subject
to a malus provision and clawback for two years after
vesting, in the event of a material misstatement of the
Company’s financial position.
All-employee share schemes
Purpose and link to strategy
Encourages long-term shareholding in the Company.
Operation
Invitations made by the Committee under the HMRC
Approved Sharesave Scheme.
Maximum potential value
Awards with a face value of up to 125% of basic salary
(or 200% if the Committee believes there are exceptional
circumstances) can be made on an annual basis.
The Company operates within a 10% in ten years ABI
(new share issue) dilution limit.
Performance metrics
Performance is measured over a three-year period.
Performance measures, weightings and targets are
determined by the Committee in advance of grant to
support Company strategy and provide shareholder
alignment. The majority of LTIP awards will continue to
be linked to financial and/or TSR performance.
Under each measure, threshold performance will result
in 25% of maximum vesting for that element (0% vests
below this), increasing pro-rata to 100% for maximum
performance.
Where TSR performance conditions are set,
performance against the condition is monitored
independently on the Committee’s behalf, and where
financial targets are set, performance against the
condition is tested based on numbers derived from the
audited financial statements.
LTIP vesting is underpinned by Committee discretion
such that for any shares to vest, the Committee must
be satisfied with the underlying performance of the
business. In making this assessment the Committee will
take into account factors such as the strength of the
balance sheet, quality of earnings, etc.
Page 92 of the Annual Report on Remuneration provides
details of the performance measures, targets and
weightings to apply for the year ending 31 July 2020.
Maximum potential value
As per HMRC limits (e.g. current maximum monthly
savings towards share purchases is limited to £500
per calendar month).
Executive Directors may participate in a monthly
savings contract on the same terms as other employees
of the Group.
Performance metrics
Not applicable.
7 8
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE Maximum potential value
Not applicable.
Share ownership guidelines
Purpose and link to strategy
To provide alignment between executives and
shareholders.
Operation
The Committee operates shareholding guidelines of
200% of salary for the Chief Executive Officer and
150% of salary for other Executive Directors.
The net of tax number of deferred bonus shares or
vested shares under the Company’s LTIP will normally
be required to be retained until the guideline is met.
The Committee may take account of progress towards
this target when determining LTIP awards.
Performance metrics
Not applicable.
Notes to the Policy Table
1. While the remuneration policy for Executive Directors is designed having regard to the policy for employees across the Group as a whole, there
are some differences in the structure for senior employees which the Committee believes to be necessary to reflect the different levels of
responsibility within the Company. The following key differences exist between the Company’s policy for the remuneration of Executive Directors
and its approach to the payment of employees generally:
•
there is an increased emphasis on performance-related pay and, in particular, for share-based incentives at the Executive Director level;
• eligibility to participate in and the maximum opportunity in relation to an annual bonus vary, based on individual role and local practice;
• participation in the LTIP is limited to the Executive Directors and certain selected senior managers; and
• benefits offered to other employees vary by subsidiary to take account of relevant market conditions and local practice.
The choice of the performance metrics and range of targets applicable to the annual bonus plan for Executive Directors reflect the Committee’s
belief that any incentive compensation should be appropriately challenging and tied to both the delivery of robust performance relating to the
Group’s financial key performance indicators and, where appropriate, specific individual objectives. Performance metrics applicable to the LTIP
are selected to support Company strategy and provide shareholder alignment. Awards made in 2017/18, 2018/19 and 2019/20 vest subject to
stretching targets. The 2017/18 award vests subject to targets relating to Absolute TSR and growth in Adjusted operating profit from continuing
operations, the 2018/19 award vests subject to targets relating to Absolute TSR, Adjusted revenue and Adjusted PBT, and the 2019/20 award
vests subject to Relative TSR, Revenue growth and Adjusted PBT. Targets applying to the annual bonus and LTIP are reviewed annually, based
on a range of internal and external reference points. Performance targets are set to be stretching but achievable, with regard to the particular
strategic priorities and economic environment in a given year.
2.
3.
4.
5.
The share ownership guideline levels are detailed above. The shares that an Executive Director may count towards the shareholding guideline
include: those held in the name of the Director; those held in the name of the Director’s spouse, partner or children; any shares held in a family
trust for the benefit of the Director and/or his/her spouse, partner or children; and any shares held in a personal pension plan on behalf of the
Director. The Committee may, in its absolute discretion, approve the holding of shares by alternate means (e.g. shares held under a deferred share
bonus award) and, if permitted, on such terms determined by the Committee, acting fairly and reasonably.
For the avoidance of doubt, in approving this Directors’ remuneration policy, authority is given to the Company to honour any commitments
entered into with current or former Directors (such as the payment of a pension or the vesting/exercise of past share awards) that have been
disclosed to and approved by shareholders in previous remuneration reports. Details of any payments to former Directors will be set out in the
Annual Report on Remuneration as they arise.
the determination of whether the performance conditions have been met and the resulting vesting/pay out;
the size of awards and payments, although with quantum restricted to those detailed in the table above and the respective plan rules;
The Committee operates the annual bonus, LTIP and Sharesave plans, in accordance with their rules, HMRC guidance and, where relevant,
the Listing Rules. To ensure these incentive plans operate in an efficient manner, the Committee retains a number of standard market practice
discretions which include:
• determining the eligibility to participate in the plans;
• determining the timing of grant of awards and any payments;
•
•
• dealing with a change of control (for example, the timing of testing performance targets) or restructuring of the Group;
• determining a good or bad leaver for incentive plan purposes, based on the rules of each plan and the appropriate treatment chosen;
• adjustments required in certain capital events such as rights issues, corporate restructuring events and special dividends; and
•
In some circumstances, such as a material acquisition/divestment of a Group business, or a change in Accounting Standards and Interpretations,
which mean the original performance conditions are no longer appropriate, the Committee can adjust the targets, set different measures and alter
weightings as necessary, to ensure the conditions achieve their original purpose and are not materially less difficult to satisfy.
the annual review of performance conditions for the annual bonus plan and LTIP.
7 9
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE DIRECTORS’ REMUNERATION REPORT
CONTINUED
Approach to recruitment and promotions
Basic salary levels will be set on appointment after having had due regard to the Company’s general remuneration
policy but adjusted, as appropriate, to reflect the experience and calibre of the individual and the market rates for
similar roles in comparable organisations. If it is considered appropriate to appoint a new Director on a below market
salary (e.g. in the event of an internal promotion), they may be the subject of a series of increases to a desired salary
positioning over an appropriate time frame, subject to performance in post.
Should it be appropriate to recruit an executive from overseas or for the individual to relocate, then reasonable
expenses and payments may be paid in relation to such a relocation which would then be subject to disclosure in due
course. Benefits and pension arrangements would generally be in line with those offered to current executives but it
may be necessary to tailor these to reflect for example, local market norms, local legislation, etc.
The annual bonus maximum will be in line with current Executive Directors (i.e. 100% of basic salary), prorated for
the period of service. Depending on the timing of the appointment the Committee may use different performance
measures, targets and weightings to that of the current executives for the first year of service.
An LTIP award may be made shortly after an appointment (subject to the Company not being in a prohibited period)
subject to the permitted maximum. The total maximum variable remuneration that may be awarded in respect of
recruitment is 300% of salary (excluding buy-out awards referred to below).
The Committee may offer additional cash and/or share-based elements to replace deferred or incentive pay
forfeited by an executive leaving a previous employer. The Committee would seek to ensure, where possible, that
these awards replicate the potential value forfeited/lost in joining the Company, and in terms of time horizons,
vesting periods, expected values and potential impact of performance conditions, these factors are recognised in
determining the quantum of such compensation. This award would be facilitated under the existing incentive plans
where possible, but also using Rule 9.4.2 of the Listing Rules if necessary.
For an internal Executive Director appointment, any variable pay element awarded in respect of the prior role may
be allowed to pay out according to its terms, adjusted as relevant to take into account the appointment.
Service contracts and loss of office payments
It is the Company’s policy that Executive Directors should serve under rolling service contracts of 12 months’
duration or less and that there should be no special provisions for compensation in the event of termination (neither
in the normal course nor following a change in control of the Company) and that any compensation payments made
should take account of the Director’s duty to mitigate his loss. The Executive Directors’ current service contracts all
comply with this policy.
The Remuneration Committee reviews the contractual terms for new Executive Directors to ensure these reflect
best practice.
In summary, the contractual provisions are as follows:
Provision detailed terms
Notice period:
Termination payment:
Change of control:
Up to 12 months
Limited to a maximum of basic salary and benefits, paid monthly and subject to
mitigation
No Executive Director’s contract contains additional provisions in respect of a
change of control
The service contract for any new appointment would be made on similar terms to those described above.
8 0
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE In a leaver event, the following payments may also be made to departing Executive Directors:
1. Any share-based entitlements granted to an Executive Director under a Company share plan will be determined
based on the relevant plan rules. In certain prescribed circumstances, however, such as death, ill-health, disability,
retirement or other circumstances at the discretion of the Committee, a ‘good leaver’ status may be applied.
Under the LTIP, for good leavers, future awards will normally be tested for performance over the full performance
period and be reduced pro rata to reflect the proportion of the performance period actually served, rounded up
to the next complete financial year, with Remuneration Committee discretion to determine that awards vest at
an earlier date and/or to disapply time prorating. Vested LTIP awards which are subject to an additional holding
period will typically be retained and released at the end of the holding period, with Committee discretion to
treat otherwise. Under the DBS, in certain prescribed circumstances, awards will be retained in connection
with a leaver event (such as death or permanent disability or any other reason permitted by the Remuneration
Committee).
2. A pro rata bonus may be payable for the period of active service in certain prescribed good leaver circumstances
and in other circumstances at the discretion of the Committee and subject to the achievement of the relevant
performance targets.
3. At the discretion of the Remuneration Committee, a contribution to reasonable outplacement costs in the event
of termination of employment due to redundancy. The Committee also retains the ability to reimburse reasonable
legal costs incurred in connection with a termination of employment.
4. Any payment for statutory entitlements or to settle or compromise claims in connection with a termination of any
existing or future Executive Director as necessary.
Chairman and Non-Executive Directors
The following sets out the fee policy for the Chairman and Non-Executive Directors:
Purpose and link to strategy
To attract and retain high-calibre individuals without
prejudice to the application of independent views.
Operation
Non-Executive Directors’ remuneration is decided
by the Executive Directors and the Chairman; the
Chairman’s fee is set separately by the Committee.
Fees are set periodically by taking account of the
time required to fulfil the role and fees payable at
similar sized companies. Any increases in fees also
take account of any increases payable to Executive
Directors and to the general workforce.
Non-Executive Directors may not participate in the
Group’s cash or share-based incentive arrangements.
Non-Executive Directors also receive reimbursement
of travel and office-related expenses.
Maximum potential value
For 2019/20, the fees comprise a base fee of £42,500
p.a. plus additional fees of £5,000 p.a. for the Senior
Independent Director position and £7,500 p.a. for
chairing the Remuneration or Audit Committees. The
Chairman (and Non-Executive Chairman Designate) fee
is set at £130,000 p.a.
These fees may be revised periodically in line with
the Company’s policy. Given the periodic nature of
the review any increases (as a % of total fees) may be
greater than that awarded to the wider workforce in
any particular year.
The maximum aggregate fees are set in accordance
with the Company’s articles of association.
Performance metrics
Not applicable.
8 1
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE DIRECTORS’ REMUNERATION REPORT
CONTINUED
ANNUAL REPORT ON REMUNERATION
The following section provides details of how Kin + Carta’s remuneration policy was implemented during 2018/19
and how we intend to implement the remuneration policy for 2019/20.
Membership of the Committee
Mike Butterworth, Nigel Pocklington and Helen Stevenson, all Independent Non-Executive Directors, served on the
Committee throughout the period. Michele Maher joined the Committee following her appointment as Independent
Non-Executive Director on 15 May 2019. The Committee was chaired by Helen Stevenson until 1 January 2019, and
thereafter Nigel Pocklington until the end of the period. The number of meetings held, attendances and a description of
the principal matters considered by the Committee in carrying out its duties during the period are described on pages
61 and 83.
During the period under review, the Committee, where appropriate, sought advice and assistance from the Company
Secretary, Daniel Fattal, and members of the Board, including the Chairman of the Board, Richard Stillwell, the Chief
Executive Officer, J Schwan, and the Chief Financial Officer, Brad Gray who was succeeded by Chris Kutsor, in
connection with carrying out its duties. None of these persons took part in decisions relating specifically to their
own remuneration.
Role of the Committee
The Committee is responsible for determining and agreeing with the Board the overall remuneration policy and
its implementation, including setting the individual remuneration packages and contractual arrangements for the
Executive Directors, senior management and the Chairman of the Board, which support the creation of value for
shareholders and the delivery of the Group’s strategic priorities.
The Committee is mindful of the intense scrutiny around executive remuneration and seeks to keep abreast of and
adopt best practice where appropriate taking into account its position in the FTSE SmallCap.
When undertaking its duties, the Committee also ensures that due account is taken of pay and employment conditions
throughout the Group by keeping abreast of matters such as: (i) the general level of salary increases (if any) applied
throughout the Group; (ii) the levels of bonuses paid (and bonus opportunity offered) to the workforce as a whole;
and (iii) any widespread changes that are proposed to Group-wide employment conditions.
The full terms of reference for the Committee are available on the Company’s website (www.kinandcarta.com).
Committee’s advisers
During the period, the Committee retained Mercer | Kepler, part of the MMC group of companies, as an independent
adviser to the Committee. They were selected following a formal tender process conducted in 2015. Mercer | Kepler
is a signatory to the Code of Conduct for Remuneration Consultants in the UK, details of which can be found on the
Remuneration Consulting Group’s website at www.remunerationconsultantsgroup.com.
During the period, one of MMC’s other companies, Marsh Inc., acted as the Company’s insurance broker. The fees
paid to Mercer | Kepler in relation to advice provided to the Committee for 2018/19 were £19,820 (2017/18:
£40,370), on a time and materials basis.
The Committee has reviewed the advice provided by Mercer | Kepler during the year and is satisfied that it has been
objective and independent. The terms of engagement between the Company and Mercer | Kepler are available from
the Company Secretary upon request.
8 2
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE Summary of activities
During the period the Committee approved:
• outcomes of bonuses for the Executive Directors in respect of 2017/18;
•
•
•
•
•
•
•
the Directors’ Remuneration Report for 2017/18;
the Executive Directors’ salaries and pension provision for 2019/20;
the Chairman’s fees for 2019/20;
the change in the proportion of operating profit from Strategic Marketing performance condition applying to the
November 2016 LTIP award;
the grant of awards in November 2018 under the Company’s 2010 LTIP Plan to certain senior managers and the
performance conditions attached to their vesting;
the remuneration arrangements for Chris Kutsor on his appointment as Chief Financial Officer, including the
structure of his buyout awards; and
the remuneration arrangements and treatment of outstanding incentives for Brad Gray on his stepping down
from the Group.
Summary of shareholder voting at the 2018 AGM
The following table shows the results of the last binding vote on the Remuneration Policy at the 2017 AGM, and the
advisory vote on the 2017/18 Remuneration Report at the 2018 AGM:
Resolution
Remuneration Policy
Remuneration Report
Note 1: Includes ‘discretionary’ votes.
Votes
for (note 1)
96,592,072
97,616,773
% for
(note 1)
99.62%
99.87%
Votes
against
371,760
126,356
%
against
Total
votes cast
0.38% 96,963,832
0.13% 97,743,129
Votes
withheld
960,595
1,754
8 3
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE DIRECTORS’ REMUNERATION REPORT
CONTINUED
Remuneration Payable to Directors for the Period Ended 31 July 2019
Directors’ single figure table (audited)
Set out below, in a single figure, is the total remuneration of all Directors for the financial year:
Basic
salary/
fee
2019
£’000
Basic
salary/
fee
2018
£’000
Taxable
benefits
(note 2)
2019
£’000
Taxable
benefits
(note 2)
2018
£’000
Bonus
2019
£’000
Bonus
2018
£’000
Share
plans
vesting
(note 3)
2019
£’000
Share
plans
vesting
(note 3)
2018
£’000
Pension
benefits
(note 4)
2019
£’000
Pension
benefits
2018
£’000
Total
2019
£’000
Total
2018
£’000
Director (note 1)
400.0
31.5
n/a
n/a
22.9
1.9
n/a 100.0
n/a
n/a
n/a
n/a
Executive Directors
J Schwan (note 4)
Chris Kutsor (note 5)
Non-Executive Directors
David Bell
Mike Butterworth
John Kerr (note 6)
Michele Maher
Nigel Pocklington
Helen Stevenson
Richard Stillwell
(note 7)
Former Directors
Matt Armitage
(note 1)
Brad Gray (note 8)
42.5
52.1
3.7
9.2
46.9
48.5
–
55.0
–
–
42.5
50.0
110.0 110.0
– 400.0
250.0 230.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
13.8
18.6
14.2
– 400.0
62.5 230.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
60.0
1.6
n/a 582.9
n/a
35.0
n/a
n/a
–
–
–
–
–
–
–
–
–
–
–
–
–
42.5
52.1
3.7
9.2
46.9
48.5
n/a
55.0
n/a
n/a
42.5
50.0
– 110.0 110.0
–
37.5
60.0
– 878.6
34.5 363.8 508.7
Notes
1. Changes in Directors and roles during the year were as follows:
a. Chris Kutsor joined the Board as Chief Financial Officer with effect from 17 June 2019.
b. David Bell joined the Board as Non-Executive Director with effect from 4 August 2018.
c. Mike Butterworth stepped down as Senior Independent Director on 31 December 2018.
d.
John Kerr joined the Board as Non-Executive Chairman Designate with effect from 22 July 2019.
e. Michele Maher joined the Board as Non-Executive Director with effect from 15 May 2019.
f. Nigel Pocklington was appointed as Chair of the Remuneration Committee with effect from 1 January 2019.
g. Helen Stevenson was appointed as Senior Independent Director and stepped down as Chair of the Remuneration Committee with effect
from 1 January 2019.
h. Matt Armitage resigned from the Board on 4 August 2018. Details of his leaver arrangements are included on page 90.
i.
Brad Gray stepped down as Chief Financial Officer and as a Director of the Board on 17 June 2019, continuing in full time employment with
the Group until 31 July 2019.
2.
3.
4.
5.
6.
Taxable benefits constitute additional payments in lieu of the provision of a company car and fuel benefit, medical expenses insurance cover and
personal tax return preparation in required countries.
Figures for ‘share plans vesting’ are based on the number of shares vesting for performance periods substantially completed as at year end. The
2015 LTIP award lapsed in full in November 2018. The 2016 LTIP award will lapse in full in November 2019. See page 86 for details.
Pension benefits were in part paid into a Group Personal Pension Plan and part paid as cash in lieu of pension for J Schwan.
The remuneration of Chris Kutsor is originally denominated in US Dollars and has been converted for the purposes of the single figure table using
the average £:$ exchange rate in the year of 1.2867.
John Kerr has elected to forego £10,000 per annum of his fee of £130,000 per annum. John Kerr’s fees are shown above after foregoing this
proportion of his fees for the period he was a Director during 2018/19. The Company donates this sum so withheld, together with a matching
sum from the Company, to registered charities.
7. Richard Stillwell has elected to forego £20,000 per annum of his fee of £130,000 per annum. Richard Stillwell’s fees are shown above after
foregoing this proportion of his fees during 2018/19. The Company donates this sum so withheld, together with a matching sum from the
Company, to registered charities.
8. Brad Gray stepped down as Chief Financial Officer and as a Director of the Board on 17 June 2019, continuing in full-time employment with the
Group until 31 July 2019. Pension benefits were paid as cash in lieu of pension. Amounts shown in the table reflect the full financial year, i.e.
including the period served after his leaving the Board. Details of Brad’s leaver arrangements are included on page 90.
8 4
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE Incentive Outcomes for the Period Ended 31 July 2019 (Audited)
Annual bonus
Executive Directors’ bonuses for the period ended 31 July 2019 provided for a payment of up to 100% of salary
based 75% on Adjusted PBT performance over the financial period and 25% on personal/strategic objectives.
Details of performance against the financial targets set are provided below:
Financial measure
Adjusted PBT
Threshold
No payment
below target
Target
(25% of salary)
Stretch
(50% of salary)
Super Stretch
(75% of salary)
Actual
performance
% of salary
earned
£19m
£20.3m
£21.6m
£19.6m
0%
Note: The percentage of bonus earned between the target and the stretches is on a straight-line basis.
Adjusted PBT is shown in the table above before strategic investments of £2.0 million, in line with the approach
agreed by the Committee at the start of the period. Although Adjusted PBT of £19.6 million before strategic
investments would support a payout of 31% of salary, the Committee and the Executive Directors agreed that
no payout for the PBT element of the 2018/19 bonus would be made in light of the Group’s overall financial
performance.
In addition to the above, each Executive Director was eligible to earn up to 25% of salary for the achievement of
stretching strategic/personal objectives, which for 2018/19 related to Kin + Carta’s strategy and priorities.
Executive Directors were assessed as having achieved their strategic/personal objectives in full, with the Committee
noting:
• Executive Directors had overseen the successful launch of a new Connective operating model, bringing together
the Group’s core capability pillars and improving cross-selling across the business. The Committee noted in
particular that the Group had over 20 clients buying from more than one business during the 2018/19 financial
period (versus a target of 10), accounting for over £10 million in revenue.
• Strong progress had been made against identified growth catalysts, in particular:
− on geographical expansion, the Group had started to establish Kin + Carta AmazeRealise as a communications
presence in the US to complement the already strong strategy, innovation and transformation capabilities,
with additional revenue exceeding the $0.5 million target set at the start of the period; and
− on deepening sector focus, the Group successfully launched a Healthcare vertical and delivered seven new
clients with revenue in the period in excess of £5 million.
Based on these achievements, the Committee agreed to award both J Schwan and Brad Gray (who was employed by
the Group for the full financial period) annual bonuses equivalent to 25% of salary in respect of 2018/19. In line with
the remuneration policy, these amounts will be paid entirely in cash. Having joined the Group in June 2019, Chris
Kutsor was not eligible for an annual bonus in respect of the 2018/19 financial period.
8 5
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE DIRECTORS’ REMUNERATION REPORT
CONTINUED
2015 LTIP
As reported last year, 2017/18 Adjusted EPS performance was below threshold against targets set for 2015 LTIP
awards and accordingly this element of the award achieved nil vesting. The elements based on relative TSR and the
percentage of operating profit from Strategic Marketing elements, both of which were underpinned by Adjusted EPS
performance, also achieved nil vesting. Accordingly, the 2015 LTIP lapsed in full in November 2018, with the value
of these awards included in the single figure table on page 84 for 2018 being £Nil.
2016 LTIP
Vesting of the 2016 LTIP awards is dependent on performance against three metrics measured over a three-year
period: Adjusted EPS; TSR relative to the FTSE AllShare Media sector (excluding FTSE100 companies); and the
proportion of Group operating profit from the Strategic Marketing businesses.
As a result of the disposals of the Marketing Activation and Books segments in 2017/18, the Committee considered
that the element based on the proportion of Group operating profit from the Strategic Marketing businesses was
no longer a relevant measure of performance (as it would be 100% by default) and resolved instead to increase the
weighting on the relative TSR from 50% to 75%.
Further details, including vesting schedules and performance against each of the metrics are provided in the table below:
Measure
Weighting
Targets*
Adjusted EPS in
2018/19
25%
75%
(increased
from 50%)
n/a
(originally
25%)
TSR relative to
the All-Share Media
sector (excl.
FTSE100
companies)
Operating profit
from Strategic
Marketing as
compared to total
Group operating
profit in 2018/19
Total vesting
0% vesting below 18.5p
25% vesting for 18.5p
100% vesting for 20.0p or more
Straight-line vesting between these points
0% vesting below median performance
25% vesting for performance in line with median
100% vesting for upper quartile performance or
greater
Straight-line vesting between these points
0% vesting below 55%
25% vesting for 55%
100% vesting for 65% or greater
Straight-line vesting between these points
Outcome
Vesting %
9.2p
0%
25th percentile
0%
n/a
n/a
0%
* The Committee assessed the impact of restating the EPS target to take into account the disposals in 2017/18. However, the targets were still not
met and accordingly this element of the award will lapse in full in November 2019.
Summary of long-term incentives vesting in November 2019 (audited)
The total number of shares which vested in relation to the performance period completed as at the period end, and
which are reflected in the single figure table on page 84, is as follows:
Date of grant
Total number
of shares
% shares
vesting
for
performance
Number of
awards vesting
Share price
on vesting
(pence)
Total value on
vesting (£)
Transfer of award/
earliest vesting
date
Brad Gray
16 Nov 2016
161,529
0%
0
n/a
0
16 Nov 2019
8 6
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE Scheme interests awarded during the 2018/19 financial period (audited)
Long-Term Incentive Plan (‘LTIP’)
In November 2018, J Schwan and Brad Gray were granted awards, which are structured as options with a nil exercise
price, under the Company’s LTIP, as follows:
J Schwan
Brad Gray
Date of grant
11 Nov 2018
11 Nov 2018
Shares over
which awards
granted
Value of shares
awarded (£)*
% of salary
awarded
410,088
256,305
£400,000
£250,000
100%
100%
* Face value is based on a share price of 97.5 pence (the market value at the time of grant).
Reflecting an improvement in the Company’s share price relative to that used for awards in 2016/17 and 2017/18,
LTIP grant sizes for 2018/19 reverted to the previous 100% of salary level. Awards granted vest on absolute TSR,
growth in Adjusted revenue and growth in Adjusted PBT, each measured over three years and with overall vesting
underpinned by Committee discretion. Vested shares will be subject to a two-year holding period.
A summary of the performance conditions is shown in the table below:
Measure
Weighting
Targets
Absolute TSR
(share price plus
rolled up dividends)
70%
Growth in Adjusted
revenue
15%
Growth in Adjusted
PBT
15%
0% vesting below 125p
25% vesting for 125p
100% vesting for 175p or more
Straight-line vesting between these points
0% vesting below 6%
25% vesting for 6%
100% vesting for 11% or more
Straight-line vesting between these points
0% vesting below 6%
25% vesting for 6%
100% vesting for 14% or greater
Straight-line vesting between these points
Vesting of awards is subject to overall
Committee discretion
Performance measurement period
Three-month average to
31 July 2021
Adjusted revenue in 2020/21
as compared to 2017/18
Adjusted PBT in 2020/21
as compared to 2017/18
All awards made since November 2013 are subject to a malus and clawback provision, which will enable the
Committee to reclaim value that should not have been received in the event that, if within the two-year period
following the year of vesting, a material misstatement of the Company’s financial results relating to the year of
vesting is identified. In such circumstances a clawback would be based on the extent to which the first vesting was
overpaid based on new information.
Deferred Bonus Shares (‘DBS’)
In November 2018, Brad Gray was granted awards under the DBS in respect of the annual bonus payable to him for
2017/18 in excess of 50% of salary. There are no performance conditions associated with these awards and shares
are released after a two-year deferral period.
Brad Gray
Date of grant
5 Nov 2018
Shares over which
awards granted
64,174
Value of shares
awarded (£)*
£60,644
Release date
5 Nov 2020
* Face value is based on a share price of 94.5 pence (the market value at the time of grant).
8 7
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE DIRECTORS’ REMUNERATION REPORT
CONTINUED
Statement of change in remuneration of Chief Executive Officer compared with
other employees
Chief
Executive
Officer
2019
£’000
Percentage
change
vs 2018
(note 1)
0%
23.1%
(75.0)%
All employees
percentage
change
vs 2018
(note 2)
19.2%
1.0%
(54)%
Salary
Benefits in kind
Annual bonus
400.0
22.9
100.0
Notes
1. CEO remuneration percentage change compares the remuneration of J Schwan for 2018/19 with that of Matt Armitage for 2017/18.
2. Reflects the change in average pay for Group Head Office employees employed in both 2017/18 and 2018/19. This subset of employees is
considered the most appropriate comparator to the Chief Executive as they have a similar remuneration structure.
Review of past performance
The chart below illustrates the Company’s Total Shareholder Return for the ten years ended 31 July 2019, relative
to the performance of the FTSE SmallCap Index and FTSE AllShare Index. Both the FTSE SmallCap and the FTSE
AllShare represent broad equity indices of which the Company has been a constituent member for the majority of
the period shown and therefore have been selected as comparators for this reason.
