Half-year Report

Half-year Report

Next Fifteen Communications Plc

26 September 2017

Next Fifteen Communications Group plc

Interim results for the six months ended 31 July 2017

Next Fifteen Communications Group plc (“Next 15” or the “Group”), the digital communications group, today announces its interim results for the six months ended 31 July 2017.

Adjusted financial results for the six months to 31 July 2017

    Six months ended

31 July 2017 (Unaudited)

  Six months ended

31 July 2016

(Unaudited)

  Growth
Revenue   £93.5m   £80.5m   16%
EBITDA   £14.5m   £12.8m   13%
Operating Profit   £12.3m   £11.1m   11%
Operating Profit Margin   13.2%   13.8%    
PBT   £12.0m   £10.6m   13%
Diluted EPS   11.4p   10.5p   9%
Dividend per share   1.8p   1.5p   20%
Net debt   £20.8m   £12.2m    

In order to assist 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, consistent with previous periods. The adjusted results are reconciled to statutory results within notes 2 and 3.

Highlights

  • Group revenue growth of 16%, with organic revenue growth of 2%
  • Strong August and September trading with high single digit organic revenue growth
  • Adjusted PBT up 13% to £12m
  • Adjusted diluted earnings per share increased by 9% to 11.4p
  • Significant clients wins including LG Electronics, Grubhub, Marvell and NTT Data
  • Velocity, a B2B content marketing agency, and Circle, a B2B market research consultancy, acquired in July
  • Elvis, an integrated digital agency, acquired in September
  • Acquisition of Charterhouse, a market research agency, announced today

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

Technology continues to change the business of marketing, opening up more and more channels between brands and audiences. Content can be highly-targeted and directly shoppable in a way not possible through traditional media. Today’s marketing deploys mountains of data, with a growing role for technology to understand and use it effectively. Next 15 agencies are well-placed to take advantage of this industry shift.

The Group has continued to invest in agile companies operating in this augmented value chain and in the first half, Group revenue grew by 16%. The addition of several businesses to the Group has been matched by some important client wins including LG Electronics, Grubhub, Marvell and NTT Data.

A 20% increase in the dividend reflects the Board’s confidence in the Group’s performance for this financial year.

Statutory financial results for the six months to 31 July 2017

    Six months ended

31 July 2017 (Unaudited)

  Six months ended

31 July 2016

(Unaudited)

Revenue   £93.5m   £80.5m
PBT   £5.2m   £4.2m
Diluted EPS   4.8p   3.5p

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, Darren Vickers
+44 (0) 20 7597 5970

Notes:

Organic revenue growth

Organic revenue growth is defined as the revenue growth at constant currency excluding the impact of acquisitions.

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

Chairman and Chief Executive’s Statement

Next 15, the digital communications group, is pleased to report its interim results for the six months ended 31st July 2017. During the period the Group’s revenues increased by 16% to £93.5m (2016: £80.5m), while adjusted profit before tax increased by 13% to £12.0m (2016: £10.6m). Adjusted EBITDA for the six month period increased by 13% to £14.5m (2016: £12.8m) and net debt remained relatively modest at £20.8m, following the acquisitions of Velocity, a content marketing agency and Circle, a B2B market research agency, during the period.

Organic revenue growth of 2% was held back in Q1 partly by geopolitical uncertainty but also several large one-off projects in the corresponding period last year. The Group is pleased to report that improved trading in Q2 and Q3 has seen organic growth for August and September move back to high single digits which is expected to continue for the rest of the year.

The Group reported a statutory profit before tax of £5.2m compared with a statutory profit before tax of £4.2m in the prior period, while reported diluted earnings per share were 4.8p compared with 3.5p in the prior period, a growth of 37%.

The improvement in trading over the last three months has provided the Group with confidence that it is well placed to meet its expectations for the full year and as such the Board has increased the interim dividend by 20% to 1.8p per share.

Operational Review

Our US businesses have increased revenues by 12.5% to £57.0m from £50.7m. Beyond and M Booth have continued to perform very strongly, whilst our other brands were held back due to a combination of very strong trading in the comparable period and an uncertain political environment. Operating margins have reduced to 18.1% in large part due to the investment in taking some of our UK brands to the US. Trading in the July to September quarter has been much improved and we are expecting operating margins in the US to be in excess of 20% in the second half of our financial year.

