LONDON: Next Fifteen has written off nearly $3 million in stolen assets due to a fraud case at Bite Communications' San Francisco office, the company said Tuesday in an earnings report for its 2012 fiscal year.
The holding company's profit before tax dropped 21% in the fiscal year ending July 31 to about $9.6 million, compared with the prior year.
The London-based holding company, which owns and operates Text 100, M Booth, The OutCast Agency, and Bite, among others, reported 6% overall revenue growth in the period, compared with the year prior, to about $146.7 million. Its adjusted pre-tax profit margin increased to 10.5% from 9.8% last fiscal year.
Its overall operating profit dropped 17.4% to $10.6 million, while its overall profit fell 18.2% to $6.9 million.
Next Fifteen said its technology PR segment, which accounts for two-thirds of its business, saw 2% revenue growth in the period to more than $97 million despite Bite losing business from Hewlett-Packard. Consumer PR revenue fell 6% to $24.1 million compared with the prior year “following a tough year for Lexis, which has been re-staffed and retooled considerably during the year,” the holding company said. Revenue in the corporate communications unit was up 31% to $10.6 million in the fiscal year.
“The transition from traditional PR services to more social and digital activities will generate mixed levels of growth across the business as new service lines replace the old,” Chairman Richard Eyre said in an earnings statement. “The digital investments made in the group continue to pay off, with organic growth substantially greater in those agencies that are further along the digital marketing path.”
The holding company's revenue numbers are dwarfed by those of the previous fiscal year, when it saw 18.9% growth to $135.4 million compared with FY 2010. Next Fifteen does not break out organic growth, which represents change in revenue without the impact of acquisitions or disposals.
Late last month, Next Fifteen delayed its earnings report after it uncovered a “complex fraud” in one of its subsidiaries. Eyre said in Tuesday's earnings report that the fraud took place in the San Francisco office of Bite “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 from the business, and will write off $200,000 in its current fiscal year.
Eyre added that the company's investigation into the matter is complete, but that investigations by the San Francisco Police Department and FBI are ongoing.
“I feel like we had a relative of Bernie Madoff working for us without us knowing,” CEO Tim Dyson told PRWeek at the time. “We expect the case will take many months to work its way through the legal systems due in part to its complexity.”
Bite Communications CEO Clive Armitage will leave the agency at the end of this year to start a digital marketing firm under Next Fifteen. Dyson said Armitage's move is not connected to the fraud case.