16th Oct 2007 07:00
Preliminary Results for the Year Ended 31 July 2007 (Unaudited) Next Fifteen Communications Group plc ('Next Fifteen' or 'the Group'), theglobal public relations consultancy group, today announces record preliminaryresults for the year to 31 July 2007. Financial Highlights: -- Net revenues increased 5.8% to £59.3m (2006: £56m) -- Revenue growth in constant currencies of 11% -- Headline profit before tax increased 26.7% to £5.61m (2006: £4.44m) -- Profit before tax increased 49% to £4.47m (2006: £3.0m) -- Adjusted net profit margin improved to 9.5% from 7.9% -- Adjusted operating profit margin, before head office costs, increased to 13.7% (2006: 11.9%) -- EBITDA increased 33% to £7.25m (2006: £5.44m) -- Adjusted earnings per share increased 33% to 7.08p (2006: 5.32p) -- Basic earnings per share increased 78% to 5.08p (2006: 2.86p) -- Net debt reduced from £1.4m to £70,000 -- Final dividend of 1.1p (2006: 1.0p), making a total dividend for the year of 1.5p (2006: 1.365p), up 10% Operational highlights: -- Group added Facebook, Boots, Cisco, Nokia and MySpace as major clients -- Acquired a further 25% stake in Lexis Public Relations in November 2006, taking holding to 76% -- New market research agency, Redshift Research launched in the UK -- Opened Bite subsidiaries in China and Hong Kong Commenting on the results, Will Whitehorn, Chairman of Next Fifteen, said: "The global public relations industry is in a period of expansion as more andmore media moves online and as social media such as blogs and phenomena such asMySpace and Facebook continue to attract users. Against this background and dueto its strength in these areas, the Group has again shown excellent growth atboth the top and bottom line. Behind these results are a stronger UK business; areduced tax- charge; further expansion in Asia; and the addition of significantnew clients including Facebook, Boots, Cisco, Nokia and MySpace. This has beenachieved despite a further 9% weakening of the US dollar, in which 44% of ourrevenues are earned. Shareholders should also note the healthy cash generationof the business, which provides a firm base for further acquisitions by theGroup in the current year." For further information contact: \* TNext Fifteen Communications GroupTim Dyson, Chief Executive 001 415 350 2801David Dewhurst, Finance Director 07974 161183Merlin 020 7653 6620Anja Kharlamova 07887 884788\* T \* T Attached: Chairman and Chief Executive Statement Consolidated Profit and Loss Account Consolidated Statement of Total Recognised Gains and Losses Consolidated Balance Sheet Consolidated Cash Flow Statement Reconciliation of Movements in Shareholders' Funds Notes to the Preliminary Statement\* T Chairman and Chief Executive's statement Next Fifteen Communications Group plc ('Next Fifteen' or 'the Group'), theglobal public relations consultancy group, is pleased to announce itspreliminary results for the year to 31 July 2007. The Group continues to performwell and has produced record results, with net revenue increasing 5.8% to £59.3m(2006: £56m) and headline profit before tax increasing 26.7% to £5.61m (2006:£4.44m) before goodwill amortisation, reorganisation costs and profit ondisposal of a non-core business (see note 5). Adjusted earnings per share haveincreased 33% to 7.08p (2006: 5.32p), while basic earnings per share haveincreased 78% to 5.08p (2006: 2.86p). The Group has significantly improved itscash position, with net debt reduced from £1.4m last year to just £70,000 at theyear-end. The Group's results were affected by currency movements during theyear, particularly the weakness of the US dollar. Using constant currencies, theGroup would have shown net revenues of £62.1m, an increase of 11%. On the backof these results the Board has proposed a final dividend of 1.1p per share,bringing the total dividend for the year to 1.5p, which represents an increaseof 10% (2006: 1.365p). Revenue growth The Group has experienced growth in three of its four regions, most notably theUK, which grew 41%. The US business was affected by the weakness of the USdollar and the change that took place in the IBM account during the previousfinancial year. Excluding the IBM account, the US businesses showed organicgrowth of 11.6% in