Full Year Results 12 months ended 31 December 2018 Chris Pullen Chief Executive Officer Mike Watts Chief Financial Officer 2018 strategic priorities Group Creating the platform for future growth Strategic Priority Status • Priority for Group capital allocation • On-going • Digital Strategy as key competitive differentiator • Worker engagement up 10 to 29 • Worker Experience Strategy – industry leading and unique • Attrition down 23% • Digital candidate attraction and on-boarding • Unique website visits up nearly 50% • New commercial approach • Early successes in contract negotiations • Improve commercial terms as a result of service differentiation Recruitment • New future service offering • Worker engagement as a service • Culture - fundamental change • Complete • Complete • PeoplePlus transition from Work Programme focussed • Final WP revenues in H1 2019 to UK’s leading skills and training business • Final exit costs incurred in 2018 • 10% share of growing Levy market • Market leading Apprenticeship Levy operator • LearnDirect fully integrated PeoplePlus • Improve contract portfolio to enhance quality of earnings • Strong progress 1 Full Year Results Group FY18 Financial Highlights Group revenue Up 18% Diluted EPS* Down 2% (2017: £958m) (2017: 112.6p) Recruitment up 21% £1,128m PeoplePlus down 6% 110.1p Group operating profit* Flat on 2017 Net Debt FY 2017: £16.5m, (2017: £39.1m) acquisitions: £49.6m Recruitment up 19% 1.44x underlying 2018 £39.1m PeoplePlus down 21% £63.0m EBITDA £150m re-financing Group operating margin* Down 60bps Final Dividend Dividend suspended (2017: 4.1%) Recruitment flat 3.5% PeoplePlus down nil 260bps * Underlying 2 Group Financial Performance FY18 Results Group Recruitment People Plus Total Group Recruitment People Plus Total Group FY 2018 FY 2018 FY 2018 FY 2017 FY 2017 FY 2017 £m’s £m’s £m’s £m’s £m’s £m’s Sales revenue 1,020.0 107.5 1,127.5 843.3 114.5 957.8 Gross profit 81.5 40.4 121.9 66.1 47.7 113.8 Gross profit margin 8.0% 37.6% 10.8% 7.8% 41.7% 11.9% Underlying operating 24.1 15.0 39.1 20.2 18.9 39.1 profit Operating profit margin 2.4% 14.0% 3.5% 2.4% 16.5% 4.1% • Group revenue up 17.7% of which 0.3% is organic. • Recruitment revenue growth of £176.7m (21.0%). Benefit of six acquisitions in year. Organic Recruitment growth £16.7m (1.9%) • Recruitment conversion of Gross Profit to Operating Profit constant at 30% vs 2017 • PeoplePlus revenue decline reflects Work Programme run off, but strong cost controls in place to limit margin fall • Group underlying operating profit margin reflects increased weighting towards Recruitment 4 FY18 Results Group Year ended 31 December Underlying 2018 Underlying 2017 • Final dividend suspended – Interim £m £m dividend was 11.3p Operating Profit 39.1 39.1 • Trading exceptional items Finance Costs (3.1) (2.8) • Provision for NMW remediation for Pre tax profit 36.0 36.3 historic underpayment of preparation Taxation (7.2) (7.3) time, plus associated HMRC penalty Post tax profit 28.8 29.0 • PeoplePlus transformation costs for Work Programme exit Dividend PS (p) 11.3 26.7 Basic Earnings PS (p) 110.1 113.2 • People - £4.2m Diluted Earnings PS (p) 110.1 112.6 • Properties - £3.7m Dividend cover (x) N/A 4.2 • IT costs - £2.7m Exceptional Items • Asset write down (non cash) Amortisation of intangible assets arising on • Acquisition deal fees 11.8 8.8 business combinations • Additional audit fees for extended Share based payment (credit)/charge 1.2 3.3 audit scope Reorganisation costs – cash 10.6 - Reorganisation costs – non cash 3.2 - NMW Remediation and Penalty 15.1 - Audit Fees 1.8 - Acquisition related costs 1.9 0.1 45.6 12.2 5 Net Debt Group 2018 net debt driven by working capital and M&A Key drivers of net debt increase Net debt increase includes acquisition costs of £49.6m 0.7 Working capital expansion timing impact 5.0 of £8.0m, comprising: 63.0 Late collections Deferred payments 49.6 LDA OLASS Structural working capital impact of 16.5 6.7 £9.0m, comprising: 2.7 7.1 Extended payment terms 6.4 M&A 6.4 43.7 VAT 17.0 Exceptional cash costs of £6.7m 31 Dec 2018 31 Dec 2017 WC £m £m Tax Other JSOP CAPEX Interest EBITDA Debt 79.2 47.8 Dividend Exceptional Acquisitions 2018 Net Debt 2018 Net Cash 16.2 31.3 Debt 2017 Net Net Debt 63.0 16.5 6 Recruitment FY18 Recruitment Headlines Financial highlights: Operational highlights: Revenue Technology Up 21% with organic • Clear market differentiation +2% and benefit of £1,020m acquisitions • Increased worker attraction and retention (2017: £843m) • Partner of choice Underlying Operating Profit Acquisitions Increased 19% (2017: £20.2m). • 6 acquisitions in year £24.1m Organic flat year • All fully Integrated, synergies achieved on year Profit margin Organic Growth In line with 2017 • Economic environment