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Next Fifteen benefits from acquisitions strategy

New business additions helped offset a decline in organic revenue
Next Fifteen benefits from acquisitions strategy
  • Dividend reinstated at 7p per share
  • Trading in the current financial year has been ahead of the group's expectations

Digital communications specialist Next Fifteen Communications (NFC) saw its organic revenue dip by 3 per cent in the year to 31 January, as some clients deferred spending. But with the contribution of acquisitions – including web optimisation agency CRE – the group’s overall revenue increased by 7 per cent to £324m.

Tight management of costs helped boost adjusted operating profit by more than a fifth to £49.5m. On a statutory basis, operating profit dropped by 29 per cent to £13.7m thanks to a £10m impairment charge on surplus office space as it shifts to more flexible working.

Next Fifteen was sitting on £14m of net cash (excluding lease liabilities) at the end of January – versus £9.3m of net debt a year earlier – and has reinstated the dividend with a final pay-out of 7p per share.

With around 60 per cent of its revenue derived from the tech sector and business-to-business activity, and limited exposure to more cyclical industries, the group has proved relatively resilient to pandemic disruption. Looking at the current financial year, it says that trading so far has been ahead of expectations. As such, Berenberg has nudged up its forecasts and anticipates that adjusted operating profit will rise to £56m in 2022, and £61m in 2023. Buy.

NEXT FIFTEEN COMMUNICATIONS (NFC)    
ORD PRICE:794pMARKET VALUE:£ 724m
TOUCH:794-802p12-MONTH HIGH:820pLOW: 320p
DIVIDEND YIELD:0.9%PE RATIO:NA
NET ASSET VALUE:128p*NET DEBT:25%
Year to 31 JanTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20161712.901.605.25
201719713.311.66.30
201822418.817.57.56
20193015.562.702.50
20203241.31-5.507.00
% change+8-76-+180
Ex-div:08 Jul   
Payment:13 Aug   
*Includes £164m in intangible assets or 180p a share

Last IC View: Buy, 376p, 23 Apr 2020