Half-yearly Report

Half-yearly Report

Next Fifteen Communications Plc

13^th October 2015

Next Fifteen Communications Group plc
Interim results for the six months ended 31 July 2015

Next Fifteen Communications Group plc (“Next 15” or the “Group”), the digital communications group, today announces its interim results for the six months ended 31 July 2015.

Headline financial results for the six months to 31 July 2015

Â	Â	Six months to 31st July 2015 (Unaudited)	Â	Six months to 31st July 2014 (Unaudited)	Â	Growth %
Revenue		£61.8m		£52.2m		18.4%
EBITDA		£8.5m		£6.4m		32.8%
Operating Profit		£7.2m		£5.5m		30.9%
Operating Profit Margin		11.7%		10.5%		Â
PBT		£7.2m		£5.4m		33.3%
Diluted EPS		7.3p		5.1p		43.1%
Dividend per share		1.2p		1.0p		20.0%
Net debt		£8.9m		£1.4m		Â

Headline results represent the performance for the 6 months to 31 July 2015 adjusted to exclude acquisition related costs, one-off and acquisition related share based payment charges, amortisation and certain other non-recurring items. These are reconciled to the statutory numbers in note 3.

Highlights

• Revenues increased by 18.4%
• Group organic revenue growth of 4.1% with organic growth of 10.3% in the US
• Headline diluted earnings per share increased by 43.1%
• Significant clients wins including Intel, Autodesk, Criteo, Airbnb, West Elm, Canary and trainline
• £2.4m invested on UK acquisitions and £3.8m on early buyout of non-controlling interests in former acquisitions following the share placing in January 2015
• Encore, Incredibull and Animl acquired during period and performing to expectations

Commenting on the results, Chairman of Next 15, Richard Eyre said:

Next 15 has made a strong start to the financial year with profits up over 30% and revenues up over 18%. These results have been driven by continued, strong, organic revenue growth in our North American business of 10.3%. However, we have also seen doubled profitability in Asia Pacific and the UK. In Asia Pacific this has been achieved by the moves to simplify the business. In the UK it follows a series of strategic acquisitions as well as margin gains within our existing agencies. Looking forward the Group is well placed to meet its expectations and as such the Board has increased the interim dividend by 20% to 1.2p per share.

Statutory financial results for the six months to 31 July 2015

Â	Â	Six months to 31st July 2015 (Unaudited)	Â	Six months to 31st July 2014 (Unaudited)
Revenue		£61.8m		£52.2m
PBT		£4.2m		£(4.2)m
Diluted EPS		3.9p		(8.1)p

For further information contact:

Next Fifteen Communications Group plc
Tim Dyson, Chief Executive Officer
[phone]

Peter Harris, Chief Financial Officer
[phone]

Investec Bank plc
Keith Anderson, Matt Lewis, Dominic Emery
[phone]

Bite Communications Limited
Tony Faccenda
[phone]
[e-mail]

Notes:

Headline results
In order to help shareholders’ understanding of the underlying performance of the business, the headline results have been presented based on the unaudited 6-month periods to 31 July 2015 and 2014.
The 6-month results are reconciled to statutory results within note 3 of this report.
The term ‘headline’ is not a defined term in IFRS. The items that are excluded from headline results include acquisition related costs, one-off and acquisition related share based payment charges, amortisation and certain other non-recurring items.

Chairman and Chief Executive’s Statement

Next 15 has made a strong start to the financial year with profits up over 30% and revenues up over 18%. These results have been driven by continued, strong, organic revenue growth in our North American business of 10.3%. However, we have also seen doubled profitability in Asia Pacific and the UK. In Asia Pacific this has been achieved by the moves to simplify the business. In the UK it follows a series of strategic acquisitions as well as margin gains within our existing agencies.

The Group reported a headline operating profit of £7.2m up from £5.5m and a headline profit before tax of £7.2m, compared with £5.4m in the prior period. We have benefitted from a significant reduction in our underlying tax rate to a sustainable rate, down to 23% from 30%, due to improvements in our UK business and the successful resolution of some historic tax queries. This has resulted in a 43% improvement in our headline diluted earnings per share to 7.3p.

The Group reported a statutory profit before tax of £4.2m compared with a statutory loss before tax of £4.2m in the prior period, while reported earnings per share were 3.9p (2014: loss 8.1p).

Looking forward, the Group is well placed to meet its expectations and as such the Board has increased the interim dividend by 20% to 1.2p per share.

