LONDON--(BUSINESS WIRE)--  

Next Fifteen Communications Group plc
(“Next 15” or the “Group”)
Interimresults for the six months ended 31 July 2021

Strong performance driven by double digit net revenue growth across all four business segments

Next Fifteen Communications Group plc (AIM:NFC), the tech and data-driven growth consultancy, today announces its interim results for the six months ended 31 July 2021.

Financial results for the six months to 31 July 2021 (unaudited)

H1 Highlights

• Group net revenue growth of 32% to £165.9m (2020: £126.2m)
• Organic net revenue growth of 23%
• Adjusted profit before tax up 69% to £35.0m (2020: £20.7m)
• Adjusted diluted earnings per share increased by 51% to 26.3p (2020: 17.4p)
• Statutory revenue growth of 36% to £208.8m (2020: £153.1m)
• Statutory operating profit of £14.9m, up from a loss of £0.4m
• Strong balance sheet with net cash of £6.6m (2020: net debt of £5.0m)
• Successful refinancing, providing up to £100m of debt capacity to fund further acquisitions and capital investment
• Significant client wins including Boots, Citibank, Diageo and Disney+
• Acquisitions of Shopper Media Group (“SMG”) and a controlling interest in Blueshirt Capital Advisers (“BCA”), both of which have performed strongly in the first half
• Acquisition of business and assets of MSI International East Inc (“MSI”) by the US arm of Savanta

Current trading and outlook
The Group’s strong trading has continued into the third quarter of our financial year, and we are currently seeing no sign of a slowdown in client demand. Despite being against a strong comparable period, we anticipate delivering double digit organic revenue growth in our second half. Our new positioning as a growth consultancy is clearly resonating with our clients and we are confident in a positive financial performance for the rest of the year.

The Group’s strong balance sheet provides scope for further investments both in the businesses and in M&A to accelerate our longer term growth.

Commenting on the results, Chair of Next 15, Penny Ladkin-Brand said:
“Our first half results have seen very strong organic revenue and profit growth across all segments and we continue to benefit from the same momentum in our second half. The increasing mix of digital services is providing strong operating leverage although we are also taking the opportunity to accelerate investment in talent and product development to continue to drive longer term growth.”

Next 15 will host an analyst and investor webcast at 12.00 today, Tuesday 28 September 2021.

The registration link can be found here: https://us06web.zoom.us/webinar/register/WN_DbyvuhonThC-2cik4oUWmA

For further information contact:

Next Fifteen Communications Group plc
Tim Dyson, Chief Executive Officer
+1 415 350 2801

Peter Harris, Chief Financial Officer
+44 (0) 20 7908 6444

Numis
Mark Lander, Hugo Rubinstein
+44 (0)20 7260 1000

Berenberg
Ben Wright, Mark Whitmore, Dan Gee-Summons
+44 (0)20 3207 7800

Powerscourt
Elly Wiliamson, Jane Glover
+44 (0)7970 246 725

Notes:

Net revenue
Net revenue is calculated as revenue less direct costs as shown on the Consolidated Income Statement.

Organic net revenue growth
Organic net revenue growth is defined as the net revenue growth at constant currency excluding the impact of acquisitions and disposals in the last 12 months.

Adjusted operating profit margin
Adjusted operating profit margin is calculated based on the operating profit after interest on finance lease liabilities as a percentage of net revenue.

This announcement contains inside information as defined in Article 7 of the Market Abuse Regulation.

About Next 15

Next 15 (AIM:NFC) is an AIM-listed tech and data-driven growth consultancy with operations in Europe, North America and across Asia Pacific. The Group has a strong track record of creating and acquiring high-performance businesses. For acquired businesses it offers an opportunity to take advantage of the Group’s global operational infrastructure and centralized resources to accelerate their growth. The Group has long-term customer relationships with many of the world’s leading companies including Google, Amazon, Facebook, Microsoft, IBM, American Express and Procter & Gamble.

The business operates across four segments, each of which describes how we help customers grow in different ways: Customer Insight helps them understand their opportunities and challenges; Customer Engagement optimises their reputation and digital assets; Customer Delivery helps them connect with customers to drive sales; and Business Transformation helps maximize long-term value through corporate positioning, business design and the development of new ventures.

At Next 15, success is underpinned by a people-led approach. Our purpose is to make our customers and our people the best versions of themselves, and our culture is empowering and respectful. We are seeking B Corp status as externally audited recognition of our commitment to our people and the planet alongside performance.

Our goal is to deliver above-market growth. Our revenues have grown by 106% over the last five years and we are aiming to double the size of the business in the next five years. This will be driven by the quality of the businesses, the strength of our customer relationships, the support our model gives them, and strong tech, data and digital tailwinds.

Chair and Chief Executive’s Statement

Next 15, the growth consultancy, is pleased to report its interim results for the six months ended 31 July 2021.

