60. Next Fifteen Communications
Next Fifteen Communications (NFC) is all about growth through acquisition, so it should be no surprise that the company has recently made further purchases. This includes marketing agencies Elvis and Velocity, as well as research businesses Circle and Charterhouse. The purchase of Elvis meant that new global clients, including Honda and Stella Artois, have been added to Next Fifteen’s portfolio, while Charterhouse has pushed the group into the financial sector. Together these helped boost the group’s billings to £243m - a 21 per cent increase on the previous year.
Next Fifteen’s chairman, Richard Eyre, is confident that the group will be able to continue to develop alongside the “extraordinary” pace of technology across the sector. So far this seems to be the case. At the full-year results in April, sales were up 15 per cent to £197m while reported pre-tax profits came in 358 per cent ahead of the year before at £13.3m. This marked a recovery from a weaker first half that was made difficult by political and economic uncertainty, according to Mr Eyre. The strengthening of sterling acted as a headwind, offset by organic growth and acquisitions, but investors might wonder how much of an impact currency will have on the business in future, especially if growth hits a more prolonged slow period.
The group reported growth across ass its regions apart from Asia, so investors may be wondering whether Next Fifteen can produce a better performance in this region by the next set of full year results in the year to January 2019. In the meantime the company is putting a keen eye on its spending. It’s done well to find synergies from recent acquisitions, helping to offset some added staff costs. This aided a 70 basis point improvement in the operating margin to 15.3 per cent. If this attention to spending is maintained then the margin should have support in the future.
Organic sales growth for Next Fifteen was already up by high single digits at the start of the current financial year. Brokers are forecasting that acquisitions made during the latter half of the group’s now ended financial year will start to pay off in the year to January 2019. Given the company’s good track record with identifying acquisitions and finding synergies, this looks encouraging. But with growing competition in the sector, we’ve recently taken a step back from our buy tip. Hold. JF
59. WANdisco
When we tipped live data company WANdisco (WAND) last December (568p, 7 Dec 2017), we flagged that it was a momentum stock – buoyed by news around contract and partnership signings. The group has deals in place with tech giants including IBM (US: IBM) and Amazon (US: AMZN) and the shares have been supported by strong full-year results to December 2017 with record bookings growth.