dollar terms. Continued investment in new operations During the final quarter of the year, the Group launched Redshift Research, aUK-based market research agency, and expanded its Bite business into Hong Kongand Beijing. The start-up costs for these businesses did not have a materialimpact on the Company's performance, and we expect that they will becomeprofit-generative in the current financial year. Redshift has made a promisingstart and, even though our Bite business in mainland China is still in theinvestment phase, we are pleased that it has been appointed by such clients asInformatica and VMware. Rise of social media The expansion of social media, such as blogs and social networking sites, hasprovided significant growth opportunities for the PR industry, through both newclient opportunities and the expansion of the services now required by clients.The Group is pleased to report that two of the most important social networkingcompanies, MySpace and Facebook are now significant clients. The vast majorityof clients are now including social media services in their PR activities. Margin improvement The Group saw its adjusted net profit margin improve from 7.9% to 9.5% duringthe year despite the investments made in new operations as mentioned above.Before head office costs, the businesses improved their operating margin from11.9% to 13.7%. Growth strategy The Group's strategic focus continues to be on organic growth and selectedacquisitions of specialist agencies that will either extend the internationalreach of our existing businesses or provide new markets or market-share for theGroup. In November 2006, the Group acquired a further 25% of Lexis, taking itsownership of this UK consumer PR business to 76%. With minimal net debt,acquisition facilities now in place and the Group's EBITDA having risen 33% to£7.25m, the Group has considerable flexibility to pursue appropriate acquisitionopportunities. Prospects The Group is well placed to benefit from the current expansion of the PRindustry in the UK and other markets such as China, India and North America.During the last twelve months the addition of new clients, that include Nokia,Boots, Facebook and Cisco, has fuelled momentum and we are optimistic about ourprospects for the current year. NEXT FIFTEEN COMMUNICATIONS GROUP PLC CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 JULY 2007 \* T 2007 2006 (Unaudited) (Audited) (restated)* Note £'000 £'000 Turnover 3 69,422 63,278 Other external charges (10,154) (7,271) ----------- ----------- Net revenue 3 59,268 56,007 Staff costs 39,930 38,735Depreciation 1,465 1,449Amortisation and amounts written offintangible assets 826 727Reorganisation costs 4 295 700Other operating charges 11,852 11,302 ----------- ----------- 54,368 52,913 ----------- ----------- Group operating profit 4,900 3,094 Share of operating profit ofassociate 56 174 ----------- ----------- Operating profit including associate 4,956 3,268 Interest receivable and similar income 113 47Interest payable and similar charges (596) (312) ----------- ----------- Profit on ordinary activities beforetaxation 3 4,473 3,003 Taxation on profit on ordinary activities 6 (1,746) (1,494) ----------- ----------- Profit on ordinary activities aftertaxation 2,727 1,509 Minority interest (241) (179) ----------- ----------- Profit attributable to shareholders 2,486 1,330 =========== =========== Earnings per share 8Basic 5.08p 2.86pDiluted 4.99p 2.77p *See note 2.\* T NEXT FIFTEEN COMMUNICATIONS GROUP PLC CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED 31 JULY 2007 \* T 2007 2006 (Unaudited) (Audited) (restated)* £'000 £'000 Group profit for the financial year 2,454 1,226Associate undertaking 32 104 ----------- ----------- Profit attributable to shareholders 2,486 1,330 Translation differences on foreign currency net investments (187) (72) Translation differences on long-term foreign currency inter-company loans (124) (110) ----------- ----------- Total recognised gains and losses related to the year 2,175 1,148 =========== ===========\* T *See note 2. NEXT FIFTEEN COMMUNICATIONS GROUP PLC CONSOLIDATED BALANCE SHEET AS AT 31 JULY 2007 \* T 2007 2006 (Unaudited) (Audited) (restated)* Note £'000 £'000Fixed assetsIntangible assets 11,871 11,188Tangible