Final Results

Final Results

Next Fifteen Communications Plc

28th April 2015

Next Fifteen Communications Group plc

Final results for the period ended 31 January 2015

Next Fifteen Communications Group plc (“Next 15” or the “Group”), the digital communications group, today announces its final results for the eighteen and twelve months ended 31 January 2015.

Headline financial results for the twelve months to 31 January 2015

      Twelve months to

31st January 2015

(Unaudited)

    Twelve months to

31st January 2014

(Unaudited)

     
Revenue     £109.2m     £98.7m     +11%
EBITDA     £14.6m     £10.6m     +38%
Operating Profit     £12.7m     £8.8m     +44%
Operating Profit Margin     11.7%     8.9%      
PBT     £12.5m     £8.3m     +51%
Diluted EPS     13.2p     7.4p     +78%
Dividend per share     3.5p     2.6p     +33%
Net cash generated from operations     £15.6m     £7.5m      

Headline results represent the performance for the 12 months to 31 January 2015 adjusted to exclude amortisation, impairments, restructuring charges and certain other non-recurring items as detailed on page 23.

Corporate Progress

  • Revenues increased by 10.6% to £109.2m from £98.7m last year
  • Group organic revenue growth of 6.1% with double digit growth of 11.3% in the US
  • Significant clients wins including Twitter, Time Warner Cable and Vimeo
  • Simplification of operations in EMEA and APAC & Co-location of San Francisco offices
  • Significant improvement in operating profit margins led by non-US regions
  • Acquisition of Encore, a programmatic advertising technology business

Statutory financial results for the eighteen months to 31 January 2015

      Eighteen months to

31st January 2015

(Audited)

    Twelve months to

31st July 2013

(Audited)

Revenue     £158.5m     £96.1m
Retained profit     £0.9m     £0.7m
Diluted EPS     (0.2)p     0.5p
Dividend per share     5.5p     2.6p
       

Statutory retained profit has remained relatively flat at £0.9m (2013: £0.7m) following a period of significant restructure.

Commenting on the results, Chairman of Next 15, Richard Eyre said:

Next 15 continues to make good progress with strong revenue growth in the US and an improving margin performance from its operations in the rest of the world, notably the UK. The acquisition of Encore and investment in Animl, which we've announced today, are in line with the Group’s strategy of investing in businesses that deliver great content, insight and the technology that enables these. The Group has got off to an encouraging start to its new financial year, with trading patterns of the last twelve months continuing.

For further information contact:

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

Peter Harris, Chief Financial Officer
+44 (0) 20 8846 0853

Investec Bank plc
Keith Anderson, Matt Lewis, Dominic Emery
+44 (0) 20 7597 4000

Bite Communications Limited
David Mercer
+44 (0) 20 8834 3472
NextFifteen@biteglobal.com

Notes:

Change of year end

In April 2014 the Group announced its intention to change its accounting reference date and financial year end from 31 July to 31 January to better align with the client budgeting cycle, which is typically based on December year ends. This has given the Group’s agencies greater visibility of client spend during our fiscal year, when building their internal budgets and has led to a better Group budgeting process. Accordingly, the audited statutory accounts cover the 18 months to 31 January 2015 compared with the previous audited 12 month period to 31 July 2013.

Headline results

In order to better aid shareholders’ understanding of the underlying performance of the business, the headline results have been presented based on the unaudited 12-month periods to 31 January 2015 and 2014.

The 12-month results are reconciled to audited results within the Appendix to this report.

The term headline is not a defined term in IFRS. The items that are excluded from headline results are detailed within the appendix.

Chairman and Chief Executive’s Statement

Next 15 is pleased to announce its final results for the twelve and eighteen months to 31 January 2015, following its decision to move the year end of the Group to January. The last eighteen months have been an active period for management. In particular, the Board has taken a series of steps to improve the performance of the Group. These included the hiring of a new CFO in Peter Harris, who has already made a significant impact; greater focus on the UK business and the simplification of operations in EMEA and Asia Pacific. We are pleased to report that these steps are proving successful. When combined with the continued strong performance by the US businesses, they have resulted in solid growth and another set of record results for the Group. Headline revenues in the 12 months to 31 January 2015 have increased 10.6% from £98.7m to £109.2m, while headline profit before tax increased 51% to £12.5m from £8.3m in 2014.

Accordingly, and with the long accounting period, audited statutory revenue for the eighteen month period increased to £158.5m from £96.1m in the prior year.

Alongside operational changes the Group has remained focused on its strategy to create a new type of integrated marketing group centred on the technology of marketing: data, insight, analytics, apps, content platforms and of course content itself. In the 12 month period to 31 January 2015, Google became the Group’s largest client. The success of relationships with businesses such as Google, Facebook and Amazon testify to the Group’s substantial progress in this.

Regional headline performance

Our US businesses have continued to perform strongly, led by our Outcast, M Booth, Text and Blueshirt agencies and our recent acquisition of the content advertising agency Story Worldwide. On a headline basis, in the year to 31 January 2015 headline revenues grew by 13% to £64.0m from £56.5m which equated to an organic growth rate of 11.3% taking account of movements in exchange rates and acquisitions over the last two years. Margins have remained consistently strong at above 20% but were impacted slightly by the acquisition of Story Worldwide which has historically achieved margins in low double digits. The headline operating profit was £14.1m compared with £13.7m in the previous headline results to 31 January 2014.

The progress outside the US has been impressive on a number of fronts. The UK business saw strong topline revenue growth of 27.3% and a significant improvement in its headline operating margins from 4.1% to 10.6%. This was the result of improved performances from both Bite and Lexis and the success of investments and acquisitions that included Agent3, Morar and Republic Publishing.

The simplification of the business in Asia and EMEA has delivered the expected improvements, with headline operating margins increasing from 1.9% to 8.0% in APAC and from -8.1% to 9.2% in EMEA, resulting in a business that is more able to compete in its various markets.

New incentivisation schemes

The Group has established a number of equity incentive plans for its subsidiary brands, whereby a percentage of the equity and an interest in the profits of the employing company may be distributed to selected employees.

The purpose of these plans is to retain and incentivise senior management and has been successful in helping secure the acquisition of Story WorldWide and smooth management succession at OutCast and M Booth.

Balance sheet and operational review

Following the appointment of Peter Harris in March 2014, the Group undertook a detailed balance sheet and operational review. The Board is in the process of implementing a number of initiatives to improve the operating performance of our businesses. As a consequence, the Group has incurred a £7m goodwill write-down against its UK business and exceptional restructuring costs of £1.8m in the UK, EMEA and APAC during the period. The co-location of offices in San Francisco also gave rise to a non-cash exceptional cost of £1m in relation to the double rent period.

Accordingly, the Group reported a retained profit for the eighteen month period of £0.9m (12 months to 31 July 2013: £0.7m) while reported basic loss per share was 0.18p (2013: profit 0.56p).

Dividend

The Board has recommended a final dividend of 2.50p per share. Together with the first interim, second interim and transitional dividends declared during the period, this brings the total dividend for the eighteen months to 31 January 2015 to 5.50p per share. This represents a 3.50p pro forma total dividend for the year to 31 January 2015.

