Final Results
Next Fifteen Communications Grp PLC
20 October 2003
Date: 20 October 2003
Contact: David Dewhurst 07974 161183
Tim Dyson 001 415 350 2801
Next Fifteen Communications Group plc 020 8996 4154
David Bick 07831 381 201
Chris Steele 07979 604687
Holborn 020 7929 5599
Next Fifteen Communications Group
Preliminary Results for the year to 31 July 2003
Sharp improvement in profitability
Highlights
• Underlying profit before tax up from £0.94m to £1.64m
• Balance sheet remains strong with net cash at £3.5m
• Robust operating performance achieved against difficult markets
• Acquisition of the business of Applied Communications in the USA
• Modest market growth returning to principal markets, particularly the USA
• Total dividend increased 11% to 1.0p via a final dividend of 0.7p per share
Commenting, Tim Dyson, Chief Executive Officer, said:
"We have made a satisfactory start to the new financial year and we are
beginning to see signs of growth in our core markets. I therefore look forward
to this year with some optimism."
CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S STATEMENT
Next Fifteen Communications Group plc, owner of some of the world's leading
public relations consultancies, is pleased to announce improved underlying
full-year results for the year to 31 July 2003.
The year has witnessed a further recovery in the Group's fortunes. The adjusted
pre-tax profit rose 30% to £2.44m (2002: £1.88m) before reorganisation costs of
£794k (2002: £947k) (see Note 5) and this was achieved on net revenue of £35.2m,
down fractionally from the previous year's £35.8m. The like-for-like profit
before tax comparison shows an improvement of £0.7m, from £0.94m to £1.64m. The
actual profit before tax of £1.64m is down from the £4.07m reported last year
but the latter number was distorted by the £3.13m exceptional profit from the
sale of the OneMonday name. The reorganisation costs incurred this year relate
to surplus office space, to redundancies and other costs arising from the
closure of non-core offices and to the merger of our AUGUST.ONE and Joe Public
Relations businesses. The adjusted earnings per share were 3.73p, up 71% from
the previous year's 2.18p (see Note 8). Basic earnings per share were 2.37p,
down from 5.94p last year, but that figure included the exceptional £2.19m
after-tax profit from the name sale. As a result, the Board is proposing a
final dividend of 0.7p, which will bring the total for the year to 1p (2002:
0.9p), a rise of 11%.
The Group's balance sheet remains very strong, with net funds of £3.5m; this
figure, although £0.5m less than at the previous year-end, follows the purchase
of £0.5m worth of the Company's shares for the Employee Share Ownership Trust
and payment of £0.9m tax on the name sale. The net cash flows generated from the
Group's trading activities remain positive.
Recovery in the Group's fortunes has been achieved in market conditions that
have remained difficult, particularly in mainland Europe and Asia Pacific.
Significantly, the recovery has coincided with the investment phase of a number
of new organic activities that will generate longer-term growth for the Group.
These include a new operation in mainland China and the formation of Inferno, a
new subsidiary brand in the UK, which will target technology clients in the
business-to-business sector. It is worth noting that the Group added some
impressive clients during the year, including Fuji Film's account in North
America, and a global brief for ARM, the leading microprocessor designer. In
addition, the Group's largest client, IBM, agreed to renew its global contract
for a further two years.
Perhaps the most exciting development for the Group occurred after the year-end
with the acquisition of the client base and staff of Applied Communications, a
highly respected technology public relations agency with offices in San
Francisco, Washington DC and Amsterdam. After more than 20 years of organic
growth for the Group, this acquisition is not so much a change of direction as a
demonstration that Next Fifteen is perfectly capable of supplementing its core
organic growth with acquisitions when the strategic fit and the timing prove
irresistible. We paid a fair price in the prevailing market environment,
achieving a level of value that would not have been available to us in the
overheated acquisition markets of a few years ago -
so our patience has been rewarded. The majority of Applied's business will
complement Bite's North American interests, and the enlarged operation will be
overseen by Bite's CEO, Clive Armitage. The remainder of the acquired
activities have been integrated into Text 100's global network.
The Group has made a satisfactory start to the new financial year. Despite the
wide disparity of predictions for the year ahead coming from London's quoted
marketing and communications companies, we feel that both the technology
specialisation and broader public relations markets will return to modest growth
over the coming year - most notably in the USA, which is now our largest market.