assets 2,991 3,063Investments 124 92 ------------ ----------- 14,986 14,343Current assetsDebtors - due within one year 16,716 15,434 - due after more than one year 397 335 ------------ ----------- 17,113 15,769 Cash at bank and in hand 5,834 4,018 ------------ ----------- 22,947 19,787 Creditors: amounts falling due within one year 12,973 12,554 Net current assets 9,974 7,233 ------------ ----------- Total assets less current liabilities 24,960 21,576 Creditors: amounts falling due after more than one year 6,852 6,834 ------------ -----------Net assets 3 18,108 14,742 ============ =========== Capital and reserves Called up share capital 1,334 1,303Shares to be issued 190 558Share premium account 5,157 5,157Merger reserve 2,160 1,353Share-based payment reserve 491 229ESOP reserve (681) (1,487)Profit and loss account 9,259 7,629 ------------ ----------- Equity shareholders' funds 17,910 14,742 Minority interests 198 - ------------ ----------- 18,108 14,742 ============ ===========\* T *See note 2. NEXT FIFTEEN COMMUNICATIONS GROUP PLC CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 JULY 2007 \* T 2007 2006 (Unaudited) (Audited) Note £'000 £'000 Net cash inflow from operating activities 10 7,204 4,948 Returns on investments andservicing of finance Interest received 113 47 Interest paid (426) (303) Minority interest dividend paid - (69) ---------- -------- Net cash outflow from returns on investments and servicing of finance (313) (325) Taxation (1,992) (2,430) Capital expenditure and financial investment (Payments for)/receipts from long-termdeposits (78) 60 Payments to acquire tangible fixed assets (1,169) (1,280) Proceeds from sale of tangible fixed assets 2 17 ---------- -------- Net cash outflow from capital expenditure and financial investment (1,245) (1,203) Acquisitions and disposals Acquisition expenses 9 (10) (720) Purchase of associate undertaking - (11) Purchase of subsidiary undertakings 9 (1,948) (2,749) Cash at bank and in hand acquired withsubsidiaries - 1,388 Payments to acquire trade and assets - (262) ---------- -------- Net cash outflow from acquisitionsand disposals (1,958) (2,354) Equity dividends paid (691) (590) ----------- --------- Net cash inflow/(outflow) before financing 1,005 (1,954) Financing Issue of new share capital - 49 Proceeds from sale of own shares 952 183 Bank loans repayable after more than one year 539 3,716 Capital element of finance lease rentalrepayments (299) (20) Redemption of minorities - (1,009) ---------- -------- Cash inflow from financing 1,192 2,919 ----------- ---------Increase in cash in the year 10 2,197 965 =========== =========\* T NEXT FIFTEEN COMMUNICATIONS GROUP PLC RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS FOR THE YEAR ENDED 31 JULY 2007 \* T 2007 2006 (Unaudited) (Audited) (restated)* £'000 £'000 Profit attributable to shareholders 2,486 1,330Dividends (691) (590) ----------- ----------- 1,795 740 Translation differences on foreign currency net investments (187) (72)Translation differences on long-term foreign currency inter-company loans (124) (110)Issue of shares 838 1,457Shares to be issued (368) (10)Share based payment reserve 262 229Disposal of own equity shares held in ESOP 952 183Minority interests 198 - ----------- -----------Net addition to shareholders' funds 3,366 2,417 =========== =========== Opening shareholders' funds 14,742 12,325 ----------- -----------Closing shareholders' funds 18,108 14,742 =========== ===========\* T *See note 2. NOTES TO THE PRELIMINARY STATEMENT FOR THE YEAR ENDED 31 JULY 2007 1. FINANCIAL INFORMATION The financial information for the year ended 31 July 2007 is not audited asdefined by APB Bulletin 1993/1 and 1998/6. The financial information in thisreport does not constitute statutory financial statements within the meaning ofsection 240 of the Companies Act 1985 (as amended). The results for the yearended 31 July 2006 have been extracted from the financial statements of theGroup on which an unqualified audit report has been received, it did not includereference to any matters to which the auditors drew attention by way of emphasisof matter, and did not contain a statement under section 237 of the CompaniesAct 1985 which has been filed the with Registrar of Companies. The preliminary statement is prepared on the basis of the accounting policies asset out in the last annual report, with the exception of the two accountingpolicies explained in note 2. 