Interim Results
Next Fifteen Communications Grp PLC
04 April 2006
4 April 2006
Next Fifteen Communications Group plc
Interim Results for six months to 31 January 2006
Record half-year revenues, profits and earnings
Next Fifteen Communications Group plc ("Next Fifteen" or "the Group"), the
international public relations consultancy group, today reports record
profitability and revenues for its financial results for the six months to 31
January 2006.
Financial highlights:
• Revenues up 29.6% to £26.5 million (2005: £20.4 million)
• Adjusted profit before tax increased by 22.4% to £1.8 million (2005:
£1.5 million)
• Adjusted earnings per share up by 17.6% to 2.47p (2005: 2.10p)
• Interim dividend increased 10.6% to 0.365p (2005: 0.33p)
Corporate progress:
• Acquisition of Credo Communications in the UK and Parachute Marketing in
the US; successful integration into Bite Communications
• Strong overall performance by the Group's technology and non-technology
focused businesses; growth of existing client mandates and significant new
client wins
• Significant revenue growth from US operations; up 58% year on year
following acquisition of OutCast in 2005
• Organic revenue growth in Asia up 32%
• Stake in Lexis Public Relations to increase to 51% in April; further
strengthening Group's presence beyond technology sector. Remaining equity to
be purchased over next four years.
Commenting on the results, Will Whitehorn, Chairman of Next Fifteen, said:
"Next Fifteen Communications Group plc is pleased to report record half year
results for the six months to 31 January 2006, achieving record revenues,
profitability and earnings.
"The Group's strategy remains focused on driving organic growth from its
existing PR brands and supplementing this with targeted acquisitions that offer
growth potential and complement the existing PR businesses.
"The Group is pleased to report strong performances from its operating
subsidiaries. In particular, its Bite and OutCast businesses have shown strong
revenue and profit growth.
"We are confident that the Group's strong organic growth prospects and recent
acquisitions coupled with further structural changes being made to the Group,
will provide a good platform from which to generate further growth at the top
and bottom line in the next financial year."
- Ends -
For further information:
Next Fifteen Communications Group
Tim Dyson, Chief Executive 001 415 350 2801
David Dewhurst, Finance Director 07974 161183
Merlin 020 7653 6620
Vanessa Maydon Mob. 07802 961 902
Rebecca Penney Mob. 07795 108 178
Attached: Chairman and Chief Executive Statement
Consolidated Profit & Loss Account
Consolidated Statement of Total Recognised Gains & Losses
Consolidated Balance Sheet
Consolidated Cash Flow Statement
Notes to the Interim Statement
CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S STATEMENT
Next Fifteen Communications Group plc is pleased to report record half year
results for the six months to 31 January 2006, achieving record revenues,
profitability and earnings. Revenues increased by 29.6% to £26.5m (2005:
£20.4m), while adjusted profit before tax increased by 22.4% to £1.8m (2005:
£1.5m) (See Note 3). At the same time adjusted earnings per share rose 17.6% to
2.47p (2005: 2.10p) (See Note 5). As a result of this record performance, the
Board has decided to increase the interim dividend by 10.6% to 0.365p (2005:
0.33p).
The Group's strategy remains focused on driving organic growth from its existing
PR brands and supplementing this with targeted acquisitions that offer growth
potential and complement the existing PR businesses.
Since the Group reported its last full-year results it has completed two small
acquisitions. The acquisition of Credo Communications in the UK was completed in
December 2005 and in February 2006, the Group completed the acquisition of the
PR assets of Parachute Marketing in the US. Both businesses were acquired to
strengthen Bite's management team and product offering in the UK and US
respectively and the operations have been successfully integrated into Bite
Communications.
The Group is pleased to report a strong overall performance from its operating
subsidiaries. In particular, its Bite and OutCast businesses have shown strong
revenue and profit growth following increased assignments from existing clients
and the addition of new clients including Virgin Lifecare, Autonomy, OQO, Getty
Images, Navio, TrustedID and Ingres.