Regional Headline Performance

Our US businesses have continued to perform strongly, led by our Outcast, M Booth, Beyond and Blueshirt agencies. In total, our US revenues grew by 38% to £39.9m from £28.9m which equated to an organic growth rate of 10.3%. US operating profit was £8.4m compared with £6.7m in the comparable six months period. Operating margins have remained consistently strong at above 20% but were diluted by the acquisition of Story Worldwide which broke even during the six month period. The Group sees a similar performance from Story Worldwide in second half. As previously stated at the time of acquisition, our plan to improve margins will require some restructuring activity, as Story Worldwide moves to simplify its offering and increase revenue growth. This restructuring was begun in the period but we expect the business to remain in transition for the rest of this financial year.

The progress outside the US has continued since the end of the last full financial year. The UK business saw total revenue growth of 5% and an almost doubling in operating profit to £1.5m as the operating margin improved from 6.2% to 11.5%. This was the result of improved performances from both Bite and Lexis and the success of recent investments and acquisitions, including Agent3, Morar, Incredibull and Encore.

The simplification of the business in Asia has delivered ahead of expectations, with operating profit more than doubling to £0.8m and margins increasing from 6.0% to 13.2%. Trading from EMEA however has suffered from a soft macro-economic environment. The operations in EMEA are in the process of being simplified and during the period the Group’s operations in South Africa were transferred to a third party who will now act as a licensed partner to Text 100. In the short term the Group sees EMEA operating around break even while it streamlines these operations.

Continued Investment

This has been an active period for business investment following the decision to raise money from investors at the start of the year. The Group acquired three new businesses in the UK in the period, with a combined consideration of £2.4m and spent £3.8m on the early buyout of non-controlling interests in former acquisitions (note 11). We are encouraged by their early contributions to the UK’s improved profitability.

Indeed, the strong progress made by Morar, our recently acquired market research consultancy, has led to a decision to merge our existing Redshift research business into it. Morar’s CEO, Roger Perowne, will head the enlarged business and it will trade under the Morar name. The move reflects the Group’s desire to build a strong offering in the insight and research area over time.

The last area of investment of which shareholders should be aware is in relation to Agent3, which has developed an insight software platform for sales and marketing departments in large organisations. The Group has decided to increase Agent 3’s, investment in product development and sales support during the coming six months due to the rapid growth of the business in the last year.

The main benefits of all these investments should come in the next financial year. We continue to actively review other investment opportunities with a focus on our chosen areas of content, insight and technology.

Balance Sheet and Net Debt

The Group raised a net £4.3m from shareholders in February 2015 to fund acquisitions and the early settlement of the earn-outs for Republic Publishing and Beyond. The Group generated cash flow of £8.7m from its trading operations during the six months to 31 July 2015 and ended the period with net debt of £8.9m.

Dividend

The Board has declared an interim dividend of 1.2p per share which is a 20% increase on the pro-forma interim dividend for last year. This will be paid to shareholders on 11 December 2015 who are registered on 13 November 2015.

Current trading and Outlook

As stated earlier, the Group has made a good start to the financial year ending 31 January 2016. Current trading is encouraging with good activity levels across the Group and the benefit of recent acquisitions coming through. Despite increased investment, the Group is on track to meet expectations for the full year.

NEXT FIFTEEN COMMUNICATIONS GROUP PLC

HEADLINE RESULTS: INCOME STATEMENT

	Â	6 Months Ended 31 July 2015 £’000 (Unaudited)	Â	6 Months Ended 31 July 2014 £’000 (Unaudited)
Revenue		61,759		52,150
Total operating charges		(53,272)		(45,708)
EBITDA		8,487		6,442
Depreciation and Amortisation		(1,241)		(903)
Operating profit		7,246		5,539
Net finance expense		(200)		(251)
Share of profits of associate		177		131
Profit before income tax		7,223		5,419
Tax		(1,628)		(1,707)
Retained profit		5,595		3,712
Profit Attributable to Owners		5,215		3,442
Profit Attributable to Minorities		380		270
Â	Â	Â	Â	Â
Weighted average number of ordinary shares		64,654,163		60,295,934
Dilutive weighted average number of ordinary shares	Â	71,257,417	Â	67,754,216
Â	Â	Â	Â	Â
Adjusted earnings per share		8.1p		5.7p
Diluted adjusted earnings per share	Â	7.3p	Â	5.1p

HEADLINE RESULTS: CASH FLOW

	Â	6 Months Ended 31 July 2015 £’000 (Unaudited)	Â	6 Months Ended 31 July 2014 £’000 (Unaudited)
Cash and cash equivalents at beginning of the year		9,315		6,217
Net cash from operating activities		8,670		11,155
Income taxes paid		(1,301)		(1,328)
Net cash outflow from investing activities		(11,107)		(3,417)
Net cash inflow / (outflow) from financing activities		5,568		(1,530)
Exchange losses on cash held		(325)	Â	(244)
Cash and cash equivalents at end of the year		10,820		10,853