Current trading and Outlook

The Group has made an encouraging start to the new financial year with trading patterns in all markets continuing as in the second half of our last fiscal year. The recent placing of 3m shares which raised £4.3m net of costs is being put to work on investments in two UK businesses; first, the acquisition of a 30% stake in Animl, a specialist digital marketing consultancy that works with Unilever, and the second is the acquisition of Encore, a programmatic advertising technology business. While these are small companies, they are set to play important roles as we continue to modernise our business and become more relevant to clients. We are actively reviewing other acquisition opportunities.

NEXT FIFTEEN COMMUNICATIONS GROUP PLC

HEADLINE RESULTS: INCOME STATEMENT

    12 Months Ended

31 January 2015

£’000

(Unaudited)

    12 Months Ended

31 January 2014

£’000

(Unaudited)

Revenue 109,194     98,749
Adjusted total operating charges (94,585)     (88,193)
Adjusted EBITDA 14,609 10,556
Depreciation and Amortisation (1,883)     (1,802)
Adjusted operating profit 12,726 8,754
Adjusted net finance expense (459) (473)
Share of (losses)/profits of associate 268     (10)
Adjusted profit before income tax 12,535 8,271
Tax on Adjusted Profit (2,998)     (2,867)
Adjusted Retained Profit 9,537 5,404
Profit Attributable to Owners 8,948 4,929
Profit Attributable to Minorities 589 475
             
Weighted average number of ordinary shares 60,949,534 59,770,198
Dilutive weighted average number of ordinary shares     67,633,298     66,718,244
             
Adjusted earnings per share 14.68 8.25
Diluted adjusted earnings per share     13.23     7.39
 

HEADLINE RESULTS: CASH FLOW

    12 Months Ended

31 January 2015

£’000

(Unaudited)

    12 Months Ended

31 January 2014

£’000

(Unaudited)

Net cash from operating activities 15,644 7,515
Net cash outflow from investing activities (14,842) (4,522)
Net cash outflow / (inflow) from financing activities 2,041     (3,156)
Cash and cash equivalents at beginning of the year 6,217 6,913
Exchange gains/(losses) on cash held 255     (533)
Cash and cash equivalents at end of the year 9,315 6,217
 

HEADLINE RESULTS: SEGMENTAL (Unaudited)

     

UK
£’000

 

Europe & Africa
£’000

 

US
£’000

 

Asia Pacific
£’000

 

Head Office
£’000

 

Total
£’000

12 months ended 31 January 2015                          
Revenue     23,754   8,970   63,966   12,504   -   109,194
Operating profit     2,526   822   14,074   998   (5,694)   12,726
Operating profit margin     10.6%   9.2%   22.0%   8.0%       11.7%
12 months ended 31 January 2014                          
Revenue     18,656   9,957   56,528   13,608   -   98,749
Operating profit     757   (811)   13,667   257   (5,116)   8,754
Operating profit margin     4.1%   (8.1)%   24.2%   1.9%       8.9%
             

NEXT FIFTEEN COMMUNICATIONS GROUP PLC

CONSOLIDATED INCOME STATEMENT

FOR THE EIGHTEEN MONTH PERIOD ENDED 31 JANUARY 2015 AND TWELVE MONTH PERIOD ENDED 31 JULY 2013

        Eighteen months ended

31 January 2015

    Year ended

31 July 2013

Note £’000

(Audited)

£’000

(Audited)

 
Billings 185,900 113,360
                   
 
Revenue 2 158,495 96,069
 
Staff costs 110,626 68,261
Depreciation 2,332 1,540
Amortisation 2,812 1,589
Impairment 7,000 1,950
(Credits) / Charges associated with misappropriation of assets

(65)

526

Other operating charges 32,149 19,198
 
Total operating charges (154,854) (93,064)
 
Operating profit 2 3,641 3,005
 
Finance expense 6 (4,699) (3,331)
Finance income 7 1,129 2,490
Net finance expense

 

(3,570)

(841)
 
Share of profits / (losses) of associate 334 (79)

Profit before income tax

2,3

405

2,085

 
Income tax expense 4 516 (1,364)
 
Profit for the period 921 721
 
Attributable to:
Owners of the parent (107) 328
Non-controlling interests 1,028 393
 
921 721
 
(Loss) / earnings per share
Basic (pence) 8 (0.18) 0.56
Diluted (pence) 8 (0.16) 0.49
 

NEXT FIFTEEN COMMUNICATIONS GROUP PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE EIGHTEEN MONTHS ENDED 31 JANUARY 2015 AND TWELVE MONTHS ENDED 31 JULY 2013

    Eighteen months ended

31 January 2015

    Year ended

31 July 2013

£’000

(Audited)

£’000

(Audited)

 
Profit for the period 921 721
 
Other comprehensive (expense) / income:
 
Items that may be reclassified subsequently to profit or loss
Exchange differences on translating foreign operations 418 951
Translation differences on long-term foreign currency intercompany loans

(77)

(118)

Net investment hedge (104) (229)
237 604
Amounts reclassified and reported in the Income Statement
Net investment hedge (44) -
(44) -
Other comprehensive income for the period 193 604
 
Total comprehensive income for the period 1,114 1,325
 
Total comprehensive income attributable to:
Owners of the parent 86 932
Non-controlling interests 1,028 393
   

 

1,114 1,325
 

NEXT FIFTEEN COMMUNICATIONS GROUP PLC

CONSOLIDATED BALANCE SHEET AS AT 31 JANUARY 2015 AND 31 JULY 2013

      31 January 2015     31 July 2013
Note £’000 £’000
Assets (Audited) (Audited)
 
Property, plant and equipment 5,451 3,165
Intangible assets 44,915 41,369
Investment in equity accounted associate 294 1
Trade investment 211 219
Deferred tax asset 6,012 3,662
Other receivables 575 1,041
Total non-current assets 57,458 49,457
 
Trade and other receivables 31,254 26,646
Cash and cash equivalents 9 9,315 8,064
Corporation tax asset 788 2,883
Total current assets 41,357 37,593
 
Total assets 98,815 87,050
 
Liabilities
 
Loans and borrowings 9 17,712 9,131
Deferred tax liabilities 177 1,388
Other payables 2,295 88
Provisions 642 345
Deferred consideration 9, 10 - 1,319
Contingent consideration

9, 10

3,333 2,945
Share purchase obligation 9, 10 4,990 3,251
Total non-current liabilities (29,149) (18,467)
 
Loans and borrowings 9 100 591
Trade and other payables 25,909 24,218
Provisions 926 62
Corporation tax liability 742 1,811
Derivative financial liabilities - 206
Deferred consideration 9, 10 94 -
Share purchase obligation 9, 10 852 295
Contingent consideration 9, 10 3,841 3,207
Total current liabilities (32,464) (30,390)
 
Total liabilities (61,613) (48,857)
 
TOTAL NET ASSETS 37,202 38,193

Equity

Share capital 1,545 1,494
Share premium reserve 8,272 7,557
Merger reserve 3,075 3,075
Share purchase reserve (2,673) (2,673)
Foreign currency translation reserve 3,525 3,184
Other reserves (510) (583)
Retained earnings 24,741 23,954
   