Our UK businesses have increased revenues by 27.9% to £25.5m from £20.0m. Operating margins have increased to 20.2% from 17.8% in the prior period due to a combination of high margin, high revenue growth acquisitions in Publitek, Twogether and Encore and operational improvements at our other UK businesses.

In EMEA we have seen a continued improvement in both revenue and profitability, whilst in APAC we have invested heavily in talent, infrastructure and technology, which we anticipate will lead to a much improved second half profit performance.

The Group is particularly pleased by the performance of its data and insight business, MIG Global which now accounts for approximately 6% of the Group’s revenues having been less than 2% of the Group’s revenues just two years ago.

The Group added LG Electronics, Grubhub, Marvell and NTT Data as clients.

The Group has undergone some minor restructuring to better serve customers and to address certain structural weaknesses in its portfolio of businesses. Our consumer PR agency Lexis has been merged into Text, while we have formally aligned Bite US and Bite UK to create one global brand. At the same time, BDA is being merged with Twogether. A small restructuring charge is being recognized as a part of these changes.

Continued Investment

On 11th July we announced the acquisition of Velocity, a B2B content marketing agency with a focus on technology clients which include multi-national technology groups, such as Sprint, Xerox and Informatica.

On 12th July we announced the acquisition of Circle, a B2B market research consultancy, through our data and insights subsidiary, MIG Global. Clients include Vodafone, Google, MasterCard, BSI, SITA, Maersk and Facebook.

On 15th September we announced the acquisition of Elvis, a UK based integrated digital agency with a focus on consumer brands, and today we announce the acquisition of Charterhouse, a market research agency focused on the financial services sector.

These investments are being financed out of our trading cash flows and we anticipate that our net debt will be below £15m by the year end unless the Group opts to make additional investments or acquisitions. This will represent less than 0.5x adjusted EBITDA.

Dividend

The Board has declared an interim dividend of 1.8p per share, which is a 20% increase on the interim dividend for last year. This will be paid to shareholders on 24 November 2017 who are registered on 27 October 2017.

Current Trading and Outlook

Looking to the full year, the Board is encouraged by trading in our third quarter and the prospects for the second half remain good. As a result, the Board remains optimistic about the outlook for the Group and is confident that it will meet its expectations for the full year.

NEXT FIFTEEN COMMUNICATIONS GROUP PLC

ADJUSTED RESULTS: INCOME STATEMENT

  Six months ended

31 July 2017 (Unaudited)

£’000

  Six months ended

31 July 2016

(Unaudited)

£’000

Revenue 93,466   80,471
Total operating charges (79,008)   (67,655)
EBITDA 14,458 12,816
Depreciation and Amortisation (2,146)   (1,737)
Operating profit 12,312 11,079
Net finance expense (333) (281)
Share of profits / (losses) of associate 24   (163)
Profit before income tax 12,003 10,635
Tax (2,401)   (2,327)
Retained profit 9,602 8,308
Profit Attributable to Owners 9,281 8,064
Profit Attributable to Minorities 321 244
         
Weighted average number of ordinary shares 73,561,342 71,039,309
Diluted weighted average number of ordinary shares   81,544,242   76,480,282
         
Adjusted earnings per share 12.6p 11.4p
Diluted adjusted earnings per share   11.4p   10.5p

ADJUSTED RESULTS: CASH FLOW

  Six months ended

31 July 2017 (Unaudited)

£’000

  Six months ended

31 July 2016

(Unaudited)

£’000

Cash and cash equivalents at beginning of the period 22,072 14,132
Net cash from operating activities 6,082 15,430
Income taxes paid (1,905) (692)
Net cash outflow from investing activities (11,775) (19,432)
Net cash inflow from financing activities 2,452 10,333
Exchange (losses) / gains on cash held (337)   830
Cash and cash equivalents at end of the period 16,589 20,601

NEXT FIFTEEN COMMUNICATIONS GROUP PLC

ADJUSTED RESULTS: SEGMENTAL (Unaudited)