600
500
400
300
200
100
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
FTSE SmallCap
FTSE AllShare
Kin + Carta
Source: DataStream from Refinitiv
The table below details the Chief Executive Officer’s single figure of remuneration over the same ten-year period:
2010
Patrick
Martell
2011
Patrick
Martell
2012
Patrick
Martell
2013
Patrick
Martell
2014
Patrick
Martell
2015
Matt
Armitage
2016
Matt
Armitage
2017
Matt
Armitage
2018
Matt
Armitage
725.3
802.0 1,246.6 1,335.0 1,648.4 1,133.5
477.8
478.2
878.6
2019
J
Schwan
582.9
100.0
100.0
100.0
96.3
100.0
69.7
Nil
Nil
100
25.0
Nil
Nil
100.0
93.9
98.5
100.0
Nil
Nil
Nil
N/A
Total
remuneration
£’000
Annual bonus
as a percentage
of maximum
LTIP vesting as
a percentage of
maximum
8 8
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE Relative importance of spend on pay
This table shows overall expenditure on pay, excluding employer’s NICs, for all employees; shareholder distributions
(payments of dividends); and rent and rates, with the percentage change in each. In the prior period, cash capital
expenditure had been used as a significant payment to assist in understanding the relative importance of spend
on pay. Following the disposal of the printing business, cash capital expenditure now primarily consists of office
refurbishment costs, which is not considered material. A new category, rent and rates, has been added to aid the
comparison of overall expenditure on pay.
Overall expenditure on pay on continuing operations
Dividends paid in the period
Rent and rates
Recruitment arrangements for Chris Kutsor (audited)
Chris Kutsor was appointed as Chief Financial Officer on 17 June 2019.
2019
£’000
105,942
2,990
7,718
2018
£’000
Percentage
change
131,100
2,784
5,757
(19.2%)
7.4%
34.1%
In order to facilitate Chris’ recruitment, the Committee agreed a balanced buyout package to compensate him for
incentives forfeited on leaving his previous employer, in line with the approved Remuneration Policy. In determining
the quantum and structure of these awards, the Committee took into account the time horizons, vesting periods and
expected values of the incentives foregone, with the aim of replicating this as closely as possible. Awards made to
Chris consisted of:
• a one-off exceptional award of 200% of salary to be granted in November 2019 under the Company’s LTIP,
with vesting based on three-year relative TSR, growth in Adjusted revenue and growth in Adjusted PBT (targets
detailed on page 92). Vested awards will be subject to a two-year mandatory holding period;
• a total of 119,601 restricted stock units (‘RSUs’) with a face value of US$166,500 (£132,159) granted on 17 June
2019. Awards vest in three equal tranches in March 2020, 2021 and 2022 subject to continued employment
with the Group. This award was facilitated using Listing Rule 9.4.2:
Date of grant
17 June 2019
Form of award
RSU
Number granted
Vesting dates
39,867
39,867
39,867
16 March 2020 (1/3)
15 March 2021 (1/3)
14 March 2022 (1/3)
• 358,803 share options with an exercise price of £1.105 granted on 17 June 2019. Options vest in March 2022
subject to continued employment with the Group. This award was facilitated using Listing Rule 9.4.2:
Date of grant
17 June 2019
Form of award
Share option
Number granted
Exercise price
(£)
358,803
£1.105
Vesting date
14 March 2022
The Committee confirms that the fair value of the buyout package offered to Chris is no higher than his awards
foregone.
In respect of his ongoing package, Chris was appointed on a salary of US$325,000 which is broadly in line with his
predecessor and which will be next subject to review in August 2020. In line with best practice, his employer pension
contribution has been aligned with the majority of employees at 5% of salary. Chris will be eligible to participate in
the Group’s annual bonus and LTIP from 2019/20 onwards on broadly the same basis as his predecessor, save for the
exceptional LTIP grant of 200% of salary in his first year, as detailed above.
8 9
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE DIRECTORS’ REMUNERATION REPORT
CONTINUED
Leaver arrangements for Brad Gray (audited)
We announced on 10 May 2019 that our Chief Financial Officer, Brad Gray, would be stepping down from his role
and the Board with effect from 17 June 2019, continuing in full-time employment with the Group until 31 July 2019
to facilitate an orderly handover.
Reflecting the circumstances of his departure and taking into account both his service as Chief Financial Officer since
August 2014 and his significant role since 1988 in the development of the Company from its legacy print-based
origins to its current focus on the digital transformation market, the Committee accorded Brad good leaver status
for the purposes of his outstanding incentives.
Details of Brad’s leaver arrangements, which are in accordance with the Remuneration Policy approved by
shareholders at the 2017 AGM, are as follows:
Fixed pay
• Brad will continue to receive base salary, pension contributions and benefits for the period to 9 May 2020.
Annual bonus
• Having served with the Group for the entire financial period, Brad will receive an annual bonus in respect of
2018/19 amounting to £62,500, payable in cash. Details of performance against targets set for the period
is discussed in detail on page 85.
• Brad will not be eligible to participate in the 2019/20 annual bonus.
• Brad retains 64,174 shares granted under the DBS in respect of the 2017/18 annual bonus vesting in
November 2020 (as detailed on page 87).
LTIP
• Brad’s outstanding LTIP awards have been treated in line with the default good leaver position in the
Remuneration Policy.
• Awards have been reduced pro rata to reflect the proportion of the performance period actually served, rounded
up to the next complete financial period, as follows:
Date of grant
16 Nov 2016
7 Dec 2017
11 Nov 2018
Prorating
percentage
100.0%
66.7%
33.3%
Original
awards
161,529
261,528
256,305
Prorated
awards
161,529
174,352
85,435
• The performance conditions for each award will be measured at the end of each respective performance period, and
any awards deemed to vest will be released at the normal vesting date. Details of the November 2016 LTIP, which was
tested for performance at the period end and which will lapse in full in November 2019, are included on page 86.
• Any shares vesting in respect of the 2017 and 2018 awards will be subject to an additional two-year holding period.
Exit payments made in the period (audited)
No exit payments were made in the period.
Payments to past Directors (audited)
Details of leaver arrangements for Matt Armitage, former Chief Executive Office, were included in last year’s Annual
Report on Remuneration. Matt remained in employment with the Group as a special adviser until 31 July 2019
during which time he received base salary, pension contributions and benefits amounting to £478,600.
In November 2018, Matt was granted awards under the DBS in respect of the annual bonus payable to him for
2017/18 in excess of 50% of salary. There are no further performance conditions associated with these awards and
shares will be released after a two-year deferral period.
Matt Armitage
Date of grant
Shares over
which awards
granted
Value of shares
awarded (£)*
Release date
5 Nov 2018
111,608
105,470 5 Nov 2020
* Face value is based on a share price of 94.5 pence (the market value at the time of grant).
9 0
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE Implementation of Executive Director Remuneration Policy for 2019/20
Basic salary
In respect of the Chief Executive Officer, J Schwan, the Committee determined that his annual salary would remain
at £400,000 for 2019/20.
Chris Kutsor was appointed as Chief Financial Officer on an annual salary of US$325,000. He will next be eligible for
a salary review in August 2020.
Salary levels are as follows:
J Schwan
Chris Kutsor
From 1 August 2019
Chief Executive Officer
Chief Financial Officer
From 4 August
2018
(or appointment)
£400,000
US$325,000
% increase
0%
n/a
The average increase across the Company for 2019/20 is 2.9%.
Pension and benefits
No changes in pension contribution rates or benefits provision to the Executive Directors are to be applied during
the period.
J Schwan and Chris Kutsor receive pension contributions amounting to 15% and 5% of base salary respectively.
Annual bonus
The annual bonus for the 2019/20 financial year will operate on broadly the same basis as in 2018/19. Bonus
opportunities for Executive Directors remain at 100% of salary, with any amount earned over 50% of salary deferred
in shares for two years and subject to malus provisions in the event of material misstatement. 75% of the bonus
opportunity will be based on Adjusted PBT performance (measured before strategic investments), with the remaining
25% based on the achievement of key strategic/personal objectives aligned with the business’ strategy and priorities
that have been communicated to shareholders.
A summary of performance measures and weightings is included in the table below:
Measure
Adjusted PBT
Strategic/personal objectives
Weighting
75%
25%
In the event of any material acquisition or divestment the Committee would adjust the PBT targets for the
acquisition/divestment. The Board considers the targets for the annual bonus measures to be commercially sensitive
and therefore will not be disclosing these objectives prospectively. However, it is intended that retrospective
disclosure, including any such adjustment of targets, will be provided in next year’s Directors’ Remuneration Report.
In setting Adjusted PBT targets for the year, the Committee reviewed a range of internal and external reference
points to ensure that targets are appropriately stretching yet achievable.
9 1
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE DIRECTORS’ REMUNERATION REPORT
CONTINUED
Long-term incentives
LTIP awards to be made to Executive Directors in late 2019 will be 100% of salary in respect of J Schwan and 200%
of salary in respect of Chris Kutsor. Awards will vest subject to performance over a three-year period with vested
shares subject to a two-year holding period.
Reflecting a number of evolutionary changes, the rationale for which is outlined in the letter from the Chair of the
Remuneration Committee, vesting of these awards will be based 50% on Relative TSR, 25% on growth in net revenue
and 25% on growth in Adjusted PBT, with vesting underpinned by Committee discretion. For any shares to vest,
the Committee must be satisfied with the underlying performance of the business. In making this assessment the
Committee will take into account factors such as the strength of the balance sheet, quality of earnings, etc.
A summary of performance targets for the forthcoming grant are included in the table below:
Measure
Weighting
Targets
Performance measurement period
25%
50%
1 August 2019 to 31 July 2022 (three-
month averaging)
Growth in net
revenue
TSR Relative to the
FTSE AllShare
0% vesting below median performance
25% vesting for performance in line with
median
100% vesting for upper quartile
performance or greater
Straight-line vesting between these points
0% vesting below 6%
25% vesting for 6%
100% vesting for 12% or more
Straight-line vesting between these points
0% vesting below 4%
25% vesting for 4%
100% vesting for 10% or more
Straight-line vesting between these points
In the event of any material acquisition or divestment the Committee would adjust the revenue and PBT targets
to ensure only out performance of the acquisition/divestment is rewarded. Vesting of awards is subject to overall
Committee discretion.
Growth in
Adjusted
PBT
Adjusted PBT in 2021/22 as
compared to 2018/19
Net revenue in 2021/22
as compared to 2018/19
25%
The growth in Adjusted PBT targets for the 2019/20 LTIP awards are lower than the growth in net revenue targets
reflecting the Company’s strategy over the next few years of further targeted investment in the Group in order to
drive long-term growth.
Implementation of Non-Executive Director remuneration policy for 2019/20
Base fee levels for the Chairman and Non-Executive Directors are currently £130,000 p.a. and £42,500 p.a.
respectively, with an additional fee for the Audit and Remuneration Committee chairs of £7,500 p.a. and a fee
for acting as the Senior Independent Director of £5,000 p.a. The Chairman, Richard Stillwell continues to forego
£20,000 p.a. of his fee, which the Company donates, together with a matching sum from the Company, to registered
charities. John Kerr, Non-Executive Chairman Designate with effect from 22 July 2019, receives a fee of £130,000
p.a. John Kerr has elected to forego £10,000 p.a. of his fee, which the Company donates, together with a matching
sum from the Company, to registered charities.
Share ownership guidelines and Directors’ interests in the share capital of the
Company (audited)
Shareholding guidelines are in place that require Executive Directors to acquire a holding equivalent to 200% of
basic salary for the Chief Executive Officer and 150% of basic salary for the Chief Financial Officer. These levels are
considered appropriate to ensure that there is robust long-term alignment achieved between Executive Directors
and shareholders. The net of tax number of deferred bonus shares or vested shares under the Company’s LTIP
will normally be required to be retained until the guideline is met. Directors’ share dealings must be conducted in
accordance with the Company’s Share Dealing Policy.
9 2
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE Interests of Directors and their connected persons in 10 pence ordinary shares (fully paid) of the Company at 31 July
2019 were as follows:
Executive (note 2)
J Schwan
Chris Kutsor (note 3)
Non-Executive
David Bell
Mike Butterworth
John Kerr
Michele Maher
Nigel Pocklington
Helen Stevenson
Richard Stillwell
Unvested share
options and
restricted stock
units
Unvested LTIP
awards (subject
to performance
conditions)
Unvested
deferred bonus
share awards
Beneficial
holding
31 July 2019
Beneficial
holding
4 August 2018
Expressed as
a percentage
of annual basic
salary (note 1)
–
478,404
915,457
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7,432,768
–
7,432,768
n/a
1,933%
0%
84,486
77,642
–
–
10,000
37,166
100,000
24,486
26,000
n/a
n/a
10,000
22,000
90,000
–
–
–
–
–
–
–
Notes
1. Calculated by reference to: the number of unvested deferred bonus share awards added to beneficial holdings; the mid-market closing price of
the Company’s ordinary shares on 31 July 2019 (104.0 pence); and the Director’s annual rate of basic salary.
2. Brad Gray’s holding on 17 June 2019, the date he stepped down as a Director, was 62% of basic salary.
3. Chris Kutsor was granted options over 358,803 ordinary shares in the Company with an exercise price of £1.105 per share. He was granted
119,601 restricted stock units. Details of these grants are disclosed on page 89.
From 31 July 2019 to 1 October 2019, there were no changes to the above stated holdings.
Directors’ outstanding share incentive awards (audited)
Details of the share options held by Directors who served during the period are shown below. All options were
granted under the LTIP for Nil consideration.
Market
price at date
of award/
exercise
price for
options (p)
Date of
award
12 Nov 15
16 Nov 16
7 Dec 17
19 Nov 18
5 Nov 18
184.70p
128.15p
79.15p
97.54p
94.50p
Balance at
3 August
2018
155,657
161,529
261,528
–
–
578,714
–
–
–
256,305
64,174
320,479
Type of
award
(Note 1)
Brad Gray
LTIP
LTIP
LTIP
LTIP
DBS
J Schwan
LTIP
LTIP
7 Dec 17
19 Nov 18
79.15p
97.54p
505,369
–
505,369
–
410,088
410,088
Chris Kutsor
RSU
RSU
RSU
OPT
17 June 19
17 June 19
17 June 19
17 June 19
110.50p
110.50p
110.50p
110.50p
–
–
–
–
–
39,867
39,867
39,867
358,803
478,404
Awarded
during year
Exercised
during year
Lapsed
during year
(Note 2)
Balance
at 31 July
2019
(Note 3)
Vesting date
Expiry date
–
–
–
–
–
–
–
–
–
–
–
–
–
–
155,657
–
87,176
170,870
–
413,703
– 12 Nov 18 12 Nov 25
161,529 16 Nov 19 16 Nov 26
7 Dec 27
174,352 7 Dec 20
85,435 19 Nov 21 19 Nov 28
–
64,174 5 Nov 20
485,490
–
–
–
–
–
–
–
–
505,369 7 Dec 20
7 Dec 27
410,088 19 Nov 21 19 Nov 28
915,457
39,867 16 Mar 20
39,867 15 Mar 21
39,867 14 Mar 22
–
–
–
358,803 14 Mar 22 17 June 29
478,404
Notes
1.
LTIP = Long Term Incentive Plan, DBS = Deferred Bonus Scheme, RSU = Restricted Share Unit (Chris Kutsor buyout awards only), OPT = Share
Options (Chris Kutsor buyout awards only).
2. Brad Gray’s outstanding LTIP awards were prorated to reflect the proportion of the performance period served, rounded up to the next complete
financial period; the remainder lapsed with effect from 9 May 2019. See page 90 for further details.
3. Details of the November 2016 LTIP, which was tested for performance at the period end and will lapse in full in November 2019, is included on page 86.
9 3
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE DIRECTORS’ REMUNERATION REPORT
CONTINUED
Details of the qualifying performance conditions in relation to outstanding LTIP awards are summarised below:
16 November 2016 award
Performance measurement
period
Weighting % of award
100% vesting
Between 25% and 100%
vesting
Underpin
7 December 2017 award
Performance measurement
period
Weighting % of award
100% vesting
Between 25% and 100%
vesting
Underpin
11 November 2018 award
Performance measurement
period
Weighting % of award
100% vesting
Between 25% and 100%
vesting
Underpin
TSR relative to constituents of the
FTSE AllShare Media Index
(excl. FTSE100 companies)
29 July 2016 to 2 August
2019
75% (increased from 50%,
see page 86)
Upper quartile or above
Between median and upper
quartile
Committee discretion
Absolute TSR (share price plus
rolled up dividends)
3-month average to 31 July
2020
70%
170p or above
Between 110p and 170p
Committee discretion
Absolute TSR (share price plus
rolled up dividends)
Absolute Adjusted basic EPS
EPS for 2018/19
financial period
25%
20.0p or more
From 18.5p to 20.0p
Operating profit from Strategic
Marketing as compared to total
Group operating profit
2018/19 financial period
0% (reduced from 25%,
see page 86)
85% or more
Between 75% and 85%
Committee discretion
Committee discretion
Growth in Adjusted operating profit
from Strategic Marketing
2019/20 as compared to
2016/17
30%
14% or more
Between 6% and 14%
Committee discretion
Growth in Adjusted revenue
Growth in Adjusted PBT
3-month average to 31 July
2021
70%
175p or above
Between 125p and 175p
2020/21 as compared to
2017/18
15%
11% or more
Between 6% and 11%
2020/21 as compared to
2017/18
15%
14% or more
Between 6% and 14%
Committee discretion
Committee discretion
Committee discretion
Note: In the event of any material acquisition or divestment the Committee would adjust the targets to ensure only out performance of the
acquisition/divestment is rewarded. Vesting of awards is subject to overall Committee discretion.
The market price of Kin and Carta plc ordinary shares of 10 pence each at 31 July 2019 was 104.0 pence and the
range during the financial period 2018/19 was 83.8 pence to 111.5 pence.
Share options – Sharesave Scheme (audited)
There are no outstanding Sharesave options in respect of Directors.
Dilution
Under the ESOS 2001, LTIP 2010 and the Sharesave Scheme, awards of options over no more than an aggregate
10% of the Company’s issued share capital may be granted over new issue shares in any rolling ten-year period (with
awards made under any other share plans also being counted).
As at 31 July 2019, excluding lapsed options and options exercised and satisfied from utilising existing issued shares,
options over 10,037,110 shares (6.5% of the Company’s issued share capital) have been exercised through new
shares or remain outstanding under all share plans and so count towards this limit.
Approved by the Board and signed on its behalf by
Nigel Pocklington
C H A I R O F T H E R E M U N E R AT I O N C O M M I T T E E
1 O C T O B E R 2 0 1 9
94
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE DIRECTORS’ REPORT
The Directors present their Directors’ Report and
the audited consolidated financial statements for the
period ended 31 July 2019. The Corporate Governance
Report set out on pages 58 to 63 also forms part of this
report.
There have been no significant events since the balance
sheet date. An indication of likely future developments
in the business of the Company and details of research
and development activities are included in the Strategic
Report.
Information about the use of financial instruments
by the Company and its subsidiaries is given in
note 29 to the financial statements.
STRATEGIC REPORT
The Strategic Report can be found on pages 8 to 55.
The Strategic Report includes the business model, key
performance indicators, the principal risks affecting
the Connective and disclosures regarding greenhouse
gas emissions.
Certain sections of this Annual Report contain forward-
looking statements with respect to the strategy, financial
condition, results, operations and businesses of the
Group or markets in which the Group operates. These
statements involve risk and uncertainty because they
depend on circumstances that occur in the future and
relate to specific events, not all of which are within
the Group’s control. Although the Group believes that
the expectations reflected in such forward-looking
statements are reasonable, there are a number of factors
that could cause actual results or developments to differ
materially from those expressed or implied by these
forward-looking statements. The Group undertakes
no obligation to update any forward-looking statement.
Nothing in the Annual Report should be construed as
a profit forecast or an invitation to deal in the ordinary
shares of Kin and Carta plc.
DIRECTORS AND THEIR
SHARE INTERESTS
The present membership of the Board, and those who
have served on the Board during the financial year, is
set out on pages 64 and 65.
The Directors’ interests in ordinary shares of the
Company are set out in the table on page 93 within
the Directors’ Remuneration Report.
RESULTS AND DIVIDENDS
The Group’s statutory profit before taxation for the
period amounted to £1.8 million (2018: statutory
loss of £31.2 million). The Directors propose a final
dividend of 1.30 pence for each ordinary share payable
on 17 December 2019 to holders on the register as at
22 November 2019. If approved, the final dividend will
make total dividends for the year of 1.95 pence per
ordinary share.
EMPLOYMENT POLICIES, EQUAL
OPPORTUNITIES, EMPLOYEE
COMMUNICATION AND DIVERSITY
The Group is committed to providing equal
opportunities with regard to employment, free from
discrimination and harassment and in a healthy and
safe working environment. Details of how we deliver
on these commitments to our employees are provided
in the Our Positive Impact report on pages 42 to 49.
ENVIRONMENT
Information relating to the environment and greenhouse
gas emissions is set out in the Our Positive Impact report
on pages 42 to 49.
HUMAN RIGHTS
Information relating to human rights is set out in the
Our Positive Impact report on pages 42 to 49.
GOING CONCERN
The Group’s business activities, together with the factors
likely to affect its future development, performance and
position are set out in the Strategic Report.
The financial position of the Group, its cash flows,
liquidity position and borrowing facilities are described
in the Financial Review. In addition, note 30 to the
financial statements includes the Group’s objectives,
policies and processes for managing its interest rate
risk, foreign exchange risk, credit risk, liquidity risk
and capital risk. The Strategic Report is to be found
on pages 8 to 55.
During the period, the Group successfully negotiated
a new revolving credit facility of £85 million which
will expire on 30 November 2022, on terms broadly in
line with the previous agreement. The banking group
consists of HSBC Bank plc, Bank of Ireland and Fifth
Third Bank.
9 5
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE DIRECTORS’ REPORT
CONTINUED
As referenced in note 23 to the financial statements,
during the period the Group met its day-to-day working
capital requirements through overdraft facilities which
were part of overall funding facilities.
At the beginning of the period, the Group had an
overdraft facility of £15 million as part of the previous
revolving credit facility. This was superseded in the
period when the Group entered into the current
revolving credit facility of £85 million. A new overdraft
facility of £7.5 million was negotiated as part of the
current revolving credit facility.
The current economic conditions create uncertainty,
particularly over the level of demand for the Group’s
services, but the Group’s forecasts and projections,
taking account of reasonably possible changes in
trading performance, show that the Group should be
able to operate within the level of its bank facility.
After making enquiries, the Directors consider that
the Group has adequate resources and borrowing
facilities to continue in operational existence for the
foreseeable future. Consequently, they have continued
to adopt the going concern basis in preparing the
financial statements.
VIABILITY STATEMENT
In accordance with provision C.2.2 of the UK Corporate
Governance Code, the Directors have assessed the
Company’s viability over a three-year period, having
taken account of the Company’s current position
and principal risks. Given the fast-changing nature of
many of the markets in which the Company operates,
a three-year assessment period, which is in alignment
with our medium-term planning horizon, was selected
to provide management and the Board sufficient
visibility of the future. As a result of the new revolving
credit facility agreement entered into during the period,
which expires in November 2022, the Company has
access to a committed credit facility throughout the
three-year forecast period.
The analysis was performed by preparing a high-
level, integrated financial forecast over the three-year
period and running a number of potentially stressful,
yet plausible, scenarios against this central scenario,
starting from the end of the 2018/19 financial period.
The related scenarios reflected the estimated financial
impact of adverse events associated with the principal
risks outlined in the Principal Risks and Uncertainties
Report from pages 50 to 55, and included mitigating
actions where these would be under the Company’s
control.
The event reflected in the stress scenarios with the
greatest financial impact comprised a general reduction
of up to 15% in net revenue, relative to the central
scenario, across all the businesses due to challenging or
uncertain economic conditions, including those arising
because of Brexit. In addition to the stress scenario
outlined above, other scenarios were also modelled,
including the loss of a significant client, an increase
of five days in the average time taken by customers
to settle trading balances due to the Company, and
a weakening of the Pound Sterling against US Dollar
to 1:1.35.
In addition to an assessment of the impact that the
scenarios could have on the Company’s debt leverage
ratio and absolute level of net debt if they were to
occur individually, the impact of a combination of the
stress scenarios occurring simultaneously was also
modelled to test the results of a particularly high-stress,
combined case. To support the final conclusion on
viability, the assessment also took account of potential
mitigations available to the business in the event of the
combined scenario.
Based on this analysis, the Directors have a reasonable
expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due up
to July 2022.
In making this statement, the Directors have also made
key assumptions which they consider to be reasonable,
for example on sales volumes and pricing, central bank
interest rates and currency exchange rates.
SHARE CAPITAL
As at 31 July 2019, the Company had 153,426,476
ordinary shares in issue with a nominal value of 10p
each, representing 100% of the total issued share
capital. The Company holds 90,637 of its ordinary
shares in Treasury. Therefore, the total number of
voting rights in the Company is 153,335,839.
At the 2018 AGM, shareholders approved an authority
for the Company to make market purchases of its own
shares up to a maximum of 15,333,583 shares. This
authority expires at the conclusion of the forthcoming
AGM and approval will be sought from shareholders for
a similar authority to be given for a further year. The
Company did not purchase any of its own shares during
the year (2018: nil).
Between 1 August 2019 and 1 October 2019, no
ordinary shares were allotted or purchased by the
Company, nor has the Company reissued shares held in
Treasury.
9 6
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE DIRECTORS’ AND OFFICERS’
LIABILITY INSURANCE AND
DIRECTORS’ INDEMNITIES
The Company maintains Directors’ and Officers’ liability
insurance which gives appropriate cover for legal
action brought against its Directors. The Company has
also granted indemnities to each of its Directors (on
identical terms) who served during the period, to the
extent permitted by law and the Company’s articles of
association, in respect of liabilities incurred by virtue
of their office. Qualifying third party provisions for
the benefit of its Directors (as defined by Section 234
of the Companies Act 2006) were in force during the
period ended 31 July 2019 and continue to be in force
at the date of this Report.
DIRECTORS’ CONFLICT
OF INTEREST
In accordance with the provisions of Section 175 of the
Companies Act 2006, the Company has procedures in
place to deal with the situation where a Director has
a conflict of interest and the Nomination Committee
regularly reviews conflict authorisation. No conflicts
of interests were identified during the period.
Directors do not take part in discussions on matters
in which they have a potential conflict, and they may
be requested to leave a meeting at which a matter in
which they may be conflicted is to be discussed.
CHANGE OF CONTROL
During the period, the Group entered into a new
revolving credit facility of £85 million which falls due
for renewal on 30 November 2022. The terms of the
revolving credit facilities stipulate that consent of the
lenders to continue the overall facility is required,
should there be a change of control of the Company.
MAJOR INTERESTS IN SHARES
The Company had been notified, in accordance with
chapter 5 of the Disclosure Guidance and Transparency
Rules, of the holdings of voting rights in its shares
set out in the table below. See also the Directors’
shareholdings on page 93.
As at 31 July 2019
Percentage of
issued share
capital carrying
voting rights*
4.84%
6.15%
4.55%
Number of
voting rights
7,432,590
9,432,576
6,975,742
FIL Limited
Merian Global Investors
(UK) Limited
Standard Life Aberdeen plc
* Percentage based on ordinary shares in issue, excluding treasury
shares, as at 31 July 2019.
Between 1 August 2019 and 1 October 2019, the
Company did not receive any notification of interests
pursuant to chapter 5 of the Disclosure Guidance and
Transparency Rules.
AUDITOR
Each of the Directors of the Company as at 1 October
2019 has confirmed that:
• so far as the Director is aware, there is no relevant
audit information of which the Company’s auditor is
unaware; and
•
the Director has taken all the steps that he or she
ought to have taken as a Director to make himself/
herself aware of any relevant audit information and
to establish that the Company’s auditor is aware of
that information.
This confirmation is given and should be interpreted in
accordance with the provisions of Section 418 of the
Companies Act 2006.
POLITICAL DONATIONS
The Company made no political donations during the
period (2018: £Nil) and the Board has no intention to
seek shareholders’ approval to permit the Board to
make political donations.
9 7
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE DIRECTORS’ REPORT
CONTINUED
ADDITIONAL INFORMATION
The Company’s share capital consists of ordinary
shares, as set out in note 31 to the financial
statements. The shares carry no rights to fixed income.
All members who hold ordinary shares are entitled to
attend and vote at the AGM. On a show of hands at a
general meeting every member present in person and
every duly appointed proxy shall have one vote and
on a poll, every member present in person or by proxy
shall have one vote for every ordinary share held or
represented. The Notice of Meeting specifies deadlines
for exercising voting rights and each share carries the
right to one vote at general meetings. All shares are
fully paid. There are no specific restrictions on the size
of a shareholding nor on the transfer of shares. The
Company is not aware of any agreements between
shareholders that may result in restrictions on the
transfer of securities and voting rights.
Details of employee share schemes are set out in note
36. Shares held by the Employee Benefit Trust abstain
from voting.
The appointment and replacement of Directors of the
Company is governed by the Company’s Articles of
Association, the UK Corporate Governance Code, the
Companies Act and related legislation. The Company’s
articles of association may only be amended by a
special resolution of shareholders at a general meeting.
Directors are elected or re-elected by ordinary resolution
at a general meeting of shareholders. The Board may
appoint a Director but anyone so appointed must
be elected by ordinary resolution at the next general
meeting. Under the articles of association, Directors
retire and may offer themselves for re-election at a
general meeting at least every three years.
