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Next Fifteen ups profit expectations despite pandemic

Snapshot

  • +20 digital marketing and communications brands under 1 roof
  • M&S, Samsung and Nike among its customers
  • Pandemic expected to hit but client wins continue
marketing

Quick facts: Next Fifteen Communications Group PLC

Price: 510 GBX

LSE:NFC
Market: LSE
Market Cap: £462.47 m
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What it does

Next Fifteen Communications Group Plc (LON:NFC) is a digital marketing and communications group, and its brands span everything from digital content to PR to market research.

The group's aim is to build a group of specialised companies that can cover a wide range of sectors and geographies, allowing it maximum access to customers and international talent.

How it's doing

In August, Next 15 said trading was well ahead of management expectations set back in March, leading it to raise its full-year expectations.

In a trading statement, the group said revenues for the six months to the end of July are expected to be up by around 6.5% year-on-year to £126mln, while adjusted profit before tax is expected to be more than 16% higher at a minimum of £20mln.

The company added that its operating margin has climbed above 16%, having been 14.7% in the first half of the previous financial year.

Next 15 said the strong performance has been driven by the group’s business-to-business (B2B) technology-focused agencies, such as Activate and Agent3, while trading in the brand marketing and creative technology divisions has been more resilient than previously anticipated.

The overall organic (like-for-like) decline in revenues for the period was roughly 6% compared to the same period of 2019, though the decline was less severe in the US where organic revenues declined by just 2.5%, the group said.

Inflexion points

  • No material impact from the crisis until April
  • Modest growth forecast in half-year
  • Client wins continue
  • Strong balance sheet makes acquisitions likely say brokers

Broker estimates

Next Fifteen has proved again that its business model is more resilient than the market gives it credit for, according to broker Berenberg.

First-half profits rose by 16% on an underlying basis, which has prompted Berenberg to increase its full-year estimate by 9% and making a 20% hike since 25 June.

Berenberg, though, suggests its forecast is conservative and further upgrades are likely.

The better than expected numbers were the result of a skew towards B2B technology clients and a growing focus on technology-enabled media services, said the broker.

Buy is its investment stance with a 520p target price.

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Next Fifteen at the Proactive One2One Virtual Conference

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