Next 15 'yet to see material impact' of coronavirus but warns of future hit

Next 15 says its business has not been materially affected by the pandemic so far, but it expects COVID-19 to have a negative impact on trading for two-thirds of its client portfolio.

Tim Dyson: 'We do anticipate our business will be significantly impacted from May'
Tim Dyson: 'We do anticipate our business will be significantly impacted from May'

The listed marcomms group – which owns PR agencies Archetype, The Outcast Agency, The Brandwidth Group, M Booth, and Publitek – made the statement in its full-year results announcement today.

Chief executive Tim Dyson said: "In terms of current trading, we have yet to see any material impact from COVID-19, with some clients switching spend away from live events into digital marketing and lead generation. The group continues to win new work and has recently added DuPont, Google Cloud and O2 as new clients.

"However, we do anticipate our business will be significantly impacted from May as clients reduce spend due to the uncertainty. The group currently expects two-thirds of the portfolio will see a negative impact from COVID-19, with revenues impacted by five to 25 per cent, depending on sector and specialism. The group currently sees the rest of the portfolio as largely unaffected due to nature of product offering and customer base."

Next 15 has adopted employee furlough and tax deferral schemes in all the territories it which it operates, and the board and senior executives have taken pay cuts.

The company has also suspended its final dividend payment, "although it fully intends to resume dividend payments once the macroenvironment improves", Dyson added.

The group has seen "some benefit from the strength of the US dollar versus sterling and some clients switching spend away from live events into digital marketing and lead-generation" during the crisis.

"We have also yet to see any material impact on our recoverability of trade debtors."

Next 15 reported a 1.4 per cent rise in revenue to £135m in its Brand Marketing division, which includes Archetype, OutCast, M Booth, Blueshirt and Publitek, in the year to 31 January 2020.

The company described the performance in the division as "satisfactory". The "expected disruption" from the launch of Archetype in early 2019, following the merger of Bite and Text100, caused revenue to fall 5.7 per cent on an organic basis.

However, this was "offset by good trading from M Booth, Blueshirt and Publitek" – excluding Archetype, organic net revenue growth in the division was 2.8 per cent.

Operating profit in the division grew 1.2 per cent to £29.9m and operating margin remained unchanged at 22.2 per cent.

As Next 15 reported last month ahead of the full-year results announcement, revenue across the company grew almost 11 per cent in the year to £248.5m.

Revenue fell two per cent on an organic basis due to "previously flagged challenges" at Archetype and Beyond. Excluding these two brands, organic growth was 10.5 per cent.

Underlying earings (EBITDA) moved from £41.7m to £56.8m and operating profit margin dipped slightly, from 16.5 to 16.4 per cent.

Chairman Richard Eyre said: "Over this year we have continued to deploy the highly effective marketing tools afforded by data and technology. This is no hasty pivot from specialist communications consulting, which was at the core of our business for our listing in 2005, but a continued evolution by acquisition and organic change, to ensure that our offer to customers is as contemporary as it is effective. This strategy continues to serve us well.

"Looking to the current financial year, we have not seen a material impact on the group’s trading performance from COVID-19 to date but are anticipating that our revenues and profits from some of our businesses will be materially affected from May as some clients reduce or delay spend due to the pandemic. On the other hand, we are expecting some businesses to see little or no impact. The timing of any recovery is hard to predict and therefore we are managing the business very tightly, while being mindful of any post-COVID-19 opportunities.

"Longer term, the board remains confident of the group’s underlying prospects. We believe we have the quality of people, the strategy and the financial strength to continue to outperform our marketplace."

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