Next 15 full-year profit grows 21 per cent on acquisitions and 'strong' H2

Next 15 saw full-year pre-tax profit grow 21 per cent to £29.3m ($41.2m), buoyed by acquisitions and "strong organic growth" in H2, but offset by some negative impact of the relative strength of Sterling.

Chairman Richard Eyre: Organic revenue growth has continued into the new financial year
Chairman Richard Eyre: Organic revenue growth has continued into the new financial year

Revenue for Next 15 - the listed owner of PR agencies Bite, Lexis, Text100 and The Blueshirt Group – rose 15 per cent to £196.8m ($276.9m) in the year to 31 January, the company announced this morning. Organic revenue growth was 5.2 per cent.

Underlying earnings (EBITDA) grew 19 per cent to £34.4m ($48.4m), while margin improved, moving from 14.6 per cent to a "record" 15.3 per cent.

Next 15 had earlier reported an improved second and third quarter in 2017 after a slow Q1.

The company said it achieved "solid performances pretty much across the portfolio" in its full year. It cited improvements from merging PR shops Lexis and Text100, and also digital agency BDA with Twogether, which it said helped simplify the operating structure and increase operating margins.

Significant client wins across the group included Samsung, Slack and Nike.

Acquisitions in the financial year included b2b digital agency Velocity; b2b market research consultancy Circle Research; UK-based integrated digital agency Elvis Communications; and specialist financial market research consultancy Charterhouse. In February 2018 it acquired Brandwidth, a UK based "digital innovation agency", with clients including Toyota, Royal Caribbean, Citroën, Kia and Vodafone.

The acquisitive holding company said it secured a £20m ($28.1m) loan from HSBC in February 2018, which is in addition to its existing £40m ($56.3m) credit facility with the bank, as it targets further acquisitions.

Chairman Richard Eyre said: "Next 15 continues to develop its services against our template of creativity, data and technology, ensuring the group's capability to develop with the extraordinary pace of technology in our sector. This has driven another good year, with revenues and earnings again reaching record levels.

"These results were influenced by three major factors: strong organic growth in the second half of the year and additional well-executed acquisitions, offset by some negative impact from the relative strength of Sterling. Organic growth that had been modest amid the political and economic uncertainty of the first half of the year, grew to more familiar levels in the second, with many of the group’s businesses turning in strong performances.

"This high single-digit organic revenue growth has continued into the new financial year, augmented by strong performances from newly acquired agencies, giving us confidence for another good year ahead."

Regional performance

The company pointed to "very strong performances from our UK portfolio of agencies" as UK revenue rose 36.8 per cent to £58.3m.

It cited a "busy period of acquisitions", alongside organic revenue growth of 7.6 per cent – growth was in double digits in H2 – and "a number of self-help measures", including the mergers.

Operating profit increased from £8m to £13m as operating margin moved from 18.9 to 22.3 per cent.

The US businesses "have continued to perform well", Next 15 said, led by its Beyond, MBooth and Bite brands. Full-year revenue rose 8.3 per cent to £115.9m ($163.1m), with organic growth at 5.1 per cent, including exchange rate movements. Operating profit increased by £0.9m ($1.3m) to £23.2m ($32.6m).

US margins remained "consistently strong" at around 20 per cent, but were impacted by some short-term investments, while restructuring costs of £0.8m ($1.1m) were incurred.

Next 15 said it delivered a "solid" trading performance in EMEA as it continued to focus on "markets of potential scale". Revenue rose 9.6 per cent to £7.9m and operating profit increased to £0.8m at an improved adjusted operating margin of 9.6 per cent.

In APAC, revenue increased 3.4 per cent to £14.7m. However, operating margin fell back from 15.2 to 13.6 per cent, and operating profit declined from £2.2m to £2m, after investments in IT infrastructure and talent in the region.

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