Next 15 drops, restructuring charges to affect second half

Next 15 Communications (NFC), the AIM-listed agency which is currently undergoing a transformation from traditional PR firm to digital communications group, saw shares drop sharply on Tuesday after warning that its full-year results will be affected by higher-than-expected restructuring charges.

Next 15 Communications (NFC), the AIM-listed agency which is currently undergoing a transformation from traditional PR firm to digital communications group, saw shares drop sharply on Tuesday after warning that its full-year results will be affected by higher-than-expected restructuring charges.

Nevertheless, results from the first half ended January 31st showed an improvement from last year ahead of analysts' forecasts, with revenues up 3.0% to £46.6m and adjusted profit before tax up 6.0% at £4.5m.

NFC also hiked its interim dividend by 11% to 0.625p per share, from 0.565p per share previously.

As part of the company's restructuring plans, its reporting segments of Technology PR and Consumer PR are now being labelled as 'Integrated Communications', while the remaining businesses which offer more specialised services will be called 'Specialist Agencies'.

In the first half, Integrated Communications revenues declined by 2.0% in the first half and accounted for 85% of group revenues, while Specialist Agencies contributed the rest, growing 20%.

The company, which employs around 1,100 people, invested in a new insight and data business during the half that will launch in the coming months. This, along with £2.5m of acquisition-related payments, pushed net debt up to £5.2m by the end of January, from £4.4m the year before.

Furthermore, NFC said that it expects to be hit by higher-than-expected incremental costs of around £2.0m over the next two years, part of which will be realised in the current financial year, which include staff restructuring charges and investment in the start-up losses of new digital brands and product development.

"The transition from traditional PR to digital communications continues at Next 15. This has been achieved without affecting performance for the half-year, which is in line with management expectations," said Chairman Richard Ryre.

"Overall the group is seeing good progress from its portfolio of agencies; however, whilst revenues remain strong, the costs of restructuring and some isolated trading challenges are likely to impact the reported profits for the second half."

Nevertheless, NFC said that revenues for the full year are currently tracking close to management expectations with the recovery in the US continuing to outpace weaker markets in Europe.

Westhouse Securities placed its 'buy' rating for the stock under review on Tuesday despite the first-half results coming in ahead of expectations.

Analyst Roddy Davidson said: "We are pleased that NFC are stepping up to capture the substantial opportunity available in digital media, but suspect that the impact of this decision on profitability over the next couple of years may disappoint some investors."

The stock was down 14.85% at 96.656p by 14:16 on Tuesday afternoon.

Recommended

Broker safety – your questions answered
Investment strategy

Broker safety – your questions answered

Cris Sholto Heaton answers more of your questions about the safety of stockbroker accounts
25 Mar 2020
How demographics affects stock valuations
Investment strategy

How demographics affects stock valuations

New research suggests that stock and bond valuations are driven by the age of the population – at least in the US.
24 Feb 2020
Do you own shares in Sirius Minerals? Here’s what you need to do now
Stocks and shares

Do you own shares in Sirius Minerals? Here’s what you need to do now

Mining giant Anglo American has proposed a cash takeover of Yorkshire-based minnow Sirius Minerals. Unhappy shareholders must decide whether to accept…
20 Feb 2020

Most Popular

A simple way to profit from the next big trend change in the markets
Investment strategy

A simple way to profit from the next big trend change in the markets

Change is coming to the markets as the tech-stock bull market of the 2010s is replaced by a new cycle of rising commodity prices. John Stepek explains…
14 Jan 2021
Forget austerity – governments and central banks have no intention of cutting back
Global Economy

Forget austerity – governments and central banks have no intention of cutting back

Once the pandemic is over will we return to an era of austerity to pay for all the stimulus? Not likely, says John Stepek. The money will continue to …
15 Jan 2021
Here’s why markets have shrugged off the US political turmoil
Investment strategy

Here’s why markets have shrugged off the US political turmoil

Despite all the current political shenanigans in the US, markets couldn’t seem to care less. John Stepek explains why, and what it means for your mone…
7 Jan 2021