Huntsworth returns to profit in H1 as Grayling is back in black

Huntsworth swung into profit in the first half of 2017, with its PR agency Grayling also returning to the black, following a period of restructuring.

CEO Paul Taaffe: 'Our momentum going into the second half remains strong'
CEO Paul Taaffe: 'Our momentum going into the second half remains strong'

The company, which also owns Red, Citigate Dewe Rogerson and Huntsworth Health, reported a pre-tax profit of £9.2m ($12m) in H1, turning around a pre-tax loss of £8.9m ($11.6m) in the same period last year.

Excluding factors such as acquisition costs and reduced asset values, pre-tax profit rose 58 per cent to £10m ($13m).

Revenue rose nine per cent to £94.2m ($122.6m), with growth of seven per cent on a like-for-like basis.

Huntsworth Health once more led the growth; like-for-like revenue in that division rose 19.6 per cent to £55.4m ($72.1m), aided by a strong US dollar.

Operating margins rose from 8.5 per cent to 11.5 per cent, primarily reflecting strong growth from Huntsworth Health and Grayling's return to profitability, Huntsworth said. The improved performance encouraged the company to increase dividends from 50p to 55p per share.

Net debt fell from £37.1m ($48.3m) to £26.8m ($34.9m).

Grayling

Grayling reported operating profit of £0.4m ($0.5m) in the first half of 2017, against an operating loss of £0.1m in the same period in 2016. This is despite revenue falling 24 per cent (or 13 per cent on a like-for-like basis) to £21m ($27.3m).

Huntsworth said the performance in is "in line with our expectations as we develop Grayling into a more focused business that operates profitable agencies".

Grayling’s business in continental Europe, the UK, and the Middle East and Africa are all now profitable, Huntsworth said, with the US arm set to return to profitability by the start of 2018, following a restructure.

Continental Europe remains the "strongest and most profitable part of the division" but had a "mixed" H1 with "good growth" in Eastern Europe offset by a "disappointing performance" in Western Europe – like-for-like revenue in the region fell six per cent.

Huntsworth said there was "good progress" in the UK following a restructure in 2015/2016 and reduced property costs, with the business "retaining a number of major clients, generating positive net new client wins and attracting high-quality new talent".

In the US, Grayling’s federal lobbying business in Washington DC "remains profitable", while its general PR business "continues to transition to a broader client portfolio".

After Grayling exited Turkey and Qatar "due to extremely difficult trading and political conditions", the division is now focused on the UAE and Kenya, which both made "strong progress" in the period.

Huntsworth Health

Huntsworth said the division’s growth was driven by its largest agencies; like-for-like revenue at full-service digital consumer shop Evoke Health and medical communications and market access agency Apothecom rose 26.4 per cent and 15.3 per cent respectively.

Profit margins across the division were in line with 2016, at 19.2 per cent, despite continued investments.

"New business momentum remains good going into H2, although revenue growth will be slower than H1, which was exceptionally high," the firm added.

Huntsworth said the addition of The Creative Engagement Group (TCEG), the 260-strong healthcare group acquired earlier this month for £24.7m ($32.1m), to Huntsworth Health "should allow TCEG to grow its US revenues from its current level of around one third of total revenues".

Red

Red "performed well" in H1, Huntsworth said, with revenue up five per cent to £6.9m ($9m). Operating profit grew 16 per cent to £1.4m ($1.8m), with margins improving from 18.2 per cent to 20.1 per cent.

However, the company predicted slower growth in H2 "following some movements in the client portfolio".

Citigate

Revenue at Huntsworth’s financial and corporate PR shop rose two per cent to £10.9m ($14.2m), largely due to positive exchange rates. Like-for-like revenue fell three per cent and margins fell to 13 per cent, from 15.1 per cent in H1 2016.

The company said the decrease was primarily driven by Asia Pacific. Like-for-like revenue in China and Singapore fell 14 per cent and nine per cent respectively, "reflecting a quieter transaction market in these regions".

Trading in the UK was "mixed", with "a strong performance from financial PR with some notable project wins, offset by a weaker performance from corporate PR". There was a "small fall" in like-for-like revenue and margins in the UK, resulting in an "adjustment to staffing levels".

Continental Europe was "broadly flat", with "a strong performance in the Netherlands largely offset by a weaker performance in France".

Commenting on Huntsworth's H1 performance, CEO Paul Taaffe said: "The group grew very strongly through the first half of 2017 led by Huntsworth Health being assisted by favourable movements in exchange rates.

"Grayling has responded well to last year’s restructuring with a return to profit. Our momentum going into the second half remains strong, driven by continued growth at Huntsworth Health, the first-time impact of the TCEG acquisition and improving trading at Grayling."

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