15th Feb 2006 07:01
Huntsworth PLC15 February 2006 15 February 2006 HUNTSWORTH PLC Trading update Huntsworth, the international public relations group, today issues its tradingupdate for the twelve months to 31 December 2005. Highlights • Transformational year for the group successfully completed withstrategy unchanged • Continuing businesses performing slightly ahead of marketexpectations • Continuing public relations operating margins, before central costs,close to 19% • Cost savings of £5 million expected for a full year, well in excessof the £2.5 million estimated at the time of the merger • Net debt significantly reduced to £23 million (2005 peak over £80m) • Proposed final dividend of 1.2p, giving an increased total dividendto all shareholders • In the period prior to disposal in November, Marketing Services andAdvertising division profits were some £2.5 million behind market expectations • Disposal of Citigate Sard Verbinnen to its management team sees endof post-merger disposal programme Jon Foulds, Chairman of Huntsworth, commented: "Shareholders who have supportedour corporate strategy so far have welcomed the steps we have taken to focus theenlarged business, improve margins, reduce debt and increase total dividends.Huntsworth now has manageable and falling debt levels and limited earn-outliabilities, which, coupled with predictable annual fee revenues, should allowthe Group to achieve good organic growth, positive cash flows and a strongprofit stream in the years ahead. " Preliminary results for the year to 31 December 2005 will be reported in thethird week of April. For further enquiries, please contact: Huntsworth plcLord Chadlington, Chief Executive Tel: (020) 7408 2232Roger Selman, Finance Director Tel: (020) 7408 2232 Citigate Dewe RogersonPatrick Toyne Sewell Tel: (020) 7638 9571 Strategy Huntsworth's strategy, which is to build an international public relations groupalongside a broader healthcare communications offering, has been pursuedrigorously during a year of transformational change for the Group. Each of the Huntsworth companies has undergone detailed review and only thosewhich meet the Group's stringent strategic and tactical objectives have beenretained to drive its long term future. This strategic review led to the sale of the Group's Marketing Services andAdvertising division to Media Square for £55 million in cash in November lastyear. A number of smaller, non-core businesses have also been, or will soon be,closed, merged or sold. The managements of these companies have been informedand are co-operating in the process. The final disposal in the refocusing of theGroup following the merger of Huntsworth and Incepta, that of Citigate SardVerbinnen to its management team, is also announced today. Operational performance The Group's continuing public relations businesses have achieved good organicgrowth, strong margins and excellent new business success. These on-goingbusinesses are expected to perform slightly ahead of market forecasts in 2005,before IFRS and exceptional items. Organic growth in those continuing public relations businesses exceeded 3% inthe year with operating margins, before head office costs, of almost 19%, veryclose to the 20% margins the Board has established as its medium-term target. Outstanding contributions were made in the UK by the Independent Brands Group,particularly Grayling and Red, while there was also a return to good profitsfrom Harrison Cowley, the UK regional consultancy. In the financial sector theCitigate companies performed very well as did Hudson Sandler. Heavy investment in people across the Healthcare division reduced operatingprofits but, as a result of that investment, strong new business and marginperformance is expected in 2006. The European business, Trimedia, is now achieving very strong profitability,particularly from some of the Incepta businesses in Continental Europe whichhave made a significant contribution in the second half. Trimedia should reachthe Group's target operating margin of 20% in 2006. Across all the Group's companies new business has been strong and includes newclients such as: the AA; Absolut Vodka; Altana Pharma; Baxter Healthcare; BiogenIdec UK; Dyson; New Star Asset Management; QinetiQ; and Typhoo Tea. Additional work has been awarded to the Group from existing clients such as: itvplc; Logica CMG; Macquarie Bank; Nescafe; Nike; Novartis; Pfizer; Premier Foods'Branston brands; Sanofi-Aventis; Skandia; and Telefonica. Around 70% of the Group's on-going public relations revenues are now eitherunder annual contract or regular repeat business, an important strategicstrength of the business. Going forward, 50% of revenues from the Group's continuing businesses are nowgenerated in the UK, 30% in Continental Europe and 20% in the Rest of the World.Around 38% of this revenue stream is in financial and public affairs; 53% infull service/consumer; with the balance in health care. As indicated at the interim stage, the Group's Marketing Services andAdvertising division continued to trade poorly in the period prior to itsdisposal in November. We expect these companies' profits to be some £2.5 millionbehind market expectations for the period up to divestment, before accountingfor the disposal. Cost management Following the completion of the strategic review, costs at head office, regionaland company levels have all been further reduced. The integration savings areexpected to reach at least £5 million during a full financial year, compared tothe £2.5 million forecast at the time of the merger. We expect to containcentral costs to around £5.5 million in 2006. Financial and treasury The Group's cash performance has been strong in the second half, resulting innet debt of around £23 million at 31 December, following the sale to MediaSquare. This is significantly better than forecast at the interims and wellbelow the Group's borrowing peak of over £80 million in 2005. The Group's bank facilities, with Lloyds TSB Bank and The Royal Bank ofScotland, total £60 million, available until April 2008. Huntsworth hasprotected its US dollar and Euro earnings for 2006 by entering into hedgingarrangements. The tax rate for 2005 is expected to be around 25%, rising to an estimated 30%in 2006. Earn-outs are now, in aggregate, estimated at less than £9 million payable overthe next three years, mainly in shares or cash at Huntsworth's option. The Board intends to propose a final dividend of 1.2p, with a scrip alternative,which provides an increased total dividend to all shareholders. Disposals In the next few days shareholders will receive a circular regarding the disposalof Citigate Sard Verbinnen ("CSV") to its management for a total cashconsideration of up to $20 million. Until the end of the purchase period, which may continue until 31 December 2009,Huntsworth will receive a share of the CSV earnings stream. By then, Huntsworthanticipates that the growth of its other US financial, public affairs andcorporate businesses, particularly Global Consulting Group and Rose and Kindel,will more than offset any future lost profit stream from CSV. A detailed announcement concerning the sale has been issued simultaneously withthis trading statement. The disposal of CSV marks the end of the integration process of Huntsworth andIncepta. While there will be some minor rationalisation of our structure duringthe spring and early summer, Huntsworth expects there to be no furthersignificant sales of Group companies. Outlook Jon Foulds, Chairman of Huntsworth, commented: "Shareholders who have supportedour corporate strategy so far have welcomed the steps we have taken to focus theenlarged business, improve margins, reduce debt and increase total dividends.Huntsworth now has manageable and falling debt levels and limited earn-outliabilities, which, coupled with predictable annual fee revenues, should allowthe Group to achieve good organic growth, positive cash flows and a strongprofit stream in the years ahead. " This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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