2. NEW ACCOUNTING POLICIES FRS20 "Share-based Payment" has been adopted in these financial statements. Themain impact of FRS20 is the recognition of a profit and loss charge reportedwithin staff costs, based upon the fair value of share options. This contrastswith the previous accounting treatment prescribed by UITF 17 "Employee ShareSchemes", under which no profit and loss charge was incurred as the option pricewas equal to the share price on date of grant. In the case of the LTIP andconditional share awards, an annual charge was made to the profit and lossaccount for the period ended 31 July 2006, representing the fair value of theshare award, spread evenly over the performance period and vesting periodrespectively. The treatment of foreign exchange differences on long-term foreign currencyinter-company loans has been revised such that the differences are takendirectly to reserves rather than through the profit and loss account. The 31July 2006 comparatives have been restated to reflect the change, reducing theinterest payable figure in the profit and loss account by £110,000 after thetransfer of £110,000 of foreign exchange loss to reserves. There is no impact onthe net assets at 31 July 2006. 3. SEGMENTAL INFORMATION Analyses of turnover, net revenue, adjusted profit before taxation, profitbefore taxation and net assets by geographical origin and destination are statedbelow. The turnover relates to one class of business, being the provision ofpublic relations services. The directors consider these regions to be separategeographical markets and the markets within which the Group operates. \* T Adjusted Profit Profit before before Turnover Net Revenue taxation taxation Net Assets (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)Year ended 31 July £'000 £'000 £'000 £'000 £'000 2007 Existing activities:UK 24,205 18,443 2,420 1,895 1,662Europe and Africa 10,141 8,567 643 643 1,349North America 27,293 25,922 4,208 3,593 13,283Asia Pacific 7,783 6,336 613 613 2,200Head Office - - (2,271) (2,271) (386) ------------ ------------ ------------ ------------ ----------- 69,422 59,268 5,613 4,473 18,108 ============ ============ ============ ============ ===========\* T \* T Adjusted Profit Profit before before Turnover Net Revenue taxation taxation Net Assets (Audited) (Audited) (Audited) (Audited) (Audited) (restated)* (restated)*Year ended 31 July £'000 £'000 £'000 £'000 £'000 2006 Existing activities:UK 15,936 13,063 821 307 1,381Europe and Africa 9,776 8,398 527 471 1,114North America 30,475 28,984 4,661 4,014 10,912Asia Pacific 7,091 5,562 575 565 1,959Head Office - - (2,154) (2,354) (624) ------------ ------------- ------------- ----------- ----------- 63,278 56,007 4,430 3,003 14,742 ============ ============= ============= =========== ===========\* T *See note 2. 4. REORGANISATION COSTS The reorganisation costs of £295,000 (2006: £700,000) relate to the transfer oftrade of August One Limited into Text 100 Limited which occurred on 1 April2007. The £295,000 comprises £199,000 of establishment costs and £96,000 ofredundancy costs. The establishment costs relate to dilapidation charges, leasebreak penalties, and a loss on disposal of the fixed assets. The reorganisation costs of £700,000 incurred in the year ended 31 July 2006related to a headcount reduction in Text 100 after spending cuts from IBM, andprofessional fees connected with a Group reorganisation in the US. 5. RECONCILIATION OF PRO FORMA FINANCIAL MEASURES \* T 2007 2006 (Unaudited) (Audited) (restated)* £'000 £'000 Profit on ordinary activities before taxation 4,473 3,003 Reorganisation costs 295 700 Amortisation and amounts written off intangible assets 826 727 Unwinding of discount on deferred consideration£ 170 - Profit on sale of division£ (151) - ----------- -----------Adjusted profit on ordinary activities before taxation 5,613 4,430 =========== ===========\* T Adjusted profit on ordinary activities before taxation has been presented toprovide additional information on the underlying profits of the Group, which maybe useful to the readers of the