Total equity attributable to owners of the parent 37,975 36,008
 
Non-controlling interests (773) 2,185
 
TOTAL EQUITY 37,202 38,193
 

NEXT FIFTEEN COMMUNICATIONS GROUP PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE EIGHTEEN MONTHS ENDED 31 JANUARY 2015

   

Share capital £’000

  Share premium reserve £’000   Merger reserve £’000   Share purchase reserve £’000   Foreign currency translation reserve £’000  

Other reserves1 £’000

  Retained earnings £’000   Equity attributable to owners of the parent
£’000		   Non-controlling interests £’000   Total equity £’000
At 31 July 2013 (Audited)   1,494   7,557   3,075   (2,673)   3,184   (583)   23,954   36,008   2,185   38,193
Profit for the year   -   -   -   -   -   -   (107)   (107)   1,028   921
Other comprehensive income for the year   -   -   -   -   341   (148)   -   193   -   193
Total comprehensive income for the year - - - - 341 (148) (107) 86 1,028 1,114
Shares issued in satisfaction of vested share options 35 82 - - - - - 117 - 117
Shares issued on acquisitions 16 633 - - - - - 649 - 649
Movement due to ESOP share purchases - - - - - (35) - (35) - (35)
Movement due to ESOP share option exercises - - - - - 256 - 256 - 256
Movement in relation to share-based payments - - - - - - 580 580 - 580
Deferred tax on share-based payments - - - - - - 208 208 - 208
Share-based payment charge for disposal of equity in a subsidiary to employees - - - - - - 1,733 1,733 - 1,733
Dividends to Owners of the parent - - - - - - (3,006) (3,006) - (3,006)
Movement on reserves for non-controlling interests - - - - - - 1,206 1,206 (1,206) -
Share options issued on acquisition of subsidiary - - - - - - 173 173 - 173
Non-controlling interest arising on acquisition - - - - - - - - (1,896) (1,896)
Non-controlling interest dividend   -   -   -   -   -   -   -   -   (884)   (884)
At 31 January 2015 (Audited)   1,545   8,272   3,075   (2,673)   3,525   (510)   24,741   37,975   (773)   37,202

1 Other reserves include ESOP reserve and hedging reserve.

NEXT FIFTEEN COMMUNICATIONS GROUP PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 JULY 2013

    Share capital £’000   Share premium reserve £’000   Merger reserve £’000   Share purchase reserve £’000   Foreign currency translation reserve £’000   Other reserves1 £’000   Retained earnings £’000   Equity attributable to owners of the parent
£’000		   Non-controlling interests £’000   Total equity £’000
At 31 July 2012 (Audited)   1,454   6,935   3,075   (2,673)   2,351   (133)   24,100   35,109   2,119   37,228
Profit for the year   –   –   –   –   –   –   328   328   393   721
Other comprehensive income for the year   –   –   –   –   833   (229)   –   604   –   604
Total comprehensive income for the year – – – – 833 (229) 328 932 393 1,325
Shares issued in satisfaction of vested share options 27 72 – – – – – 99 – 99
Shares issued on acquisitions 13 550 – – – – – 563 – 563
Movement due to ESOP share
purchases – – – – – (245) – (245) – (245)
Movement due to ESOP share
option exercises – – – – – 24 – 24 – 24
Movement in relation to share-based payments – – – – – – 569 569 – 569
Deferred tax on share-based payments – – – – – – (84) (84) – (84)
Share-based payment charge for disposal of equity in a subsidiary to employees – – – – – – 450 450 – 450
Dividends to Owners of the parent – – – – – – (1,409) (1,409) – (1,409)
Non-controlling interest arising on acquisition – – – – – – – – 176 176
Non-controlling interest dividend   –   –   –   –   –   –   –   –   (503)   (503)
At 31 July 2013 (Audited)   1,494   7,557   3,075   (2,673)   3,184   (583)   23,954   36,008   2,185   38,193

1 Other reserves include ESOP reserve and hedging reserve.

NEXT FIFTEEN COMMUNICATIONS GROUP PLC

CONSOLIDATED STATEMENT OF CASH FLOW

FOR THE EIGHTEEN MONTHS ENDED 31 JANUARY 2015 AND TWELVE MONTHS ENDED 31 JULY 2013

 

   

Eighteen months ended
31 January 2015

     Year ended

31 July 2013

£’000

(Audited)

£’000

(Audited)

 
Cash flows from operating activities
 
Profit for the period 921 721
Adjustments for:
Depreciation 2,332 1,540
Amortisation 2,812 1,589
Impairment 7,000 1,950
Finance expense 4,699 3,331
Finance income (1,129) (2,490)
Share of (profit) / loss from equity accounted associate (285) 79
Loss on sale of property, plant and equipment 73 82
Income tax expense (516) 1,364
Share-based payment charge 2,486 1,019
 
Net cash inflow from operating activities before changes in working capital 18,393 9,185
 
Change in trade and other receivables (1,705) (1,178)
Change in trade and other payables 2,234 2,910
Decrease in provision 285 269
814 2,001
   
Net cash generated from operations 19,207 11,186
 
Income taxes paid (3,031) (2,686)
   
Net cash inflow from operating activities 16,176 8,500
 
Cash flows from investing activities
 
Acquisition of subsidiaries and trade and assets, net of cash acquired (5,597) (961)
Payment of contingent and deferred consideration (8,217) (2,058)
Acquisition of property, plant and equipment (3,712) (1,786)
Proceeds on disposal of property, plant and equipment 24 -
Acquisition of intangible assets (691) (161)
Net movement in long-term cash deposits 230 (166)
Interest received 62 48
   
Net cash outflow from investing activities (17,901) (5,084)
   
Net cash from operating and investing activities (1,725) 3,416
 

NEXT FIFTEEN COMMUNICATIONS GROUP PLC

CONSOLIDATED STATEMENT OF CASH FLOW (Continued)

FOR THE EIGHTEEN MONTHS ENDED 31 JANUARY 2015 AND TWELVE MONTHS ENDED 31 JULY 2013

    Eighteen months ended

31 January 2015

    Year ended

31 July 2013

 
£’000

(Audited)

£’000

(Audited)

Net cash outflow from investing activities b/f (1,725) 3,416
 
Cash flows from financing activities
 
Proceeds from sale of own shares 90 95
Issue costs on issue of ordinary shares (5) (5)
Purchase of own shares (34) (221)
Capital element of finance lease rental repayment (103) (59)
Net movement in bank borrowings 8,090 (1,286)
Interest paid (743) (483)
Non-controlling interest dividend paid (884) (503)
Dividends paid to shareholders of the parent (3,006) (1,409)
   
Net cash outflow from financing activities 3,405 (3,871)

Net increase / (decrease) in cash and cash equivalents

1,680 (455)
Cash and cash equivalents at beginning of the period 8,064 8,436
Exchange (losses)/gains on cash held (429) 83
   
Cash and cash equivalents at end of the period 9,315 8,064
 

NOTES TO THE PRELIMARY RESULTS

FOR THE EIGHTEEN MONTHS ENDED 31 JANUARY 2015 AND TWELVE MONTHS ENDED 31 JULY 2013

1) BASIS OF PREPARATION

The financial information in these results has been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively Adopted IFRSs). The principal accounting policies used in preparing the results are those the Group has applied in its financial statements for the period ending 31 January 2015. The comparative financial information for the full year ended 31 July 2013 has been derived from the audited statutory financial statements for that year. A copy of those statutory financial statements has been delivered to the Registrar of Companies. The auditors’ 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 fair value accounting charges, including movement in fair value of financial instruments, unwinding of the discount on contingent and deferred consideration, unwinding of the discount on the share purchase obligation, changes in estimates of contingent consideration and share purchase obligations, amortisation of acquired intangibles, 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.

