Final Results

Final Results

Next Fifteen Communications Plc

Next Fifteen Communications Group plc

Final results for the year ended 31 January 2017

Next Fifteen Communications Group plc (“Next 15” or the “Group”), the digital communications group, today announces its final results for the year ended 31 January 2017.

Adjusted financial results for the year to 31 January 2017

    Year ended

31 January 2017

(Audited)

  Year ended

31 January 2016

(Audited)

  Growth
Revenue   £171.0m   £129.8m   32%
EBITDA   £29.0m   £19.2m   51%
Operating Profit   £25.0m   £16.5m   52%
Operating Profit Margin   14.6%   12.7%    
PBT   £24.2m   £16.1m   50%
Diluted EPS   23.4p   16.9p   38%
Dividend per share   5.25p   4.2p   25%
Cash generated from operations   £32.8m   £16.3m   101%
Net debt   £11.4m   £6.6m    

In order to help shareholders’ understanding of the underlying performance of the business, adjusted results have been presented. The items that are excluded from adjusted results include acquisition related costs, one-off and acquisition related share based payment charges, amortisation and certain other non-recurring items. The adjusted results are reconciled to statutory results within notes 2 and 3.

Highlights

  • Revenues increased by 32%, with Group organic1 revenue growth of 10%
  • Adjusted operating profit margin improves to 14.6% from 12.7%
  • Adjusted diluted earnings per share increased by 38% to 23.4p
  • Cash generated from operations increased by 101% to £32.8m
  • 25% increase in dividend per share to 5.25p
  • Significant clients wins including LinkedIn, GM and KPMG
  • Publitek, Twogether, Pinnacle and HPI acquired during the year and performing to management expectations

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

“Next 15 continues to develop its business toward content, data and technology, reflecting the board’s view of the future of marketing communications. Content has been at the heart of the business since its PR roots, though today's clients typically require many more creative ideas as they build relationships with customers on multiple platforms. Data has always driven the work we have done for clients but its availability has grown dramatically through online interactions, to a point where selectivity has become as important as analysis. We foresee data services providing a greater share of the Group’s revenues in the future. Technology is also playing a greater part in the understanding and meeting of customer needs by brand owners, not least through the use of artificial intelligence to reduce the hit and miss historically associated with marketing.

“The results for the financial year to January 2017 were helped by forex, but reflect strong organic growth, judicious and effective acquisitions and continued organisational efficiencies in an entrepreneurial culture. Current trading reassures the Board that the outlook for Next 15 continues to be positive.”

Statutory financial results for the year to 31 January 2017

    Year ended

31 January 2017

(Audited)

  Year ended

31 January 2016

(Audited)

Revenue   £171.0m   £129.8m
Profit for the year   £1.7m   £4.5m
Diluted EPS   1.5p   5.6p

For further information contact:

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

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

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

Notes:

1Organic

The organic growth is defined as the growth at constant exchange rates excluding the impact of acquisitions and office closures since the beginning of the comparative period (i.e. 1st February 2015).

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

Chairman and Chief Executive’s Statement

Review of Adjusted Results to 31 January 2017

The last 12 months has been a period of exceptional progress across the Group. We have again succeeded in growing the revenues at our US businesses at a double-digit organic rate whilst achieving an operating profit margin in excess of 20%. M Booth and Beyond US have had impressive performances whilst OutCast, Connections Media and Bite US have continued to deliver solid results.

In addition, we have benefited from the series of operational improvements we have implemented which have resulted in an increase in the operating margins of our non-US operations. We have improved the efficiency of a number of our UK businesses whilst acquiring high-growth, high-margin agencies in Publitek, Pinnacle and Twogether. We also acquired HPI, which has been merged with Morar to create MIG Global.

We have also benefited significantly from the merger in 2015 of our agencies in APAC and EMEA where trading continued to improve as the year progressed in both markets.

In total for the 12 months to 31 January 2017, the Group delivered revenue of £171.0m, adjusted operating profit of £25.0m, adjusted profit before income tax of £24.2m and adjusted diluted earnings per share of 23.4p.

