Interim Results

Next Fifteen Communications Grp PLC 17 April 2007 17 April 2007 Next Fifteen Communications Group plc Interim results Next Fifteen Communications Group plc ("Next Fifteen" or "the Group"), the international public relations consultancy group, today reports record profitability and revenues for its financial results for the six months to 31 January 2007. Financial highlights: â€¢Revenues up 11% to Â£29.4 million (2006: Â£26.5 million) â€¢Adjusted profit before tax increased by 53% to Â£2.6 million (2006: Â£1.7 million) â€¢EBITDA up 41% to Â£3.6 million (2006: Â£2.5 million) â€¢Adjusted earnings per share rose by 47% to 3.36p (2006: 2.28p) â€¢Interim dividend increased 9.6% to 0.4p (2006: 0.365p) â€¢Adjusted operating profit margin before net central costs increased to 12.2% (2006: 10.9%) following a reduction in staff costs to 68.8% of revenue (2006: 70.2%) Corporate progress: â€¢Strong overall performance by the Group's technology and non-technology businesses; growth of existing client revenue and significant new client wins including Boots, Cisco, Raytheon and Polycom â€¢Growing revenue contribution from the Group's new "Clean Technologies" practices which focus on "green" technology clients including those in the bio fuels sector â€¢Organic revenue growth in Asia up 11%; helped by launch of Vox PR and a new Text 100 office in Kuala Lumpur â€¢Stake in Lexis Public Relations increased to 76%, further strengthening the Group's presence beyond the technology sector. Remaining equity to be purchased over the next three years â€¢UK business has performed well with Lexis revenue consolidated, and 12% growth in Bite London following the successful integration of Credo â€¢OutCast, acquired in June 2005, continues to perform strongly with revenue growth of 22% in $ terms â€¢Post-period end, successful merger of August One and Text 100 businesses to strengthen Text 100's consumer and technology offering. Commenting on the results, Will Whitehorn, Chairman of Next Fifteen, said: "Overall, the Group has generated strong results for the period and continues to make good progress. The Group is well placed to expand its business further due to its operations in high growth markets such as China and India and its operations in North America. "Significant new client wins were achieved in both technology and non-technology sectors; these include Boots, Cisco, Raytheon and Polycom. Outcast, acquired in June 2005, performed exceptionally well, growing revenue by 22% in dollar terms. In addition, the Group has created practices in all three pf its US businesses (Outcast, Bite and Text 100) to service the rapidly expanding Clean Technology market in areas such as bio fuels. "We remain optimistic about the growth potential of the PR market and, in particular, high growth markets such as India and China as well as more established markets such as the UK and US. Beyond the current financial year, the Board remains confident that the Group will continue to generate good organic growth given its sector focus and geographic reach. In addition, the Group is actively seeking selected acquisitions to expand its service offerings." - Ends - For further information: Next Fifteen Tim Dyson, Chief Executive 001 415 350 2801 David Dewhurst, Finance Director 07974 161 183 Merlin 020 7653 6620 Vanessa Maydon 07802 961 902 Anja Kharlamova 07887 788 4788 Attached: Chairman and Chief Executive's Statement Consolidated Profit & Loss Account Consolidated Statement of Total Recognised Gains & Losses Consolidated Balance Sheet Consolidated Cash Flow Statement Notes to the Interim Statement Chairman and Chief Executive's Statement Next Fifteen is pleased to report once again record results for the six months to 31 January 2007. Revenues increased by 11% to Â£29.4m (2006: Â£26.5m) and earnings before interest, tax, depreciation and amortisation rose by 41% to Â£3.6m (2006: Â£2.5m). Adjusted profit before tax increased by 53% to