statement. £As required by FRS12 - "Provisions, Contingent Liabilities and Assets", aninterest charge of £170,000 has been recognised during the period in relation tothe deferred consideration payable for OutCast Communications. The £170,000 isreported within "interest payable and similar charges" in the Group profit andloss account. £On 31 August 2006, Bite Communications Limited (a wholly owned subsidiary ofNext Fifteen Communications Group plc) sold the business in and assets of itsonline division "Bullet" to a newly incorporated company owned by one of thefounders of Bullet. The £151,000 profit is reported within "other operatingcharges" in the Group profit and loss account. *See note 2. 6. TAX ON PROFIT ON ORDINARY ACTIVITIES \* T 2007 2006 (Unaudited) (Audited) £'000 £'000 UK corporation tax on profits of the year 299 616Overseas taxation 1,474 1,258 ----------- ----------- Total current tax charge for the year 1,773 1,874 Prior year under/(over) provision (UK) (130) (51)Prior year under provision (Overseas) 14 11Deferred taxation 89 (340) ----------- ----------- Total tax charge on profit on ordinary activities 1,746 1,494\* T The current year tax charge is high due to the proportion of profits generatedin the higher tax regime of the US. During the year the Group utilised brought forward overseas tax losses of£637,000. The amount of overseas tax losses available to carry forward at 31July 2007 was £359,000. The estimated value of the deferred tax asset notrecognised in relation to these losses, measured at 29%, the weighted effectiverate of the countries with losses, was £104,000. The amount of UK tax losses available for carry forward at 31 July 2007 was£678,000. The estimated value of the deferred tax asset not recognised inrelation to these losses at 30%, the UK tax rate, was £203,000. 7. DIVIDENDS A final dividend of 1.1p (2006: 1.0p) per share has been proposed. The interimdividend was 0.4p per share (2006: 0.365p), making a total for the year of 1.5pper share (2006: 1.365p). The final dividend, if approved at the AGM on 29January 2008, will be paid on 1 February 2008 to all shareholders on theRegister of Members on 4 January 2008. The ex-dividend date for the shares is 2January 2008. 8. EARNINGS PER SHARE Basic earnings per share is calculated by dividing the earnings attributable toordinary shareholders by the weighted average number of ordinary shares duringthe year, determined in accordance with the provisions of FRS 22 - "Earnings pershare". Diluted earnings per share is calculated by adjusting the weighted averagenumber of ordinary shares in issue on the assumption of conversion of all thepotentially dilutive ordinary shares. The Group has three categories ofpotentially dilutive shares: a. share options granted where the exercise price is less than the average priceof the Company's ordinary shares during the year, b. performance shares which are reasonably expected to vest based upon theperformance condition, which relates to earnings per share ("EPS") growth over a3 year period, being satisfied. c. conditional shares which are reasonably expected to vest based upon thecondition that the award recipient, Aedhmar Hynes, CEO of Text 100, remainsemployed by the Group. Adjusted earnings per share is calculated by dividing the earnings attributableto ordinary shareholders before the post-tax effects of adjusting items (asdefined in note 5), by the weighted average number of ordinary shares during theyear. Diluted adjusted earnings per share is calculated by dividing the adjustedearnings attributable to ordinary shareholders by the dilutive number ofordinary shares during the year. \* T 2007 2006 (Unaudited) (Audited) (restated)* £'000 £'000 Basic and diluted earnings attributable to ordinary shareholders 2,486 1,330Reorganisation costs after taxation 207 470Amortisation of goodwill after taxation 766 670Profit on sale of business after taxation (106) -Unwinding of discount on deferred consideration after taxation 112 - ----------- -----------Adjusted and diluted adjusted earnings attributable to ordinary shareholders 3,465 2,470 =========== =========== Number Number Weighted average number of ordinary shares 48,954,264 46,457,657Dilutive shares 819,624 1,544,997 Diluted weighted average