Regional Adjusted Performance

Our US businesses have continued to perform strongly led by our Text 100, Beyond, OutCast, M Booth, Connections Media and Bite agencies. In the year to 31 January 2017 revenues grew by 28.1% to £107.0m from £83.5m which equated to an organic growth rate of 12.6%, taking account of movements in exchange rates. Margins have remained consistently strong at above 20%, but were impacted by the performance of our recent acquisition Story Worldwide, which continued to disappoint. We incurred £0.6m in exceptional restructuring costs as we aligned the cost base with the anticipated revenue and the business has got off to an encouraging start in our new financial year as a result of our actions. The adjusted operating profit from our US businesses was £22.3m compared with £17.5m in the previous 12 months to 31 January 2016.

The UK businesses have delivered a very encouraging performance over the last 12 months, with revenue increasing by 52.7% to £42.6m from £27.9m in the prior period. Adjusted operating profit increased to £8.0m from £3.8m in the prior year with the adjusted operating margin increasing to 18.9% from 13.6% in the prior period.

The improved performance in the UK has been delivered due to the acquisition of a number of high-growth, high-margin agencies, alongside a number of self-help measures. In March 2016, we acquired Publitek, a digital content marketing agency focused on the electronic components sector, and then in September 2016 we acquired Pinnacle, a competitor to Publitek, and merged them under the Publitek brand name. In March 2016 we acquired Twogether, a digital agency focused on helping technology clients with their channel marketing. Finally, in November 2016, we acquired HPI, a market research agency, and merged it with Morar.

We have delivered an improved trading performance in EMEA as we have continued to focus our efforts on markets of potential scale. Revenue increased by 11.5% to £7.2m and operating profit increased to £0.6m at an improved operating margin of 9.0%.

APAC produced an encouraging performance as we continued to benefit from the operational restructuring we undertook in 2015. Revenue increased by 18.4% to £14.2m, the operating margin improved to 15.2% from 11.5% in the prior period and the operating profit increased by 56.7% to £2.2m.

Balance Sheet and Net Debt

The Group’s balance sheet remains in a healthy position with net debt as at 31 January 2017 of £11.4m (2016: £6.6m), reflecting 0.4x adjusted EBITDA. The Group benefited from cash generated from operations of £32.8m, up 101% on the prior year following strong management of working capital.

Over the period we invested £21.6m in acquisition related payments of which £9.0m fell in the second half.

Cash flow KPIs   Year to

31 January

2017

£m

  Year to

31 January

2016

£m

Net cash inflow from operating activities   26.5   16.1
Working capital movement 6.3 0.2
Net cash generated from operations 32.8 16.3
Income tax paid (2.0) (3.0)
Investing activities (30.6) (20.2)
Dividend paid to shareholders   (3.3)   (2.4)

In March 2016 the Group entered into a new extended four-year £30m revolving credit facility with HSBC. The facility is primarily used for acquisitions and is due to be repaid out of the trading cash flows of the Group. The facility is available in a combination of sterling, US dollar and euro at an interest margin dependent upon the level of gearing in the business. The Group also has a US facility of $6m, which is available for property rental guarantees and US-based working capital needs.

As part of the facility Next 15 is required to comply with a number of covenants, including maintaining the multiple of net bank debt before earn-out obligations to adjusted EBITDA below 1.75x and the level of net bank debt including earn-out obligations to adjusted EBITDA below 2.5x. Next 15 has ensured that it has complied with all of its covenant obligations with significant headroom.

Current Trading and Outlook

Looking ahead, the Group has made a good start to the new financial year with encouraging signs across our brands.

The Board is recommending the payment of a final dividend for the 12 months to 31 January 2017 of 3.75p per share, which would represent a total dividend of 5.25p for the year to 31 January 2017 which reflects an increase of 25% on the dividend in the prior year.

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ADJUSTED RESULTS: INCOME STATEMENT

  Year Ended

31 January 2017

£’000

(Audited)

  Year Ended

31 January 2016

£’000

(Audited)

Revenue 171,013   129,757
Total operating charges (142,049)   (110,581)
EBITDA 28,964 19,176
Depreciation and amortisation (3,994)   (2,657)
Operating profit 24,970 16,519
Net finance expense (498) (422)
Share of loss from associate (272)   (5)
Profit before income tax 24,200 16,092
Tax (5,324)   (3,540)
Retained profit 18,876 12,552
Profit attributable to owners 18,346 12,082
Profit attributable to minorities 530 470
         
Weighted average number of ordinary shares 72,306,063 66,298,503
Dilutive weighted average number of ordinary shares   78,289,119   71,637,907
         