HEADLINE RESULTS: SEGMENTAL (Unaudited)

Â	Â	UK £’000	Â	Europe & Africa £’000	Â	US £’000	Â	Asia Pacific £’000	Â	Head Office £’000	Â	Total £’000
6 months ended 31 July 2015		Â		Â		Â		Â		Â		Â
Revenue		12,799		3,207		39,917		5,836		-		61,759
Operating profit		1,478		(113)		8,355		768		(3,242)		7,246
Operating profit margin		11.5%		(3.5)%		20.9%		13.2%		Â		11.7%
6 months ended 31 July 2014		Â		Â		Â		Â		Â		Â
Revenue		12,195		4,772		28,943		6,240		-		52,150
Operating profit		756		486		6,651		372		(2,726)		5,539
Operating profit margin		6.2%		10.2%		23.0%		6.0%		Â		10.6%

NEXT FIFTEEN COMMUNICATIONS GROUP PLC

CONSOLIDATED INCOME STATEMENT

FOR THE SIX MONTH PERIOD ENDED 31 JULY 2015

	Â		Â	Six months ended 31 July 2015 (Unaudited)	Â	Six months ended 31 July 2014 (Unaudited)	Â	Eighteen months ended 31 January 2015 (Audited)
		Note		£’000		£’000		£’000
									Â
Billings		Â		70,696		60,242		185,900
									Â
Revenue		2		61,759		52,150		158,495
									Â
Staff costs				42,877		36,425		110,626
Depreciation				1,098		758		2,332
Amortisation				1,344		951		2,812
Impairment				-		7,000		7,000
Credits associated with misappropriation of assets				-		-		(65)
Other operating charges				11,658		10,403		32,149
Total operating charges				(56,977)		(55,537)		(154,854)
				Â		Â		Â
Operating profit / loss		2		4,782		(3,387)		3,641
									Â
Finance expense		6		(1,463)		(1,176)		(4,699)
Finance income		7		734		210		1,129
Share of profits / (losses) of associate				177		131		334
				Â		Â		Â
Profit / (loss) before income tax		2,3		4,230		(4,222)		405
									Â
Income tax expense		4		(1,062)		(1,007)		516
				Â		Â		Â
Profit / (loss) for the period				3,168		(5,229)		921
									Â
Attributable to:
Owners of the parent				2,788		(5,499)		(107)
Non-controlling interests				380		270		1,028
				3,168		(5,229)		921
Earnings per share
Basic (pence)		8		4.3p		(9.1)p		(0.2)p
Diluted (pence)		8		3.9p		(8.1)p		(0.2)p

NEXT FIFTEEN COMMUNICATIONS GROUP PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 31 JULY 2015

	Â	Six months ended 31 July 2015 (Unaudited)	Â	Six months ended 31 July 2014 (Unaudited)	Â	Eighteen months ended 31 January 2015 (Audited)
		£’000		£’000		£’000
							Â
Profit for the period		3,168		(5,229)		921
							Â
Other comprehensive (expense) / income:
Items that may be reclassified into profit or loss
Exchange differences on translating foreign operations		(1,379)		(453)		418
Translation differences on long-term intercompany loans		-		(17)		(77)
Net investment hedge		237		250		(104)
		(1,142)		(220)		237
Amounts reclassified and reported in the Income Statement
Net Investment Hedge		-		(44)		(44)
Other Comprehensive expense/ income for the period		(1,142)		(264)		193
Total comprehensive income/expense for the period		2,026		(5,493)		1,114
							Â
Attributable to:
Owners of the parent		1,646		(5,763)		86
Non-controlling interests		380		270		1,028
		2,026		(5,493)		1,114

