Next Fifteen profits drop from £6m to £2.1m

Full-year results for Bite owner Next Fifteen show its pre-tax profits have dropped despite revenue growth of 5 per cent in the year to 31 July.

Tim Dyson: Next Fifteen chief executive
Tim Dyson: Next Fifteen chief executive

Some, but far from all, of the fall was a result of costs associated with both previously known and apparently new accounting and financial issues at Bite.

The latter consists of a £1.7m writedown in the value of goodwill relating to the acquisition of what became Bite Germany following a management restructure and accounting errors.

The previously known fraud at Bite’s US operations, uncovered in 2012, resulted in a charge of £526,000 this year.

Next Fifteen said these were accounting issues "that can be contained and solved" and were not evidence of a flawed business model.

The group pointed to record revenues of £96.1m after a 4.8 per cent year-on-year increase as proof of its adaptation to the changing needs of clients.

However, the top line growth’s effect on the bottom line was diminished by an 8.8 per cent increase in staff costs, to £68.2m, and a 9.1 per cent increase in "other operating costs", to £19.2m.

Richard Eyre, chairman of Next Fifteen, said: "While this has been a tough year, it remains a year of progress in many ways.

"Indeed, the group has made a good start to the current financial year and has already added work from clients such as Sainsbury’s and HBO."

The group’s performance within individual markets was challenging in the UK and Asia-Pacific, where revenues fell 3 per cent and 2 per cent respectively, and flat in Europe.

There was 10 per cent growth in the US, the group’s largest market.

The company’s share price, which a profit warning and the departure of its finance director sent down from 92 pence to 70 pence last week, was around the 73 pence level in early trading this morning.

Next Fifteen owns a range of agencies including Text 100, Beyond, Connections Media, OutCast, M Booth and the Blueshirt Group.

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