Half-year Report

Half-year Report

Next Fifteen Communications Plc

Next Fifteen Communications Group plc
(“Next 15” or the “Group”)
Interim results for the six months ended 31 July 2021

Strong performance driven by double digit net revenue growth across all four business segments

Next Fifteen Communications Group plc (AIM:NFC), the tech and data-driven growth consultancy, today announces its interim results for the six months ended 31 July 2021.

Financial results for the six months to 31 July 2021 (unaudited)

		Six months ended 31 July 2021 £m		Six months ended 31 July 2020 £m		Year on year change
Adjusted results 1
Net revenue		165.9		126.2		32%
Operating profit after interest on financial lease liabilities		35.0		21.2		65%
Operating profit margin		21.1%		16.8%
Profit before tax		35.0		20.7		69%
Diluted EPS (p)		26.3p		17.4p		51%
Interim dividend per share (p)		3.6p		-
Statutory results
Revenue		208.8		153.1		36%
Operating profit/(loss)		14.9		(0.4)
Profit/(loss) before tax		3.1		(3.4)
Net cash inflow from operating activities		27.3		31.5		(13%)
Diluted loss per share (p)		(2.9)p		(3.6)p		19%

1 Adjusted results have been presented to provide additional information that may be useful to shareholders to understand the performance of the Group by facilitating comparability both year on year and with industry peers. Adjusted results are reconciled to statutory results within notes 2 and 3.

H1 Highlights

• Group net revenue growth of 32% to £165.9m (2020: £126.2m)
• Organic net revenue growth of 23%
• Adjusted profit before tax up 69% to £35.0m (2020: £20.7m)
• Adjusted diluted earnings per share increased by 51% to 26.3p (2020: 17.4p)
• Statutory revenue growth of 36% to £208.8m (2020: £153.1m)
• Statutory operating profit of £14.9m, up from a loss of £0.4m
• Strong balance sheet with net cash of £6.6m (2020: net debt of £5.0m)
• Successful refinancing, providing up to £100m of debt capacity to fund further acquisitions and capital investment
• Significant client wins including Boots, Citibank, Diageo and Disney+
• Acquisitions of Shopper Media Group (“SMG”) and a controlling interest in Blueshirt Capital Advisers (“BCA”), both of which have performed strongly in the first half
• Acquisition of business and assets of MSI International East Inc (“MSI”) by the US arm of Savanta

Current trading and outlook
The Group’s strong trading has continued into the third quarter of our financial year, and we are currently seeing no sign of a slowdown in client demand. Despite being against a strong comparable period, we anticipate delivering double digit organic revenue growth in our second half. Our new positioning as a growth consultancy is clearly resonating with our clients and we are confident in a positive financial performance for the rest of the year.

The Group’s strong balance sheet provides scope for further investments both in the businesses and in M&A to accelerate our longer term growth.

Commenting on the results, Chair of Next 15, Penny Ladkin-Brand said:
“Our first half results have seen very strong organic revenue and profit growth across all segments and we continue to benefit from the same momentum in our second half. The increasing mix of digital services is providing strong operating leverage although we are also taking the opportunity to accelerate investment in talent and product development to continue to drive longer term growth.”

Next 15 will host an analyst and investor webcast at 12.00 today, Tuesday 28 September 2021.

The registration link can be found here: https://us06web.zoom.us/webinar/register/WN_DbyvuhonThC-2cik4oUWmA

For further information contact:

Next Fifteen Communications Group plc
Tim Dyson, Chief Executive Officer
[phone]

Peter Harris, Chief Financial Officer
[phone]

Numis
Mark Lander, Hugo Rubinstein
[phone]

Berenberg
Ben Wright, Mark Whitmore, Dan Gee-Summons
[phone]

Powerscourt
Elly Wiliamson, Jane Glover
[phone]

Notes:

Net revenue
Net revenue is calculated as revenue less direct costs as shown on the Consolidated Income Statement.

Organic net revenue growth
Organic net revenue growth is defined as the net revenue growth at constant currency excluding the impact of acquisitions and disposals in the last 12 months.

Adjusted operating profit margin
Adjusted operating profit margin is calculated based on the operating profit after interest on finance lease liabilities as a percentage of net revenue.

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

About Next 15

Next 15 (AIM:NFC) is an AIM-listed tech and data-driven growth consultancy with operations in Europe, North America and across Asia Pacific. The Group has a strong track record of creating and acquiring high-performance businesses. For acquired businesses it offers an opportunity to take advantage of the Group’s global operational infrastructure and centralized resources to accelerate their growth. The Group has long-term customer relationships with many of the world’s leading companies including Google, Amazon, Facebook, Microsoft, IBM, American Express and Procter & Gamble.

The business operates across four segments, each of which describes how we help customers grow in different ways: Customer Insight helps them understand their opportunities and challenges; Customer Engagement optimises their reputation and digital assets; Customer Delivery helps them connect with customers to drive sales; and Business Transformation helps maximize long-term value through corporate positioning, business design and the development of new ventures.

At Next 15, success is underpinned by a people-led approach. Our purpose is to make our customers and our people the best versions of themselves, and our culture is empowering and respectful. We are seeking B Corp status as externally audited recognition of our commitment to our people and the planet alongside performance.