NEXT FIFTEEN COMMUNICATIONS GROUP PLC

CONSOLIDATED BALANCE SHEET AS AT 31 JULY 2015

	Â		Â	31 July 2015 (Unaudited)	Â	31-Jul-14 (Unaudited) Â	Â	31 January 2015 (Audited)
		Note		£’000		£’000		£’000
Assets
Property, plant and equipment				7,275		3,534		5,451
Intangible assets				47,500		34,828		44,915
Investment in equity accounted associate				877		190		294
Trade investment				276		197		211
Deferred tax asset				5,538		3,740		6,012
Other receivables				989	Â	844	Â	575
Total non-current assets				62,455		43,333		57,458
									Â
Trade and other receivables				33,616		28,592		31,254
Cash and cash equivalents		9		10,820		10,853		9,315
Corporation tax asset				729	Â	3,600	Â	788
Total current assets				45,165		43,045		41,357
				Â	Â	Â	Â	Â
Total assets				107,620		86,378		98,815
						Â
Liabilities
Loans and borrowings		9		19,669		100		17,712
Deferred tax liabilities				159		1,388		177
Other payables				56		305		2,295
Provisions				341		860		642
Contingent consideration		10		4,902		978		3,333
Share purchase obligation		10		3,572	Â	4,335	Â	4,990
Total non-current liabilities				(28,699)		(7,966)		(29,149)
									Â
Loans and borrowings		9		-		12,050		100
Trade and other payables				32,301		25,597		25,909
Provisions				-		-		926
Corporation tax liability				770		3,213		742
Derivative financial liabilities				-		137		-
Deferred consideration		10		-		1,720		94
Share purchase obligation		10		181		715		852
Contingent consideration		10		2,420		3,918		3,841
Total current liabilities				(35,672)		(47,350)		(32,464)
									Â
Total liabilities				(64,371)		(55,316)		(61,613)
				Â	Â	Â	Â	Â
TOTAL NET ASSETS				43,249	Â	31,062	Â	37,202
									Â
Equity
Share capital				1,639		1,521		1,545
Share premium reserve				13,678		7,962		8,272
Merger reserve				3,075		3,075		3,075
Share purchase reserve				(2,673)		(2,673)		(2,673)
Foreign currency translation reserve				2,146		97		3,525
Other reserves				(273)		477		(510)
Retained earnings				26,116	Â	19,665	Â	24,741
Total equity attributable to owners of the parent				43,708		30,124		37,975
Non-controlling interests				(459)		938		(773)
				Â	Â	Â	Â	Â
TOTAL EQUITY				43,249	Â	31,062	Â	37,202

NEXT FIFTEEN COMMUNICATIONS GROUP PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTH PERIOD ENDED 31 JULY 2015

	Â	Share capital	Â	Share premium reserve	Â	Merger reserve	Â	Share purchase reserve	Â	Foreign currency translation reserve	Â	Other reserves1	Â	Retained earnings	Â	Equity attributable to owners of the Company	Â	Non-controlling interests	Â	Total equity
																					Â
		£’000		£’000		£’000		£’000		£’000		£’000		£’000		£’000		£’000		£’000
																					Â
At 1 January 2014 (unaudited)		1,519		7,901		3,075		(2,673)		567		271		26,400		37,060		2,840		39,900
																					Â
Profit for the period		-		-		-		-		-		-		(5,499)		(5,499)		270		(5,229)
Other comprehensive income for the period		-		-		-		-		(470)		206		-		(264)		-		(264)
Total comprehensive (expense) / income for the period		-		-		-		-		(470)		206		(5,499)		(5,763)		270		(5,493)
Shares issued on satisfaction of vested share options		1		10		-		-		-		-		-		11		-		11
Shares issued on acquisitions		1		51		-		-		-		-		-		52		-		52
Movement in relation to share-based payments		-		-		-		-		-		-		242		242		-		242
Share options issued on acquisition of subsidiary		-		-		-		-		-		-		66		66		-		66
Movement on reserves for non-controlling interests		-		-		-		-		-		-		41		41		(41)		-
Non-controlling interest on business combination		-		-		-		-		-		-		-		-		(2,000)		(2,000)
Dividends to owners of the parent		-		-		-		-		-		-		(1,585)		(1,585)		-		(1,585)
Non-controlling interest dividend		-		-		-		-		-		-		-		-		(131)		(131)
At 31 July 2014 (unaudited)		1,521		7,962		3,075		(2,673)		97		477		19,665		30,124		938		31,062
(Loss) / profit for the period		-		-		-		-		-		-		3,532		3,532		319		3,851
Other comprehensive income / (expense) for the period		-		-		-		-		3,428		(987)		-		2,441		-		2,441
Total comprehensive income / (expense) for the period		-		-		-		-		3,428		(987)		3,532		5,973		319		6,292
Shares issued on satisfaction of vested share options		17		-		-		-		-		-		-		17		-		17
Shares issued on acquisitions		7		310		-		-		-		-		-		317		-		317
Movement in relation to share-based payments		-		-		-		-		-		-		1,885		1,885		-		1,885
Deferred tax on share-based payments		-		-		-		-		-		-		208		208		-		208
Dividends to owners of the parent		-		-		-		-		-		-		(1,421)		(1,421)		-		(1,421)
Movement on reserves for non-controlling interests		-		-		-		-		-		-		819		819		(819)		-
Share options issued on acquisition of subsidiary														53		53		-		53
Non-controlling interest arising on acquisition		-		-		-		-		-		-		-		-		(812)		(812)
Non-controlling interest dividend		-		-		-		-		-		-		-		-		(399)		(399)
At 31 January 2015 (audited)		1,545		8,272		3,075		(2,673)		3,525		(510)		24,741		37,975		(773)		37,202
																					Â
Profit for the period		-		-		-		-		-		-		2,788		2,788		380		3,168
Other comprehensive income / (expense) for the period		-		-		-		-		(1,379)		237		-		(1,142)		-		(1,142)
Total comprehensive income / (expense) for the period		-		-		-		-		(1,379)		237		2,788		1,646		380		2,026
Shares issued on acquisitions		17		1,178		-		-		-		-		-		1,195		-		1,195
Shares issued on placing		77		4,228		-		-		-		-		-		4,305		-		4,305
Movement in relation to share-based payments		-		-		-		-		-		-		1,104		1,104		-		1,104
Movement on reserves for non-controlling interests		-		-		-		-		-		-		(2,517)		(2,517)		2,517		-
Non-controlling interest on business combination		-		-		-		-		-		-		-		-		(2,236)		(2,236)
Non-controlling interest dividend		-		-		-		-		-		-		-		-		(347)		(347)
At 31 July 2015 (unaudited)		1,639		13,678		3,075		(2,673)		2,146		(273)		26,116		43,708		(459)		43,249