number of ordinary shares 49,773,888 48,002,654 ----------- ----------- Basic earnings per share 5.08p 2.86pDiluted earnings per share 4.99p 2.77pAdjusted earnings per share 7.08p 5.32pDiluted adjusted earnings per share 6.96p 5.15p\* T Adjusted and diluted adjusted earnings per share have been presented to provideadditional, useful information. The adjusted earnings per share is theperformance measure used for the vesting of employee share options andperformance shares. Per FRS 22 - "Earnings per share", the 2006 dilutive shares have been restatedto exclude conditional and performance share awards which have not vested by theperiod end. *See note 2. 9. ACQUISITIONS a. On 31 October 2006, the Company paid £569,000 ($1,078,000) relating to thedeferred consideration for the purchase of OutCast Communications Limited("OutCast") in June 2005. The £569,000 comprised cash of £323,000 ($613,000)with the remainder in shares. b. On 30 November 2006, the Company acquired a further 25% stake in the UKpublic relations company Lexis Public Relations Limited ("Lexis"), by theacquisition of a 25% stake in Panther Communications Group Limited ("Panther"),the parent company of Lexis. The stake was acquired for a total consideration of£2,071,000 of which £1,553,000 was satisfied in cash and the remainder inshares, taking the Company's total stake to 76%. Based upon the acquisition balance sheet at 30 November 2006, goodwill of£2,039,000 has been capitalised, including £10,000 of legal and professionalfees, and will be amortised over its useful economic life of 20 years. It is theintention of the Company to acquire the whole of Panther by 2010 and Panther'sexisting management has agreed to sell further stakes in the company over thenext three years. c. On 1 January 2007, the Company paid £143,000 as deferred consideration forthe purchase of Credo Communications Limited ("Credo") in December 2005. The£143,000 comprised cash of £72,000, with the remainder in shares. 10. NOTES TO THE CASH FLOW STATEMENT \* T(1) Reconciliation of operating profit to net cash inflow from operating activities 2007 2006 (Unaudited) (Audited) (restated)* £'000 £'000 Group operating profit 4,900 3,094Depreciation, amortisation and amounts written off intangible assets 2,291 2,176Loss on sale of tangible fixed assets 151 4Loss on sale of minority interest - (100)Share-based payment charge 262 229Increase in debtors (2,294) (2,668)Increase in creditors 1,894 2,218Decrease in provisions - (5) ------------ -----------Net cash inflow from operating activities 7,204 4,948 ============ =========== (2) Reconciliation of net cash flow to movement in net debt 2007 2006 (Unaudited) (Audited) £'000 £'000 Increase in cash at bank and in hand 1,970 1,192Cash outflow/(inflow) from decrease/(increase) in bank overdraft 227 (227) ------------ -----------Increase in cash in the year 2,197 965Cash outflow from decrease in lease financing 299 20Cash inflow from increase in bank loans repayable after more than one year (539) (3,716) ------------ -----------Change in net debt/funds resulting from cash flows 1,957 (2,731) Increase in lease financing (434) (299)Bank loans acquired with subsidiary - (724)Translation differences (154) (134) ------------ -----------Change in net debt/funds resulting from non-cash movements (588) (1,157) Movement in net debt/funds in the year 1,369 (3,888) Net (debt)/funds at 1 August (1,439) 2,449 ------------ -----------Net debt at 31 July (70) (1,439) ============ ===========\* T (3) Analysis of net debt \* T At 31 July Cash Exchange Other non- At 31 July 2006 flow movement cash 2007 movements (Audited) (Unaudited) £'000 £'000 £'000 £'000 £'000 Cash at bank and in hand 4,018 1,970 (154) - 5,834 Bank overdraft (227) 227 - - - ---------- -------- ---------- ----------- ----------- 3,791 2,197 (154) - 5,834 Obligations under finance leases (279) 299 - (434) (414) Bank loans repayable within one year (320) - - - (320) Bank loans repayable after more than one year (4,631) (539) - - (5,170) ---------- -------- ---------- ----------- -----------Net debt (1,439) 1,957 (154) (434) (70) ========== ======== ========== =========== ===========\* T Copyright Business Wire 2007Related Shares:
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