Enabling the Disrupters
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Next Fifteen Communications Group plc Annual Report 201 ENABLING THE DISRUPTERS 5 Next Fifteen Communications Group plc Annual Report 2015 ifc/01 CONTENTS This Annual Report covers the statutory 01–16 STRATEGIC REPORT reporting period, which is the 18 months Financial and operational highlights 01 About us 02 to 31 January 2015 (‘the reporting period’). A letter from our Chairman 04 A message from our Chief The Annual Report for the previous Executive Officer 06 statutory reporting period covered the Our mission and strategy 08 Key performance indicators 09 financial year ended 31 July 2013. Financial Review 10 The change in the Group’s financial year How we manage our risks 13 end from 31 July to 31 January was made Principal risks and uncertainties 14 to better align with our clients’ budgeting 17–35 GOVERNANCE cycle, the majority of which have Board of Directors 17 Corporate Governance Report 19 December year ends. In order to aid Directors’ Remuneration Report 25 understanding of the underlying Report of the Directors 31 Statement of Directors’ Responsibilities 34 performance of the business, Independent Auditors’ Report 35 commentary in the Chairman’s letter, CEO’s message and Financial Review 36–101 FINANCIAL STATEMENTS Consolidated Income Statement 36 focuses on the headline results being Consolidated Statement of Comprehensive Income 37 the adjusted unaudited performance for Consolidated Balance Sheet 38 the 12 months to 31 January 2015 Consolidated Statement of Changes in Equity 39 compared with the 12-month Consolidated Statement of Cash Flow 41 unaudited period to 31 January 2014. Notes to the accounts 43 Company Balance Sheet 86 Items that are excluded from Reconciliation of movements headline results are detailed within in shareholders’ funds 87 Notes forming part of the Company pages 96 to 101. These figures are financial statements 88 Five-year financial information 94 reconciled to the audited statutory Appendix 1: Results for the 12-month period to 31 January 2015 and numbers in the appendices on 31 January 2014 96 pages 96 to 101. Appendix 2: Reconciliation of 12-month period to 31 January 2015 to audited results 98 Appendix 3: Reconciliation of 12-month period to 31 January 2014 to audited results 100 102–104 OTHER INFORMATION Financial calendar and contacts 102 Notes 103 This Annual Report, together with trading statements, news releases, presentations and previous Annual Reports, is available online at www.next15.com. Next Fifteen Communications Group plc Annual Report 2015 FINANCIAL AND OPERATIONAL HIGHLIGHTS Headline revenue (£m) Headline profit before tax (£m) Statutory retained profit (£m) report Strategic £109.2m £12.5m £0.9m +11% +51% +29% 109.2 98.7 12.5 90.6 92.9 5.3 4.3 9.0 8.3 5.1 0.7 0.9 2012 2013 2014 2015 2012 2013 2014 2015 2011 2012 2013 2015 Governance Headline diluted adjusted earnings Headline net cash from operating per share (pence) Dividend per share (pence) activities (£m) 13.2p 3.5p £15.6m +79% +33% +108% 13.2 3.5 15.6 9.5 9.8 2.4 2.6 7.4 2.1 8.8 7.5 5.7 2012 2013 2014 2015 2012 2013 2014 2015 2012 2013 2014 2015 Financial statements • Headline revenues increased by 10.6% to £109.2m from £98.7m last year; revenue for the 18 months statutory period was £158.5m • Statutory retained profit has remained relatively flat at £0.9m (2013: £0.7m) following a period of significant restructure • Organic growth of 6.1% with double digit growth of 11.3% in the US • Net debt of £8.6m after £11.0m of acquisition-related payments in the 12-month period • Appointment of a new Chief Financial Officer • Simplification of operations in EMEA and APAC • Co-location of San Francisco offices Other information • Acquisition of a 75% stake in Encore, a programmatic advertising technology business • Within the statutory reporting period the Group acquired: • 51% of Republic Publishing Limited, a content marketing business • a majority shareholding (54%) in Agent3 Ltd, a provider of technology platforms and marketing services • the trade and certain assets of Story Worldwide LLC, a content advertising agency • a 75% stake in Morar, an international market research consultancy which measures and advises on brand performance Unless otherwise stated, figures are for the headline results to 31 January. Headline results represent the unaudited performance for the 12 months to 31 January 2015 adjusted to exclude amortisation, impairments, restructuring charges and certain other non-recurring items. These are reconciled to the audited statutory numbers in the appendices on pages 96 to 101. Next Fifteen Communications Group plc Annual Report 2015 02/03 ABOUT US OUR COMPANY Next 15 is a communications business which employs 1,248 people across 35 offices in 18 countries. The Group comprises 16 subsidiary agencies, spanning digital content, marketing, PR, consumer, technology, marketing software, market research, public affairs and policy communications. 