Adjusted earnings per share 25.4p 18.2p
Diluted adjusted earnings per share   23.4p   16.9p

ADJUSTED RESULTS: CASH FLOW

  Year Ended

31 January 2017

£’000

(Audited)

  Year Ended

31 January 2016

£’000

(Audited)

Cash and cash equivalents at beginning of the year 14,132 9,315
Net cash inflow from operating activities 32,844 16,288
Income taxes paid (1,978) (2,954)
Net cash outflow from investing activities (30,592) (20,158)
Net cash inflow from financing activities 6,500 11,459
Exchange gains on cash held 1,166   182
Cash and cash equivalents at end of the year 22,072 14,132

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ADJUSTED RESULTS: SEGMENTAL

                         
   

UK
£’000

 

EMEA
£’000

 

US
£’000

 

Asia Pacific
£’000

 

Head Office
£’000

 

Total
£’000

Year ended 31 January 2017 (Audited)                        
Revenue   42,638   7,166   107,008   14,201   –   171,013
Operating profit / (loss)   8,042   647   22,347   2,162   (8,228)   24,970
Operating profit margin   18.9%   9.0%   20.9%   15.2%   –   14.6%
Organic revenue growth   3.7%   5.7%   12.6%   6.4%   –   9.9%
Year ended 31 January 2016 (Audited)                        
Revenue   27,885   6,426   83,456   11,990   –   129,757
Operating profit / (loss)   3,805   452   17,492   1,380   (6,610)   16,519
Operating profit margin   13.6%   7.0%   21.0%   11.5%   –   12.7%
Organic revenue growth   (0.6%)   (8.1%)   14.1%   (2.4%)   –   7.8%

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CONSOLIDATED INCOME STATEMENT

FOR THE YEARS ENDED 31 JANUARY 2017 AND 31 JANUARY 2016

    Year ended

31 January 2017

(Audited)

  Year ended

31 January 2016

(Audited)

Note £’000 £’000
 
Billings       200,745   151,658
 
Revenue 2 171,013 129,757
 
Staff costs 126,756 92,721
Depreciation 3,482 2,348
Amortisation 6,017 3,796
Other operating charges 26,844   22,463
Total operating charges (163,099) (121,328)
     
Operating profit 2 7,914   8,429
 
Finance expense 6 (5,607) (4,905)
Finance income 7 865 2,059
Share of loss from associate (272) (5)
     
Profit before income tax 3 2,900   5,578
 
Income tax expense 4 (1,232) (1,116)
     
Profit for the period 1,668   4,462
 
Attributable to:
Owners of the parent 1,138 3,992
Non-controlling interests 530   470
1,668   4,462
Earnings per share
Basic (pence) 8 1.6 6.0p
Diluted (pence) 8 1.5 5.6p

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED 31 JANUARY 2017 AND 31 JANUARY 2016

  Year ended

31 January 2017

(Audited)

  Year ended

31 January 2016

(Audited)

£’000 £’000
 
Profit for the period 1,668 4,462
 
Other comprehensive income / (expense):
Items that may be reclassified into profit or loss
Exchange differences on translating foreign operations 5,128 1,585
Loss on net investment hedge (1,378)   (662)
3,750 923
Amounts reclassified and reported in the Income Statement
Profit on net investment hedge -   4
Other Comprehensive income for the period 3,750   927
Total comprehensive income for the period 5,418   5,389
 
Attributable to:
Owners of the parent 4,888 4,919
Non-controlling interests 530   470
5,418   5,389

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CONSOLIDATED BALANCE SHEET AS AT 31 JANUARY 2017 AND 2016

    31 January 2017

(Audited)

  31 January 2016

(Audited)

Note £’000 £’000
Assets
Property, plant and equipment 15,764 9,988
Intangible assets 79,979 53,555
Investment in equity accounted associate 120 465
Trade investment 743 235
Deferred tax asset 9,987 6,485
Other receivables 817   702
Total non-current assets 107,410 71,430
 
Trade and other receivables 42,143 40,924
Cash and cash equivalents 9 22,072 14,132
Corporation tax asset 601   1,097
Total current assets 64,816 56,153
       
