Acquisition

Acquisition

Next Fifteen Communications Plc

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION, DISTRIBUTION OR FORWARDING, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, NEW ZEALAND THE REPUBLIC OF SOUTH AFRICA, JAPAN OR ANY OTHER JURISDICTION IN WHICH SUCH PUBLICATION, RELEASE OR DISTRIBUTION WOULD BE UNLAWFUL.

THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND IS NOT AN OFFER OF SECURITIES IN ANY JURISDICTION.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION. FOR THE PURPOSES OF ARTICLE 7 OF REGULATION 596/2014 AS IT FORMS PART OF UK DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018, AS AMENDED (“MAR”).

For immediate release

2 March 2022

Next Fifteen Communications Group plc

(“Next 15” or the “Company”)

Acquisition of Engine UK

A complementary acquisition providing growth consultancy capabilities and an attractive international client base. Expected to be high single digit earnings enhancing in the first year

Next Fifteen Communications Group plc, the tech and data-driven growth consultancy, is pleased to announce that it has conditionally agreed to acquire Engine Acquisition Limited ("Engine UK") for an enterprise value of £77.5 million (the "Acquisition"). Engine UK is a broad-based digital transformation, communications and creative business with approximately 600 staff and 300 UK and international clients. The Acquisition will be funded from the Company's debt facilities and the proceeds of a proposed placing of new ordinary shares in the Company, raising up to £50 million (the "Placing"), also announced today (the “Placing Announcement”).

The Placing is being conducted through an accelerated bookbuilding process which will be launched immediately following the release of the Placing Announcement. Numis Securities Limited ("Numis") and Joh. Berenberg, Gossler & Co. KG ("Berenberg") are acting as the Company's joint bookrunners (Berenberg and Numis together, the "Bookrunners") in connection with the Placing. The Company and the Bookrunners have today entered into a placing agreement with respect to the Placing (the "Placing Agreement").

The acquisition is conditional on the Placing Agreement having become unconditional in all respects (except for any conditions relating to admission of the Ordinary Shares to trading on AIM) ("Admission), save that the Company may waive such condition. Completion is expected to occur following Admission and following receipt by the seller's solicitors of the sums due to be paid on Completion.

Acquisition highlights

• Acquisition of Engine UK for an enterprise value of £77.5 million, with £61.7 million paid on completion in cash, subject to adjustment by a daily rate amount between 1 March 2022 and completion. The upfront consideration will be funded from the Placing alongside existing debt facilities
• In the year ended 31 December 2021, Engine UK increased its net revenue by 18% to £88.6 million and generated adjusted EBITDA of £11.8 million ¹, representing an acquisition multiple of approximately 6.7x 2021 adjusted EBITDA
• High quality private and public sector client base including global brands such as AstraZeneca, E-ON, Sky and public sector clients including the Home Office and the Ministry of Justice
• Engine UK’s business is comprised of three divisions: Communications, Creative and Transformation, providing a range of services across business transformation and client engagement campaigns
  • The Communications division provides a broad range of services including corporate strategy, positioning and communications for the financial, healthcare and consumer market. It is one of the UK’s leading full-service strategic communications consultancies, and trades under the brand MHP Mischief, delivering above industry growth rates and margins
  • The Creative division provides digital brand experiences, integrated online and offline advertising and influencer marketing. Engine’s Creative division is a highly regarded and award-winning digital creative agency which the Company plans to merge with its ODD creative agency to deliver a digitally native, data-driven creative agency
  • The Transformation division offers technology and digital transformation consulting that combines strategy, data and technology to deliver meaningful change to public and private sector organisations. Client base is predominantly public sector, with significant growth opportunity in the private sector with scope for margin expansion