During the period the Group’s net revenues increased by 32% to £165.9m (2020: £126.2m), while adjusted profit before tax increased by 69% to £35.0m (2020: £20.7m). The positive revenue performance aided by the favourable revenue mix towards more higher margin services and improved operational gearing resulted in the Group’s adjusted operating margin increasing to 21.1% (2020: 16.8%). Our minority interest increased to £2.0m (2020: £0.3m) due to exceptional performances from Agent3 and BCA, both of which have significant management minority shareholdings. Our tax rate on adjusted profit increased to 22% (2020: 20%) due to the increased proportion of our profit coming from our US operations. Despite this, our diluted adjusted EPS increased by 51% to 26.3p (2020: 17.4p) driven by the strong performance at an adjusted operating profit level. Continued strong cash generation resulted in our net cash increasing to £6.6m. This is after the recent acquisitions of SMG and BCA, in addition to other earn out and tax related payments, leaving the Group well placed to make further investments and acquisitions.

We are pleased to announce that the Group has returned to paying an interim dividend post its suspension in response to the pandemic. An interim dividend of 3.6p will be paid to shareholders on 26 November 2021. This represents a notional 20% increase on the interim dividend which we would have paid last year.

The performance has been strong across all four areas of the Group with all delivering double digit organic net revenue growth. Business Transformation was our fastest growing segment following the recent acquisitions of Mach49 and BCA, with Delivery also showing exceptional organic growth as our clients reacted to the pandemic by increasing spend on more measurable products and services. Our Customer Insight and Customer Engagement segments also produced encouraging performances. A fuller financial analysis by segment is provided below.

Given the robust performance of the businesses, we are using the period to accelerate investment in productizing a number of areas of the Group and hire additional digital talent. While these investments will have a minor impact on margins this year, they are expected to help drive sustained long-term organic growth.

The Group reported a statutory operating profit of £14.9m compared with £0.4m loss in the prior period, while reported diluted loss per share was 2.9p compared with 3.6p in the prior period.

Segment adjusted performance

Our customer engagement businesses are designed to help our customers optimize their brand reputation and build the mission-critical digital assets such as apps and websites that are the window through which much of the world’s commerce is now transacted. Revenue grew by 10% to £91.2m, with operating profit of £20.4m, an increase of 25%, delivered at an improved operating margin of 22.3%. We have had positive performances across the board but MBooth has been the standout performer benefitting from a recovery in revenues from its more consumer-oriented client base and its broad range of service offerings. Archetype and Beyond’s profitability have both risen significantly in the period due to resilient revenue performances and efficiency savings.

Customer delivery businesses are deeply specialised to use creativity, data, and analytics to create the connections with customers to drive sales and other forms of interaction. This link in the chain is increasingly digital. Businesses want to anticipate what their customers want and when they will want it. It is perhaps not surprising that this is a high growth area for our Group. Revenue grew by 60% to £36.3m, with operating profit almost doubling to £13.2m at an improved operating margin of 36.3%. Activate has continued to excel as its technology led client base has continued to see the benefit of using Activate’s ROI driven lead generation services. Both Agent3 and Twogether have seen significant revenue and profit growth from their more integrated B2B client marketing offerings. We acquired Shopper Media Group, the commerce marketing activation business, in April which has made a very positive start as part of the Group.

Our customer insight businesses are set up to help customers understand the opportunities and challenges they face and arm them with the data and insights they need to make the best decisions. Revenue grew by 23% to £18.8m, with operating profit of £3.3m delivered at a much improved operating margin of 17.7%. Our Savanta business showed a strong recovery from a Covid-impacted comparable period. Within the period, Savanta acquired YouthSight, a UK based youth specialist agency, and MSI, a US based healthcare and financial services specialist agency in the period which will strengthen the performance in our second half.

Business transformation is where customers need our help to either redesign their business model or create entirely new ventures. It is also the area where we help our clients to understand how to maximise the value of the organisation. Revenue grew by 257% to £19.7m, with operating profit of £4.6m at an operating margin of 23.4%. Mach49, which we acquired in August last year, has performed exceptionally well as its clients have embraced its corporate venture building expertise and the business has evolved into a more retainer-based business. The Blueshirt Group and BCA, where we increased our shareholding to 51% in May 2021, both benefitted from the revival of the tech IPO market, while Palladium performed strongly as its focus on providing tech oriented due diligence and value creation services to the Private Equity market proved popular.

Reconciliation between statutory and adjusted profit

Adjusted financial measures are presented to provide additional information that may be useful to shareholders through facilitating comparability with industry peers and to best represent the underlying performance of the business. Adjusted results are explained and reconciled to statutory results within note 2 and 3.

We had a net charge of £7.9m in relation to our estimate of future contingent consideration, due to stronger trading than expected from Mach49 and Agent3. As a Group, we are moving towards the inclusion of employment conditions for certain acquisition-related payments. As a result, we are required to build up a provision relating to these payments over time and therefore this has led to an accounting charge of £5.8m (2020: £1.7m). We also incurred a one-off £5.8m charge related to new incentive schemes for various brands.

Due to the success in subletting properties that were impaired in the prior year, a £1.0m credit has been incurred. Since the prior year end, we have repaid the furlough monies received from the UK government in full of £1.4m, which was also treated as an exceptional gain in the year to 31 January 2021. We incurred £0.2m of deal costs in relation to acquisitions, and the amortisation of acquired intangibles was £8.4m in the period.