Our goal is to deliver above-market growth. Our revenues have grown by 106% over the last five years and we are aiming to double the size of the business in the next five years. This will be driven by the quality of the businesses, the strength of our customer relationships, the support our model gives them, and strong tech, data and digital tailwinds.

Chair and Chief Executive’s Statement

Next 15, the growth consultancy, is pleased to report its interim results for the six months ended 31 July 2021.

During the period the Group’s net revenues increased by 32% to £165.9m (2020: £126.2m), while adjusted profit before tax increased by 69% to £35.0m (2020: £20.7m). The positive revenue performance aided by the favourable revenue mix towards more higher margin services and improved operational gearing resulted in the Group’s adjusted operating margin increasing to 21.1% (2020: 16.8%). Our minority interest increased to £2.0m (2020: £0.3m) due to exceptional performances from Agent3 and BCA, both of which have significant management minority shareholdings. Our tax rate on adjusted profit increased to 22% (2020: 20%) due to the increased proportion of our profit coming from our US operations. Despite this, our diluted adjusted EPS increased by 51% to 26.3p (2020: 17.4p) driven by the strong performance at an adjusted operating profit level. Continued strong cash generation resulted in our net cash increasing to £6.6m. This is after the recent acquisitions of SMG and BCA, in addition to other earn out and tax related payments, leaving the Group well placed to make further investments and acquisitions.

We are pleased to announce that the Group has returned to paying an interim dividend post its suspension in response to the pandemic. An interim dividend of 3.6p will be paid to shareholders on 26 November 2021. This represents a notional 20% increase on the interim dividend which we would have paid last year.

The performance has been strong across all four areas of the Group with all delivering double digit organic net revenue growth. Business Transformation was our fastest growing segment following the recent acquisitions of Mach49 and BCA, with Delivery also showing exceptional organic growth as our clients reacted to the pandemic by increasing spend on more measurable products and services. Our Customer Insight and Customer Engagement segments also produced encouraging performances. A fuller financial analysis by segment is provided below.

Given the robust performance of the businesses, we are using the period to accelerate investment in productizing a number of areas of the Group and hire additional digital talent. While these investments will have a minor impact on margins this year, they are expected to help drive sustained long-term organic growth.

The Group reported a statutory operating profit of £14.9m compared with £0.4m loss in the prior period, while reported diluted loss per share was 2.9p compared with 3.6p in the prior period.

Segment adjusted performance

	Customer Engage £000	Customer Delivery £000	Customer Insight £000	Business Transformation £000	Head Office £000	Total £000
6 months ended 31 July 2021
Net revenue	91,170	36,295	18,760	19,724	-	165,949
Adjusted operating profit / (loss) after interest on finance lease liabilities	20,363	13,168	3,329	4,621	(6,476)	35,005
Adjusted operating profit margin	22.3%	36.3%	17.7%	23.4%	-	21.1%
Organic net revenue growth	14.6%	48.8%	22.3%	47.4%	-	23.1%
6 months ended 31 July 2020
Net revenue	82,711	22,623	15,299	5,525	-	126,158
Adjusted operating profit / (loss) after interest on finance lease liabilities	16,354	6,716	1,616	1,300	(4,814)	21,172
Adjusted operating profit margin	19.8%	29.7%	10.6%	23.5%	-	16.8%
Organic net revenue (decline)/growth	(11.4%)	12.7%	(8.0%)	2.9%	-	(6.6%)

Our customer engagement businesses are designed to help our customers optimize their brand reputation and build the mission-critical digital assets such as apps and websites that are the window through which much of the world’s commerce is now transacted. Revenue grew by 10% to £91.2m, with operating profit of £20.4m, an increase of 25%, delivered at an improved operating margin of 22.3%. We have had positive performances across the board but MBooth has been the standout performer benefitting from a recovery in revenues from its more consumer-oriented client base and its broad range of service offerings. Archetype and Beyond’s profitability have both risen significantly in the period due to resilient revenue performances and efficiency savings.

Customer delivery businesses are deeply specialised to use creativity, data, and analytics to create the connections with customers to drive sales and other forms of interaction. This link in the chain is increasingly digital. Businesses want to anticipate what their customers want and when they will want it. It is perhaps not surprising that this is a high growth area for our Group. Revenue grew by 60% to £36.3m, with operating profit almost doubling to £13.2m at an improved operating margin of 36.3%. Activate has continued to excel as its technology led client base has continued to see the benefit of using Activate’s ROI driven lead generation services. Both Agent3 and Twogether have seen significant revenue and profit growth from their more integrated B2B client marketing offerings. We acquired Shopper Media Group, the commerce marketing activation business, in April which has made a very positive start as part of the Group.

Our customer insight businesses are set up to help customers understand the opportunities and challenges they face and arm them with the data and insights they need to make the best decisions. Revenue grew by 23% to £18.8m, with operating profit of £3.3m delivered at a much improved operating margin of 17.7%. Our Savanta business showed a strong recovery from a Covid-impacted comparable period. Within the period, Savanta acquired YouthSight, a UK based youth specialist agency, and MSI, a US based healthcare and financial services specialist agency in the period which will strengthen the performance in our second half.