We believe that the signs of market improvement are there to be seen and that
it will take a sudden macroeconomic reverse to stall this progress.
Tom Lewis Tim Dyson
Chairman CEO
20 October 2003
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 JULY 2003
2003 2002
(Unaudited) (Audited)
£'000 £'000
TURNOVER (Note 2) 39,740 40,250
Other external charges (4,582) (4,458)
NET REVENUE 35,158 35,792
Staff costs (Note 3) 22,604 22,975
Depreciation and amortisation 1,732 1,820
Other operating charges:
Reorganisation costs (Note 4) 794 947
Other operating charges 8,431 8,999
(33,561) (34,741)
OPERATING PROFIT 1,597 1,051
Exceptional profit relating to sale of trademark - 3,132
Interest receivable and similar income 102 62
Interest payable and similar charges (55) (178)
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION (Note 5) 1,644 4,067
Tax on profit on ordinary activities (Note 6) (692) (1,614)
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 952 2,453
MINORITY INTERESTS (41) (72)
PROFIT ATTRIBUTABLE TO MEMBERS 911 2,381
Equity dividends paid and proposed (Note 7) (371) (361)
RETAINED PROFIT FOR THE 540 2,020
FINANCIAL YEAR
BASIC EARNINGS PER SHARE (Note 8) 2.371p 5.937p
DILUTED EARNINGS PER SHARE (Note 8) 2.305p 5.781p
ADJUSTED EARNINGS PER SHARE (Note 8) 3.731p 2.184p
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 31 JULY 2003
2003 2002
(Unaudited) (Audited)
£'000 £'000
Profit attributable to members 911 2,381
Currency translation differences on foreign currency net investments 143 (117)
Total recognised gains and losses relating to the year 1,054 2,264
CONSOLIDATED BALANCE SHEET
AS AT 31 JULY 2003
2003 2002
(Unaudited) (Audited)
£'000 £'000
FIXED ASSETS
Intangible assets (Note 9) 57 -
Tangible assets 2,603 3,228
Investments (Note 10) 2,036 1,509
4,696 4,737
CURRENT ASSETS
Debtors 7,371 6,470
Cash at bank and in hand 3,828 4,724
11,199 11,194
CREDITORS - Amounts falling due within
one year (6,234) (6,941)
NET CURRENT ASSETS 4,965 4,253
TOTAL ASSETS LESS CURRENT LIABILITIES 9,661 8,990
CREDITORS - Amounts falling due after
more than one year (96) (208)
PROVISIONS FOR LIABILITIES AND CHARGES (521) (410)
NET ASSETS 9,044 8,372
EQUITY CAPITAL AND RESERVES
Called up share capital 1,121 1,121
Share premium account 2,711 2,711
Profit and loss account 5,148 4,465
8,980 8,297
EQUITY SHAREHOLDERS FUNDS (Note 11)
MINORITY INTERESTS 64 75
9,044 8,372
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 JULY 2003
2003 2002
(Unaudited) (Audited)
£'000 £'000
NET CASH INFLOW FROM OPERATING ACTIVITIES (Note 13 (1)) 3,594 4,284
RETURNS ON INVESTMENTS
AND SERVICING OF FINANCE
Interest received 102 62
Interest paid (55) (178)
Minority interest dividends paid (75) (36)
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND SERVICING OF
FINANCE (28) (152)
NET CASH OUTFLOW FROM TAXATION (1,948) (702)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Long term deposits 17 (53)
Payments relating to sale of trademark - (73)
Payments to acquire tangible fixed assets (1,177) (977)
Payments to acquire own shares (527) -
Proceeds from sale of trademark - 3,205
Proceeds from sale of own shares 16 8
Receipts from sales of tangible fixed assets 35 209
NET CASH (OUTFLOW)/INFLOW FROM CAPITAL EXPENDITURE AND FINANCIAL
INVESTMENTS (1,636) 2,319
ACQUISITIONS AND DISPOSALS
Payments to acquire trade and assets (40) -
NET CASH OUTFLOW FROM AQUISTIONS AND DISPOSALS (40) -
EQUITY DIVIDENDS PAID (461) -
NET CASH (OUTFLOW)/ INFLOW BEFORE FINANCING (519) 5,749
FINANCING
Issue of shares to minorities 4 -
Net capital outflow from bank loans (75) (2,256)
Capital element of finance lease payments (239) (415)
Redemption of minorities (91) -
NET CASH OUTFLOW FROM FINANCING (401) (2,671)
(DECREASE)/ INCREASE IN CASH FOR THE YEAR (Note 13 (3)) (920) 3,078
1) FINANCIAL INFORMATION
The financial information set out in the announcement does not constitute the
Company's statutory accounts for the years ended 31 July 2003 or 2002. The
financial information for the year ended 31 July 2003 is unaudited whilst the
financial information for the year ended 31 July 2002 is derived from the
statutory accounts for that year which have been delivered to the Registrar of
Companies. The auditors reported on those accounts; their report was unqualified
and did not contain a statement under s237(2) or (3) Companies Act 1985. The
statutory accounts for the year ended 31 July 2003 will be finalised on the
basis of the financial information presented by the directors in this
preliminary announcement and will be delivered to the Registrar of Companies
following the Company's annual general meeting. The announcement is prepared on
the basis of the accounting policies as stated in the statutory accounts for the
year ended 31 July 2002.
