Huntsworth eyes sale of Grayling Middle East to regional CEO

Huntsworth is in discussions with Grayling's Middle East and Africa CEO Loretta Ahmed about a possible sale of the agency's Middle East business to her, PRWeek has learned.

Huntsworth CEO Paul Taaffe: The Middle East is 'a very tough market place right now'
Huntsworth CEO Paul Taaffe: The Middle East is 'a very tough market place right now'

The idea is for Grayling Middle East to become an affiliate agency to Grayling under her ownership. It comes more than 30 years after Grayling first opened in the region, debuting in Dubai.

An internal email seen by PRWeek from Huntsworth CEO Paul Taaffe reads: "We are in discussions with Loretta Ahmed (the CEO for the Middle East and Africa region for Grayling) over the sale of Grayling in the Middle East from Huntsworth.

"This will be good for all of us, as it will allow more flexibility locally in a tough market, while Grayling still has access to a great agency in Dubai, which will become a dedicated affiliate. For the rest of us, nothing has changed." Grayling declined to comment to PRWeek on the details of the deal at this time.

The proposed sale of Grayling Middle East was announced at Huntsworth's half-year results on Tuesday.

The firm has taken a £3.4m write-down from the proposed sale of the business, which generates revenue of around £3m from offices in Dubai, Abu Dhabi, Saudi Arabia, Oman, Qatar and Kuwait.

Huntsworth said Grayling's half-year performance globally - revenue fell 3.2 per cent to £17.1m - was "largely the result of a decline in revenues in the USA for clients terminated last year and an underperformance in the Middle East".

Taaffe told PRWeek after the results announcement that a sale "may or may not" happen.

He said Grayling Middle East is "a perfectly nice business", adding: "The issue is that the Middle East market, and particularly the UAE market, is a very tough marketplace right now for a lot of people.

"Our business is probably more robust than most. It's not underperforming; it's just a tough marketplace - but it's certainly performing on par with the marketplace."

No other disposals

Huntsworth said in its Communications division, "a restructured cost base and the elimination of further underperforming business will continue to improve profitability as the year progresses".

But speaking to PRWeek, Taaffe denied that more disposals are planned. "We're not targeting office closures or sales or anything like that," he said.

"The biggest challenge we've been working on in the last couple of years has been eliminating unprofitable client contracts. We've almost completed that exercise. We're happy with our operations, most of them are performing a lot better.

"We think that public relations is in a gentle growth phase. Our Communications division we target this year to be flat, so the fact it's grown almost one per cent in the first half is a strong signal."

Huntsworth saw like-for-like revenue growth in its Communications arm for the first time in "a number of years" in H1, as like-for-likes rose 0.9 per cent.

Grayling UK led the growth (+10.9 per cent). "They've had three years of double digit growth and they're on track for that this year, so that's exceptional for a medium-sized agency in the UK marketplace," said Taaffe.

"It's an extension of previous trends. They have a very strong public affairs team. The fact they have operations in the regions, which not many PR companies have is, I think, a real source of strength for them. And I think their consumer business is on fire. Everything is coming together in that company."

Performance

Taaffe said Grayling had "reasonably robust growth" in Western Europe. "We're growing in Belgium on the back of public affairs and we're growing in France and Spain right now, so that's very strong.

"Eastern Europe is a little tough, but it's holding it's own. I guess the biggest issue would be the German-speaking market; that's where it's just a little tougher."

Like-for-like revenue growth at Citigate Dewe Rogerson was 7.2 per cent as revenue hit £10.7m, although Huntsworth said the second half of the year "may prove softer in the UK".

Taaffe pointed to comparisons with a "strong" second half in 2018, and added: "I think the biggest problems is the capital markets in the UK, certainly for Citigate, are relatively flat. There are not many IPOs; transactions have stopped because large corporates are concerned about Brexit.

"I suspect until there's some resolution relative to the political/economic situation, the capital markets will be relatively quiet in the UK. It's not all our business - we have retained clients - but projects are what make a good year in Citigate: IPOs and transactions."

He added that the IPO market in the Netherlands is "almost non-existent", but on the flipside, it has been "very strong" in Hong Kong and Singapore.

Taaffe said the London office move is completed. PRWeek previously reported that Huntsworth has been moving its London staff from Citigate and other agencies into Grayling’s office near Holborn and Red’s premises in Soho.

"Our agencies are within proximity of each other so they can actually begin to work together more closely, which is happening a little bit with Citigate and Grayling, for example, with public affairs issues and other corporate issues."

Acquisitions

Taaffe ruled out further acquisitions this year, having completed six deals in the past two and a half years, most recently Luxembourg-based CC, a strategic market access, health economics and outcomes research consultancy; and global health communications specialist Kyne.

Taaffe said: "We're committed to getting our debt down a little bit, so there are some opportunities [for acquisitions] but we won't be taking advantage of that for the rest of this year.

"We're done now. That's six acquisitions in two-and-a-half years and I feel that we need to take a bit of a pause and help them connect into the business."

Taaffe said he is "a little concerned" about Brexit in the second half of the year, but emphasised that firms entering or operating in the UK will still need to communicate, regardless of the outcome.

"British consumers aren't just going to disappear. So communication - and certainly fast, cost efficient communication, which public relations excels at - I think will be at the same level as it is now."

Huntsworth's share price rose from 90p to 95p as of first thing today (Wednesday).

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