Total assets 172,226 127,583
 
Liabilities
Loans and borrowings 9 31,869 20,683
Deferred tax liabilities 2,692 -
Other payables 5,537 5,739
Provisions 54 450
Contingent consideration 10 10,971 5,701
Share purchase obligation 10 3,033   2,225
Total non-current liabilities (54,156) (34,798)
 
Loans and borrowings 9 1,589 -
Trade and other payables 39,409 34,088
Provisions 2,647 989
Corporation tax liability 1,594 765
Share purchase obligation 10 400 1,509
Contingent consideration 10 3,934   2,643
Total current liabilities (49,573) (39,994)
     
Total liabilities (103,729) (74,792)
     
TOTAL NET ASSETS 68,497   52,791
 
Equity
Share capital 1,834 1,763
Share premium reserve 25,681 21,523
Share purchase reserve (2,673) (2,673)
Foreign currency translation reserve 10,238 5,110
Other reserves 529 1,907
Retained earnings 31,962   24,418
Total equity attributable to owners of the parent 67,571 52,048
Non-controlling interests 926 743
     
TOTAL EQUITY 68,497   52,791

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEARS ENDED 31 JANUARY 2017 AND 31 JANUARY 2016

 

Share capital

  Share premium reserve   Share purchase reserve   Foreign currency translation reserve   Other reserves1   Retained earnings   Equity attributable to owners of the Company   Non-controlling interests   Total equity
 
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
 
At 31 January 2015 (audited) 1,545 8,272 (2,673) 3,525 2,565 24,741 37,975 (773) 37,202

Profit for the year

- - - - - 3,992 3,992

470

4,462

Other comprehensive income / (expense) for the year   -   -   -   1,585   (658)   -   927  

-

 

927

Total comprehensive income / (expense) for the year   -   -   -   1,585   (658)   3,992   4,919  

470

 

5,389

Shares issued on satisfaction of vested share options 38 - - - - - 38

-

38

Shares issued on acquisitions 19 1,331 - - - - 1,350 - 1,350
Shares issued on placing 161 11,920 - - - - 12,081 - 12,081
Movement in relation to share-based payments - - - - - 1,274 1,274

-

1,274

Tax on share-based payments - - - - - 239 239 - 239
Dividends to owners of the parent - - - - - (2,441) (2,441) - (2,441)
Movement due to ESOP share purchases - - - - (38) - (38) - (38)
Movement due to ESOP share option exercises - - - - 38 - 38

-

38

Movement on reserves for non-controlling interests - - - - - (3,494) (3,494)

3,494

-

Share options issued on acquisition of subsidiary - - - - - 107 107

-

107

Non-controlling interest arising on acquisition - - - - - - -

(1,888)

(1,888)

Non-controlling interest dividend - - - - - - - (560) (560)
                                     
At 31 January 2016 (audited)   1,763   21,523   (2,673)   5,110   1,907   24,418   52,048   743   52,791

Profit for the year

- - - - - 1,138 1,138 530 1,668
Other comprehensive income / (expense) for the year   -   -   -   5,128   (1,378)   -   3,750   -   3,750
Total comprehensive income / (expense) for the year   -   -   -   5,128   (1,378)   1,138   4,888   530   5,418
Shares issued on satisfaction of vested share options 27 - - - - (265) (238) - (238)
Shares issued on acquisitions 44 4,158 - - - - 4,202 - 4,202
Movement in relation to share-based payments - - - - - 8,974 8,974 - 8,974
Tax on share-based payments - - - - - 1,239 1,239 - 1,239
Dividends to owners of the parent - - - - - (3,264) (3,264) - (3,264)
Movement due to ESOP share purchases - - - - (25) - (25) - (25)
Movement due to ESOP share option exercises - - - - 25 - 25 - 25
Movement on reserves for non-controlling interests - - - - - (292) (292) 292 -
Share options issued on acquisition of subsidiary - - - - - 14 14 - 14
Non-controlling interest arising on acquisition - - - - - - - 436 436
Non-controlling interest dividend   -   -   -   -   -   -   -   (1,075)   (1,075)
At 31 January 2017 (audited)   1,834   25,681   (2,673)   10,238   529   31,962   67,571   926   68,497

1 Other reserves include the ESOP reserve, the treasury reserve, the merger reserve and the hedging reserve.

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CONSOLIDATED STATEMENT OF CASH FLOW

FOR THE YEARS ENDED 31 JANUARY 2017 AND 31 JANUARY 2016

  Year ended

31 January 2017

(Audited)