                         
   

UK
£’000

 

Europe & Africa
£’000

 

US
£’000

 

Asia Pacific
£’000

 

Head Office
£’000

 

Total
£’000

6 months ended

31 July 2017

                       
Revenue   25,542   3,773   57,040   7,111   -   93,466
Operating profit   5,165   287   10,321   602   (4,063)   12,312
Operating profit margin   20.2%   7.6%   18.1%   8.5%   -   13.2%
Organic revenue growth   3.5%   4.4%   1.5%   (0.8%)   -   1.9%
6 months ended 31 July 2016                        
Revenue   19,977   3,320   50,706   6,468   -   80,471
Operating profit   3,555   160   10,161   874   (3,671)   11,079
Operating profit margin   17.8%   4.8%   20.0%   13.5%   -   13.8%
Organic revenue growth   2.9%   4.0%   17.2%   6.6%   -   12.8%

NEXT FIFTEEN COMMUNICATIONS GROUP PLC

CONSOLIDATED INCOME STATEMENT

FOR THE SIX MONTH PERIOD ENDED 31 JULY 2017

    Six months ended

31 July 2017 (Unaudited)

  Six months ended

31 July 2016

(Unaudited)

  12 months ended

31 January 2017 (Audited)

Note £’000 £’000 £’000
 
Billings       113,921   94,625   200,745
 
Revenue 2 93,466 80,471 171,013
 
Staff costs 65,880 54,559 126,756
Depreciation 1,978 1,564 3,482
Amortisation 3,381 2,550 6,017
Other operating charges 15,075   15,167   26,844
Total operating charges (86,314)   (73,840)   (163,099)
Operating profit 2 7,152   6,631   7,914
 
Finance expense 6 (2,405) (2,469) (5,607)
Finance income 7 468 163 865
Share of profits / (losses) of associate 24 (163) (272)
         
Profit before income tax 3 5,239   4,162   2,900
 
Income tax expense 4 (1,044) (1,273) (1,232)
         
Profit for the period 4,195   2,889   1,668
 
Attributable to:
Owners of the parent 3,874 2,645 1,138
Non-controlling interests 321   244   530
4,195   2,889   1,668
Earnings per share
Basic (pence) 8 5.3 3.7 1.6
Diluted (pence) 8 4.8 3.5 1.5

NEXT FIFTEEN COMMUNICATIONS GROUP PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 31 JULY 2017

  Six months ended

31 July 2017 (Unaudited)

  Six months ended

31 July 2016

(Unaudited)

  12 months ended

31 January 2016 (Audited)

£’000 £’000 £’000
 
Profit for the period 4,195 2,889 1,668
 
Other comprehensive income / (expense):
Items that may be reclassified into profit or loss
Exchange differences on translating foreign operations (1,804) 2,583 5,128
Net investment hedge 551   (753)   (1,378)
(1,253) 1,830 3,750
Amounts reclassified and reported in the Income Statement
Net investment hedge -   -   -
Other comprehensive (expense) / income for the period (1,253)   1,830   3,750
Total comprehensive income for the period 2,942   4,719   5,418
 
Attributable to:
Owners of the parent 2,621 4,475 4,888
Non-controlling interests 321   244   530
2,942   4,719   5,418

NEXT FIFTEEN COMMUNICATIONS GROUP PLC

CONSOLIDATED BALANCE SHEET AS AT 31 JULY 2017

    31 July 2017 (Unaudited)   31 July 2016

(Unaudited)

  31 January 2017 (Audited)
Note £’000 £’000 £’000
Assets
Property, plant and equipment 14,819 15,548 15,764
Intangible assets 91,926 73,574 79,979
Investment in equity accounted associate 139 485 120
Trade investment 1,216 736 743
Deferred tax asset 10,515 4,693 9,987
Other receivables 540   1,034   817
Total non-current assets 119,155 96,070 107,410
 
Trade and other receivables 54,762 42,928 42,143
Cash and cash equivalents 9 16,589 20,601 22,072
Corporation tax asset 940   1,317   601
Total current assets 72,291 64,846 64,816
           