Text 100, the Group's largest business has added two global clients, Philips and
Mathworks, during the period. It has also added Adobe, Tacit Networks and Par 3
Communications. During the period, Text 100 worked with its largest client, IBM,
to reallocate budgets from developed markets such as the US and EMEA to emerging
markets such as China. This has slowed Text 100's growth in these developed
markets; however, with a strong new business climate we anticipate a return to
growth in the second half of 2006.
Inferno, the Group's third technology PR business in the UK, has continued to
expand and new clients include Voice over IP leader, Vonage.
The Group's non-technology businesses, August One and now Lexis both added
significant clients including nPower, Network Rail, Kerry Foods and Norwich
Union.
Looking at the performance of the Group by region, North America continues to
generate strong revenue growth and now accounts for over 50% of Group turnover.
With the acquisition of OutCast towards the end of the last financial year, the
Group saw North American revenues rise by 58% year on year. Even without these
acquired revenues, the Group's North American business generated revenue growth
of 29%. In the period, the Group has also demonstrated strong organic revenue
growth in Asia of 32%. Revenues in EMEA remained relatively flat overall in the
first half, although we are encouraged by the improvement in revenue prospects
for the second half.
Prospects
In early April, the Group will complete the next stage of its acquisition of one
of the UK's leading consumer PR agencies, Lexis Public Relations. Following
this, Next Fifteen will own 51% of Lexis. The remaining 49% will be acquired
over the next four years in line with agreements already signed. The acquisition
of Lexis has successfully strengthened the Group's presence beyond the
technology sector.
The Group has recently embarked on a restructuring of the business to further
reduce its cost base and also improve its overall tax position. This will result
in one-off expenses in the second half. We are confident, however, that these
changes, in addition to the Group's strong organic growth prospects and recent
acquisitions, will provide a good platform from which to generate further growth
in the next financial year.
Will Whitehorn Tim Dyson
Chairman Chief Executive Officer
4 April 2006
NEXT FIFTEEN COMMUNICATIONS GROUP PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE SIX MONTHS ENDED 31 JANUARY 2006
Six months ended 31 Six months ended 31 Year ended
January 2006 January 2005 31 July 2005
(Unaudited) (Unaudited) (Audited)
Note £'000 £'000 £'000
Turnover
Existing
operations 2 29,516 23,035 48,516
Acquisitions 2 35 - -
------- ------ ------
Continuing
operations 29,551 23,035 48,516
Other
external (3,065) (2,606) (5,290)
charges
------- ------- ------
Net revenue 26,486 20,429 43,226
Staff costs 18,498 14,183 30,100
Depreciation 700 583 1,115
Amortisation
and amounts
written off
intangible
assets 288 100 232
Other
operating
charges 5,468 4,194 8,746
------- ------ ------
(24,954) (19,060) (40,193)
Group
operating
profit
Existing
operations 1,514 1,369 3,033
Acquisitions 8 18 - -
------- ------- ------
Continuing
operations 1,532 1,369 3,033
Share of
operating
profit of
acquired
associate 8 74 - -
------- ------- ------
Operating
profit
including
associate 1,606 1,369 3,033
Interest
receivable
and 16 25 46
similar
income
Interest
payable and
similar
charges (217) (16) (25)
------- ------- ------
Profit on
ordinary
activities
before
taxation 2 1,405 1,378 3,054
Taxation on
profit on
ordinary
activities 4 (558) (601) (1,332)
------- ------- ------
Profit on
ordinary
activities
after 847 777 1,722
taxation
Minority
interest (26) (53) (183)
------- ------- ------
Profit
attributable
to members 821 724 1,539
------- ------- ------
Earnings per
share 6
Basic 1.78p 1.85p 3.87p
Diluted 1.67p 1.77p 3.73p
Adjusted 2.47p 2.10p 4.45p
NEXT FIFTEEN COMMUNICATIONS GROUP PLC
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE SIX MONTHS ENDED 31 JANUARY 2006
Six months ended Six months ended Year ended
31 January 2006 31 January 2005 31 July 2005
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Profit attributable to