Â£2.6m (2006: Â£1.7m). At the same time, adjusted earnings per share rose by 47% to 3.36p (2006: 2.28p). As a result of this strong performance, the Board has decided to increase the interim dividend by 9.6% to 0.4p (2006: 0.365p). The Group's strategy remains focused on generating organic growth from its existing PR brands and supplementing this with targeted acquisitions that offer growth potential and complement the existing PR businesses. Overall, the Group has generated strong results for the period and continues to make good progress. The Group is well placed to expand its business further due to its operations in high-growth markets such as China and India and its operations in North America. In India, we launched a new PR brand, Vox PR, as an alternative technology-focused business, with offices in Delhi, Mumbai and Bangalore. The growth from Vox PR and a new office for Text 100 in Malaysia helped grow APAC region revenues by 11%. Significant new client wins were achieved in both technology and non-technology sectors; these include Boots, Cisco, Raytheon and Polycom. OutCast, acquired in June 2005, performed exceptionally well, growing revenue by 22% in dollar terms. In addition the Group has created practices in all three of its US businesses (Outcast, Bite and Text 100) to service the rapidly expanding Clean Technology market in areas such as bio fuels. Clients in this area include Novazone, Khosla Ventures, and PARC. In November 2006, the Group acquired a further 25% of Lexis Public Relations, thereby increasing its holding to 76%. This adds to the UK revenue and profits and further strengthens the Group's presence beyond the technology sector. The remaining equity will be purchased over the next three years. The acquisitions of OutCast and Lexis have helped the Group reduce its reliance on key clients, with the top 10 clients now representing less than 40% of total revenue. The successful integration of Credo Communications into Bite London (acquired in December 2005) has helped the business grow by 12% in the first half of the year. Prospects Shortly after the period-end, the Board decided to merge its August One business into Text 100 to strengthen Text 100's consumer technology and corporate PR services. This merger has gone smoothly and the expanded operations have already seen significant new business opportunities emerge as a result. The merger will result in some costs related to duplicated resources and office space in the second half. However, the Group remains fully confident of meeting its targets for the current financial year. Turnover growth has been held back again by an 8.2% weakening of the dollar over the first half of the year, and with 40% of the Group's revenue coming from the US this will also affect the second half. The impact on profit growth is significantly mitigated by matching dollar costs and some currency protection. We remain optimistic about the growth potential of the PR market and, in particular, high-growth markets such as India and China as well as more established markets such as the UK and US. Beyond the current financial year, the Board remains confident that the Group will continue to generate good organic growth given its sector focus and geographic reach. In addition, the Group is actively seeking selected acquisitions to expand its service offerings. Will Whitehorn Tim Dyson Chairman Chief Executive Officer 17 April 2007 NEXT FIFTEEN COMMUNICATIONS GROUP PLC CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE SIX MONTHS ENDED 31 JANUARY 2007 Six months Six months Year ended ended 31 ended 31 31 July 2006 January 2007 January 2006 (Audited) (Unaudited) (Unaudited) (restated)(1) (restated)(1) Note Â£'000 Â£'000 Â£'000 Turnover 2 34,797 29,551 63,278 Other external charges (5,354) (3,065) (7,271) ------ ------- ------ Net revenue 29,443 26,486 56,007 Staff costs 20,258 18,583 38,848 Depreciation 746 700 1,449 Amortisation and amounts written off intangible