Business transformation is where customers need our help to either redesign their business model or create entirely new ventures. It is also the area where we help our clients to understand how to maximise the value of the organisation. Revenue grew by 257% to £19.7m, with operating profit of £4.6m at an operating margin of 23.4%. Mach49, which we acquired in August last year, has performed exceptionally well as its clients have embraced its corporate venture building expertise and the business has evolved into a more retainer-based business. The Blueshirt Group and BCA, where we increased our shareholding to 51% in May 2021, both benefitted from the revival of the tech IPO market, while Palladium performed strongly as its focus on providing tech oriented due diligence and value creation services to the Private Equity market proved popular.

Reconciliation between statutory and adjusted profit

		Six months ended 31 July 2021 (Unaudited)		Six months ended 31 July 2020 (Unaudited)
		£000		£000
Profit / (loss) before income tax		3,135		(3,402)
Unwinding of discount on deferred and contingent consideration and share purchase obligation payable		3,343		2,182
Change in estimate of future contingent consideration and share purchase obligation payable		7,885		(366)
One-off charge for employee incentive schemes		5,803		189
Employment-related acquisition payments		5,794		1,699
Restructuring costs		-		2,052
Deal costs		242		178
Property (write back)/impairment		(990)		10,910
Amortisation of acquired intangibles		8,440		7,264
UK furlough grant		1,396		-
Adjusted profit before income tax		35,048		20,706

Adjusted financial measures are presented to provide additional information that may be useful to shareholders through facilitating comparability with industry peers and to best represent the underlying performance of the business. Adjusted results are explained and reconciled to statutory results within note 2 and 3.

We had a net charge of £7.9m in relation to our estimate of future contingent consideration, due to stronger trading than expected from Mach49 and Agent3. As a Group, we are moving towards the inclusion of employment conditions for certain acquisition-related payments. As a result, we are required to build up a provision relating to these payments over time and therefore this has led to an accounting charge of £5.8m (2020: £1.7m). We also incurred a one-off £5.8m charge related to new incentive schemes for various brands.

Due to the success in subletting properties that were impaired in the prior year, a £1.0m credit has been incurred. Since the prior year end, we have repaid the furlough monies received from the UK government in full of £1.4m, which was also treated as an exceptional gain in the year to 31 January 2021. We incurred £0.2m of deal costs in relation to acquisitions, and the amortisation of acquired intangibles was £8.4m in the period.

Cashflow
Despite the unwinding of the benefits from government Covid-related schemes and a very strong revenue performance which negatively impacted our working capital, the Group delivered a resilient cashflow performance with the net cash inflow from operating activities of £27.3m compared to £31.5m in the prior period. This resulted in our net cash increasing to £6.6m as at 31 July 2021.

Bank refinancing
The Group completed a refinancing of its bank facilities on 2 September 2021. This involved a new three-year RCF with HSBC and Bank of Ireland for £60m, with two one-year extension options. As part of the arrangement the group has a £40m accordion option to facilitate future acquisitions.

Dividend
We are pleased to announce that the Group has returned to paying an interim dividend post its suspension in response to the pandemic. An interim dividend of 3.6p will be paid to shareholders on 26 November 2021, who hold shares on 29 October 2021. This represents a notional 20% increase on the interim dividend which we would have paid last year in the absence of the pandemic.

Current Trading and Outlook
The Group’s strong trading has continued into the third quarter of our financial year and we are currently seeing no sign of a slowdown in client demand, despite being against a tough comparable period in our second half. Our new positioning as a growth consultancy is clearly resonating with our clients and we are confident of a positive financial performance for the rest of the year.

The Group’s strong balance sheet provides scope for further investments both in the businesses and in M&A to accelerate our long term growth.

NEXT FIFTEEN COMMUNICATIONS GROUP PLC
CONSOLIDATED INCOME STATEMENT
FOR THE SIX-MONTH PERIOD ENDED 31 July 2021
				Six months ended 31 July 2021 (Unaudited)		Six months ended 31 July 2020 (Unaudited)		12 months ended 31 January 2021 (Audited)
		Note		£000		£000		£000
Revenue				208,756		153,100		323,668
Direct costs				(42,807)		(26,942)		(56,782)
Net revenue		2		165,949		126,158		266,886
Staff costs				122,419		88,836		189,530
Depreciation				4,681		6,618		11,609
Amortisation				9,269		7,960		16,394
Other operating charges				14,705		23,108		35,665
Total operating charges				(151,074)		(126,522)		(253,198)
Operating profit/(loss)		2		14,875		(364)		13,688
Finance expense		6		(12,776)		(4,985)		(16,884)
Finance income		7		827		1,888		1,459
Share of profit from associate				209		59		431
Profit/(loss) before income tax		3		3,135		(3,402)		(1,306)
Income tax (expense)/credit		4		(3,998)		408		(2,643)
Loss for the period				(863)		(2,994)		(3,949)
Attributable to:
Owners of the parent				(2,844)		(3,330)		(4,938)
Non-controlling interests				1,981		336		989
				(863)		(2,994)		(3,949)
Loss per share
Basic (pence)		8		(3.1)		(3.8)		(5.5)
Diluted (pence)		8		(2.9)		(3.6)		(5.3)