¹ Other reserves include ESOP reserve and hedging reserve.

NEXT FIFTEEN COMMUNICATIONS GROUP PLC

CONSOLIDATED STATEMENT OF CASH FLOW

FOR THE SIX MONTH PERIOD ENDED 31 JULY 2015

	Â	Six months ended 31 July 2015 (Unaudited)	Â	Six months ended 31 July 2014 (Unaudited)	Â	Eighteen months ended 31 January 2015 (Audited)
		£’000		£’000		£’000
Cash flows from operating activities
Profit / loss for the period		3,168		(5,229)		921
Adjustments for:
Depreciation		1,098		758		2,332
Amortisation		1,344		951		2,812
Impairment		-		7,000		7,000
Finance expense		1,463		1,176		4,699
Finance income		(734)		(211)		(1,129)
Share of (profit) from equity accounted associate		(177)		(131)		(285)
Loss on sale of property, plant and equipment		49		11		73
Income tax expense		1,062		1,007		(516)
Share-based payment charge		1,362		312		2,486
		Â		Â		Â
Net cash inflow from operating activities before changes in working capital		8,635		5,644		18,393
							Â
Change in trade and other receivables		(2,427)		235		(1,705)
Change in trade and other payables		2,819		4,768		2,234
Change in provision		(357)		508		285
		35		5,511		814
		Â		Â		Â
Net cash generated from operations		8,670		11,155		19,207
							Â
Income taxes paid		(1,301)		(1,328)		(3,031)
		Â		Â		Â
Net cash inflow from operating activities		7,369		9,827		16,176
							Â
Cash flows from investing activities
Acquisition of subsidiaries and trade and assets, net of cash acquired		(1,647)		(990)		(5,597)
Payment of contingent and deferred consideration		(6,461)		(557)		(8,217)
Acquisition of property, plant and equipment		(2,676)		(1,575)		(3,712)
Proceeds on disposal of property, plant and equipment		-		21		24
Acquisition of intangible assets		(171)		(217)		(691)
Net movement in long-term cash deposits		(177)		(113)		230
Interest received		25		14		62
		Â		Â		Â
Net cash outflow from investing activities		(11,107)		(3,417)		(17,901)

NEXT FIFTEEN COMMUNICATIONS GROUP PLC

CONSOLIDATED STATEMENT OF CASH FLOW (Continued)

FOR THE SIX MONTH PERIOD ENDED 31 JULY 2015

	Â	Six months ended 31 July 2015 (Unaudited)	Â	Six months ended 31 July 2014 (Unaudited)	Â	Eighteen months ended 31 January 2015 (Audited)
		£’000		£’000		£’000
							Â
Cash flows from financing activities
Proceeds from sale of own shares		4,480		1		90
Issue costs on issue of ordinary shares		(175)		-		(5)
Purchase of own shares		-		(13)		(34)
Capital element of finance lease rental repayment		(21)		(6)		(103)
Net movement in bank borrowings		1,857		638		8,090
Interest paid		(226)		(275)		(743)
Non-controlling interest dividend paid		(347)		(290)		(884)
Dividends paid to shareholders of the parent		-		(1,585)		(3,006)
		Â		Â		Â
Net cash inflow/(outflow) from financing activities		5,568		(1,530)		3,405
		Â		Â		Â
Net increase in cash and cash equivalents		1,830		4,880		1,680
							Â
Cash and cash equivalents at beginning of the period		9,315		6,217		8,064
Exchange (losses) on cash held		(325)		(244)		(429)
		Â		Â		Â
Cash and cash equivalents at end of the period		10,820		10,853		9,315