Total assets 191,446 160,916 172,226
 
Liabilities
Loans and borrowings 9 35,911 31,231 31,869
Deferred tax liabilities 3,426 - 2,692
Other payables 4,683 6,156 5,537
Provisions 116 54 54
Contingent consideration 10 15,228 9,816 10,971
Share purchase obligation 10 2,839   2,740   3,033
Total non-current liabilities 62,203 49,997 54,156
 
Loans and borrowings 9 1,517 1,507 1,589
Trade and other payables 46,128 40,527 39,409
Provisions 699 2,499 2,647
Corporation tax liability 2,617 1,451 1,594
Share purchase obligation 10 - - 400
Contingent consideration 10 6,053   5,210   3,934
Total current liabilities 57,014 51,194 49,573
         
Total liabilities 119,217 101,191 103,729
         
TOTAL NET ASSETS 72,229   59,725   68,497
Equity
Share capital 1,848 1,804 1,834
Share premium reserve 27,856 24,976 25,681
Foreign currency translation reserve 8,434 7,693 10,238
Other reserves (1,593) (1,519) (2,144)
Retained earnings 35,335   25,847   31,962
Total equity attributable to owners of the parent 71,880 58,801 67,571
Non-controlling interests 349 924 926
         
TOTAL EQUITY 72,229   59,725   68,497

NEXT FIFTEEN COMMUNICATIONS GROUP PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTH PERIOD ENDED 31 JULY 2017

 

Share capital

  Share premium 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
 
At 1 February 2016 (audited) 1,763 21,523 5,110 (766) 24,418 52,048 743 52,791
 
Profit for the period - - - - 2,645 2,645 244 2,889
Other comprehensive income / (expense) for the period   -   -   2,583   (753)   -   1,830   -   1,830
Total comprehensive income / (expense) for the period   -   -   2,583   (753)   2,645   4,475   244   4,719
Shares issued on satisfaction of vested share options 3 - - - - 3 - 3
Shares issued on acquisitions 38 3,453 - - - 3,491 - 3,491
Movement in relation to share-based payments - - - - 1,498 1,498 - 1,498
Dividends to owners of the parent - - - - (2,165) (2,165) - (2,165)
Movement on reserves for non-controlling interests - - - - (549) (549) 549 -
Non-controlling interest dividend   -   -   -   -   -   -   (612)   (612)
At 31 July 2016 (unaudited)   1,804   24,976   7,693   (1,519)   25,847   58,801   924   59,725
Profit for the period - - - - (1,507) (1,507) 286 (1,221)
Other comprehensive income / (expense) for the period   -   -   2,545   (625)   -   1,920   -   1,920
Total comprehensive income / (expense) for the period   -   -   2,545   (625)   (1,507)   413   286   699
Shares issued on satisfaction of vested share options 24 - - - (265) (241) - (241)
Shares issued on acquisitions 6 705 - - - 711 - 711
Movement in relation to share-based payments - - - - 8,729 8,729 - 8,729
Dividends to owners of the parent - - - - (1,099) (1,099) - (1,099)
Movement on reserves for non-controlling interests - - - - 257 257 (257) -
Non-controlling interest arising on acquisition - - - - - - 436 436
Non-controlling interest dividend   -   -   -   -   -   -   (463)   (463)
At 31 January 2017 (audited)   1,834   25,681   10,238   (2,144)   31,962   67,571   926   68,497
 
Profit for the period - - - - 3,874 3,874 321 4,195
Other comprehensive income / (expense) for the period   -   -   (1,804)   551   -   (1,253)   -   (1,253)
Total comprehensive income / (expense) for the period   -   -   (1,804)   551   3,874   2,621   321   2,942
Shares issued on satisfaction of vested share options 1 - - - (1) - - -
Shares issued on acquisitions 13 2,175 - - - 2,188 - 2,188
Movement in relation to share-based payments - - - - 2,493 2,493 - 2,493
Dividends to owners of the parent - - - - (2,761) (2,761) - (2,761)
Movement on reserves for non-controlling interests - - - - (232) (232) 232 -
Non-controlling interest dividend   -   -   -   -   -   -   (1,130)   (1,130)
At 31 July 2017 (unaudited)   1,848   27,856   8,434   (1,593)   35,335   71,880   349   72,229