members 821 724 1,539
Translation differences on
foreign currency net
investments 7 (73) 124
Translation differences on
long-term foreign currency
loans used to finance
overseas subsidiaries (73) 20 146
-------- ------ ------
Total recognised gains and
losses relating to the
period 755 671 1,809
======== ====== ======
NEXT FIFTEEN COMMUNICATIONS GROUP PLC
CONSOLIDATED BALANCE SHEET
AS AT 31 JANUARY 2006
31 January 2006 31 January 2005* 31 July 2005*
(Unaudited) (Unaudited) (Audited)
Note £'000 £'000 £'000
Fixed assets
Intangible assets 8,239 700 6,917
Tangible assets 2,872 2,399 2,961
Investment in associate 1,555 - -
------ ------ ------
12,666 3,099 9,878
Current assets
Debtors
-due within one year 13,486 9,377 11,602
-due after more 404 221 418
than one year ------ ------ ------
13,890 9,598 12,020
Cash at bank
and in hand 756 2,723 2,960
------ ------ ------
14,646 12,321 14,980
Creditors: amounts falling due
within one year 8,093 6,997 8,821
------ ------ ------
Net current assets 6,553 5,455 6,159
------ ------ ------
Total assetsless current
liabilities 19,219 8,554 16,037
Creditors: amounts falling due
after more than one year 5,440 99 3,259
Provision for liabilities
and charges - 70 5
------ ------ ------
Net assets 2 13,779 8,385 12,773
------ ------ ------
Capital and reserves
Called up share capital 1,281 1,123 1,244
Shares to be issued 553 - 568
Share premium account 5,988 2,723 5,112
ESOP reserve (1,559) (1,842) (1,667)
Profit and loss account 7,516 6,073 7,068
------ ------ ------
Equity shareholders' funds 13,779 8,077 12,325
Minority interests - 308 448
------ ------ ------
13,779 8,385 12,773
------ ------ ------
* as re-stated under FRS 21. See Note 1.
NEXT FIFTEEN COMMUNICATIONS GROUP PLC
CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 31 JANUARY 2006
Six months ended Six months ended Year ended
31 January 2006 31 January 2005 31 July 2005
(Unaudited) (Unaudited) (Audited)
Note £'000 £'000 £'000
Net cash
inflow from
operating
activities 7 608 1,638 3,818
Returns on
investments and
servicing of
finance
Interest
received 18 25 46
Interest paid (126) (8) (12)
Minority
interest
dividend paid (69) (10) (26)
------ ------ ------
Net cash
(outflow)/
inflow from
returns on
investments
and servicing
of finance (177) 7 8
Taxation (1,215) (416) (996)
Capital
expenditure and
financial
investment
Receipts
from/(payments
for) long-term
deposits 6 63 (40)
Payments to
acquire
tangible fixed
assets (625) (967) (1,932)
Proceeds from
sale of
tangible fixed
assets 9 4 17
------ ------ ------
Net cash
outflow from
capital
expenditure
and financial
investment (610) (900) (1,955)
Acquisitions and
disposals
Purchase of
associate
undertaking 8 (1,272) - -
Purchase of
subsidiary
undertaking 8 (216) - (3,408)
Cash at bank
and in hand
acquired with
subsidiary 8 132 - 85
Acquisition
expenses 8 (594) - -
Payments to
acquire trade
and assets (74) (217) (311)
------ ------ ------
Net cash
outflow from
acquisitions
and disposals (2,024) (217) (3,634)
Equity
dividends paid (417) (314) (444)
------ ------ ------
Net cash
outflow before
financing (3,835) (202) (3,203)
Financing
Issue of new
share capital 27 10 2,431
Issue of
shares to
minorities - 2 68
Proceeds from
sale of own
shares 115 11 169
Long-term loan 2,605 - 511
Capital
element of
finance lease
rental
repayments - (56) (69)
Redemption of
minorities (1,108) (4) (4)
------ ------ ------
Cash
inflow/(outflo
w) from
financing 1,639 (37) 3,106
------ ------ ------
Decrease in
cash in the
period 7 (2,196) (239) (97)
------ ------ ------
NOTES TO THE INTERIM ACCOUNTS
FOR THE SIX MONTHS ENDED 31 JANUARY 2006
1) FINANCIAL INFORMATION
The financial information is for the six months ended 31 January 2006 and is not
audited as defined by APB Bulletin 1993/1 and 1998/6. The financial information
in this report does not constitute statutory financial statements within the
meaning of section 240 of the Companies Act 1985 (as amended). The results for
the year ended 31 July 2005 have been extracted from the financial statements of
the Group on which an unqualified audit report has been received which did not
contain a statement under section 237 of the Companies Act 1985 and which have
been filed with the Registrar of Companies.