NOTES TO THE INTERIM RESULTS
FOR THE SIX MONTHS ENDED 31 JULY 2015

1) BASIS OF PREPARATION
The financial information in these results has been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively Adopted IFRSs). The principal accounting policies used in preparing the results are those the Group has applied in its financial statements for the period ending 31 January 2016. The comparative financial information for the period ended 31 January 2015 has been derived from the audited statutory financial statements for that period. A copy of those statutory financial statements has been delivered to the Registrar of Companies. The auditors’ report on those accounts was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under section 498(2)-(3) of the Companies Act 2006.

2) SEGMENT INFORMATION
Measurement of operating segment profit
The Board of Directors assesses the performance of the operating segments based on a measure of adjusted operating profit before intercompany recharges, which reflects the internal reporting measure used by the Board of Directors. This measurement basis excludes the effects of certain acquisition related costs and goodwill impairment charges. Other information provided to them is measured in a manner consistent with that in the financial statements. Head office costs relate to group costs before allocation of intercompany charges to the operating segments. Intersegment transactions have not been separately disclosed as they are not material. The Board of Directors does not review the assets and liabilities of the Group on a segmental basis and therefore this is not separately disclosed.

	Â	UK	Â	Europe and Africa	Â	US	Â	Asia Pacific	Â	Head Office	Â	Total
		£’000		£’000		£’000		£’000		£’000		£’000
Â		Â		Â		Â		Â		Â		Â
Six months ended 31 July 2015 (Unaudited)
Revenue		12,799		3,207		39,917		5,836		-		61,759
Adjusted operating profit / (loss)		1,478		(113)		8,355		768		(3,242)		7,246
Six months ended 31 July 2014 (Unaudited)
Revenue		12,195		4,772		28,943		6,240		-		52,150
Adjusted operating profit / (loss)		756		486		6,651		372		(2,726)		5,539
Eighteen months ended 31 January 2015 (Audited)
Revenue		33,460		13,778		92,358		18,899		-		158,495
Adjusted operating profit / (loss)		3,299		584		21,018		1,208		(8,150)		17,959

A reconciliation of segment adjusted operating profit to profit before income tax is provided as follows:

Â	Â	Six months ended 31 July 2015 (Unaudited)	Â	Six months ended 31 July 2014 (Unaudited)			Â	Eighteen months ended 31 January 2015 (Audited)
		£’000		Â	Â	£’000		Â	Â	£’000
Segment adjusted operating profit		7,246				5,539				17,959
Amortisation of acquired intangibles		(1,201)				(806)				(2,375)
Impairment of goodwill		-				(7,000)				(7,000)
Charge associated with prior period restructure		-				(1,054)				(2,001)
Share based payment charge (note 3)		(1,059)				(66)				(1,906)
Charge associated with office moves		-				-				(1,036)
Deal costs (note 3)		(204)				-				-
Total operating profit		4,782				(3,387)				3,641
Unwinding of discount on acquisition related liabilities		(756)				(612)				(2,452)
Change in estimate on acquisition related liabilities		227				(170)				(643)
Movement in fair value of interest rate cap-and-collar		-				67				206
Share of profit from associate		177				131				334
Other finance expense		(225)				(275)				(743)
Other finance income		25				24				62
Profit before income tax		4,230				(4,222)				405

NOTES TO THE INTERIM RESULTS (Continued)

FOR THE SIX MONTHS ENDED 31 JULY 2015

3) RECONCILIATION OF PRO-FORMA FINANCIAL MEASURES

Â	Â	Six months ended 31 July 2015 (Unaudited)	Â	Six months ended 31 July 2014 (Unaudited)	Â	Eighteen months ended 31 January 2015 (Audited)
		£’000		£’000		£’000
Profit / (loss) before income tax		4,230		(4,222)		405
Movement in fair value of interest rate cap-and-collar contract		-		(67)		(206)
Unwinding of discount on deferred and contingent consideration and share purchase obligation payable		756		612		2,452
Change in estimate of future contingent consideration and share purchase obligation payable		(227)		170		643
Share-based payment charge1		1,059		66		1,906
Charge associated with prior period restructure		-		1,054		2,001
Charge associated with office moves		-		-		1,036
Deal costs2		204		-		-
Amortisation of acquired intangibles		1,201		806		2,375
Impairment of goodwill		-		7,000		7,000
Adjusted profit before income tax		7,223		5,419		17,612

Adjusted profit before income tax has been presented to provide additional information which may be useful to the reader, and it is a measure of performance used in the calculation of the adjusted earnings per share. This measure is considered to best represent the underlying performance of the business and so it is used for the vesting of employee performance shares.