NEXT FIFTEEN COMMUNICATIONS GROUP PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 31 July 2021
		Six months ended 31 July 2021 (Unaudited)		Six months ended 31 July 2020 (Unaudited)		12 months ended 31 January 2021 (Audited)
		£000		£000		£000
Loss for the period		(863)		(2,994)		(3,949)
Other comprehensive (expense) / income:
Items that may be reclassified into profit or loss
Exchange differences on translating foreign operations		(711)		473		(1,395)
		(711)		473		(1,395)
Items that will not be reclassified subsequently to profit or loss
Revaluation of investments		329		5		(117)
Total other comprehensive (expense) / income for the period		(382)		478		(1,512)
Total comprehensive expense for the period		(1,245)		(2,516)		(5,461)
Attributable to:
Owners of the parent		(3,226)		(2,852)		(6,450)
Non-controlling interests		1,981		336		989
		(1,245)		(2,516)		(5,461)

NEXT FIFTEEN COMMUNICATIONS GROUP PLC
ADJUSTED RESULTS: KEY PERFORMANCE INDICATORS
		Six months ended 31 July 2021 (Unaudited) £000		Six months ended 31 July 2020 (Unaudited) £000
Net revenue		165,949		126,158
Total operating charges		(124,879)		(96,916)
Depreciation and amortisation		(5,510)		(7,314)
Operating profit		35,560		21,928
Interest on finance lease liabilities		(555)		(756)
Operating profit after interest on finance lease liabilities		35,005		21,172
Operating profit margin		21.1%		16.8%
Net finance expense excluding interest on finance lease liabilities		(166)		(525)
Share of profits of associate		209		59
Profit before income tax		35,048		20,706
Tax		(7,739)		(4,141)
Retained profit		27,309		16,565
Weighted average number of ordinary shares		91,992,850		88,542,197
Diluted weighted average number of ordinary shares		96,443,000		93,197,615
Adjusted earnings per share		27.5p		18.3p
Diluted adjusted earnings per share		26.3p		17.4p
Cash inflow from operating activities		27,300		31,536
Cash outflow on acquisition related payments		(24,733)		(18,350)
Net cash/(debt)		6,622		(4,993)
Dividend (per share)		3.6p		-

NEXT FIFTEEN COMMUNICATIONS GROUP PLC
CONSOLIDATED BALANCE SHEET AS AT 31 July 2021
				31 July 2021 (Unaudited)		31 July 2020 (Unaudited)		31 January 2021 (Audited)
		Note		£000		£000		£000
Assets
Property, plant and equipment				8,753		10,048		8,904
Right-of-use assets				22,967		27,623		26,008
Intangible assets				183,763		157,332		163,777
Investment in equity-accounted associate				-		123		254
Investments in financial assets				1,343		1,080		955
Deferred tax asset				15,875		15,233		15,314
Other receivables				823		590		860
Total non-current assets				233,524		212,029		216,072
Trade and other receivables				115,612		68,634		77,530
Cash and cash equivalents		9		27,342		30,191		26,831
Corporation tax asset				776		1,943		1,215
Total current assets				143,730		100,768		105,576
Total assets				377,254		312,797		321,648
Liabilities
Loans and borrowings		9		-		30,184		7,810
Deferred tax liabilities				2,729		4,932		3,229
Lease liabilities				26,456		35,147		31,812
Other payables				1,482		1,193		1,576
Provisions				7,455		3,949		7,140
Contingent consideration Other contingent liability		10 10		20,694 3,927		20,615 -		36,194 -
Share purchase obligation		10		8,183		1,670		5,302
Total non-current liabilities				70,926		97,690		93,063
Loans and borrowings		9		20,720		5,000		5,000
Trade and other payables				115,455		66,988		77,319
Lease liabilities				10,851		11,038		10,957
Provisions				5,721		2,700		5,656
Corporation tax liability				1,612		2,510		604
Deferred consideration		10		125		1,424		1,262
Contingent consideration		10		28,683		8,666		9,700
Share purchase obligation		10		1,480		1,263		1,206
Total current liabilities				184,647		99,589		111,704
Total liabilities				255,573		197,279		204,767
TOTAL NET ASSETS				121,681		115,518		116,881
Equity
Share capital				2,317		2,265		2,274
Share premium reserve				103,952		90,838		92,408
Foreign currency translation reserve				5,455		8,034		6,166
Other reserves				(2,065)		(2,065)		(2,065)
Retained earnings				10,793		16,890		18,174
Total equity attributable to owners of the parent				120,452		115,962		116,957
Non-controlling interests				1,229		(444)		(76)
TOTAL EQUITY				121,681		115,518		116,881

