KCT.L Regulatory News (KCT)

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

For immediate release

23 July 2020

Kin and Carta plc

Financing and Trading Update

On 1 April 2020, Kin and Carta plc ("the Company") announced that it was in discussions with its banking syndicate which continues to be supportive of the business.

The Company's banks have agreed to increase the ceiling on its quarterly leverage covenant to up to 5.0 times EBITDA (previous 2.5 times) for four quarters commencing with the quarter ended 31 July 2020. This position provides significant headroom to the Company's base case forecasts and underpins the Company's confidence in its ability to trade through a further downturn if required. The Company's balance sheet remains resilient, with net debt expected to improve at the end of the financial year compared to the £39.5 million reported at 31 January 2020. The Company's revolving credit facility remains unchanged at £85 million and is committed until November 2022.

As also communicated on 1 April, the Company is working with the Trustees of the legacy defined benefit pension scheme. The Company and the Trustees have agreed to a deferral of deficit repair contributions for a period of five months which commenced in April. We anticipate finalising a revised schedule of future contributions under the recovery plan by mid-September 2020.

Trading Update

Following an encouraging start to our fiscal second half (1 February to 31 July 2020), organic net revenue for H2 is expected to decline c. 20% compared with the same period last year due to the effects of the COVID-19 pandemic. Including the Spire acquisition, we expect net revenue in H2 to decline c. 10% compared to the same period last year. We expect a similar level of profitability in the second half of the current financial year to the first half.

Whilst the pipeline has improved in the last 60 days, we expect the financial headwinds of the COVID-19 pandemic to continue into the first half of our next financial year, which starts on 1 August 2020.

Despite the near-term contractions in client spend, the pandemic has underlined the market's need for our digital capabilities. We have begun to see early indications of existing and new clients investing again in the digital transformation of their businesses, particularly in the areas of eCommerce, artificial intelligence and cloud and data modernisation. The strong start to the second half of the current financial year was driven by returns from our Connective strategy and partner channel investments which will continue to drive the Company's performance. The Board remains optimistic regarding medium and long-term client demand for the Company's digital transformation services.

The Company will update the market further at its preliminary results announcement in respect of the year ending 31 July 2020, which is expected to be issued in November 2020.

Enquiries:

Important notices

This announcement contains inside information and is issued on behalf of the Company by Daniel Fattal, Company Secretary.

Cautionary statement regarding forward-looking statements

This Announcement may contain "forward-looking statements" with respect to certain of the Company's plans and its current goals and expectations relating to its future financial condition, performance, strategic initiatives, objectives and results. Forward-looking statements sometimes use words such as "aim", "anticipate", "target", "expect", "estimate", "intend", "plan", "goal", "believe", "seek", "may", "could", "outlook" or other words of similar meaning. By their nature, all forward-looking statements involve risk and uncertainty because they are based on numerous assumptions regarding the Company's present and future business strategies, relate to future events and depend on circumstances which are or may be beyond the control of the Company which could cause actual results or trends to differ materially from those made in or suggested by the forward-looking statements in this Announcement, including, but not limited to, domestic and global economic business conditions; market-related risks such as fluctuations in interest rates; the policies and actions of governmental and regulatory authorities; the effect of competition, inflation and deflation; the effect of legislative, fiscal, tax and regulatory developments in the jurisdictions in which the Company and its respective affiliates operate; the effect of volatility in the equity, capital and credit markets on profitability and ability to access capital and credit; a decline in credit ratings of the Company; the effect of operational and integration risks; an unexpected decline in sales for the Company; inability to realise anticipated synergies; any limitations of internal financial reporting controls; and the loss of key personnel. Any forward-looking statements made in this Announcement by or on behalf of the Company speak only as of the date they are made. Save as required by the Market Abuse Regulation, the Disclosure Guidance and Transparency Rules, the Listing Rules or by law, the Company undertakes no obligation to update these forward-looking statements and will not publicly release any revisions it may make to these forward-looking statements that may occur due to any change in its expectations or to reflect events or circumstances after the date of this Announcement.