Huntsworth plans acquisition drive after annual profits and revenue fall

Grayling and Citigate parent company Huntsworth has promised an acquisition drive in growth markets as it announced a 10.6 per cent drop in pre-tax profits for the year ended 31 December 2013.

Huntsworth chief executive Lord Chadlington: prioritising digital acquisitions in Asia-Pacific
Huntsworth chief executive Lord Chadlington: prioritising digital acquisitions in Asia-Pacific

The plan involves a deepening of its relationship with strategic partner BlueFocus, the China-based marketing group which this time last year agreed to buy 19.8 per cent of UK-listed Huntsworth.

BlueFocus and Huntsworth have signed a framework agreement for a joint venture, which the latter’s chief executive Lord Chadlington said would invest in growth countries, and especially in digitally strong firms in Asia-Pacific, "to complete the Huntsworth/BlueFocus global network".

Discussions envisage Huntsworth having a majority 51 per cent stake and managing and consolidating any acquisitions. Each party would invest up to £50m over the first three years, subject to approval by the Huntsworth board and Chinese regulators.

The move follows a year in which Huntsworth’s pre-tax profits dropped from £22.5m in 2012 to £20.1m (both figures exclude exceptional items, such as a £3.7m restructuring cost in 2013).

Huntsworth said profits were held back by its decision to use the capital injection from BlueFocus to increase its investment in its business. The investment, which totalled £4.4m in 2013, will continue this year to position it for an anticipated upturn in PR spending.

Revenues declined from £173m to £171.7m, a like-for-like decline of 1.7 per cent that continued with a 2.5 per cent drop in the first quarter of 2014.

Huntsworth blamed this fall on its dependence on the economies of the UK and Europe, which the BlueFocus partnership is helping it to break.

The fortunes of the group’s flagship global network Grayling accounted for much of the revenue decline. Grayling’s revenue dropped 6.4 per cent to £78.5m, which was attributed to depressed European markets. Huntsworth said Grayling’s investment in data and proprietary digital tools under new global chief executive Pete Pedersen was expected to moderate this decline.

However, the group’s next biggest division, Huntsworth Health, grew revenues by 7.1 per cent to £57.1m, with the company attributing this to the ongoing digitalisation of the division’s agencies.

Its financial PR network Citigate grew 1.1 per cent to £23.3m, with the recovery in IPO business helping it start to reverse last year’s 10.5 per cent revenue fall.

Its UK-focused consumer PR shop, The Red Consultancy, found its long run of top-line growth ending with a 7.2 per cent drop to £12.9m, though its operating profit climbed from £2.6m to £3.1m.  Huntsworth commented that 2013 saw consumer PR budgets come under intense pressure but Red is confident of returning to growth later this year.  

Today’s results announcement comes on the heels of Huntsworth board changes including the resignation of independent director Joe MacHale and chairman Richard Sharp’s decision not to seek re-election.

Yesterday the board appointed Lord Myners, the former City minister, as a senior independent director and Myners will become chairman if re-elected at the group’s forthcoming AGM.

Today Myners said: "I am looking forward both to working with my new colleagues and strategic partners in growing our business and pursuing value opportunities based on established international platforms, competencies and relationships."

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