    UK   Europe and Africa   US and Canada   Asia Pacific   Head Office   Total
£’000 £’000 £’000 £’000 £’000 £’000
                           
 
Eighteen months ended 31 January 2015 33,460 13,778 92,358 18,899 - 158,495
Revenue
 
Adjusted operating profit / (loss)     3,299   584   21,018   1,208   (8,150)   17,959
 
Year ended 31 July 2013 19,119 10,504 52,468 13,978 - 96,069
Revenue
 
Adjusted operating profit / (loss)     1,146   (217)   11,804   265   (4,778)   8,220
 

NOTES TO THE PRELIMARY RESULTS (Continued)

FOR THE EIGHTEEN MONTHS ENDED 31 JANUARY 2015 AND TWELVE MONTHS ENDED 31 JULY 2013

2) SEGMENT INFORMATION (Continued)

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

 

    Eighteen months ended

31 January 2015

    Year ended

31 July 2013

      £’000     £’000
 
Segment adjusted operating profit 17,959 8,220
Amortisation of acquired intangibles (2,375) (1,379)
Impairment of goodwill (7,000) (1,950)
Restructuring and reorganisation costs associated with integrated digital transitions within brands - (779)
Charge associated with current period restructure (note 3) (2,066) -
Charges associated with equity transactions accounted for as share based payments (note 3) (1,222) (131)
Share-based payment charge for disposal of equity in a subsidiary to employees (note 3) (684) (450)
Charge associated with office moves in San Francisco (note 3) (1,036) -
Charges for misappropriation of assets (note 3) - (265)
Income from recovery and subsequent re-sale of assets (note 3) 65 318
Cost associated with investigation and response to fraudulent activity (note 3)

-

(579)

Total operating profit 3,641 3,005
Unwinding of discount on deferred and contingent consideration and share purchase obligation payable (note 10)

(2,452)

(1,167)

Change in estimate of future contingent consideration and share purchase obligation payable (note 10) (643) 647
Movement in fair value of interest rate cap-and-collar contract 206 114
Share of profit /(loss) from associate 334 (79)
Other finance expense (743) (483)
Other finance income     62     48
Profit before income tax     405     2,085
 

NOTES TO THE PRELIMARY RESULTS (Continued)

FOR THE EIGHTEEN MONTHS ENDED 31 JANUARY 2015 AND TWELVE MONTHS ENDED 31 JULY 2013

3) RECONCILIATION OF PRO-FORMA FINANCIAL MEASURES

 

    Eighteen months ended

31 January 2015

    Year ended

31 July 2013

      £’000     £’000
 
Profit before income tax 405 2,085
Movement in fair value of interest rate cap-and-collar contract (206) (114)
Unwinding of discount on deferred and contingent consideration and share purchase obligation payable 2,452 1,167
Charges associated with misappropriation of assets2 - 265
Income from recovery and sale of misappropriated assets 2 (65) (318)
Cost associated with investigation and response to fraudulent activity2 - 579
Change in estimate of future contingent consideration and share purchase obligation payable 643 (647)
Charges associated with equity transactions accounted for as share based payments4 1,222 131
Share-based payment charge for disposal of equity in a subsidiary to employees5 684 450
Charge associated with current period restructure1 2,066 -
Restructuring and reorganisation costs associated with integrated digital transitions within brands - 779
Charge associated with office moves in San Francisco3 1,036 -
Amortisation of acquired intangibles 2,375 1,378
Impairment of goodwill     7,000     1,950
Adjusted profit before income tax     17,612     7,705
 

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 share options and performance shares.

1 Following the appointment of a new CFO in March 2014, the Group undertook a detailed balance sheet and operational review. Following this the Board is in the process of implementing a number of initiatives to improve the operational performance of the businesses. As a consequence, the Group has incurred a £7m goodwill write-down against its UK businesses, exceptional restructuring costs in the UK of £0.3m, EMEA £0.7m and in APAC £0.6m. This charge also includes £0.4m in relation to the change in Group CFO.

2 Charges for misappropriation of assets relates to a fraud whereby cash was extracted from the business by a long-serving employee in a trusted position and hidden through recognition of fictitious assets and understated liabilities across two of the Group’s North American Bite subsidiaries. In the current year the charge is income related to the recovery of funds through the sale of assets purchased with the misappropriated cash.

3 On 27 August 2014, we signed a nine year lease at 100 Montgomery Street in San Francisco which will be the new location for all of our businesses in that city. There is a 12 month rent free period (including construction period) on the new premises but the Group has to account for the rental cost of the building equally over the term of the lease from 1 October 2014. Accordingly the Group has suffered a period of double rent from an accounting perspective.

4 This transaction relates to the acquisition of the 20% minority interest in Bourne whereby performance shares were issued as partial consideration and a transaction whereby a restricted grant of Brand equity was given to key management in Story Worldwide in place of a traditional earnout.

5 This transaction relates to a restricted grant of equity given to employees of the MBooth and Bite NA subsidiaries (OutCast subsidiary in FY13) at nil cost which holds value in the form of access to future profit distributions as well as any future sale value under the performance-related mechanism set out in the share sale agreement. This value is recognised as a one-off share-based payment expense of £684,000 (FY13: £450,000) in the current year income statement.

NOTES TO THE PRELIMARY RESULTS (Continued)

FOR THE EIGHTEEN MONTHS ENDED 31 JANUARY 2015 AND TWELVE MONTHS ENDED 31 JULY 2013

4) TAXATION

The tax charge on adjusted profit for the period ended 31 January 2015 is £4,378k, equating to an effective tax rate of 24.85%. The Group’s effective tax rate has reduced due to a higher proportion of profit coming from lower tax regimes such as the UK, the reduction in the rate of corporation tax in the UK towards 20% and the successful resolution of a number of historic tax queries. The Group’s corporation tax rate is expected to remain higher than the standard UK rate for the foreseeable future due to the higher rate of tax the Group suffers on its overseas profits.

5) DIVIDENDS

A final dividend of 2.50p (Final 2013: 1.925p) per ordinary share will be paid on 7 August 2015 to shareholders listed on the register of members on 10 July 2015. Shares will go ex-dividend on 9 July 2015.