ANNUAL GENERAL MEETING
The thirty-eighth AGM of the Company will be held on
Thursday, 5 December 2019. The Notice of Meeting is
included in a separate document sent to shareholders.
CORPORATE GOVERNANCE
The corporate governance statement as required
by the UK Financial Conduct Authority’s Disclosure
Guidance and Transparency Rules (DTR 7.2) comprises
the Additional Information section of the Directors’
Report above and the Corporate Governance Report
on pages 58 to 63 of this Annual Report.
FCA LISTING RULES – COMPLIANCE WITH LISTING RULE 9.8.4R
The following disclosures required by LR 9.8.4R are contained in the Annual Report as set out below and
are incorporated into the Directors’ Report:
Listing Rule requirement
Details of any long-term incentive schemes as
required by LR 9.4.3R.
Details of any arrangements under which a Director of the Company has
waived or agreed to waive any emoluments from the Company or any
subsidiary undertakings where a Director has agreed to waive future
emoluments, details of such waiver together with those relative to emoluments
which were waived during the period under review.
Details required in the case of any allotment for cash of equity securities made
during the period under review otherwise than to the holders of the Company’s
equity shares in proportion to their holdings of such equity shares and which
has not been specifically authorised by the Company’s shareholders.
The information required under the paragraph (LR 9.8.4 paragraph 7) must be
given for any unlimited major subsidiary undertaking of the Company.
Location in Annual Report
Directors’ Remuneration Report on
pages 75 to 94
No such waivers
No such share allotments
By order of the Board
Daniel Fattal
C O M PA N Y S E C R E TA R Y
1 O C T O B E R 2 0 1 9
9 8
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE STATEMENT OF DIRECTORS’
RESPONSIBILITIES
DIRECTORS’ CONFIRMATIONS
The Directors consider that the Annual Report and
Accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary
for shareholders to assess the Group and Company’s
position and performance, business model and
strategy.
Each of the Directors, whose names and functions are
listed in the Corporate Governance Report confirm
that, to the best of their knowledge:
•
•
•
the Company financial statements, which have
been prepared in accordance with United Kingdom
Generally Accepted Accounting Practice (United
Kingdom Accounting Standards, comprising
FRS 101 ‘Reduced Disclosure Framework’, and
applicable law), give a true and fair view of the
assets, liabilities, financial position and profit of the
Company;
the Group financial statements, which have been
prepared in accordance with IFRSs as adopted by
the European Union, give a true and fair view of the
assets, liabilities, financial position and profit of the
Group; and
the Directors’ Report includes a fair review of the
development and performance of the business and
the position of the Group and Company, together
with a description of the principal risks and
uncertainties that it faces.
This responsibility statement was approved by the
Board of Directors on 1 October 2019 and is signed
on its behalf by
J Schwan
C H I E F E X E C U T I V E O F F I C E R
1 O C T O B E R 2 0 1 9
Chris Kutsor
C H I E F F I N A N C I A L O F F I C E R
1 O C T O B E R 2 0 1 9
The Directors are responsible for preparing the Annual
Report and the financial statements in accordance with
applicable law and regulation.
Company law requires the Directors to prepare
financial statements for each financial 362-day
period. Under that law the Directors have prepared
the Group financial statements in accordance with
International Financial Reporting Standards (‘IFRSs’) as
adopted by the European Union and Company financial
statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United
Kingdom Accounting Standards, comprising FRS 101
‘Reduced Disclosure Framework’, and applicable law).
Under company law the Directors must not approve
the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of
the Group and Company and of the profit or loss of the
Group and Company for that period. In preparing the
financial statements, the Directors are required to:
• select suitable accounting policies and then apply
them consistently;
• state whether applicable IFRSs as adopted by
the European Union have been followed for the
Group financial statements and United Kingdom
Accounting Standards, comprising FRS 101,
have been followed for the Company financial
statements, subject to any material departures
disclosed and explained in the financial statements;
• make judgements and accounting estimates that are
reasonable and prudent; and
• prepare the financial statements on the going
concern basis unless it is inappropriate to presume
that the Group and Company will continue in
business.
The Directors are also responsible for safeguarding the
assets of the Group and Company and hence for taking
reasonable steps for the prevention and detection of
fraud and other irregularities.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Group and Company’s transactions and
disclose with reasonable accuracy at any time the
financial position of the Group and Company and
enable them to ensure that the financial statements
and the Directors’ Remuneration Report comply with
the Companies Act 2006 and, as regards the Group
financial statements, Article 4 of the IAS Regulation.
The Directors are responsible for the maintenance
and integrity of the Company’s website. Legislation in
the United Kingdom governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
9 9
Kin + Carta Annual Report and Accounts 2019CORPORATE GOVERNANCE Consolidated Statement of
Comprehensive Income
Report to the Members of
Kin and Carta plc
Consolidated Income
Statement
S Independent Auditors’
E
R
U
G
I
F
R
U
O
Company Statement of
Changes in Equity
Company Balance Sheet
Notes to the Consolidated
Financial Statements
Consolidated Statement of
Changes in Equity
102
112
113
114
117
163
164
Consolidated Statement of Cash
116
Flows
Consolidated Balance Sheet 115
Notes to the Company Financial
165
Statements
Shareholder Information
173
Financial Calendar
174
1 0 0
Kin + Carta Annual Report and Accounts 2019
Kin + Carta Annual Report and Accounts 2019
1 0 1
INDEPENDENT AUDITORS’ REPORT TO THE
MEMBERS OF KIN AND CARTA PLC
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Opinion
In our opinion:
• Kin and Carta plc’s Group financial statements and Company financial statements (the ‘financial statements’) give
a true and fair view of the state of the Group’s and of the Company’s affairs as at 31 July 2019 and of the Group’s
profit and cash flows for the 362-day period (the ‘period’) then ended;
•
•
•
the Group financial statements have been properly prepared in accordance with International Financial Reporting
Standards (‘IFRSs’) as adopted by the European Union;
the Company financial statements have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 ‘Reduced Disclosure
Framework’, and applicable law); and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006
and, as regards the Group financial statements, Article 4 of the IAS Regulation.
We have audited the financial statements, included within the Annual Report and Accounts (the ‘Annual Report’),
which comprise: the Consolidated and Company Balance Sheets as at 31 July 2019; the Consolidated Income
Statement and Consolidated Statement of Comprehensive Income, the Consolidated Statement of Cash Flows and
the Consolidated and Company Statements of Changes in Equity for the 362-day period then ended; and the notes
to the financial statements, which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (‘ISAs (UK)’) and applicable
law. Our responsibilities under ISAs (UK) are further described in the “Auditors’ responsibilities for the audit of the
financial statements” section of our report. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit
of the financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest
entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard
were not provided to the Group or the Company.
Other than those disclosed in the Directors’ Report, we have provided no non-audit services to the Group or the
Company in the period from 4 August 2018 to 31 July 2019.
1 0 2
Kin + Carta Annual Report and Accounts 2019OUR FIGURES Our audit approach
Overview
• Overall Group materiality: £889,000 (2018: £915,000), based on 5% of Adjusted profit
before tax.
Materiality
• Overall Company materiality: £845,000 (2018: £870,000), based on 1% of net assets,
Audit scope
Key
audit
matters
capped at 95% of the Group overall materiality.
• The Kin and Carta plc Group consists of entities in the UK and USA, in addition to
smaller operations in Asia.
• We performed a full scope audit over the significant trading entities of the Group, which
include: Amaze Limited, Realise Limited, Incite Marketing Planning Limited, The App
Business Limited and Edit Agency Limited (the ‘UK trading companies’) and Solstice
Consulting LLC in Chicago together with the parent company Kin and Carta plc.
• Our audit scoping gave us coverage of 77% of adjusted profit before tax, with 82%
coverage of revenue.
• Carrying value of goodwill and other intangible assets (Group).
• Valuation of retirement benefit obligations (Group and Company).
• Revenue recognition (Group).
• Classification of Adjusting Items (Group).
• Carrying value of investments and recoverability of intercompany loans and
intercompany debtors (Company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the
financial statements.
Capability of the audit in detecting irregularities, including fraud
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with
laws and regulations related to GDPR, changes to sentencing tariffs and calculations and the regular updates to
legislation around competition, bribery, modern slavery, money laundering and consumer protection. We considered
the extent to which non-compliance might have a material effect on the financial statements. We also considered those
laws and regulations that have a direct impact on the preparation of the financial statements such as the Companies
Act 2006 and, the Listing Rules and tax legislation. We evaluated management’s incentives and opportunities for
fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that
the principal risks were related to posting inappropriate journal entries to improve results, and management bias in
accounting estimates. Management are incentivised on Adjusted profit-based measures. Audit procedures performed
by the Group engagement team on both the Group and component financial information included:
•
reviewing the financial statements disclosures and agreeing to underlying supporting documentation;
• enquiries of management and the in-house legal team; and
•
testing journal entries and evaluating whether there was evidence of management bias over accounting estimates
that represented a risk of material misstatement due to fraud.
There are inherent limitations in the audit procedures described above and the further removed non-compliance
with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we
would become aware of it. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk
of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or
intentional misrepresentations, or through collusion.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the
audit of the financial statements of the current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect
on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement
team. These matters, and any comments we make on the results of our procedures thereon, were addressed in
the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters. This is not a complete list of all risks identified by our audit.
1 0 3
Kin + Carta Annual Report and Accounts 2019OUR FIGURES INDEPENDENT AUDITORS’ REPORT TO THE
MEMBERS OF KIN AND CARTA PLC CONTINUED
Key audit matter
Carrying value of goodwill and
other intangible assets
Group
Refer to pages 119 to 129 (Significant Accounting
Policies) and page 141 (Notes to the Financial
Statements – note 17).
The Group operates in competitive markets, where
customers’ expenditure on marketing, communications
and innovation is subject to budgetary constraints and
market pressures. As such the business is subject to
the risk of loss of key customers, or decline in demand.
Therefore there is a risk of impairment of the goodwill and
intangible assets recognised in the Consolidated Balance
Sheet. At the year end, the Group had goodwill of £85.7
million and other intangible assets of £25.6 million.
Management considers each legal entity to be
a cash-generating unit and has performed an
impairment assessment using discounted cash flows
to ensure that the carrying value of the consolidated
goodwill and other intangibles is supported by the
recoverable amounts derived from expected future
cash flows.
We focused on this area as the determination
of whether an impairment charge was necessary
involved significant estimates about the future
results of each entity.
How our audit addressed the key audit matter
We considered the carrying value of the Group’s
intangible assets compared to its market capitalisation
which gives an indication of the overall value of the
Group. The market capitalisation at year end was in
excess of the carrying value of assets.
We evaluated the reasonableness of management’s future
cash flow forecasts and tested the mathematical accuracy
of the underlying calculations.
We agreed management’s forecast to the latest Board
approved strategic plan. We also compared past results
to those budgeted to assess the quality of management’s
forecasting. Based on this evaluation, we considered
management’s ability to forecast was appropriate to
support the basis upon which the future cash flows
have been prepared.
The key assumptions in the calculations were growth in
revenue and EBITDA. In assessing these assumptions we
considered external market growth forecasts. We considered
the forecasts had been prepared on a supportable basis.
We also tested:
• management’s assumption in respect of the long-term
growth rates in the forecasts by comparing them to
long-term average growth rates of the UK and US
economy; and
•
the discount rates applied, by assessing the cost of
capital for the Company and comparable organisations,
and obtaining advice from valuations specialists.
We were satisfied the assumptions used in the
assessment of impairment of goodwill and other
intangibles were appropriate.
We also performed sensitivity analysis in respect of key
assumptions to determine at what level changes in these
would eliminate headroom in the impairment test. There
were no changes in key assumptions that were considered
reasonably possible which would eliminate headroom.
As a result of the challenges faced by Hive previously,
and the ongoing uncertainty in the market in which it
operates, management IS continuing to disclose that there
is a reasonably possible risk of goodwill impairment in
Hive resulting from the loss of a major customer. While
we consider this risk to have reduced in the current year,
given the history of the division and its reliance on a small
number of key customers, we consider management’s
approach to the disclosure to be appropriate. In addition,
management has continued to disclose that the long-
term impact of GDPR continues to be uncertain and has
potential to negatively impact Edit.
1 0 4
Kin + Carta Annual Report and Accounts 2019OUR FIGURES
How our audit addressed the key audit matter
Given the complexity involved in the valuation of
retirement benefit obligations and the size of the assets
and liabilities, we engaged experts to assist us in the audit
of this matter.
We reviewed the assumptions and methodologies used
by the Group’s actuary, XPS Pensions Group, to value
the pensions scheme liabilities as at 31 July 2019 in
accordance with IAS 19 to ensure these were appropriate
given the composition of the scheme.
It was concluded that overall the assumptions for the
valuation of the liabilities are within our indicative ranges
for the duration of the scheme, although towards the
more optimistic end of those ranges.
Key audit matter
Valuation of retirement benefit obligations
Group and Company
Refer to pages 119 to 129 (Significant Accounting
Policies) and page 148 (Notes to the Financial
Statements – note 28).
Gross pension assets as at 31 July 2019 are £386.9
million (3 August 2018: £353.4 million) and gross
pension liabilities are £379.2 million (3 August 2018:
£351.6 million) resulting in a net surplus of £6.7 million
(3 August 2018: £1.9 million).
The Group’s actuary, XPS Pensions Group, has
performed a valuation of the pension scheme assets
and liabilities as at 31 July 2019 in accordance with
IAS 19. This includes consideration of the estimated
potential impact of Guaranteed Minimum Pensions
(‘GMP’) equalisation rules.
We focused on this area as the valuation of retirement
benefit obligations involved significant judgements and
assumptions.
1 0 5
Kin + Carta Annual Report and Accounts 2019OUR FIGURES INDEPENDENT AUDITORS’ REPORT TO THE
MEMBERS OF KIN AND CARTA PLC CONTINUED
Key audit matter
Revenue from contracts with customers
Group
Refer to pages 119 to 129 (Significant Accounting
Policies) and page 130 (Notes to the Financial
Statements – note 3).
Revenue is recognised in accordance with the stage
of completion of the contract activity. The stage of
completion is determined relative to the total number
of hours expected to complete the work or provision
of services, or to the project milestones achieved as at
year end to the contracted project milestones. Where
recorded revenue exceeds amounts invoiced to clients,
the excess is classified as a contract asset and where
recorded revenue is less than amounts invoiced to
clients, the difference is classified as a contract liability.
Careful consideration needs to be given to projects open
at year end requiring significant judgement in respect of
the stage of completion and the associated revenue and
profit margin to be recognised.
The total amount of revenue and margin to be
recognised under a contract can be affected by changes
in conditions and circumstances over time, such as:
• variations to the original contract terms;
• cost overruns; and
• scope changes that require further negotiation and
settlement.
Variations can arise from changing client specifications,
changes to the job based on unforeseen circumstances,
as well as from inefficiencies on the part of either
party. There is therefore judgement to be applied in
determining the amounts to be recovered from any
additional work performed.
There is therefore a risk that contract revenue is not
recognised in the correct period or that revenue and
associated profit margin is misstated.
How our audit addressed the key audit matter
We understood management’s policies and their controls
for recording revenue through performance of detailed
end-to-end walkthroughs of the finance and operational
processes.
We performed substantive testing of revenue contracts
across the full scope components as follows:
• Reviewed a sample of the terms and conditions
attached to revenue contracts to understand the
existence of the enforceable right to be paid for work
and evaluated management’s judgements used to
determine the timing of recognition of revenue.
• Targeted a number of contracts to audit, including those
with significant revenue recognised in the year or with
significant contract assets or contract liabilities at the
year end, and a further sample on a haphazard basis.
• For contracts where revenue is recognised based
on time spent by staff: On a sample of contracts
we tested the hours completed, obtained an
understanding from project managers as to the
budgeted hours, challenged the assumptions,
evaluated the outturn of previous estimates and
agreed the actual hours incurred post year end to
the forecast for the period.
• For contracts where revenue is recognised based
on project milestones: On a sample of contracts we
tested that milestones had been delivered to the
clients by obtaining evidence of delivery from project
managers, obtaining an understanding of the status of
milestones in progress, challenging the assumptions
and evaluating the outturn of previous estimates.
We also assessed how the project managers determined
that the stage of completion was correctly calculated by
obtaining their calculations and agreeing the inputs to
supporting evidence and correspondence with customers.
We found that revenue was recorded appropriately.
To assess whether revenue and profit is accurately recorded
and to test the timing of recognition of revenue, we
challenged management’s judgements on the completeness
of work for a sample of contracts by checking original
contracts, amendments to contracts, where applicable (e.g.
due to agreed changes in scope), and checking that the
contractual milestones had been reached.
No significant issues were noted from our work.
1 0 6
Kin + Carta Annual Report and Accounts 2019OUR FIGURES Key audit matter
Classification of Adjusting Items
Group
Refer to pages 119 to 129 (Significant Accounting
Policies) and page 133 (Notes to the Financial
Statements – note 7).
The Group has total Adjusting Items before interest
and tax of £15.8 million (2018: £49.6 million). These
principally relate to £2.6 million for restructuring
programmes across the Group to align the capabilities
and resources with the Connective operating model;
£5.7 million pension scheme administration costs and
past service costs in respect of GMP equalisation; £2.4
million contingent consideration payable by the Group
in respect of the FY16 acquisition of The App Business
Limited; and £6.7 million amortisation of acquired
intangibles from previous acquisitions. This is partially
offset by a profit on disposal of £1.8 million.
We focused on this area as the classification and
disclosure of items as “Adjusting Items” involved
judgement on whether they are exceptional and non-
recurring items and treatment should be consistent
between periods.
Carrying value of investments and recoverability
of intercompany loans and intercompany debtors
Company
Refer to pages 119 to 129 (Significant Accounting
Policies) and page 168 (Notes to the Company Financial
Statements – note 9)
As at 31 July 2019, the Company has investments in
the Group of £76.4 million (3 August 2018: £78.8
million), loans to subsidiaries of £135.0 million (3 August
2018: £149.0 million) and intercompany debtors of £3.4
million (3 August 2018: £5.4 million).
The carrying value of the Company’s investments in
subsidiaries and intercompany receivables represents
93% of the Company’s total assets.
We do not consider the valuation of these investments
and recovery of intercompany receivables to be at a high
risk of significant misstatement or to be subject to a
high level of judgement. However, due to their
materiality in the context of the Company financial
statements as a whole these are considered to be the
areas on which increased audit effort is required.
How our audit addressed the key audit matter
We have reviewed the amounts identified as Adjusting
Items in the financial statements to ensure these
are appropriate to be classified as Adjusting Items in
accordance with The European Securities Markets
Authority (‘ESMA’) guidance in 2016 on disclosure of
Adjusting Performance Measures, and where appropriate,
consistent with the prior year.
We have agreed the amounts recognised to underlying
support and reviewed the disclosure presented in note 7
and our work did not identify any significant matters in
relation to management’s classification.
We assessed the investment values and intercompany
receivables against the net assets of the investments to
identify whether the carrying values are supportable by
the asset position of the subsidiary.
Where the carrying amount exceeded the net asset
value of the subsidiary, our procedures were focused
on management’s value-in-use calculations including
evaluation of key assumptions used and the mathematical
accuracy of the calculations.
The work we performed did not highlight any issues
regarding the recoverability of the carrying value of
investments, intercompany loans or intercompany debtors
at the balance sheet date.
1 0 7
Kin + Carta Annual Report and Accounts 2019OUR FIGURES
INDEPENDENT AUDITORS’ REPORT TO THE
MEMBERS OF KIN AND CARTA PLC CONTINUED
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the
financial statements as a whole, taking into account the structure of the Group and the Company, the accounting
processes and controls, and the industry in which they operate.
The Kin and Carta plc Group consists of a number of UK trading and holding entities, Solstice Consulting LLC in
Chicago, as well as a number of smaller overseas entities.
We performed a full scope audit over the significant UK trading companies and Solstice Consulting LLC, in addition
to specific procedures over balances within the other statutory entities based on their overall size and values of their
specific financial statement line items.
Our audit scoping gave us coverage of 77% of Adjusted profit before tax, and 82% coverage of revenue.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the
nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and
in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Company financial statements
Overall materiality
How we determined it
£889,000 (2018: £915,000).
5% of Adjusted Group profit before tax.
Rationale for benchmark
applied
Adjusted profit before tax is a primary
measure used by management and
shareholders in assessing the performance
of the Group and is a generally accepted
auditing benchmark. This measure provides
us with a consistent year-on-year basis for
determining materiality based on trading
performance and eliminates the impact of
non-recurring items.
£845,000 (2018: £870,000).
Company materiality equates to 1% of net
assets, capped at 95% of Group overall
materiality.
Net assets is an appropriate benchmark
for determining the materiality of the
Company, which is a holding Company
and non-trading.
For each component in the scope of our Group audit (the UK trading companies, the Company and Solstice
Consulting LLC), we allocated a materiality that is less than our overall Group materiality. The range of materiality
allocated across components was between £473,000 and £845,000. Certain components were audited to a local
statutory audit materiality that was also less than our overall Group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above
£44,450 (Group audit) (2018: £45,000) and £42,250 (Company audit) (2018: £45,000) as well as misstatements
below those amounts that, in our view, warranted reporting for qualitative reasons.
1 0 8
Kin + Carta Annual Report and Accounts 2019OUR FIGURES
Going concern
In accordance with ISAs (UK) we report as follows:
Reporting obligation
Outcome
We are required to report if we have anything material
to add or draw attention to in respect of the Directors’
statement in the financial statements about whether
the Directors considered it appropriate to adopt the
Going Concern basis of accounting in preparing the
financial statements and the Directors’ identification
of any material uncertainties to the Group’s and the
Company’s ability to continue as a going concern over
a period of at least 12 months from the date of
approval of the financial statements.
We are required to report if the Directors’ statement
relating to Going Concern in accordance with Listing
Rule 9.8.6R(3) is materially inconsistent with our
knowledge obtained in the audit.
We have nothing material to add or to draw attention to.
However, because not all future events or conditions can
be predicted, this statement is not a guarantee as to the
Group’s and Company’s ability to continue as a Going
Concern. For example, the terms on which the United
Kingdom may withdraw from the European Union are
not clear, and it is difficult to evaluate all of the potential
implications on the Group’s trade, customers, suppliers
and the wider economy.
We have nothing to report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and
our auditors’ report thereon. The Directors are responsible for the other information. Our opinion on the financial
statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to
the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or our
knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material
inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a
material misstatement of the financial statements or a material misstatement of the other information. If, based on
the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by
the UK Companies Act 2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, the Companies
Act 2006 (‘CA06’), ISAs (UK) and the Listing Rules of the Financial Conduct Authority (‘FCA’) require us also to report
certain opinions and matters as described below (required by ISAs (UK) unless otherwise stated).
1 0 9
Kin + Carta Annual Report and Accounts 2019OUR FIGURES INDEPENDENT AUDITORS’ REPORT TO THE
MEMBERS OF KIN AND CARTA PLC CONTINUED
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic
Report and Directors’ Report for the period ended 31 July 2019 is consistent with the financial statements and has
been prepared in accordance with applicable legal requirements. (CA06)
In light of the knowledge and understanding of the Group and Company and their environment obtained in the course
of the audit, we did not identify any material misstatements in the Strategic Report and Directors’ Report. (CA06)
The Directors’ assessment of the prospects of the Group and of the principal risks that would threaten
the solvency or liquidity of the Group
We have nothing material to add or draw attention to regarding:
• The Directors’ confirmation on page 50 of the Annual Report that they have carried out a robust assessment of
the principal risks facing the Group, including those that would threaten its business model, future performance,
solvency or liquidity.
• The disclosures in the Annual Report that describe those risks and explain how they are being managed or
mitigated.
• The Directors’ explanation on page 96 of the Annual Report as to how they have assessed the prospects of
the Group, over what period they have done so and why they consider that period to be appropriate, and their
statement as to whether they have a reasonable expectation that the Group will be able to continue in operation
and meet its liabilities as they fall due over the period of their assessment, including any related disclosures
drawing attention to any necessary qualifications or assumptions.
We have nothing to report having performed a review of the Directors’ statement that they have carried out a
robust assessment of the principal risks facing the Group and statement in relation to the longer-term viability of
the Group. Our review was substantially less in scope than an audit and only consisted of making inquiries and
considering the Directors’ process supporting their statements, checking that the statements are in alignment with
the relevant provisions of the UK Corporate Governance Code (the ‘Code’); and considering whether the statements
are consistent with the knowledge and understanding of the Group and Company and their environment obtained
in the course of the audit. (Listing Rules)
Other Code Provisions
We have nothing to report in respect of our responsibility to report when:
• The statement given by the Directors, on page 99, that they consider the Annual Report taken as a whole to be
fair, balanced and understandable, and provides the information necessary for the members to assess the Group’s
and Company’s position and performance, business model and strategy is materially inconsistent with our
knowledge of the Group and Company obtained in the course of performing our audit.
• The section of the Annual Report on pages 66 to 69 describing the work of the Audit Committee does not
appropriately address matters communicated by us to the Audit Committee.
• The Directors’ statement relating to the Company’s compliance with the Code does not properly disclose a
departure from a relevant provision of the Code specified, under the Listing Rules, for review by the auditors.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in
accordance with the Companies Act 2006. (CA06)
1 1 0
Kin + Carta Annual Report and Accounts 2019OUR FIGURES Responsibilities for the financial statements and the audit
Responsibilities of the Directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities in respect of the financial statements set out
on page 99, the Directors are responsible for the preparation of the financial statements in accordance with the
applicable framework and for being satisfied that they give a true and fair view. The Directors are also responsible for
such internal control as they determine is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Company’s
ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going
concern basis of accounting unless the Directors either intend to liquidate the Group or the Company or to cease
operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website
at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Company’s members as a body in
accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving
these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report
is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
OTHER REQUIRED REPORTING
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the Company, or returns adequate for our audit have not
been received from branches not visited by us; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
•
the Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the members at the AGM on
29 November 2018 to audit the financial statements for the year ended 31 July 2019 and subsequent financial
periods following a competitive tender process. This is therefore our first year of uninterrupted engagement.
Julian Jenkins (Senior Statutory Auditor)
F O R A N D O N B E H A L F O F P R I C E WAT E R H O U S E C O O P E R S L L P
C H A R T E R E D AC C O U N TA N T S A N D S TAT U T O R Y A U D I T O R S
L O N D O N
1 O C T O B E R 2 0 1 9
1 1 1
Kin + Carta Annual Report and Accounts 2019OUR FIGURES CONSOLIDATED INCOME STATEMENT
362 days to 31 July 2019
371 days to 3 August 2018
(Restated*)
Adjusted
Results
£’000
Adjusting
Items**
£’000
Statutory
Results
£’000
Adjusted
Results
£’000
Adjusting
Items
£’000
Statutory
Results
£’000
Note
Continuing operations:
Revenue
Project-related costs
Net revenue
Cost of service
Gross profit
Selling costs
Administrative expenses
Share of results of joint arrangement
Other operating (expense)/income
Operating profit/(loss)
Net pension finance income/(expense)
Other finance expense
Profit/(loss) before tax
Income tax (charge)/credit
Net profit/(loss) for the period from
continuing operations
Net profit from discontinued operations
Net profit/(loss) for the period
Attributable to:
Shareholders of the parent Company
Basic earnings/(loss) per share (p)
From continuing operations
From continuing and discontinued
operations
Diluted earnings/(loss) per share (p)
From continuing operations
From continuing and discontinued
operations
3 172,111
(24,090)
148,021
(74,805)
73,216
(14,732)
(38,763)
169
(5)
19,885
–
(2,329)
17,556
(3,428)
4
(24,615)
763 172,874 178,292
(28,614)
(525)
238 148,259 149,678
(74,075)
(303)
75,603
(65)
(13,170)
(34)
(41,817)
(17,292)
569
–
(20)
1,771
21,165
(15,620)
–
30
(2,694)
(189)
18,471
(15,779)
(3,659)
2,772
(75,108)
73,151
(14,766)
(56,055)
169
1,766
4,265
30
(2,518)
1,777
(656)
–
63 178,355
(28,614)
63 149,741
(74,322)
75,419
(13,170)
(92,493)
569
1,522
(28,153)
(324)
(2,694)
(31,171)
(1,223)
(247)
(184)
–
(50,676)
–
1,542
(49,318)
(324)
–
(49,642)
2,436
14,128
–
14,128
(13,007)
–
(13,007)
1,121
–
1,121
14,812
3,511
18,323
(47,206)
(326)
(47,532)
(32,394)
3,185
(29,209)
14,128
(13,007)
1,121
18,323
(47,532)
(29,209)
9.22
(8.49)
0.73
10.10
(32.19)
(22.09)
9.22
(8.49)
0.73
12.49
(32.41)
(19.92)
9.17
(8.44)
0.73
10.10
(32.19)
(22.09)
9.17
(8.44)
0.73
12.49
(32.41)
(19.92)
8
14
14
14
14
* The results for the 371 days to 3 August 2018 have been restated for certain types of cost reclassifications (note 39) and to present net revenue
(note 40).