The interim statement is prepared on the basis of the accounting policies as set
out in the last annual report, except for the following:
FRS 21 'Events after the balance sheet date' has been adopted in these interim
financial statements. The main change is that dividends are only recorded when
an obligation exists at the period end date. Consequently, dividends which the
company proposes, but are not approved as at the balance sheet date, are no
longer accrued but are required to be disclosed in the notes to the financial
statements. The prior year comparative figures have been restated to reflect the
adoption of FRS 21.
The effect of this change in accounting policy on the comparatives is that net
assets have increased by £401,000 at 31 July 2005 and by £131,000 as at 31
January 2005.
Dividends for the year as reported in the profit and loss account previously
have decreased by £89,000 for the year ended 31 July 2005 and increased by
£181,000 for the period ended 31 January 2005.
FRS25 'Financial Instruments: Disclosure and Presentation', dividends are no
longer shown on the face of the Profit &Loss account but are shown in the
shareholder's funds note to the year end financial statements.
NOTES TO THE INTERIM ACCOUNTS
FOR THE SIX MONTHS ENDED 31 JANUARY 2006
2) SEGMENTAL INFORMATION
Analysis of turnover, profit before taxation and net assets by geographic origin
and destination are stated below. The turnover relates to one class of business,
being the provision of public relations services.
Turnover Profit before Net assets
taxation
£'000 £'000 £'000
Six months ended 31 January 2006
(Unaudited)
Continuing activities:
UK 6,041 (249) 1,803
EMEA* 4,746 110 1,103
North America 15,231 2,123 6,311
Asia Pacific 3,498 222 1,909
Head office - (891) 1,962
--------- --------- ---------
29,516 1,315 13,088
Acquisitions:
UK(1) 35 90 691
--------- --------- ---------
29,551 1,405 13,779
========= ========= =========
Year ended 31 July 2005
(Audited)
Continuing activities:
UK 12,269 551 3,673
EMEA* 9,581 584 1,310
North America 21,214 2,442 4,983
Asia Pacific 5,452 644 1,537
Head office - (1,167) 1270
--------- --------- ---------
48,516 3,054 12,773
========= ========= =========
Six months ended 31 January 2005
(Unaudited)
Continuing activities:
UK 6,038 221 1,823
EMEA* 4,703 295 1,134
North America 9,640 935 3,258
Asia Pacific 2,654 281 1,432
Head office - (354) 738
--------- --------- ---------
23,035 1,378 8,385
========= ========= =========
*EMEA means Europe (excluding the UK), Middle East and Africa. The directors
consider these regions to be separate geographic markets and the markets within
which the Group operates.
(1) The turnover from acquisitions all relates to Credo Communications
("Credo"). The profit before tax from acquisitions includes £18,000 of
apportioned Credo profit, with the remaining £72,000 generated by Lexis after
deduction of £2,000 external interest expense. The net assets from acquisitions
comprise £571,000 in respect of Lexis and £120,000 related to Credo.