Strategic rationale

• Adds significant capabilities for Next 15 to offer growth consultancy services to UK and international clients
• Accelerates Next 15’s Business Transformation ambitions, adding significant scale and bringing new capabilities in the counter cyclical public sector, as well as an experienced management team
• Engine UK adds significant strategic communication capabilities in the UK to match Next 15’s existing US offerings
• Additional capability added in areas of Brand Strategy, Corporate Reputation and Capital Markets communications
• Creates an enhanced consumer cluster of UK businesses
• Revenue growth opportunities identified:
  • Partnerships already operating between Savanta and both MHP Mischief and Transformation; other partnership opportunities being explored with M Booth, Palladium and Blueshirt
  • Cross-functional data and digital B2C growth capability; opportunity to collaborate on a new set of data products
  • Expansion of global footprint with opportunity for cross-selling
  • Incentive schemes to be implemented for Engine UK management teams in each division to reward revenue growth and margin progression over the next 5 years

Financial highlights

• The acquisition is expected to be high single digits earnings enhancing in the current financial year, and double-digit earnings enhancing in the year to 31 January 2024, being the first full financial year post completion
• Management are confident of delivering cost synergies of at least £3 million from the year to 31 January 2024
• Strong pipeline of potential bolt-on acquisitions whilst keeping prudent leverage levels

Tim Dyson, CEO of Next 15, said:

“We are delighted to welcome the people and clients of Engine UK to Next 15. Acquiring this broad-based digital transformation, communications and creative business fits well with our track record and strategy of adding growth businesses which then contribute to our target of doubling the size of our business in the next three to five years. Its three businesses are home to great talent and strong client relationships and provide multiple opportunities to expand and further apply our growth consultancy services.

“We look forward to working with the management teams, staff and clients of the three businesses at Engine UK and the other industry leaders within Next 15 to execute our growth plan built on our model of independence, incentives and investment.”

Information on Engine UK

Engine UK is a division of Engine Group Holdings LLC which has been owned by Lake Capital since 2014. The UK business operates on a standalone basis and operating under three pillars: Communications, Creative and Transformation operating with their own management teams. The business has c. 600 staff from a wide range of disciplines including creatives, brand expert, product and UX designers, editors, consultants, data scientists and technologists, healthcare specialists and communications experts.

Engine UK’s Communications division represents c.33% of Engine UK’s revenues and is one of the UK’s leading full-service strategic communications consultancies. The business provides a broad range of services including corporate strategy, positioning and communications for financial communications, the Healthcare sector and UK Consumer market. We look forward to helping their management team deliver on its ambition to double revenues to c.£60 million over the next five years. Clients include AstraZeneca, E.ON and Coinbase.

Engine UK’s Creative pillar serves a diverse mix of sectors and represents c.34% of Engine UK’s 2021 revenue. Services provided include digital brand experiences, integrated online and offline advertising and influencer marketing. Creative is well positioned with a blue-chip client base that includes Cazoo, E.ON and Santander.

Engine UK’s Business Transformation consultancy primarily serves the UK public sector, and represents c.33% of Engine UK’s revenue. Transformation combines strategy, data and technology to deliver meaningful change to public and private sector organisations. The overwhelming majority of revenues are from the public sector with significant opportunity to grow their capability in private sectors and to increase margins. Clients include the Department for Education, the Home Office and Toyota.

Financial track record

• Engine UK’s unaudited financials for the 12 months to 31 December 2021 are shown below:

£m	Comms	Creative	Transform	HO	FY21	FY20
Net revenue	28.9	30.5	29.2	-	88.6	75.1
Controllable EBITDA	12.5	11.0	7.4	-	30.9	24.5
Allocation of HO costs 2	(4.9)	(3.8)	(3.0)	(7.4)	(19.1)	(18.8)
Adjusted EBITDA 3	7.6	7.2	4.4	(7.4)	11.8	5.7
EBITDA Margin	26%	24%	15%		13%	8%

• Head office costs allocated to each pillar (in line with how each business uses those services)

Engine Acquisition Limited is being acquired from Engine Group Holdings LLC. In its last audited accounts, for the year to 31 December 2020, Engine Acquisition Limited and its subsidiaries reported a statutory loss before tax of £10.5 million and consolidated gross assets of £102 million.

