Earnings surge at Porta as it closes Brussels and Germany offices

Porta Communications has reported underlying earnings (EBITDA) after costs of £828,000 in the first six months of 2015 - a 66 per cent rise on the same period last year - and said it has closed "non-performing" offices in Brussels and Germany along with "less successful departments".

Porta CEO David Wright: "Another period of healthy trading performance"
Porta CEO David Wright: "Another period of healthy trading performance"

Fee income at the AIM-listed Porta rose 69 per cent to £13.9m, and revenue grew 75 per cent to £17.4m.

Organic growth was 17 per cent for Porta, whose PR agencies include Newgate, Thirteen, Redleaf Communications, and Publicasity, which it acquired in December last year. It also acquired PPS in November last year and merged it into Newgate.

Fee income per employee over the six months grew to £54,000, 10 per cent above the same period last year.

CEO David Wright said following a review of the PR business, the management team "took the decision to close smaller non-performing offices in Brussels and Germany, and certain, less successful departments", including areas where there's a duplication of services.

The decision has already led to an annualised cost saving of over £1m, with "full benefits" to be recognised in 2016.

Wright said the German office, based in Frankfurt, employed two people. "Germany is a very difficult market for employment," he told PRWeek. "We found it difficult to get the right people, and we looked across acquisitions and we didn’t find anything that we liked or fitted that well.

"It is too small to have any impact and it’s never going to grow into a size that makes it worthwhile for us, so we disposed of it. We can serve it from London."

The Brussels office was also small, employing four people. Wright told PRWeek that market is "highly fragmented".

"There are a lot of small operations in Brussels but the trouble is they lurch from project to project and in between they’re not really as profitable as they should be. We can put our resources elsewhere where we get a much higher return."

No more office closures are planned, he added.

Wright said Porta has successfully integrated its non-consumer PR businesses under the Newgate brand, with the exception of Redleaf. This has led to the agencies winning new business together, and as such profits from shared clients grew 155 per cent in the half year. Wright told PRWeek this uplift was worth around £1m per year.

On highlights in the period, Wright said: "Newgate Australia is consistently winning new mandates in all areas of its business, Newgate Asia won a number of new, large projects in the region, and Redleaf Communications secured a number of new clients and is trading at record levels."

Porta’s focus is now on "building our established brands and expanding both our geographical reach and range of services", said Wright.

He described the strength of the PR market globally as "pretty mixed".

"it’s a lot more buoyant, from our perspective, in Asia Pacific, in particular Australia and Hong Kong. The UK, I think, is very tough. I think it’s highly competitive and I would see over the next few years quite a bit of rationalisation. We’re taking market share - organic growth is 17 per cent which is pretty impressive in our industry. But I would say we’re taking more market share in Asia Pacific than in the UK.

He added: "This has been another period of healthy trading performance, with positive contributions throughout our integrated agency network. Our global offering is experiencing strong growth and the acquisitions that we made last year are also performing well.

"We are recruiting high quality, experienced executives in key areas, and management is confident that this will lead to further new business wins in the second half, leading to another strong performance in reported EBITDA."

In July, Porta announced it had acquired a 29.5 per cent stake in corporate comms agency Broker Profile.

Speaking to PRWeek in February, Wright said acquisition opportunities in the PR and marketing sectors were better than during his time at Citigate from 1988 to 2003, although he would not look to raise money for purchases until the group's share price grew. He reiterated this view to PRWeek today, saying: "What governs my position is the share price."

"Our growth in the future, apart form being organic, will probably be more via recruitment than acquisition," he stressed.

Porta’s share price was 7.7p at the time of writing, down 0.65 per cent this morning.

This article was updated on Tuesday afternoon with comment from David Wright.

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