NEXT FIFTEEN COMMUNICATIONS GROUP PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTH PERIOD ENDED 31 July 2021
		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 31 January 2020 (audited)		2,163		76,019		7,561		(2,065)		29,618		113,296		(585)		112,711
(Loss) / profit for the period		-		-		-		-		(3,330)		(3,330)		336		(2,994)
Other comprehensive income for the period		-		-		473		-		5		478		-		478
Total comprehensive income / (expense) for the period		-		-		473		-		(3,325)		(2,852)		336		(2,516)
Shares issued on satisfaction of vested share options		64		9,253		-		-		(9,317)		-		-		-
Shares issued on acquisitions		38		5,566		-		-		-		5,604		-		5,604
Movement in relation to share-based payments		-		-		-		-		273		273		-		273
Movement on reserves for non-controlling interests		-		-		-		-		(359)		(359)		359		-
Non-controlling interest dividend		-		-		-		-		-		-		(554)		(554)
At 31 July 2020 (unaudited)		2,265		90,838		8,034		(2,065)		16,890		115,962		(444)		115,518
(Loss) / profit for the period		-		-		-		-		(1,608)		(1,608)		653		(955)
Other comprehensive expense for the period		-		-		(1,868)		-		(122)		(1,990)		-		(1,990)
Total comprehensive (expense) / income for the period		-		-		(1,868)		-		(1,730)		(3,598)		653		(2,945)
Shares issued on satisfaction of vested share options		5		909		-		-		(914)		-		-		-
Shares issued on acquisitions		4		661		-		-		-		665		-		665
Movement in relation to share-based payments		-		-		-		-		3,775		3,775		-		3,775
Movement on reserves for non-controlling interests		-		-		-		-		153		153		(153)		-
Non-controlling interest dividend		-		-		-		-		-		-		(132)		(132)
At 31 January 2021 (audited)		2,274		92,408		6,166		(2,065)		18,174		116,957		(76)		116,881
(Loss) / profit for the period		-		-		-		-		(2,844)		(2,844)		1,981		(863)
Other comprehensive (expense) / income for the period		-		-		(711)		-		329		(382)		-		(382)
Total comprehensive (expense) / income for the period		-		-		(711)		-		(2,515)		(3,226)		1,981		(1,245)
Shares issued on satisfaction of vested share options		20		4,763		-		-		(4,783)		-		-		-
Shares issued on acquisitions		23		6,781		-		-		-		6,804		-		6,804
Movement in relation to share-based payments		-		-		-		-		6,346		6,346		-		6,346
Dividends to owners of the parent		-		-		-		-		(6,491)		(6,491)		-		(6,491)
Movement on reserves for non-controlling interests		-		-		-		-		62		62		(62)		-
Non-controlling interest purchased in the period		-		-		-		-		-		-		564		564
Non-controlling interest dividend		-		-		-		-		-		-		(1,178)		(1,178)
At 31 July 2021 (unaudited)		2,317		103,952		5,455		(2,065)		10,793		120,452		1,229		121,681
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 2021
		Six months ended 31 July 2021 (Unaudited)		Six months ended 31 July 2020 (Unaudited)		Twelve months ended 31 January 2021 (Audited)
		£000		£000		£000
Cash flows from operating activities
Loss for the period		(863)		(2,994)		(3,949)
Adjustments for:
Depreciation		4,681		6,618		11,609
Amortisation		9,269		7,960		16,394
Finance expense		12,776		4,985		16,884
Finance income		(827)		(1,888)		(1,459)
Share of profit from equity accounted associate		(209)		(59)		(431)
Impairment of RoU assets		-		7,664		8,503
Loss on sale/impairment of property, plant and equipment		741		5,753		6,885
Gain on exit of finance lease		(1,196)		(2,327)		(2,327)
Income tax expense		3,998		(408)		2,643
Employment linked acquisition provision charge		5,794		1,699		8,041
IFRS 2 charges		7,411		502		3,587
Net cash inflow from operating activities before changes in working capital		41,575		27,505		66,380
Change in trade and other receivables		(25,659)		1,607		(5,692)
Change in trade and other payables		16,506		6,962		12,942
Change in other liabilities		(53)		(1,524)		(697)
		(9,206)		7,045		6,553
Net cash generated from operations before tax and interest outflows		32,369		34,550		72,933
Income taxes paid		(5,069)		(3,014)		(8,423)
Net cash inflow from operating activities		27,300		31,536		64,510
Cash flows from investing activities
Acquisition of subsidiaries and trade and assets, net of cash acquired		(11,477)		(4,237)		(8,097)
Payment of contingent and deferred consideration		(13,256)		(14,113)		(15,539)
Purchase of investment		(60)		-		-
Acquisition of property, plant and equipment		(1,444)		(1,028)		(1,998)
Proceeds on disposal of property, plant and equipment		2		2		4
Acquisition of intangible assets		(1,505)		(1,059)		(2,109)
Net movement in long-term cash deposits		(39)		120		(82)
Income from finance lease receivables		597		434		780
Interest received		22		33		47
Net cash outflow from investing activities		(27,160)		(19,848)		(26,994)

NEXT FIFTEEN COMMUNICATIONS GROUP PLC
CONSOLIDATED STATEMENT OF CASH FLOW (Continued)
FOR THE SIX MONTH PERIOD ENDED 31 July 2021
		Six months ended 31 July 2021 (Unaudited)		Six months ended 31 July 2020 (Unaudited)		Twelve months ended 31 January 2021 (Audited)
		£000		£000		£000
Cash flows from financing activities
Repayment of lease liabilities		(5,846)		(6,235)		(12,647)
Net movement in bank borrowings		7,945		(3,000)		(24,912)
Interest on borrowings paid		(219)		(578)		(881)
Dividend and profit share paid to non-controlling interest partners		(1,178)		(554)		(686)
Net cash inflow/(outflow) from financing activities		702		(10,367)		(39,126)
Net increase/(decrease) in cash and cash equivalents		842		1,321		(1,610)
Cash and cash equivalents at beginning of the period		26,831		28,661		28,661
Exchange (loss)/gains on cash held		(331)		209		(220)
Cash and cash equivalents at end of the period		27,342		30,191		26,831

NOTES TO THE INTERIM RESULTS
FOR THE SIX MONTHS ENDED 31 July 2021

1) BASIS OF PREPARATION

The unaudited consolidated interim financial statements represent a condensed set of financial information and have been prepared using the recognition and measurement principles of International Accounting Standards, and in accordance with IAS 34, Interim Financial Reporting. 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 2021.