The person responsible for arranging the release of this announcement on behalf of the Company is Peter Harris, a director of the Company.

For further information please contact:

Next Fifteen Communications Group plc Tim Dyson, Chief Executive Officer Peter Harris, Chief Financial Officer	[phone] [phone]
Numis (Nomad, Joint Broker and Joint Bookrunner) Mark Lander / Hugo Rubinstein / William Baunton (ECM) Berenberg (Joint Broker and Joint Bookrunner) Ben Wright / Mark Whitmore / Richard Andrews	[phone] [phone]
Powerscourt Elly Williamson / Sabine Pirone / Ollie Simmonds	[phone]

THIS ANNOUNCEMENT IS RELEASED BY AND IS THE SOLE RESPONSIBILITY OF NEXT FIFTEEN COMMUNICATIONS GROUP PLC AND CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF MAR, AND IS DISCLOSED IN ACCORDANCE WITH THE COMPANY'S OBLIGATIONS UNDER ARTICLE 17 OF MAR.

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.

IMPORTANT NOTICES

This announcement is not for publication or distribution, directly or indirectly, in or into the United States of America. This announcement is not an offer of securities for sale into the United States. The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States, except pursuant to an applicable exemption from registration. No public offering of securities is being made in the United States.

The distribution of this Announcement in certain jurisdictions may be restricted by law. No action has been taken by the Company, the Joint Bookrunners or any of their respective affiliates, agents, directors, officers, consultants, partners or employees ("Representatives") that would permit possession or distribution of this Announcement in any jurisdiction where action for that purpose is required. Persons into whose possession this Announcement comes are required by the Company and the Joint Bookrunners to inform themselves about and to observe any such restrictions.

This announcement is for information purposes only and is not an offer of securities in any jurisdiction.

This Announcement may contain, or may be deemed to contain, "forward-looking statements" with respect to certain of the Company's plans and its current goals and expectations relating to its future financial condition, performance, strategic initiatives, objectives and results. Forward-looking statements sometimes use words such as "aim", "anticipate", "target", "expect", "estimate", "intend", "plan", "goal", "believe", "seek", "may", "could", "outlook" or other words of similar meaning. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond the control of the Company, including amongst other things, United Kingdom domestic and global economic business conditions, market-related risks such as fluctuations in interest rates and exchange rates, the policies and actions of governmental and regulatory authorities, the effect of competition, inflation, deflation, the timing effect and other uncertainties of future acquisitions or combinations within relevant industries, the effect of tax and other legislation and other regulations in the jurisdictions in which the Company and its affiliates operate, the effect of volatility in the equity, capital and credit markets on the Company's profitability and ability to access capital and credit, a decline in the Company's credit ratings; the effect of operational risks; and the loss of key personnel. As a result, the actual future financial condition, performance and results of the Company may differ materially from the plans, goals and expectations set forth in any forward-looking statements. Any forward-looking statements made in this Announcement by or on behalf of the Company speak only as of the date they are made. Except as required by applicable law or regulation, the Company expressly disclaims any obligation or undertaking to publish any updates or revisions to any forward-looking statements contained in this Announcement to reflect any changes in the Company's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.

No statement in this Announcement is intended to be a profit forecast or estimate, and no statement in this Announcement should be interpreted to mean that earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings per share of the Company.

Neither the content of the Company's website nor any website accessible by hyperlinks on the Company's website is incorporated in, or forms part of, this Announcement.

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¹ Unaudited. Adjusted EBITDA is presented after IFRS 16 property costs and the writing off of unused office space within the Engine UK headquarters

² Allocation of HO costs performed as if the businesses were owned by Next 15 during 2021 to better reflect the impact on the Group’s segments going forward

³ Adjusted EBITDA presented after IFRS 16 property costs and having written off the unused 2 floors within the Engine UK building

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