6) FINANCE EXPENSE

 

    Eighteen months ended

31 January 2015

    Year ended

31 July 2013

      £’000     £’000
 
Financial liabilities at amortised cost
Bank interest payable 720 464

Financial liabilities at fair value through profit and loss

Unwinding of discount on deferred and contingent consideration and share purchase obligation payable 2,452 1,167
Change in estimate of future contingent consideration and share purchase obligation payable 1,504 1,681
 
Other
Finance lease interest 5 8
Other interest payable     18     11
Finance expense     4,699     3,331
 

7) FINANCE INCOME

 

    Eighteen months ended

31 January 2015

    Year ended

31 July 2013

      £’000     £’000
 
Financial assets at amortised cost
Bank interest receivable 46 41

Financial assets at fair value through profit and loss

Movement in fair value of interest rate cap-and-collar contract 206 114
Change in estimate of future contingent consideration and share purchase obligation payable 861 2,328
Other interest receivable     16     7
Finance income     1,129     2,490
 

NOTES TO THE PRELIMARY RESULTS (Continued)

FOR THE EIGHTEEN MONTHS ENDED 31 JANUARY 2015 AND TWELVE MONTHS ENDED 31 JULY 2013

8) EARNINGS PER SHARE

 

   

Eighteen months ended
31 January 2015

     Year ended

31 July 2013

£’000 £’000
             
Earnings attributable to ordinary shareholders (107) 328
Movement in fair value of interest rate cap-and-collar contract after tax (165) (87)
Unwinding of discount on future deferred and contingent consideration and share purchase obligation payable after tax 730 1,167
Charge associated with misappropriation of assets (note 3) - 158
Income from recovery and sale of misappropriated assets (65) (191)
Cost associated with investigation and response to fraudulent activity - 356
Change in estimate of future contingent consideration and share purchase obligation payable after tax (397) (1,313)
Charges associated with equity transactions accounted for as share based payments (note 3) 765 550
Costs associated with the current period restructure (note 3) 1,983 -
Share-based payment charge for disposal of equity in a subsidiary to employees (note 3) 410 -
Restructuring and reorganisation costs associated with digital transitions within brands (note 3) - 569
Charge associated with office moves in San Francisco (note 3) 622 -
Amortisation of acquired intangibles after tax 1,433 940
Impairment of intangibles 7,000 1,950
             
Adjusted earnings attributable to ordinary shareholders     12,209     4,427
 
Number Number
             
Weighted average number of ordinary shares 60,825,828 59,068,925
Dilutive share options/performance shares outstanding 5,995,432 5,641,070
Other potentially issuable shares 570,657 1,863,899
             
Diluted weighted average number of ordinary shares     67,391,917     66,573,894
 
Basic earnings per share (0.18)p 0.56p
Diluted earnings per share (0.16)p 0.49p
Adjusted earnings per share 20.07p 7.49p
Diluted adjusted earnings per share     18.12p     6.65p
 

Adjusted and diluted adjusted earnings per share have been presented to provide additional useful information. The adjusted earnings per share is the performance measure used for the vesting of employee share options and performance shares. The only difference between the adjusting items in this note and the figures in note 3 is the tax effect of those adjusting items.

NOTES TO THE PRELIMARY RESULTS (Continued)

FOR THE EIGHTEEN MONTHS ENDED 31 JANUARY 2015 AND TWELVE MONTHS ENDED 31 JULY 2013

9) NET DEBT

The Barclays Bank revolving credit facilities expired in December 2014. During the period the Group reviewed its global banking arrangements and has now consolidated it with HSBC, who were already the Group’s corporate bankers in NA. The Group has recently agreed a new 4 year £20m loan facility at reduced interest rate margins.

    31 January 2015     31 July 2013
£’000 £’000
 
Total loans and borrowings 17,812 9,722
Obligations under finance leases 70 151
Less: cash and cash equivalents     (9,315)     (8,064)
Net debt     8,567     1,809
Share purchase obligation 5,842 3,546
Contingent consideration 7,174 6,152
Deferred consideration     94     1,319
      21,677     12,826
 

10) OTHER FINANCIAL LIABILITIES

 

   

Deferred consideration

    Contingent consideration     Share purchase obligation

 

£’000

£’000 £’000
 
At 1 August 2012 - 7,932 3,989
Reclassification 1,537 (1,537) -
Arising during the year - 888 -
Changes in assumptions - 254 (901)
Exchange differences - 172 88
Utilised (380) (2,192) -
Unwinding of discount     162     635     370
At 31 July 2013     1,319     6,152     3,546
 
Reclassification 1,241 (1,241) -
Arising during the year - 4,562 3,439
Changes in assumptions - 1,253 (610)
Exchange differences (65) (37) (88)
Utilised (2,642) (4,747) (1,424)
Unwinding of discount     241     1,232     979
At 31 January 2015     94     7,174     5,842
Current 94 3,841 852
Non-current - 3,333 4,990
 

NOTES TO THE PRELIMARY RESULTS (Continued)

FOR THE EIGHTEEN MONTHS ENDED 31 JANUARY 2015 AND TWELVE MONTHS ENDED 31 JULY 2013

11) ACQUISITIONS

M Booth

On 1 August 2014, Next 15 established a long-term equity-based incentive scheme for the senior management team at M Booth to incentivise the new management following the closure of the earnout and exit of the CEO. As at 31 July 2014, Next 15 owned 100% of the equity in M Booth LLC. On 1 August 2014, 12% of that equity was reclassified as a new restricted class of shares and allotted to certain members of the M Booth senior management team for £Nil consideration. The 12% interest holds value based on access to non-cumulative and restricted profit distributions as well as the opportunity to gain value from future incremental growth in revenue and profitability above the levels seen in the years to 31 July 2013 and 31 July 2012. Any value is realised on any subsequent sale of shares which is restricted by defined terms around the timing and pricing formula. The purchase of the shares will be settled in Next 15 shares.

The holders of the 12% non-controlling interest have the option of selling 50% of their interest back to Next 15 commencing at the end of fiscal year 2018 and the remaining 50% interest can be sold by the participant at the end of fiscal year 2019 or any subsequent fiscal year or held indefinitely. In the event an employee shareholder leaves the business, Next 15 have the option to re-purchase the shares under a consistent pricing formula.

The allotment of shares is accounted for as an equity-settled share-based payment with no performance period resulting in a one-off charge (£641,000) to the income statement at inception.

Bite NA

On 1 October 2014, Next 15 established a long-term equity-based incentive scheme for the senior management team at Bite NA to incentivise a change in the commercial behaviour and to drive improved revenue growth and margin increase. As at 30 September 2014, Next 15 owned 100% of the equity in Bite Corporation LLC. On 1 October 2014, 5% of that equity was reclassified as a new restricted class of shares and allotted to certain members of the Bite NA senior management team for £Nil consideration. The 5% interest holds value based on access to non-cumulative and restricted profit distributions as well as the opportunity to gain value from future incremental growth in revenue and profitability above the levels seen in the year to 31 July 2014 and expected performance in the 12 month period to 31 July 2015. Any value is realised on any subsequent sale of shares which is restricted by defined terms around the timing and pricing formula. The purchase of the shares will be settled in Next 15 shares.

The holders of the 5% non-controlling interest have the option of selling 50% of their interest back to Next 15 commencing at the end of fiscal year 2018 and the remaining 50% interest can be sold by the participant at the end of fiscal year 2019 or any subsequent fiscal year or held indefinitely. In the event an employee shareholder leaves the business, Next 15 have the option to re-purchase the shares under a consistent pricing formula.