The comparative financial information for the year ended 31 January 2021 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.

The Group has previously reported its results split into three divisions: Brand Marketing, Data and Insights and Creative Technology. From 1 February 2021, the Group structure has been enhanced, moving from three divisions to four: Customer Insight, Customer Engagement, Customer Delivery and Business Transformation.

		Customer Engage £000		Customer Delivery £000		Customer Insight £000		Business Transfor mation £000		Head Office £000		Total £000
6 months ended 31 July 2021 (Unaudited)
Net revenue		91,170		36,295		18,760		19,724		-		165,949
Adjusted operating profit / (loss) after interest on finance lease liabilities		20,363		13,168		3,329		4,621		(6,476)		35,005
Adjusted operating profit margin 1		22.3%		36.3%		17.7%		23.4%		-		21.1%
Organic net revenue growth		14.6%		48.8%		22.3%		47.4%		-		23.1%
6 months ended 31 July 2020 (Unaudited)
Net revenue		82,711		22,623		15,299		5,525		-		126,158
Adjusted operating profit / (loss) after interest on finance lease liabilities		16,354		6,716		1,616		1,300		(4,814)		21,172
Adjusted operating profit margin1		19.8%		29.7%		10.6%		23.5%		-		16.8%
Organic net revenue growth		(11.4%)		12.7%		(8.0%)		2.9%		-		(6.6%)
Year ended 31 January 2021 (Unaudited)
Net revenue		166,534		49,557		33,073		17,722		-		266,886
Adjusted operating profit / (loss) after interest on finance lease liabilities		36,866		15,232		4,876		3,906		(11,394)		49,486
Adjusted operating profit margin1		22.1%		30.7%		14.7%		22.0%		-		18.5%
Organic net revenue growth		(9.2%)		17.2%		(3.6%)		9.0%		-		(3.4%)
1 Adjusted operating profit margin is calculated based on the operating profit after interest on finance lease liabilities as a percentage of net revenue.

NOTES TO THE INTERIM RESULTS (Continued)
FOR THE SIX MONTHS ENDED 31 July 2021

2) SEGMENT INFORMATION (continued)

		UK		Europe and Africa		US		Asia Pacific		Head Office		Total
		£000		£000		£000		£000		£000		£000
Six months ended 31 July 2021 (Unaudited)
Net revenue		64,626		4,713		89,302		7,308		-		165,949
Adjusted operating profit / (loss) after interest on finance lease liabilities		14,309		1,050		25,210		912		(6,476)		35,005
Adjusted operating profit margin 1		22.1%		22.3%		28.2%		12.5%		-		21.1%
Organic revenue growth		19.7%		13.6%		26.9%		13.3%		-		23.1%
Six months ended 31 July 2020 (Unaudited)
Net revenue		46,773		4,228		68,657		6,500		-		126,158
Adjusted operating profit / (loss) after interest on finance lease liabilities		8,955		868		15,011		1,152		(4,814)		21,172
Adjusted operating profit margin1		19.1%		20.5%		21.9%		17.7%		-		16.8%
Organic revenue growth		(11.9%)		(3.3%)		(2.6%)		(6.2%)		-		(6.6%)
Twelve months ended 31 January 2021 (Audited)
Net revenue		106,247		8,610		138,383		13,646		-		266,886
Adjusted operating profit / (loss) after interest on lease liabilities		22,402		1,997		34,150		2,331		(11,394)		49,486
Adjusted operating profit margin1		21.1%		23.2%		24.7%		17.1%		-		18.5%
Organic net revenue decline		(6.4%)		(4.7%)		(0.8%)		(5.5%)		-		(3.4%)
1 Adjusted operating profit margin is calculated based on the operating profit after interest on finance lease liabilities as a percentage of net revenue.

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

		Six months ended 31 July 2021 (Unaudited)		Six months ended 31 July 2020 (Unaudited)		Twelve months ended 31 January 2021 (Audited)
		£000		£000		£000
Segment adjusted operating profit after interest on finance lease liabilities		35,005		21,172		49,486
Interest on finance lease liabilities		555		756		1,408
Segment adjusted operating profit		35,560		21,928		50,894
Amortisation of acquired intangibles (note 3)		(8,440)		(7,264)		(15,002)
One-off charge for employee incentive schemes (note 3)		(5,803)		(189)		(2,424)
Employment-related acquisition payments (note 3)		(5,794)		(1,699)		(8,041)
Restructuring costs (note 3)		-		(2,052)		(2,746)
Property write back/(impairment) (note 3)		990		(10,910)		(10,018)
UK furlough grant (note 3)		(1,396)		-		1,396
Deal costs (note 3)		(242)		(178)		(371)
Operating profit/(loss)		14,875		(364)		13,688

NOTES TO THE INTERIM RESULTS (Continued)
FOR THE SIX MONTHS ENDED 31 July 2021

3) RECONCILIATION OF ADJUSTED FINANCIAL MEASURES

		Six months ended 31 July 2021 (Unaudited)		Six months ended 31 July 2020 (Unaudited)		Twelve months ended 31 January 2021 (Audited)
		£000		£000		£000
Profit/(loss) before income tax		3,135		(3,402)		(1,306)
Unwinding of discount on deferred and contingent consideration and share purchase obligation payable1		3,343		2,182		5,153
Change in estimate of future contingent consideration and share purchase obligation payable1		7,885		(366)		8,064
One-off charge for employee incentive schemes2		5,803		189		2,424
Employment-related acquisition payments3		5,794		1,699		8,041
Restructuring costs4		-		2,052		2,746
Deal costs5		242		178		371
Property (write back)/impairment 6		(990)		10,910		10,018
UK furlough grant7		1,396		-		(1,396)
Amortisation of acquired intangibles8		8,440		7,264		15,002
Adjusted profit before income tax		35,048		20,706		49,117