  Year ended

31 January 2016

(Audited)

£’000 £’000
Cash flows from operating activities
Profit for the year 1,668 4,462
Adjustments for:
Depreciation 3,482 2,348
Amortisation 6,017 3,796
Finance expense 5,607 4,905
Finance income (865) (2,059)
Share of loss from equity-accounted associate 272 5
Loss on sale of property, plant and equipment 110 156
Income tax expense 1,232 1,116
Share-based payment charge 8,989 1,393
     
Net cash inflow from operating activities before changes in working capital 26,512 16,122
 
Change in trade and other receivables 8,430 (6,740)
Change in trade and other payables (2,861) 6,447
Change in provision 763   459
6,332 166
     
Net cash generated from operations 32,844 16,288
 
Income taxes paid (1,978) (2,954)
     
Net cash inflow from operating activities 30,866 13,334
 
Cash flows from investing activities
Acquisition of subsidiaries and trade and assets, net of cash acquired (14,546) (4,190)
Payment of contingent consideration (6,622) (9,160)
Acquisition of investments and associates (777) -
Proceeds on disposal of associates 330 -
Acquisition of property, plant and equipment (8,284) (6,411)
Proceeds on disposal of property, plant and equipment 7 7
Acquisition of intangible assets (612) (562)
Net movement in long-term cash deposits (292) 109
Interest received 204 49
     
Net cash outflow from investing activities (30,592) (20,158)

NEXT FIFTEEN COMMUNICATIONS GROUP PLC

CONSOLIDATED STATEMENT OF CASH FLOW (Continued)

FOR THE YEARS ENDED 31 JANUARY 2017 AND 31 JANUARY 2016

  Year ended

31 January 2017

(Audited)

  Year ended

31 January 2016

(Audited)

£’000 £’000
 
Cash flows from financing activities
Proceeds from sale of own shares - 12,540
Issue costs on issue of ordinary shares - (457)
Capital element of finance lease rental repayment (55) (23)
Increase in bank borrowings and overdrafts 11,589 6,661
Repayment of bank borrowings and overdrafts - (3,790)
Interest paid (695) (471)
Non-controlling interest dividend paid (1,075) (560)
Dividends paid to shareholders of the parent (3,264) (2,441)
     
Net cash inflow from financing activities 6,500 11,459
     
Net increase in cash and cash equivalents 6,774   4,635
 
Cash and cash equivalents at beginning of the period 14,132 9,315
Exchange gains on cash held 1,166 182
     
Cash and cash equivalents at end of the period 22,072   14,132

NOTES TO THE YEAR END RESULTS

FOR THE YEARS ENDED 31 JANUARY 2017 AND 31 JANUARY 2016

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 2017. The comparative financial information for the year ended 31 January 2016 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, amortisation of acquired intangibles, brand equity incentive scheme charges and other exceptional one-off costs. 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   EMEA   US   Asia Pacific   Head Office   Total
£’000 £’000 £’000 £’000 £’000 £’000
                         
Year ended 31 January 2017 (Audited)
Revenue 42,638 7,166 107,008 14,201 – 171,013
Adjusted operating profit / (loss) 8,042 647 22,347 2,162 (8,228) 24,970
Operating profit margin 18.9% 9.0% 20.9% 15.2% – 14.6%
Organic revenue growth   3.7%   5.7%   12.6%   6.4%   –   9.9%
Year ended 31 January 2016 (Audited)
Revenue 27,885 6,426 83,456 11,990 – 129,757
Adjusted operating profit / (loss) 3,805 452 17,492 1,380 (6,610) 16,519
Operating profit margin 13.6% 7.0% 21.0% 11.5% – 12.7%
Organic revenue growth   (0.6%)   (8.1%)   14.1%   (2.4%)   –   7.8%

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

 

 

Year ended

31 January 2017

(Audited)

 

Year ended

31 January 2016

(Audited)

£’000 £’000
Segment adjusted operating profit 24,970 16,519
Amortisation of acquired intangibles (5,505) (3,487)
Share based payment charge and charges associated with equity transactions accounted for as share-based payments (note 3) (10,507) (1,549)
Charge associated with office moves - (1,354)
Current period restructure (note 3) (676) (1,492)
Deal costs (note 3) (368) (208)
Total operating profit 7,914 8,429