1 Other reserves include ESOP reserve, hedging reserve, share purchase reserve and merger reserve.

NEXT FIFTEEN COMMUNICATIONS GROUP PLC

CONSOLIDATED STATEMENT OF CASH FLOW

FOR THE SIX MONTH PERIOD ENDED 31 JULY 2017

  Six months ended

31 July 2017 (Unaudited)

  Six months ended

31 July 2016

(Unaudited)

  Twelve months ended

31 January 2017 (Audited)

£’000 £’000 £’000
Cash flows from operating activities
Profit for the period 4,195 2,889 1,668
Adjustments for:
Depreciation 1,978 1,564 3,482
Amortisation 3,381 2,550 6,017
Finance expense 2,405 2,469 5,607
Finance income (468) (163) (865)
Share of (profit) / loss from equity accounted associate (24) 163 272
Loss on sale of property, plant and equipment 10 139 110
Income tax expense 1,044 1,273 1,232
Share-based payment charge 2,019 1,025 8,989
         
Net cash inflow from operating activities before changes in working capital 14,540 11,909 26,512
 
Change in trade and other receivables (11,514) 3,363 8,430
Change in trade and other payables 795 (858) (2,861)
Change in other liabilities 2,261   1,016   763
(8,458) 3,521 6,332
         
Net cash generated from operations before tax outflows 6,082 15,430 32,844
 
Income taxes paid (1,905) (692) (1,978)
         
Net cash inflow from operating activities 4,177 14,738 30,866
 
Cash flows from investing activities
Acquisition of subsidiaries and trade and assets, net of cash acquired (5,073) (9,718) (14,546)
Payment of contingent and deferred consideration (4,439) (2,216) (6,622)
Purchase of investment (464) (662) (777)
Proceeds on disposal of associates - - 330
Acquisition of property, plant and equipment (1,460) (6,453) (8,284)
Proceeds on disposal of property, plant and equipment 3 -

7

Acquisition of intangible assets (504) (95) (612)
Net movement in long-term cash deposits 120 (332) (292)
Interest received 42 44 204
         
Net cash outflow from investing activities (11,775) (19,432) (30,592)
  Six months ended

31 July 2017 (Unaudited)

  Six months ended

31 July 2016

(Unaudited)

  Twelve months ended

31 January 2017 (Audited)

£’000 £’000 £’000
 
 
Cash flows from financing activities
Capital element of finance lease rental repayment (13) (29) (55)
Net movement in bank borrowings 3,970 11,302 11,589
Interest paid (375) (328) (695)
Dividend and profit share paid to non-controlling interest partners (1,130) (612) (1,075)
Dividends paid to shareholders of the parent - - (3,264)
         
Net cash inflow from financing activities 2,452 10,333 6,500
         
Net increase in cash and cash equivalents (5,146)   5,639   6,774
 
Cash and cash equivalents at beginning of the period 22,072 14,132 14,132
Exchange (losses) / gains on cash held (337) 830 1,166
         
Cash and cash equivalents at end of the period 16,589   20,601   22,072

NOTES TO THE INTERIM RESULTS

FOR THE SIX MONTHS ENDED 31 JULY 2017

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 year ended 31 January 2017. The comparative financial information for the year ended 31 January 2017 has been derived from the audited statutory financial statements for that period. A copy of those statutory financial statements has been delivered to the Registrar of Companies. The auditor’s 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 acquisition related costs 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   Asia Pacific   Head Office   Total
£’000 £’000 £’000 £’000 £’000 £’000
                         
Six months ended 31 July 2017 (Unaudited)
Revenue 25,542 3,773 57,040 7,111 - 93,466
Adjusted operating profit / (loss)   5,165   287   10,321   602   (4,063)   12,312
Six months ended 31 July 2016 (Unaudited)
Revenue 19,977 3,320 50,706 6,468 - 80,471
Adjusted operating profit / (loss)   3,555   160   10,161   874   (3,671)   11,079
Twelve months 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

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

 

Six months ended

31 July 2017

(Unaudited)

 

Six months ended

31 July 2016

(Unaudited)