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 The Group adjusts for the remeasurement of the acquisition-related liabilities within the adjusted performance measures in order to aid comparability of the Group’s results year on year as the charge/credit from remeasurement can vary significantly depending on the underlying brand’s performance. It is non-cash and its directional impact to the income statement is opposite to the brand’s performance driving the valuations. The unwinding of discount on these liabilities is also excluded from underlying performance on the basis that it is non-cash and the balance is driven by the Group’s assessment of the time value of money and this exclusion ensures comparability.

2 This charge relates to transactions whereby a restricted grant of brand equity was given to key management in Brandwidth Marketing Limited and Publitek Limited (total of £0.6m) (2020: Savanta Group Limited) 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. The remaining £5.2m of the charge relates to an additional new incentive scheme for the sellers of Activate. This value is recognised as a one-off charge in the income statement in the year of grant as the agreements do not include service requirements, thus the cost accounting is not aligned with the timing of the anticipated benefit of the incentive, namely the growth of the relevant brands.

3 This charge relates to payments linked to the continuing employment of the sellers which is being recognised over the required period of employment. Although these costs are not exceptional or non-recurring, the Group determined they should be excluded from the underlying performance as the costs solely relate to acquiring the business. The sellers of the business are typically paid market salaries and bonuses in addition to these acquisition-related payments and therefore the Group determines these costs solely relate to acquiring the business. Adjusting for these within the Group’s adjusted performance measures gives a better reflection of the Group’s profitability and enhances comparability year-on-year.

4 In the prior period the Group incurred restructuring costs which primarily related to Covid-19 redundancy costs taken in the period in response to the pandemic. These costs related to specific transformational events and they did not relate to underlying trading of the relevant brands.

5 This charge relates to third party professional fees incurred during acquisitions.

6 In the current period the Group has recognised gains relating to the reorganisation of the property space across the Group. The majority of the credit relates to right-of-use assets which were impaired in the prior year and have subsequently been sublet or assigned ahead of expectation. The Group has adjusted for this credit to align to the treatment of the impairment in the prior year and because the additional one-off credit does not relate to the underlying trading of the business and therefore added back to aid comparability.

7 As a result of Covid-19, a number of the UK agencies received government support from the UK furlough scheme in the prior period. During the current year the Group has repaid all amounts received from the UK government. As a result of the receipt and repayment being accounted for in two separate years, the amounts are added back to aid comparability of the Group’s profitability year on year.

8 In line with its peer group, the Group adds back amortisation of acquired intangibles. Judgement is applied in the allocation of the purchase price between intangibles and goodwill, and in determining the useful economic lives of the acquired intangibles. The judgements made by the Group are inevitably different to those made by our peers and as such amortisation of acquired intangibles been added back to aid comparability.

NOTES TO THE INTERIM RESULTS (Continued)
FOR THE SIX MONTHS ENDED 31 July 2021

4) TAXATION

The tax charge for the six months ended 31 July 2021 is based on the Group’s estimated effective tax rate for the year ending 31 January 2022 of 22% (six months ended 31 July 2020 of 20%).

5) DIVIDENDS

An interim dividend of 3.6p (six months ended 31 July 2020: nil) per ordinary share will be paid on 26 November 2021 to shareholders listed on the register of members on 29 October 2021. Shares will go ex-dividend on 28 October 2021. The last date for DRIP elections to be returned to the registrar is 5 November 2021.

6) FINANCE EXPENSE

		Six months ended 31 July 2021 (Unaudited)		Six months ended 31 July 2020 (Unaudited)		Twelve months ended 31 January 2021 (Audited)
		£000		£000		£000
Financial liabilities at amortised cost
Bank interest payable		217		575		877
Interest on finance lease liabilities		555		756		1,408
Financial liabilities at fair value through profit and loss
Unwinding of discount on future deferred and contingent consideration and share purchase obligation payable1		3,343		2,182		5,153
Change in estimate of future contingent consideration and share purchase obligation payable1		8,659		1,470		9,442
Other
Other interest payable		2		2		4
Finance expense		12,776		4,985		16,884
1These items are adjusted for in calculating the adjusted net finance expense.

7) FINANCE INCOME

		Six months ended 31 July 2021 (Unaudited)		Six months ended 31 July 2020 (Unaudited)		Twelve months ended 31 January 2021 (Audited)
		£000		£000		£000
Financial assets at amortised cost
Bank interest receivable		14		19		43
Finance lease interest receivable		31		20		34
Financial assets at fair value through profit and loss
Change in estimate of future contingent consideration and share purchase obligation payable1		774		1,836		1,378
Other interest receivable		8		13		4
Finance income		827		1,888		1,459
1These items are adjusted for in calculating the adjusted net finance expense.