created Q4 headwinds 2.36% • Headwinds continued into H1 2019 • Worker supply remains strong 8 Recruitment update at a glance Recruitment • Size and scale providing resilience, but headwinds in • Consolidation trend continues 2019 • Growth opportunities with new and existing blue chip • Engagement platform provides competitive clients differentiation Customers’ locations Peak workforce 463 60,300 2017: 337 fully flexible workers Recruitment market Food share 11% 70% 2017: 9% of revenues 9 Customer Experience Recruitment Benefits delivered • NPS* increased by 10 points to 29 • 23% reduction in attrition Q4 on Q4 • 120% increase in candidate applications through the website • 11% increase in recruitment • Nearly 50% increase in unique visitors to our website – over 1m in last 12 months • Record 50,000 direct to Staffline website applications in May 19 * Net Promoter Score 10 Active contract management Recruitment leads to better margin Case Study • Delivered best and highest peak in December 2017 • Productivity per worker improved • NPS has improved from -22 in March to +4 in November • Worker retention higher than market average Through worker engagement and productivity initiatives, Staffline has secured a contract extension of 4 years and increased our hourly fee by c.30% 11 PeoplePlus FY18 PeoplePlus Headlines Financial highlights: Operational highlights: Revenue Completed transition to leading skills and training Down 6% as Work provider Programme runs off • Work programme ended March 2019 £107.5m (2017: £114.5m) • Non work programme revenue 73% of 2018 total Underlying Operating Profit Apprenticeship Levy Reduced 21% • Worked with >7,000 people in 2018 £15.0m (2017: £18.9m) • Key wins with Lloyds, William Hill, Royal Mail, Boden • Strong pipeline developed Costs reduced by Reduced 3% (includes costs New wins of LDA acquisition). Strong • ESFA - £35m over 27 months, up from £14m £3.1m cost control programme and • PEF - £105m TCV over 4 years – More than doubling our low operational gearing. existing business ESF – European Social Fund PEF – Prison Education Framework 13 Transition to Skills and Training PeoplePlus complete Work Programme Employability Justice Services • 9 contract package areas across • Local and devolved government • Prison Education – Market share England as Prime Provider contracts including key contract in increased to 25% from 10% Scotland • Contract end March 2019 • Community Rehabilitation • Business start-up services Company including New Enterprise Allowance 49% 27% 2% 9% 10% 16% 20% 23% 31% 2017 2018 2019 2017 2018 2019 2017 2018 2019 Skills Services Communities Northern Ireland • Adult Education – Prime Provider • Adult Social Care Services – • Skills and Employability led to Skills Funding Agency, Welsh Carers Hubs and Independent business with multiple contracts, Government and Skills Living Services including apprenticeship delivery Development Scotland • Innovative Youth Employment • Apprenticeships – Levy and non- Services Levy provision 13% 31% 41% 5% 5% 7% 4 % 4% 3% 2017 2018 2019 2017 2018 2019 2017 2018 2019 Percentage represents full year proportion of revenue for each sector for 2017, 2018 and 2019 14 Work Programme finalised PeoplePlus No further exit costs Contract variation in H2 2018 Work Programme finalised • Unilateral contract variation by Government • Last remaining customers were on programme until significantly reduced economics of operating and 31 March 2019 claiming “Sustainment Outcomes” previously • Last remaining “Job Outcomes” revenue claimable available until March 2021 until 30 Sep 2019 • Consequent early exit costs of property and people, booked as “exceptional cost” in 2018. No further exit costs Outstanding credentials. PeoplePlus transformation is complete PeoplePlus… • Now the UK’s market leading Skills and Training • Will exit the Work Programme as the long term top provider performing operator • Simplified operating model with no on-going Work • Helped c.460,000 of the UK’s long term unemployed Programme overhang back into sustainable work 15 Total business transformation PeoplePlus Jan 2018 Today 2020 - 2022 Customer Diversification Customer Diversification Customer Diversification • Work Programme >390 • Work Programme closed with <10 • Contract base more diversified colleagues engaged colleagues now engaged in across central, local and devolved • Central Government funding contract completion activities government – with multiple run off dominant • Circa £150m in new contracts dates • No private sector client announced in Q1 and win rate at 1 • Strong contract flows with over propositions beyond in 2 60% of revenues already secured apprenticeships • 35 new contracts live on 1st April (excluding apprenticeships) • Bid Engine in need of •