** The Adjusting Items are detailed within note 7.
1 1 2
Kin + Carta Annual Report and Accounts 2019OUR FIGURES CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
Profit/(loss) for the period
Items that will not be reclassified subsequently to profit or loss:
Actuarial profit on defined benefits pension scheme
Tax charge on items taken through other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Transfers of (losses)/gains on cash flow hedges
(Losses)/gains on cash flow hedges
Foreign exchange gains/(losses)
Other comprehensive income for the period
Total comprehensive income/(expense) for the period attributable
to shareholders of the parent Company
362 days to
31 July
2019
£’000
371 days to
3 August
2018
£’000
1,121
(29,209)
6,206
(991)
5,215
(265)
(201)
2,068
1,602
6,817
10,958
(1,731)
9,227
76
265
(852)
(511)
8,716
7,938
(20,493)
1 1 3
Kin + Carta Annual Report and Accounts 2019OUR FIGURES CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
Share
capital
£’000
Additional
paid-in
capital**
£’000
ESOP
reserve
£’000
Treasury
shares
£’000
Share
option
reserve
£’000
Hedging
and
translation
reserve
£’000
Other
reserves
£’000
Retained
earning/
(accumu-
lated
deficit)
£’000
Total
£’000
Balance at
28 July 2017
Loss for the period
Other comprehensive
(expense)/income
Total comprehensive expense
Dividends
Recognition of share-based
contingent consideration
deemed as remuneration
Transfer of share-based
contingent consideration
deemed as remuneration
Recognition of share-based
payments
Settlement of share-based
contingent consideration
deemed as remuneration
Tax on share-based payments
Balance at
3 August 2018
Profit for the period
Other comprehensive income
Total comprehensive income
Dividends
Recognition of share-based
contingent consideration
deemed as remuneration
Transfer of share-based
contingent consideration
deemed as remuneration
Purchase of own shares
Recognition of share-based
payments
Settlement of share-based
payment
Tax on share-based payments
Balance at
31 July 2019
14,284 70,418
–
–
–
–
–
–
–
–
1,059
–
–
–
–
–
119
–
–
–
15,343 70,537
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(163)
–
7,900
–
–
–
–
–
–
–
–
(511)
(511)
–
1,194 79,349
3,572 97,205
– (29,209) (29,209)
8,716
9,227
(511)
(511) (19,982) (20,493)
(2,784)
(2,784)
–
–
6,016
–
6,016
–
6,016
–
–
–
–
(6,865)
1,274
(1,101)
(74)
(163)
–
–
–
–
7,150
–
–
–
–
–
–
–
–
(6,746)
6,965
219
1,274
–
1,274
(1,101)
(74)
42
–
–
(74)
683 78,207 (12,187) 81,363
1,121
6,817
7,938
(2,990)
1,121
5,215
6,336
(2,990)
–
1,602
1,602
–
–
1,602
1,602
–
–
1,669
–
1,669
–
1,669
128
–
–
(185)
–
–
–
–
164
–
–
–
–
–
–
(7,440)
–
(650)
–
75
–
–
–
–
–
(7,312)
(185)
7,909
–
(650)
164
75
–
8
–
597
(185)
(650)
172
75
15,343 70,665
(21)
(163)
804
2,285 73,570
(924) 87,989
** Additional paid-in capital includes share premium, merger reserve and capital redemption reserve (note 33).
1 1 4
Kin + Carta Annual Report and Accounts 2019OUR FIGURES CONSOLIDATED BALANCE SHEET
COMPANY NUMBER 01552113
Assets
Non-current assets
Property, plant and equipment
Investment property
Goodwill
Other intangible assets
Other long-term financial asset
Investment in joint arrangement
Deferred tax assets
Retirement benefits surplus
Other non-current assets
Current assets
Trade and other receivables
Derivative financial instruments
Income tax receivable
Assets held for sale
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Loans
Trade and other payables
Derivative financial instruments
Income tax payable
Deferred consideration payable
Deferred income
Provisions
Non-current liabilities
Loans
Other non-current liabilities
Provisions
Deferred tax liabilities
Total liabilities
Net assets
Capital and reserves
Share capital
Other reserves
Accumulated deficit
Total equity
31 July
2019
£’000
3 August
2018
£’000
Note
15
16
17
17
18
19
27
28
20
20
21
20
23
22
21
12
24
25
23
26
25
27
5,499
4,957
85,662
25,573
–
547
2,528
6,665
18
131,449
40,911
–
136
–
22,017
63,064
194,513
–
27,479
158
1,946
2,000
5,195
1,383
38,161
60,416
2,228
1,874
3,845
68,363
106,524
87,989
15,343
73,570
(924)
87,989
6,301
4,470
84,742
31,493
3
223
1,264
1,858
13
130,367
40,451
291
904
5,282
14,398
61,326
191,693
40,363
35,851
62
61
21,170
4,915
919
103,341
–
822
1,849
4,318
6,989
110,330
81,363
15,343
78,207
(12,187)
81,363
These financial statements were approved by the Board of Directors on 1 October 2019 and signed on its behalf by
J Schwan
Chris Kutsor
C H I E F E X E C U T I V E O F F I C E R
C H I E F F I N A N C I A L O F F I C E R
1 1 5
Kin + Carta Annual Report and Accounts 2019OUR FIGURES CONSOLIDATED STATEMENT
OF CASH FLOWS
Operating activities
Cash generated from operations
Interest paid
Income taxes paid
Net cash generated from operating activities
Investing activities
Purchase of property, plant and equipment
Purchase of other intangibles
Proceeds on disposal of property, plant and equipment
Proceeds on disposal of subsidiaries
Deferred consideration paid for acquisitions made in prior periods
Net cash (used)/generated from investing activities
Financing activities
Purchase of own shares
Dividends paid
Additional investment in joint arrangement
Increase/(decrease) in bank loans
Net cash generated/(used) in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Effect of foreign exchange rate changes
Cash and cash equivalents at end of the period
362 days to
31 July
2019
£’000
371 days to
3 August
2018
£’000
8,989
(2,329)
(306)
6,354
(2,756)
(279)
7,230
–
(19,875)
(15,680)
(185)
(2,990)
(118)
19,083
15,790
6,464
14,398
1,155
22,017
25,848
(2,694)
(5,430)
17,724
(4,425)
(149)
3,166
32,442
(16,518)
14,516
–
(2,784)
–
(40,000)
(42,784)
(10,544)
25,651
(709)
14,398
Note
34
12
13
20
1 1 6
Kin + Carta Annual Report and Accounts 2019OUR FIGURES NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
1. GENERAL INFORMATION
Kin and Carta plc is a public limited company incorporated in the United Kingdom (‘UK’) and registered in England
and Wales under the Companies Act 2006. The address of the registered office is One Tudor Street, London EC4Y
0AH. The nature of the Group’s operations and its principal activities are set out in the Chief Executive’s Statement
on pages 13 to 17.
Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards
(‘IFRS’) and IFRIC interpretations adopted by the European Union, Article 4 of the EU IAS Regulation and with
those parts of the Companies Act 2006 applicable to companies reporting under IFRS. These consolidated financial
statements (‘the financial statements’) are presented in Sterling because this is the currency of the primary economic
environment in which the Group operates.
The consolidated financial statements have been prepared on a historical cost basis, except for the remeasurement
to fair value of certain financial assets and liabilities as described in the accounting policies below. The accounting
policies have been applied consistently throughout the Group.
In the current period, the following revised Standards and Interpretations have been adopted:
IFRS 15
IFRS 9
Revenue from Contracts with Customers; this standard is mandatory for accounting periods
beginning on or after 1 January 2018.
Financial Instruments; this standard is mandatory for accounting periods beginning on or after
1 January 2018.
IFRS 2 (amendments) Share-based Payment Transactions; this amendment is mandatory for accounting periods
beginning on or after 1 January 2018.
IFRS 4 (amendments) Applying IFRS 4 Financial Instruments; this amendment is mandatory for accounting periods
beginning on or after 1 January 2018.
IAS 40 (amendments) Investment Property; this amendment is mandatory for accounting periods beginning on or
after 1 January 2018.
IFRIC 22
Foreign Currency Transactions and Advance Consideration; this amendment is mandatory for
accounting periods beginning on or after 1 January 2018.
In addition “Annual Improvements 2014–2016 Cycle” includes amendments to a number of Standards and
Interpretations including IFRS 1 and IAS 28 which have been adopted in the current period.
At the date of authorisation of these financial statements, the following Standards, Amendments and Interpretations
which have not been applied in these financial statements were in issue but not yet effective (and in some cases had
not yet been adopted by the EU). The Group has not applied these standards in the preparation of the consolidated
financial statements:
IFRS 16
Leases; this standard was issued in January 2016 to replace IAS 17; this standard is mandatory
for accounting periods beginning on or after 1 January 2019. Further details on the expected
impact of implementation of the IFRS 16 Leases standard are disclosed below.
IFRS 9 (amendments) Financial Instruments; this standard is mandatory for accounting periods beginning on or after
1 January 2019.
IAS 19 (amendments) Employee Benefits; this standard is mandatory for accounting periods beginning on or after
1 January 2019.
IAS 28 (amendments) Investments in Associates and Joint Ventures; this amendment is mandatory for accounting
periods beginning on or after 1 January 2019.
IFRIC 23
Uncertainty over Income Tax Treatments; this amendment is mandatory for accounting periods
beginning on or after 1 January 2019.
1 1 7
Kin + Carta Annual Report and Accounts 2019OUR FIGURES NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
1. GENERAL INFORMATION continued
In addition “Annual Improvements 2015–2017 Cycle” includes amendments to a number of Standards and
Interpretations including IFRS 2, IFRS 11, IAS 12 and IAS 28. The effective date of the IFRS 2, IFRS 11, IAS 12
and IAS 28 amendments is for accounting periods beginning on or after 1 January 2019.
The Directors do not expect that the adoption of the standards listed above will have a material impact on the
financial statements of the Group in future periods, except the expected impact of implementation of IFRS 16
which is detailed below.
IFRS 9 Financial Instruments
The Group has adopted IFRS 9 Financial Instruments (‘IFRS 9’) for the financial period beginning on 4 August 2018.
Under the standard, trade receivables and cash will continue to be accounted for at amortised cost. IFRS 9 introduces
an expected credit losses model, rather than the current incurred loss model, when assessing the impairment of
financial assets. Given the historic rate of revenue loss and ageing of the trade receivables, the expected loss model
does not have a material impact on the Group’s opening retained earnings on application as at 4 August 2018 and
the current period. Therefore, in line with the transition guidelines in IFRS 9, the Group has not restated its financial
statements for the prior period.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 Revenue from Contracts with Customers (‘IFRS 15’) was adopted by the Group for the financial period
beginning on 4 August 2018. In accordance with the transition provisions, the new rules have been adopted using
the simplified retrospective transition method.
The Group assessed whether the adoption of IFRS 15 had any impact on the timing of revenue recognition. Under
IAS 18 the Group recognised revenue based on stage of completion whereas IFRS 15 established a five-step model
where the recognition should be when contractual performance obligations are satisfied by transferring control of
the goods or services to the customer. Following assessment of the contracts held by the Group, it was determined
that the impact of aligning the Group’s revenue recognition with performance obligations to the customer did
not have a material impact on the revenue in the prior periods. Therefore, no restatement has been made and
a reconciliation of retained earnings is not required.
IFRS 16 Leases
IFRS 16 requires the recognition of all lease assets and liabilities by lessees on the balance sheet and is effective for the
Group’s year ending 31 July 2020. The standard will primarily change lease accounting for lessees; lease agreements
will give rise to the recognition of an asset representing the right to use the leased item and a loan obligation for future
lease payables. Lease costs will be recognised in the form of depreciation of the right to use the asset and interest on
the lease liability. Lessee accounting under IFRS 16 will be similar in many respects to existing IAS 17 accounting for
finance leases, but will be substantively different to existing accounting for operating leases where rental charges are
currently recognised on a straight-line basis and no lease asset or lease loan obligation is recognised.
The Group has adopted IFRS 16 on 1 August 2019 using the Standard’s modified retrospective approach. Under this
approach the cumulative effect of initially applying IFRS 16 was recognised as an adjustment to equity at the date of
initial application. Comparative information is not restated. The Group has adopted the transition exemptions for leases
with a remaining term of 12 months or less and for low-value assets. This has been applied on a lease-by-lease basis.
The Group has assessed the impact on the majority of leases, including all material leases. On assessing the impact
on the Group’s consolidated financial statements there will be a reduction in profit of approximately £0.1 million
for the year ending 31 July 2020 when comparing to the current accounting for operating leases. The assessment
indicates that the Group will recognise a right-of-use asset of £20.9 million and a corresponding lease liability of
£24.2 million. The profile of the Group’s principal leases is shown in note 35.
Going concern
The directors have, at the time of approving the financial statements, a reasonable expectation that the Company
and the Group have adequate resources to continue in operational existence for the foreseeable future, a minimum
of 12 months from the date of approval of these financial statements. Thus they continue to adopt the going concern
basis of accounting in preparing the financial statements. During the period the Group successfully negotiated
a new revolving credit facility of £85.0 million that will expire on 30 November 2022, on terms broadly in line with
the previous agreement. Further detail is contained in the Directors’ Report on pages 95 to 98.
1 1 8
Kin + Carta Annual Report and Accounts 2019OUR FIGURES 2. SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled
by the Company (its subsidiary undertakings) for each period. Control is achieved where the Company has the power
to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.
Where necessary, adjustments are made to the results of subsidiaries to bring their accounting policies into line with
those of the Group. All intra-Group transactions, balances, income and expenses are eliminated on consolidation.
(b) Adjusting Items
Statutory results (‘Statutory Results’) presented in the Consolidated Income Statement include Adjusting Items.
Income statement items are presented in the middle column under the heading ‘Adjusting Items’ where they do
not form part of the underlying trading activities of the Group or, in the opinion of the Directors, their separate
presentation enhances understanding of the financial performance of the Group.
The results, excluding Adjusting Items, are presented in the Consolidated Income Statement under the heading
‘Adjusted Results’, in order to provide a consistent and comparable view of the performance of the Group.
Furthermore, the Adjusted Results are aligned to the Group’s strategy and are used to measure the financial
performance of the Group’s businesses and are the basis for remuneration. Further details can be found under
the Adjusted Performance Measures section on pages 36 to 41.
Items included as Adjusting Items are as follows:
• Redundancies, restructuring costs and empty property costs
Redundancies and restructuring costs that occur as one-off costs in the individual businesses, that in aggregate
can be significant in size, are recorded as Adjusting Items. Careful consideration is applied by management in
assessing whether these costs relate to the restructure of a business within the Group or redundancies in the
normal course of business which are not treated as Adjusting Items. Redundancies and restructuring costs related
to the closure or disposal of a site are recorded within this caption. Empty property costs comprise expenses
relating to the maintenance and security of leasehold property or property owned by the Group from which no
ongoing activity takes place (further details surrounding empty property costs can be found below). The costs do
not relate to the continuing operations of the Group and are therefore recorded as Adjusting Items.
• Operating results of a site arising after a formal decision on its closure
Operating losses from non-continuing sites, where that site does not meet the definition of a discontinued
operation under IFRS 5 Non Current Assets Held for Sale and Discontinued Operations include revenue,
operational and overhead expenses incurred after a formal decision on a site’s closure has been taken. These
items also include settlement of onerous leases, costs related to the transfer of assets and professional fees
related to the closure of the site. The above items are recorded as Adjusting Items on the basis that they do not
form part of the ongoing trading activities of the Group.
• St Ives Defined Pension Benefits Scheme income/expense
The Scheme was closed to new entrants in April 2002 and to the accrual of future benefits in August 2008.
Given the substantial change in the composition of the Group over the last eight years, with a significant number
of site closures and disposal of businesses which employed Scheme members, the number of Scheme members
still employed by the Group has declined substantially and stood at five as at 31 July 2019, representing less than
1% of the total Scheme membership. After the closure of the Scheme, all the in-service members at that time
were transferred to a defined contribution scheme. Payments to the defined contribution scheme are expensed
to the Consolidated Income Statement and are treated as part of Adjusted Results and not as an Adjusting Item.
Therefore the Group classifies the income/(expense) relating to the Scheme as an Adjusting Item.
• Non-cash impairment charges related to goodwill and other assets
Impairment charges related to non-current and current assets are non-cash items, do not occur in the normal
course of business and tend to be significant in size and irregular in nature. The presentation of this item as an
Adjusting Item further enhances the understanding of the ongoing trading performance of the Group.
1 1 9
Kin + Carta Annual Report and Accounts 2019OUR FIGURES NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
2. SIGNIFICANT ACCOUNTING POLICIES continued
• Costs related to acquisitions made in prior periods
The Group has grown both organically with the development of new operating subsidiaries and through acquisition.
However, there is significant inconsistency between the accounting treatment of the goodwill and intangibles
associated with the acquisition of businesses and those generated internally. On an unadjusted basis, a business
acquired under IFRS 3 would report substantially lower operating profits and a lower return on capital than the
businesses which have been developed by the Group, thus making comparison of performance of the Group and
segment difficult.
Therefore the following items are recorded as Adjusting Items to provide a more realistic and comparable view of
the Group and enhance the clarity of the performance of the Group to readers of the accounts:
i. Amortisation charges related to intangible assets identified through acquisition accounting.
ii. Expenses related to contingent consideration required to be treated as remuneration for acquired businesses.
iii. Charges and credits arising from the re-estimation of deferred consideration payable in respect of
acquisitions.
iv. Charges related to the acquisition of businesses or the setting up of new subsidiaries.
• Gain or loss associated with disposal of trade, subsidiaries or assets
The gain or loss on disposal of trade, subsidiaries or assets tends to be significant in size and irregular in nature. The
disposal of property, plant and equipment is primarily associated with closed sites or businesses that have been
disposed of by the Group. Therefore the gain or loss on the disposal of these assets is treated as an Adjusting Item.
When reviewing these items, the Directors considered the guidelines issued by the Financial Reporting Council
(‘FRC’) and the European Securities and Markets Authority (‘ESMA’).
A reconciliation of Statutory Results to Adjusted Results can be found in the Consolidated Income Statement. Further
details relating to the Adjusting Items are available in note 7.
(c) Revenue recognition
Revenue from supply of goods and services is measured at the fair value of consideration received or receivable and
comprises amounts receivable for goods and services, net of trade discounts, up-front payments, VAT and other
sales-related taxes.
Revenue is recognised once contractual performance obligations have been delivered, in accordance with the terms
of the contractual agreement. Contracts can have a single or series of different deliverables and over time, revenue
is recognised as each contractual obligation is satisfied.
For services performed, on a time basis, i.e. where the terms of the contract have provision for licensing the product
on a subscription basis, revenue is recognised evenly over the period of contractual term as the performance
obligations are satisfied evenly over the term of subscription. Generally the performance obligations are satisfied
over time as service is rendered.
For services that are linked to delivering of goods to fulfil the contract, revenue is recognised when the goods are
delivered, in line with meeting the contractual and performance obligations. The goods can be delivered in full or
in part-quantities.
For performance obligations that are satisfied over time, the Group uses either input or output methods, to measure
progress for each performance obligation, depending on the particular arrangement. In the majority of cases, relevant
output measures such as the completion of project milestones set out in the contract are used to assess proportional
performance. Where this is not the case then an input method based on costs incurred to date is used to measure
performance. The primary input of substantially all work performed is represented by staff costs. As a result of
the relationship between labour and cost there is normally a direct correlation between costs incurred and the
proportion of the contract performed to date.
Typically, customers are not entitled to refunds across the Group. The above methods are deemed to be appropriate
in identifying the point of transfer of goods and services for revenue recognition.
1 2 0
Kin + Carta Annual Report and Accounts 2019OUR FIGURES 2. SIGNIFICANT ACCOUNTING POLICIES continued
Payment terms for supplier payments across the Group vary, with the majority of terms being 60 to 90 days. In some
exceptional circumstances the Group amends payment terms to between zero and 30 days. The Group generally is
paid by customers in arrears for its services, however some work is invoiced in advance.
Net revenue:
Net revenue is calculated as revenue less project-related costs as shown in the Consolidated Income Statement.
Project-related costs comprise primarily third party pass-through expenses and direct costs attributable to a project.
These costs typically include amounts payable to external suppliers where they are engaged, at the Group’s discretion,
to perform a specific part of the performance obligation under a contract with the client, other than the costs of
certain freelance contractors and agency staff. Cost of service includes the costs of directly employed staff, freelance
contractors and agency staff who are engaged in the delivery of performance obligations under client contracts.
Accrued and deferred income:
Accrued income is a contract asset and is recognised when a performance obligation has been satisfied but has not
yet been billed. Contract assets are transferred to receivables when the right to consideration is unconditional and
billed per the terms of the contractual agreement.
In certain cases, payments are received from customers prior to satisfaction of performance obligations and recognised
as deferred income on the Consolidated Balance Sheet. These balances are considered contract liabilities and are
typically related to prepayments for third party expenses that are incurred shortly after billing.
(d) Investment properties
Investment properties are properties which are held to earn rental income and are stated at cost less accumulated
depreciation.
Depreciation is charged at between 2% and 4% per annum so as to write off the cost or valuation of assets over their
estimated useful lives, using the straight-line method.
An investment property is derecognised upon disposal or when the investment property is permanently withdrawn
from use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition
of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the
asset) is included in the Consolidated Income Statement in the period in which the property is derecognised.
(e) Intangible assets
Goodwill
Goodwill arising on the acquisition of a subsidiary represents the excess of the cost of the acquisition over the net
fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary at the date of the acquisition.
Fair value is finalised within 12 months of the date of the acquisition. Goodwill is not amortised but reviewed for
impairment annually in accordance with the impairment of goodwill policy set out in note 2(g) below.
Other intangible assets – computer software
Computer software that is not integral to an item of property, plant or equipment is classified as an intangible asset
and is held on the Consolidated Balance Sheet at cost less amortisation and impairments. These assets are amortised
over their estimated useful lives, which is generally two to five years.
Other intangible assets – customer relationships
Customer relationships identified as separable intangible assets in the context of business combinations are capitalised
at their fair value at the date of acquisition. They are amortised over their estimated useful lives, which is generally two
to ten years.
Other intangible assets – proprietary techniques
Proprietary techniques identified as separable intangible assets in the context of business combinations are capitalised
at their fair value at the date of acquisition. They are amortised over their estimated useful life which is generally three
to ten years.
1 2 1
Kin + Carta Annual Report and Accounts 2019OUR FIGURES NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
2. SIGNIFICANT ACCOUNTING POLICIES continued
Other intangible assets – trademarks
Trademarks identified as separable intangible assets in the context of business combinations are capitalised at their
fair value at the date of acquisition. They are amortised over their estimated useful lives, which is generally ten years.
All intangible assets with finite lives are amortised on a straight-line basis.
(f) Property, plant and equipment
Property, plant and equipment held for use in the production or supply of goods, or for administration purposes, is stated
in the Consolidated and Company Balance Sheets at cost less any accumulated depreciation and impairment losses.
Costs are recognised as an asset only when it is probable that future economic benefits associated with the item will
flow to the Group and the cost of the item can be measured reliably. All repairs and maintenance are charged to the
Consolidated Income Statement during the period in which they are incurred.
Assets in the course of construction are carried at cost less any recognised impairment loss. Cost includes
professional fees. Depreciation of these assets commences when the assets are ready for their intended use.
Freehold land is not depreciated.
Depreciation is charged, other than on freehold land and assets under the course of construction, so as to write off the
cost or valuation of assets over their estimated useful lives, using the straight-line method, on the following basis:
Freehold buildings
Long leases
Plant and machinery
Fixtures, fittings and equipment
2%–4%
Period of lease
10%–33.3%
10%–33.3%
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits
are expected to arise from the continued use of the asset. The gain or loss arising on the disposal or scrappage of
an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is
recognised in the Consolidated Income Statement.
(g) Impairment of property, plant, equipment and intangible assets excluding goodwill
At each balance sheet date the Group reviews the carrying amounts of its property, plant and equipment and
intangible assets to determine whether there is any indication that those assets have suffered any impairment loss.
If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the
impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the
Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The recoverable amount is the higher of fair value less costs to sell and value-in-use. In assessing value-in-use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessment of the time value of money and the risks specific to the assets for which the estimates of future
cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount,
the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised immediately as an expense in the Consolidated Income Statement.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased
to the revised estimate of its recoverable amount, but only in so far as the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-
generating unit) in prior periods.
1 2 2
Kin + Carta Annual Report and Accounts 2019OUR FIGURES 2. SIGNIFICANT ACCOUNTING POLICIES continued
(h) Impairment of goodwill
Goodwill arising on acquisition is allocated to the group of cash-generating units that are expected to benefit from
the synergies of the combination. A cash-generating unit represents the lowest level at which goodwill is monitored
by the Group’s Board of Directors for internal management purposes. The recoverable amount of the group of
cash-generating units to which goodwill has been allocated is tested for impairment annually on a consistent date
during each financial period, or more frequently when such events or changes in circumstances indicate that it may
be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the
impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the
other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit.
Any impairment is recognised immediately in the Consolidated Income Statement. Impairments of goodwill are not
subsequently reversed.
On disposal of a cash-generating unit, the attributable amount of goodwill is included in the determination of the
gain or loss on disposal.
(i) Tax
The tax expense in the Consolidated Income Statement comprises tax currently payable and deferred tax.
The tax currently payable is based on the taxable profit for the period. Taxable profit differs from net profit as
reported in the Consolidated Income Statement because it excludes items of income and expense that are taxable or
deductible in other periods and it further excludes items that are never taxable or deductible. The Group’s liability for
current tax is calculated using tax rates that have been enacted or substantively enacted at the balance sheet date.
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the accounts
and the corresponding tax bases used in the computation of taxable profit; and is accounted for using the balance
sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary
differences arise on non-deductible goodwill or from the initial recognition (other than business combinations) of
other assets or liabilities in a transaction that affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except
where the Group is able to control the reversal of the temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and is reduced to the extent that
it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the
asset is realised. Deferred tax is charged or credited in the Consolidated Income Statement, except when it relates
to items charged or credited in other comprehensive income, in which case the deferred tax is also dealt with in the
Consolidated Statement of Comprehensive Income or when it relates to items that are charged or credited to the
Consolidated Statement of Comprehensive Income or directly to the Consolidated Statement of Changes in Equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current assets against
current liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends
to settle its current tax assets and liabilities on a net basis.
Current tax and deferred tax are recognised in the Consolidated Income Statement, except when they relate to
items that are recognised in the Consolidated Statement of Comprehensive Income or directly to the Consolidated
Statement of Changes in Equity. Where current tax or deferred tax arises from the initial accounting for a business
combination, the tax effect is included in the accounting for the business combination.
(j) Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that
the Group will be required to settle the constructive or legal obligation, and its value can be reliably estimated. When
a provision needs to be released, the provision is taken back to the Consolidated Income Statement within the line
item where it was initially booked.
1 2 3
Kin + Carta Annual Report and Accounts 2019OUR FIGURES NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
2. SIGNIFICANT ACCOUNTING POLICIES continued
Provisions for repairs
Provisions for repairs are made where the Group is committed under the terms of the lease to make repairs to leasehold
property. The provision is made for the estimated cost over the period of the lease.
Provisions for reorganisation and onerous leases
Provisions for restructuring costs and onerous lease costs are recognised when the Group has a detailed formal
plan for the restructuring that has been communicated to affected parties, or onerous contracts related to closed/
discontinued operations.
(k) Foreign currencies
The individual financial statements of each Group company are presented in the currency of the primary economic
environment in which it operates (its functional currency). For the purpose of the consolidated financial statements,
the results and financial position of each Group company are expressed in Sterling, which is the functional currency
of the Company, and the presentation currency for the consolidated financial statements.
Transactions in foreign currencies other than Sterling are translated at the exchange rate ruling at the date of
the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are
translated to Sterling at the exchange rate ruling at that date.
Exchange differences are recognised in the Consolidated Income Statement in the period in which they arise except for:
• exchange differences on transactions entered into to hedge certain foreign currency risks; and
• exchange differences on monetary items receivable from or payable to a foreign operation for which settlement
is neither planned nor likely to occur in the foreseeable future (thereby forming part of the net investment in the
foreign operation), which are recognised initially in the Consolidated Statement of Comprehensive Income and
reclassified to the Consolidated Income Statement on disposal or partial disposal of the net investment.
Foreign currency differences arising on translation or settlement of monetary items are recognised in the
Consolidated Income Statement.
The results of overseas subsidiaries with functional currencies other than Sterling are translated into Sterling at the
average rate of exchange ruling in the period. The average exchange rate for each functional currency is calculated as
an average of the Sterling exchange rate ruling at the end of each monthly period.
Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated
using the exchange rate at the date of the transaction and not retranslated at each period end. Non-monetary assets
and liabilities denominated in foreign currencies that are stated at fair value are translated to Sterling at exchange
rates ruling at the date the fair value was determined. Exchange gains and losses arising on the retranslation of non-
monetary assets and liabilities are recognised directly in a separate component of the Consolidated Statement of
Comprehensive Income.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and
liabilities of the foreign operation and translated at the period end closing rate.
(l) Financial instruments
Financial assets and financial liabilities are recognised in the Consolidated Balance Sheet when the Group becomes
a party to the contractual provisions of the instrument.
The Group classifies its financial instruments in the following categories:
Financial instrument category
Note Measurement
Other long-term financial asset
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Derivative financial instruments
Deferred consideration payable
Bank borrowings
18 Fair value through other comprehensive income
20 Amortised cost
20 Amortised cost
22 Amortised cost
21 Fair value through profit and loss
12 Fair value through profit and loss
23 Amortised cost
Fair value
measurement
hierarchy*
3
3
N/A
3
2
3
N/A
* The fair value measurement hierarchy is only applicable for financial instruments measured at fair value.
1 2 4
Kin + Carta Annual Report and Accounts 2019OUR FIGURES 2. SIGNIFICANT ACCOUNTING POLICIES continued
Fair value measurements, where applicable, are categorised into Level 1, 2 or 3 based on the degree to which
the inputs to the fair value measurements are observable and the significance of the inputs to the fair value
measurement in its entirety, which are described as follows:
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can
access at the measurement date.
• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or
liability, either directly or indirectly.
• Level 3 inputs are unobservable inputs for the asset or liability.
The Group’s primary categories of financial instruments are listed below:
Trade and other receivables
All trade receivables held by the Group are financial assets held within a business model whose objective is to hold
financial assets in order to collect the contractual cash flows. Trade receivables are initially recognised at fair value
and will subsequently be measured at amortised cost less allowances for impairment.
The Group recognises a loss allowance for expected credit losses (‘ECL’) on trade receivables and contract assets.
The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial
recognition of the respective financial instrument. The Group recognises expected credit losses for trade receivables
and contract assets. The expected credit losses on these financial assets are estimated using a provision matrix based
on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly
liquid investments maturing within 90 days from the date of acquisition that are readily convertible into known
amounts of cash and which are subject to an insignificant risk of changes in value.
Bank borrowings
Interest-bearing bank loans and overdrafts are recorded as the proceeds receivable, net of direct issue costs. Finance
charges are accounted for on an accruals basis in the Consolidated Income Statement using the effective interest
rate method and are included in creditors to the extent that they are not settled in the period in which they arise.
Other long-term financial assets
Unlisted shares held by the Group are classified as being other long-term financial assets and are stated at fair value.
Fair values of unlisted shares are calculated with reference to exit price. All other long-term financial assets carried
at fair value have been fair valued using a level 3 measurement as per the fair value hierarchy defined in IFRS 13.
Gains or losses arising from changes in fair value are recognised directly in equity, until the security is disposed of or
is determined to be impaired, at which time the cumulative gain or loss previously recognised in equity is included in
the Consolidated Income Statement for the period.
The Group does hold investments in equity instruments and has made the irrecoverable designation to measure
these at fair value through other comprehensive income (‘FVTOCI’) as they are not held for trading.
Trade and other payables
Trade payables are not interest-bearing and are stated at their nominal value.
Derivative financial instruments and hedge accounting
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and
interest rates. The Group uses derivative financial instruments to hedge its exposure to foreign exchange for the
purchase of subsidiaries, goods and services denominated in foreign currencies and the sale of goods and services
similarly denominated.
The use of financial derivatives is governed by the Group’s policies approved by the Board of Directors, which
provide written principles on the use of financial derivatives consistent with the Group’s risk management strategy.
The Group does not hold or issue derivative financial instruments for speculative purposes.
1 2 5
Kin + Carta Annual Report and Accounts 2019OUR FIGURES NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
2. SIGNIFICANT ACCOUNTING POLICIES continued
Changes in the fair value of derivative financial instruments that are designated and effective as cash flow hedges of
forecast transactions are recognised directly in equity and the ineffective portion is recognised immediately in the
Consolidated Income Statement.
If the cash flow hedge of a firm commitment or forecast transaction results in the recognition of an asset or
liability, then, at the time the asset or liability is recognised, the associated gains and losses on the derivative that
had previously been recognised in equity are included in the initial measurements of the asset or liability. For the
hedges that do not result in the recognition of an asset or liability, amounts deferred in equity are recognised in the
Consolidated Income Statement in the same period as gains or losses are recognised on the hedged item.
The gain or loss on hedging instruments relating to the effective portion of a net investment hedge is recognised in
equity and the ineffective portion is recognised immediately in the Consolidated Income Statement. Gains or losses
accumulated in equity are included in the Consolidated Income Statement when the foreign operations are disposed of.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no
longer qualifies for hedge accounting.
At that time, any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until
the forecast transaction occurs. If a hedge transaction is no longer expected to occur, the net cumulative gain or
loss previously recognised in equity is included in the Consolidated Income Statement for the period. Derivatives
embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks
and characteristics are not closely related to those of their host contracts and the host contracts are not carried at
fair value with unrealised gains or losses reported in the Consolidated Income Statement.
Those derivatives which are not designated as hedges are classified as held for trading and gains and losses on those
instruments are recognised immediately in the Consolidated Income Statement.
A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative fair value
is recognised as a financial liability.
Deferred/contingent consideration payable
Deferred/contingent consideration payable and consideration required to be treated as remuneration in respect
of acquired businesses are typically determined based on a multiple of future incremental EBITDA, and the related
amounts are based on forecasts that have been derived from the most recent budgets and forecasts. Any change in
the fair value of the outcome is recognised in the Consolidated Income Statement as an Adjusting Item. The deferred
consideration payable and accrued contingent consideration required to be treated as remuneration are recognised
as financial liabilities, where amounts are expected or required to be cash-settled. Where amounts are settled by
future issuance of Kin and Carta plc shares, amounts required to settle the liability are recorded in equity.
The Directors consider that the carrying value of all financial assets and liabilities is approximately equal to their
fair value, except for investment properties, which are recorded at amortised cost. The fair value of these assets is
disclosed in note 12.
(m) Retirement benefits
The Group operates both defined benefits and defined contribution schemes for its employees. Payments to the
defined contribution schemes are expensed to the Consolidated Income Statement as they fall due.
For the St Ives Defined Benefits Pension Scheme (‘the Scheme’) full actuarial calculations are carried out every three
years using the projected unit credit method and updates are performed for each financial period end. Actuarial gains
and losses are recognised in full in the period in which they occur. They are recognised outside the Consolidated
Income Statement and presented in the Consolidated Statement of Comprehensive Income.
The retirement benefits obligation recognised in the Consolidated Balance Sheet represents the present value of the
defined benefits obligations and as reduced by the fair value of the Scheme’s assets.
Any asset resulting from this calculation is recognised in the Consolidated Balance Sheet, as the Group has an
unconditional right to a refund of any surplus in the defined benefits pension scheme at the end of the Scheme’s
duration.
1 2 6
Kin + Carta Annual Report and Accounts 2019OUR FIGURES 2. SIGNIFICANT ACCOUNTING POLICIES continued
Past service cost is recognised at the earlier of when the planned amendment or curtailment occurs and when the
entity recognises related restructuring costs or termination benefits.
Given the closure of the Scheme and the change in the composition of the Group, the Board has concluded that
the Scheme’s income and expenses do not relate to the underlying trading activities of the Group. Furthermore, the
underlying assumptions used in the Scheme’s valuation are determined by reference to external market data (notably
discount and inflation rates) that are outside the Group’s control and can vary significantly between periods. The
Group’s accounting policy is therefore to record the income and expenses related to the Scheme as an Adjusting Item.
Defined benefit income and expenses are split into four categories:
• Gains and losses on curtailments and settlements and costs incurred in the running of the Scheme.
• Net pension finance charge.
• Past service costs including Guaranteed Minimum Pension (‘GMP’) costs.
• Remeasurement of gains and losses.
The Group presents the first three components of the Scheme’s costs within Adjusting Items in its Consolidated
Income Statement and the remeasurement costs within the Consolidated Statement of Comprehensive Income.
(n) Share-based payments
The Group makes equity-settled share-based payments to certain employees, which are measured at fair value at
the date of the grant. The fair value determined at the grant date of the equity-settled share-based payments is
expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually
vest. At each balance sheet date, the Group revises its estimate of the number of equity instruments expected to
vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of the original
estimates, if any, is recognised in the Consolidated Income Statement such that the cumulative expense reflects the
revised estimate, with a corresponding adjustment to the Consolidated Statement of Changes in Equity reserves. The
fair value of share options issued is measured using a binomial model, for the effects of non-transferability, exercise
restrictions and behavioural considerations.
SAYE share options granted to employees are treated as cancelled when employees cease to contribute to the
scheme. This results in accelerated recognition of the expenses that would have arisen over the remainder of the
original vesting period.
The cumulative expense is reversed when an employee in receipt of the share options terminates service prior to
the completion of vesting period. Where the terms of an equity-settled award are modified on termination of the
employment, the total fair value of the share-based payments is recorded in the Consolidated Income Statement.
(o) Employee Share Ownership Plan (‘ESOP’)
As the Group is deemed to have control of its ESOP trust, it is included in the consolidated financial statements. The
ESOP’s assets and liabilities are included on a line-by-line basis in the consolidated financial statements. The ESOP’s
investment in the Group’s shares is deducted from equity in the Consolidated Balance Sheet as if they were treasury
shares and presented in the ESOP reserve.
(p) Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards
of ownership to the lessee. All other leases are classified as operating leases.
Rental costs under operating leases are charged to the Consolidated Income Statement in equal amounts over the
terms of the lease.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a
liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis
over the lease term.
Further details on the adoption of the IFRS 16 Leases standard are disclosed in note 1.
1 2 7
Kin + Carta Annual Report and Accounts 2019OUR FIGURES NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
2. SIGNIFICANT ACCOUNTING POLICIES continued
(q) Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for
each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities
incurred or assumed by the Group together with the equity instruments equivalent to the mid-market share price
on the date of completion, in exchange for control of the acquiree. Acquisition-related costs are recognised in the
Consolidated Income Statement as incurred.
Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent
consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are
adjusted against the cost of acquisition where they qualify as measurement period adjustments (see below). All
other subsequent changes in the fair value of contingent consideration classified as an asset, liability or equity are
accounted for in accordance with relevant IFRSs.
Contingent consideration payable to selling shareholders who continue to be employed by the Group, but which is
automatically forfeited upon termination of employment, is classified as remuneration for post-combination services
and is recorded in the Consolidated Income Statement. The contingent consideration is satisfied in cash and equity
instruments equivalent to the mid-market share price on the date of the consideration payable.
The cash-settled contingent consideration treated as remuneration for post-combination services is recognised
in accordance with IAS 19 (revised) Employee Benefits and has been recorded as deferred consideration
payable in the Consolidated Balance Sheet. At each balance sheet date, the Group revises its estimate for the
contingent consideration payable which is to be settled in cash. The impact of the revision, if any, is recognised
in the Consolidated Income Statement such that the cumulative expense reflects the revised estimate, with a
corresponding adjustment to the Consolidated Balance Sheet.
The equity-settled contingent consideration treated as remuneration for post-combination services is recognised
in accordance with IFRS 2 Share-based Payments and is recorded in equity reserves. Further details can be
found in the share-based payments accounting policy. At each balance sheet date, the Group revises its estimate
of the consideration payable which is to be settled in shares. The impact of the revision, if any, is recognised
in the Consolidated Income Statement such that the cumulative expense reflects the revised estimate, with a
corresponding adjustment to equity reserves.
The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under
IFRS 3 are recognised at their fair value at the acquisition date, except that:
• deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised
and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively;
•
liabilities or equity instruments related to the replacement by the Group of an acquiree’s share-based payment
awards are measured in accordance with IFRS 2 Share-based Payment; and
• assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held
for Sale and Discontinued Operations are measured in accordance with that Standard.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the
combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete.
Those provisional amounts are adjusted during the measurement period (see below), or additional assets or liabilities
are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition
date that, if known, would have affected the amounts recognised as of that date.
The measurement period is the period from the date of acquisition to the date that the Group obtains complete
information about facts and circumstances that existed as of the acquisition date, and is subject to a maximum of one year.
(r) Joint arrangements
Joint arrangements are entities where no one party is able to exercise overall control in which the Group has an
interest. The Group’s share of the post-tax results of its joint arrangements is included in the Consolidated Income
Statement using the equity method of accounting. Where the Group transacts with a joint arrangement, profits and
losses are eliminated to the extent of the Group’s interest in the joint arrangement.
Investments in joint arrangements are carried in the Consolidated Balance Sheet at cost plus post-acquisition
changes in the Group’s share of net assets of the entity, less any provision for impairment.
1 2 8
Kin + Carta Annual Report and Accounts 2019OUR FIGURES 2. SIGNIFICANT ACCOUNTING POLICIES continued
(s) Non-current assets held for sale
Non-current assets classified as held for sale are measured at the lower of amortised cost and fair value less costs
of disposal. Non-current assets are classified as held for sale if their carrying value will be recovered through a
sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly
probable and the asset is available for immediate sale in its present condition. The sale should be completed within
one year from the date of classification as an asset held for sale.
(t) Discontinued operations
A discontinued operation is a segment, subsidiary, or a component of a subsidiary that has been disposed of, and
represents a separate line of business. The trading results of a discontinued operation together with any gains or
loss from the disposal of the operation is reported separately as discontinued operations in the Consolidated Income
Statement. Further information can be found in note 8.
(u) Critical accounting judgements and key sources of estimation uncertainty
In the course of applying the Group’s accounting policies the following estimations and accounting judgements have
been made which could have a significant effect on the results of the Group were they subsequently found to be
inappropriate.
Critical accounting judgements
Adjusting Items
In the opinion of the Directors, separate presentation of Adjusting Items and APMs provides useful information in
the understanding of the financial performance of the Group and its businesses. The classification of Adjusting Items
requires management judgement after considering the nature and intentions of a transaction. The Group’s definitions
of Adjusting Items are outlined within the Group accounting policies on page 119 to 120. These definitions have
been applied consistently period-on-period. Further details are provided in note 7.
Key sources of estimation uncertainty
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value-in-use of the cash-generating units
for which goodwill has been identified. In arriving at the value-in-use the forecast of future cash flows of cash-
generating units and selection of appropriate discount rates is required to calculate present values, a process which
involves estimation. The recoverability analysis indicates that the carrying amount of goodwill will be recovered in
full. The situation will be monitored closely should future developments indicate that adjustments are appropriate.
The carrying value of goodwill at the balance sheet date was £85.7 million (2018: £84.7 million). A sensitivity analysis
can be found in note 17.
Impairment of acquired intangibles
The Group considers the recoverability of acquired intangibles which are included within the Consolidated Balance
Sheet at £25.6 million (2018: £31.5 million). The key areas of consideration when assessing the recoverability of
these assets are in relation to the discount rates, terminal growth rates, budgets and forecasts to be applied to
forecast cash flows. A sensitivity analysis can be found in note 17.
Retirement benefits obligations
The calculation of retirement benefits obligations requires estimates to be made of discount rates, inflation rates,
future salary and pension increases and mortality. The net surplus in the Consolidated Balance Sheet for the
retirement benefits scheme was £6.7 million (2018: surplus of £1.9 million). A sensitivity analysis can be found
in note 28.
1 2 9
Kin + Carta Annual Report and Accounts 2019OUR FIGURES NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
3. REVENUE
An analysis of the Group’s revenue as defined by International Financial Reporting Standard 15 − ‘Revenue’ is as
follows:
Continuing operations:
Rendering of services
Discontinued operations:
Sale of goods
Continuing and discontinued operations:
Sale of goods
Rendering of services
Revenue from the sale of goods and rendering of services
2019
£’000
2018
£’000
172,874
178,355
–
140,738
–
172,874
172,874
140,738
178,355
319,093
4. SEGMENT REPORTING
The Group delivers transformative growth for the world’s largest companies and fuses three specialisms – strategy,
innovation, and communications under its organisational model: the Connective. It is a network which spans all of
the Group’s digital transformation businesses.
The Group reports its results through one segment – the Connective – and with corporate costs shown as a separate
segment based on the Group’s internal reporting to the Chief Operating Decision Maker (‘CODM’). The CODM has
been determined to be the Chief Executive Officer and Chief Financial Officer who are primarily responsible for the
assessment of the performance of the businesses/brands which currently operate under the Connective.
The corporate costs are reported separately to the single operating segment as this presentation better reflects the
segment’s underlying profitability.
Results from continuing operations for the current period:
Revenue
Net revenue
Adjusting Items
Adjusted net revenue
Operating profit/(loss) before Adjusting Items
Adjusting Items
Statutory profit/(loss) from operations
Net pension finance income
Other finance expense
Statutory profit before tax
Income tax charge
Statutory net profit for the period from continuing operations
362 days to 31 July 2019
The Connective
£’000
Corporate costs
£’000
172,874
148,259
(238)
148,021
25,631
(9,913)
15,718
–
–
–
–
(5,746)
(5,707)
(11,453)
Total
£’000
172,874
148,259
(238)
148,021
19,885
(15,620)
4,265
30
(2,518)
1,777
(656)
1,121
1 3 0
Kin + Carta Annual Report and Accounts 2019OUR FIGURES 4. SEGMENT REPORTING continued
Results from continuing operations for the prior period:
Revenue
Net revenue
Adjusting Items
Net adjusted revenue
Operating profit/(loss) before Adjusting Items
Adjusting Items
Statutory loss from operations
Net pension finance expense
Other finance expense
Statutory loss before tax
Income tax charge
Statutory net loss for the period from continuing operations
Other information
Capital additions
Depreciation and amortisation charges
Impairment charges
Capital additions
Depreciation and amortisation charges
Impairment charges
371 days to 3 August 2018
(restated note 39)
The Connective
£’000
Corporate costs
£’000
178,355
149,741
(63)
149,678
26,483
(49,287)
(22,804)
–
–
–
–
(5,318)
(31)
(5,349)
At 31 July 2019
Continuing
operations
£’000
Discontinued
operations
£’000
3,034
9,471
159
–
–
–
At 3 August 2018
Continuing
operations
£’000
Discontinued
operations
£’000
4,050
11,025
12,082
509
1,563
18,833
Total
£’000
178,355
149,741
(63)
149,678
21,165
(49,318)
(28,153)
(324)
(2,694)
(31,171)
(1,223)
(32,394)
Total
£’000
3,034
9,471
159
Total
£’000
4,559
12,588
30,915
Geographical segments
Operations
Revenue by geographical area is based on the location where the provision of goods and services has been provided.
United Kingdom
United States of America
Rest of the world
Total
362 days to
31 July
2019
£’000
105,738
65,166
1,970
172,874
371 days to
3 August
2018
£’000
119,753
57,066
1,536
178,355
Customer location
The Group derives 51% (2018: 55%) of the total revenue from customers located in the UK, 41% (2018: 36%) of the
total revenue from customers located in the US, and 8% (2018: 9%) from customers located in the rest of the world.
1 3 1
Kin + Carta Annual Report and Accounts 2019OUR FIGURES NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
5. OPERATING PROFIT/(LOSS)
Profit/(loss) from operations includes continuing and discontinuing operations with the exception of operating lease
rentals which only represent continuing operations. Profit/(loss) from operations has been arrived at after charging/
(crediting):
Auditors’ remuneration
Audit fees:
– Audit of the Company accounts
– Audit of the accounts of the Company’s subsidiaries
Other assurance-related services
Non-audit fees:
– Transaction-related services
Total fees paid to the auditors
Staff costs (note 6)
Depreciation of property, plant and equipment (note 15)
Depreciation of investment property (note 16)
Amortisation of intangible assets (note 17)
Impairment of non-current and current assets – continuing operations
Impairment of goodwill and intangible assets – continuing operations
Impairment of non-current and current assets – discontinuing operations
Operating lease rentals
– land and buildings
– plant and equipment
– other
Loss on disposal of property, plant and equipment included in Adjusting Items
Profit on disposal of property, plant and equipment included in Adjusting Items
6. STAFF COSTS
The average monthly number of employees (including Executive Directors) was:
Continuing operations
Operations
Sales
Administration
Continuing operations
Discontinued operations
Continuing and discontinued operations
2019
£’000
2018
£’000
178
169
347
45
–
392
105,942
2,402
246
6,823
159
–
–
5,716
31
53
5
(1,771)
185
318
503
40
230
773
164,848
3,669
236
8,683
–
12,082
18,833
4,457
23
59
20
(1,542)
31 July
2019
Number
3 August
2018
Number
1,193
136
234
1,563
–
1,563
1,162
73
208
1,443
1,909
3,352
1 3 2
Kin + Carta Annual Report and Accounts 2019OUR FIGURES 6. STAFF COSTS continued
The employment costs during the period were:
Continuing operations
Wages and salaries
Social security costs
Other pension costs
Share-based contingent consideration deemed as remuneration
Share-based payment (credit)/charge
Continuing operations
Discontinued operations
Continuing and discontinued operations
2019
£’000
2018
£’000
97,265
5,408
2,250
104,923
1,669
(650)
105,942
–
105,942
99,211
5,694
2,201
107,106
16,704
7,290
131,100
33,748
164,848
The period-on-period decrease of £58.9 million in staff costs was due to a charge of £50.5 million arising in the
prior period relating to contingent consideration required to be treated as remuneration, of which £16.7 million was
included within continuing operations and £33.7 million within discontinued operations.
7. ADJUSTING ITEMS
Adjusting Items disclosed on the face of the Consolidated Income Statement included in respect of continuing
operations are as follows:
Expense/(income)
Restructuring items
Redundancies and other charges
Losses related to closure of a subsidiary
Costs associated with empty properties
Impairment of tangible assets
St Ives Defined Benefits Pension Scheme costs
Scheme administrative costs
Curtailment credit
Past service cost (GMP equalisation uplift)
Other related costs
Costs related to acquisitions made in prior periods
Amortisation of acquired intangibles
Impairment of goodwill and intangible assets
Contingent consideration required to be treated as
remuneration
Increase in deferred consideration
Adjusting Items
Profit on disposal of property, plant and equipment
Adjusting Items before interest and tax
Bank arrangement fees
Net pension finance (credit)/charge in respect of defined
benefits pension scheme
Adjusting Items before tax
Income tax credit
Adjusting Items after tax
2019
£’000
1,946
251
279
159
502
–
4,126
1,079
6,674
–
2,375
–
2018
£’000
2019
£’000
2018
£’000
2,737
–
325
–
2,635
3,062
617
(1,261)
–
613
5,707
(31)
8,659
12,082
23,994
3,094
9,049
17,391
(1,771)
15,620
189
(30)
15,779
(2,772)
13,007
47,829
50,860
(1,542)
49,318
–
324
49,642
(2,436)
47,206
1 3 3
Kin + Carta Annual Report and Accounts 2019OUR FIGURES NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
7. ADJUSTING ITEMS continued
Restructuring items
Current period
Redundancy and restructuring costs of £1.9 million were incurred in the course of changing the Group’s proposition
across Innovation, Communication and Strategy capabilities.
During the period, a decision was made to cease the operations of My Bench Limited, a 100% owned subsidiary of
Kin and Carta plc, and therefore a charge of £0.3 million comprising the losses incurred after the decision to close,
was recorded as an Adjusting Item.
Empty property cost of £0.3 million and impairment of £0.2 million are recorded in respect of the restructuring of
Pragma.
Prior period
The restructuring items in the period include redundancy and restructuring costs of £2.5 million relating to
AmazeRealise, Hive and Incite and redundancies of £0.2 million in Kin and Carta plc following the disposal of the
Group’s Books and Marketing Activation segments.
There were empty property costs of £0.3 million following the amalgamation of Occam and Response One into the
new Edit office located in Bath.
Disposal of properties
Current period
The profit on disposal of property, plant and equipment is comprised of £1.9 million relating to the sale of property in
Redditch offset by a loss of £0.1 million relating to obsolete software.
Prior period
The profit on disposal of property, plant and equipment of £1.5 million relates to the sale of properties in Bungay
and Bath.
St Ives Defined Benefit Pension Scheme costs
Current period
The Scheme charges include service costs of £0.5 million, net pension finance credit of £30,000, a Guaranteed
Minimum Pension (GMP) equalisation uplift of £4.1 million and costs in relation to running the Scheme of £1.1 million.
Prior period
The Scheme charges include service costs of £0.6 million, a net pension finance charge of £0.4 million and costs in
relation to running the Scheme of £0.6 million offset by a one-off curtailment credit of £1.3 million.
Costs related to acquisitions made in current and prior periods
Current period
Charges relating to the amortisation of acquired customer relationships, proprietary techniques and software
intangibles were £6.7 million in the current period (note 17).
During the period, charges relating to contingent consideration deemed as remuneration of £2.4 million were
recorded in the Consolidated Income Statement as Adjusting Items. The charges are in respect of the acquisition
of The App Business.
Prior period
Due to a decline in revenue generated from the healthcare business, Hive’s goodwill was impaired by £9.6 million
and an impairment charge of £2.1 million was recorded against Hive’s proprietary techniques. An additional
impairment charge of £0.4 million was recorded in respect of Fripp, Sandeman and Partners intangible assets due
to obsolescence of techniques.
1 3 4
Kin + Carta Annual Report and Accounts 2019OUR FIGURES 7. ADJUSTING ITEMS continued
Charges relating to the amortisation of acquired customer relationships, proprietary techniques and software
intangibles were £8.7 million (note 17).
Charges relating to contingent consideration deemed as remuneration of £24.0 million were recorded in the
Consolidated Income Statement as Adjusting Items. The charges were primarily in respect of the acquisitions
of Solstice and The App Business.
An additional deferred consideration charge of £3.1 million was recorded in respect of Solstice.
Tax
In the current period, the tax credit of £2.8 million (2018: £2.4 million) relates to the items discussed above.
Discontinued operations
In the prior period, a cost of £0.3 million was recorded as Adjusting Items in respect of the disposal of the Books and
Marketing Activation segments.
8. DISCONTINUED OPERATIONS
The Group disposed of its Books and Marketing Activation segments in the prior period. As a result these segments
have been classified as discontinued operations for the prior period. There are no discontinued operations in the
current year.
The results of the discontinued operations for the prior period are summarised as follows:
Revenue
Operating costs
Profit before tax before Adjusting Items
Income tax charge
Profit after tax before Adjusting Items
Adjusting Items from discontinued operations are analysed below:
Impairment of goodwill
Impairment of non-current and current assets
Amortisation of acquired intangibles and other Adjusting Items
Total Adjusting Items before tax
Gain on sale of discontinued operations
Total Adjusting Items after tax
Profit after tax before Adjusting Items
Total Adjusting Items after tax
Statutory profit after tax
9. PENSION FINANCE (CREDIT)/CHARGE
Investment income on defined benefit pension scheme assets (note 28)
Interest costs on defined benefit pension scheme obligations (note 28)
371 days to
3 August
2018
£’000
140,738
(136,562)
4,176
(665)
3,511
371 days to
3 August
2018
£’000
(14,482)
(4,351)
173
(18,660)
18,334
(326)
371 days to
3 August
2018
£’000
3,511
(326)
3,185
2019
£’000
(9,388)
9,358
(30)
2018
£’000
(9,035)
9,359
324
1 3 5
Kin + Carta Annual Report and Accounts 2019OUR FIGURES NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
10. OTHER FINANCE COSTS
2019
£’000
Interest on bank overdrafts and loans
Bank arrangement fee relating to current bank revolving facility
Bank arrangement fee relating to expired bank revolving facility
2,052
277
189
2,518
11. TAX
Income tax on the profit/(loss) as shown in the Consolidated Income Statement is as follows:
2018
£’000
2,694
–
–
2,694
2019
£’000
2018
£’000
Continuing operations:
Total current tax charge:
Current period
Adjustments in respect of prior periods
Total current tax charge
Deferred tax on origination and reversal of temporary differences:
Deferred tax credit
Adjustments in respect of prior periods
Total deferred tax credit (note 27)
Total income tax charge
Discontinued operations:
Total current tax charge:
Current period
Adjustments in respect of prior periods
Total current tax charge
Deferred tax on origination and reversal of temporary differences:
Deferred tax credit
Adjustments in respect of prior periods
Total deferred tax credit (note 27)
Total income tax charge
Continuing and discontinued operations:
Total current tax charge:
Current period
Adjustments in respect of prior periods
Total current tax charge
Deferred tax on origination and reversal of temporary differences:
Deferred tax credit
Adjustments in respect of prior periods
Total deferred tax credit (note 27)
Total income tax charge
(2,970)
(575)
(3,545)
2,641
248
2,889
(656)
2019
£’000
–
–
–
–
–
–
–
2019
£’000
(2,970)
(575)
(3,545)
2,641
248
2,889
(656)
(3,588)
58
(3,530)
2,249
58
2,307
(1,223)
2018
£’000
(894)
35
(859)
175
19
194
(665)
2018
£’000
(4,482)
93
(4,389)
2,424
77
2,501
(1,888)
2018
£’000
(3,659)
2,436
(1,223)
Income tax on the profit/(loss) from continuing operations before and after Adjusting Items is as follows:
Tax charge on Adjusted profit before tax
Tax credit on Adjusting Items
Total income tax charge
1 3 6
2019
£’000
(3,428)
2,772
(656)
Kin + Carta Annual Report and Accounts 2019OUR FIGURES 11. TAX continued
The tax charge for continuing operations can be reconciled to the profit/(loss) before tax shown in the Consolidated
Income Statement as follows:
Profit/(loss) before tax from continuing operations
Tax calculated at a rate of 46.9% (2018: 19.04%)
Non-deductible charges on impairment of tangible and intangible assets
Expenses not deductible for tax purposes
Effect of tax deductible goodwill
Effect of change in United Kingdom corporate tax rate
Credit on research and development activities
Movement in deferred tax on industrial buildings
Reassessment of tax losses
Adjustments in respect of prior periods
Total income tax charge
Income tax as shown in the Consolidated Statement of Comprehensive Income is as follows:
United Kingdom corporation tax credit
Deferred tax on origination and reversal of temporary differences (note 27)
Total income tax charge
Income tax as shown in the Consolidated Statement of Changes in Equity is as follows:
Deferred tax on origination and reversal of temporary differences (note 27)
2019
£’000
1,777
(835)
–
(789)
588
66
255
368
18
(327)
(656)
2019
£’000
608
(1,599)
(991)
2019
£’000
75
2018
£’000
(31,171)
5,935
(1,817)
(6,546)
626
(46)
244
290
(25)
116
(1,223)
2018
£’000
1,258
(2,989)
(1,731)
2018
£’000
(74)
UK tax rates
The Finance Act 2015, which provides for reductions in the main rate of corporation tax from 20% to 19% effective
from 1 April 2017 and to 18% effective from 1 April 2020, was substantively enacted on 26 October 2015. In the
Finance Act 2016, the Government announced further reductions in the main tax rate down to 17% effective from
1 April 2020, which was substantively enacted on 6 October 2016. These rate reductions have been reflected in the
calculation of deferred tax at the balance sheet date.