 

Twelve months ended

31 January 2017

(Audited)

£’000 £’000 £’000
 
Segment adjusted operating profit 12,312 11,079 24,970
Amortisation of acquired intangibles (3,212) (2,378) (5,505)
Share based payment charge (note 3) (1,452) (1,883) (10,507)
Restructuring costs (427) - (676)
Deal costs (note 3) (69)   (187)   (368)
Total operating profit 7,152   6,631   7,914

3) RECONCILIATION OF ADJUSTED FINANCIAL MEASURES

 

Six months ended

31 July 2017

(Unaudited)

 

Six months ended

31 July 2016

(Unaudited)

 

Twelve months ended

31 January 2017

(Audited)

£’000 £’000 £’000
 
Profit before income tax 5,239 4,162 2,900
Unwinding of discount on deferred and contingent consideration and share purchase obligation payable 1,068 1,032 2,182
Change in estimate of future contingent consideration and share purchase obligation payable 536 993 2,062
Share-based payment charge1 1,452 1,883 10,507
Restructuring costs 427 - 676
Deal costs2 69 187 368
Amortisation of acquired intangibles 3,212 2,378 5,505
Adjusted profit before income tax 12,003 10,635 24,200

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. The adjusting items are consistent with those in the prior period.

1 This charge relates to a transaction whereby a restricted grant of Brand equity was given to key management in Text LLC, The Outcast Agency LLC and Bite LLC (6 months to 31 July 2016: Agent3 Limited, The Lexis Agency Limited, M Booth & Associates LLC and Vrge Strategies LLC) at nil cost. This value is recognised as a one-off share-based payment in the Income Statement. The charge also includes acquisition related payments linked to the continuing employment of the sellers which is being recognised over the required period of employment. In the prior period it also included a charge for the acquisition of the 20% minority interest in Bourne whereby performance shares were issued as partial consideration.

2 This charge relates to third party professional fees incurred during acquisitions, see note 11.

4) TAXATION

The tax charge for the six months ended 31 July 2017 is based on the Group’s estimated effective tax rate for the year ending 31 January 2018 (20%). This is 2% lower than the Group’s effective tax rate for the previous period (22%), due to the increasing proportion of profits the Group expects to realise in lower tax jurisdictions such as the U.K.

5) DIVIDENDS

An interim dividend of 1.8p (six months ended 31 July 2016: 1.5p) per ordinary share will be paid on 24 November 2017 to shareholders listed on the register of members on 27 October 2017. Shares will go ex-dividend on 26 October 2017.

6) FINANCE EXPENSE

 

Six months ended

31 July 2017

(Unaudited)

 

Six months ended

31 July 2016

(Unaudited)

 

Twelve months ended

31 January 2017

(Audited)

£’000 £’000 £’000
Financial liabilities at amortised cost
Bank interest payable 375 313 685
Financial liabilities at fair value through profit and loss
Unwinding of discount on future contingent consideration and share purchase obligation payable 1,068 1,032 2,182
Change in estimate of future contingent consideration and share purchase obligation payable 962 1,110 2,723
 
Other
Finance lease interest - 4 7
Other interest payable - 10 10
Finance expense 2,405 2,469 5,607

7) FINANCE INCOME

 

Six months ended

31 July 2017

(Unaudited)

 

Six months ended

31 July 2016

(Unaudited)

 

Twelve months ended

31 January 2017

(Audited)

£’000 £’000 £’000
Financial assets at amortised cost
Bank interest receivable 29 23 40
Financial assets at fair value through profit and loss
Change in estimate of future contingent consideration and share purchase obligation payable 426 117 661
Other interest receivable 13 23 164
Finance income 468 163 865

8) EARNINGS PER SHARE

  Six months ended

31 July 2017 (Unaudited)

  Six months ended 31 July 2016 (Unaudited)   Twelve months ended

31 January 2017

(Audited)