Cashflow
Despite the unwinding of the benefits from government Covid-related schemes and a very strong revenue performance which negatively impacted our working capital, the Group delivered a resilient cashflow performance with the net cash inflow from operating activities of £27.3m compared to £31.5m in the prior period. This resulted in our net cash increasing to £6.6m as at 31 July 2021.

Bank refinancing
The Group completed a refinancing of its bank facilities on 2 September 2021. This involved a new three-year RCF with HSBC and Bank of Ireland for £60m, with two one-year extension options. As part of the arrangement the group has a £40m accordion option to facilitate future acquisitions.

Dividend
We are pleased to announce that the Group has returned to paying an interim dividend post its suspension in response to the pandemic. An interim dividend of 3.6p will be paid to shareholders on 26 November 2021, who hold shares on 29 October 2021. This represents a notional 20% increase on the interim dividend which we would have paid last year in the absence of the pandemic.

Current Trading and Outlook
The Group’s strong trading has continued into the third quarter of our financial year and we are currently seeing no sign of a slowdown in client demand, despite being against a tough comparable period in our second half. Our new positioning as a growth consultancy is clearly resonating with our clients and we are confident of a positive financial performance for the rest of the year.

The Group’s strong balance sheet provides scope for further investments both in the businesses and in M&A to accelerate our long term growth.

NOTES TO THE INTERIM RESULTS
FOR THE SIX MONTHS ENDED 31 July 2021

1) BASIS OF PREPARATION

The unaudited consolidated interim financial statements represent a condensed set of financial information and have been prepared using the recognition and measurement principles of International Accounting Standards, and in accordance with IAS 34, Interim Financial Reporting. The principal accounting policies used in preparing the results are those the Group has applied in its financial statements for the year ended 31 January 2021.

The comparative financial information for the year ended 31 January 2021 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 auditor’s 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.

The Group has previously reported its results split into three divisions: Brand Marketing, Data and Insights and Creative Technology. From 1 February 2021, the Group structure has been enhanced, moving from three divisions to four: Customer Insight, Customer Engagement, Customer Delivery and Business Transformation.

NOTES TO THE INTERIM RESULTS (Continued)
FOR THE SIX MONTHS ENDED 31 July 2021

2) SEGMENT INFORMATION (continued)

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

NOTES TO THE INTERIM RESULTS (Continued)
FOR THE SIX MONTHS ENDED 31 July 2021

3) RECONCILIATION OF ADJUSTED FINANCIAL MEASURES

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. The adjusting items are consistent with those in the prior period.

NOTES TO THE INTERIM RESULTS (Continued)
FOR THE SIX MONTHS ENDED 31 July 2021

4) TAXATION

The tax charge for the six months ended 31 July 2021 is based on the Group’s estimated effective tax rate for the year ending 31 January 2022 of 22% (six months ended 31 July 2020 of 20%).

5) DIVIDENDS

An interim dividend of 3.6p (six months ended 31 July 2020: nil) per ordinary share will be paid on 26 November 2021 to shareholders listed on the register of members on 29 October 2021. Shares will go ex-dividend on 28 October 2021. The last date for DRIP elections to be returned to the registrar is 5 November 2021.

6) FINANCE EXPENSE

7) FINANCE INCOME

NOTES TO THE INTERIM RESULTS (Continued)
FOR THE SIX MONTHS ENDED 31 July 2021

8) EARNINGS PER SHARE

Adjusted and diluted adjusted earnings per share have been presented to provide additional information which may be useful to shareholders through facilitating comparability with industry peers. The adjusted earnings per share is the performance measure used for the vesting of employee performance shares.

NOTES TO THE INTERIM RESULTS (Continued)
FOR THE SIX MONTHS ENDED 31 July 2021

9) NET DEBT

The HSBC Bank revolving credit facility of £40m expires in July 2022 and therefore the outstanding balance has been classified in current borrowings. The £20m loan drawn from HSBC is repayable in annual instalments and has £5m left to be repaid in December 2021. The group completed a refinancing of its bank facilities in September 2021 to include a new three year RCF for £60m, refer to note 11 for details.

10) OTHER FINANCIAL LIABILITIES

NOTES TO THE INTERIM RESULTS (Continued)
FOR THE SIX MONTHS ENDED 31 July 2021

11) EVENTS AFTER THE BALANCE SHEET DATE

Acquisition of MSI
On 1 August 2021, the US arm of the Group’s largest customer insight business, Savanta, acquired the business and assets of MSI International East Inc (“MSI”), a New Jersey based market research agency. This is a further step in the ambition for half of Savanta’s revenues to be delivered from its US arm. MSI’s clients include a variety of Fortune 500 companies across the Healthcare, Pharmaceutical, Investment, Insurance, IT/Security and Retirement sectors.

Bank Refinancing
The Group completed a refinancing of its bank facilities on 2 September 2021. This involved a new three year RCF with HSBC and Bank of Ireland for £60m, with two one year extension options. As part of the arrangement the Group has a £40m accordion option to facilitate future acquisitions.

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Next Fifteen Communications Plc

Source: Next Fifteen Comm