NOTES TO THE YEAR END RESULTS (Continued)

FOR THE YEARS ENDED 31 JANUARY 2017 AND 31 JANUARY 2016

3) RECONCILIATION OF ADJUSTED RESULTS

 

 

Year ended

31 January 2017

(Audited)

 

Year ended

31 January 2016

(Audited)

£’000 £’000
Profit before income tax 2,900 5,578
Unwinding of discount on deferred and contingent consideration and share purchase obligation payable 2,182 1,512
Change in estimate of future contingent consideration and share purchase obligation payable 2,062 912
Share based payment charge and charges associated with equity transactions accounted for as share-based payments 1 10,507 1,549
Charge associated with current period restructure 676 1,492
Charge associated with office moves - 1,354
Deal costs2 368 208
Amortisation of acquired intangibles 5,505 3,487
Adjusted profit before income tax 24,200 16,092

Adjusted profit before income tax has been presented to provide additional information which may be useful to the reader, and it is a measure of performance used in the calculation of the adjusted earnings per share. This measure is considered to best represent the underlying performance of the business and so it is used for the vesting of employee performance shares.

1 This charge relates to the acquisition of the 20% minority interest in Bourne whereby performance shares were issued as partial consideration, and transactions whereby a restricted grant of Brand equity was given to key management in Agent3 Limited, BYND Limited, MIG Global Limited, The Lexis Agency Limited, Twogether Creative Limited, BYND LLC, Vrge Strategies LLC and M Booth LLC (2016: Bite Communications Limited, Bite Communications LLC and The OutCast Agency LLC) 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 in the income statement. It also includes charges associated with equity transactions accounted for as share based payments.
2 This charge relates to third party professional fees incurred during acquisitions and restructures, note 11.

4) TAXATION

The tax charge on adjusted profit for the year ended 31 January 2017 is £5,324,000, equating to an effective tax rate of 22%, which is consistent with the prior year. 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 3.75p (2016: 3.00p) per ordinary share will be paid on 4 August 2017 to shareholders listed on the register of members on 30 June 2017. Shares will go ex-dividend on 29 June 2017.

NOTES TO THE YEAR END RESULTS (Continued)

FOR THE YEARS ENDED 31 JANUARY 2017 AND 31 JANUARY 2016

6) FINANCE EXPENSE

 

 

Year ended

31 January 2017

(Audited)

 

Year ended

31 January 2016

(Audited)

 
£’000 £’000
 
Financial liabilities at amortised cost
Bank interest payable 685 445

Financial liabilities at fair value through profit and loss

Unwinding of discount on deferred and contingent consideration and share purchase obligation payable 2,182 1,512
Change in estimate of future contingent consideration and share purchase obligation payable 2,723 2,922
 
Other
Finance lease interest 7 8
Other interest payable 10 18
Finance expense 5,607 4,905

7) FINANCE INCOME

 

 

Year ended

31 January 2017

(Audited)

 

Year ended

31 January 2016

(Audited)

 
£’000 £’000
 
Financial assets at amortised cost

 

Bank interest receivable 40 42

Financial assets at fair value through profit and loss

Change in estimate of future contingent consideration and share purchase obligation payable 661 2,010
Other interest receivable 164 7
Finance income 865 2,059

NOTES TO THE YEAR END RESULTS (Continued)

FOR THE YEARS ENDED 31 JANUARY 2017 AND 31 JANUARY 2016

8) EARNINGS PER SHARE

  Year ended

31 January 2017

(Audited)

  Year ended

31 January 2016

(Audited)

£’000 £’000
 
Earnings attributable to ordinary shareholders 1,138 3,992
Unwinding of discount on future deferred and contingent consideration and share purchase obligation payable after tax 2,028 1,312
Change in estimate of future contingent consideration and share purchase obligation payable after tax 2,070 912
Share based payment charge 8,075 1,237
Costs associated with current period restructure 511 995
Costs associated with office moves - 863
Amortisation of acquired intangibles 4,187 2,563
Deal costs 337 208
Adjusted earnings attributable to ordinary shareholders 18,346 12,082
 
Number Number
 
Weighted average number of ordinary shares 72,306,063 66,298,503
Dilutive LTIP shares 2,103,789 2,904,335
Dilutive Growth Deal shares 2,905,385 1,689,729
Other potentially issuable shares 973,882 745,340
   
Diluted weighted average number of ordinary shares 78,289,119 71,637,907
 
 
Basic earnings per share 1.6p 6.0p
Diluted earnings per share 1.5p 5.6p
Adjusted earnings per share 25.4p 18.2p
Diluted adjusted earnings per share 23.4p 16.9p

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 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 YEAR END RESULTS (Continued)

FOR THE YEARS ENDED 31 JANUARY 2017 AND 31 JANUARY 2016

9) NET DEBT

The HSBC Bank revolving credit facility expires in 2020 and therefore the outstanding balance has been classified in non-current borrowings.