The allotment of shares is accounted for as an equity-settled share-based payment with no performance period resulting in a one-off charge (£43,000) to the income statement at inception.

Story WorldWide

On 23 September 2014, Next 15 formed SWLLC Acquisition LLC “Story Worldwide”, a US based business, for the purpose of acquiring certain trade and assets from Story Worldwide LLC “Old Story”. On 1 November 2014 Story Worldwide paid $6,600,000 for the purchase of certain trade and assets of the Old Story.

Following the acquisition of the trade and assets on 1 November 2014, Next 15 established a long-term equity-based incentive scheme for the senior management team at Story WorldWide in replace of a traditional earnout mechanism, to provide an incentive mechanism for the senior management team at Story WorldWide.

As at 31 October 2014, Next 15 owned 100% of the equity in Story WorldWide. On 1 November 2014, 50% of that equity was reclassified as a new restricted class of shares and allotted to certain members of the Story WorldWide senior management team for £Nil consideration. The 50% interest holds value based on access to non-cumulative and restricted profit distributions as well as the opportunity to gain value from future incremental growth in revenue and profitability above the levels seen in the years to 31 January 2015 and 31 January 2014. Any value is realised on any subsequent sale of shares which is restricted by defined terms around the timing and pricing formula. The purchase of the shares will be settled in Next 15 shares.

NOTES TO THE PRELIMARY RESULTS (Continued)

FOR THE EIGHTEEN MONTHS ENDED 31 JANUARY 2015 AND TWELVE MONTHS ENDED 31 JULY 2013

The holders of the 50% non-controlling interest have the option of selling 30% of their interest back to Next 15 commencing at the end of fiscal year 2018, a further 30% of their interest at the end of fiscal year 2020 and the remaining 40% interest can be sold by the participant at the end of fiscal year 2022 or any subsequent fiscal year or held indefinitely. In the event an employee shareholder leaves the business, Next 15 have the option to re-purchase the shares under a consistent pricing formula.

The allotment of shares is accounted for as an equity-settled share-based payment with no performance period resulting in a one-off charge (£1,049,000) to the income statement at inception.

Republic Publishing

On 14 January 2014, Next 15 acquired 51% of the issued share capital of Republic Publishing Limited (“Republic”), a content marketing agency based in the UK. The initial consideration consisted of cash on completion of £735,000. A working capital payment of £385,000 was paid on 6 March 2014 to reflect the final balance sheet at the acquisition date. A top-up payment has been paid following the yearend, (note 12), based on revenue and profit margin targets for the 12 months from acquisition.

Further to this a mechanism was in place to purchase the remaining 49% of the business over the next two to six years. The total present value of the share purchase obligation is £2,245,000. There is a total consideration cap of £5,000,000.

Goodwill of £1,471,000 arises from anticipated profitability and future operating synergies from the acquisition. Intangible assets of £1,044,000 have been recognised in respect of customer relationships and will be amortised over five years.

In the post-acquisition period, the Republic business contributed £3,334,000 to revenue and £502,000 to profit before tax.

Following the year end this earnout has been restructured, note 12.

Continuous Insight and Agent 3

On 14 February 2014, Agent3 Limited, a digital marketing consultancy in which Next 15 held a 45% stake, acquired the entire issued share capital of UK-based Continuous Insight Limited, a business which provides customer and market insight to large business to business enterprise organisations operating in the IT, Telecommunications and Professional Services sectors.

The initial consideration consisted of 12.5% of the issued share capital in Agent 3 Limited and £760,000 paid in cash at completion with a deferred consideration payment of £120,000 which was paid on 14 August 2014. Working capital payments of £234,000 and £100,000 were paid on 10 March 2014 and 25 March 2014 respectively to reflect the final balance sheet at the acquisition date. Further contingent consideration which is capped at £230,000 has become payable following the achievement of certain revenue and profit performance targets over the one year period ended 31 January 2015.

As part of the transaction, Next 15’s holding in Agent3 increased to 54%. This majority stake has therefore resulted in the consolidation of Agent3 into the Next 15 group accounts. Next 15 has entered into a shareholders’ agreement under which it has an obligation to purchase 14% of the remaining non-controlling interest and an option but not obligation to purchase a further 36% of the remaining non-controlling interest over the next three to five years based on the profitability of the business.

Next 15 also has the option to purchase the minority shareholdings on the cessation of employment of the relevant minority shareholders. Any share purchase obligation that may become payable may be satisfied by cash or up to 25% in Next 15 shares at the full discretion of Next 15.

Goodwill of £1,108,000 arises from anticipated profitability and future operating synergies from the combination. Intangible assets of £665,000 have been recognised in respect of customer relationships and £143,000 for non-compete agreements, both of which will be amortised over six years.

In the post-acquisition period, the Agent3 and Continuous Insight businesses have contributed £3,300,000 to revenue and £280,000 to profit before tax.

Morar

On 4 December 2014, Next 15 acquired 75% of the issued share capital of Morar Consulting Limited (“Morar”), an international market research consultancy based in London, which measures and advises on brand performance. The initial consideration consisted of cash on completion of £1,350,000. An estimated working capital payment of £476,000 is expected to be paid shortly to reflect the final balance sheet at the acquisition date. Contingent consideration, due in 3 years, has an estimated present value at the date of acquisition of £1,955,000 based on future revenue growth and profit margin performance.

NOTES TO THE PRELIMARY RESULTS (Continued)

FOR THE EIGHTEEN MONTHS ENDED 31 JANUARY 2015 AND TWELVE MONTHS ENDED 31 JULY 2013

Further to this a mechanism is in place to purchase the remaining 25% of the business over the next five years. The total present value of the share purchase obligation is £1,319,000.

Goodwill of £1,913,000 arises from anticipated profitability and future operating synergies from the acquisition. Intangible assets of £2,582,000 have been recognised in respect of customer relationships, non-compete agreements and Intellectual Property and will be amortised over five, five and three years respectively.

In the post-acquisition period, the Morar business contributed £430,000 to revenue and £83,000 to profit before tax.

12) EVENTS AFTER THE BALANCE SHEET DATE

Republic

Further to the acquisition of the 51% interest in Republic on the 21 January 2014, on 2 April 2015, Next 15 purchased the remaining minority interest in Republic for an aggregate consideration of £3,000,000. The consideration comprises £1,800,000 in cash, 302,094 shares in Next 15 and a deferred payment of £700,000 which is due to be settled in 2016.

Beyond

On 2 April 2015, Next 15 acquired the remaining 32.8% minority interests in Beyond Corporation Limited and Beyond International Corporation “Beyond”, its digital experience design agency, for an aggregate consideration of £2,370,000. The consideration comprises £2,000,000 in cash with the balance being satisfied in Next 15 shares.

Encore

On the 27 April 2015, Next 15 purchased 75% of the issued share capital of Encore Digital Media Limited, a programmatic advertising technology business, for initial cash consideration of £687,000, with a right to purchase the remaining shares over a 5 year period.