assets 404 288 727 Reorganisation costs - - 700 Other operating charges 5,667 5,468 11,302 ------- ------ ------ (27,075) (25,039) 53,026 ------- ------- ------ Group operating profit 2,368 1,447 2,981 Share of operating profit of associate 32 74 174 ------- ------- ------ Operating profit including associate 2,400 1,521 3,155 Interest receivable and similar income 52 16 47 Interest payable and similar charges (290) (217) (312) ------- ------- ------- Profit on ordinary activities before taxation 2,3 2,162 1,320 2,890 Taxation on profit on ordinary activities 4 (888) (558) (1,494) ------- ------- ------ Profit on ordinary activities after taxation 1,274 762 1,396 Minority interest (97) (26) (179) ------- ------- ------ Profit attributable to shareholders 6 1,177 736 1,217 ======= ======= ====== Earnings per share 6 Basic 2.43p 1.59p 2.62p Diluted 2.29p 1.50p 2.48p (1) See note 1 for details. NEXT FIFTEEN COMMUNICATIONS GROUP PLC CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE SIX MONTHS ENDED 31 JANUARY 2007 Six months Six months Year ended ended ended 31 January 2007 31 January 2006 31 July 2006 (Unaudited) (Unaudited) (Audited) (restated)(1) (restated)(1) Â£'000 Â£'000 Â£'000 Profit attributable to shareholders 1,177 736 1,217 Translation differences on foreign currency net investments (587) 7 (72) Translation differences on long-term foreign currency inter-company loans 301 (73) (110) -------- ------ ------ Total recognised gains and losses related to the period 891 670 1,035 ======== ====== ====== (1) See note 1 for details. NEXT FIFTEEN COMMUNICATIONS GROUP PLC CONSOLIDATED BALANCE SHEET AS AT 31 JANUARY 2007 31 January 2007 31 January 2006 31 January 2006 (Unaudited) (Unaudited) (Audited) (restated)(1) (restated)(1) Note Â£'000 Â£'000 Â£'000 Fixed assets Intangible assets 12,551 8,239 11,188 Tangible assets 3,037 2,872 3,063 Investments 124 1,555 92 ------ ------ ------ 15,712 12,666 14,343 Current assets Debtors - due within one year 16,338 13,486 15,434 - due after more than one year 355 404 335 ------ ------ ------ 16,693 13,890 15,769 Cash at bank and in hand 2,604 756 4,018 ------ ------ ------ 19,297 14,646 19,787 Creditors: amounts falling due within one year 11,490 8,093 12,554 ------ ------ ------ Net current assets 7,807 6,553 7,233 ------ ------ ------ Total assets less current liabilities 23,519 19,219 21,576 Creditors: amounts falling due after more than one year 7,361 5,440 6,834 ------ ------ ------ Net assets 2 16,158 13,779 14,742 ------ ------ ------ Capital and reserves Called up share capital 1,334 1,281 1,303 Shares to be issued 240 553 558 Share premium account 5,157 5,907 5,157 Merger reserve 2,158 81 1,353 Share-based payment reserve 516 171 342 ESOP reserve (1,280) (1,559) (1,487) Profit and loss account 7,978 7,345 7,516 ------ ------ ------ Equity shareholders' funds 16,103 13,779 14,742 Minority interests 55 - - ------ ------ ------ 16,158 13,779 14,742 ------ ------ ------ (1) See note 1 for details. NEXT FIFTEEN COMMUNICATIONS GROUP PLC CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 31 JANUARY 2007 Six months Six months Year ended ended 31 ended 31 January 2007 January 2006 (Unaudited) (Unaudited) 31 July 2006 (Audited) Note Â£'000 Â£'000 Â£'000 Net cash inflow from operating activities 7 1,897 608 4,948 Returns on investments and servicing of finance Interest received 52 18 47 Interest paid (213) (126) (303) Minority interest dividend paid - (69) (69) ------ ------ ------ Net cash outflow from returns on investments and servicing of finance (161) (177) (325) Taxation (1,560) (1,215) (2,430) Capital expenditure and financial investment (Payments for)/receipts from long-term deposits (31) 6 60 Payments to acquire tangible fixed assets (699) (625) (1,280) Proceeds from sale of tangible fixed assets 6 9 17 ------ ------ ------ Net cash outflow from capital expenditure and financial investment (724) (610) (1,203) Acquisitions and disposals Acquisition