1,248 35 18 16 People Offices Countries Subsidiary Agencies OUR SECTORS OUR BRANDS DIGITAL DIGITAL CONTENT POLICY COMMUNICATIONS INVESTOR RELATIONS MARKETING SOFTWARE MARKET RESEARCH CONSUMER TECHNOLOGY Next Fifteen Communications Group plc Annual Report 2015 OUR CLIENTS Strategic report Strategic Next 15 represents many of the world’s most interesting and important companies. It is also working with what it hopes will become the next generation of Fortune 500 companies. Making brands famous is in our DNA and is behind our name, the origin of which was explained by Tim Dyson: “Everyone will be famous for 15 minutes, but we care about what happens next.” Governance How we create value for our Adapting our model to Financial statements clients and generate revenue a digital future In today’s world we create value Next 15 has taken a ‘ground up’ them and their customers. We have by influencing the way brands approach to digital. This means we also invested in creating and acquiring are regarded by their customers. have challenged all of our businesses specialised digital agencies and We do this using a wide range of to evaluate the way they do business technologies such as Beyond and digital tools and communities such so that they can take advantage of the Agent3 that open up new market Facebook, Twitter, Pinterest, YouTube opportunities that digital creates for opportunities for the Group. and LinkedIn. WHAT MAKES US DIFFERENT CALIFORNIA PRESENCE CORPORATE CULTURE Other information Having a strong presence in Silicon Next 15 encourages an entrepreneurial the norm and encourages people Valley gives us real-time access to and meritocratic culture so that we to stay with the Group long term. the way the technology industry is can attract and retain the best and the We believe our culture drives excellence changing. Furthermore, working brightest. In many ways our culture is but also encourages people to think in directly with the likes of Facebook, more like a fast-paced tech company the manner of a start-up rather than a Google and Twitter has given us a great than a traditional agency. In a business corporate monolith. insight into how marketing will evolve where your people are your most as these channels become a critical important asset, we look to create a means by which brands interact with culture that is differentiated from their customers. Next Fifteen Communications Group plc Annual Report 2015 04/05 A LETTER FROM OUR CHAIRMAN “ The Group has remained focused on its strategy to create a new type of integrated marketing group centred on the technology of marketing: data, insight, analytics, apps, content platforms and, of course, content itself.” Dear Shareholder, Profit before tax for the period was In previous letters, I have observed In my last letter to you I applauded the relatively flat on the prior year at £0.9m that the historic separation of PR and performance of Next 15’s US business (2013: £0.7m). advertising is diminishing, not least because of the growing importance but acknowledged that some other The progress outside the US has been of social media to brand marketers. parts of the business had struggled impressive on a number of fronts. The Group’s early embrace of digital to deliver the desired results. At that The UK business saw strong topline techniques and its core skills of brand time the Board took a series of steps growth on headline numbers of 27.3% storytelling have positioned it well to to improve the performance of the and a significant improvement in its benefit from this market movement. whole Group. These included the hiring headline operating margins from 4% The acquisition of Story Worldwide in of a new Chief Financial Officer in to 11%. This was the result of improved the US is a natural development of this Peter Harris, who has already made a performances from both Bite and strategy. Story, as the name suggests, significant impact; greater focus on the Lexis and the success of investments is a content-driven advertising UK business and the simplification of and acquisitions that included Agent3, business which is focused on creating operations in EMEA and Asia Pacific. I’m Morar and Republic Publishing. pleased to report that these steps are authentic narratives for brands that proving successful. When combined The simplification of the business can be executed using both digital and with continued strong performance by in Asia and EMEA has delivered the traditional channels. Story’s clients the US businesses, they have resulted expected improvements, with headline include Unilever, SEI, Beech-Nut in solid growth and another set of operating margins increasing from and Lexus. 1.9% to 8.0% in APAC and -8.1% to record results for the Group. The recent placing of 3m shares which 9.2% in EMEA, resulting in a business raised £4.3m net of costs is being put Revenue for the 18 months to that is more able to compete in its to work on investments in two UK 31 January 2015 was £158.5m, various markets.