Animl

On the 11 March 2015, Next 15 purchased 30% of the issued share capital of Animl Limited, a two-year old creative business, for £110,000. It was founded to deliver “a newer, better response to conventional marketing spend” by fusing great storytelling and digital innovation and will work closely alongside The Lexis Agency Ltd, Bite DA and N15’s recent acquisition, Morar Consulting. There is a put and call option to buy the remaining 70% over the next 5 years.

Placing

On 29 January 2015 the Group announced their intention to place 3,089,862 new ordinary shares of 2.5p each in the capital of the Company at a price of 145 pence per Placing Share. On 29 January 2015 the Group further announced the successful placing of the new capital by Investec Bank plc. The Placing Shares rank pari passu in all respects with the existing Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid after the date of issue.

Appendix 1: Results for the 12 month period to 31 January 2015 and 31 January 2014 (Unaudited)

1.1 Consolidated income statement

      12 Months Ended

31 January 2015

£’000

    12 Months Ended

31 January 2014

£’000

Billings     126,159     118,278
Revenue     109,194     98,749
Adjusted total operating charges     (94,585)     (88,193)
Adjusted EBITDA     14,609     10,556
Depreciation and Amortisation     (1,883)     (1,802)
Adjusted operating profit     12,726     8,754
Adjusted net finance expense     (459)     (473)
Share of (losses)/profits of associate     268     (10)
Adjusted profit before income tax     12,535     8,271
Tax on Adjusted Profit     (2,998)     (2,867)
Adjusted Retained Profit     9,537     5,404
Profit Attributable to Owners     8,948     4,929
Profit Attributable to Minorities     589     475
             
Weighted average number of ordinary shares     60,949,534     59,770,198
Dilutive weighted average number of ordinary shares     67,633,298     66,718,244
             
Adjusted earnings per share     14.68     8.25
Diluted adjusted earnings per share     13.23     7.39
             
Revenue     109,194     98,749
Operating costs     (106,179)     (90,837)
EBITDA     3,015     7,912
Depreciation and Amortisation     (3,570)     (3,207)
Operating (Loss) / Profit     (555)     4,705
Net finance expenses     (2,577)     (1,382)
Share of (losses)/profits of associate     268     (10)
Profit before income tax     (2,864)     3,313
Taxation     1,486     (1,802)
Retained Profit     (1,378)     1,511
Profit Attributable to Owners     (1,967)     1,036
Profit Attributable to Minorities     589     475
             
Basic (pence)     (3.23)     1.73
Diluted (pence)     (2.91)     1.55
       

1.2: Consolidated statement of cash flow

      12 Months Ended

31 January 2015

£’000

    12 Months Ended

31 January 2014

£’000

Net cash from operating activities     15,644     7,515
Net cash outflow from investing activities     (14,842)     (4,522)
Net cash outflow from financing activities     2,041     (3,156)
Cash and cash equivalents at beginning of the year     6,217     6,913
Exchange gains/(losses) on cash held     255     (533)
Cash and cash equivalents at end of the year     9,315     6,217
       

1.3: Segment information

     

UK
£’000

 

Europe & Africa
£’000

 

US
£’000

 

Asia Pacific
£’000

 

Head Office
£’000

 

Total
£’000

12 months ended 31 January 2015                          
Revenue     23,754   8,970   63,966   12,504   -   109,194
Adjusted operating profit     2,526   822   14,074   998   (5,694)   12,726
12 months ended 31 January 2014                          
Revenue     18,656   9,957   56,528   13,608   -   98,749
Adjusted operating profit     757   (811)   13,667   257   (5,116)   8,754
             

1.4: Reconciliation of adjusted items

      12 Months Ended

31 January 2015

£’000

    12 Months Ended

31 January 2014

£’000

Profit before income tax     (2,864)     3,313
Movement in fair value of interest rate cap-and-collar contract     (135)     (155)
Unwinding of discount on deferred and contingent consideration and share purchase obligation payable     1,911     1,111
Charges associated with misappropriation of assets     -     -
Income from recovery and sale of misappropriated assets     (53)     (119)
Cost associated with investigation and response to fraudulent activity     -     -
Change in estimate of future contingent consideration and share purchase obligation payable     342     (47)
Charges associated with equity transactions accounted for as share based payments     1,168     151
Share-based payment charge for disposal of equity in a subsidiary to employees     684     -
Charge associated with current period restructure     1,758     308
Restructuring and reorganisation costs associated with integrated digital transitions within brands     -     354
Charge associated with office moves in San Francisco     1,036     -
Amortisation of acquired intangibles     1,688     1,405
Impairment of goodwill     7,000     1,950
Adjusted profit before income tax     12,535     8,271
       

Appendix 2: Reconciliation of 12 month period to 31 January 2015 to Audited Results for the 18 month period to 31 January 2015

2.1 Consolidated income statement

      18 Months Ended

31 January 2015

£’000

(Audited)

  12 Months Ended

31 January 2015

£’000

(Unaudited)

  6 Months Ended

31 January 2014

£’000

(Unaudited)

Billings     185,900   126,159   59,741
Revenue     158,495   109,194   49,301
Adjusted total operating charges     (137,767)   (94,585)   (43,182)
Adjusted EBITDA     20,728   14,609   6,119
Depreciation and Amortisation     (2,769)   (1,883)   (886)
Adjusted operating profit     17,959   12,726   5,233
Adjusted net finance expense     (681)   (459)   (222)
Share of (losses)/profits of associate     334   268   66
Adjusted profit before income tax     17,612   12,535   5,077
Tax on Adjusted Profit     (4,377)   (2,998)   (1,379)
Adjusted Retained Profit     13,235   9,537   3,698
Profit Attributable to Owners     12,207   8,948   3,259
Profit Attributable to Minorities     1,028   589   439
               
Revenue     158,495   109,194   49,301
Operating costs     (149,711)   (106,179)   (43,532)
EBITDA     8,784   3,015   5,769
Depreciation and Amortisation     (5,143)   (3,570)   (1,573)
Operating (Loss) / Profit     3,641   (555)   4,196
Net finance expenses     (3,570)   (2,577)   (993)
Share of (losses)/profits of associate     334   268   66
Profit before income tax     405   (2,864)   3,269
Taxation     516   1,486   (970)
Retained Profit     921   (1,378)   2,299
Profit Attributable to Owners     (107)   (1,967)   1,860
Profit Attributable to Minorities     1,028   589   439
       

2.2: Consolidated statement of cash flow

      18 Months Ended

31 January 2015

£’000

(Audited)

  12 Months Ended

31 January 2015

£’000

(Unaudited)

  6 Months Ended

31 January 2014

£’000

(Unaudited)

Net cash from operating activities     16,176   15,644   532
Net cash outflow from investing activities     (17,901)   (14,842)   (3,059)
Net cash outflow from financing activities     3,405   2,041   1,364
Cash and cash equivalents at beginning of the year     8,064   6,217   8,064
Exchange gains/(losses) on cash held     (429)   255   (684)
Cash and cash equivalents at end of the year     9,315   9,315   6,217
       

2.3: Segment information

     

UK
£’000

 

Europe & Africa
£’000

 

US
£’000

 

Asia Pacific
£’000

 

Head Office
£’000

 

