Huntsworth armed for the upturn

Last week, public relations (PR) specialists Huntsworth announced yet another acquisition as the group - which is led by the founder of Shandwick PR, Peter Gummer (now Lord Chadlington) - continues its push to become a global PR player.

The £20m deal was with Washington-based Dutko Worldwide, which has 10 offices in the US and claims to be the largest independent public policy management firm - better known as a lobbyist - in the US. The purchase significantly bolsters Huntsworth's lobbyist network, which activity currently accounts for about 7 per cent of Huntsworth's revenues. Moreover, Malcolm Morgan, an analyst at stockbroker KBC Peel Hunt, expects it will add to earnings by next year. The deal will also add to Huntsworth's growing US presence, which accounted for 26 per cent of revenues in its last financial year.

This is also Huntsworth's third acquisition this year. The group purchased Middle East-based PR outfit Momentum International in February; UK and US PR company Tonic Life Communications in July and Swedish PR business Sund Kommunikation i Malmo in August. Huntsworth also made an approach for Aim-quoted technology PR group Next Fifteen in May, although this was rejected.

So far, integrating acquisitions has not appeared to be a problem, and Huntsworth has now made more than 20 since 2003. Indeed, its bosses are keen to buy in more growth. However, this does not mean they have given up on organic growth. The hope is that this will be achieved via a rationalisation programme, which has seen Huntsworth consolidate its 26 brands into just four. These four divisions will be Huntsworth Healthcare, Citigate, Grayling and Red. Grayling, will house a number of brands, including Trimedia and Mmd, and will account for 44 per cent of group revenues. The streamlining, which was announced less than a year ago, has been completed ahead of schedule and management is confident it will help boost organic growth from 2011 onwards. This will, however, mean a one-off exceptional charge this year, which is expected to be between £8m and £10m, and the non-cash write-off of the balance-sheet values of discarded brands.

In the meantime, Huntsworth's resilient client base offers some comfort. The group's healthcare offering, Huntsworth Healthcare, which is the second largest part of its business accounting for 30 per cent of revenues, has blue-chip clients, such as AstraZeneca and Novartis. Elsewhere in the group, other blue-chip clients include Nestle and the London Stock Exchange.

However, some of Huntsworth's clients are in more vulnerable sectors. Financial clients account for 16 per cent of sales, and consumer-based clients another 19 per cent. Against that, the group has managed to retain 96 per cent of its client base over the past year, which is in line with 2008.

Huntsworth's strong retainer rates has also resulted in a significant chunk of revenues being committed for this year and for 2010. In a recent trading update, the group said that 96 per cent of its forecast revenues for 2009 had been committed by the end of its third quarter. Further, the group said that it expected to have some 70 per cent of 2010's revenues committed by January, adding that the trading environment is "significantly better" than at the turn of the calendar year.