2) SEGMENTAL INFORMATION
Analysis of turnover, profit before taxation and net assets by geographic origin
and destination are stated below. The turnover relates to one class of business.
2003 2002
(Unaudited) (Audited)
Turnover Profit Net assets Turnover Profit Net assets
before tax before tax
£'000 £'000 £'000 £'000 £'000 £'000
Continuing
activities:
Europe, Middle East 22,363 1,157 6,100 22,504 *3,842 *6,341
and Africa
North America 13,569 529 1,220 13,186 377 789
Asia Pacific 3,808 (53) (340) 4,560 (154) (208)
Non- allocated - 11 2,064 - 2 1,450
assets
39,740 1,644 9,044 40,250 4,067 8,372
The directors consider these regions to be separate geographic markets and the
markets within which the Group operates.
*In 2002, the Europe, Middle East and Africa region includes, in its profit on
ordinary activities before tax, the exceptional profit on sale of the trademark
of £3,132k and in its net assets, the exceptional profit after tax on sale of
the trademark of £2,192k.
3) STAFF COSTS
Staff costs for the year ended 31 July 2002 have been restated by adding £365k
relating to medical benefits and the cost of temporary staff that had previously
been categorised as other operating charges.
4) REORGANISATION COSTS
Reorganisation costs of £794k (2002: £947k) relate to the cost of office space,
which is surplus to current requirements and redundancies and other costs
arising from the closure of non-core offices. The reorganisation costs also
include the one-off costs of merging the activities of Joe Public Relations with
those of AUGUST.ONE Communications to create a much stronger and more broadly
focused business.
5) RECONCILIATION OF PROFORMA FINANCIAL MEASURES
2003 2002
(Unaudited) (Audited)
£'000 £'000
Profit on ordinary activities before taxation 1,644 4,067
Reorganisation costs 794 947
Exceptional profit relating to sale of trademark - (3,132)
Adjusted profit on ordinary activities before taxation 2,438 1,882
Adjusted profit on ordinary activities before taxation has been presented to
provide additional information which may be useful to the readers of the
statement.
6) TAX ON PROFIT ON ORDINARY ACTIVITIES
2003 2002
(Unaudited) (Audited)
£'000 £'000
UK corporation tax at 30% (2002: 30%) on the results for the year 365 1,110
Overseas taxation 539 639
904 1,749
Prior year under/ (over) provision (UK) 35 (82)
Prior year (over)/ under provision (overseas) (30) 109
Deferred taxation (217) (162)
692 1,614
7) DIVIDENDS
A final dividend of 0.7p (2002: 0.9p) per share has been proposed. The interim
dividend was 0.3p (2002: nil) per share, making a total for the year of 1p per
share (2002:0.9p). The final dividend, if approved at the AGM on 21 January 2004
will be paid on 23 January 2004 to all shareholders on the Register of Members
on 19 December 2003. The ex-dividend date for the shares is 17 December 2003.
8) EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the earnings attributable to
the ordinary shareholders by the weighted average number of ordinary shares
during the year, determined in accordance with the provisions of FRS14 Earnings
per share.
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares in issue on the assumption of conversion of all the
potentially dilutive ordinary shares. The Group has only one category of
dilutive potential shares, being share options granted where the exercise price
is less than the average price of the Company's ordinary shares during the year.