 

 

31 January 2017

(Audited)

  31 January 2016

(Audited)

 

 

£’000

£’000
 
Total loans and borrowings 33,458 20,683
Obligations under finance leases 26 72
Less: cash and cash equivalents   (22,072)   (14,132)
Net debt   11,412   6,623
Share purchase obligation 3,433 3,734
Contingent consideration   14,905   8,344
    29,750   18,701

10) OTHER FINANCIAL LIABILITIES

 

 

Deferred consideration

  Contingent consideration   Share purchase obligation
 

 

 

£’000

  £’000   £’000
At 31 January 2015 (Audited)   94   7,174   5,842
Arising during the year - 4,092 916
Exchange differences - 223 93
Utilised (95) (4,519) (4,166)
Unwinding of discount 1 935 576
Change in estimate   -   439   473
At 31 January 2016 (Audited)   -   8,344   3,734
Arising during the year - 7,936 400
Exchange differences - 312 144
Utilised - (5,080) (1,509)
Written off as sold - - (187)
Unwinding of discount - 1,787 395
Change in estimate   -   1,606   456
At 31 January 2017 (Audited)   -   14,905   3,433
Current - 3,934 400
Non-current - 10,971 3,033

NOTES TO THE YEAR END RESULTS (Continued)

FOR THE YEARS ENDED 31 JANUARY 2017 AND 31 JANUARY 2016

11) ACQUISITIONS AND OTHER SIGNIFICANT TRANSACTIONS

Morar

On 26 February 2016, Next 15 acquired the remaining 25% minority interest in MIG Global Limited (formerly Morar Consulting Limited), its research and advisory agency and settled in full the remaining obligation for the original purchase of 75% of the issued share capital made on 3 December 2014. The aggregate consideration for the minority interest and remaining obligation was £3.55m of which £1.5m was paid in February 2017.

HSBC Facility

On 8 March 2016 the Group entered into a new extended four year £30m revolving credit facility with HSBC. The facility is primarily used for acquisitions and is due to be repaid out of the trading cash flows of the Group. The facility is available in a combination of sterling, US dollar and euro at an interest margin dependent on the level of gearing in the business.

Publitek

On 10 March 2016, Next 15 purchased the entire share capital of Publitek Limited (“Publitek”), a specialist technical content marketing business that services customers in the global semiconductor and electronic component market, for initial consideration of £6.2m. As part of the acquisition of Pinnacle in September 2016 Next 15 settled £1.7m of the Publitek contingent consideration early in order to align the earn-outs of these two businesses which will be managed as one business going forward. Further consideration is payable based on a proportion of average profits of the combined Pinnacle and Publitek Group, for the years ending 31 January 2018, 2019, 2020 and 2021.

Twogether

On 31 March 2016, Next 15 purchased the entire share capital of Twogether Creative Limited (“Twogether”), a B2B creative and digital marketing agency with a focus on technology clients, for initial consideration of £6.6m. Further consideration is payable based on the average profits of Twogether for the years ending 31 January 2018, 2019, 2020 and 2021.

Phrasee

On 14 July 2016 Next 15 purchased 10% of the share capital in Phrasee Limited (“Phrasee”), a marketing software company for consideration of £0.7m.

Pinnacle

On 26 September 2016 Next 15 purchased the entire share capital of Pinnacle, a technical content and digital marketing agency, for initial consideration of £4.4m. Further consideration is payable based on a proportion of the combined Pinnacle and Publitek Group, for the years ending 31 January 2018, 2019, 2020 and 2021.

HPI

On 9 November 2016, Morar purchased an 85% interest in HPI Research Limited, a market research business, for £1.3m with an obligation to purchase the remaining 15% based on the performance for the year to 31 January 2018.

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