Next 15 secures £30m acquisition fund as US leads surge to FY profit growth

Next 15 has reported a rise in pre-tax profits of nearly a third for the year to 31 January 2016, and revealed that it has secured a £30m ($42.8m) funding package to fund previous and further acquisitions.

Tim Dyson: Acquisitions ahead for the Next 15 boss
Tim Dyson: Acquisitions ahead for the Next 15 boss

The 28.8 per cent rise in full-year pre-tax profits to £16.1m ($23m) came on revenue 18.9 per cent higher than in the previous year, at £129.8m ($185.2m).

The London-listed owner of Bite, Lexis, Text100 and The Blueshirt Group was buoyed by a stronger second half and particularly strong performance in the US – and investors will be buoyed by the news of its extended £30m credit facility with HSBC as it targets further acquisitions.

This funding package was previously £20m, and will be used to fund the onboarding of acquisitions made in the previous years, as well as future purchases. "It would probably be towards the end of the next year before we'd do further acquisitions", CEO Tim Dyson (pictured) told PRWeek, repeating a previous assertion that these would be in tech and data areas, rather than in PR.

Organic revenue growth was 7.8 per cent in the year to 31 January 2016, accelerating to 10.9 per cent in the second half for the group. Operating profit rose 29.9 per cent to £16.5m ($23.5m) in the year (figures exclude acquisition-related costs and other one-off items).

The company cited "significant" client wins in the year, including Oculus, and Etsy.

US revenue rose 30 per cent to £83.5m ($119.2m), with organic growth of 14 per cent and margins above 20 per cent, although the latter was impacted "marginally" by the acquisition of ad agency Story Worldwide, which had a "disappointing performance".

The firm said US agencies M Booth and Beyond US had a "stellar performance", and growth in America was also led by Outcast, Connections Media and its Blueshirt agencies. US operating profit grew from £14.1m ($20.1m) to £17.5m ($25m).

The UK had a "much-improved performance", with revenue up 17 per cent to £27.9m ($39.8m) and operating profit rising from £2.5m ($3.6m) to £3.8m ($5.4m). Operating margin rose from 10.6 to 13.6 per cent.

The company said: "Lexis and Bite UK have continued to improve their operational performance, while we merged our agencies Text 100, Republic and IncrediBull under the Text 100 brand with effect from 1 February 2016, which will lead to a broader product offering and operational efficiencies going forward."

Next 15 said the merger of its two research firms under the Morar brand in the year had led to an improved H2 in the UK.

The company exited South Africa and Denmark in the year as it focused on EMEA "markets of potential scale". This delivered a "much-improved underlying trading performance in EMEA in the second half" along with restructuring costs of £0.9m ($1.3m).

The firm described performance in APAC as "encouraging" as it benefited from restructuring last year. Operating margin there improved from eight to 11.5 per cent.

Next 15 raised £12.1m ($17.3m) for acquisitions and investments in the year via two fundraisings, and spent £13.4m ($19.1m) on acquisitions, snapping up creative agency ODD and majority stakes in Morar and ad tech business Encore. Since the new year began, it has acquired tech-focused digital agencies Publitek and Twogether.

Next 15 said that in March it entered a new, extended four-year £30m revolving credit facility with HSBC, primarily to be used for acquisitions.

Meanwhile, the company said it had made a "good start to the new financial year", with a continuation of the trading patterns from the second half of 2015. It is recommending a total dividend of 4.3p for the year, up 20 per cent on the previous year.

Next 15 chairman Richard Eyre said: "These are good times for Next 15. Organically and through acquisition, we have built a strong portfolio of modern, technology-driven marketing businesses. Pursuit of the group’s digital strategy has again delivered increased organic revenues and an expanded operating margin.

"Taken with these results and encouraging current trading, the board has confidence that the current financial year should also be a year of progress for the group."

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