expenses 8 (10) (594) (720) Purchase of associate undertaking - (1,272) (11) Purchase of subsidiary undertaking 8 (1,946) (216) (2,749) Cash at bank and in hand acquired with subsidiary - 132 1,388 Payments to acquire trade and assets - (74) (262) ------ ------ ------ Net cash outflow from acquisitions and disposals (1,956) (2,024) (2,354) Equity dividends paid (492) (417) (590) ------ ------ ------ Net cash outflow before financing (2,996) (3,835) (1,954) Financing Issue of new share capital - 27 49 Proceeds from sale of own shares 272 115 183 Cash inflow from long-term bank loan 7 839 2,605 3,716 Capital element of finance lease rental repayments 7 (34) - (20) Redemption of minorities - (1,108) (1,009) ------ ------ ------ Cash inflow from financing 1,077 1,639 2,919 ------ ------ ------ (Decrease)/inc rease in cash in the period 7 (1,919) (2,196) 965 ------ ------ ------ NOTES TO THE INTERIM ACCOUNTS FOR THE SIX MONTHS ENDED 31 JANUARY 2007 1) FINANCIAL INFORMATION The financial information is for the six months ended 31 January 2007 and is not audited as defined by APB Bulletin 1993/1 and 1998/6. The financial information in this report does not constitute statutory financial statements within the meaning of section 240 of the Companies Act 1985 (as amended). The results for the year ended 31 July 2006 have been extracted from the financial statements of the Group on which an unqualified audit report has been received which did not contain a statement under section 237 of the Companies Act 1985 and which have been filed with the Registrar of Companies. The interim statement is prepared on the basis of the accounting policies as set out in the last annual report, except for the following: FRS20 "Share-based Payment" has been adopted in these interim financial statements. The main impact of FRS20 is the recognition of a profit and loss charge based upon the fair value of share options. This contrasts with the previous accounting treatment prescribed by UITF 17 "Employee Share Schemes", under which no profit and loss charge was incurred as the option price was equal to the share price on date of grant. The prior full and half year comparatives have been restated to reflect the change. The effect of this change in accounting policy on the comparatives is that the LTIP and conditional share award charges, reported within staff costs, have increased by Â£85,000 and Â£113,000 for the 6 months ended 31 January 2006 and the year ended 31 July 2006 respectively. There is no impact on the net assets of either comparative period as the charges are offset by a corresponding movement in the share-based payment reserve. FRS23 "The Effects of Changes in Foreign Exchange Rates", adopted at 31 July 2006 is no longer being implemented, and instead the provisions of SSAP20 apply. This impacts the treatment of foreign exchange differences on long-term foreign currency inter-company loans, which under SSAP20 are taken directly to reserves rather than through the profit and loss account. The 31 July 2006 full year comparatives have been restated to reflect the change, reducing the interest payable figure in the profit and loss account by Â£110,000 after the transfer of Â£110,000 of foreign exchange loss to reserves. There is no impact on the net assets at 31 July 2006. NOTES TO THE INTERIM ACCOUNTS FOR THE SIX MONTHS ENDED 31 JANUARY 2007 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, being the provision of public relations services. Turnover Profit before Net assets taxation (restated)(1) (restated)(1) Â£'000 Â£'000 Â£'000 Six months ended 31 January 2007 (Unaudited) Continuing activities: UK 12,205 832 733 EMEA* 5,011 245 1,219 North America 13,623 2,144 12,423 Asia Pacific 3,896 327 2,119 Head Office 62 (1,386) (336) --------- --------- --------- 34,797 2,162 16,158 ========= ========= ========= Six months ended 31 January 2006 (Unaudited) Continuing activities: UK 6,076 (170) 2,483 EMEA* 4,746 105 1,098 North