¹ This charge relates to the acquisition of the 20% minority interest in Bourne whereby performance shares were issued as partial consideration, a transaction whereby a restricted grant of Brand equity was given to key management in Bite Communications Limited and The OutCast Agency LLC (2015: Story Worldwide, MBooth and Bite NA) at nil cost which holds value in the form of access to future profit distributions as well as any future sale value under the performance-related mechanism set out in the share sale agreement. This value is recognised as a one-off share-based payment in the income statement.

² This charge relates to 3rd party professional fees incurred during acquisitions and restructures, note 11.

4) TAXATION

The tax charge on adjusted profit for the six months ended 31 July 2015 (£1,628k) is based on the forecast effective tax rate of 23% of adjusted profit before tax for the year ending 31 January 2016, which is expected to be slightly higher than the standard UK rate due to the proportion of Group profits realised in overseas jurisdictions with higher rates of tax.

5) DIVIDENDS

An interim dividend of 1.2p (2015: 1p) per ordinary share will be paid on 11 December 2015 to shareholders listed on the register of members on 13 November 2015. Shares will go ex-dividend on 12 November 2015.

NOTES TO THE INTERIM RESULTS (Continued)

FOR THE SIX MONTHS ENDED 31 JULY 2015

6) FINANCE EXPENSE

Â	Â	Six months ended 31 July 2015 (Unaudited)	Â	Six months ended 31 July 2014 (Unaudited)	Â	Eighteen months ended 31 January 2015 (Audited)
							Â
		£’000		£’000		£’000
							Â
Financial liabilities at amortised cost
Bank interest payable		214		271		720
Financial liabilities at fair value through profit and loss
Unwinding of discount on deferred and contingent consideration and share purchase obligation payable		756		611		2,452
Change in estimate of future contingent consideration and share purchase obligation payable		482		290		1,504
							Â
Other
Finance lease interest		3		2		5
Other interest payable		8		2		18
Finance expense		1,463		1,176		4,699

7) FINANCE INCOME

Â	Â	Six months ended 31 July 2015 (Unaudited)	Â	Six months ended 31 July 2014 (Unaudited)	Â	Eighteen months ended 31 January 2015 (Audited)
							Â
		£’000		£’000		£’000
							Â
Financial assets at amortised cost				Â
Bank interest receivable		17		17		46
Financial assets at fair value through profit and loss
Movement in fair value of interest rate cap-and-collar contract		-		66		206
Change in estimate of future contingent consideration and share purchase obligation payable		709		121		861
Other interest receivable		8		6		16
Finance income		734		210		1,129

NOTES TO THE INTERIM RESULTS (Continued)

FOR THE SIX MONTHS ENDED 31 JULY 2015

8) EARNINGS PER SHARE

	Â	Six months ended 31 July 2015 (Unaudited)	Â	Six months ended 31 July 2014 (Unaudited)	Â	Eighteen months ended 31 January 2015 (Audited)
		£’000		£’000		£’000
						Â
Earnings attributable to ordinary shareholders		2,788		(5,499)		(107)
Movement in fair value of interest rate cap-and-collar contract after tax		-		(52)		(165)
Unwinding of discount on future deferred and contingent consideration and share purchase obligation payable after tax		646		633		730
Change in estimate of future contingent consideration and share purchase obligation payable after tax		(56)		6		(397)
Share based payment charge		826		78		1,175
Costs associated with prior period restructure		-		733		1,918
Costs associated with office moves		-		-		622
Amortisation of acquired intangibles		878		543		1,433
Deal costs		133		-		-
Impairment of intangibles		-		7,000		7,000
Adjusted earnings attributable to ordinary shareholders		5,215		3,442		12,209
						Â
		Number		Number		Number
						Â
Weighted average number of ordinary shares		64,654,163		60,295,934		60,825,828
Dilutive LTIP shares		4,603,298		5,444,208		4,868,493
Dilutive Growth Deal shares		1,473,699		1,159,543		1,126,939
Other potentially issuable shares		526,257		854,531		570,657
		Â		Â		Â
Diluted weighted average number of ordinary shares		71,257,417		67,754,216		67,391,917
						Â
						Â
Basic earnings per share		4.3p		(9.1)p		(0.2)p
Diluted earnings per share		3.9p		(8.1)p		(0.2)p
Adjusted earnings per share		8.1p		5.7p		20.1p
Diluted adjusted earnings per share		7.3p		5.1p		18.1p

Adjusted and diluted adjusted earnings per share have been presented to provide additional useful information. The adjusted earnings per share is the performance measure used for the vesting of employee performance shares. The only difference between the adjusting items in this note and the figures in note 3 is the tax effect of those adjusting items.

