Cost-cutting hits revenue and profit at Porta

Cost-cutting at Newgate UK has dampened the first-half performance of Porta Communications, with revenue, earnings and profit taking a hit.

Cost-cutting hits revenue and profit at Porta

Porta's first-half performance is on par with a recent forecast after earnings took a hit from internal restructuring and cost-cutting.

Revenue declined by five per cent year-on-year to £18.5m, while adjusted earnings dropped 13 per cent to £1m in the six months to 30 June 2018. Profit was down by five per cent to £15.7m, although these results are not unexpected.

Last month, Porta chairman John Foley warned the stock market that the comms group would post adjusted EBITDA of "no more than 15 per cent lower" than the same period in 2017 due to the group consolidating the cost base and operations of London agencies.

Newgate UK is merging with consultancy Redleaf, and Newgate’s London office is stripping back costs, including non-performing services, ahead of the move.

The internal restructure is expected to complete in the second half of 2018, with its impact being reflected in financial statements from Q4 this year.

"Porta was bold enough to enter into a number of ‘start-ups’, as well as making a significant number of acquisitions in order to achieve its aim of creating an integrated communications and marketing group with clear synergies between each office and business," Foley said.

"A number of the group's businesses are producing strong financial results, but the challenge for the new joint CEOs is to ensure that the success that they have generated in their respective businesses becomes the case across the whole group."

In April, Porta Communications appointed Redleaf chief executive Emma Kane and Newgate Australia managing partner Brian Tyson as joint CEOs of the global group, succeeding Steffan Williams.

Kane said after experiencing years of gross profit, Porta’s focus for this year is to drive productivity and profitability, particularly through merging the operations of its two largest London agencies under the Newgate brand.

Although group performance was down, there were positive earnings results for Newgate agencies in Abu Dhabi, Australia, Hong Kong and Singapore, while Redleaf and 2112 also posted earnings growth.

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