LONDON: Next Fifteen saw a 65% drop in pre-tax profit in the fiscal year ending July 31 to about $3.37 million, compared with FY 2012.
The holding company, which said last Tuesday that profit from the 2013 fiscal year would fall short of market expectations, saw 2% organic revenue growth in the 12-month period. The revenue increase was led by North American business.
Next Fifteen, which owns and operates Text 100, M Booth, Bite, The OutCast Agency, Beyond, and 463 Communications, among others, attributed most of its profit decline to challenges at Bite and “accounting issues in two of its 12 offices.”
Last October, the London-based umbrella group delayed its annual financial results due to the discovery of fraud in its Bite subsidiary. The incident took place in the agency's San Francisco office, orchestrated “by a long-standing member of the finance team in a trusted position.” In response, the company wrote off $2.8 million in cash stolen at that time, as well as $200,000 in its 2013 fiscal year.
Earlier this month, Next Fifteen finance director David Dewhurst stepped down from his role after 14 years at the company. In response, the “board is focused on bringing in an experienced leader for the finance function to further develop the finance and accounting infrastructure within the brands,” it said in an earnings statement.
The company added that it is seeking “full financial transparency but without impeding the entrepreneurial nature of the brands.”
Next Fifteen reported that Text 100, OutCast, M Booth, and the Blueshirt Group each earned record revenue in FY 2013, leading to revenue of $154.2 million for the holding company. US business saw 10% organic growth in revenue for the year.
In the second half of 2013, the group's US businesses grew 17% on an organic basis, accounting for 55% of Next Fifteen's overall revenue.
The holding company's overall operating profit dropped nearly 55% to $4.8 million from $190.6 million last year, while overall profit declined 83% to $1.16 million from $6.9 million in 2012.
"While this has been a tough year, it remains a year of progress in many ways," Next Fifteen Chairman Richard Eyre said in an earnings statement. "Record revenues and the steady transition of the business will underpin the future growth of the company. 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."
Bite has also seen a number of agency leadership changes in the past 12 months. Former Bite CEO Clive Armitage left the firm at the end of last year to start his own digital marketing agency under Next Fifteen. Holding company CEO Tim Dyson said Armitage's exit was not related to the fraud case.
Andy Cunningham, who was previously president of North America at Bite, succeeded Armitage as chief executive, but then stepped down in June to focus on SeriesC, the marketing consultancy she founded. Dyson has taken over the firm on an interim basis.
Last month, Bite appointed former Edelman SVP Sean Mills as the agency's regional director for North America.