£’000 £’000 £’000
 
Earnings attributable to ordinary shareholders 3,874 2,645 1,138
Unwinding of discount on future contingent consideration and share purchase obligation payable 1,019 935 2,028
Change in estimate of future contingent consideration and share purchase obligation payable 607 825 2,070
Share based payment charge 899 1,651 8,075
Restructuring costs 345 - 511
Amortisation of acquired intangibles 2,468 1,821 4,187
Deal costs 69 187 337
Adjusted earnings attributable to ordinary shareholders 9,281 8,064 18,346
 
Number Number Number
 
Weighted average number of ordinary shares 73,561,342 71,039,309 72,306,063
Dilutive LTIP shares 2,737,223 2,483,255 2,103,789
Dilutive Growth Deal shares 4,338,031 1,755,159 2,905,385
Other potentially issuable shares 907,646 1,202,559 973,882
     
Diluted weighted average number of ordinary shares 81,544,242 76,480,282 78,289,119
 
 
Basic earnings per share 5.3p 3.7p 1.6p
Diluted earnings per share 4.8p 3.5p 1.5p
Adjusted earnings per share 12.6p 11.4p 25.4p
Diluted adjusted earnings per share 11.4p 10.5p 23.4p

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 notes 2 and 3 is the tax effect of those adjusting items.

9) NET DEBT

The HSBC Bank revolving credit facility expires in 2022 and therefore the outstanding balance has been classified in non-current borrowings with the exception of £1.5m which is due for repayment within one year.

 

 

31 July 2017

(Unaudited)

  31 July 2016 (Unaudited)   31 January 2017

(Audited)

 

 

£’000

£’000 £’000
 
Total loans and borrowings 37,428 32,738 33,458
Obligations under finance leases 9 46 26
Less: cash and cash equivalents   (16,589)   (20,601)   (22,072)
Net debt   20,848   12,183   11,412
Share purchase obligation 2,839 2,740 3,433
Contingent consideration   21,281   15,026   14,905
    44,968   29,949   29,750

10) OTHER FINANCIAL LIABILITIES

  Contingent consideration   Share purchase obligation
 
£’000 £’000
         
At 1 February 2016 (Audited)   8,344   3,734
Arising during the period 5,951 -
Change in estimate 779 214
Exchange differences 192 88
Utilised (1,059) (1,509)
Unwinding of discount   819   213
At 31 July 2016 (Unaudited)   15,026   2,740
Arising during the period 1,985 400
Change in estimate 827 242
Exchange differences 120 56
Utilised (4,021) -
Written off as sold - (187)
Unwinding of discount   968   182
At 31 January 2017 (Audited)   14,905   3,433
Arising during the period 7,578 -
Change in estimate 859 (323)
Exchange differences (40) (50)
Utilised (2,910) (400)
Unwinding of discount   889   179
At 31 July 2017 (Unaudited)   21,281   2,839
Current 6,053 -
Non-current 15,228 2,839

11) ACQUISITIONS AND OTHER SIGNIFICANT TRANSACTIONS

HSBC Facility

On 5 July 2017, the Group entered a new extended five year £40m 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 ranging from 1.5% to 1.9% dependent on the level of gearing in the business.

Velocity

On 10 July 2017, Next 15 purchased the entire share capital of Velocity Partners Limited (“Velocity”), a B2B content marketing agency with a focus on technology clients, for initial consideration of £5.9m. Further consideration is payable based on the average profits of Velocity for the years ending 31 April 2018, and 31 January 2019, 2020, 2021 and 2022.

Circle

On 11 July 2017, Next 15 purchased the entire share capital of Circle Research Limited (“Circle”), a B2B market research consultancy, for initial consideration of £5.2m which includes £2.2m for the net assets of the business. Further consideration is payable based on the average profits of Circle for the years ending 31 January 2019 and 2020.

12) EVENTS AFTER THE BALANCE SHEET DATE

Elvis

On 14 September 2017, Next 15 purchased the entire share capital of Elvis Communications Limited (“Elvis”), an integrated digital agency, for initial consideration of £5.0m. Up to £0.5m is payable as deferred consideration.

Charterhouse

Today we announce that Next 15 have purchased the entire share capital of Charterhouse Research Limited (“Charterhouse”), a market research consultancy, for initial consideration of £1.8m. Further consideration is payable based on the profits of Charterhouse for the years ending 31 January 2019 and 2020.

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