US tax rates
The tax charges related to US subsidiaries have been calculated using a rate of 28.51% (2018: 33.83%) which
reflects a full year of the impact of the reduction in the federal rate of US income tax in January 2018.
Blended tax rates
The blended tax rate is calculated at 46.9% (2018: 19.04%). This is mainly due to profits of £5.0 million taxed at US
federal tax rates and relevant US state tax rates (28.51%), offset by losses of £3.2 million in UK being taxed at the
UK corporation tax rate (19%). Taxation for other jurisdictions is calculated at the statutory rates prevailing in the
respective jurisdictions.
1 3 7
Kin + Carta Annual Report and Accounts 2019OUR FIGURES NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
12. ACQUISITIONS
Solstice Consulting LLC
In March 2015, the Group acquired 100% of the equity stock of Solstice Consulting LLC (‘Solstice’). The deferred
consideration payable for the remainder of the third and final tranche of consideration of £3.4 million was settled
in cash in August 2018.
The App Business Limited
In January 2016, the Group acquired 100% of the issued share capital of The App Business Limited (‘TAB’). Deferred
consideration was payable in four tranches dependent upon the level of EBITDA achieved by TAB for the years
ended 30 April 2016, 30 April 2017, 30 April 2018 and 30 April 2019. The deferred consideration for the third
tranche was £22.0 million with a further £2.0 million to be paid in cash if the EBITDA for the year ended 30 April
2019 was equal to or greater than the EBITDA for the year to 30 April 2018. The Group issued 5.7 million ordinary
shares in the period ended 3 August 2018 and, subsequently made a cash payment of £16.5 million to settle the
third tranche of deferred consideration during the current period.
Subsequent to the year end, the Group paid £1.2 million in cash and issued a loan note of £0.8 million in respect
of the fourth tranche of deferred consideration of £2.0 million. The loan note is exercisable after January 2020.
The deferred consideration payable as at 31 July 2019 is as follows:
TAB – Fourth Tranche
The movement in the deferred consideration liability is as follows:
Deferred consideration payable as at 4 August 2018
Amounts paid in current period
Charge in the current period related to deferred consideration liability
Deferred consideration payable as at 31 July 2019
Deferred
consideration
payable as at
31 July 2019
£’000
2,000
£’000
21,170
(19,875)
705
2,000
Cash outflow related to acquisitions made in prior periods
The total impact on investing cash outflows in the current period related to acquisitions made in prior periods is as
follows:
TAB – deferred consideration
Solstice – deferred consideration
Net cash outflow
13. DIVIDENDS
Final dividend paid for the period ended 28 July 2017
Interim dividend paid for the period ended 2 February 2018
Final dividend paid for the period ended 3 August 2018
Interim dividend paid for the period ended 31 January 2019
Dividends paid during the period
Proposed final dividend at the period end of 1.30p per share
(2018: 1.30p per share)
2019
£’000
16,523
3,352
19,875
2018
£’000
1,857
927
−
−
2,784
per share
1.30p
0.65p
1.30p
0.65p
2019
£’000
−
−
1,993
997
2,990
1.30p
1,993
1,993
The proposed final dividend is subject to the approval by shareholders at the 2019 Annual General Meeting and has
not been included as a liability in these financial statements.
1 3 8
Kin + Carta Annual Report and Accounts 2019OUR FIGURES 14. EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share is based on the following data:
Weighted average number of ordinary shares for the purposes
of basic earnings per share
Effect of dilutive potential ordinary shares:
Share options
Weighted average number of ordinary shares for the purposes
of diluted earnings per share
2019
£’000
2018
£’000
153,307
146,654
842
−
154,149
146,654
In 2018, the share options were anti-dilutive and as such no diluted earnings per share is presented for 2018.
Continuing operations
Earnings/(loss) and basic earnings/(loss) per share
Adjusted earnings and Adjusted basic earnings per share
Adjusting Items
Earnings/(loss) and basic earnings/(loss) per share
Earnings/(loss) and diluted earnings/(loss) per share
Adjusted earnings and Adjusted diluted earnings per share
Adjusting Items
Earnings/(loss) and diluted earnings/(loss) per share
Discontinued operations
Earnings and basic earnings per share
Adjusted earnings and Adjusted basic earnings per share
Adjusting Items
Earnings and basic earnings per share
Earnings and diluted earnings per share
Adjusted earnings and Adjusted diluted earnings per share
Adjusting Items
Earnings and diluted earnings per share
Continuing and discontinued operations
Earnings/(loss) and basic earnings/(loss) per share
Adjusted earnings and Adjusted basic earnings per share
Adjusting Items
Earnings/(loss) and basic earnings/(loss) per share
Earnings/(loss) and diluted earnings/(loss) per share
Adjusted earnings and Adjusted diluted earnings per share
Adjusting Items
Earnings/(loss) and diluted earnings/(loss) per share
2019
2018
Earnings/(loss)
£’000
Earnings/(loss)
per share
pence
Earnings/(loss)
£’000
Earnings/(loss)
per share
pence
14,128
(13,007)
1,121
14,128
(13,007)
1,121
–
–
–
–
–
–
14,128
(13,007)
1,121
14,128
(13,007)
1,121
9.22
(8.49)
0.73
9.17
(8.44)
0.73
–
–
–
–
–
–
9.22
(8.49)
0.73
9.17
(8.44)
0.73
14,812
(47,206)
(32,394)
14,812
(47,206)
(32,394)
3,511
(326)
3,185
3,511
(326)
3,185
18,323
(47,532)
(29,209)
18,323
(47,532)
(29,209)
10.10
(32.19)
(22.09)
10.10
(32.19)
(22.09)
2.39
(0.22)
2.17
2.39
(0.22)
2.17
12.49
(32.41)
(19.92)
12.49
(32.41)
(19.92)
1 3 9
Kin + Carta Annual Report and Accounts 2019OUR FIGURES NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
15. PROPERTY, PLANT AND EQUIPMENT
Land and
buildings
Freehold
£’000
Land and
buildings
Long leases
£’000
Fixtures, fittings,
equipment and
motor vehicles
£’000
Cost or valuation:
At 28 July 2017
Additions
Disposals – continuing operations
Disposals – discontinued operations
Reclassification – investment property
Reclassification – asset under construction
Foreign exchange
At 3 August 2018
Additions
Disposals
Reclassification
Reclassification – software
Reclassification – investment property
Foreign exchange
At 31 July 2019
Accumulated depreciation and impairment:
At 28 July 2017
Charge for the period
Disposals – continuing operations
Disposals – discontinued operations
Impairment – discontinued operations
Reclassification – investment property
Foreign exchange
At 3 August 2018
Charge for the period
Impairment
Disposals
Reclassification
Foreign exchange
At 31 July 2019
Net book value:
At 31 July 2019
At 3 August 2018
15,684
–
(1,600)
–
(13,821)
–
–
263
–
–
(263)
–
–
–
–
4,135
36
(148)
–
–
(3,834)
–
189
–
–
–
(189)
–
–
–
74
5,601
586
(262)
(3,143)
–
306
13
3,101
647
(186)
301
–
–
46
3,909
3,236
433
(195)
(3,144)
577
–
3
910
635
159
(186)
319
18
1,855
2,054
2,191
Plant and
machinery
£’000
89,664
3,452
(2,069)
(85,214)
–
(1,122)
27
4,738
1,587
(1,678)
–
(341)
(656)
109
3,759
79,013
2,404
(2,014)
(78,050)
929
–
16
2,298
1,189
–
(1,648)
–
74
1,913
1,846
2,440
Total
£’000
120,105
4,410
(4,357)
(95,673)
(13,821)
–
70
10,734
2,679
(2,043)
–
(341)
(656)
276
10,649
93,870
3,669
(2,718)
(88,141)
1,558
(3,834)
29
4,433
2,402
159
(1,997)
–
153
5,150
5,499
6,301
9,156
372
(426)
(7,316)
–
816
30
2,632
445
(179)
(38)
–
–
121
2,981
7,486
796
(361)
(6,947)
52
–
10
1,036
578
–
(163)
(130)
61
1,382
1,599
1,596
The amount of fully depreciated property, plant and equipment as at the period end is £2.8 million (2018: £3.1 million).
1 4 0
Kin + Carta Annual Report and Accounts 2019OUR FIGURES 16. INVESTMENT PROPERTY
Cost:
At 3 August 2018
Additions
Reclassification – property, plant and equipment
At 31 July 2019
Accumulated depreciation:
At 3 August 2018
Charge
At 31 July 2019
Net book value:
At 31 July 2019
At 3 August 2018
Investment
Property
£’000
7,394
77
656
8,127
2,924
246
3,170
4,957
4,470
As at 31 July 2019, the fair value of investment properties is not materially different from its net book value of
£5.0 million. This was arrived at on the basis of a valuation carried out by CBRE, independent valuers not connected
with the Group on 25 November 2016. The valuation conforms to International Valuation Standards.
An amount in relation to rental income from investment properties of £0.8 million (2018: £0.3 million) has been
recognised in the Consolidated Income Statement.
The Group has freehold land with a net book value of £0.2 million (2018: £2.2 million). These assets have not been
depreciated.
17. GOODWILL AND OTHER INTANGIBLE ASSETS
Cost and carrying amount of goodwill:
At 28 July 2017
Impairment – continuing operations
Impairment – discontinued operations
Foreign exchange
At 3 August 2018
Foreign exchange
At 31 July 2019
£’000
108,676
(9,564)
(14,482)
112
84,742
920
85,662
The exchange rate movement of £0.9 million (2018: £0.1 million) relates to Solstice’s goodwill, which is denominated
in US Dollars.
Goodwill is allocated amongst the following cash-generating units (‘CGUs’):
Continuing operations:
AmazeRealise
Edit
Hive
Incite
Pragma
Solstice
The App Business
2019
£’000
2018
£’000
31,294
23,522
5,500
601
886
15,481
8,378
85,662
31,294
23,522
5,500
601
886
14,561
8,378
84,742
The Group tests goodwill annually for impairment or more frequently if there are indicators that goodwill might be
impaired.
1 4 1
Kin + Carta Annual Report and Accounts 2019OUR FIGURES NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
17. GOODWILL AND OTHER INTANGIBLE ASSETS continued
Changes in CGU
During the prior period, the Data Marketing businesses and Branded3 were merged to create a new agency, Edit,
that is now able to offer a single data capability to its clients. The goodwill of these CGUs was combined to better
reflect this new proposition.
Amaze and Realise continue to work closely under a single brand, AmazeRealise, and a common management
structure. The goodwill of these CGUs was combined in the prior period under AmazeRealise.
Prior to both of the above mergers there was no impairment of goodwill required.
During the prior period Pragma acquired the trading assets and liabilities held by Fripp, Sandeman and Partners to
enhance its retail offering and to benefit from the synergies generated by the merger. The goodwill related to Fripp,
Sandeman and Partners of £0.7 million is now included within Pragma’s goodwill.
Assumptions
The recoverable amounts of the CGUs are determined using a value-in-use calculation. The key assumptions for the
value-in-use calculations are those regarding discount rates, terminal growth rates and cash flow forecasts in the
medium term. Management estimates discount rates using pre-tax rates that reflect current market assessments of
the time value of money and the risks specific to the CGUs. The Group prepares cash flow forecasts derived from
five-year forecasts. These include Board approved two-year forecasts for the financial periods 2020 and 2021 and
forecasts based on a nominal revenue growth rate of 2.6% for the financial periods 2022, 2023 and 2024. The rate is
calculated using a real growth rate of 0.6% and a long-term inflation rate of 2.0% (in line with the Bank of England’s
target for this measure), giving a nominal growth rate of 2.6%. A terminal nominal growth rate of 2% (2018: 2%) has
been used in the value-in-use calculation to derive the terminal value for each CGU. The assumptions were applied
for all CGUs including Solstice.
The pre-tax discount rate used for all of the CGUs, other than Solstice, was 10.3% (2018: 10.7%). The pre-tax
discount rate used for Solstice, a US-based subsidiary, was 13.0% (2018: 12.6%).
The key assumptions used in the value-in-use calculations and the sensitivities to short-term revenue growth and
pre-tax discount rate assumptions are detailed below.
Value-in-use assumptions:
Pre-tax discount rate
Excess of value-in-use
over carrying value
(£’000)
Sensitivity of value-in-use to changes
in key growth assumption:
Cumulative revenue
decline in five-year
forecast calculation
resulting in potential
impairment
Increase to pre-tax
discount rate resulting in
potential
impairment
10.3%
10.3%
10.3%
10.3%
10.3%
13.0%
10.3%
38,333
13,647
5,382
29,830
3,204
113,668
92,213
13.7%
10.9%
4.0%
100.0%
21.3%
70.4%
47.4%
9.1%
4.2%
7.8%
100.0%
16.8%
65.4%
51.6%
AmazeRealise
Edit
Hive
Incite
Pragma
Solstice
The App Business
Reasonably possible changes in key assumptions:
Edit continues to enhance its offering to ensure its services are GDPR compliant. As at the reporting date, the
long-term impact of the introduction of GDPR continues to be uncertain. The impact could have the potential to
negatively impact the sector and so affect our five-year forecasts and projected revenue growth rates.
During the current period, Hive have experienced an increase in new business wins and has restructured its cost
base to align with the Group strategy. However, due to the evolving technologies in the Health sector, projected
revenue growth for Hive and its dependence on a number of key clients, the loss of a key client could potentially
result in a further goodwill impairment of up to £5.5 million.
1 4 2
Kin + Carta Annual Report and Accounts 2019OUR FIGURES 17. GOODWILL AND OTHER INTANGIBLE ASSETS continued
Other intangible assets
Computer
software
£’000
Customer
relationships
£’000
Proprietary
techniques
£’000
Cost:
At 28 July 2017
Additions
Disposals – discontinued operations
Disposals – continuing operations
Foreign exchange
At 3 August 2018
Additions
Reclassification – property, plant and
equipment
Disposals
Foreign exchange
At 31 July 2019
Accumulated amortisation:
At 28 July 2017
Charge for the period
Impairment
Disposals – discontinued operations
Disposals – continuing operations
Impairment – discontinued operations
Foreign exchange
At 3 August 2018
Charge for the period
Disposals
Foreign exchange
At 31 July 2019
Net book value:
At 31 July 2019
At 3 August 2018
11,150
149
(4,055)
(302)
3
6,945
279
341
(2,168)
7
5,404
10,543
271
–
(4,043)
(289)
23
–
6,505
239
(2,032)
3
4,715
689
440
36,489
–
(6,840)
–
14
29,663
–
–
–
121
29,784
25,887
3,291
–
(6,840)
–
221
25
22,584
2,878
–
118
25,580
4,204
7,079
46,036
–
–
–
79
46,115
–
–
–
644
46,759
16,910
4,799
2,518
–
–
–
53
24,280
3,379
–
273
27,932
18,827
21,835
Trademarks
£’000
Total
£’000
3,244
–
–
–
7
3,251
–
–
–
69
3,320
787
322
–
–
–
–
3
1,112
327
–
28
1,467
1,853
2,139
96,919
149
(10,895)
(302)
103
85,974
279
341
(2,168)
841
85,267
54,127
8,683
2,518
(10,883)
(289)
244
81
54,481
6,823
(2,032)
422
59,694
25,573
31,493
The research and development costs incurred during the period were estimated at £1.0 million (2018: £1.1 million).
All research and development costs were expensed in the current and prior period.
Customer relationship assets include customer contracts, order backlogs and non-contractual customer relationships.
Proprietary techniques include models, algorithms and processes that are used to generate revenue from customers.
These assets are recorded at fair value at the date of acquisition and are amortised over their estimated useful lives.
Material customer relationships and proprietary techniques are disclosed overleaf.
1 4 3
Kin + Carta Annual Report and Accounts 2019OUR FIGURES NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
17. GOODWILL AND OTHER INTANGIBLE ASSETS continued
Remaining
amortisation
period (months)
Customer relationships:
AmazeRealise
Edit
Incite
Solstice
Proprietary techniques:
AmazeRealise
Pragma
Solstice
TAB
18. OTHER LONG-TERM FINANCIAL ASSET
Carried at fair value:
Unlisted shares
Total
32
25
7
–
Remaining
amortisation
period (months)
55
38
67
78
2019
£’000
1,285
2,343
576
–
4,204
2019
£’000
4,016
763
6,057
7,991
18,827
2019
£’000
–
–
2018
£’000
1,767
3,467
1,565
280
7,079
2018
£’000
4,892
1,004
6,718
9,221
21,835
2018
£’000
3
3
As at 3 August 2018 and 31 July 2019, the Group holds a non-controlling interest of 9.0% in Ebeltoft Corporation
Limited.
19. INVESTMENT IN JOINT ARRANGEMENT
At 3 August 2018
Additions
Reclassification
Share of results of joint arrangement
Foreign exchange
At 31 July 2019
Share of net
assets of joint
arrangement
£’000
223
118
3
169
34
547
The Group holds a 50% interest in Loop Integration LLC (‘Loop’), incorporated in Chicago, USA. The principal
operation of the company is an ecommerce consultancy specialising in Hybris software integration. During the
period, there was an advance of a loan to Loop of £0.1 million. More details can be found in note 38.
1 4 4
Kin + Carta Annual Report and Accounts 2019OUR FIGURES 20. OTHER FINANCIAL ASSETS
Trade and other receivables
Amounts receivable for the sale of goods and services
Less: provision for impairment of trade receivables
Trade receivables
Accrued income
Other receivables
Prepayments and other assets
2019
£’000
25,881
(988)
24,893
10,379
258
5,381
40,911
2018
£’000
25,859
(1,456)
24,403
10,687
251
5,110
40,451
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
Non-current assets
Other receivables
Cash and cash equivalents
Cash and cash equivalents
2019
£’000
18
2019
£’000
2018
£’000
13
2018
£’000
22,017
14,398
Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity
of three months or less. The carrying amounts of these assets approximate to their fair value.
21. DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial assets
Forward foreign currency contracts
Derivative financial liabilities
Forward foreign currency contracts
All forward foreign currency contracts are designated and effective as hedging instruments.
22. TRADE AND OTHER PAYABLES
Trade payables
Accruals for goods and services
Other taxes, social security and employee-related liabilities
Other payables
2019
£’000
–
2019
£’000
158
2019
£’000
5,533
7,742
11,030
3,174
27,479
2018
£’000
291
2018
£’000
62
2018
£’000
8,920
9,366
12,772
4,793
35,851
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
1 4 5
Kin + Carta Annual Report and Accounts 2019OUR FIGURES NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
23. LOANS
2019
£’000
2018
£’000
Bank loans
Current liabilities
Non-current liabilities
–
60,416
40,363
–
Bank loans
During the year the Group refinanced its debt and now has access to a multicurrency credit facility of £85.0 million
which is due to expire on 30 November 2022, of which up to £7.5 million can be drawn as an overdraft facility.
Interest on loan drawdowns is charged at LIBOR plus a margin which varies between 1.75% and 2.00%, depending
on the ratio of the Group’s net debt to EBITDA excluding Adjusting Items. Interest on overdraft drawdowns is
charged at an average rate of 1.65% over UK base rate and 2.25% over US base rate dependent on the currency of
the loan.
As at 31 July 2019, the Group’s outstanding loans within this facility were £60.4 million (2018: £40.4 million). The
undrawn portion of this facility at 31 July 2019 was £24.6 million (2018: £54.6 million).
The Directors consider that the carrying amount of the loans approximates to their fair value.
24. DEFERRED INCOME
Deferred income
2019
£’000
5,195
2018
£’000
4,915
There were no significant changes in the deferred income balances during the reporting period. All the brought
forward deferred income was recognised as revenue in the current reporting period and deferred income carried
forward is expected to be recognised as revenue in the next 12 months. There was no revenue recognised in the
current reporting period that related to performance obligations that were satisfied in a prior year.
25. PROVISIONS
Balance at 28 July 2017
Charged to the Consolidated Income Statement
Discontinued operations – disposal
Balance at 3 August 2018
Charged to the Consolidated Income Statement
Utilised during the period
Release
Balance at 31 July 2019
Current
Non-current
Provision for
repairs
£’000
Provision for
reorganisation
£’000
2,211
111
(844)
1,478
908
(73)
(146)
2,167
383
1,784
2,167
–
1,290
–
1,290
282
(482)
–
1,090
1,000
90
1,090
Total
£’000
2,211
1,401
(844)
2,768
1,190
(555)
(146)
3,257
1,383
1,874
3,257
Provision for repairs
Where the Group is committed under the terms of a lease to make repairs to leasehold premises, a provision for
repairs is made for these estimated costs over the period of the lease. It is anticipated that these liabilities will
crystallise between 2020 and 2025.
Provision for reorganisation
The provision for reorganisation comprises redundancy payments, onerous property and other costs of which
£1.0 million is payable within 12 months and £0.1 million is payable in 2021.
1 4 6
Kin + Carta Annual Report and Accounts 2019OUR FIGURES 26. OTHER NON-CURRENT LIABILITIES
Other non-current liabilities of £2.2 million (2018: £0.8 million) primarily relate to lease incentive accrual as part of
the leasehold property.
27. DEFERRED TAX
Deferred income taxes are calculated in full on temporary differences under the liability method using a principal tax
rate of 17% for UK operations (2018: 17%) and 28.51% for US operations (2018: 33.83%). The reduction in the tax
rates for US operations reflects the recent change in the federal corporate tax rates from 35% to 21%.
Deferred tax assets and liabilities are classified in the balance sheet as follows:
2018
£’000
(1,264)
4,318
3,054
2018
£’000
921
1,208
(2,501)
2,989
74
363
3,054
Total
£’000
921
Deferred tax assets
Deferred tax liabilities
The net movement in the deferred tax assets and deferred tax liabilities is as follows:
At the beginning of the period 4 August 2018/29 July 2017
Disposal – discontinued operations
Credit to the Consolidated Income Statement (note 11)
Items taken to other comprehensive income
Items taken directly to equity
Foreign exchange
At the end of the period 31 July 2019/3 August 2018
The individual movements in deferred tax liabilities/(assets) are as follows:
2019
£’000
(2,528)
3,845
1,317
2019
£’000
3,054
–
(2,889)
1,599
(75)
(372)
1,317
Balance at 28 July 2017
Disposal – discontinued
operations
(Credit)/charge to the
Consolidated Income
Statement
Items taken directly to other
comprehensive income
Items taken directly to equity
Foreign exchange
Balance at 3 August 2018
(Credit)/charge to the
consolidated income
statement
Items taken directly to other
comprehensive income
Items taken directly to equity
Foreign exchange
Balance at 31 July 2019
Accelerated
tax
depreciation
£’000
Retirement
benefits
obligations
£’000
Rolled over
capital gains
£’000
Short-term
timing
differences
£’000
Share
options
£’000
Acquired
intangible
assets
£’000
(201)
(2,727)
69
(1,060)
(30)
4,870
1,129
–
(153)
54
–
–
(8)
767
2,989
–
–
316
(138)
(782)
–
–
(56)
573
1,599
–
–
1,133
–
–
–
–
–
69
–
–
–
–
69
116
–
(37)
1,208
(202)
(223)
(1,977)
(2,501)
–
–
–
(1,146)
–
74
–
(179)
–
–
371
3,227
2,989
74
363
3,054
(767)
113
(1,315)
(2,889)
–
–
–
(1,913)
–
(75)
–
(141)
–
–
(316)
1,596
1,599
(75)
(372)
1,317
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when the deferred income taxes relate to the same fiscal authority.
1 4 7
Kin + Carta Annual Report and Accounts 2019OUR FIGURES NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
27. DEFERRED TAX continued
Unrecognised gross tax losses, all of which have an unlimited life, are as follows:
Unrecognised trading losses
Unrecognised capital losses
2019
£’000
643
15,567
16,210
2018
£’000
895
15,113
16,008
At the period end, the amount of future tax deductible charges in relation to goodwill amortisation in respect of
which no deferred tax assets have been recognised is £44.4 million.
28. RETIREMENT BENEFITS
Defined contribution schemes
The Group operates defined contribution schemes for all qualifying employees. The assets of the schemes are
held separately from those of the Group in funds under the control of the trustees. Payments to the schemes are
expensed to the Consolidated Income Statement as they fall due. The total expense recognised in the Consolidated
Income Statement for continuing operations of £2.3 million (2018: £2.0 million) represents contributions payable
to these schemes by the Group at rates specified in the rules of the schemes. At 31 July 2019, contributions of
£0.1 million (2018: £0.3 million) due in respect of the 2019 reporting period had not been paid over to the schemes.
The amounts were paid over subsequent to the balance sheet date, within the requisite time limits.
St Ives Defined Benefits Pension Scheme
The Group operates the St Ives Defined Benefits Pension Scheme (‘the Scheme’) with assets held in separate trustee
administered funds. Pension benefits are linked to a member’s final salary at retirement and their length of service.
The Scheme was closed to new entrants from 6 April 2002, and closed to future benefit accruals with effect from
31 August 2008.
The Scheme is a registered scheme under UK legislation and is contracted out of the State Second Pension. The
Scheme has one current participating employer, Kin and Carta plc.
The Scheme was established from 30 September 1988 under trust and is governed by the Scheme’s trust deed and
rules dated 23 April 1991 and subsequent amendments. The directors of St Ives Pension Scheme Trustees Limited
(‘the Trustees’) are responsible for the operation and the governance of the Scheme, including making decisions
regarding the defined benefits pension scheme’s funding and investment strategy in conjunction with the Company.
The most recent actuarial valuation completed by the Scheme had an effective date of 6 April 2016. Since then a
further valuation is in progress as at 6 April 2019 with the preliminary results prepared by XPS Pensions Limited.
The Scheme’s liability at 31 July 2019 have been estimated by updating the preliminary results as at 6 April 2019 by
allowing for the passage of time, the expected benefits paid from the Scheme and the change in assumptions. The
bid value of the Scheme’s assets as at 31 July 2019 has been provided by River and Mercantile Solutions.
The present value of the defined benefits obligation, and the related current service cost and past service cost, were
measured using the projected unit credit method.