NOTES TO THE INTERIM ACCOUNTS
FOR THE SIX MONTHS ENDED 31 JANUARY 2006
3) RECONCILIATION OF PRO FORMA FINANCIAL MEASURES
Six months ended Six months ended Year ended
31 January 2006 31 January 2005 31 July2005
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Profit on ordinary
activities before taxation 1,405 1,378 3,054
Amortisation and amounts
written off intangible
assets (1) 313 100 232
Unwinding of discount on
deferred consideration (1) 91 - -
---------- ---------- ----------
Adjusted profit on ordinary
activities before taxation 1,809 1,478 3,286
========== ========== ==========
Adjusted profit on ordinary activities before taxation has been presented to
provide additional information which may be useful to the readers of the
statement.
(1) See Note 6 for details.
4) TAX ON PROFIT ON ORDINARY ACTIVITIES
The tax charge is based on the forecast effective tax rate for the year and is
higher than a standard UK rate as a result of profits being generated in high
tax regimes.
5) DIVIDENDS
An interim dividend of 0.365p (2005: 0.33p) will be paid on 26 May 2006 to
shareholders on the register of members on 28 April 2006. Shares will go ex
dividend on 26 April 2006. The Employee Share Ownership Trust has waived its
rights to dividends of £18,000 in the six months ended 31 January 2006 (Interim
2005: £18,000; Full year 2005: £54,000). The total interim dividend paid is
expected to be £190,000.
NOTES TO THE INTERIM ACCOUNTS
FOR THE SIX MONTHS ENDED 31 JANUARY 2006
6) EARNINGS PER SHARE
Six months ended Six months ended Year ended 31
31 January 2006 31 January 2005 July 2005
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Basic and diluted
earnings attributable
to ordinary
shareholders 821 724 1,539
Amortisation
of goodwill after taxation
227 100 232
Unwinding of
discount on deferred
consideration 91 - -
---------- ---------- ----------
Adjusted earnings
attributable to ordinary
shareholders 1,139 824 1,771
---------- ---------- ----------
Number Number Number
Weighted average number
of ordinary
shares 46,183,526 39,178,138 39,806,952
Dilutive share
options 2,888,972 1,782,661 1,477,007
---------- ---------- ----------
Diluted weighted
average number
of ordinary
shares 49,072,498 40,960,799 41,283,959
---------- ---------- ----------
Basic earnings per
share 1.78p 1.85p 3.87p
Diluted earnings per
share 1.67p 1.77p 3.73p
Adjusted earnings per
share 2.47p 2.10p 4.45p
Adjusted earnings per share has been presented to provide additional information
which may be useful to the readers of the statement.
(1) includes £25,000 of amortisation on the goodwill arising from the
acquisition of the 25% stake in Lexis during the period. In compliance with FRS
9 - "Associates and Joint Ventures", the Lexis amortisation has been treated as
a reduction to the operating profit of Lexis, as reported within the Group
profit and loss account under "Operating profit from acquired associate".
(2) as required by FRS 12 - "Provisions, Contingent Liabilities and Assets", an
interest charge of £91,000 has been recognised during the period in relation to
the deferred consideration payable for OutCast Communications.
NOTES TO THE INTERIM ACCOUNTS
FOR THE SIX MONTHS ENDED 31 JANUARY 2006
7) NOTES TO THE CASH FLOW STATEMENT
(1) Reconciliation of operating profit to net cash inflow from operating
activities
Six months ended Six months ended Year ended
31 January 2006 31 January 2005 31 July 2005
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Group
operating
profit 1,532 1,369 3,033
Depreciation,
amortisation
and amounts
written off
intangible
assets 988 683 1,347
Loss on sale
of tangible
fixed assets 3 4 15
(Profit)/loss
on sale of
minority
interest* (100) - 15
LTIP and
conditional
share award
charge 86 - -
Increase in
debtors (1,516) (667) (2,425)
(Decrease)/inc
rease in
creditors (380) 375 2,024
Decrease in
provisions (5) (126) (191)
----------- ----------- -----------
Net cash
inflow from
operating
activities 608 1,638 3,818
=========== =========== ===========
*See note 8 for details.