NOTES TO THE INTERIM RESULTS (Continued)
FOR THE SIX MONTHS ENDED 31 July 2021

8) EARNINGS PER SHARE

		Six months ended 31 July 2021 (Unaudited)		Six months ended 31 July 2020 (Unaudited)		Twelve months ended 31 January 2021 (Audited)
		£000		£000		£000
Loss attributable to ordinary shareholders		(2,844)		(3,330)		(4,938)
Unwinding of discount on future deferred and contingent consideration and share purchase obligation payable		3,343		2,182		5,153
Change in estimate of future contingent consideration and share purchase obligation payable		7,885		(366)		8,064
One-off charge for employee incentive schemes		5,803		189		2,424
Restructuring costs		-		2,052		2,746
Property (write back)/impairment		(990)		10,910		10,018
UK Furlough grant		1,396		-		(1,396)
Employment-related acquisition payments		5,794		1,699		8,041
Amortisation of acquired intangibles		8,440		7,264		15,002
Deal costs		242		178		371
Tax effect of adjusting items above		(3,741)		(4,549)		(7,280)
Adjusted earnings attributable to ordinary shareholders		25,328		16,229		38,205
		Number		Number		Number
Weighted average number of ordinary shares		91,992,850		88,542,197		89,382,909
Dilutive LTIP & Options shares		1,945,908		609,071		820,997
Dilutive Growth Deal shares		947,547		1,711,629		1,552,359
Other potentially issuable shares		1,556,695		2,334,718		2,062,239
Diluted weighted average number of ordinary shares		96,443,000		93,197,615		93,818,504
Basic loss per share		(3.1)p		(3.8)p		(5.5)p
Diluted loss per share		(2.9)p		(3.6)p		(5.3)p
Adjusted earnings per share		27.5p		18.3p		42.7p
Diluted adjusted earnings per share		26.3p		17.4p		40.7p

Adjusted and diluted adjusted earnings per share have been presented to provide additional information which may be useful to shareholders through facilitating comparability with industry peers. The adjusted earnings per share is the performance measure used for the vesting of employee performance shares.

NOTES TO THE INTERIM RESULTS (Continued)
FOR THE SIX MONTHS ENDED 31 July 2021

9) NET DEBT

The HSBC Bank revolving credit facility of £40m expires in July 2022 and therefore the outstanding balance has been classified in current borrowings. The £20m loan drawn from HSBC is repayable in annual instalments and has £5m left to be repaid in December 2021. The group completed a refinancing of its bank facilities in September 2021 to include a new three year RCF for £60m, refer to note 11 for details.

		31 July 2021 (Unaudited)		31 July 2020 (Unaudited)		31 January 2021 (Audited)
		£000		£000		£000
Cash and cash equivalents		27,342		30,191		26,831
Less: total loans and borrowings		(20,720)		(35,184)		(12,810)
Net cash/(debt)		6,622		(4,993)		14,021
Share purchase obligation		(9,663)		(2,933)		(6,508)
Contingent consideration		(49,377)		(29,281)		(45,894)
Deferred consideration		(125)		(1,424)		(1,262)
Other contingent liability		(3,927)		-		-
		(56,470)		(38,631)		(39,643)

10) OTHER FINANCIAL LIABILITIES

		Deferred consideration		Contingent consideration		Other Contingent Liability		Share purchase obligation
		£000		£000		£000		£000
At 31 January 2020 (Audited)		2,715		42,181		-		3,367
Arising during the period		-		417		-		-
Reclassification		2,405		(2,405)		-		-
Change in estimate		-		258		-		(624)
Exchange differences		-		3		-		7
Utilised		(3,811)		(13,057)		-		-
Unwinding of discount		115		1,884		-		183
At 31 July 2020 (Unaudited)		1,424		29,281		-		2,933
Arising during the period		-		12,468		-		-
Reclassification		-		-		-		-
Change in estimate		-		5,074		-		3,356
Exchange difference		-		(1,982)		-		(57)
Utilised		(226)		(1,578)		-		-
Unwinding of discount		64		2,631		-		276
At 31 January 2021 (Audited)		1,262		45,894		-		6,508
Arising during the period		-		5,626		3,888		-
Reclassification		125		(125)		-		-
Change in estimate		-		5,148		-		2,737
Exchange differences		-		(521)		-		(16)
Utilised		(1,301)		(9,476)		-		-
Unwinding of discount		39		2,831		39		434
At 31 July 2021 (Unaudited)		125		49,377		3,927		9,663
Current		125		28,683		-		1,480
Non-current		-		20,694		3,927		8,183

NOTES TO THE INTERIM RESULTS (Continued)
FOR THE SIX MONTHS ENDED 31 July 2021

11) EVENTS AFTER THE BALANCE SHEET DATE

Acquisition of MSI
On 1 August 2021, the US arm of the Group’s largest customer insight business, Savanta, acquired the business and assets of MSI International East Inc (“MSI”), a New Jersey based market research agency. This is a further step in the ambition for half of Savanta’s revenues to be delivered from its US arm. MSI’s clients include a variety of Fortune 500 companies across the Healthcare, Pharmaceutical, Investment, Insurance, IT/Security and Retirement sectors.

Bank Refinancing
The Group completed a refinancing of its bank facilities on 2 September 2021. This involved a new three year RCF with HSBC and Bank of Ireland for £60m, with two one year extension options. As part of the arrangement the Group has a £40m accordion option to facilitate future acquisitions.

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