Total
£’000

18 Months ended 31 January 2015 (Audited)                          
Revenue     33,460   13,778   92,358   18,899   -   158,495
Adjusted operating profit     3,299   584   21,016   1,208   (8,148)   17,959
12 months ended 31 January 2015 (Unaudited)                          
Revenue     23,754   8,970   63,966   12,504   -   109,194
Adjusted operating profit     2,526   822   14,074   998   (5,694)   12,726
6 months ended 31 January 2014 (Unaudited)                          
Revenue     9,706   4,808   28,392   6,395   -   49,301
Adjusted operating profit     773   (238)   6,942   210   (2,454)   5,233
             

2.4: Reconciliation of adjusted items

      18 Months Ended

31 January 2015

£’000

(Audited)

  12 Months Ended

31 January 2015

£’000

(Unaudited)

  6 Months Ended

31 January 2014

£’000

(Unaudited)

Profit before income tax     405   (2,864)   3,269
Movement in fair value of interest rate cap-and-collar contract     (206)   (135)   (71)
Unwinding of discount on deferred and contingent consideration and share purchase obligation payable     2,452   1,911   541
Charges associated with misappropriation of assets     -   -   -
Income from recovery and sale of misappropriated assets     (65)   (53)   (12)
Cost associated with investigation and response to fraudulent activity     -   -   -
Change in estimate of future contingent consideration and share purchase obligation payable     643   342   301
Charges associated with equity transactions accounted for as share based payments     1,222   1,168   54
Share-based payment charge for disposal of equity in a subsidiary to employees     684   684   -
Charge associated with current period restructure     2,066   1,758   308
Restructuring and reorganisation costs associated with integrated digital transitions within brands     -   -   -
Charge associated with office moves in San Francisco     1,036   1,036   -
Amortisation of acquired intangibles     2,375   1,688   687
Impairment of goodwill     7,000   7,000   -
Adjusted profit before income tax     17,612   12,535   5,077
       

Appendix 3: Reconciliation of 12 month period to 31 January 2014 to Audited Results

3.1 Consolidated income statement

      12 Months Ended

31 January 2014

£’000

(Unaudited)

  6 Months Ended

31 January 2014

£’000

(Unaudited)

  12 Months Ended

31 July 2013

£’000

(Audited)

  6 Month Ended

31 January 2013

£’000

(Unaudited)

Billings     118,278   59,741   113,360   54,823
Revenue     98,749   49,301   96,069   46,621
Adjusted total operating charges     (88,193)   (43,182)   (86,099)   (41,088)
Adjusted EBITDA     10,556   6,119   9,970   5,533
Depreciation and Amortisation     (1,802)   (886)   (1,751)   (835)
Adjusted operating profit     8,754   5,233   8,219   4,698
Adjusted net finance expense     (473)   (222)   (435)   (184)
Share of (losses)/profits of associate     (10)   66   (79)   (3)
Adjusted profit before income tax     8,271   5,077   7,705   4,511
Tax on Adjusted Profit     (2,867)   (1,379)   (2,885)   (1,397)
Adjusted Retained Profit     5,404   3,698   4,820   3,114
Profit Attributable to Owners     4,929   3,259   4,427   2,757
Profit Attributable to Minorities     475   439   393   357
                   
Revenue     98,749   49,301   96,069   46,621
Operating costs     (90,837)   (43,532)   (89,935)   (42,630)
EBITDA     7,912   5,769   6,134   3,991
Depreciation and Amortisation     (3,207)   (1,573)   (3,129)   (1,495)
Operating (Loss) / Profit     4,705   4,196   3,005   2,496
Net finance expenses     (1,382)   (993)   (841)   (452)
Share of (losses)/profits of associate     (10)   66   (79)   (3)
Profit before income tax     3,313   3,269   2,085   2,041
Taxation     (1,802)   (970)   (1,364)   (532)
Retained Profit     1,511   2,299   721   1,509
Profit Attributable to Owners     1,036   1,860   328   1,152
Profit Attributable to Minorities     475   439   393   357
         

3.2: Consolidated statement of cash flow

      12 Months Ended

31 January 2014

£’000

(Unaudited)

  6 Months Ended

31 January 2014

£’000

(Unaudited)

  12 Months Ended

31 July 2013

£’000

(Audited)

  6 Month Ended

31 January 2013

£’000

(Unaudited)

Net cash from operating activities     7,515   532   8,500   1,517
Net cash outflow from investing activities     (4,522)   (3,059)   (5,084)   (3,621)
Net cash outflow from financing activities     (3,156)   1,364   (3,871)   649
Cash and cash equivalents at beginning of the year     6,913   8,064   8,436   8,436
Exchange gains/(losses) on cash held     (533)   (684)   83   (68)
Cash and cash equivalents at end of the year     6,217   6,217   8,064   6,913
         

3.3: Segment information

     

UK
£’000

 

Europe & Africa
£’000

 

US
£’000

 

Asia Pacific
£’000

 

Head Office
£’000

 

Total
£’000

12 Months ended 31 January 2014 (Unaudited)                          
Revenue     18,656   9,957   56,528   13,608   -   98,749
Adjusted operating profit     757   (811)   13,667   257   (5,116)   8,754
6 months ended 31 January 2014 (Unaudited)                          
Revenue     9,706   4,808   28,392   6,395   -   49,301
Adjusted operating profit     773   (238)   6,942   210   (2,454)   5,233
12 months ended 31 July 2013 (Audited)                          
Revenue     19,119   10,504   52,468   13,978   -   96,069
Adjusted operating profit     1,146   (217)   11,804   265   (4,779)   8,219
6 months ended 31 January 2013 (Unaudited)                          
Revenue     10,169   5,355   24,332   6,765   -   46,621
Adjusted operating profit     1,162   356   5,079   218   (2,117)   4,698
             

3.4: Reconciliation of adjusted items

      12 Months Ended

31 January 2014

£’000

(Unaudited)

  6 Months Ended

31 January 2014

£’000

(Unaudited)

  12 Months Ended

31 July 2013

£’000

(Audited)

  6 Month Ended

31 January 2013

£’000

(Unaudited)

Profit before income tax     3,313   3,269   2,085   2,041
Movement in fair value of interest rate cap-and-collar contract     (155)   (71)   (114)   (30)
Unwinding of discount on deferred and contingent consideration and share purchase obligation payable     1,111   541   1,167   597
Charges associated with misappropriation of assets     -   -   265   265
Income from recovery and sale of misappropriated assets     (119)   (12)   (318)   (211)
Cost associated with investigation and response to fraudulent activity     -   -   579   579
Change in estimate of future contingent consideration and share purchase obligation payable     (47)   301   (647)   (299)
Charges associated with equity transactions accounted for as share based payments     151   54   131   34
Share-based payment charge for disposal of equity in a subsidiary to employees     -   -   450   450
Charge associated with current period restructure     308   308   -   -
Restructuring and reorganisation costs associated with integrated digital transitions within brands     354   -   779   425
Charge associated with office moves in San Francisco     -   -   -   -
Amortisation of acquired intangibles     1,405   687   1,378   660
Impairment of goodwill     1,950   -   1,950   -
Adjusted profit before income tax     8,271   5,077   7,705   4,511

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