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Huntsworth's profits soar

Adjusted pre-tax profits jump over 20 per cent at media agency Huntsworth and the benefits of multi-office contracts are now trickling through to the bottom line, too.
August 15, 2012

Chief operating officer Sally Withey of media agency Huntsworth is optimistic about the company's "robust pipeline" of business. In the first half, adjusted pre-tax profits rose 21 per cent to £11.6m, despite revenues holding flat, and with the benefits of multi-office contracts now trickling through to the bottom line, Huntsworth remains an attractive recovery play on a lowly PE ratio of 7 and offering a chunky 7 per cent yield.

IC TIP: Buy at 50p

Global and multi-office revenues now make up 49 per cent of the total, helping Huntsworth offset the decline in its single-location offices. While the company has made cutbacks, Ms Withey said the cost control efforts were closely linked to the push for multi-office deals: "With the larger contracts having taken longer to kick off, we now have greater visibility on revenues. This means we can better match our resources." Ms Withey said she expects to be able to hold on to the margin improvements, which on an operating basis rose almost three points to 20.5 per cent before central costs.

Bucking the general trend, Huntsworth grew European revenues by 4.8 per cent, with Ms Withey describing the international pipeline as "very strong". Moreover, while April's full-year numbers suffered due to contract slippage, these have now come on stream. Typical contract sizes are now between £0.5m and £1.5m, compared with £50,000 in the past.

Peel Hunt kept its forecasts for full-year profits at £23.6m and EPS of 7.1p (£19.3m and 6.3p for 2011).

HUNTSWORTH (HNT)

ORD PRICE:50pMARKET VALUE:£124m
TOUCH:49-50.25p12-MONTH HIGH:70pLOW: 32p
DIVIDEND YIELD:7.0%PE RATIO:10
NET ASSET VALUE:85p*NET DEBT:33%

Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20111086.202.201.0
20121079.553.201.0
% change-1+54+45-

Ex-div: 3 Oct

Payment: 9 Nov

*Includes intangible assets of £298m, or 120p a share