Full-year losses narrow at Huntsworth despite 'difficult' 2016 at Grayling

Huntsworth's losses narrowed in 2016 thanks to a strong performance from the holding company's health comms arm, and despite a "difficult" year for Grayling, whose like-for-like revenue fell 17.4 per cent.

CEO Paul Taaffe: Group is 'positioned for continued growth'
CEO Paul Taaffe: Group is 'positioned for continued growth'

The firm, which also owns Red and Citigate Dewe Rogerson, reported a pre-tax loss of £16.5m ($20.4m) in 2016, compared to £39.8m ($49.3m) in the previous year.

Excluding factors such as reduction in value of assets and restructuring costs of £1.6m ($2m), pre-tax profit was £16m ($20m), up from £13.3m ($16.5m) in 2015.

Revenue rose one per cent on a like-for-like basis to £180.1m ($223.2m). Overall growth was seven per cent, however, due to the impact of currency exchange rates, which boosted revenue by £14.1m ($17.5m) and operating profit by £1.8m ($2.2m). Just over half of the London-headquartered group's revenue is expressed in dollars.

Huntsworth Health continued to be the company’s strongest performer, growing like-for-like revenue 13.8 per cent to £90.8m ($112.5m) in 2016.

Like-for-like revenue grew 4.5 per cent at Citigate (to £22.1m, $27.4m) and four per cent at Red (to £13.3m, $16.5m), while Grayling’s revenue dropped 17.4 per cent on a like-for-like basis to £53.9m ($66.8m).

CEO Paul Taaffe, who has been overseeing a large-scale restructure at Huntsworth since joining in 2015, said: "The group has delivered a 21 per cent increase in headline profits as a result of strong growth in Huntsworth Health, Citigate Dewe Rogerson and Red, together with favourable movements in exchange rates.

"While Grayling declined, the restructuring is now complete and as a result the division is well-placed to return to profitability in 2017. The group is now positioned for continued growth, led by Huntsworth Health and supported by favourable exchange rates."

Agency performance

Grayling

Huntsworth’s troubled PR shop Grayling reported a loss of £0.8m ($1m), against a profit of £2.6m ($3.2m) in 2015, as the restructuring programme saw more closures and disposals of "loss-making operations". Grayling delivered a negative operating margin of 1.4 per cent.

Trading in the UK was "tough", as like-for-like revenue fell 23 per cent, although the firm said the benefits of the restructure were apparent in H2.

The US business underwent a "transitional year", as it exited its state and local lobbying activities, including selling Whiteboard Advisors in January 2017. "In the future, the division will be focused on higher value PR budgets, digital marketing and branding opportunities, all of which are expected to help the region return to growth."

Continental Europe outperformed, with like-for-like revenues down six per cent. Margins "broadly held up" in the region, where restructuring activity saw the closure of Grayling’s Swedish office at the end of 2016.

The MENA region had a "difficult trading year" with the loss of a major client and the end of one of its biggest projects.

The firm added: "2016 has been a difficult year for Grayling, but Q4 saw revenues stabilise, and with the actions taken over the past twelve months the division is in a good position to return to profitability in 2017."

Huntsworth Health

Operating profit at Huntsworth’s biggest division, which includes several health-related marcoms agencies, rose 33 per cent to £18.3m ($22.7m). Growth was driven by the US, where highlights included 15 per cent like-for-like revenue growth at its PR agency Tonic Life Communications.

Huntsworth said: "All agencies in Huntsworth Health have good momentum going into 2017 with a number of recent significant client wins. As such the division has the foundations for another year of strong revenue and operating profit growth in 2017."

Citigate Dewe Rogerson

Operating profit at Huntsworth’s financial and corporate comms agency rose from £3.1m ($3.8m) to £3.6m ($4.5m) in 2016, with margin growing from 15 to 16 per cent.

The business opened in New York in the period, with the combined UK/US business producing like-for-like revenue growth of 12 per cent "on fractionally lower margins".

Like-for-like revenue in Asia rose one per cent in a "tough marketplace" – margins there grew five per cent as the agency "focused on its operational efficiency".

"Tough comparatives" in Continental Europe left like-for-like revenue in that region down two per cent, although margins remained "strong".

Red

Huntsworth’s consumer agency "performed strongly in 2016 in what remains a highly competitive environment", the firm said. Operating profit rose from £2.6m ($3.2m) to £2.7m ($3.4m) and margins of 20 per cent were maintained.

New clients at Red in the year included soft drinks brand Robinson’s, plus Spotify, Gumtree and Trainline.


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