America 15,231 2,068 6,256 Asia Pacific 3,498 213 1,900 Head Office - (896) 2,042 --------- --------- --------- 29,551 1,320 13,779 ========= ========= ========= Year ended 31 July 2006 (Audited) Continuing activities: UK 15,935 294 1,367 EMEA* 9,776 465 1,108 North America 30,476 3,940 10,839 Asia Pacific 7,091 552 1,946 Head Office - (2,361) (518) --------- --------- --------- 63,278 2,890 14,742 ========= ========= ========= *EMEA means Europe (excluding the UK), Middle East and Africa. (1) See note 1 for details. NOTES TO THE INTERIM ACCOUNTS FOR THE SIX MONTHS ENDED 31 JANUARY 2007 3) RECONCILIATION OF PRO-FORMA FINANCIAL MEASURES Six months Six months Year ended ended ended 31 January 2007 31 January 2006 31 July 2006 (Unaudited) (Unaudited) (Audited) (restated)(1) (restated)(1) Â£'000 Â£'000 Â£'000 Profit on ordinary activities before taxation 2,162 1,320 2,890 Reorganisation costs - - 700 Amortisation and amounts written off intangible assets 404 313 727 Unwinding of discount on deferred consideration(2) 77 91 - ---------- ---------- ---------- Adjusted profit on ordinary activities before taxation 2,643 1,724 4,317 ========== ========== ========== Adjusted profit on ordinary activities before taxation has been presented to provide additional information which may be useful to the reader. (1) See note 1 for details. (2) As required by FRS12 - "Provisions, Contingent Liabilities and Assets", an interest charge of Â£77,000 has been recognised during the period in relation to the deferred consideration payable for OutCast Communications. 4) TAXATION ON PROFIT ON ORDINARY ACTIVITIES The tax charge is based on the forecast effective tax rate for the year and is higher than a standard UK rate as a result of profits being generated in high tax regimes. 5) DIVIDENDS An interim dividend of 0.4p (2006: 0.365p) per ordinary share will be paid on 31 May 2007 to shareholders on the register of members on 27 April 2007. Shares will go ex dividend on 25 April 2007. The Employee Share Ownership Trust has waived its rights to dividends of Â£18,000 in the six months ended 31 January 2007 (Interim 2006: Â£18,000; Full year 2006: Â£62,000). NOTES TO THE INTERIM ACCOUNTS FOR THE SIX MONTHS ENDED 31 JANUARY 2007 6) EARNINGS PER SHARE Six months Six months Year ended 31 ended 31 ended 31 July 2006 January 2007 January 2006 (Audited) (Unaudited) (Unaudited) (restated)(1) (restated)(1) Â£'000 Â£'000 Â£'000 Basic and diluted earnings attributable to ordinary shareholders 1,177 736 1,217 Reorganisation costs after taxation - - 470 Amortisation of goodwill after taxation 372 227 670 Unwinding of discount on deferred consideration 77 91 - ----------- ----------- ---------- Adjusted and diluted adjusted earnings attributable to ordinary shareholders 1,626 1,054 2,357 =========== =========== ========== Number Number Number Weighted average number of ordinary shares 48,346,868 46,183,526 46,457,657 Dilutive shares 3,036,054 2,888,972 2,601,295 ----------- ----------- ---------- Diluted weighted average number of ordinary shares 51,382,922 49,072,498 49,058,952 ----------- ----------- ---------- Basic earnings per share 2.43p 1.59p 2.62p Diluted earnings per share 2.29p 1.50p 2.48p Adjusted earnings per share 3.36p 2.28p 5.07p Diluted adjusted earnings per share 3.16p 2.15p 4.80p Adjusted and diluted adjusted earnings per share have been presented to provide additional useful information. The adjusted earnings per share is the performance measure used for the vesting of employee share options and performance shares. (1) See note 1 for details. NOTES TO THE INTERIM ACCOUNTS FOR THE SIX MONTHS ENDED 31 JANUARY 2007 7) NOTES TO THE CASH FLOW STATEMENT (1) Reconciliation of operating profit to net cash inflow from operating activities Six months Six months Year ended ended ended 31 January 2007 31 January 2006 31 July 2006 (Unaudited) (Unaudited) (Audited) (restated)(1) (restated)(1) Â£'000 Â£'000 Â£'000 Group operating profit 2,368 