(2) Reconciliation of net cash flow to movement in net (debt)/ funds
Six months ended Six months ended Year ended
31 January 2006 31 January 2005 31 July 2005
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Decrease in cash in the
period (2,196) (239) (97)
Cash outflow
from decrease in lease
financing - 56 69
Cash inflow from increase
in debt (2,605) - (511)
----------- ----------- -----------
Change in net funds
resulting from
cashflows (4,801) (183) (539)
Translation
differences (8) 21 115
----------- ----------- -----------
Movement in net funds in
the period (4,809) (162) (424)
Net funds at beginning of
period 2,449 2,873 2,873
----------- ----------- -----------
Net(debt)/funds
at period end (2,360) 2,711 2,449
=========== =========== ===========
NOTES TO THE INTERIM ACCOUNTS
FOR THE SIX MONTHS ENDED 31 JANUARY 2006
8) ACQUISITIONS
During the period the Group made three acquisitions:
1.
On 4 August 2005, the Company acquired a 25% stake in the UK public
relations company Lexis Public Relations Limited ("Lexis") by the purchase of a
25% stake in Panther Communications Group Limited ("Panther"), the parent
company of Lexis. The consideration of £1,507,000, including professional fees
capitalised of £235,000 (reported within "Acquisition expenses" in the Group
Cashflow Statement) was fully satisfied in cash. Lexis has been treated as an
associate undertaking in the Group accounts under the equity method of
accounting as required by FRS 9 - "Associates and Joint Ventures".
Based upon the provisional acquisition balance sheet, goodwill of £1,009,000 has
been capitalised, being reported within the "Investment in associate" balance in
the Group balance sheet, and is being amortised over its useful economic life of
20 years. £25,000 of amortisation on the Lexis goodwill has been recognised
since acquisition, being treated as a reduction to the operating profit from
associate in the Group profit and loss account as required by FRS 9.
Further purchases of Panther will be made over the next four years based upon
the performance of Lexis. The next purchase, due on 6 April 2006, will take the
Company's ownership in Panther to a minimum of 51%, after which the results of
Lexis will be fully consolidated into the Group accounts.
2.
Between 10 August 2005 and 24 October 2005 the Company purchased the
minority interest in Bite Communications Group Limited ("Bite"). As at 31
January 2006 the Company controlled 100% of Bite. Under the terms of the
agreement and prior to the purchase of the minority interest, all existing share
options over Bite shares were exercised, increasing the minority interest and
effecting a part disposal of Bite by Next Fifteen Group, on which a £100,000
gain was made at Group level. The total consideration payable for the minority
interest was £2,212,000, of which £1,108,000 was satisfied in cash and the
remainder in shares. The goodwill of £1,520,000 arising on the purchase has been
capitalised and is being amortised over its useful economic life of 20 years.
3.
On 31 December 2005, the Company indirectly purchased 100% of the
share capital of Credo Communications Limited ("Credo"). The total consideration
payable to the previous shareholders of Credo is £373,000 with £218,000 paid in
cash on completion (including £2,000 stamp duty, reported within "Acquisition
expenses" in the Group Cashflow Statement) and the balance to be satisfied in
both cash and shares by the 31 December 2006. Based upon the provisional
completion balance sheet, cash in hand and at bank of £132,000 was acquired with
Credo, which is shown on the face of the Group Cashflow Statement. The
operations of Credo have since been transferred into Bite Communications
Limited. The operating profit apportioned to the Credo trade and assets in
January 2006 has been calculated as £18,000. Goodwill of £254,000 has been
recognised on the acquisition and is being amortised over its useful economic
life of 5 years.
£357,000 of acquisition costs were paid in the period which related to the
purchase of OutCast Communications ("OutCast") in June 2005. All these costs
have been capitalised as part of the OutCast acquisition and £326,000 were
accrued in the July 2005 balance sheet. The £357,000 comprises a tax charge of
£250,000 resulting from the conversion of OutCast from an S Corp to a C Corp and
£107,000 of legal and accounting fees.
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