The principal assumptions used for the purpose of the actuarial valuations are as follows:
2019
per
annum
2.15%
3.15%
nil
3.05%
2018
per
annum
2.70%
3.05%
nil
2.90%
Discount rate
Expected rate of inflation
Expected rate of salary increases
Future pension increases
1 4 8
Kin + Carta Annual Report and Accounts 2019OUR FIGURES 28. RETIREMENT BENEFITS continued
Assumed life expectancies for retirement at the age of 65 are as follows:
Members retiring immediately
Members retiring in 20 years’ time
2019
2018
Male
20.9
22.3
Female
22.9
24.4
Male
21.4
22.8
Female
23.3
24.9
The amount recognised in the Consolidated Balance Sheet in respect of the Scheme is as follows:
Present value of funded obligations
Fair value of Scheme assets
Retirement benefits surplus
2019
£’000
(379,227)
385,892
6,665
2018
£’000
(351,591)
353,449
1,858
Amounts recognised in the Consolidated Income Statement in respect of the Scheme as Adjusting Items are as
follows:
Scheme administrative costs (note 7)
Curtailment credit (note 7)
Interest costs on defined benefit pension scheme obligations (note 9)
Investment income on defined benefit pension scheme assets (note 9)
Service cost – past service cost (GMP equalisation uplift) (note 7)
2019
£’000
502
–
9,358
(9,388)
4,126
4,598
2018
£’000
617
(1,261)
9,359
(9,035)
–
(320)
Amounts recognised in the Consolidated Statement of Comprehensive Income in respect of the Scheme are as
follows:
Net measurement – (losses)/gains – financial
Net measurement – gains/(losses) – experience
Net measurement – gains – demographic
Return on assets, in excess of interest income recorded in the Consolidated Income
Statement
Changes in the present value of the Scheme obligations are as follows:
Opening defined benefits obligation
Interest cost
Net measurement – losses/(gains) – financial
Net measurement – gains – demographic
Net measurement – (gains)/losses – experience
Curtailment credit
Benefits paid
Past service cost – GMP equalisation uplift
Closing defined benefits obligation
2019
£’000
(40,961)
3,034
9,591
34,542
6,206
2019
£’000
351,591
9,358
40,961
(9,591)
(3,034)
–
(14,184)
4,126
379,227
2018
£’000
6,242
(1,603)
2,370
3,949
10,958
2018
£’000
370,535
9,359
(6,242)
(2,370)
1,603
(1,261)
(20,033)
–
351,591
The Group has an unconditional right to a refund of any surplus at the end of the Scheme’s duration.
1 4 9
Kin + Carta Annual Report and Accounts 2019OUR FIGURES NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
28. RETIREMENT BENEFITS continued
Changes in the fair value of the Scheme assets are as follows:
Opening fair value of Scheme assets
Interest income on Scheme assets
Return on assets, in excess of interest income, recorded in the
Consolidated Statement of Comprehensive Income
Contributions by employer
Benefits paid
Scheme administrative cost
Closing fair value of Scheme assets
The fair value of the Scheme assets at the balance sheet date is analysed as follows:
Equity instruments
Bonds
Other
2019
£’000
353,449
9,388
34,542
3,199
(14,184)
(502)
385,892
Value at
31 July
2019
£’000
208,320
161,047
16,525
385,892
2018
£’000
354,494
9,035
3,949
6,621
(20,033)
(617)
353,449
Value at
3 August
2018
£’000
188,686
146,602
18,161
353,449
The Scheme’s assets do not include any of the Group’s own financial instruments, nor any property occupied by or
other assets used by the Group.
The Scheme exposes the Group to actuarial risks such as market (investment) risk, interest rate risk, inflation risk and
longevity risk. The defined benefits pension scheme does not expose the Group to any unusual scheme-specific or
company-specific risk.
Investment risk: the Scheme holds some of its investments in asset classes, such as equities, which have volatile
market values and, while these assets are expected to provide the best returns over the long term, any short-term
volatility could cause additional funding to be required. Derivative contracts are used from time to time which would
limit losses in the event of a fall in equity markets.
Interest rate risk: the Scheme’s liabilities are assessed using market rates of interest to discount the liabilities and are
therefore subject to any volatility in the movement of the market rate of interest. The net interest income or expense
recognised as an Adjusting Item in the Consolidated Income Statement is also calculated using the market rate of
interest. The Scheme’s swap investments are expected to provide a degree of protection from any movement in the
market rate of interest.
Inflation risk: a significant proportion of the benefits under the Scheme are linked to inflation. Although the Scheme’s
assets are expected to provide a hedge against inflation over the long term, rising inflation over the short term could
lead to an increase in the deficit. The Scheme’s swap investments are expected to provide a degree of protection
from any short-term inflationary movements.
Longevity risk: in the event that members live longer than assumed, the liabilities may be understated, and thus
increasing any deficit.
A sensitivity analysis of the principal assumptions used to measure the defined benefits pension obligation as at
31 July 2019 is analysed as follows:
Discount rate
Rate of Inflation (‘RPI’)
Assumed life expectancy at age 65
1 5 0
Change in assumption
Increase by 0.5%
Increase by 0.5%
Increase by 1 year
Impact on the defined
benefits pension
obligation
Decrease by 8%
Increase by 7%
Increase by 5%
Kin + Carta Annual Report and Accounts 2019OUR FIGURES 28. RETIREMENT BENEFITS continued
The Scheme’s investment strategy is to invest broadly 65% in return-seeking assets and 35% in matching assets
(mainly government bonds). The strategy reflects the Scheme’s liability profile and the Trustees’ and Group’s attitude
to risk.
As at 31 July 2019, 58% of the Scheme’s assets are quoted in active markets and 42% are unquoted.
The last funding valuation of the Scheme was as at 6 April 2016 and revealed a funding deficit of £42.8 million. The
Company agreed to pay £2.6 million per year with a view to eliminating the shortfall by August 2026. The Company
has also agreed to pay £400,000 per year towards the cost of running the Scheme. As at 31 July 2019, the triennial
full actuarial calculation for the Scheme is ongoing.
The liabilities of the Scheme are based on the current value of expected benefit payment cashflows to members of
the Scheme over the next 75 years. The average duration of the liabilities is approximately 18 years.
The Scheme has one current participating employer; Kin and Carta plc. Kin and Carta plc is responsible for paying all
contributions to the Scheme. Kin and Carta plc has an unconditional right to a refund of any surplus in the defined
benefits pension scheme at the end of the Scheme’s duration. Kin and Carta plc is also liable for all the liabilities on
wind-up or withdrawal from the Scheme in accordance with the Scheme’s trust deed and rules.
29. FINANCIAL INSTRUMENTS
The financial instruments by category and maturity profile are as follows:
Financial instrument category
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Derivative financial instruments – liabilities
Deferred consideration payable
Amortised
cost
£’000
40,911
22,017
27,479
–
–
Note
20
20
22
21
12
Fair value
through profit
and loss
£’000
Maturity
profile
–
–
–
158
2,000
Less than 12 months
Less than 12 months
Less than 12 months
Less than 12 months
Less than 12 months
The maturity profile is based on the remaining period between the balance sheet date and the contractual maturity
date of the Group’s financial assets/liabilities at 31 July 2019, based on contractual undiscounted receipts/payments.
30. FINANCIAL RISK MANAGEMENT
The Group’s Treasury function is responsible for managing the Group’s exposure to financial risk and operates within
a defined set of policies and procedures reviewed and approved by the Board.
These risks include market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity
risk and cash flow interest rate risk. The Group does not enter into or trade financial instruments, including derivative
financial instruments for speculative purposes.
At the 2019 period end the Group’s borrowings consisted of various loan drawdowns under the Group’s revolving
multicurrency credit facility. As at 31 July 2019 all of the Group’s borrowings were set to mature within one to four
months. The loan drawdowns are interest-bearing and are recorded on an undiscounted basis. Under the terms of
the new and previous facility, the Group has the right to renew these borrowings until the expiration of the facility.
Interest rate risk
The Group carries a cash flow risk where there are changes in the interest rate levied on the Group’s borrowings as
currently interest on the Group’s borrowings is at floating rates. The Group finances its operations through a mixture of
retained earnings and bank borrowings. Group policy is to constantly review the exposure risk to interest rate fluctuations
in relation to the risk as a proportion of Group earnings and wherever possible with matching short-term deposits of
surplus funds. The Group is not subject to fair value interest rate risk as the majority of debt is at floating rates.
1 5 1
Kin + Carta Annual Report and Accounts 2019OUR FIGURES NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
30. FINANCIAL RISK MANAGEMENT continued
Interest rate management
An analysis of financial assets and liabilities exposed to interest rate risk by currency are set out below:
Financial assets subject to interest rate risk
Sterling
US Dollar
Euro
Singapore Dollar
Argentine Peso
Chinese Yuan
2019
£’000
5,912
14,796
984
67
236
22
22,017
2018
£’000
1,499
11,865
799
95
115
25
14,398
The Group’s financial assets comprise cash and cash equivalents, all of which attract interest at the relevant base rate.
Financial liabilities subject to interest rate risk
Sterling bank loans
US Dollar bank loans
2019
£’000
40,000
20,416
60,416
2018
£’000
25,000
15,363
40,363
The Group’s financial liabilities comprise loan borrowings which bear interest at floating rates based upon Sterling
and US Dollar LIBOR, and overdraft borrowings which bear interest at floating rates based upon UK bank base rate.
Interest rate sensitivity analysis
The analysis shows the additional charge to the Consolidated Income Statement assuming that the amount of the
liability outstanding at the balance sheet date was outstanding for the entire period.
100% movement in Sterling LIBOR
2019
£’000
465
2018
£’000
324
The changes would not have impacted other equity reserves as all interest-bearing financial assets and liabilities are
subject to floating interest rates and their fair values do not fluctuate with changes in interest rates.
Foreign exchange risk
From time to time the Group enters into contracts to supply services to customers trading in the following regions:
• Europe at prices denominated in Euros.
• USA at prices denominated in US Dollars.
• Singapore at prices denominated in Singapore Dollars.
• China at prices denominated in Chinese Yuan.
• Canada at prices denominated in CAD Dollars.
Forward foreign exchange contracts
The Group enters into forward foreign exchange contracts to cover specific foreign currency payments and receipts
and to manage the risk associated with anticipated sale and purchase transactions.
Forward foreign exchange contracts have been used to hedge the exchange rate risk arising from these
commitments which are designated as cash flow hedges. As at 31 July 2019, the aggregate amount of unrealised
loss under forward foreign exchange contracts deferred in the hedging reserve relating to the exposure on trade
receivables and anticipated sale transactions amounted to £200,000. It is anticipated that the sales receipts will
occur in the 12 months following the balance sheet date.
1 5 2
Kin + Carta Annual Report and Accounts 2019OUR FIGURES 30. FINANCIAL RISK MANAGEMENT continued
The following table details the forward currency contracts outstanding at the period end:
Sell US Dollars (up to 12 months)
Sell CAD Dollars (up to 12 months)
Sell Euros (up to 12 months)
Average
exchange rate
Sterling : foreign
currency
1.31
1.77
1.16
Foreign
currency
’000
388
162
2,768
Contract
value
£’000
297
91
2,389
Notional
value
£’000
317
101
2,517
Exchange rate sensitivity analysis
As at 31 July 2019, $25 million were drawn in US Dollars on the revolving credit facility.
Credit risk
The Group’s principal financial assets are bank balances and cash, trade and other receivables, which represent
the Group’s maximum exposure to credit risk in relation to financial assets. The Group’s credit risk is primarily
attributable to its trade receivables. The amounts presented in the Consolidated Balance Sheet are net of provision
for impairment of trade receivables, estimated by the Group’s management based on prior experience and their
assessment of the current economic environment. The Group’s credit risk is relatively low as the Group maintains
credit insurance for all of its UK and US operations up to a maximum aggregate claim in any one year of £8.5 million.
In addition, its UK subsidiaries’ sales are principally with a large number of counterparties and customers in the UK,
and are denominated in Sterling.
Before accepting any new customers, the Group uses an external credit scoring system to assess the potential
customer’s credit quality and defines credit limits by customer. Limits and scoring attributed to customers are
reviewed regularly.
Included in the Group’s trade receivables balance are debtors with a carrying amount of £4.4 million (2018: £5.7 million)
which are past due at the reporting date for which the Group has not provided as there has not been a significant
change in credit quality and the amounts are still considered recoverable. The Group does not hold any collateral over
these balances.
Ageing of impaired receivables
Between 0 and 59 days
Between 60 and 89 days
Between 90 and 119 days
120 days and above
Movement in provision for impairment of trade receivables
Balance at the beginning of the period
Impairment losses recognised
Impairment losses reversed
Balance at the end of the period
2019
£’000
65
312
535
76
988
2019
£’000
1,456
193
(661)
988
2018
£’000
343
430
346
337
1,456
2018
£’000
1,991
166
(701)
1,456
Consideration of expected credit losses
In determining the recoverability of a trade receivable the Group considers any change in the quality of the trade
receivable from the date the credit was initially granted up to the reporting date. The concentration of credit risk is
limited due to the customer base being large and unrelated, and being covered by credit insurance arrangements.
Accordingly, the Directors believe that there is no further credit provision required in excess of the provision for
impairment of trade receivables already recognised.
1 5 3
Kin + Carta Annual Report and Accounts 2019OUR FIGURES NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
30. FINANCIAL RISK MANAGEMENT continued
Ageing of past due but not impaired receivables
Between 0 and 59 days
Between 60 and 89 days
Between 90 and 119 days
2019
£’000
3,779
244
391
4,414
2018
£’000
5,199
484
–
5,683
Liquidity risk
The Group’s policy is to maintain flexibility with respect to its liquidity position, by utilising short-term cash deposits
and, where necessary, short-term bank borrowings for working capital and longer-term borrowings for capital
expenditure requirements. During the current period the Group negotiated a revolving credit facility from £95.0 million
to £85.0 million. Up to £7.5 million of this facility can be drawn as an overdraft facility. The facility agreement will
expire on 30 November 2022. The contractual maturities of drawn down borrowings, as well as undrawn facilities,
are detailed in note 23.
Capital risk management
The Group manages its capital to ensure that entities in the Group will each be able to continue as a going concern
while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital
structure of the Group consists of debt, which includes the borrowings disclosed in note 23, cash and cash
equivalents, and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained
earnings as disclosed in the Consolidated Statement of Changes in Equity. The Board has reviewed and discussed the
Group’s funding requirements and concluded that the Group is well served by its current funding arrangements and
does not see any need to adjust the Group’s capital in order to meet its objectives.
During the current period the Group reduced its revolving credit facility from £95 million to £85 million. Interest
on loan drawdowns is charged at LIBOR plus a margin which varied between 1.75% and 2.00%, depending on the
ratio of the Group’s net debt to EBITDA excluding Adjusting Items. Interest on overdraft drawdowns is charged at an
average rate of 1.65% over UK base rate and 2.25% over US base rate dependent on the currency of the loan.
The Group is subject to covenants on its borrowings (further discussed in the Financial Review on page 32) which
could be considered an externally imposed capital requirement. The Board continually monitors the Group’s
performance against its banking covenants and undertakes monthly reviews of working capital, cash forecast,
deferred/contingent consideration and headroom on banking covenants. At the period end the Group’s leverage ratio
was 1.7 times (2018: 1.1 times) and interest cover was 9 times (2018: 8 times). The covenant criteria throughout the
financial period required the Group’s leverage ratio to be less than 2.5 and interest cover to be greater than 4. The
Group has fully complied with the requirements of these covenants during the period under review and expects to
continue to do so.
31. SHARE CAPITAL
Issued and fully paid:
At 3 August 2018 and at 31 July 2019
Number of
shares
Ordinary shares
of 10p each
£’000
153,426,476
15,343
All authorised and issued share capital is represented by equity shareholdings. The number of authorised and issued
Kin and Carta plc ordinary shares as at 1 October 2019 was 153,426,476.
1 5 4
Kin + Carta Annual Report and Accounts 2019OUR FIGURES 32. ADDITIONAL PAID-IN CAPITAL
Balance at 28 July 2017
Transfer of contingent consideration deemed as
remuneration
Balance at 3 August 2018
Transfer of contingent consideration deemed as
remuneration
Balance at 31 July 2019
Share
premium
£’000
60,237
–
60,237
–
60,237
Merger
Reserve
£’000
8,943
119
9,062
128
9,190
Capital
redemption
reserve
£’000
Total
£’000
1,238
70,418
–
1,238
–
1,238
119
70,537
128
70,665
The additional paid in capital includes share premium, the capital redemption reserve and the merger reserve. The
capital redemption reserve represents the buyback of the Kin and Carta plc ordinary shares in prior periods. The
merger reserve was derived from acquisitions made in prior periods.
33. OTHER RESERVES
Other reserves in the Consolidated Statement of Changes in Equity is made up of additional paid in capital as
detailed in note 32 above along with the following:
• ESOP reserve representing Kin and Carta plc ordinary shares held in the Group’s Employee Benefit Trust.
• A portfolio of treasury shares consisting of 90,637 Kin and Carta plc ordinary shares held by the Company as at
31 July 2019 (2018: 90,637 Kin and Carta plc ordinary shares).
• Share option reserve representing the cumulative charge related to the options granted to the Group’s employees
over Kin and Carta plc ordinary shares.
• Hedging and translation reserve which includes amounts relating to foreign translation differences arising on the
retranslation of reserves due to the Group’s presentation in Sterling.
1 5 5
Kin + Carta Annual Report and Accounts 2019OUR FIGURES NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
34. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
2019
£’000
Profit/(loss) from continuing operations
Profit from discontinued operations
Adjustments for:
Depreciation of property, plant and equipment
Share of profit from joint arrangement
Disbursement from joint arrangement
Impairment losses related to continuing operations
Impairment losses related to discontinued operations
Amortisation of intangible assets
Profit on disposal of subsidiaries
Profit on disposal of property, plant and equipment
Share-based payment (credit)/charge
Settlement of share-based payment
Increase/(decrease) in defined benefits pension scheme obligations
Remeasurement of deferred consideration
Charge for contingent consideration required to be treated as remuneration
Increase in provisions
Operating cash inflows before movements in working capital
(Increase)/decrease in receivables
Decrease in inventory
Decrease in payables
Increase/(decrease) in deferred income
Cash generated from operations
4,265
–
2,648
(169)
–
159
–
6,823
–
(1,766)
(650)
172
1,429
–
2,375
491
15,777
(181)
–
(6,856)
249
8,989
Analysis of financing liabilities
Bank loans – current
Bank loans – non-current
3 August
2018
£’000
40,363
–
40,363
Financing
cash flow
£’000
–
59,446
59,446
Non-cash changes
Repayment
£’000
(40,363)
–
(40,363)
Foreign
exchange gains
£’000
–
970
970
2018
£’000
(28,153)
3,850
3,905
(569)
876
12,082
18,833
8,683
(18,334)
(1,501)
1,274
–
(7,882)
3,094
23,994
1,402
21,554
9,620
662
(4,587)
(1,401)
25,848
31 July
2019
£’000
–
60,416
60,416
Cash and cash equivalents (which are presented as a single class of assets on the face of the Consolidated Balance
Sheet) comprise cash at bank and other short-term highly liquid investments with a maturity of three months or less.
The effective interest rates on cash and cash equivalents are based on current market rates.
1 5 6
Kin + Carta Annual Report and Accounts 2019OUR FIGURES 35. CAPITAL AND OTHER COMMITMENTS
At 31 July 2019, the Group had outstanding commitments for the future minimum lease payments under non-
cancellable operating leases as follows:
Within one year
Between one and five years
After five years
2019
Land and
buildings
£’000
6,584
11,725
11,423
29,732
2019
Other
£’000
81
30
–
111
2018
Land and
buildings
£’000
7,378
16,924
10,052
34,354
2018
Other
£’000
51
58
–
109
36. SHARE-BASED PAYMENTS
The Company operates a number of share-based payment schemes for certain employees of the Group.
Long-term Incentive Plan 2010 (‘LTIP’)
Executive Directors and certain members of senior management have been granted nil-cost share options under
the Company’s long-term incentive plan. Details of the LTIP are included on page 78 of the Directors’ Remuneration
Report.
Number of options
Outstanding at the beginning of the period
Granted during the period
Lapsed during the period
Outstanding at the end of the period
Exercisable at the end of the period
Estimated % of options vesting over next three years
2019
’000
2018
’000
4,364
2,266
(2,906)
3,724
–
83%
3,230
2,964
(1,830)
4,364
–
66%
The fair value of the options granted in the current period under the LTIP scheme were measured using a Black–
Scholes options pricing model. The inputs to the model are:
Weighted average mid-market share price (pence)
Weighted average exercise price
Expected life
Expected volatility
Risk-free rate
Dividend yield
Weighted average fair value of the options (pence)
LTIP
0.99
£nil
3 years
29.17%
2.00%
4.00%
0.88
Save As You Earn Share Option Plan (‘Sharesave Plan’)
The Company has granted share options to eligible employees under an HMRC-approved all-employee Sharesave
Plan. Details of the plan are included on page 78 of the Directors’ Remuneration Report.
A reconciliation of the movement in the share options is shown below:
Outstanding at the beginning of the period
Granted during the period
Lapsed during the period
Outstanding at the end of the period
Exercisable at the end of the period
Estimated % of options vesting in the future years
Number of options
Weighted average
exercise price
2019
’000
919
454
(722)
651
–
100%
2018
’000
1,329
–
(410)
919
919
100%
2019
pence
1.18
0.83
1.18
0.94
–
2018
pence
1.18
–
1.18
1.18
1.18
1 5 7
Kin + Carta Annual Report and Accounts 2019OUR FIGURES NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
36. SHARE-BASED PAYMENTS continued
The Group recognised a credit of £0.7 million (2018: charge of £1.3 million) relating to equity-settled share-based
payments other than in the context of acquisitions. The exercise price of options outstanding at 31 July 2019 ranges
between £nil and £1.18.
Share-based contingent consideration required to be treated as remuneration
The Group recognised a share-based credit of £0.7 million (2018: £6.0 million) relating to contingent consideration for
acquisitions made in prior periods, which is recorded as part of deemed remuneration in Adjusting Items (note 7).
The Group acquired several entities in prior periods for which consideration was paid partly in the form of Kin and
Carta plc ordinary shares. The shares were contingent on continuous employment of certain former shareholders and
are treated as share-based payments, in accordance with IFRS 2. All options either vested or were exercised during
the period as follows:
Realise Limited
The Health Hive
Group Limited
Solstice
Consulting LLC
Fripp, Sandeman
and Partners
Limited
Number of options
Outstanding at the beginning of the period
Lapsed during the period
Vested during the period
Exercised during the period
Outstanding at the end of the period
The App Business Limited
Number of options
Outstanding at the beginning of the period
Lapsed during the period
Exercised during the period
Outstanding at the end of the period
Exercisable at the end of the period
Estimated % of options vesting in the future years
2018
’000
273
–
(273)
–
–
2018
’000
384
–
(384)
–
–
2018
’000
7,058
(2,161)
–
(4,897)
–
2019
’000
4,078
–
(4,078)
–
–
–
2018
’000
–
206
–
(206)
–
2018
’000
6,984
(1,299)
(1,607)
4,078
–
100%
The fair value of the options granted were measured using a Black–Scholes option pricing model. The inputs to the
model were:
Weighted average mid-market share price
Weighted average exercise price
Expected life
Expected volatility
Risk-free rate
Dividend yield
Weighted average fair value of the options
2019
£1.47
£1.18
3 years
37.19%
2.00%
5.00%
£1.57
1 5 8
Kin + Carta Annual Report and Accounts 2019OUR FIGURES 37. HEDGING AND TRANSLATION RESERVES
Hedging reserve and translation reserve
The reserve represents the cumulative amount of gains and losses on hedging instruments deemed effective in cash
flow hedges and the translation of the net assets of the Group’s foreign operations, which relate to subsidiaries only,
from their functional currency into the parent’s functional currency, being Sterling.
Gains and losses transferred from the hedging and translation reserves into the Consolidated Income Statement
during the period are included in the following line items in the Consolidated Income Statement:
Revenue
2019
£’000
(201)
2018
£’000
265
38. 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 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 £0.5 million (2018: £0.2 million) from Loop Integration LLC and the Group incurred £6,000
in charges (2018: £19,000) for services received. The Group also received a dividend of £nil (2018: £0.4 million). At the
reporting date, Loop Integration LLC owed the Group £93,000 (2018: £8,000) for services rendered and £123,000 (2018:
£nil) for a loan balance outstanding.
Aggregate Directors’ remuneration
The Group considers the Directors of Kin and Carta plc to be the key management personnel whose remuneration
is disclosed in the Directors’ Remuneration Report on page 84.
39. RESTATEMENT
Previously, the Group reported certain employee costs of the various businesses under cost of sales. The Group’s
accounting policy is to include these types of costs within selling costs and, accordingly, the comparatives have been
restated to ensure consistency. Additionally, the Group are reporting net revenue and therefore cost of sales are split
between project-related costs and cost of service.
Adjusted results:
Cost of sales
Project-related costs
Cost of service
Selling costs
Statutory results:
Cost of sales
Project-related costs
Cost of service
Selling costs
371 days to 3 August 2018
Before
restatement
£’000
(105,110)
–
–
(10,749)
(105,357)
–
–
(10,749)
Adjustments
£’000
Restated
£’000
105,110
(28,614)
(74,075)
(2,421)
105,357
(28,614)
(74,322)
(2,421)
–
(28,614)
(74,075)
(13,170)
–
(28,614)
(74,322)
(13,170)
1 5 9
Kin + Carta Annual Report and Accounts 2019OUR FIGURES NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
40. NET REVENUE
The Group reports net revenue as the Board believes it to be a more relevant growth metric for the business and
more closely aligns with technology consulting peers. It is more relevant because the Group is moving away from
project-related media buying and other pass-through costs which skews gross revenue metrics, and is focusing
on more DX-related business opportunities that are more indicative of its core business and underlying margin
generation.
Net revenue is calculated as revenue less project-related costs as shown on the Consolidated Income Statement.
Project-related costs are comprised primarily of third party pass-through expenses as well as direct third party
services attributable to a project. These costs typically include amounts payable to external suppliers where they are
engaged, at the Group’s discretion, to perform a specific part of the performance obligation under a contract with
the client, other than the costs of certain freelance contractors and agency staff.
Cost of service includes the costs of directly employed staff, freelance contractors and agency staff who are engaged
in the delivery of performance obligations under client contracts.
41. LIST OF UNDERTAKINGS
In accordance with section 409 of the Companies Act 2006, a full list of related undertakings, the country of incorporation,
the registered office address and the percentage of equity owned is disclosed below, as at 31 July 2019.
Subsidiaries
Unless otherwise stated, the subsidiary undertakings below are wholly owned and the share capital disclosed
comprises ordinary shares (or the local equivalent thereof) which are directly or indirectly held by Kin and Carta plc.
These undertakings are controlled by the Group and their results are fully consolidated into the Group’s financial
statements.
As at 31 July 2019, the trading subsidiaries were as follows:
Principal subsidiaries
Amaze Limited
Amaze (Europe) Limited
Amaze Communication Services Limited
Branded3 Search Limited
eBee Limited
Edit Agency Limited
Fripp, Sandeman and Partners Limited
Incite Marketing Planning Limited
Incite Marketing Planning Singapore Pte Ltd
Incite New York LLC
Kin and Carta Partnerships Limited
Occam DM Limited
Pollen Health Limited
Pragma Consulting Limited
Realise Limited
Solstice Consulting LLC
Solstice Mobile Argentina Srl
The App Business Limited
The Health Hive Limited
Note
a
a
a
a, k
a
a
a
a, m
b
c, o
a, t
a, n
a
a
d
e, o
f
a
a
Place of incorporation
Nature of business
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
Singapore
United States of America
England and Wales
England and Wales
England and Wales
England and Wales
Scotland
United States of America
Argentina
England and Wales
England and Wales
Digital Transformation
Digital Transformation
Digital Transformation
Digital Transformation
Digital Transformation
Digital Transformation
Digital Transformation
Digital Transformation
Digital Transformation
Digital Transformation
Digital Transformation
Digital Transformation
Digital Transformation
Digital Transformation
Digital Transformation
Digital Transformation
Digital Transformation
Digital Transformation
Digital Transformation
1 6 0
Kin + Carta Annual Report and Accounts 2019OUR FIGURES 41. LIST OF UNDERTAKINGS continued
As at 31 July 2019, the other subsidiaries were as follows:
Other subsidiaries
Amaze (Holdings) Limited
Amaze Communication Services (Holdings) Limited
Amaze Technology Limited
Kin + Carta Limited
Kin and Carta Advisory Limited
Kin and Carta Advisory LLC
Kin and Carta Belgium SPRL
Kin and Carta Holdings Limited
Kin and Carta Illinois LLC
Kin and Carta Marketing Services (Delaware) LLC
Kin and Carta Marketing Services Limited
Okana Systems Limited
Pollen Health (US) LLC
Pragma Holdings Limited
Realise Holdings Limited
Relish Agency Limited
Response One Holdings Limited
Solstice Consulting Argentina LLC
Solstice Consulting Latin America LLC
SouthWest Mailing Limited
St Ives Blackburn Limited
Non-trading subsidiaries
St Ives Burnley Limited
St Ives Direct Edenbridge Limited
St Ives Direct Leeds Limited
St Ives Financial Limited
St Ives Marketing Services (Singapore) Pte Ltd
St Ives Pension Scheme Trustees Limited
St Ives Westerham Press Limited
The Health Hive (US) LLC
The Health Hive Group Limited
Note
a
a
a
a
a, q
c, o, r
i
a, s
g, o, u
c, o, v
a, w
a, p
c, o
a
d
a
a, l
h, o
h, o
a
a
Place of incorporation
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
United States of America
Belgium
England and Wales
United States of America
United States of America
England and Wales
England and Wales
United States of America
England and Wales
Scotland
England and Wales
England and Wales
United States of America
United States of America
England and Wales
England and Wales
Note
Place of incorporation
a
a
a
a
j
a
a
England and Wales
England and Wales
England and Wales
England and Wales
Singapore
England and Wales
England and Wales
c, o United States of America
England and Wales
a
Other related undertaking
The related undertaking below is recognised using the equity method of accounting and the membership interest
disclosed is held by a subsidiary of the Group.