1,447 2,981 Depreciation, amortisation and amounts written off intangible assets 1,150 988 2,176 Loss on sale of tangible fixed assets 7 3 4 Profit on sale of minority interest - (100) (100) LTIP and conditional share award charge 174 171 342 Increase in debtors (840) (1,516) (2,668) (Decrease)/inc rease in creditors (962) (380) 2,218 Decrease in provisions - (5) (5) ----------- ----------- ----------- Net cash inflow from operating activities 1,897 608 4,948 =========== =========== =========== (2) Reconciliation of net cash flow to movement in net debt/funds Six months Six months Year ended ended ended 31 January 2007 31 January 2006 31 July 2006 (Unaudited) (Unaudited) (Audited) (restated)(1) (restated)(1) Â£'000 Â£'000 Â£'000 (Decrease)/inc rease in cash at bank and in hand (1,331) (2,196) 1,192 Increase in bank overdraft (588) - (227) ----------- ----------- ----------- (Decrease)/inc rease in cash in the period (1,919) (2,196) 965 Cash outflow from decrease in lease financing 34 - 20 Cash inflow from increase in bank loans repayable after more than one year (839) (2,605) (3,716) ----------- ----------- ----------- Change in net debt/funds resulting from cashflows (2,724) (4,801) (2,731) Increase in lease financing (88) - (299) Bank loans acquired with subsidiary - - (724) Translation differences (73) (8) (134) ----------- ----------- ----------- Change in net debt/funds resulting from non-cash movements (161) (8) (1,157) Movement in net debt/funds in the period (2,885) (4,809) (3,888) ----------- ----------- ----------- Net (debt)/funds at beginning of period (1,439) 2,449 2,449 Net debt at period end (4,324) (2,360) (1,439) =========== =========== =========== (1) See note 1 for details. NOTES TO THE INTERIM ACCOUNTS FOR THE SIX MONTHS ENDED 31 JANUARY 2007 7) NOTES TO THE CASH FLOW STATEMENT (continued) (3) Analysis of net debt At 31 July 2006 Cashflow Exchange Non cash At 31 January movement movements 2007 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Cash at bank and in hand 4,018 (1,331) (83) - 2,604 Bank overdraft (227) (588) 10 - (805) --------- --------- -------- -------- --------- 3,791 (1,919) (73) - 1,799 Obligations under finance leases (279) 34 - (88) (333) Bank loans repayable within one year (320) - - - (320) Bank loans repayable after more than one year (4,631) (839) - - (5,470) --------- --------- -------- -------- --------- (1,439) (2,724) (73) (88) (4,324) ========= ========= ======== ======== ========= 8) ACQUISITIONS 1. On 31 October 2006, the Company paid Â£566,000 ($1,078,000) relating to the deferred consideration for the purchase of OutCast Communications Limited ("OutCast") in June 2005. Â£321,000 ($613,000) of the Â£566,000 was settled in cash and the remainder in shares. 2. On 30 November 2006, the Company acquired a further 25% stake in the UK public relations company Lexis Public Relations Limited ("Lexis") by the purchase of a 25% stake in Panther Communications Group Limited ("Panther"), the parent company of Lexis. The stake was acquired for a total consideration of Â£2,071,000 of which Â£1,553,000 was satisfied in cash and the remainder in shares, taking the Company's total stake to 76%. Based upon the acquisition balance sheet at 30 November 2006, goodwill of Â£2,039,000 has been capitalised including Â£10,000 of legal and professional fees. The goodwill will be amortised over its useful economic life of 20 years. It is the intention of the Company to acquire the whole of Panther by 2010 and Panther's existing management has agreed to sell further stakes in the company over the next three years. 3. On 1 January 2007, the Company paid Â£143,000 as deferred consideration for the purchase of Credo Communications Limited ("Credo") in December 2005. Â£72,000 of the Â£143,000 was settled in cash and the remainder in shares. This information is provided by RNS The company news service from the London Stock Exchange

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