LONDON: Grayling and Citigate parent company Huntsworth has promised an acquisition drive in growth markets as it disclosed a 10.6% drop in pre-tax profit in 2013.
The plan involves a deepening of its relationship with strategic partner BlueFocus, the China-based marketing group that agreed to buy 19.8% of UK-based Huntsworth at this time last year.
BlueFocus and Huntsworth have signed a framework for a joint venture, which the latter’s chief executive, Peter Chadlington, said would invest in growth countries, especially in digitally strong firms in Asia-Pacific, "to complete the Huntsworth-BlueFocus global network."
Huntsworth would have a 51% stake with say over managing and consolidating any acquisitions. Each party would invest up to £50 million, or about $84 million, over the first three years. The deal would be subject to approval by Huntsworth’s board and Chinese regulators.
The move follows a year in which Huntsworth’s pre-tax profits dropped from £22.5 million (about $37.8 million) in 2012 to £20.1 million (approximately $33.8 million). Both figures exclude exceptional items, such as a £3.7 million 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 more than $7 million last year, will continue this year to position it for an anticipated upturn in PR spending.
Revenue declined 1.7% on a like-for-like basis to about $287.5 million in 2013, continuing with a 2.5% 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. The firm’s revenue dropped 6.4% to about $132 million, which was attributed to depressed European markets. Huntsworth said Grayling’s investment in data and proprietary digital tools under new global CEO Pete Pedersen was expected to moderate this decline.
However, the group’s next biggest division, Huntsworth Health, grew revenues by 7.1%, with the company attributing this to the ongoing digitalization of the division’s agencies.
Its financial PR network, Citigate, grew 1.1%, with the recovery in IPOs helping it start to reverse last year’s 10.5% revenue drop.
Its UK-focused consumer PR shop, The Red Consultancy, found its long run of top-line growth ending with a 7.2% drop, though its operating profit increased. Huntsworth commented that 2013 saw consumer PR budgets come under intense pressure, but Red is confident of returning to growth later this year.
Tuesday’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.
On Monday, the board appointed Lord Myners as a senior independent director; she will become chairman if re-elected at the group’s forthcoming meeting.
"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," Myners said on Tuesday.
This story originally appeared on the website of PRWeek UK.