Other related undertaking
Loop Integration LLC
Note
c, o
Percentage
50
1 6 1
Kin + Carta Annual Report and Accounts 2019OUR FIGURES NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
41. LIST OF UNDERTAKINGS continued
Notes
a. Registered office: One Tudor Street, London EC4Y 0AH, United Kingdom
b. Registered office: 36 Armenian Street #04–02, 179934, Singapore
c. Registered office: 200 Bellevue Parkway, Suite 210, Wilmington, Delaware 19809, United States
d. Registered office: Quay House, 142 Commercial Street, Edinburgh EH6 6LB, United Kingdom
e. Registered office: 208 South LaSalle Street, Suite 814, Chicago, Illinois 60604, United States
f. Registered office: Aguirre 1169, Ciudad Autonoma de Buenos Aires, Argentina
g. Registered office: 100 N. LaSalle, Suite 500, Chicago, Illinois 60602, United States
h. Registered office: 160 Greentree Drive, Suite 101, Dover, Delaware 19904, United States
i. Registered office: 1000 Bruxelles, Avenue du Port 86C, Boîte 204, Belgium
j. Registered office: 38 Beach Road, #29–11 South Beach Tower, 189767, Singapore
k. Share classes: Ordinary, A Ordinary, B Ordinary
l. Share classes: A Ordinary, B Ordinary
m. Share classes: A, B, C, D and F Ordinary
n. Share classes: Ordinary, A Preferred Ordinary, B Ordinary, C Ordinary, D Ordinary, Deferred Ordinary
o. Share classes: Membership interest
p. Share classes: Ordinary and A Ordinary
q. On 24 July 2019, Kin and Carta Consulting Limited changed its name to Kin and Carta Advisory Limited
r. On 24 July 2019, Pragma Consulting US LLC changed its name to Kin and Carta Advisory LLC
s. On 8 November 2018, St Ives Holdings Limited changed its name to Kin and Carta Holdings Limited
t. On 19 August 2019, My Bench Limited changed its name to Kin and Carta Partnerships Limited
u. On 23 January 2019, St Ives Illinois LLC changed its name to Kin and Carta Illinois LLC
v. On 23 January 2019, St Ives Marketing Services (Delaware) LLC changed its name to Kin and Carta Marketing
Services (Delaware) LLC
w. On 25 September 2018, St Ives Marketing Services Limited changed its name to Kin and Carta Marketing
Services Limited
1 6 2
Kin + Carta Annual Report and Accounts 2019OUR FIGURES COMPANY BALANCE SHEET
NO. 01552113
REGISTERED IN ENGLAND AND WALES
Fixed assets
Tangible assets
Intangible assets
Investment property
Investments
Retirement benefit surplus
Current assets
Cash and bank
Debtors due within one year
Derivative financial instruments
Assets held for sale
Creditors: amounts falling due within one year
Bank loans and overdrafts
Trade and other creditors
Derivative financial instruments
Net current liabilities
Total assets less current liabilities
Creditors: Amounts falling due after more than one year
Bank loans and overdrafts
Deferred tax
Provisions
Net assets
Capital and reserves
Share capital
Share premium account
Other reserves
Profit and loss account
Total equity
31 July
2019
£’000
3 August
2018
£’000
Note
5
6
7
9
14
10
11
8
12
12
11
12
12
14
15
15
16
467
458
5,106
211,348
6,665
224,044
1,559
4,736
–
–
6,295
–
(15,979)
(136)
(9,820)
214,224
(60,416)
(1,347)
(1,605)
150,856
15,343
60,237
11,048
64,228
150,856
1,159
198
4,618
227,821
1,858
235,654
–
7,915
291
5,281
13,487
(66,370)
(34,097)
(8)
(86,988)
148,666
–
(1,103)
(1,187)
146,376
15,343
60,237
17,287
53,509
146,376
The profit for the financial period for the Company was £0.6 million (2018: loss of £27.2 million).
These financial statements were approved by the Board of Directors on 1 October 2019 and signed on its behalf by
J Schwan
Chris Kutsor
C H I E F E X E C U T I V E O F F I C E R
C H I E F F I N A N C I A L O F F I C E R
1 6 3
Kin + Carta Annual Report and Accounts 2019OUR FIGURES COMPANY STATEMENT OF
CHANGES IN EQUITY
Share
capital
£’000
Share
premium
account
£’000
14,284 60,237
–
–
Merger
reserve
£’000
8,943
–
Capital
redemption
reserve
£’000
1,238
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,059
–
–
–
15,343 60,237
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
119
–
–
–
9,062
–
–
–
–
–
–
128
–
–
–
–
–
–
–
–
–
–
1,238
–
–
–
–
–
–
–
–
–
–
–
–
15,343 60,237
–
–
9,190
–
–
1,238
Balance at 28 July 2017
Loss for the period
Other comprehensive income:
Items that will not be
reclassified subsequently to
profit or loss
Actuarial gain on defined
benefits pension scheme
Tax charge on items taken
directly to equity
Total comprehensive expense
Dividends
Recognition of share-based
contingent consideration
deemed as remuneration
Transfer of share-based
contingent consideration
deemed as remuneration
Recognition of share-based
payments
Settlement of share-based
payments
Tax on share-based payments
Balance at 3 August 2018
Profit for the period
Other comprehensive income:
Items that will not be
reclassified subsequently to
profit or loss
Actuarial gain on defined
benefits pension scheme
Tax charge on items taken
directly to equity
Total comprehensive income
Dividends
Recognition of share-based
contingent consideration
deemed as remuneration
Transfer of share-based
contingent consideration
deemed as remuneration
Recognition of share-based
payments
Settlement of share-based
payments
Tax on share-based payments
Balance at 31 July 2019
1 6 4
ESOP
reserve
£’000
Treasury
shares
£’000
Share
option
reserve
£’000
Profit
and loss
account
£’000
Total
£’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(163)
–
7,900 67,215 159,654
(27,156)
– (27,156)
–
– 10,958 10,958
(1,731)
–
(1,731)
– (17,929) (17,929)
(2,784)
–
(2,784)
–
–
–
–
–
6,016
–
6,016
–
–
–
–
(163)
–
(6,865)
6,965
219
1,274
1,274
42
–
(1,101)
(74)
–
(74)
7,150 53,509 146,376
577
577
–
–
–
–
–
–
–
–
–
–
6,206
6,206
(991)
5,792
(2,990)
(991)
5,792
(2,990)
–
1,669
–
1,669
(185)
–
164
–
(21)
–
–
–
–
(163)
(7,440)
7,909
412
(650)
–
(650)
172
75
804 64,228 150,856
8
–
75
Kin + Carta Annual Report and Accounts 2019OUR FIGURES NOTES TO THE COMPANY
FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
The separate financial statements of the Company are presented as required by the Companies Act 2006. The
financial statements have been prepared in accordance with FRS 101 Reduced Disclosure Framework as issued
by the Financial Reporting Council.
Financial Reporting Standard 1 – reduced disclosure exemptions
The Company is taking advantage of the applicable disclosure exemptions permitted by FRS 101 in its financial
statements, which are summarised below:
Standard
Disclosure exemption
IFRS 2, Share-based Payment
• Para 45(b) – number and weighted average exercise prices of share
options
• Para 46–52 – fair value disclosures for share options
IFRS 7, Financial Instruments: Disclosures • Full exemption
IFRS 13, Fair Value Measurement
• Para 91–99 – disclosure of valuation techniques and inputs used for
IAS 1, Presentation of the Financial
Statements
IAS 7, Statement of Cash Flows
IAS 8, Accounting Policies, Changes in
Accounting Estimates and Errors
fair value measurement of assets and liabilities
• Para 10(d) – statement of cash flows
• Para 10(f) – a statement of financial position as at the beginning of
the preceding period when an entity applies an accounting policy
retrospectively or makes a retrospective statement of items in its financial
statements, or when it reclassifies items in its financial statements
• Para 16 – statement of compliance with all IFRS
• Para 38 – present comparative information in respect of paragraph
79(a)(iv) of IAS 1
• Para 38A – requirement for minimum of two primary statements,
including cash flow statements
• Para 38B–D – additional comparative information
• Para 40A–D – requirements for a third statement of financial position
• Para 111 – cash flow statement information
• Para 134–136 – capital management disclosures
• Full exemption
• Para 30 and 31 – requirement for the disclosure of information when
an entity has not applied a new IFRS that has been issued but is not
yet effective
IAS 24, Related Party Disclosures
• Para 17 and 18A– key management compensation
• The requirements to disclose related party transactions entered into
between two or more members of a group, provided that any subsidiary
which is a party to the transaction is wholly owned by such a member
The equivalent disclosures are given in the consolidated financial statements on pages 117 to 162 and notes 1 to 41.
As permitted by section 408(3) of the Companies Act 2006, the income statement of the Company is not presented
in this Annual Report. The Company has not published its individual cash flow statement as its liquidity, solvency and
financial adaptability are dependent on the Group rather than its own cash flows.
The principal accounting policies adopted are the same as those set out in note 2 to the consolidated financial
statements except as noted below.
The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company
has adequate resources to continue in operational existence for the foreseeable future (for a minimum of 12 months
from the date of approval of these financial statements). Thus they continue to adopt the going concern basis of
accounting in preparing the financial statements under the historical cost convention. Further detail is contained in
the Directors’ Report on pages 95 and 96.
(a) Investments
Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment.
1 6 5
Kin + Carta Annual Report and Accounts 2019OUR FIGURES NOTES TO THE COMPANY
FINANCIAL STATEMENTS CONTINUED
2. PROFIT FROM OPERATIONS
As permitted by Section 408 of the Companies Act 2006, no profit and loss account of the Company is included
in these financial statements. The profit for the financial period for the Company was £0.6 million (2018: loss of
£27.2 million).
3. AUDITORS’ REMUNERATION
Fees paid to the auditors in respect of their audit of the Company were £178,000 (2018: £185,000).
4. EMPLOYEE INFORMATION
The average monthly number of employees (including Executive Directors) was:
Administration
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Other pension costs
Share-based payment
2019
Number
51
2019
£’000
4,671
248
53
–
4,972
2018
Number
65
2018
£’000
5,151
392
88
1,274
6,905
Disclosure of individual Directors’ remuneration, share options, long-term incentive schemes, pension contributions
and pension entitlements required by the Companies Act 2006 and those elements specified for audit by the
Financial Conduct Authority are shown in the tables in the Directors’ Remuneration Report on pages 75 to 94 and
form part of these parent Company financial statements. Further details of share-based payments are contained in
note 36 to the consolidated financial statements.
1 6 6
Kin + Carta Annual Report and Accounts 2019OUR FIGURES Land and
buildings
Short leases
£’000
Plant and
machinery
£’000
Asset under
construction
£’000
Fixtures, fittings,
equipment and
motor vehicles
£’000
659
41
–
700
122
–
–
–
822
395
66
–
461
136
–
597
225
239
1,956
54
(46)
1,964
35
(1,326)
–
–
673
1,793
56
(42)
1,807
62
(1,299)
570
103
157
–
656
–
656
400
(341)
(715)
–
–
–
–
–
–
–
–
–
656
319
60
–
379
74
(50)
–
–
403
240
32
–
272
37
(45)
264
139
107
5. TANGIBLE ASSETS
Cost:
At 28 July 2017
Additions
Disposals
At 3 August 2018
Additions
Disposals
Transfer to software
Transfers to investment property
At 31 July 2019
Accumulated depreciation and impairment:
At 28 July 2017
Charge
Disposals
At 3 August 2018
Charge
Disposals
At 31 July 2019
Net book value:
At 31 July 2019
At 3 August 2018
6. INTANGIBLE ASSETS
Cost:
At 28 July 2017
Additions
Disposals
At 3 August 2018
Additions
Disposals
Transfer from assets under construction
At 31 July 2019
Accumulated depreciation and impairment:
At 28 July 2017
Charge
Disposals
At 3 August 2018
Charge
Disposals
At 31 July 2019
Net book value:
At 31 July 2019
At 3 August 2018
Total
£’000
2,934
811
(46)
3,699
631
(1,376)
(341)
(715)
1,898
2,428
154
(42)
2,540
235
(1,344)
1,431
467
1,159
Software
£’000
2,317
18
(1)
2,334
141
(2,168)
341
648
2,012
125
(1)
2,136
86
(2,032)
190
458
198
1 6 7
Kin + Carta Annual Report and Accounts 2019OUR FIGURES NOTES TO THE COMPANY
FINANCIAL STATEMENTS CONTINUED
7. INVESTMENT PROPERTY
Cost:
At 28 July 2017
Disposals
Reclassification to assets held for sale
At 3 August 2018
Additions
Transfer from assets under construction
At 31 July 2019
Accumulated depreciation and impairment:
At 28 July 2017
Charge
Disposals
Reclassification to assets held for sale
At 3 August 2018
Charge
At 31 July 2019
Net book value:
At 31 July 2019
At 3 August 2018
Investment
property
£’000
15,219
(1,599)
(6,427)
7,193
18
715
7,926
3,602
267
(148)
(1,146)
2,575
245
2,820
5,106
4,618
At 31 July 2019, the fair value of investment properties is not materially different from its netbook value of £5.1 million.
This was arrived at on the basis of a valuation carried out by CBRE, independent valuers not connected with the Group.
The valuation conforms to International Valuation Standards.
Within investment property, the Company has freehold land with a net book value of £0.2 million (2018: £0.2 million),
these assets have not been depreciated.
Rental income of £0.8 million (2018: £1.2 million) in relation to the investment properties have been recorded
in the profit and loss account in the current period.
8. ASSETS HELD FOR SALE
As at 3 August 2018 there were assets held for sale of £5.3 million. These were disposed of in the current year;
see note 7 of the consolidated financial statements.
9. INVESTMENTS
At 4 August 2018
Impairment
Loan advances
Loan repayments
Foreign exchange revaluation
At 31 July 2019
Shares in
subsidiaries at
cost
£’000
78,840
(2,459)
–
–
–
76,381
Loans to
subsidiaries
£’000
148,981
–
15,517
(31,188)
1,657
134,967
Total
£’000
227,821
(2,459)
15,517
(31,188)
1,657
211,348
All of the above are unlisted investments. The principal trading subsidiaries are listed in note 41 of the consolidated
financial statements.
1 6 8
Kin + Carta Annual Report and Accounts 2019OUR FIGURES 10. DEBTORS
Within one year
Amounts owed by Group undertakings
Other debtors
Corporation tax recoverable
Prepayments and accrued income
11. DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial assets
Forward foreign currency contracts
Derivative financial liabilities
Forward foreign currency contracts
12. CREDITORS
Amounts falling due within one year:
Bank loans and overdrafts (note 13)
Trade and other creditors:
Amounts owing to Group undertakings
Consideration payable on purchase of subsidiaries
Trade creditors
Corporation tax payable
Tax and social security
Other creditors
Accruals and deferred income
Amounts falling due after more than one year:
Bank loans and overdrafts (note 13)
Deferred tax
The net deferred tax liabilities/(assets) provided in the financial statements are as follows:
Capital allowances in excess of depreciation
Temporary differences on share options
Other timing differences
Provisions
Retirement benefits obligations
2019
£’000
3,365
62
–
1,309
4,736
2019
£’000
–
2019
£’000
136
2019
£’000
2018
£’000
5,395
361
1,413
746
7,915
2018
£’000
291
2018
£’000
8
2018
£’000
–
66,370
4,943
2,000
1,101
1,967
366
263
5,339
15,979
2019
£’000
60,416
1,347
61,763
2019
£’000
379
(140)
489
(514)
1,133
1,347
5,933
17,818
1,031
–
888
6,490
1,937
34,097
2018
£’000
–
1,103
1,103
2018
£’000
458
(178)
507
–
316
1,103
The Finance Act 2015 provides for reductions in the main rate of corporation tax from 20% to 19% effective from
1 April 2017, and to 18% effective from 1 April 2020. In the Finance Act 2016, the Government announced further
reductions in the main tax rate down to 17% effective from 1 April 2020.
1 6 9
Kin + Carta Annual Report and Accounts 2019OUR FIGURES NOTES TO THE COMPANY
FINANCIAL STATEMENTS CONTINUED
13. BORROWINGS AND FINANCE OBLIGATIONS
Amounts falling due within one year
Bank overdrafts
Bank loans
Amounts falling due after more than one year
Bank loans
2019
£’000
2018
£’000
–
–
–
26,007
40,363
66,370
60,416
–
Bank overdrafts and loans
During the year, the Company refinanced its debt and now has access to a multicurrency credit facility and now has
access to a multicurrency credit facility of £85 million which is due to expire on 30 November 2022; of this up to
£7.5 million can be drawn as an overdraft facility. Interest on loan drawdowns is charged at LIBOR plus a margin
which varies between 1.75% and 2.00%, depending on the ratio of the Group’s net debt to EBITDA excluding
Adjusting Items. Interest on overdraft drawdowns is charged at an average rate of 1.65% over the UK base rate.
As at 31 July 2019, the Group’s outstanding loans within this facility were £60.4 million (2018: £40.4 million).
The undrawn portion of this facility at 31 July 2019 was £24.6 million (2018: £54.6 million).
The Company’s overdraft is guaranteed by certain UK subsidiary undertakings and the Company guarantees the
loans and overdrafts of those UK subsidiary undertakings. At 31 July 2019, the aggregate liability for the Company
under this guarantee amounted to £60.4 million (2018: £66.8 million). The aggregate value of overdraft liabilities
belonging to these subsidiaries which are guaranteed by the Company amounted to £8.2 million (2018: £Nil).
At 31 July 2019, there was no loan or overdraft secured against the assets of the Company (2018: £Nil). The
Directors consider that the carrying amount of the loans and overdrafts approximates their fair value.
The Company has guaranteed amounts payable to certain property landlords and suppliers and customers of its trading
subsidiaries. The maximum aggregate liability under these financial guarantees is £26.7 million (2018: £31.1 million).
14. PROVISIONS
Provision for repairs
Provision for reorganisation
At 4 August 2018
Charge to profit and loss account
Utilisation
At 31 July 2019
2019
£’000
1,060
545
1,605
Provision for
repairs
£’000
Provision for
reorganisation
£’000
420
640
–
1,060
767
74
(296)
545
2018
£’000
420
767
1,187
Total
£’000
1,187
714
(296)
1,605
The provision for repairs at 31 July 2019 relates to the dilapidation of properties, for which the Company is responsible.
Provisions held as at 31 July 2019 are estimated to be utilised between financial periods ending 2020 and 2021.
1 7 0
Kin + Carta Annual Report and Accounts 2019OUR FIGURES 15. RETIREMENT BENEFIT
The provision for reorganisation provision comprises of onerous leases on properties.
Retirement benefit surplus
2019
Currency
6,665
2018
Currency
1,858
The Company participates in both the defined benefit and defined contribution schemes operated by Kin and Carta
Group plc. The assets and liabilities of the defined benefit scheme are held in separate trustee-administered funds.
The pension costs are based on pension costs across the Group as a whole. For the defined contribution scheme, the
profit and loss charge represents contributions payable.
The Group is required to account for the defined benefit scheme under International Accounting Standard 19 −
Employee Benefits (‘IAS 19’). The IAS 19 disclosures are included in note 28 to the consolidated financial statements.
16. CALLED UP SHARE CAPITAL AND SHARE PREMIUM ACCOUNT
All authorised and issued share capital is represented by equity shareholdings. Further information on equity can
be found in note 31 of the consolidated financial statements.
Issued and fully paid:
At 3 August 2018 and at 31 July 2019
Number of
shares
Ordinary shares
of 10p each
£’000
Share premium
account
£’000
153,426,476
15,343
60,237
All authorised and issued share capital is represented by equity shareholdings. The number of authorised and issued
Kin and Carta plc ordinary shares at 1 October 2019 was 153,426,476.
17. OTHER RESERVES
The movements in reserves are disclosed in the Company Statement of Changes in Equity.
At 31 July 2019, the Company held a portfolio of treasury shares consisting of 90,637 Kin and Carta plc ordinary
shares.
Details of dividends can be found in note 13 to the consolidated financial statements.
18. OPERATING LEASE COMMITMENTS
At 31 July 2019, the Company had outstanding commitments for the future minimum lease payments under non-
cancellable operating leases as follows:
Within one year
Between one and five years
2019
Land and
buildings
£’000
414
103
517
2019
Other
£’000
5
2
7
2018
Land and
buildings
£’000
414
517
931
2018
Other
£’000
10
8
18
19. RELATED PARTY TRANSACTIONS
Details on related party transactions can be found in note 38 to the consolidated financial statements.
1 7 1
Kin + Carta Annual Report and Accounts 2019OUR FIGURES NOTES TO THE COMPANY
FINANCIAL STATEMENTS CONTINUED
20. STATEMENT OF GUARANTEE
The Company has signed a statement of guarantee in respect of the liabilities of a number of subsidiary companies
as at 31 July 2019 under section 479C of the Companies Act 2006. As a result, the following subsidiaries are exempt
from the requirements of the UK Companies Act 2006 in relation to the audit of individual accounts for the period
ended 31 July 2019 by virtue of s479A of that Act:
Company
registration
number
6418202
2051287
2670935
6479012
6844490
1284879
09569438
05095081
7839170
2184185
6423579
07661730
6417738
06385430
11403627
11442056
00190460
08417677
3877530
190460
11456907
6724581
05502768
1396772
5464477
00565977
3067683
00872411
02286545
483880
SC306420
Company
Amaze (Europe) Limited
Amaze Communication Services Limited
Amaze Communication Services (Holdings) Limited
Branded3 Search Limited
eBee Limited
Fripp, Sandeman and Partners Limited
Kin and Carta Partnerships Limited
Occam DM Limited
Pollen Health Limited
Pragma Consulting Limited
The Health Hive Limited
The Health Hive Group Limited
Amaze (Holdings) Limited
Amaze Technology Limited
Kin + Carta Limited
Kin and Carta Advisory Limited
Kin and Carta Holdings Limited
Kin and Carta Marketing Services Limited
Okana Systems Limited
Pragma Holdings Limited
Relish Agency Limited
Response One Holdings Limited
SouthWest Mailing Limited
St Ives Blackburn Limited
St Ives Burnley Limited
St Ives Direct Edenbridge Limited
St Ives Direct Leeds Limited
St Ives Financial Limited
St Ives Pension Scheme Trustees Limited
St Ives Westerham Press Limited
Realise Holdings Limited
1 7 2
Kin + Carta Annual Report and Accounts 2019OUR FIGURES SHAREHOLDER INFORMATION
CORPORATE INFORMATION
Further information about the Group can be found on
our website: www.kinandcarta.com
Alternatively, you can email your query to our registrars
at shareholderenquiries@linkgroup.co.uk although, for
legal reasons, they may subsequently require you to
confirm any instruction in writing.
OUR PRINCIPAL ADVISERS
Stockbrokers
Numis Securities Limited, The London Stock Exchange
Building, 10 Paternoster Square, London EC4M 7LT
Financial advisers
N.M. Rothschild & Sons Limited, New Court, St.
Swithin’s Lane, London EC4N 8AL
Bankers
HSBC Bank plc, 60 Queen Victoria Street,
London EC4N 4TR
Fifth Third Bank, 68 King William Street, London,
United Kingdom EC4N 7DZ
The Governor and Company of the Bank of Ireland,
Bow Bells House, 1 Bread Street, London EC4M 9BE
Solicitors
Herbert Smith Freehills LLP, Exchange House,
Primrose Street, London EC2A 2EG
This year’s Annual Report and Accounts, as well as
copies of past years’ Annual Reports and Accounts, Half
Year Statements and Shareholder circulars, are available
to view and download from our investor website.
Regulatory announcements and press releases made
during the year, and in past years, are also available to
view in the Regulatory News section of the investor
website at: https://investors.kinandcarta.com
Should you wish to receive further copies of the
Annual Report and Accounts, please contact the
Company Secretary, Kin and Carta plc, One Tudor
Street, London EC4Y 0AH.
SHARES
Kin and Carta plc ordinary shares of 10 pence each
are listed on the London Stock Exchange and trade
under the symbol: KCT. Our International Securities
Identification Number (‘ISIN’) is GB0007689002 and
our Stock Exchange Daily Official List (‘SEDOL’) number
is 768900.
Share price information and our latest regulatory
announcements can be obtained from the Stock
Exchange website, www.londonstockexchange.com.
SHAREHOLDING ENQUIRIES
Kin and Carta plc’s register is maintained by Link Asset
Services, who are able to deal with shareholders’
queries, including in respect of any of the following
matters:
•
transfer of shares;
• change of name or address;
•
•
•
•
registering the death of a shareholder;
lost share certificates;
lost or out-of-date dividend warrants; and
the payment of dividends directly into bank or
building society accounts.
Their contact details are: Kin and Carta plc Shareholder
Services, Link Asset Services, The Registry, 34 Beckenham
Road, Beckenham, Kent BR3 4TU.
Link’s shareholder helpline telephone number is
0871 664 0300 (calls cost 12 pence per minute
plus network extras). If calling from overseas, please
telephone +44 (0) 371 664 0300. Lines are open from
9.00 a.m. to 5.30 p.m., Monday to Friday.
1 7 3
Kin + Carta Annual Report and Accounts 2019OUR FIGURES FINANCIAL CALENDAR
FINANCIAL YEAR ENDED 3 AUGUST 2018
Record date for final dividend
Annual General Meeting 2018
Payment date for final dividend of 1.30p per ordinary share
FINANCIAL YEAR ENDED 31 JULY 2019
Half year end
Announcement of half year results
Record date for interim dividend
Payment date for interim dividend of 0.65p per ordinary share
Financial year end
Announcement of full year results
Ex-dividend date
Record date for proposed final dividend
Annual General Meeting 2019
Payment date for proposed final dividend of 1.30p per ordinary share
FINANCIAL YEAR ENDING 31 JULY 2020
Half year end
Announcement of half year results
Financial year end
23 November 2018
29 November 2018
17 December 2018
31 January 2019
12 March 2019
12 April 2019
10 May 2019
31 July 2019
2 October 2019
21 November 2019
22 November 2019
5 December 2019
17 December 2019*
31 January 2020
March 2020
31 July 2020
* If approved by shareholders at the 2019 Annual General Meeting the proposed final dividend will be paid on 17 December 2019.
DIVIDEND REINVESTMENT PLAN
The Dividend Reinvestment Plan (the Plan) can be a convenient and easy way to build up your shareholding by using
your cash dividends to buy more shares in the Company. The Plan is provided by Link Asset Services (‘Link’), a trading
name of Link Market Services Trustees Limited, which is authorised and regulated by the Financial Conduct Authority
(‘FCA’).
Should you require any further information, please do not hesitate to contact Link Asset Services on 0871 664
0300. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom
are charged at the applicable international rate. Lines are open between 9.00 a.m. to 5.30 p.m. Monday to Friday
excluding public holidays in England and Wales. Alternatively, please email shares@linkgroup.co.uk or log on to
www.kinandcarta-shares.co.uk.
UNAUTHORISED BROKERS (‘BOILER ROOM SCAMS’)
It is very unlikely that a reputable authorised firm that a shareholder has had no relationship with would make
contact out of the blue offering to buy Kin + Carta’s shares or offer other investment opportunities.
Therefore, shareholders are advised to be wary of anyone offering to give unsolicited advice, buy shares at a
discount or give free company reports. These calls are typically from overseas-based ‘brokers’ who target UK
shareholders, offering to sell them what are often worthless or high-risk shares in US or UK investments. This sharp
practice is commonly known as a ‘boiler room scam’. If you receive any unsolicited investment advice:
• make sure you get the correct name of the person or organisation;
• check that they are properly authorised by the FCA before taking any action by visiting: www.fsa.gov.uk/register/
home.do;
•
report the matter to the FCA either by calling their Consumer Helpline (0800 111 6768) or by completing an
online form at: www.fca.org.uk/scams; and
•
if calls persist, hang up.
1 74
Kin + Carta Annual Report and Accounts 2019OUR FIGURES This Annual Report is printed by an FSC® (Forest Stewardship Council) certified
printer using vegetable-based inks.
This report has been printed on Magno silk, a white coated paper and board using
100% EFC pulp.
Designed and published by Jones and Palmer
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Kin and Carta plc
One Tudor Street
London
EC4Y 0AH
Telephone
Email
Website
+44 (0) 20 7928 8844
hello@kinandcarta.com
www.kinandcarta.com