Adjusted earnings per share is calculated by dividing the earnings attributed to
ordinary shareholders pre-reorganisation costs after tax, by the weighted
average number of ordinary shares during the year. For 2002, the adjusted
earnings per share is calculated by dividing earnings attributed to ordinary
shareholders before reorganisation costs after tax and after deduction of the
exceptional profit arising from the sale of the OneMonday trademark, by the
weighted average number of ordinary shares during the year.
2003 2002
(Unaudited) (Audited)
£'000 £'000
Basic and diluted earnings attributable to ordinary shareholders 911 2,381
Reorganisation costs after taxation 522 687
Exceptional profit on sale of OneMonday trademark after taxation - (2,192)
Adjusted earnings attributable to ordinary shareholders 1,433 876
Weighted average number of ordinary shares 38,416,045 40,108,105
Dilutive share options 1,099,136 1,079,982
Adjusted weighted average number of ordinary shares 39,515,181 41,188,087
Basic earnings per share 2.371p 5.937p
Diluted earnings per share 2.305p 5.781p
Adjusted earnings per share 3.731p 2.184p
Adjusted Earnings per share has been presented to provide additional information
which may be useful to the readers of the statement.
9) GOODWILL
Goodwill has been created as a result of the Company purchasing 1.55% of the
voting share capital of Bite Communications Group Limited from one of the
minority shareholders, and the complete minority interest of Joe Public
Relations Limited during the year.
10) INVESTMENTS
This represents investment in own shares and is the cost of shares held by the
Employee Share Ownership Trust in the Company. The market value as at 31 July
2003 was £2,797k.
11) RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
2003 2002
(Unaudited) (Audited)
£'000 £'000
Profit attributable to members 911 2,381
Currency translation differences on foreign currency net investments 143 (117)
Dividends (371) (361)
Net addition to Shareholders' funds 683 1,903
Opening Shareholders' funds 8,297 6,394
Closing Shareholders' funds 8,980 8,297
12) SUBSEQUENT EVENTS
On 8 September 2003, the Company announced the completion of the acquisition of
the trade and certain assets of Applied Communications Group's Public Relations
division. On 2 October 2003, the Company further announced the acquisition of
Applied's research division. The acquired activities are based in San Fransisco
and Amsterdam. The maximum consideration of the two transactions is £1.067m
($1.715m) payable in cash over three years. £103k ($165k) was paid on
completion, £435k ($700k) will be payable in equal instalments over the first
two years and the remaining £529k ($850k) is subject to performance criteria.
The acquired net liabilities have an estimated value of £42k ($67k). Under the
agreements Applied Communications Group retained accounts receivable, cash and
certain intangible assets such as its brand name and intellectual property
rights.
13) NOTES TO THE CASH FLOW STATEMENT
(1) Reconciliation of operating profit to net cash inflow from operating
activities
2003 2002
(Unaudited) (Audited)
£'000 £'000
Operating profit 1,597 1,051
Depreciation and amortisation 1,732 1,820
Profit on sale of own shares (16) (8)
Loss on sale of tangible fixed assets 202 33
Loss on disposal of investments - 14
(Increase)/decrease in debtors (388) 1,065
Increase in creditors 362 297
Increase in provisions 105 12
Net cash inflow from operating activities 3,594 4,284
(2) Analysis of changes in net funds during the year
31 July 2002 Cash flows Other Exchange 31 July 2003
(Audited) changes movement (Unaudited)
£'000 £'000 £'000 £'000 £'000
Cash at bank and in hand 4,724 (1,074) - 178 3,828
Bank overdraft (154) 154 - - -
4,570 (920) - 178 3,828
Bank loans due within one year (75) 75 - - -
Finance leases (475) 239 (87) 7 (316)
Net funds 4,020 (606) (87) 185 3,512
(3) Reconciliation of net cash flow to movement in net funds
2003 2002
(Audited) (Unaudited)
£'000 £'000
(Decrease)/ increase in cash in the year (920) 3,078
Cash outflow from decrease in debt and lease financing 314 2,671
Change in net funds resulting from cash flows (606) 5,749
New finance leases (87) (544)
Translation differences 185 (69)
Movement in net funds in the year (508) 5,136
Net funds/ (debt) at 1 August 4,020 (1,116)
Net funds at 31 July 3,512 4,020
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