NOTES TO THE INTERIM RESULTS (Continued)

FOR THE SIX MONTHS ENDED 31 JULY 2015

9) NET DEBT

The HSBC Bank revolving credit facility expires in 2018 and therefore the outstanding balance has been classified in non-current borrowings.

31 July 2015 (Unaudited)			Â	31 July 2014 (Unaudited)	Â	31 January 2015 (Audited)
	Â
£’000				£’000		£’000
							Â
Total loans and borrowings		19,669		12,150		17,812
Obligations under finance leases		61		73		70
Less: cash and cash equivalents		(10,820)		(10,853)		(9,315)
Net debt		8,910		1,370		8,567
Share purchase obligation		3,753		5,050		5,842
Contingent consideration		7,322		4,896		7,174
Deferred consideration		-		1,720		94
Â		19,985		13,036		21,677

10) OTHER FINANCIAL LIABILITIES

Deferred consideration			Â	Contingent consideration	Â	Share purchase obligation
	Â
£’000				£’000		£’000
							Â
At 1 January 2014 (Unaudited)		1,629		3,977		4,792
Arising during the year		-		1,143		440
Changes in assumptions		-		334		(165)
Exchange differences		(6)		(88)		(71)
Utilised		-		(723)		(207)
Unwinding of discount		97		253		261
At 31 July 2014 (Unaudited)		1,720		4,896		5,050
Reclassification		85		(85)		-
Arising during the year		-		2,659		1,527
Changes in assumptions		-		640		(469)
Exchange differences		13		406		189
Utilised		(1,781)		(2,078)		(962)
Unwinding of discount		57		736		507
At 31 January 2015 (Audited)		94		7,174		5,842
Arising during the period		-		2,426		889
Exchange differences		-		(111)		(49)
Utilised		(95)		(2,254)		(3,370)
Unwinding of discount		1		400		355
Change in estimate		-		(313)		86
At 31 July 2015 (Unaudited)		-		7,322		3,753
Current		-		2,420		181
Non-current		-		4,902		3,572

NOTES TO THE INTERIM RESULTS (Continued)

FOR THE SIX MONTHS ENDED 31 JULY 2015

11) ACQUISITIONS AND OTHER SIGNIFICANT TRANSACTIONS

Incredibull
On 2 July 2015 Next 15 acquired the entire issued share capital of IncrediBull World Limited (“IncrediBull”), a brand marketing consultancy based in London. Initial consideration consisted of cash on completion of £1.3m and an additional £0.3m satisfied in Next 15 shares.

Further consideration will be paid based on the profit of IncrediBull for the year to 31 December 2015.

Republic
Further to the acquisition of the 51% interest in Republic on 21 January 2014, on 2 April 2015, Next 15 purchased the remaining minority interest in Republic for an aggregate consideration of £3,000,000. The consideration comprises £1,800,000 in cash, 302,094 shares in Next 15 and a deferred payment of £700,000 which is due to be settled in 2016.

Beyond
On 2 April 2015, Next 15 acquired the remaining 32.8% minority interests in Beyond Corporation Limited and Beyond International Corporation “Beyond”, its digital experience design agency, for an aggregate consideration of £2,370,000. The consideration comprises £2,000,000 in cash with the balance being satisfied in Next 15 shares.

Encore
On 27 April 2015, Next 15 purchased 75% of the issued share capital of Encore Digital Media Limited, a programmatic advertising technology business, for initial cash consideration of £687,000, with a right to purchase the remaining shares over a 5 year period.

Animl
On 11 March 2015, Next 15 purchased 30% of the issued share capital of Animl Limited, a two-year old creative business, for £110,000. It was founded to deliver “a newer, better response to conventional marketing spend” by fusing great storytelling and digital innovation and will work closely alongside The Lexis Agency Ltd, Bite DA and N15’s recent acquisition, Morar Consulting. There is a put and call option to buy the remaining 70% over the next 5 years.

Placing
On 29 January 2015 the Group announced its intention to place 3,089,862 new ordinary shares of 2.5p each in the capital of the Company at a price of 145 pence per Placing Share. On 29 January 2015 the Group further announced the successful placing of the new capital by Investec Bank plc. The Placing Shares rank pari passu in all respects with the existing Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid after the date of issue.

12) EVENTS AFTER THE BALANCE SHEET DATE

There have been no events after the balance sheet date that requires disclosure.

View source version on businesswire.com: http://www.businesswire.com/news/home/20151012006004/en/